State Bank of India v. Chander Kalani: Right decision based on incorrect reasoning         

The High Court of Delhi (“the Delhi High Court”) in State Bank of India v. Chander Kalani[1]  was called upon to decide whether a statutory appeal under Section 62 of the Information Technology Act, 2000 (“the IT Act”) from an order of the Telecom Disputes Settlement and Appellate Tribunal ( “TDSAT”) was maintainable before it. While the Delhi High Court held that in view of the facts of the case, the appeal under Section 62 of the IT Act lay before the High Court of Judicature at Bombay (“the Bombay High Court”), the reasoning, it is submitted, is flawed and based on principles hitherto unknown to law.

Brief facts and relevant provision

The facts necessary for the purpose of this comment are as follows:

  1. The respondents were non-resident Indians who maintained a joint NRE account with six fixed deposits in one of State Bank of India’s Mumbai branches (the “appellant Bank”).
  2. The Bank had failed to maintain reasonable security measures and procedures for verification which enabled an unknown fraudster to break two fix deposits held by the respondents and transfer an amount of INR 63,00,000 to an overseas account.
  3. Upon having become aware of the above, the respondents, inter alia, preferred Complaint No. 1/2014 before the Adjudicating Officer under the IT Act who by his order dated 12-1-2015 , found the Bank guilty under Section 43 and directed it to pay the respondents compensation of INR 40,00,000 along with interest at the rate of 18% per annum. It may be noted here that the Adjudicating Officer is an appointee of the Central Government but may be an officer of the State Government as was in the present case.
  4. The Bank preferred Writ Petition No. 930 of 2016[2] before the Bombay High Court against the order of the Adjudicating Officer since the post of the Chairman of the Cyber Appellate Tribunal was vacant owing to which the Bank’s appeal was not being heard. During the pendency of the writ petition, the IT Act came to be amended and TDSAT was designated to hear cyber appeals. Therefore, the Bombay High Court by its order dated 11-7-2017 directed that the appeal preferred by the Bank before the Cyber Appellate Tribunal now be heard by TDSAT.
  5. TDSAT by its order dated 31-7-2018 in Cyber Appeal No. 13 of 2015[3] upheld the order passed by the Adjudicating Officer. The Bank impugned this order before the Delhi High Court by preferring a statutory appeal under Section 62 of the IT Act.

Section 62 reads as under:

62. Appeal to High Court.– Any person aggrieved by any decision or order of the[Appellate Tribunal][4] may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the[Appellate Tribunal][5] to him on any question of fact or law arising out of such order:

Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.

It is therefore clear that Section 62 and for that matter no other provision in the IT Act provides to which ‘High Court’ does an appeal lie from an order passed by TDSAT.

Submissions, reasoning and decision of the Delhi High Court

The Bank made the following submissions on maintainability: (i) TDSAT was subject to superintendence of the Delhi High Court; (ii) the appellant being dominus litis ought to have the liberty to chose the forum he wished to approach (the doctrine of forum coveniens); and (iii) the order having been passed by TDSAT in Delhi, a part of the cause of action arose in Delhi making the Delhi High Court the proper court to entertain the appeal. The Bank relied on the decisions of the Delhi High Court in Sterling Agro Industries Ltd. v. Union of India[6] and J. Sekar v. Union of India[7] to support its submission mentioned above at (iii).

The respondents submitted that the appeal was not maintainable before the Delhi High Court since no cause of action arose there and that the appeal would lie before the Bombay High Court. In support of its submissions, the respondents relied on the judgment of the Supreme Court in Ambica Industries v. Commissioner of Central Excise[8] and the judgment of the Delhi High Court in Dharampal Premchand Ltd. v. Commissioner of Central Excise[9].

The Delhi High Court before undertaking a detailed analysis of the facts of the case observed that Section 62 provides no guidance as to which High Court an appeal would lie from an order of TDSAT i.e. it does not say whether the statutory provision or the doctrine of dominus litis or the situs of the forum or the cause of action, would be a factor to determine the High Court to which an appeal lies under Section 62 of the IT Act.

The Delhi High Court also observed that the Adjudicating Officer was a State Government employee exercising original jurisdiction and that it was under the dominance and superintendence of the Bombay High Court. It further observed that neither of the parties had challenged the jurisdiction of the Adjudicating Officer or the Bombay High Court. It was on the basis of these facts that the Delhi High Court held that the appeal under Section 62 of the IT Act in the present case should lies before the Bombay High Court.

Analysis

It is submitted that the decision reached by the Delhi High Court although correct is based on flawed reasoning. The Supreme Court in Ambica Industries[10] was called on to decide an identical issue, albeit, under a different statute being the Central Excise Act, 1944 (“the Excise Act”). Section 62 of the IT Act is pari materia to Section 35-G(1) of the Excise Act before amendment. In that case, the Supreme Court rejected the cause of action doctrine on the following basis:

12…. Before dilating on the said proposition of law it may be noticed that the decision of a tribunal would be binding on the assessing authority. If the situs of the Appellate Tribunal should be considered to be the determinative factor, a decision rendered by the tribunal shall be binding on all the authorities exercising its jurisdiction under the said tribunal.

13. The Tribunal, as noticed hereinbefore, exercises jurisdiction over all the three States. In all the three States there are High Courts. In the event, the aggrieved person is treated to be the dominus litis, as a result whereof, he elects to file the appeal before one or the other High Court, the decision of the High Court shall be binding only on the authorities which are within its jurisdiction. It will only be of persuasive value on the authorities functioning under a different jurisdiction. If the binding authority of a High Court does not extend beyond its territorial jurisdiction and the decision of one High Court would not be a binding precedent for other High Courts or courts or tribunals outside its territorial jurisdiction, some sort of judicial anarchy shall come into play. An assessee, affected by an order of assessment made at Bombay, may invoke the jurisdiction of the Allahabad High Court to take advantage of the law laid down by it and which might suit him and thus he would be able to successfully evade the law laid down by the High Court at Bombay.

14. Furthermore, when an appeal is provided under a statute, Parliament must have thought of one High Court. It is a different matter that by way of necessity, a tribunal may have to exercise jurisdiction over several States but it does not appeal to any reason that Parliament intended, despite providing for an appeal before the High Court, that appeals may be filed before different High Courts at the sweet will of the party aggrieved by the decision of the tribunal.[11]

The Supreme Court further held that the doctrine of dominus litis and situs of the Appellate Tribunal could not go hand in hand and illustrated facts in which these doctrines could not be applied concurrently and therefore rejected these doctrines[12]. Although Ambica Industries was brought to the notice of the Delhi High Court, it chose not to rely on the principles laid therein. It is submitted that the appellant’s contentions were similar to the ones raised in Ambica Industries, all of which were dealt with in a detailed manner by the Supreme Court. Moreover, as was rightly pointed out in Ambica Industries, the situs of a tribunal could vary from time to time and that its situs may be at one place for the sake of convenience and other factors which Parliament would have considered while enacting the law or the Government while issuing a notification under the relevant Act. It is submitted that for this reason TDSAT which although has its seat in Delhi, is subject to jurisdiction of all High Courts provided the facts of the case pertain to disputes before the Adjudicating Officer of the State where the High Court is seated.

Moreover, the Supreme Court in Ambica Industries also held that the jurisdiction of the High Court should be determined on the basis of statutory provisions. In that case, the High Court had been defined under Section 36 of the Central Excise Act. As already observed, there is no definition of ‘High Court’ under the IT Act. In addition to the reasoning above, it is submitted, that even from the wording of Section 62 of the Act itself one can infer that Parliament did not contemplate that appeals under Section 62 would lie before only one High Court i.e. the High Court which exercised superintendence over TDSAT. It is a settled principle of statutory interpretation that the “heading” of a section can be relied upon to clear any doubt or ambiguity in the interpretation of the provision and to discern the legislative intent[13]. While Section 62 of the IT Act uses the phrase to “the High Court”, the “heading” says “Appeal to High Court”, the latter therefore (in absence of use of the definitive article ‘the’) meaning any High Court which may have jurisdiction. In view of this interpretation too, it cannot be inferred that the Delhi High Court would have jurisdiction since it exercises superintendence over TDSAT. 

Further, since the High Court proceeded on an incorrect basis, its rejection of the judgments relied upon by the appellant cannot be based on such reasoning. It is submitted that Sterling Agro[14] and J. Sekar[15] pertain to jurisdiction under Articles 226 and 227 of the Constitution and not with respect to provisions of statutory appeals. Therefore, these judgments relied upon by the appellant could be applied to facts of the present case. However, the Delhi High Court in Dharampal Premchand Ltd.[16] which dealt with Sterling Agro and Ambica Industries held that the principles laid down in the former could also be applied to interpretation of Section 35-G of the Central Excise Act.

Conclusion

The judgment is a classic case of missing the woods for the tree. Although ultimately, the decision of the Delhi High Court is the same as that it would have arrived at had it followed Ambica Industries, it is a matter of concern that despite this judgment having been cited it was not relied upon in reaching the final decision. As a matter of judicial discipline, the Delhi High Court ought to have relied on Ambica Industries which is the law of the land under Article 141 of the Constitution. Moreover, the emphasis laid on the fact that parties to the case did not raise any objection with respect to the jurisdiction of the Adjudicating Officer and the Bombay High Court is totally misplaced and should have had no bearing on deciding the issue of maintainability under Section 62 of the IT Act. However, it remains to be seen whether the argument that the Adjudicating Officer under the IT Act being an agent of the Central Government would be amenable to jurisdiction of the Delhi High Court on the ground that the Central Government has its seat in Delhi.


*Advocate. The author can be reached at rhythm.buaria@gmail.com

[1] 2019 SCC OnLine Del 7031

[2] State Bank of India v. The Adjudicating Officer and Principal Secretary (Bombay High Court, 11/07/2017)

[3] State Bank of India v. Chander Kalani, 2018 SCC OnLine TDSAT 738

[4] Subs. for “Cyber Appellate Tribunal” by Act 7 of 2017, S. 169(a) (w.e.f. 26-5-2017) 

[5] Ibid.

[6] 2011 SCC OnLine Del 3162

[7] 2018 SCC OnLine Del 6523

[8] (2007) 6 SCC 769

[9] 2011 SCC OnLine Del 3412

[10] Ambica Industries v. Commissioner of Central Excise, (2007) 6 SCC 769

[11] Ibid, SCC at pp. 775 and 776

[12] Ibid, SCC at pp. 776 and 777

[13] See N. C. Dhoundial v. Union of India, (2004) 2 SCC 579 at p. 587

[14] Sterling Agro Industries Ltd. v. Union of India, 2011 SCC OnLine Del 3162

[15] J. Sekar v. Union of India, 2018 SCC OnLine Del 6523

[16] Dharampal Premchand Ltd. v. Commissioner of Central Excise, 2011 SCC OnLine Del 3412

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