2021 SCC Vol. 9 Part 2

In this part read a very interesting decision expertly analysed by our editors. Supreme Court ruled that the trustees are required to seek consent by majority of the unit holders, when they by majority decide to wind up a  mutual fund scheme. Also, consent by majority of the unit holders should be sought post-publication of the notice and disclosure of the reasons for winding up.[Franklin Templeton Trustee Services (P) Ltd. v. Amruta Garg, (2021) 9 SCC 606]

Short Notes: 15

Civil Procedure Code, 1908 — S. 25 — Transfer of cases — Matrimonial dispute: In this case, prayer for transfer of case, declined. However, directions on manner of conducting of proceedings were issued. Trial court was directed to conduct proceedings online for effective participation of parties, if facility available. [Pooja Hemani v. Manish Hemdev, (2021) 9 SCC 320]

Companies Act, 2013 — Ss. 241 and 242 — Conduct of affairs of company prejudicial to public interest, or, to the company, or, prejudicial or oppressive to any member(s) of company — Relief on grounds of, under S. 241(1)(a) r/w Ss. 242(1)(a) & (b) — When can be granted: In a petition under S. 241, the true question to be asked by the Tribunal is whether removal of a Director/Executive Chairman tantamounts to conduct which is oppressive or prejudicial to some members. Further, even in cases where the Tribunal finds that the removal of a Director was not in accordance with law or was not justified on facts, the Tribunal cannot grant relief under S. 242 unless the removal is found to be oppressive or prejudicial. There may be cases where the removal of a Director might have been carried out perfectly in accordance with law and yet may be part of a larger design to oppress or prejudice the interests of some members and in such cases the Tribunal can grant a relief under S. 242. [Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd., (2021) 9 SCC 449]

Constitution of India — Art. 226 — Passing of order in casual and/or cryptic manner —Unsustainability of: In this case, dispute between appellant and R-4 concerning alleged right to way of R-4 decided by Revenue Authorities against appellant. As appeal was dismissed, that order was challenged before High Court. While dismissing the writ petition, High Court passed cryptic order without considering essential issues. The Supreme Court held that the High Court ought to have considered essential issues arising in the matter in more detailed manner. Hence, writ petition was restored for decision afresh in accordance with law. [Sulochanabai Swaropchand Chawre v. Commr., Amravati, (2021) 9 SCC 317]

Constitution of India — Arts. 21 & 22 and Art. 19 — Preventive detention laws — Interpretation of: Preventive detention laws to be interpreted in light of Arts. 21 & 22 and not Art. 19. Hence, “maintenance of public order” and “public order” in the context of preventive detention laws have to be interpreted in light of Arts. 21 & 22. Hence, ruling in Madhu Limaye, (1970) 3 SCC 746 that liberal meaning must be given to “public order”, held, is not applicable in interpreting “public order” in the context of preventive detention laws. Madhu Limaye case dealt with scope of expression “in the interests of public order” occurring in Arts. 19(2) to 19(4). [Banka Sneha Sheela v. State of Telangana, (2021) 9 SCC 415]

Contempt of Court — Criminal Contempt — General principles — Prejudice to or interference with judicial proceeding: In this case, suo motu proceedings were initiated by Court. Misconception of fact, was clarified before the Court. Suo motu proceedings were dropped and notice was discharged. Review petition on main matter, found to be without merit and review petitioner’s apprehensions to be baseless, hence, review petition dismissed with certain clarifications to allay apprehensions of review petitioner. [Bhavna Lall, In re., (2021) 9 SCC 314]

Criminal Procedure Code, 1973 — S. 482 — High Court’s power under — Scope of: High Court’s power under this section cannot be used to undermine a statutory dictate, in present case provided under Ss. 14 and 17 of the Insolvency and Bankruptcy Code, 2016 (IBC). Hence, interim order of High Court defreezing bank account of person concerned who had allegedly conspired with MD of corporate debtor to violate moratorium under S. 14 IBC, modified to the effect that said bank account could only be operated once amount in question transferred in violation of S. 14 IBC, was returned to corporate debtor. National Plywood Industries Ltd. [Resolution Professional v. JSVM Plywood Industries Ltd.,(2021) 9 SCC 401]

Income Tax Act, 1961 — Ss. 12-AA and 80-G: Cancellation of registration under S. 12-AA as charitable trust and approval granted under S. 80-G for deduction of donations made to such trust held, proper in present case as the facts clearly show that donations were bogus in nature and registration and approval conferred upon respondent Trust under Ss. 12-AA and 80-G were being completely misused by the Trust. [CIT v. Batanagar Education & Research Trust, (2021) 9 SCC 439]

Insolvency and Bankruptcy Code, 2016 — Ss. 2(e), 78, 79, 94 to 187, 239(2)(g), (h) & (i), (m) to (zc), (zn) to (zs) and 249 and S. 1(3) & proviso thereto: Validity of Notification dt. 15-11-2019 bringing into force provisions of IBC applicable to personal guarantors of corporate debtors, upheld. It was held that there is no illegality in Government bringing into force different provisions of IBC in a stage-by-stage process by repeatedly invoking the power of conditional legislation in this regard conferred by IBC, as the same has been done in a rational manner to better effectuate the objectives of IBC. Moreover, there is sufficient indication in IBC indicating that personal guarantors, though forming part of the larger grouping of individuals, are to be, in view of their intrinsic connection with corporate debtors, dealt with differently, through the same adjudicatory process and by the same forum (though not the same insolvency provisions) as the corporate debtors. Thus, held, impugned notification was issued within the power granted by Parliament, and in valid exercise of it. Amendment Act of 2018, altering S. 2(e) and sub-categorising three categories of individuals, resulting in Ss. 2 (e), (f) and (g), held, provides the necessary statutory backing for Government to apply IBC, in such a manner as to achieve the objective of the amendment i.e. to ensure that adjudicating body dealing with insolvency of corporate debtors also has before it the insolvency proceedings of personal guarantors of such corporate debtors. [Lalit Kumar Jain v. Union of India, (2021) 9 SCC 321]

SEBI (Mutual Funds) Regulations, 1996 — Regns. 18(15)(c), 39(2)(a) and 39(3) — Winding up of mutual fund scheme — Consent of majority of the unitholders, as envisaged under Regn. 18(15)(c): Regn. 18(15)(c) mirrored by use of the word “shall” is couched as a command. Further, the expression “when the majority of the trustees decide to wind up” in Regn. 18(15)(c) manifestly refers to Regn. 39(2)(a) as this is the only Regulation which entitles the trustees to wind up the scheme. Further, Regn. 18(15)(c), when it refers to trustees’ decision to wind up, it implies the trustees’ opinion to wind up the scheme. Applying the principle of harmonious construction, held, the opinion of the trustees would stand, but the consent of the unitholders is a prerequisite for winding up. Also, investments by the unitholders constitute the corpus of the scheme and to deny the unitholders a say, when Regn. 18(15)(c) requires their consent, debilitates their role and right to participate. [Franklin Templeton Trustee Services (P) Ltd. v. Amruta Garg, (2021) 9 SCC 606]

Telecommunications Laws — Telecom Agreement/Telecom Licence/Spectrum Allocation/Scams/Auction/Licence Fees — Licence fees — National Telecom Policy, 2012 — Sharing Guidelines dt. 24-9-2015 — AGR dues: In this case, applications purportedly for correction or rectification of defects or arithmetical errors in calculation of AGR dues of TSPs (telecom service providers) as specified in order of Supreme Court dt. 20-7-2020, Assn. of Unified Telecom Service Providers of India, (2020) 3 SCC 525, held, not maintainable as allowing the same would amount to allowing recalculation/recomputation of AGR dues which has been held to be impermissible in earlier orders of Supreme Court pertaining to this issue. [Union of India v. Assn. of Unified Telecom Service Providers of India, (2021) 9 SCC 445]

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