Section 340
Case BriefsSupreme Court

   

Supreme Court: While answering the reference questions arising from a reference order of a Division Bench, the 3-judges Bench of Sanjay Kishan Kaul, Abhay S. Oka and Vikram Nath, JJ., held that Section 340 of the CrPC does not mandate a preliminary inquiry and an opportunity of hearing to the would-be accused before a complaint is made under Section 195 of the CrPC.

Questions Referred

The instant matter arose from a reference made to a three Judges Bench by an order passed in State of Punjab v. Jasbir Singh, (2020) 12 SCC 96, seeking the following questions to be answered:

“(i) Whether Section 340 of the Code of Criminal Procedure, 1973 mandates a preliminary inquiry and an opportunity of hearing to the would-be accused before a complaint is made under Section 195 of the Code by a Court?

(ii) what is the scope and ambit of such preliminary inquiry?”

Background

The High Court, by the impugned judgment in Jasbir Singh v. State of Punjab, 2019 SCC OnLine P&H 2965, granted relief to the respondent while dealing with an aspect of forgery in a civil case, on the reasoning that the FIR registered against the respondent-accused did not comply with the mandatory requirements of Section 340 which provides for the procedure in cases mentioned in section 195, particularly because the FIR was filed without any inquiry and without giving any opportunity to the respondent to be heard.

The Reference Order

By the reference order in State of Punjab v. Jasbir Singh, (2020) 12 SCC 96, the Division Bench of the Supreme Court noted that a three Judges Bench in Pritish v. State of Maharashtra, (2002) 1 SCC 253, had held that the purpose of a preliminary inquiry under Section 340(1), CrPC was not to find whether a person is guilty or not but only to decide whether it was expedient in the interest of justice to inquire into the offence. It was thus observed that the Court is not obliged to make a preliminary inquiry on a complaint but if the Court decides to do so, it should make a final set of the facts which is expedient in the interest of justice that offence should be further probed into.

The Division Bench noted that the views of the Court in Pritish’s case (supra) were conflicting with the views of the other 3-judges’ Bench in Sharad Pawar v. Jagmohan Dalmiya, (2010) 15 SCC 290, to the extent that in para 7, it was observed that it was necessary to conduct a preliminary inquiry as contemplated under Section 340 CrPC. and also, to afford an opportunity of being heard to the defendants.

The Division Bench, in the reference order simultaneously noted the observations of the Constitution Bench in Iqbal Singh Marwah v. Meenakshi Marwah, (2005) 4 SCC 370, which was post the judgment in Pritish’s case (supra) but prior to the judgment in Sharad Pawar’s case (supra). In the said case, the Constitution Bench had opined:

“In view of the language used in Section 340 CrPC the Court is not bound to make a complaint regarding commission of an offence referred to in Section 195(1)(b), as the Section is conditioned by the words ‘Court is of opinion that it is expedient in the interest of justice.’ This shows that such a course will be adopted only if the interest of justice requires and not in every case. Before filing of the complaint, the Court may hold a preliminary enquiry and record a finding to the effect that it is expedient in the interests of justice that enquiry should be made into any of the offences referred to in Section 195(i)(b). This expediency will normally be judged by the Court by weighing not the magnitude of injury suffered by the person affected by such forgery or forged document, but having regard to the effect or impact, such commission of offence has upon administration of justice.”

Analysis and Conclusion

In the view of the above, the Court held that the Constitution Bench’s view would naturally prevail which makes the legal position quite abundantly clear. Additionally, the Court noted that what is reported in Sharad Pawar’s case (supra) is only an order giving factual scenario and not a judgment that lays down the principles of law. As a matter of caution, the Court remarked,

“The scenario is that any order or judgment passed by this Court becomes a reportable exercise to create more volumes of reported cases! This thus has a possibility at times of causing some confusion on the legal principles prevalent. The observations in the quoted paragraph extracted aforesaid apparently came out of the flow of the order rather than pronouncing any principles of law and that is why the Bench itself categorized what is observed as an order i.e, in the given factual scenario.”

Hence, the Court concluded that there is no question of opportunity of hearing in a scenario of this nature and the law as enunciated by the Constitution Bench in Iqbal Singh Marwah’s case (supra) is in line with what was observed in Pritish’ case (supra). Further, the Bench noted that interestingly both the aforesaid judgments had not been noted in order passed in Sharad Pawar’s Case (supra).

Consequently, the Court answered the first question negatively. Insofar as the second question is concerned, the Court held that scope and ambit of such a preliminary inquiry already stands resolved in terms of the Constitution Bench judgment in the Iqbal Singh Marwah’s case (supra). The matter is directed to be placed before the regular Bench for consideration on merits.

[State of Punjab v. Jasbir Singh, 2022 SCC OnLine SC 1240, decided on 15-09-2022]


Advocates who appeared in this case :

For Appellant(s): AOR Rooh-e-hina Dua, Advocates Harshit Khanduja, Kanishak Bunderwal, and Ananya Sikri

For Respondent(s): AOR Shubham Bhalla and Advocates Sumeir Ahuja, Akansha Gulati, and Deepak Samota


*Kamini Sharma, Editorial Assistant has put this report together.

Case BriefsSupreme Court

Supreme Court: In a suo motu case initiated to address the question as to whether the provision of pre-sentence hearing in capital punishment cases is mandatory or discretionary, the 3-judges Bench of Uday Umesh Lalit, CJ., and S. Ravindra Bhat*, Sudhanshu Dhulia, JJ., suggested that the matter be referred to a constitution Bench. Highlighting the apparent flaw of depriving the capital punishment convict of pre-sentence hearing, the Court held,

“In all cases where imposition of capital punishment is a choice of sentence, aggravating circumstances would always be on record, and would be part of the prosecution’s evidence, leading to conviction, whereas the accused can scarcely be expected to place mitigating circumstances on the record, for the reason that the stage for doing so is after conviction. This places the convict at a hopeless disadvantage, tilting the scales heavily against him.”

Question of Law

Due to a difference of opinion and approach amongst various judgments, on the question of whether, after recording conviction for a capital offence, the court is obligated under law to conduct a separate hearing on the issue of the sentence, the Bench had assembled to adjudicate the issue.

Validity of Capital Punishment and Valuable Safeguards

In Bachan Singh v. State of Punjab, (1980) 2 SCC 684, the majority upheld the constitutionality of the death sentence, on the condition that it could be imposed in the “rarest of rare” cases. The Court, being conscious of the safeguard of a separate hearing on the question of sentence, articulated it as a valuable right, which ensures to a convict, to urge why in the circumstances of his or her case, the extreme penalty of death ought not to be imposed. The Court noted,

“The present legislative policy discernible from Section 235 (2) read with Section 354 (3) is that in fixing the degree of punishment or making the choice of sentence for various offences the Court should not confine its consideration “principally” or merely to the circumstances connected with a particular crime, but also give due consideration to the circumstances of the criminal.”

Bifurcated Hearing: Inconsistent Precedents

Section 235 of the CrPC, 1973 which deals with judgment of acquittal or conviction, reads as follows: “235.’(1) After hearing arguments and points of law (if any), the Judge shall give a judgment in the case. (2) If the accused is convicted, the Judge shall, unless he proceeds in accordance with the provisions of Section 360, hear the accused on the question of sentence, and then pass sentence on him according to law.”

Hence, Section 235 (2) provides for a bifurcated trial and specifically gives the accused person a right of a pre-sentence hearing, at which stage, he can bring on record material or evidence, which may not be strictly relevant to or connected with the particular crime under inquiry, but nevertheless, have, consistently with the policy underlined in Section 354 (3) a bearing on the choice of sentence.

Precedents holding Bifurcated Hearing is of mandatory nature

In Santa Singh v. State of Punjab, (1976) 4 SCC 190, the Court had held that a separate stage should be provided after conviction when the court can hear the accused in regard to the factors bearing on sentence and then pass proper sentence on the accused—the nature of the offence, the circumstances of the offence (extenuating or aggravating), the prior criminal record of the offender, the age of the offender, the record of the offender as to employment, the background of the offender with reference to education, home life, sobriety and social adjustment, the emotional and mental condition of the offender, the prospects for the rehabilitation of the offender, the possibility of return of the offender to a normal life in the community, the possibility of treatment or training of the offender, the possibility that the sentence may serve as a deterrent to crime by the offender or by others and the current community need, if any, for such a deterrent in respect to the particular type of offence. In the aforesaid case, the Court had also noted,

“Of course, care would have to be taken by the court to see that this hearing on the question of sentence is not abused and turned into an instrument for unduly protracting the proceedings. The claim of due and proper hearing 8 would have to be harmonized with the requirement of expeditious disposal of proceedings.”

In Mithu v. State of Punjab, (1983) 2 SCC 277, the Court held that it is because the court has an option to impose either of the two alternative sentences, subject to the rule that the normal punishment for murder is life imprisonment, that it is important to hear the accused on the question of sentence. In Allauddin Mian v. State of Bihar, (1989) 3 SCC 5, the Court observed,

“To assist the court in determining the correct sentence to be imposed the legislature introduced sub-section (2) to Section 235. The said provision therefore satisfies a dual purpose; it satisfies the rule of natural justice by according to the accused an opportunity of being heard on the question of sentence and at the same time helps the court to choose the sentence to be awarded. Since the provision is intended to give the accused an opportunity to place before the court all the relevant material having a bearing on the question of sentence there can be no doubt that the provision is salutary and must be strictly followed. It is clearly mandatory and should not be treated as a mere formality.”

Similarly, other more recent three-judge decisions have also ruled that same day sentencing in capital offences violate the principles of natural justice, and is opposed to Section 235 (2).

Precedents Stating Bifurcated Hearing is merely discretionary

However, some the three-judge Benches have arrived at a different conclusion that same-day sentencing does not necessarily fall foul of Section 235(2) of the CrPC. This contrary line of cases are based on the premise that the court may adjourn for a separate hearing, but the absence of it would not in itself vitiate the sentence. In Dagdu v. State of Maharashtra, (1977) 3 SCC 68, a three-judge bench rejected the interpretation of Santa Singh case (supra) as laying down that failure on the part of the court to hear a convicted accused, on the question of sentence, would necessitate remand to the trial court. Instead, it held that such an omission could be remedied by the higher court by affording a hearing to the accused on the question of sentence, provided the hearing was “real and effective” wherein the accused was permitted to “adduce before the court all the data which he desires to be adduced on the question of sentence”.

Several decisions have since relied on Dagdu (supra), and concluded that the action of the court sentencing an accused on the same day as conviction in itself would not vitiate the sentence. The decision in Dagdu (supra) was in turn, followed by another three-judge bench in Tarlok Singh v. State of Punjab, (1977) 3 SCC 218. Similarly, in Ramdeo Chauhan v. State of Assam, (2001) 5 SCC 714, a similar conclusion was arrived at, but on differing reasoning. The Court held,

“While the accused facing the possibility of death sentence was not entitled to an adjournment, nothing barred the court from granting the same.”

Judicial Interpretation of “Sufficient Time”

The Court through its various judgments had held that “sufficient time must be given to the accused on the question of sentence”. The common thread that runs through all these decisions is the express acknowledgment that meaningful, real and effective hearing must be afforded to the accused, with the opportunity to adduce material relevant for the question of sentencing. However, the Court noted,

“What is conspicuously absent, is consideration and contemplation about the time this may require.”

In Manoj Pratap Singh v. State of Rajasthan, 2022 SCC OnLine SC 768, where ‘sufficient time’ for compliance with Section 235(2) CrPC was considered; it was concluded that the trial court had “scrupulously carried out its duty in terms of Section 235(2)” since the sentence was awarded 3 days after the conviction, after considering both the aggravating and mitigating circumstances. After hearing the parties on the question of conviction in Manoj v. State of M.P., 2021 SCC OnLine SC 3219, the Court had adjourned the matter for submissions on sentencing, with directions eliciting reports from the probation officer, jail authorities, a trained psychiatrist and psychologist, etc., to assist the accused in presenting mitigating circumstances. Noticing the lack of a uniform framework in this regard, the Court had initiated the present Suo Motu W.P. (Crl.) No. 1/2022 to address the necessity of working out the modalities of psychological evaluation, the stage of adducing evidence in order to highlight mitigating circumstances, and the need to build institutional capacity in this regard.

Conclusion

The Court, after observing that the social milieu, the age, educational levels, whether the convict had faced trauma earlier in life, family circumstances, psychological evaluation of a convict and post-conviction conduct, are relevant factors at the time of considering whether the death penalty ought to be imposed upon the accused, opined that it is necessary to have clarity in the matter to ensure a uniform approach on the question of granting real and meaningful opportunity, as opposed to a formal hearing, to the accused/convict, on the issue of sentence.

Consequently, the Court held that a reference to a larger bench of five Judges is necessary for this purpose and directed the matter to be placed before the Chief Justice of India for appropriate orders in this regard.

[Framing Guidelines Regarding Potential Mitigating Circumstances to be Considered while Imposing Death Sentences: In re, 2022 SCC OnLine SC 1246, decided on 19-09-2022]

*Judgment by: Justice S. Ravindra Bhat


*Kamini Sharma, Editorial Assistant has put this report together.

Case BriefsSupreme Court

Supreme Court: While adjudicating a case related to the Reliance Commercial Finance resolution, the 3-judges Bench comprising Dr. D Y Chandrachud*, Surya Kant, and A S Bopanna, JJ., was posed with a question as to whether the SEBI Standardisation of procedure Circular (13-10-2020) has retroactive application. The Court clarified,

“Many decisions of this Court define ‘retroactivity’ to mean laws that destroy or impair vested rights, in real terms, this is the definition of ‘retrospectivity’ or ‘true retroactivity’.”

On one hand, SEBI argued that the circular will have a retroactive application, on the other, Reliance Commercial Finance Ltd., argued that applying the circular on the instant case would make its application retrospective. The Court held that the SEBI Circular has retroactive application by relying on the following definitions:

In Principles of Statutory Interpretation by Justice G.P. Singh (14th Edn., 2016 at p. 583), it is stated that the rule against retrospective construction is not applicable to a statute merely because “a part of the requisites for its action is drawn from a time antecedent to its passing.” If that were not so, every statute will be presumed to apply only to persons born and things which come into existence after its operation and the rule may well result in virtual nullification of most of the statutes.

Significant Precedents

In Vineeta Sharma v. Rakesh Sharma, 2020 (9) SCC 1, the Court described the nature of prospective, retrospective, and retroactive laws as follows:

“The prospective statute operates from the date of its enactment conferring new rights. The retrospective statute operates backwards and takes away or impairs vested rights acquired under existing laws. A retroactive statute is the one that does not operate retrospectively. It operates in futuro. However, its operation is based upon the character or status that arose earlier. Characteristic or event which happened in the past or requisites which had been drawn from antecedent events.”

Noticing that the terms “retrospective” and “retroactive” are often used interchangeably, though their meanings are distinct, the Court referred to State Bank’s Staff Union (Madras Circle) v. Union of India, (2005) 7 SCC 584, where this difference was succinctly appreciated in the following words:

“’Retroactivity’ is used to cover at least two distinct concepts. The first, which may be called ‘true retroactivity’, consists in the application of a new rule of law to an act or transaction which was completed before the rule was promulgated. The second concept, which will be referred to as ‘quasi-retroactivity’, occurs when a new rule of law is applied to an act or transaction in the process of completion…the foundation of these concepts is the distinction between completed and pending transactions….” (T.C. Hartley, The Foundations of European Community Law 129 (1981)

Conclusion

The Court clarified that though many decisions of the Court define “retroactivity” to mean laws that destroy or impair vested rights, in real terms, this is the definition of “retrospectivity” or “true retroactivity”. “Quasi-retroactivity” or simply “retroactivity” on the other hand is a law that is applicable to an act or transaction that is still underway. Such an act or transaction has not been completed and is in the process of completion. Retroactive laws also apply where the status or character of a thing or situation arose prior to the passage of the law.

[SEBI v. Rajkumar Nagpal, 2022 SCC OnLine SC 1119, decided on 30-08-2022]


*Judgment by: Justice Dr. D Y Chandrachud


Appearance:

For SEBI: N Venkataraman, Senior Counsel & Additional Solicitor General

For RCFL: Darius Khambata, Senior Counsel

For Bank of Baroda: KV Viswanathan, Senior Counsel

For Authum Investment and Infrastructure Ltd.: Dhruv Mehta, Senior Counsel


*Kamini Sharma, Editorial Assistant has put this report together.


Also Read

SC upholds applicability of SEBI Circular; but gives a green signal to Reliance Commercial Finance resolution to avoid “unscrambling of resolution process”

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of NV Ramana, CJI and Krishna Murari and Hima Kohli, JJ has referred the question relating to interpretation of Schedule X of the Constitution pertaining to disqualification, as well as the powers of the Speaker and the Governor and the power of judicial review thereof, to the 5-judge Constitution bench.

In Nabam Rebia & Bamang Felix v. Deputy Speaker, Arunachal Pradesh Legislative Assembly, (2016) 8 SCC 1, a Constitution bench of this Court held as follows:

“193 We are, therefore, of the view that constitutional purpose and constitutional harmony would be maintained and preserved, if a Speaker refrains from adjudication of a petition for disqualification under the Tenth Schedule, whilst his own position, as the Speaker, is under challenge. This would also, allow the two provisions [Article 179(c) and the Tenth Schedule] to operate in their individual constitutional space, without encroaching on the other.”

The Court observed that this proposition of law laid down by the Constitution bench in Nebam Rebia case, stands on contradictory reasoning, which requires gap filling to uphold the constitutional morality. Hence, this question must be referred to Constitution bench for the requisite gap filling exercise to be conducted.

The Court has, hence, referred the following substantial questions of law relating to the interpretation of the Constitution to the 5-judge Constitution Bench:

  1. Whether notice for removal of a Speaker restricts him from continuing with disqualification proceedings under Tenth Schedule of the Constitution, as held by this Court in Nebam Rebia case?
  2. Whether a petition under Article 226 or Article 32 lies, inviting a decision on a disqualification petition by the High Courts or the Supreme Court, as the case may be?
  3. Can a Court hold that a member is “deemed” to be disqualified, by virtue of his/her actions, absent a decision by the Speaker?
  4. What is the status of proceedings in the House during the pendency of disqualification petitions against the members?
  5. If the decision of a Speaker that a member has incurred disqualification under the Tenth Schedule relates back to the date of the action complained of, then what is the status of proceedings that took place during the pendency of a disqualification petition?
  6. What is the impact of the removal of Paragraph 3 of the Tenth Schedule?
  7. What is the scope of the power of the Speaker to determine the Whip and the leader of the house legislature party? What is the interplay of the same with respect to the provisions of the Tenth Schedule?
  8. Are intra-party decisions amenable to judicial review? What is the scope of the same?
  9. What is the extent of discretion and power of the Governor to invite a person to form the Government, and whether the same is amenable to judicial review?
  10. What is the scope of the powers of the Election Commission of India with respect to determination of a split within a party?

[Subhash Desai v. Principal Secretary, Governor of Maharashtra, 2022 SCC OnLine SC 1062, order dated 23.08.2022]

Case BriefsSupreme Court

Supreme Court: In a case relating to pre-litigation mediation in commercial disputes, the bench of KM Joseph* and Hrishikesh Roy, JJ has stressed on making mediation a potent alternate dispute resolution device.

The Court listed down the following indispensable requirements that are necessary to achieve this goal:

  1. Existence of adequate infrastructural facilities and, what is more important, availability of trained and skilled Mediators. The role of the Mediator, as per Rule (5) of the Commercial Courts Act, 2015 (Pre-Institution Mediation and Settlement) Rules, 2018, is to facilitate the voluntary resolution of a commercial dispute and assist the parties in this regard.
  2. Availability in the number of Mediators in the country, particularly, in the light of lowering of the monetary valuation from Rs. 1 crore to Rs. 3 lakhs. It is all well to pass a law with sublime objects as in this case. However, the goal will not be realised unless the State Governments and all other relevant Authorities bestow their attention in the matter of providing adequate facilities.
  3. Knowledge of the laws, which are the subject matter of the suits under the Act, is indispensable for a Mediator to effectively discharge his duties. His role is supreme and it is largely shaped by his own knowledge of the law that governs commercial cases. There must be training by Experts, including at the State Judicial Academies. This must be undertaken on a regular and urgent basis, particularly keeping in mind when there is a dearth of trained mediators.
  4. There is a need to have a dedicated bar for mediation. The effective participation of the bar which must be adequately remunerated for its service will assist in mediation evolving. The concerned High Court may also undertake periodic exercise to establish a panel of trained mediators in District and Taluka levels as per need.

In the case at hand, the Court has held that the statutory pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015 is mandatory and any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11 of the Civil Procedure Code, 1908.

Pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015 mandatory; any violation would lead to rejection of plaint: SC

[PATIL AUTOMATION PRIVATE LIMITED v. RAKHEJA ENGINEERS PRIVATE LIMITED, 2022 SCC OnLine SC 1028, decided on 17.08.2022]


*Judgment by: Justice KM Joseph


For petitioner(s): AORs Ayush Negi, Santosh Krishnan, Arup Banerjee,

Advocates Chitanya Nikte, Vishakha Upadhyaya, Himanshu Tyagi,. Varnita Ojha, Sonam Anand

For Respondent(s): AORs Hetu Arora Sethi, Nikhil Swami

Advocates Saket Sikri, Ekta Kalra Sikri, Ajay Pal Singh Kullar, Vikalp Mudgal, Prabha Swami, Divya Swami

For Appellant: Senior Advocate Sanjeev Anand

Case BriefsSupreme Court

Supreme Court: The bench of KM Joseph and Hrishikesh Roy, JJ has held that the statutory pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015 is mandatory and any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11 of the Civil Procedure Code, 1908. This power can be exercised even suo moto by the court.

While this declaration has been directed to be effective from 20.08.2022 so that concerned stakeholders become sufficiently informed, the Court made clear that,

  • in case plaints have been already rejected and no steps have been taken within the period of limitation, the matter cannot be reopened on the basis of this declaration.
  • if the order of rejection of the plaint has been acted upon by filing a fresh suit, the declaration of prospective effect will not avail the plaintiff.
  • if the plaint is filed violating Section 12A after the jurisdictional High Court has declared Section 12A mandatory also, the plaintiff will not be entitled to the relief.

Going into the legislative intent, the Court highlighted that Section 12A of the 2015 Act was inserted to the Act by amendment in the year 2018 as a compulsory provision. The object of the Act and the Amending Act of 2018, unerringly point to at least partly foisting compulsory mediation on a plaintiff who does not contemplate urgent interim relief. The provision has been contemplated only with reference to plaintiffs who do not contemplate urgent interim relief. The Legislature has taken care to expressly exclude the period undergone during mediation for reckoning limitation under the Limitation Act, 1963.

Further, the language used in Section 12A of the 2015 Act, which includes the word ‘shall’, certainly, go a long way to assist the Court to hold that the provision is mandatory. The entire procedure for carrying out the mediation, has been spelt out in the Rules. The parties are free to engage Counsel during mediation. The expenses, as far as the fee payable to the Mediator, is concerned, is limited to a one-time fee, which appears to be reasonable, particularly, having regard to the fact that it is to be shared equally.

Noticing that the statute which has generated the controversy is the Amending Act of year 2018, the Court observed that,

“The Amending Act containing certain Section 12A is a toddler. The law necessarily would have teething problems at the nascent stage.”

The Court, further, observed that is an undeniable reality that Courts in India are reeling under an extraordinary docket explosion. Mediation, as an Alternative Dispute Mechanism, has been identified as a workable solution in commercial matters.

The Court observed that it is an undeniable reality that Courts in India are reeling under an extraordinary docket explosion. Mediation, as an Alternative Dispute Mechanism, has been identified as a workable solution in commercial matters.

“A trained Mediator can work wonders. Mediation must be perceived as a new mechanism of access to justice.”

Hence, any reluctance on the part of the Court to give Section 12A, a mandatory interpretation, would result in defeating the object and intention of the Parliament. The fact that the mediation can become a non-starter, cannot be a reason to hold the provision not mandatory.

[PATIL AUTOMATION PRIVATE LIMITED v. RAKHEJA ENGINEERS PRIVATE LIMITED, 2022 SCC OnLine SC 1028, decided on 17.08.2022]


*Judgment by: Justice KM Joseph


For petitioner(s): AORs Ayush Negi, Santosh Krishnan, Arup Banerjee,

Advocates Chitanya Nikte, Vishakha Upadhyaya, Himanshu Tyagi,. Varnita Ojha, Sonam Anand

For Respondent(s): AORs Hetu Arora Sethi, Nikhil Swami

Advocates Saket Sikri, Ekta Kalra Sikri, Ajay Pal Singh Kullar, Vikalp Mudgal, Prabha Swami, Divya Swami

For Appellant: Senior Advocate Sanjeev Anand

Case BriefsSupreme Court

Supreme Court: The Division Bench of M.R. Shah* and Sanjiv Khanna, JJ., reversed concurrent findings of the Arbitral Tribunal and the Delhi High Court rejecting the National Highway Authority of India’s (NHAI) application to file a counter-claim in a commercial dispute. The Court held, 

“When there is a provision for filing the counter-claim – set off, which is expressly inserted in Section 23 of the Arbitration Act, 1996, there is no reason for curtailing the right of the appellant for making the counter-claim or set off. If we do not allow the counter-claim made by the NHAI in the proceedings arising out of the claims made by the Contractor, it may lead to parallel proceedings before various fora.” 

Continuous Breach of Contract and Its Subsequent Termination  

NHAI and the respondent-contractor entered into an Engineering Procurement and Construction (EPC) Agreement (hereinafter “the Contract”) in respect of the improvement/augmentation of two laning with paved shoulders of National Highway 210 under National Highways Development Project (NHDP) PHASE-III.  

According to NHAI, the Contractor was in continuous breach of specific obligations under the Contract for which a cure period notice was issued calling upon the Contractor to cure the defaults within 60 days. When the Contractor failed to cure the defects pointed, a notice of intention to terminate the Contract was issued. Having found the Contractor’s reply totally unsatisfactory, the NHAI issued a termination notice under Clause 23.1.2 of the Contract.  

Commencement of Arbitration 

Aggrieved by the untimely termination of the contract, the Contractor invoked the arbitration clause. NHAI joined the arbitration and after two days of filing the Statement of Defence, it sent a letter to the Arbitral Tribunal seeking extension of time for filing the counter-claim which was rejected by the Tribunal, essentially on the ground that the procedure under Clauses 26.1 and 26.2 of the contract had not been followed by the NHAI and therefore, the counter-claim was beyond the scope of the arbitration agreement and adjudication of the said dispute was beyond the jurisdiction of the Tribunal.  

Particularly, the Tribunal held that the counter-claim was a dispute which needed to be first amicably settled by way of conciliation as mandated by Clause 26 and, only then it could be taken to arbitration.  

To challenge the aforementioned order, NHAI preferred the appeal under Section 34 of the Arbitration Act, 1996 before the Delhi High Court. The High Court dismissed the appeal and confirmed the order passed by the Arbitral Tribunal. 

Contentions of the Parties 

NHAI submitted that both in the termination notice as well as in the Statement of Defence, it had reserved its right to claim damages and stated that it would file its counter-claim separately. Hence, it could not be said that claim was raised by surprise or by way of counterblast. Further, the counter-claim was not a separate ‘dispute’ but rather a ‘claim’ and Clause 26 does not contemplate repeated invocation of the same procedure when there is an overlapping cause of action. 

Contesting the stand taken by NHAI, the contractor contended that mere reservation of rights would not entitle either party to bypass the contractually agreed mechanism under Clause 26. Since the EPC Contract does not contemplate parties raising claims by directly resorting to arbitration without going through the steps set out in Clause 26; i.e., Step 1: Notification of Disputes and Step 2: Resolution by amicable settlement.  

Factual Analysis  

Whether Counter Claim was a separate dispute?  

Under the contract, both the parties are given the opportunity to resolve the dispute amicably through conciliation, and thereafter the “Dispute”, which is not resolved shall have to be finally settled by arbitration. Noting that the cause of dispute was the termination of the contract by the NHAI, the Court stated,  

It may be true that in a given case, the “Dispute” may include the claims and/or counter-claims, but, at the same time, the main dispute can be said to be termination of the contract, which as observed hereinabove was required to be resolved through conciliation after following the procedure as above.”  

Hence, opining that NHAI’s request to file counter-claim was a “claim” and not a “dispute”, the Court held that both the Arbitral Tribunal as well as the High Court had failed to appreciate the difference between the expressions “claim”, which may be made by one side and “Dispute”, which by its definition has two sides.  

Whether NHAI bypassed the agreed procedure?  

The Court noted that from the very beginning, the NHAI reserved its right to claim damages, and even in the Statement of Defence, it claimed such a set off of Rs.1.23 crores and also specifically stated it reserved its right to file the counter-claim. Further, there was no delay at all on the part of the NHAI initially praying for an extension of time to file the counter-claim and/or thereafter to file the application under Section 23(2A) permitting it to place on record the counter-claim.  

The Court ruled that once it was established that the counter-claim was a “claim” and not a “dispute” there was no requirement to follow the procedure mentioned under Clause 26, much less a question to bypass the procedure. The Court said,  

“Once any dispute, difference or controversy is notified under Clause 26.1, the entire subject matter including counter-claim/set off would form subject matter of arbitration as ‘any dispute which is not resolved in Clauses 26.1 and 26.2’.” 

Therefore, the Court opined that not permitting the NHAI to file the counter-claim would defeat the object and purpose of permitting to file the counter-claim/set off as provided under Section 28 23(2A) of the Arbitration Act, 1996. 

Findings and Conclusion 

In the light of the above, the Court held that by such a narrow interpretation, the Arbitral Tribunal had taken away the valuable right of the NHAI to submit counter-claim; thereby negotiating the statutory and contractual rights of the NHAI and paving way for a piecemeal and inchoate adjudication. Similarly, the High Court had seriously erred by making a narrow interpretation of Clause 26 while confirming the order passed by the Arbitral Tribunal. 

Consequently, the Arbitral Tribunal order and the impugned judgment of the High Court were quashed and set aside. NHAI’s application to file the counter-claim was allowed. Additionally, the Court directed the time spent in litigation (the period between 18-07-2017 till 11-07-2022) be excluded from computing the period of the passing of the award under Section 29A of the Arbitration Act, 1996.  

[National Highway Authority of India v. Transstroy (India) Ltd., 2022 SCC OnLine SC 832, decided on 11-07-2022]  


*Judgment by: Justice M. R. Shah  

Appearance by:  

For NHAI: ASG Madhavi Diwan 

For the Contractor: Senior Advocate Nakul Dewan 


Kamini Sharma, Editorial Assistant has put this report together 

Punajb and Haryana High Court
Case BriefsHigh Courts

Punajb and Haryana High Court: In a petition filed under section 439 CrPC for grant of regular bail under Sections 22, 25, 27-A and 29 of the NDPS Act, Jasjit Singh Bedi, J, reiterating the observations made by various Courts including the Supreme Court on the mandatory compliance of section 42 of the NDPS Act by the concerned authority (in this case, the police), enlarged the petitioner-accused on bail. The Court observed that,

“Violation of the mandatory provisions of the Act would entitle the accused to the grant of bail even if the recovery is of commercial quantity of contraband”

The brief facts of the case are that a secret informer informed the police about the accused-petitioner’s habitual selling of intoxicating tablets and it was further informed by him that the accused-petitioner was going to sell the tablets to his customers arriving in a white colour Activa scooter on the side of the drain bridge at Bathinda road. Founding the information reliable, a ruqa was sent to the police station concerned for registering the FIR against the accused-petitioner. During the course of investigation the check post was installed and the accused-petitioner was apprehended and 2000 strips, each strip containing 10 tablets i.e. 20,000 intoxicating tablets of Tramadol Hydrochloride labeled as Radol-100 were recovered from him. During the interrogation, he disclosed the names of co accused persons in the present case.

The counsel for the accused applicant made a submission that since no communication of the secret information received was sent to the superior officer within 72 hours and no reasons were recorded as to why warrants/authorization could not be obtained prior to conducting the raid/setting up of a naka after sunset, the search and seizure was completely vitiated as Section 42 of the NDPS Act has been violated and the mandatory provisions of the act would entitle the accused-petitioner to the grant of bail even if the recovery is of commercial quantity of contraband.

The counsel for the state on the other hand contended that since the plastic bag containing the intoxicating tablets had fallen on the ground and when the active scooter slipped it could not be said that the contraband was kept or concealed in any conveyance and, therefore, Section 42 of the NDPS Act would not be attracted. He further contended that due to heavy recovery being effected from the accused-petitioner, he could not be enlarged on bail.

The Court referred to various judgments of the Supreme Court and the High Courts, wherein it was held that delayed compliance with a satisfactory explanation for the delay can still be countenanced but total non-compliance with the provisions of Section 42(2) is impermissible, etc. On finding that the secret information was never received in writing, the Court held that there has been complete non-compliance of the provisions of Section 42(2) of the NDPS Act.

The Court, hence, recorded a prima facie satisfaction under Section 37 of the NDPS Act that there are reasonable grounds to believe that the petitioner is not guilty of the offence and was not likely to commit any offence while on bail as he has clean antecedents. He was, hence, directed to be released on bail.

[Pankaj v. State of Punjab, 2022 SCC OnLine P&H 1296, decided on 14-06-2022]


Advocates who appeared in this case :

Parminder Singh Sekhon, Advocate, for the petitioner;

Punjab Kirat Singh Sidhu, Deputy Advocate General, for the Respondent.

Case BriefsSupreme Court

Supreme Court: In an insurance repudiation case the Division Bench of Ajay Rastogi and Abhay S. Oka*, JJ., held that where the insurance policy expressly defines a term the insurance company cannot rely on Statutory interpretation of the same to repudiate the insurance claim.  

The Court reversed National Consumer Disputes Redressal Commission’s (NCDRC) judgment by which it had held that the insurance company was justified in repudiating the claim.   

Factual Backdrop  

The appellant had taken Standard Fire and Special Perils Policy from the insurance company in respect of his Engineering Workshop and Plant. The total sum assured was Rs.26,00,00,000 under the policy covering the loss on account of fire, lightning, explosion, riots, strike etc.  

As per the claim made by the appellant, after midnight of 22-03-2010, about 50­60 antisocial people with arms and ammunition entered the factory premises of the appellant and caused substantial damage to the factory, machinery, and other equipment. The mob demanded money and jobs for local people. The appellant contended that the object of the incident was to terrorise the management of the appellant and workers in the factory by forcing them to pay a ransom to the miscreants. 

The appellant lodged a regular claim with the insurance company. The surveyor assessed the loss at Rs.89,43,422 while the appellant claimed that the insurance company was liable to make an interim payment of Rs.1.5 crores.   However, the insurance company repudiated the appellant’s claim relying on the Exclusion Clause of the policy regarding loss or damage caused by the acts of terrorism.  

Findings of NCDRC  

Therefore, the appellant approached NCDRC complaining about deficiency in the service offered by the insurance company. By the impugned judgment and order, the NCDRC held that because of the “Terrorism   Damage   Exclusion   Warranty”; i.e., the Exclusion Clause, the insurance company was justified in repudiating the claim of the appellant. The NCDRC held that the damage caused to the factory and equipment of the appellant was due to an act of terrorism. 

Analysis and Findings  

The Exclusion Clause of the policy defined the act of terrorism as—“the actions can be termed as acts of terrorism provided the same are committed for political, religious, ideological or similar purposes.   The words ‘similar purposes’ will have to be construed ejusdem generis.” 

Noticeably, the repudiation of the policy was based on the Preliminary Survey Report, Investigation Report, and the Final Survey Report.   However, the Court noted that the Survey Reports could not throw any light on the question whether there was an act of terrorism, the Investigation Report did not conclusively prove that the persons involved in the incident belonged to Maoist or similar groups. Similarly, the FIR and Closure Report did not refer to acts of terrorism as defined under the Exclusion Clause, rather it showed that the police had registered a case against 105 miscreants who could not be traced. 

Therefore, the Court held that the insurance company had not discharged the burden of bringing the case within the four corners of the Exclusion Clause.  

The insurance company had argued that since the police had invoked Section 17 of the Criminal Law (Amendment) Act, 1908 against the miscreants for unlawful association, the very fact that the provisions of the Amendment Act of 1908 had been applied showed that the loss caused to the appellant was due to a terrorist act. The Court, rejecting the contention of the insurance company held, 

“When the policy itself defines the acts of terrorism in the Exclusion Clause, the terms of the policy being a concluded contract will govern the rights and liabilities of the parties.  Therefore, the parties cannot rely upon the definitions of ‘terrorism’ in various penal statutes since the Exclusion Clause contains an exhaustive definition of acts of terrorism.” 

Conclusion 

Thus, the Court concluded that the NCDRC had committed an error by applying the Exclusion Clause. The policy specifically covered the damage caused by riots or violent means. Hence, the Court held that the decision to repudiate the policy could not be sustained.  

Resultantly, the impugned order was set aside. However, noting that adjudication would have to be made on the quantum of the amount payable to the appellant after appreciating the evidence on record, including the valuation reports, the Court remanded the matter to the NCDRC for reconsideration. Further, relying on the expected damage estimated by the insurance company’s valuer, the Court directed the insurance company to deposit a sum of Rs.89,00,000 with the NCDRC with liberty to the appellant to make an application for withdrawal. 

[Narsingh Ispat Ltd. v. Oriental Insurance Co. Ltd., 2022 SCC OnLine SC 535, decided on 02-05-2022] 


*Judgment by: Justice Abhay S. Oka 


Appearance by:  

For the Appellant: Santosh Kumar, Advocate  

For the Insurance company: Santosh Paul, Senior Advocate  


Kamini Sharma, Editorial Assistant has put this report together  

Case BriefsSupreme Court

Supreme Court: The 3-judge Bench comprising Uday Umesh Lalit, S. Ravindra Bhat*, Pamidighantam Sri Narasimha, JJ., reversed NCDRC’s findings where it had relied on third-party DGFT Guidelines to interpret the date of ‘despatch/shipment’ in the Single Buyer Exposure Policy of the respondent, and thereby deny the appellant’s claim.

The respondent had treated the date on which loading commenced as the date of despatch/shipment’ to reject the appellant’s insurance claim. Deciding the case in favour of the appellant, the Court held,

“The term ‘despatch’ contained in the policy implied ‘completion’ of handing over of possession of the goods to the first carrier (the ship), and not the date on which the loading ‘commenced’ such an interpretation would give rise to an absurdity.”

Factual Matrix

The appellant was an exporter of fish meat and fish oil, who had obtained an insurance cover of ₹ 2.45 crores for foreign buyers’ failure to pay for goods exported from Export Credit Guarantee Corporation Ltd. (ECGC), a government company (under the control of the Ministry of Commerce and Industry, Union Government). ECGC provides a range of credit risk insurance cover to exporters.

The vessel (Tiger Mango Voyage 62) set sail on 15-12-2012. The Bill of Lading was prepared on 19-12-2012, with a line specifying the date of ‘onboard’ (i.e., date on which vessel commenced loading the goods in question on board) as 13-12-2012. The vessel delivered the goods on 22-01-2013, however, the overseas buyer defaulted on payment which gave rise to the appellant’s claim lodged with ECGC on 14-02-2013.

ECGC rejected the appellant’s claim stating that since the date of ‘despatch/shipment’ was not clearly defined in the policy, reliance was to be placed on the definition contained in the Directorate General of Foreign Trade (DGFT) Guidelines. As per which, for containerized cargo, the date of ‘despatch/shipment’ was to be interpreted as the date of ‘Onboard Bill of Lading’, which was 13-12-2012, i.e., a day prior to the effective date of the Policy, i.e., 14-12-2012. Therefore, ECGC reasoned that the appellant was not entitled to the claim amount.

The appellant, feeling aggrieved, complained of deficiency of service, and approached the NCDRC for compensation. By the impugned order, NCDRC upheld the rationale of the ECGC and rejected the appellant’s claim.

Analysis and Conclusions

Common Business Sense

Rejecting the interpretation of the terms ‘despatch/shipment’ as construed by ECGC, the Court opined that in event of confusion the disputed terms need to be interpreted in a common business sense. The Court stated,

“The date of loading goods onto the vessel, which commenced one day prior to the effective date of the policy, is not as significant as the date on which the foreign buyer failed to pay for the goods exported, which was well within the coverage period of the Policy.”

Reliance was placed by the Court on Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd., (2006) 12 SCC 673, to hold that while interpreting insurance contracts, the risks sought to be covered must also be kept in mind. Further, the Court opined that the date of loading the goods onto the vessel was immaterial to the purpose for which the policy was taken by the appellant. The Court noted,

“A plain reading of the policy in question demonstrates that it was taken to protect against failure of the foreign buyer in paying the Indian exporter for goods exported. It was not a policy taken to cover in-transit insurance, and the cause of action triggering the claim arose much later, i.e., on 14.02.2013, well within the coverage of the policy.”

Interpretation of Despatch/Shipment

The Court opined that on harmoniously construing the documents of the policy, it is, in fact, the date on the Bill of Lading, and not the Mate’s Receipt/date of shipment which ought to be considered as the date of ‘despatch/shipment’, for the Bill of Lading is the legal document conferring title and possession of the goods to the carrier. Therefore, the Court held that reliance on the DGFT Guidelines to disallow the claim of the appellant was not good in law.

Further, the Court observed that even if the third-party DGFT Guidelines were to be applied, it would not favour the ECGC, as a plain reading of provision 9.12 of the guidelines shows that the date on the Bill of Lading has to be considered as the date of despatch/shipment.

Conclusion

In the backdrop of above, the impugned order of the NCDRC was set aside; the appellant’s complaint was consequently allowed. ECGC was directed to pay the claim amount of Rs. 1,96,38,400/- crores to the appellant, with interest at the rate of 9% p.a.

[Haris Marine Products v. Export Credit Guarantee Corpn. Ltd., 2022 SCC OnLine SC 509, decided on 25-04-2022]


*Judgment by: Justice S. Ravindra Bhat


Appearance by:

For the Appellant: Ms Anjana Prakash, Senior Advocate

For the ECGC: Mr Rajnish Kumar Jha, Advocate


Kamini Sharma, Editorial Assistant has put this report together


Case BriefsSupreme Court

Supreme Court: The 3-judge bench of L. Nageswara Rao, BR Gavai* and AS Bopanna, JJ has held that a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the   meaning of clause (8) of Section 5 of the IBC. Consequently, the holder of the Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC. As such, the holder of such certificate would be entitled to initiate CIRP, if initiated within a period of three years from the date of issuance of the Recovery Certificate.

The Court explained that the words “means a debt along with interest, if any, which is disbursed against the consideration for the time value of money” are followed by the words “and includes”. By employing the words “and includes”, the Legislature has only given instances, which could be included in the term “financial debt”.  However, the list is not exhaustive but inclusive.

“The legislative intent could not have been to exclude a liability in respect of a “claim” arising out of a Recovery Certificate from the definition of the term “financial debt”, when such a liability in respect of a “claim” simpliciter would be included in the definition of the term “financial debt”.”

Observing that the trigger point for initiation of CIRP is default of claim, the Court further explained that “default” is non-payment of debt by the debtor or the Corporate Debtor, which has become due and payable, as the case may be, a “debt” is a liability or obligation in respect of a claim which is due from any person, and a “claim” means a right to payment, whether such a right is reduced to judgment or not. It could thus be seen that unless there is a “claim”, which may or may not be reduced to any judgment, there would be no “debt” and consequently no “default” on non-payment of such a “debt”.

“When the “claim” itself means a right to payment, whether such a right is reduced to a judgment or not, we find that if the contention of the respondents, that merely on a “claim” being fructified in a decree, the same would be outside the ambit of clause (8) of Section 5 of the IBC, is accepted, then it would be inconsistent with the plain language used in the IBC.”

Hence, taking into consideration the object and purpose of the IBC, the legislature could never have intended to keep a debt, which is crystallized in the form of a decree, outside the ambit of clause (8) of Section 5 of the IBC.

[Kotak Mahindra Bank Ltd. v. A. Balakrishnan, 2022 SCC OnLine SC 706, decided on 30.05.2022]


*Judgment by: Justice BR Gavai

Case BriefsSupreme Court

Supreme Court: The bench of Hemant Gupta and V. Ramasubramanian*, JJ has held that an ad hoc payment made to the workers pursuant to the interim orders passed by this Court in a previous round of litigation does not form part of “wages” within the meaning of the expression under Section 2(s) of the Payment of Gratuity Act, 1972, for the purpose of calculating gratuity.

Factual Background

The scales of pay of the employees of public sector undertakings were revised w.e.f. 01.01.1992.

When the benefit of such revision was not made available to the employees of Fertiliser Corporation of India Limited and Hindustan Fertiliser Corporation Limited, their employees moved writ petitions in various High Courts, in the year 1996.

The writ petitions pending on the file of various High Courts were transferred to the Supreme Court.

By an interim order dated 18.08.2000, the Supreme Court directed an ad hoc monthly payment of Rs.1500/¬, Rs.1000/-, Rs.750/¬ and Rs.500/¬, respectively to four different categories of employees, as an interim measure, subject to the final outcome of the writ petitions which stood transferred to this Court.

In the final order, the Supreme Court held that economic viability or the financial capacity of the employer is an important factor which cannot be ignored while fixing the wage structure and that the materials on record clearly revealed that both these companies were suffering heavy losses for several years. It also made it clear that what was paid was only ad hoc.

Once the curtain was finally drawn on their very employment, the Controlling Authority started passing orders in the applications filed by the employees individually, treating the ad hoc payment as part of the wages.

The Management of these companies moved an application before the Supreme Court for clarification/modification of the order. On 01.05.2008, the Supreme Court disposed of the interim application by just observing that when the final order is passed, the interim order automatically comes to an end.

Analysis

Section 2(s) of the Act defines wages, as follows:-

“wages” means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employments and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.”

The Court explained that the definition of the expression is in 3 parts,

  • the first part indicating the meaning of the expression,
  • the second part indicating what is included therein and
  • the third part indicating what is not included therein.

In the first part of the definition, the emphasis is on what is earned by the employee “in accordance with the terms and conditions of employment”.

Hence, irrespective of whether what was earned has been paid or remained payable, the same is included in the definition, provided it is in accordance with the terms and conditions of his employment.

The Court also took note of the ruling in Straw Board Manufacturing Co. Ltd. v. Workmen, (1977) 2 SCC 329, wherein it was held that:

“We clarify that wages will mean and included basic wages and Dearness Allowance and nothing else”.

The Court also observed that it is a fundamental principle of law that a party who is in enjoyment of an interim order, is bound to lose the benefit of such interim order when the ultimate outcome of the case goes against him.

“Merely because of the fortuitous circumstance of the Voluntary Separation Scheme coming into effect before the transferred cases were finally dismissed by this Court by an order dated 25.04.2003, creating an illusion as though the last drawn pay included this  ad hoc  payment, it is not possible to go against the fundamental rule that the benefits of an interim order would automatically go when the party who secured it, failed in the final stage.”

Keeping in mind the above definition, if we go back to historical facts, it would be clear that the employees initiated the first round of litigation before various High Courts, for the grant of the benefit of revision of pay scales, way back in the year 1996, on the ground that the employees of other PSUs have been granted revision on par with the Government servants. It will thus be clear that what was claimed in the first round of litigation was not what was payable in accordance with the terms and conditions of employment. Therefore, this Court was clear in its interim order dated 18.08.2000 as to how 1the ad hoc payment ordered there under should be treated. Even in the final order, this Court made it clear that what was paid was only ad hoc.

The Court, hence, held that the ad hoc payment made pursuant to the interim orders will not form part of the wages. However, in view of the efflux of time and taking into account the fact that few employees are now no more, the Court directed the Management not to effect any recovery, if payment has already been made to any of the respondents or their families.

[Fertilizer Corporation of India Ltd. v. Rajesh Chandra Srivastava, 2022 SCC OnLine SC 417, decided on 07.04.2022]


*Judgment by: Justice V. Ramasubramanian

Case BriefsSupreme Court

Supreme Court: Harmoniously interpreting Section 2 (9), Sections 39A and 56 of the Maharashtra Municipal Corporations Act, 1949 (MMC Act), the bench of L. Nageswar Rao and BR Gavai*, JJ has held that the Commissioner of the Municipal Corporation will have the power to suspend or initiate departmental proceedings against an Additional Municipal Commissioner (AMC), who is an officer, superior in rank to the Assistant Commissioner. However, in case of suspension of such an officer, the only requirement would be to report to the Corporation, with reasons thereof, and if such a suspension is not confirmed by the Corporation within a period of six months from the date of such suspension, the same shall come to an end.

Stating that any other interpretation would lead to absurdity and anomaly, and therefore will have to be avoided, the bench observed that

“… the intention of the legislature would not have been to lead to such an absurd and anomalous situation. A legislative intent cannot be to leave an employee scot-free though he has indulged into serious misconduct.”

Relevant Provisions

  • In the definition of the “Commissioner” under Section 2(9), though an acting Commissioner appointed under Section 39 of the MMC Act has been included, an AMC appointed under Section 39A of the MMC Act has not been included.
  • Under Section 39A of the MMC Act, though the AMC will exercise all or any of the powers and perform all or any of the duties and functions of the Commissioner, the same shall be subject to the control of the Commissioner. No doubt, that the AMC would be subject to the same liabilities, restrictions and terms and conditions of service, to which the Commissioner of the Corporation is subjected. However, the legislative intent is clear that the powers to be exercised by AMCs would be subject to the control of the Commissioner.
  • Under Section 56(1), a competent authority is entitled to impose any of the penalties specified in Section 56 (2) on a municipal officer or servant if such authority is satisfied that such officer or servant is guilty of breach of departmental rules or discipline or of carelessness, neglect of duty or other misconduct or is incompetent.
    1. Clause (a) of the proviso to Section 56 (1), however, provides that no municipal officer or servant holding the post equivalent to or higher in rank than the post of the Assistant Commissioner, shall be dismissed by the Commissioner without the previous approval of the Corporation.
    2. Clause (b) of the proviso to Section 56(1) enables the Commissioner to suspend any officer or servant, whether appointed by the Corporation or any other competent authority, except Transport Manager being a Government Officer on deputation, pending an order of the Corporation. It further provides that when the officer suspended is a Transport Manager or an officer appointed under Section 45 of the MMC Act, such suspension with reasons thereof, shall, forthwith be reported by the Commissioner to the Corporation. It further provides that such a suspension shall come to an end if not confirmed by the Corporation within a period of six months from the date of such suspension.
  • Whereas, the Commissioner is empowered to suspend any officer or servant, whether appointed by the Corporation or any other competent authority, in case of a Transport Manager being a Government Officer on deputation or any officer appointed under Section 45 of the 21 MMC Act, the Commissioner is required to report such a suspension with reasons thereof, to the Corporation. It further provides that such suspension shall come to an end if not confirmed by the Corporation within a period of six months from the date of such suspension.

Analysis

On a conjoint reading of the aforesaid provisions of the MMC Act, the Court observed that though a competent authority may impose any of the penalties on a municipal officer or servant, no municipal officer or servant holding the post equivalent to or higher in rank than the post of an Assistant Commissioner, shall be dismissed by the Commissioner without the previous approval of the Corporation.

The Court explained that the legislature has created two classes of the municipal officers and servants.  One class is of the municipal officers and servants, other than the ones holding the post equivalent to or higher in rank than the post of an Assistant Commissioner. In this category, a competent authority may   impose the penalties as provided under the provisions of the MMC Act. The other class of municipal officers is of the persons holding the post equivalent to or higher in rank than the post of Assistant Commissioner. The officers in such a class can be dismissed only by the Commissioner and that too with the previous approval of the Corporation.

Observing that the term “post equivalent to or higher in rank than the post of Assistant Commissioner”   cannot be construed in a narrow compass, the Court held that clause (a) of subsection (1) of Section 56 of the MMC Act would also include the post of AMC.

The Court disagreed with the finding of the Bombay High Court that in view of Section 39A of the MMC Act, the Commissioner or the Corporation will not have power to suspend or initiate departmental inquiry against the AMC, and held that the same is in ignorance of the provisions of Section 56 and sub¬section (9) of Section 2 of the MMC Act.

“The court should not always cling to literal interpretation and should endeavor to avoid an unjust or absurd result. The court should not permit a mockery of legislation. It has been held that to make sense out of an unhappily worded provision, where the purpose is apparent to the judicial eye, ‘some’ violence to language is also permissible.”

[Kalyan Dombivali Municipal Corporation v. Sanjay Gajanan Gharat, 2022 SCC OnLine SC 385, decided on 31.03.2022]


*Judgment by: Justice BR Gavai


Counsels

For KDM Corporation: Senior Advocate P.S. Patwalia

For State: Advocate Rahul Chitnis

For Respondent: Advocate Anupam Lal Das

Case BriefsSupreme Court

Supreme Court: The Division Bench of L. Nageswara Rao and Vineet Saran*, JJ., quashed the confiscation order of Customs and Central Excise Commission confiscating land, building, plant and machinery of Rathi Ispat Ltd. for lacking statutory backing. The Bench observed that the existing law only permit confiscation of goods and no land, building can be confiscated under the Central Excise Rules, 2017.

Chronology of Events

  • The Commissioner, Customs and Central Excise, Ghaziabad (Commissioner) had imposed a penalty of Rs.7,98,03,000 and confiscated the land, building, plant and machinery of Rathi Ispat Ltd. (RIL) under Rule 173Q(2) of the Central Excise Rules, 1944 on 25-11-1997.
  • However, the said order was set aside by the Customs, Excise & Gold (Control) Appellate Tribunal (now CESTAT) for being contrary to principles of natural justice, and the matter was remanded back for de novo proceedings.
  • Subsequently, subrule 2 of Rule 173Q of the Central Excise Rules, 1944, came to be omitted by a notification dated 12-05-2000.
  • In 2005, RIL availed credit from the consortium of banks with the Appellant/Punjab National Bank being the lead bank, and mortgaged all its movable and immovable properties for securing the loan.
  • By the order dated 26-03-2007, the Commissioner confirmed the demand of excise duty of Rs.7,98,02,226 and a penalty of Rs.7,98,03,000 on RIL. The Commissioner also ordered, under rule 173Q(2) of the 1944 Rules, for the confiscation of all the land, building, plant, machinery and materials used in connection with manufacture and storage.
  • Similarly, the Central Excise Commissioner, vide order dated 29-03-2007, confirmed a demand of central excise duty amounting to Rs.2,67,00,348 and Rs.74,24,332 from RIL and also imposed a penalty of Rs.3,41,24,68 and further, under rule 173Q(2) of the 1944 Rules, ordered confiscation of land, building, plant, machinery, material, conveyance etc.

RIL’s Default in Clearing the Loan

Since RIL defaulted in clearing the loan amount and had failed to liquidate outstanding dues, the Appellant bank issued notice to RIL under section 13(2) of the SARFAESI Act, 2002, however, Commissioner, Customs and Central Excise had already confiscated the property by virtue of Rule 173Q(2) of Rules, 1944. Aggrieved, the appellant bank approached the Allahabad High Court with its grievances, however dismissing the petition, the High Court held that if any property has been confiscated it vests in the state and no person can claim any right, title, or interest over it, further the High Court opined that the bank had no locus standi to challenge the order as RIL had already preferred an appeal against confiscation.

Question of Law

  1. Whether the Commissioner could have invoked the powers under Rule 173(Q)(2) of Central Excise Rules, 1944 on 26-03-2007 and 29-03-2007 when on such date, the rule 173Q(2) was not on the Statue Book having been omitted w.e.f. 17-05-2000?
  2. Whether in the absence of any provisions providing for First Charge in relation to Central Excise dues in the Central Excise Act, 1944, the dues of the Excise department would have priority over the dues of the Secured Creditors or not?

Validity of Confiscation Order

The Bench noted that in the impugned order, the High Court had not considered that on the date of the confiscation orders Rule 173Q(2) stood omitted from the statute books. Rejecting the contention of the respondent that notwithstanding the omission of Section 173Q(2) from the 1944 Rules the proceedings were entitled to continue on account of Section 38A(c) and Section 38A(e) of the Central Excise Act, 1944, read along with Section 6 of the General Clauses Act, 1897 as misplaced and lacking statutory backing, the Bench opined that the proceedings initiated under the erstwhile Rule 173Q(2) would come to an end on the repeal of the said Rule 173Q(2).

The Bench followed the decision of Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536, wherein it had been held that Section 6 of the General Clauses Act, 1897 is applicable where any Central Act or Regulation made after commencement of the General Clauses Act repeals any enactment. It is not applicable in the case of omission of a “Rule”. Secondly, Section 38A(c) and 38A(e) of the Central Excise Act, 1944, are attracted only when “unless a different intention appears”.

Noticeably, in the instant case the legislature had clarified its intent to not restore/revive the power of confiscation of any land, building, plant machinery etc., after omission of the provisions which could be inferred from the fact that power to confiscate any land, building, plant, machinery etc. after omission had not been introduced in the subsequent Central Excise Rules, 2001, Central Excise Rules, 2002 and Central Excise Rules, 2017.

Additionally, this intent was also fortified by the fact that the newly enacted Rule 28 of the Rules of 2001, Rule 28 of the Rules of 2002 and Rule 28 of the Rules of 2017, did not provide for confiscation of any land, building, plant, machinery etc. and their consequent vesting in the Central Government, as Rule 28 only provided for vesting in the Central Government of the “Goods” confiscated by the Central Excise Authorities under the Excise Act, 1944.

Whether the dues of the Excise department create a First Charge?

In UTI Bank Ltd. v. Commissioner Central Excise, 2006 SCC Online Madras 1182, it had been held that since there is no specific provision claiming “first charge” in the Central Excise Act and the Customs Act, the claim of the Central Excise Department cannot have precedence over the claim of secured creditor, viz., the petitioner Bank. Similarly, in Union of India v. SICOM Ltd., (2009) 2 SCC 121, it was observed that prior to insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08-04-2011, there was no provision in the Act inter alia, providing for First Charge on the property of the assessee or any person under the Act of 1944.

Further, section 35 of the SARFAESI Act, 2002 inter alia, provides that the provisions of the SARFAESI Act shall have overriding effect on all other laws. Therefore, the provisions of Section 11E of the Central Excise Act, 1944 are subject to the provisions contained in the SARFAESI Act, 2002. Therefore, the Bench held that the Secured Creditor-Bank would have a First Charge on the Secured Assets.

Verdict

In the light of above, the Bench concluded that the Commissioner of Customs and Central Excise could not have invoked the powers under Rule 173Q(2) of the Central Excise Rules, 1944 on 26-03-2007 and 29-03-2007 for confiscation of land, buildings etc., when on such date, the said Rule 173Q(2) was not in the Statute books, having been omitted by a notification dated 12-05-2000. Secondly, the dues of the secured creditor, i.e. the bank, would have priority over the dues of the Central Excise Department. Accordingly, the appeal was allowed and the confiscation orders were quashed.

[Punjab National Bank v. Union of India, 2022 SCC OnLine SC 227, decided on 24-02-2022]


*Judgment by: Justice Vineet Saran 


Appearance by:

For the Appellant: Dhruv Mehta, Senior Counsel

For Union of India: K.M. Nataraj, Additional Solicitor General


Kamini Sharma, Editorial Assistant has put this report together

Case BriefsSupreme Court

Supreme Court: While adjudicating the issue as to whether promotion scheme implemented by office memorandum supersedes recruitment regulations, the Division Bench of Dr Dhananjaya Y Chandrachud* and A S Bopanna, JJ., held that regulations made under the statute have the force of law. The Bench expressed,

“The ESIC Recruitment Regulations 2015 had precedence over the Office Memorandum dated 29 October 2008 which implemented the DACP Scheme in respect of officers of the Central Health Service under the Union Ministry of Health and Family Welfare.”

Factual Matrix

The Employees’ State Insurance Corporation (ESIC) had appealed against the judgment of Karnataka High Court, wherein the High Court had Bench rejected ESIC’s petition against the order of Central Administrative Tribunal (CAT) directing it to consider promotion of the contesting respondents – to the post of “Associate Professor” under the Dynamic Assured Career Progression (DACP) Scheme as opposed to ESIC’s recruitment regulations. The stand of the appellant was that the recruitment and promotion of its teaching staff are governed by the Employees’ State Insurance Corporation (Medical Teaching Faculty Posts) Recruitment Regulations 2015 not DACP.

The Central Government had issued the DACP Scheme through an Office Memorandum dated 29-10-2008 contemplating promotion as Associate Professor upon completion of two years of service in the post of Assistant Professor as an officer under the Ministry of Health and Family. After two years of service as Assistant Professor on 2 February 2017, the contesting respondents sought promotion under the DACP Scheme and instituted proceedings before the CAT, wherein the Tribunal held that the ESIC Recruitment Regulations 2015 were not relevant for adjudication of the matter and directed the appellant to consider the contesting respondents for promotion under the DACP Scheme.

Findings of the Tribunal and the High Court

Upholding the findings of CAT, the High Court had dismissed the appeal on the ground that since the contesting respondents were recruited before the ESIC Recruitment Regulations 2015 came into effect, they would get the benefit of the DACP Scheme. Further, the High Court opined that the DACP Scheme has statutory effect under Section 17 of the ESI Act and ESIC Recruitment Regulations 2015 had departed from the DACP Scheme without seeking prior approval of the Central Government.

Observations and Findings

The question before the Bench was with regard to interpretation of Section 17(2)(a) of the ESIC Act, 1948 and the applicability of the Office Memorandum dated 29-10-2008 against the ESIC Recruitment Regulations 2008 and the subsequently issued ESIC Recruitment Regulations 2015.

The ESIC Recruitment Regulations 2008 were issued by the ESIC in the exercise of its powers under Section 97(1) and Section 17(3) of the ESI Act, 1948. While Recruitment Regulations, 2008 embodied a requirement of four years’ service as Assistant Professor for promotion as an Associate Professor, the ESIC Recruitment Regulations 2015 stipulated a requirement of five years’ service as Assistant Professor for promotion to the post of Associate Professor. The preamble of the ESIC Recruitment Regulations 2015 noted that these regulations were to supersede the ESIC Recruitment Regulations 2008 and were made with the approval of the Central Government.

Relying on the decision of Constitution Bench in Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, (1975) 1 SCC 421, wherein it was held that in the event of a conflict between an executive instruction, an office memorandum in this case, and statutory regulations – the latter prevail, the Bench held that the ESIC Recruitment Regulations 2008 and ESIC Recruitment Regulations 2015 had statutory effect by virtue of Section 97(3) of the ESI Act.

Similarly, in Sant Ram Sharma v. State of Rajasthan, (1968) 1 SCR 111, it was held that, “Government cannot amend or supersede statutory rules by administrative instructions, but if the rules are silent on any particular point Government can fill up the gaps and supplement the rules and issue instructions not inconsistent with the rules already framed.”

Therefore, the Bench opined that on the dates when the contesting respondents joined the service of the appellant – 07-02-2014 till 26-06-2016 – their promotions were governed by the ESIC Recruitment Regulations 2008 which mandated four years of qualifying service for promotion from Assistant Professor to Associate Professor. However, when the contesting respondents had completed two years of service, they were governed by the ESIC Recruitment Regulations 2015 which came into effect on 5 July 2015 and mandated five years of qualifying service for promotion from Assistant Professor to Associate Professor. Thus, the Bench held that DACP Scheme facilitating promotion on the completion of two years of service was not applicable to the contesting respondents, when the regulations had a statutory effect that overrides the Office Memorandum dated 29-10-2008 which implemented the DACP Scheme.

On the contention that the advertisements indicated the applicability of the DACP Scheme before the ESIC Recruitment Regulations 2015 were issued, the Bench held that a subsequent amendment to recruitment regulations would override the conditions prescribed in the advertisement.

Regarding the issue that concession of the Counsel for the appellant before the CAT would preclude the appellant from urging that the DACP Scheme was not applicable to the Teaching Cadre at the ESIC, the Bench remarked,

“While this Court expresses its disapproval at the lack of proper instructions being tendered to the Counsel of the appellant, there can be no estoppel against a statute or regulations having a statutory effect.”

Conclusion

In the backdrop of above, the Bench concluded that the CAT and the High Court failed to notice applicability of the ESIC Recruitment Regulations 2015 to the promotions of the Teaching Cadre in the appellant corporation. The advertisements for recruitment mentioning the DACP Scheme would have no effect since they were in contravention of the applicable recruitment regulations. Accordingly, the appeal was allowed and the impugned judgement and order was set aside.

[The Employees’ State Insurance Corpn. v. Union of India, 2022 SCC OnLine SC 70, decided on 20-01-2022]


*Judgment by: Justice Dr Dhananjaya Y Chandrachud


Appearance by:

For the Appellant: Santhosh Krishnan, Advocate

For the Respondents: Yatindra Singh, Senior Advocate and Anand Sanjay M Nuli, Advocate


Kamini Sharma, Editorial Assistant has put this report together 


Case BriefsSupreme Court

Supreme Court: The Division Bench of R. Subhash Reddy* and Hrishikesh Roy, JJ., held that to determine State Monopoly for disallowance of certain fee, charge, etc. in the case of State Government Undertakings the aspect of ‘exclusivity’ has to be viewed from the nature of undertaking on which levy is imposed and not on the number of undertakings on which the levy is imposed. The Bench stated,

“If this aspect of exclusivity is viewed from the nature of undertaking, in this particular case, both KSBC and Kerala State Cooperatives Consumers’ Federation Ltd. are undertakings of the State of Kerala, therefore, levy is an exclusive levy on the State Government Undertakings.”

Background

The issue before the Bench was whether the appellant-Kerala State Beverages Manufacturing & Marketing Corporation Ltd., a company engaged in wholesale and retail trade of beverages exempted from levy of gallonage fees, licence fee and shop rental (kist) for FL9 licence and FL1 licence, surcharge on sales tax and turnover tax for the assessment years 2014-2015 and 2015-2016?

The case of the appellant was that the company did not fall within the purview of Section 40(a)(iib), while the case of the revenue was that all the aforesaid amounts were covered under Section 40(a)(iib) as such, such amounts were not deductible for the purpose of computation of income. Section 40 of the Income Tax Act, 1961 is the provision dealing with ‘amounts not deductible’. However, by the Finance Act, 2013 (Act 17 of 2013), Section 40 of the Act was amended by inserting Section 40(a)(iib).

Findings of the High Court

The question of law raised was answered by the High Court of Kerala partly in favour of assessee/appellant and partly in favour of the revenue in the following manner:

“We hold that the levy of Gallonage Fee, Licence Fee and Shop Rental (kist) with respect to the FL9 licences granted to the appellant will clearly fall within the purview of Section 40 (a) (iib) and the amount paid in this regard is liable to be disallowed. The amount of Gallonage Fee, Licence Fee, or Shop Rental (kist) paid with respect to FL1 licences granted in favour of the appellant, with respect to the retail business in foreign liquor, is not an exclusive levy on the appellant, which is a state government undertaking. Therefore the disallowance made with respect to those amounts cannot be sustained. The surcharge on sales tax and turnover tax is not a ‘fee or charge’ coming within the scope of Section 40 (a) (iib) and is not an amount which can be disallowed under the said provision. Therefore the disallowance made in this regard is liable to be set aside. In the result the assessment completed against the appellants with respect to the assessment years 20142015, 20152016 are hereby set aside.”

State Monopoly

During the assessment years 2014-2015 and 2015-2016 the appellant was holding FL9 and FL1 licences to deal in wholesale and retail of Indian Made Foreign Liquor (IMFL) and Foreign Made Foreign Liquor (FMFL) granted by the Excise Department Rules. The appellant was the only licence holder for the relevant years so far as licence to deal in wholesale, and so far as FL1 licences were concerned, it was also granted to one other State owned Undertaking, i.e., Kerala State Cooperatives Consumers’ Federation Ltd.

By interpreting the word ‘exclusively’ as worded in Section 40(a)(iib)(A) of the Act, High Court in the impugned order had held that the levy of gallonage fee, licence fee and shop rental (kist) with respect to FL9 licences granted to the appellant would clearly fall within the purview of Section 40(a)(iib) of the Act and the amounts paid in that regard was liable to be disallowed. At the same with respect to FL1 licences granted in favour of the appellant for retail business, it was held that it was not an exclusive levy; as such disallowance made with respect to the same could not be sustained.

Considering the relevant Memorandum to the Finance Act, 2013 and underlying object for amendment of Income Tax Act, 2013, the Bench opined that the amendment was made to plug the possible diversion or shifting of profits from these undertakings into State’s treasury. Hence, in view of Section 40(a)(iib) of the Act any amount which is  levied exclusively on the State owned undertaking cannot be claimed as a deduction in the books of State owned undertaking, thus same is liable to income tax.

Disagreeing with the view taken by the High Court, the Bench opined that if the amended provision is to be read in the manner interpreted by the High Court, it will literally defeat the very purpose and intention behind the amendment. The Bench stated,

“The aspect of exclusivity under Section 40(a)(iib) is not to be considered with a narrow interpretation, which will defeat the very intention of Legislature, only on the ground that there is yet another player, viz., Kerala State Cooperatives Consumers’ Federation Ltd. which is also granted licence under FL1.”

The Bench added, the aspect of ‘exclusivity’ under Section 40(a)(iib) had to be viewed from the nature of undertaking on which levy is imposed and not on the number of undertakings on which the levy is imposed. Since both the undertakings; i.e. KSBC and Kerala State Cooperatives Consumers’ Federation Ltd. were undertakings of the State, the Bench held that levy was an exclusive levy on the State Government Undertakings.

Fee vis-a-vis Tax

Observing that a clear distinction between ‘fee’ and ‘tax’ was carefully maintained throughout the scheme under Section 40(a) of the Act itself, as wherever the Parliament intended to cover the tax it specifically mentioned as a tax, the Bench stated that Section 40(a)(i) and 40(a)(ia) specifically relate to tax related items. Section 40(a)(ic) refers to a sum paid on account of fringe benefit tax. At the same time, Section 40(a)(iib) refers to royalty, licence fee, service fee, privilege fee or any other fee or charge. Hence,

“If these words are considered to include a tax or surcharge like sales tax, the distinction so carefully spelt out in Section 40 between a tax and a fee will be obliterated and rendered meaningless.”

Further, the Bench observed that gallonage fee, licence fee and shop rental (kist) were the levies under the Kerala Abkari Act on all the licence holders, as such it could not be said that same was an exclusive levy on the appellant/KSBC. Hence, the Bench expressed,

“Once the State Government Undertaking takes licence, the statutory levies referred above are on the Government undertaking because it is granted licences.”

Therefore, the Bench disagreed with the finding of the High Court holding that such finding was contrary to object and intention behind the legislation.

Findings and Conclusion

In the backdrop of above, the Bench concluded:

  1. Gallonage fee, licence fee and shop rental (kist) with respect to FL9 and FL1 licences granted to the appellant would squarely fall within the purview of Section 40(a)(iib).
  2. Surcharge on sales tax and turnover tax, is not a fee or charge coming within the scope of Section 40(a)(iib)(A) or 40(a)(iib)(B), as such same is not an amount which can be disallowed under the said provision and disallowance made in this regard was rightly set aside by the High Court.

Resultantly, assessments completed against the assessee for 2014-2015 and 2015-2016 were set aside and the Assessing Officer was directed to pass revised orders after computing the liability in accordance with the directions in this judgment.

[Kerala State Beverages Manufacturing & Marketing Corporation Ltd. v. CIT, 2022 SCC OnLine SC 3, decided on 03-01-2021]


*Judgment by: Justice R. Subhash Reddy


Appearance by:

For the Appellant: S. Ganesh, Senior Advocate

For the State: N. Venkataraman, Additional Solicitor General


Kamini Sharma, Editorial Assistant has put this report together 


 

Case BriefsSupreme Court

Supreme Court: In a Trademark infringement case, the bench of L. Nageswara Rao, BR Gavai* and BV Nagarathna, JJ has ordered in favour of Renaissance Hotel Holdings and has held that the words “RENAISSANCE” and “SAI RENAISSANCE” are phonetically as well as visually similar. 

Factual Background

The Court was deciding the case initiated by the Renaissance Hotel Holdings Inc., a company incorporated under the laws of the State of Delaware, United States of America, which is the holder and proprietor of the trade mark and service mark “RENAISSANCE” in relation to hotel, restaurant, catering, bar, cocktail lounge, fitness club, spa services, etc. The Company discovered that the respondents were operating one hotel in Bangalore and another one in Puttaparthi under the name “SAI RENAISSANCE”, which wholly incorporates the well-known trade mark and service mark “RENAISSANCE”.

The appellant submitted that the trade mark “RENAISSANCE” has been used by it for its hospitality business throughout the world since the year 1981 and that it is one of the world’s largest and leading chains of hotel and has been using the trade mark “RENAISSANCE” in India since 1990.

It was argued that the respondents were copying the trade mark “RENAISSANCE”, its stylized representation, signage and business cards and leaflets in such a manner so as to suggest an affiliation, association, nexus or connection with the business of the appellant.

The trial court restrained the respondents

  • from using the trade mark “SAI RENAISSANCE” or any other trade mark which incorporates the appellant-plaintiff’s trade mark “RENAISSANCE” or is deceptively similar.
  • from opening, operating, managing, franchising, licensing, dealing directly or indirectly in hotels, restaurant, or hospitality services of any manner under the trade mark or service mark “RENAISSANCE” or any deceptively similar mark “RENAISSANCE” or any deceptively similar mark including on the internet as a domain name or in any manner so as to pass off their services as those of or concocted with the appellanf.

The trial court, however, rejected the claim of the appellant for damages.

The Karnataka High Court, however, held that no evidence was produced by the appellant to show that the respondents were taking unfair advantage of its trade mark or that the use of the word   “SAI RENAISSANCE” was detrimental to the distinctive character or reputation of the appellant’s trade mark.

Analysis

The Court noticed that the appellant’s trademark “RENAISSANCE” is registered under Class 16 and Class 42, which deals with hotels and hotel related services and goods. The mark and the business name “SAI RENAISSANCE”, which was being used by the respondents, was also in relation to Class 16 and Class 42.   The Court also observed that that the words “RENAISSANCE” and “SAI RENAISSANCE” are phonetically as well as visually similar.

Hence, the present case stood squarely covered by the provisions of Section 29(2)(c) read with sub-section (3) of Section 29 of the the Trade Marks Act, 1999. The present case also stood covered under sub-sections (5) and (9) of Section 29 of the said Act.

The Court noticed that the High Court erred in taking into consideration clause (c) of sub-section (4) of Section 29 of the said Act in isolation without noticing other parts of the said sub-section (4) of Section 29 of the said Act and the import thereof. The High Court has failed to take into consideration that in order to avail the benefit of Section 30 of the said Act, apart from establishing that the use of the impugned trademark was not such as to take unfair advantage of or is detrimental to the distinctive character or repute of the trade mark, it is also necessary to establish that such a use is in accordance with the honest practices in industrial or commercial matters.

Explaining the rule of interpretation, the Court said,

“It is thus trite law that while interpreting the provisions of a statute, it is necessary that the textual interpretation should be matched with the contextual one.  The Act must be looked at as a whole and it must be discovered what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation.  Statutes have to be construed so that every word has a place and everything is in its place.”

As per Section 30(1), for availing the benefit of Section 30 of the said Act, it is required that the twin conditions, i.e., the use of the impugned trade mark being in accordance with the honest practices in industrial or commercial matters, and that such a use is not such as to take unfair advantage of or be detrimental to the distinctive character or repute of the trade mark, are required to be fulfilled.  In sub-section (1) of Section 30 of the said Act, after clause (a), the word used is ‘and’, like the one used in sub-section (4) of Section 29 of the said Act, in contradistinction to the word ‘or’ used in sub-section (2) of Section 29 of the said Act. The High Court has referred only to the condition stipulated in clause (b) of sub-section (1) of Section 30 of the said Act ignoring the fact that, to get the benefit of sub-section (1) of Section 30 of the said Act, both the conditions had to be fulfilled.

“Unless it is established that such a use is in accordance with the honest practices in industrial or commercial matters, and is not to take unfair advantage or is not detrimental to the distinctive character or repute of the trade mark, one could not get benefit under Section 30(1) of the said Act.”

Therefore, it was noticed that by picking up a part of the provisions in sub¬section (4) of Section 29 of the said Act and a part of the provision in sub-section (1) of Section 30 of the said Act and giving it a textual meaning without considering the context in which the said provisions have to be construed, was not permissible.

Hence, it was held that the High Court was not justified in interfering with the well-reasoned order of the trial court.

[Renaissance Hotel Holdings Inc. v. B. Vijaya Sai, 2022 SCC OnLine SC 61, decided on 19.01.2022]


*Judgment by: Justice BR Gavai


Counsels:

For appellant: Senior Advocate K.V. Viswanathan

For respondent: Advocate B.C. Sitarama Rao

Case BriefsHigh Courts

Madhya Pradesh High Court: The Division Bench comprising of Sujoy Paul and Arun Kumar Sharma, JJ., held that the Demonstrators and Tutors working in cities/urban areas are to be treated as ‘in-service candidates’ as neither the relevant order nor the rule precludes the Medical Officers working in urban areas or hospitals from benefit of being ‘in-service candidate’. The Bench remarked,

“If we hold that the Demonstrators and Tutors are eligible despite being posted in towns (not covered under difficult, rural or remote areas) as in-service candidates and petitioners are not, it will divide a homogeneous class of ‘in-service candidates’ and will create a class within the class without there being any rationale and justification for the same.”

The interesting conundrum in the instant case was whether the petitioners, MBBS qualified Doctors rendering their services as regular employees in the Department of Health Services, State of M.P. fall in the category of ‘in service candidates’ and whether they have separate channel of entry in P.G. Course as per order dated 19-08-2021 issued by the State Government.

As per the Government order dated 19-08-2021, the reservation/separate channel of entry to the extent of 30% in P.G. Degree Course was made. The order covered Demonstrator, Tutors and the Medical Officers, the category to which present petitioners belonged. Further, as per the as per Rule 2(k) of M.P. Chikitsa Shikisha Pravesh Niyam 2018, the petitioners were covered in the definition of “serving employees”.

The petitioners urged that 30% reservation/separate channel of entry, earmarked for Degree Seats for Demonstrator/Tutors/Medicals Officer which made the petitioners being Medical Officers entitled to such reservation yet they were treated to be eligible only for open seats.

Difficult Area vis-a-vis Difficult Services

Evidently, a policy decision dated 28-03-2021 was issued to provide additional marks/incentive to the serving candidates. However, the benefit of incentive was confined to the candidates working in rural, remote and difficult areas.

Although, Harda and Indore, where petitioners were admittedly working did not fall under the umbrella of “difficult area”, the petitioners argued that the policy was issued in Pre-Covid era and considering the fact that Indore and Harda District Hospitals were also difficult areas where the petitioners were rendering their service 24×7 during Pandemic era, they must be treated to be performing difficult service, and therefore, the benefit of the order dated 28-03-2019 must be extended in favour of petitioners as well. Citing the decision in Malpe Vishwanath Acharya and others Vs. State of Maharashtra, (1998) 2 SCC 1, the petitioners submitted that a provision of law may be valid at the time of its issuance but may lose its relevance by efflux of time. Therefore, the petitioners urged that during Pandemic, since all the Doctors working in District Hospitals became vulnerable and worked at the cost of their and families’ lives, they should be included in the category of difficult posting/area.

Accordingly, the Bench accepted the stand of State that under Regulation 9 (8) of the MCI PG Regulations 2000 emphasis is on ‘difficult area’ and not on ‘difficult services’.

(a) Whether ‘in-service candidates’ includes doctors posted in District Hospital, Harda and Indore respectively?

Opining that a conjoint reading of the Government Order dated 19-08-2021 and the rules leaves no room for any doubt that definition of ‘in-service candidate’ is wide enough to include the medical officers and that admittedly, petitioners were working as Medical Officers in District Hospitals, the Bench held that there was no impediment which deprived the petitioner from right of consideration in Post Graduate Degree Course as a separate channel of entry.

Rejecting the argument of the State that the relief claimed by the petitioners was contrary to Medical Council of India (MCI) Regulations and the State Government cannot legislate contrary to the Regulations framed by MCI as prescribing standard of education on Pan India basis is within the domain of MCI, the Bench ruled that there is no Regulation of MCI which deprives the present petitioners for consideration as in-service candidates as the condition of service in “difficult area” as required under Regulation 9(8) is applicable to ‘Diploma Course’ and not the course in question i.e. Postgraduate Degree Course. The Bench stated,

“This argument pales insignificance because present matter does not relate to Diploma Course. Thus, Regulation 9(8) has no application and no other regulation for this purpose is brought to the notice of this Court.”

Since the governing rule (Admission Rules) brought the petitioners within the zone of consideration, the Bench held that the petitioners had a separate channel of entry being Medical Officers in earmarked 30% total seats of Postgraduate Medical Courses.

(b) Whether the petitioners are entitled to get incentive of marks as per circular/order dated 28-03-2019?

The Order dated 28-03-2019 provided for 10% additional marks to the doctors who had their place of posting in the last one and a half year in a ‘difficult area’ as defined under Regulation 9(8). The petitioners, claiming to be serving in difficult situation during pandemic demanded parity with those candidates whose place of service was classified as difficult area and consequently, the petitioner were seeking to get the benefit on 10% incentive marks on that basis.

Accepting the stand of the State was that Regulation 9(8) is very clear that emphasis is on ‘difficult area’ and not on ‘difficult services’ and the area in which petitioners were working were not difficult areas at all, and further observing that the order dated 28-03-2019 was not called in question, the Bench held that the said order is a policy decision taken by the Government which could not be lightly disturbed. The Bench added, the policy decision can be interfered with on limited grounds and when it was not even challenged, it has to be read as such and the Court cannot re-write and insert something which is not there in their policy decision. Accordingly, the claim of the petitioners was rejected with regard to incentive marks.

Conclusion

In view of foregoing analysis, the Bench held the following:

  1. Rules – Definition of ‘in-service candidates’ also includes the Medical Officers working in District Hospital whether or not such Hospital is situated in difficult, remote or rural area. Thus, they are entitled to be considered as special entry under 30%.
  2. MCI Regulations – Regulation 9(8). This regulation is applicable to Diploma Course and not to Degree or Post Graduate Degree Course. No provision was brought to the notice of the Court to show that posting at remote, difficult or rural area is essential to become in-service candidate for Post Graduate Degree Course.
  3. Government – The scope of judicial review is very limited. The Government is best suited to take a policy decision which can be interfered with if shown to be palpably arbitrary, discriminatory or unconstitutional. The order dated 28-03-2019 is not arbitrary, discriminatory or unconstitutional.
  4. ‘Difficult area’ does not include “difficult services” rendered in District Hospital Indore and Harda. Thus, question of grant of incentive marks to the petitioners does not arise.
  5. The petitioners fell in the category of ‘in-service candidates’ for the purpose of Postgraduate Medical Courses and the respondents had erred in not treating them in the said category in the impugned chart/table uploaded on the official website. Accordingly, the impugned entries of the chart/table were set aside.

Consequently, the State Government was directed to treat the petitioners as in-service candidates for Postgraduate Degree Course and consider their claim in accordance with law. [Vijendra Dhanware v. State of Madhya Pradesh, W.P. No.25819 of 2021, decided on 14-01-2022]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance by:

For petitioners: Shri Siddharth Gupta, Advocate.

For respondent/State: Shri Piyush Dharmadhikari, Govt. Adv. for respondents 1, 2 and 4.

Shri Anoop Nair, Advocate for respondent 3.

Case BriefsSupreme Court

Supreme Court: The bench of L. Nageswara Rao and Hima Kohli, JJ has held that the formulae for fixing the percentage of reservation for the SC and ST candidates and for determining the percentage of seats to be reserved for OBC candidates under the second proviso of Section 3 of the Central Educational Institutions (Reservation in Admission) Act, 2006, ought to be gathered from the same source and any other interpretation would lead to uncertainty.

Factual Background

The Court was hearing the appeal from the judgment of the Manipal High Court wherein it was held that after the amendment of the Central Educational Institutions (Reservation in Admission) Act, 2006 , in the year 2012, on introduction of the Central Educational Institutions (Reservation in Admission) Amendment Act, 2012 , Manipur University is required to follow the reservation norms of 2% for the candidates belonging to Scheduled Caste, 31% for the Scheduled Tribes and 17% for the Other Backward Classes for purposes of admission in the University.

The candidates belonging to the SC category and had applied for admission in various Post Graduate courses, had questioned the purported reduction of the quota for SC category candidates from 15%, as prescribed in Section 3 of the Reservation Act to 2% and filed a writ petition in the High Court of Manipur. It was contended that the Amendment Act was legislated to ensure that reservation for SC and ST candidates as prescribed in Section 3 of the Parent Act, should not be reduced from the benchmark of 15% and 7.5% respectively. Rather, the Amendment Act contemplates that the percentage of reservation for SC and ST candidates earmarked in Section 3 of the Parent Act could be increased even to the detriment of the earmarked percentage of reservation for OBC candidates, to ensure that the overall limit of 50% reservation for SC and ST candidates taken collectively, is not disturbed in any manner.

Analysis

Observing that once the two provisos were inserted in Section 3 of the Parent Act by virtue of the Amendment Act, the general norms of reservation as laid down in Clauses (i), (ii) and (iii) of Section 3 of the Parent Act had to be restricted in terms of the said provisos, the Supreme Court gave the following explanation:

While the first proviso deals with “State seats”, if any, in a CEI situated in tribal areas referred to in the Sixth Schedule to the Constitution, the second proviso addresses a situation where there are no State seats in a CEI and the seats reserved for the SC/ST candidates exceeds the percentage specified under Clauses (i) and (ii) of Section 3 (viz., 15% seats for SCs plus 7.5% for STs, totalling to 22.5% seats) or if the combined seats reserved for the SC and ST candidates exceeds the sum total of the percentage as specified under Clauses (i) and (ii).

Two riders have also been dovetailed in the second proviso to Section 3, namely Clauses (a) and (b).

    • Clause (a) of the second proviso, contemplates a situation where seats referred to in the second proviso are less than 50% of the annual permitted strength on the date immediately preceding the date of commencement of the Amendment Act.
    • Clause (b) provides for a situation where such seats are over 50% of the annual permitted strength on the date immediately preceding the date of commencement of the Amendment Act.

In a situation contemplated in Clause (a) of the second proviso, a restriction has been imposed on the total percentage of seats required to be reserved for OBC candidates under Section 3(iii) of the Parent Act by limiting them to the balance seats available after factoring in the combined percentage of seats specified in Clauses (i) and (ii) of Section 3 of the Parent Act, falling short of 50% of the annual permitted strength.

But in circumstances contemplated in Clause (b), the Act recognizes the fact that no seats need be reserved for the OBC candidates under Clause (iii) of Section 3 of the Parent Act. However, this is subject to the condition that the extent of reservation of seats for SC and ST candidates shall not be reduced when it comes to CEIs established in “Specified north eastern region”.

“This goes to demonstrate that the underlying intent of the Amendment Act was to secure a particular percentage of seats through reservation for a set of candidates and leave some space for capping of seats for OBC candidates, depending on the circumstances contemplated in Clauses (a) and (b) of the second proviso to the amended Section 3.”

The Court, hence, held that the reference point of the period for determining the reservation quota for OBC candidates must be the same as that of the SC and ST candidates for the simple reason that for working out the reservation quota for OBC candidates would necessarily require one to find out in the first instance, as to what would be the difference between 50% of the annual permitted strength and the combined existing percentage for the SC and ST candidates, as obtained on the date immediately preceding the date of commencement of the Reservation Act.

It was observed that,

“Both the issues are so interlaced that to determine the percentage of reservation for OBC candidates, one would have to undertake an exercise of determining the percentage of seats to be reserved for SC and ST candidates, all within the four corners of the second proviso inserted in Section 3 of the Parent Act. Any other interpretation sought to be assigned to the second proviso to Section 3 inserted post-amendment, would make the proviso itself unworkable and redundant and is, therefore, impermissible.”

The Court made clear that the general rules of reservation have been encapsulated in Clauses (i), (ii) and (iii) of Section 3 of the Parent Act. But when it comes to CEIs established in States falling under the definition of “Specified north eastern region”, categorized in Section 2(ia) introduced by the Amendment Act, the two new provisos appended to Section 3 would govern the norms of reservation which prescribes a different criteria, vis-à-vis the main provision and would apply irrespective of whether they are situated in areas covered by the Sixth Schedule to the Constitution or not.

[Shri Kshetrimayum Maheshkumar Singh v. Manipal University, 2022 SCC OnLine SC 12, decided on 05.01.2022]


*Judgment by: Justice Hima Kohli


Counsels

For appellant: Advocate Punam Kumari

For Respondents: Advocates Ashutosh Dubey, Shivendra Dwivedi

Case BriefsSupreme Court

Supreme Court: In a case where the Madhya Pradesh High Court had held that demand of money for construction of a house cannot be treated as a dowry demand, the 3-judge bench of NV Ramana, CJ and AS Bopanna and Hima Kohli*, JJ has found the said observation erroneous and has held that the word “Dowry” ought to be ascribed an expansive meaning so as to encompass any demand made on a woman, whether in respect of a property or a valuable security of any nature.

The Unfortunate Facts

The deceased, Geeta Bai, was 18 years old when she got married on 7th May, 1998. In less than four years of her marriage, Geeta Bai committed suicide at her matrimonial home by pouring kerosene oil and setting herself on fire. She was admitted in a burnt condition in the Community Health Centre, Baroda on 20th April, 2002 and breathed her last on the same day. At that time, she was five months pregnant. While the Mother-in-law and Brother-in-law were acquitted by the Trial Court, the husband and father-in-law of the deceased were convicted under Sections 304-B, 306 and 498-A IPC and were sentenced to rigorous imprisonment for life for the first offence, RI for a period of seven years with fine for the second offence and RI for three years with fine for the third offence.

The conviction and sentence imposed on the respondents was primarily based on the evidence maternal uncles of the deceased who stated that the respondents had been demanding money from the deceased for constructing a house which her family members were unable to give. As a result, she was constantly harassed and subjected to cruelty, finally leading to her committing suicide.

The High Court gave clean chit to the father-in-law and also set aside the order of conviction in respect of the husband under Sections 304B and 306 IPC. However, his conviction was sustained under Section 498-A IPC, but the sentence of RI for three years imposed on him was reduced to the period already undergone by him on the ground that the demand of money for construction of a house cannot be treated as a demand for dowry.

Analysis

Dowry

In a three Judge Bench decision of this Court in Rajinder Singh v. State of Punjab, (2015) 6 SCC 477, Section 2 of the Dowry Act was split into six distinct parts for a better understanding of the said provision, with the first part stating,

“ Dowry must first consist of any property or valuable security— the word “any” is a word of width and would, therefore, include within it property and valuable security of any kind whatsoever.”

Since the word “dowry” takes in its ambit any kind of property or valuable security, the Court held that the High Court fell into an error by holding that the demand of money for construction of a house cannot be treated as a dowry demand.

“The Latin maxim “Ut Res Magis Valeat Quam Pereat” i.e, a liberal construction should be put up on written instruments, so as to uphold them, if possible, and carry into effect, the intention of the parties, sums it up. Interpretation of a provision of law that will defeat the very intention of the legislature must be shunned in favour of an interpretation that will promote the object sought to be achieved through the legislation meant to uproot a social evil like dowry demand.”

The Court, hence, held that the word “Dowry” ought to be ascribed an expansive meaning so as to encompass any demand made on a woman, whether in respect of a property or a valuable security of any nature.

“When dealing with cases under Section 304-B IPC, a provision legislated to act as a deterrent in the society and curb the heinous crime of dowry demands, the shift in the approach of the courts ought to be from strict to liberal, from constricted to dilated. Any rigid meaning would tend to bring to naught, the real object of the provision. Therefore, a push in the right direction is required to accomplish the task of eradicating this evil which has become deeply entrenched in our society.”

Ingredients of Section 304-B IPC

The most fundamental constituent for attracting the provisions of Section 304-B IPC is that the death of the woman must be a dowry death. Four pre-requisites for convicting an accused for the offence punishable under Section 304- B are as follows:

  • that the death of a woman must have been caused by burns or bodily injury or occurred otherwise than under normal circumstance;
  • that such a death must have occurred within a period of seven years of her marriage;
  • that the woman must have been subjected to cruelty or harassment at the hands of her husband, soon before her death; and (
  • that such a cruelty or harassment must have been for or related to any demand for dowry

Key facts

  • The respondents had been constantly tormenting the deceased and asking her to approach her family members for money to build a house and it was only on their persistence and insistence that she was compelled to ask them to contribute some amount for constructing a house.
  • The marriage of the deceased and the respondent No.1 was conducted in a community marriage organization where some couples would have tied the knot goes to show that the parties were financially not so well off.
  • Before the marriage of the deceased also, her maternal uncle used to bear her expenses and that of her mother and brother as her father had abandoned them.

Ruling on facts

The Court hence held that the High Court fell in an error in drawing an inference that since the deceased had herself joined her husband and father-in-law, respondents herein and asked her mother or uncle to contribute money to construct a house, such demand cannot be treated as a “dowry demand”. On the contrary, it observed that the evidence brought on record showed that the deceased was pressurized to make such a request for money to her mother and uncle.

“It was not a case of complicity but a case of sheer helplessness faced by the deceased in such adverse circumstances.”

The Court held that such glairing circumstances, when viewed together, can hardly mitigate the offence of the respondents or take the case out of the purview of Section 304-B IPC, when all the four pre-requisites for invoking the said provision stand satisfied, namely,

  • that the death of Geeta Bai took place at her matrimonial home within seven years of her marriage;
  • that the said death took place in abnormal circumstances on account of burning and that too when she was five months pregnant;
  • that she had been subjected to cruelty and harassment by the respondents soon before her death and
  • such cruelty/harassment was in connection with demand for dowry.

[State of Madhya Pradesh v. Jogindra, 2022 SCC OnLine SC 33, decided on 11.01.2022]


*Judgment by: Justice Hima Kohli


Counsel For State: Advocate General Prashant Singh