Case BriefsSupreme Court

Supreme Court: The bench of UU Lait and Indira Banerjee, JJ has explained that Section 12 of the Specific Relief Act, 1963 has to be construed in a liberal, purposive manner that is fair and promotes justice.

“A contractee who frustrates a contract deliberately by his own wrongful acts cannot be permitted to escape scot free.”

While hearing a case relating to sale of land in the year 1984, the Court held that Section 12 of the Specific Relief Act is to be construed and interpreted in a purposive and meaningful manner to empower the Court to direct specific performance by the defaulting party, of so much of the contract, as can be performed, in a case like this.

“To hold otherwise would permit a party to a contract for sale of land, to deliberately frustrate the entire contract by transferring a part of the suit property and creating third party interests over the same.”

The Court explained that the relief of specific performance of an agreement, was at all material times, equitable, discretionary relief, governed by the provisions of the Specific Relief Act 1963. Even though the power of the Court to direct specific performance of an agreement may have been discretionary, such power could not be arbitrary. The discretion had necessarily to be exercised in accordance with sound and reasonable judicial principles.

After the amendment of Section 10 of the Specific Relief Act, the words “specific performance of any contract may, in the discretion of the Court, be enforced” have been substituted with the words “specific performance of a contract shall be enforced subject to …”. Hence,

“the Court is, now obliged to enforce the specific performance of a contract, subject to the provisions of sub-section (2) of Section 11, Section 14 and Section 16 of the S.R.A. Relief of specific performance of a contract is no longer discretionary, after the amendment.”

Referring to suits relating to sale of land, the Court explained that

“an agreement to sell immovable property, generally creates a right in personam in favour of the Vendee. The Vendee acquires a legitimate right to enforce specific performance of the agreement.”

The Court ordinarily enforces a contract in its entirety by passing a decree for its specific performance. However, Section 12 of the Specific Relief Act carves out exceptions, where the Court might direct specific performance of a contract in part.

Further, where a party to the contract is unable to perform the whole of his part of the contract, the Court may, in the circumstances mentioned in Section 12 of the Specific Relief Act, direct the specific performance of so much of the contract, as can be performed, particularly where the value of the part of the contract left unperformed would be small in proportion to the total value of the contract and admits of compensation.

The Court may, under Section 12 of the Specific Relief Act direct the party in default to perform specifically, so much of his part of the contract, as he can perform, provided the other party pays or has paid the consideration for the whole of the contract, reduced by the consideration for the part which must be left unperformed.

[B. Santoshamma v. D. Sarala, CIVIL APPEAL NO.3574 OF 2009, decided on 18.09.2020]

Case BriefsSupreme Court

Supreme Court: Asking Telecom Operators to make the payment of 10% of the total AGR dues as by 31.3.2021, the 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ gave 10 years to the Telecom Service Providers (TSPs) to complete the payment of their AGR dues.

“The TSPs make payment in yearly instalments commencing from 1.4.2021 up to 31.3.2031 payable by 31st March of every succeeding financial year.”

The Union of India on the representation made by the telecom service providers and Indian Banks’ Association, had decided to provide the facility of making payment in instalments within 20 years. The Court, however, said that the period of 20 years fixed for payment is excessive.

“… it is a revenue sharing regime, and it is grant of sovereign right to the TSPs. under the Telecom Policy. We feel that some reasonable time is to be granted, considering the financial stress and the banking sector’s involvement. We deem it appropriate to grant facility of time to make payment of dues in equal yearly instalments.”

The Court, however, clarified that at the same time, it is to be ensured that the dues are paid in toto.

“The concession is granted only on the condition that the dues shall be paid punctually within the time stipulated by this Court. Even a single default will attract the dues along with interest, penalty and interest on penalty at the rate specified in the agreement.”

The Court noticed that the decision of the Cabinet is based on the various factors, and in the interest of the economy and the consumers. The decision is taken after extensive deliberations and consultations, and till the date of judgment, the dues have been worked out as per the decision rendered by this Court. Only for the subsequent period, some relaxation has been given as to the rate of interest, penalty, and interest on penalty, which is permissible.

“The arrears have accumulated for the last 20 years. It is also to be noted that some of the companies are under insolvency proceedings, validity of which is to be examined, and they were having huge arrears of AGR dues against them.  For protecting the telecom sector, a decision has been taken on various considerations mentioned above, which cannot be objected to.”

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393the bench of Arun Mishra, SA Nazeer and MR Shah, JJ had refused to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers. It had held,

“The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue.”

The Court, hence, noticed that is clear that in the case, which was decided by this Court relating to AGR dues, respondents were the parties, and they were litigating with respect to the definition of AGR in the second round of appeal filed before this Court.  Each of them was aware that the dispute as to the definition of AGR was pending in this Court. Thus, it is apparent that it was known to the parties that AGR dues to be finalised as per the decision of this Court in a pending matter, and lis was pending for the last 20 years.

“The liability cannot be escaped as specified in the Trading Guidelines to the extent that the seller or buyer is liable. They have to pay the AGR as per the judgment rendered by this Court. The purchasers who are not seller or buyer, shall have to pay the dues to the extent they are liable under the Guidelines, as discussed above.”

On the submission that they have paid dues as per the self-assessment or, in some cases, demands have not been raised, the Court directed DoT to complete the assessment in such cases of trade and raise demand if it has not been raised and to examine the correctness of self-assessment and raise demand, if necessary, after due verification.

“In  case demand notice has not been issued, let DoT raise the demand within six weeks from today.”

The Court, hence, issued the following directions:

  • That for the demand raised by the Department of Telecom in respect of the AGR dues based on the judgment of this Court, there shall not be any dispute raised by any of the Telecom Operators and that there shall not be any re-assessment.
  • That, at the first instance, the respective Telecom Operators shall make the payment of 10% of the total dues as demanded by DoT by 31.3.2021.
  • TSPs have to make payment in yearly instalments commencing from 1.4.2021 up to 31.3.2031 payable by 31st March of every succeeding financial year.
  • Various companies through Managing Director/Chairman or other authorised officer, to furnish an undertaking within four weeks, to make payment of arrears as per the order.
  • The existing bank guarantees that have been submitted regarding the spectrum shall be kept alive by TSPs. until the payment is made.
  • In the event of any default in making payment of annual instalments, interest would become payable as per the agreement along with penalty and interest on penalty automatically without reference to Court. Besides, it would be punishable for contempt of Court.
  • Compliance of order to be reported by all TSPs and DoT every year by 7th April of each succeeding year.

[Union of India v. Association of Unified Telecom Service Providers India, 2020 SCC OnLine SC 703, decided on 01.09.2020]

Case BriefsSupreme Court

Supreme Court: The bench of Indira Banjerjee and Indu Malhotra, JJ that the Courts are duty bound to issue a writ of Mandamus for enforcement of a public duty.

“The High Courts exercising their jurisdiction under Article 226 of the Constitution of India, not only have the power to issue a Writ of Mandamus or in the nature of Mandamus, but are duty bound to exercise such power, where the Government or a public authority has failed to exercise or has wrongly exercised discretion conferred upon it by a Statute, or a rule, or a policy decision of the Government or has exercised such discretion malafide, or on irrelevant consideration.”

The Court was hearing the case pertaining to a private road in Pune being declared as being owned by Pune Municipal Corporation whilst in the property records, there was no private road.  In 1970, by an order of the Pune Municipal Corporation, a Plot was divided into 4 plots and a private road admeasuring 414.14 square meters. Read more

“There is no whisper as to how the road came to be shown as in possession of Pune Municipal Commissioner nor of the procedure adopted for effecting changes, if any, in the property records.”

Considering the issue at hand, the Court noticed in case of dispossession except under the authority of law, the owner might obtain restoration of possession by a proceeding for Mandamus against the Government. It said that in all such cases, the High Court must issue a Writ of Mandamus and give directions to compel performance in an appropriate and lawful manner of the discretion conferred upon the Government or a public authority.”

“In appropriate cases, in order to prevent injustice to the parties, the Court may itself pass an order or give directions which the government or the public authorities should have passed, had it properly and lawfully exercised its discretion.”

Stating that the Court is duty bound to issue a writ of Mandamus for enforcement of a public duty, the bench said that there can be no doubt that an important requisite for issue of Mandamus is that Mandamus lies to enforce a legal duty. This duty must be shown to exist towards the applicant.

“A statutory duty must exist before it can be enforced through Mandamus. Unless a statutory duty or right can be read in the provision, Mandamus cannot be issued to enforce the same.”

It further said that High Court is not deprived of its jurisdiction to entertain a petition under Article 226 merely because in considering the petitioner’s right to relief questions of fact may fall to be determined. In a petition under Article 226 the High Court has jurisdiction to try issues both of fact and law. Exercise of the jurisdiction is, it is true, discretionary, but the discretion must be exercised on sound judicial principles.

[Hari Krishna Mandir Trust v. State of Maharashtra,  2020 SCC OnLine SC 631, decided on 07.08.2020]


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Case BriefsSupreme Court

Supreme court: The 2-judge bench of Indira Banerjee and Indu Malhotra, JJ has held that Section 88 of Maharashtra Regional and Town Planning Act, 1966 cannot be read in isolation from the other provisions of the Act, particularly Sections 65, 66, 125 and 126 thereof. It further, said,

“however laudable be the purpose, the Executive cannot deprive a person of his property without specific legal authority, which can be established in a court of law.”

On whether Section 88 of Maharashtra Regional and Town Planning Act, 1966 can be read in isolation

Section 125 read with Section 126 enables the state/Planning authority to acquire land. Section 65 read with Section 66, on the other hand, protect the interests of the owners. Considering all the relevant provisions, the Court held that on a proper construction of Section 88, when land is acquired for the purposes of a Development Scheme, the same vests in the State free from encumbrances. No third party can claim any right of easement to the land, or claim any right as an occupier, licensee, tenant, lessee, mortgagee or under any sale agreement. However,

“Section 88 of the Regional and Town Planning Act cannot be read in isolation. It has to be read with Section 125 to 129 relating to compulsory acquisition as also Section 59, 69 and 65.”

On Right to property vis-à-vis Doctrine of Eminent Domain

Article 300A of the Constitution of India embodies the doctrine of eminent domain which comprises two parts,

  • possession of property in the public interest; and
  • payment of reasonable compensation.

Noticing that the right to property may not be a fundamental right any longer, but it is still a constitutional right under Article 300A and a human right, the Court said that the right to property includes any proprietary interest hereditary interest in the right of management of a religion endowment, as well as anything acquired by inheritance. However laudable be the purpose, the Executive cannot deprive a person of his property without specific legal authority, which can be established in a court of law.

“In case of dispossession except under the authority of law, the owner might obtain restoration of possession by a proceeding for Mandamus against the Government.”

Factual background and Ruling

The Court was hearing the case pertaining to a private road in Pune being declared as being owned by Pune Municipal Corporation whilst in the property records, there was no private road.  In 1970, by an order of the Pune Municipal Corporation, a Plot was divided into 4 plots and a private road admeasuring 414.14 square meters.

On perusal of the documents, the Court noticed that there can be no doubt at all that the road in question measuring 444.14 sqm. never belonged to the Pune Municipal Corporation. In the property records, there was no private road. The Municipal Corporation was never shown as owner of the vacant plot or of any private road. Even assuming that there was any policy decision to have an approach road to every plot, it was incumbent upon the authorities concerned to acquire the land.

“There is no whisper as to how the road came to be shown as in possession of Pune Municipal Commissioner nor of the procedure adopted for effecting changes, if any, in the property records.”

The Court, hence, held that the Pune Municipal Corporation had a public duty under Section 91 to appropriately modify the scheme and to show the private road as property of its legitimate owners, as per the property records in existence, and or in the award of the Arbitrator.

It, hence, directed the Municipal Corporation to

“delete the name of the Pune Municipal Corporation as owner of the private road in the records pertaining to the Scheme and carry out such other consequential alterations as may be necessary under Section 91 of the Maharashtra Regional and Town Planning Act, 1966.”

[Hari Krishna Mandir Trust v. State of Maharashtra,  2020 SCC OnLine SC 631, decided on 07.08.2020]


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Case BriefsSupreme Court

Supreme Court: In a major turnaround in the AGR case, with respect to Public Sector Undertakings, the Department of Telecommunication has decided to withdraw the demands which constitute 96% of the of the ?4 lakh crore demand. However, with respect to 4% other Public Sector Undertakings, Solicitor General Tushar Mehta told the bench of Arun Mishra, SA Nazeer and MR Shah, JJ that “the final decision shall be taken before the next date of hearing and placed on record.

The decision came after the Court pulled up the Government for misusing it’s 2019 verdict and had said that the said verdict only applied to AGR dues owed by the telecom companies and not to PSUs.

In today’s order, the Court directed the telecom operators to file audited Balance Sheets, for the last 10 years including for the Calendar year ending 31.3.2020 as well as the Income Tax Returns and the particulars of AGR deposited during the last 10 years. It also requested to make payments of reasonable amount also to show their bonafides, before the next date of hearing.

The matter is scheduled to be taken up in the 3rd week of July.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393, where it had  refused  to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers and had said,

“The definition of revenue has been taken in a broad, comprehensive, and inclusive manner to pose fewer problems of interpretation, and exclusion of certain items was avoided.”

[In re Mandar Deshpande, 2020 SCC OnLine SC 518 , order dated 18.06.2020]


Also read:

In a big blow to the Telecom Sector, SC refuses to change AGR definition

 

 

Case BriefsSupreme Court

Supreme Court: Dealing with the questions relating to interpretation of Section 47-A of the Indian Stamp Act, 1899 and the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 as amended from time to time, the bench of UU Lait and Indu Malhotra, JJ has held,

“There is nothing in the scheme of the Act which purports to restrict the exercise of suo motu power under Section 47-A, and confines it to cases where knowledge of any illegality or infirmity in the proceedings undertaken by the subordinate officers must be gathered from sources other than through a pending appeal.”

Under sub-section (1) of Section 47-A of the Act, if there is reason to believe that the market value has not been truly set forth in the Instrument tendered for registration, a reference can be made to the Collector, who (i) after giving the parties reasonable opportunity of being heard; and (ii) after holding an enquiry in such manner as may be prescribed by Rules, has to determine the correct value of the concerned property.

As per Rule 7 of the Rules, after considering the representations in writing and those urged at the time of hearing as well as all the relevant factors and evidence, the Collector must pass an order determining the market value of the concerned property and assess the element of duty payable on the instrument of transfer. Such order is required to be passed “within three months from the date of first notice”.

Here are the issues decided by the Court:

Whether Rule 7 of the Rules prescribing 3 months’ time for the Collector to pass an order determining the market value of the properties and duty payable on the instrument from the first notice, is directory or mandatory?

Explaining why requirement of the passing of order within 3 months from the date of first notice cannot be mandatory, the Court said,

“Form I notice itself must give twenty-one days to the concerned persons to respond. Depending upon their response, their statements would be recorded and/or certain information may be required to be called for, whereafter the Order in Form II is to be issued provisionally determining the market value. The concerned persons are entitled to raise objections in writing and must be afforded hearing. After fulfilling these requirements, the order in terms of Rule 7 can be passed. All these stages may not be completed in three months.”

The Court further explained that Section 47-A by itself does not prescribe any timeline. If the stipulation or fixation of period of three months from the first notice in terms of Rule 6 or from notice in Form II is taken to be mandatory it would lead to a situation of incongruity. The fact that Form II notice had been issued, would mean that on a prima facie view of the record and material, the value stated in the instrument was not the correct value; which in turn would mean that prima facie the Government Coffers were being denied the rightful dues.

“If for any reason the proceedings are not completed within three months and, therefore, must be held to be vitiated, the public interest would suffer, and the persons who were prime facie responsible for suppressing the real value, would stand to gain.”

The Court, hence, held that the amendment of Rule 7 incorporating the period of three months was essentially to guide the public officials to complete the process as early as possible but was not intended to create a right in favour of those who had prime facie conducted themselves prejudicing public interest.

Whether the appellate authority has power under Section 47A of the Act to enhance the market value of the property while deciding the appeal filed by the registrants?

Explaining the scope of appellate authority’s power under Section 47-A, the Court held that while entertaining an appeal, if an obvious illegality is noticed by the revisional authority, it can certainly exercise suo motu power to undo the mistake, or rectify an error committed by the subordinate officer authority, subject to such restrictions as are imposed on the exercise of the power by the statute.

Stating that nothing in the scheme of the Act purports to restrict the exercise of suo motu power under Section 47-A, and confines it to cases where knowledge of any illegality or infirmity in the proceedings undertaken by the subordinate officers must be gathered from sources other than through a pending appeal, the Court said,

“Unless the statute expressly or even by necessary implication restricts the exercise of power, there would be no occasion to read into the power, any other limitations.”

The Court, further, said that it makes no difference as to what was the source of the information or knowledge, so long as the power is exercised within the confines of the limitations or restrictions imposed by the statute, and is in accordance with law. Apart from the restrictions imposed by the statute, none can be read into the exercise of power on the ground as to the nature or source of information.

[Inspector General of Registration, Tamil Nadu v. K. Baskaran, 2020 SCC OnLine SC 509 , decided on 15.06.2020]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ has given 5 days to Telecom Service Providers to file a joint affidavit with respect to their proposal to secure the amount, which is to be paid against AGR dues. The matter will now be taken up on June 18, 2020.

The issues that are to be considered are:

  • reasonable time-frame
  • how to ensure the payment of the amount even within that time-frame
  • what kind of securities, undertakings and guarantees should be furnished to ensure that the amount is paid by the Telecom Service Providers

It was also brought into Court’s notice that how the demand was raised on the basis of it’s judgment with respect to Public Sector Undertakings when the licences were different and the judgment never dealt with the issue of Public Sector Undertakings and their agreements are quite different. Noticing that the licences are different, the Court asked the Department of Telecom reconsider the demand that has been sprung, within three days, and on the next date of hearing report the compliance of the action taken on the basis of this order.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393, the Court had refused  to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers and had said,

“The definition of revenue has been taken in a broad, comprehensive, and inclusive manner to pose fewer problems of interpretation, and exclusion of certain items was avoided.”

[In re Mandar Deshpande, 2020 SCC OnLine SC 501, order dated 11.06.2020]


Also read:

In a big blow to the Telecom Sector, SC refuses to change AGR definition

Case BriefsSupreme Court

Supreme Court: The 2-judge bench of AM Khanwilkar and Dinesh Maheshwari, JJ has held that for bringing any particular foreign exchange receipt within the ambit of Section 80-O of Income Tax Act for deduction, it must be a consideration attributable to information and service contemplated by Section 80-O; and in case of a contract involving multiple or manifold activities and obligations, every consideration received therein in foreign exchange will not ipso facto fall within the ambit of Section 80-O.

Factual Background

The appellants, who had been engaged in providing services to certain foreign buyers of frozen seafood and/or marine products and had received service charges from such foreign buyers/enterprises in foreign exchange, claimed deduction under Section 80-O of the Act of 1961, as applicable for the relevant assessment year/s. In both these cases, the respective Assessing Officer/s denied such claim for deduction essentially with the finding that the services rendered by respective assessees were the ‘services rendered in India’ and not the ‘services rendered from India’ and, therefore, the service charges received by the assessees from the foreign enterprises did not qualify for deduction in view of clause (iii) of the Explanation to Section 80-O of the Act of 1961.

ITAT Decision: As per the agreements with the referred foreign enterprises, the assessee had passed on the necessary information which were utilised by the foreign enterprises concerned to make a decision either to purchase or not to purchase; and hence, it were a service rendered from India

Kerala High Court Decision: Assessees were merely marine product procuring agents for the foreign enterprises, without any claim for expertise capable of being used abroad rather than in India and hence, the services rendered by them do not qualify as the ‘services rendered from India’, for the purpose of Section 80-O of the Act of 1961.

Supreme Court Ruling

Explaining the law on the issue the Court said that any foreign exchange receipt has to be attributable to the information or service contemplated by the provision and only that part of foreign exchange receipt, which is so attributable to the activity contemplated by Section 80-O, would qualify for claiming deduction. Such enquiry is required to be made by the Assessing Officer; and for the purpose of this imperative enquiry, requisite material ought to be placed by the assessee to co-relate the foreign exchange receipt with information/service referable to Section 80-O. Evidently, such an enquiry by the Assessing Officer could be made only if concrete material is placed on record to show the requisite correlation.

On the argument that Section 80-O of the Act is essentially an incentive provision and, therefore, needs to be interpreted and applied liberally, the Court said that that deductions, exemptions, rebates et cetera are the different species of incentives extended by the IT Act.

“Section 80-O is only one of the provisions in the Act of 1961 dealing with incentive; and even as regards the incentive for earning or saving foreign exchange, there are other provisions in the Act …”

Without expanding unnecessarily on variegated provisions dealing with different incentives, the Court said that it would be suffice to notice that the proposition that incentive provisions must receive “liberal interpretation” or to say, leaning in favour of grant of relief to the assessee is not an approach countenanced by this Court.

“at and until the stage of finding out eligibility to claim deduction, the ambit and scope of the provision for the purpose of its applicability cannot be expanded or widened and remains subject to strict interpretation but, once eligibility is decided in favour of the person claiming such deduction, it could be construed liberally in regard to other requirements, which may be formal or directory in nature.”

Applying the aforementioned principles, the Court noticed that, in the case at hand, all the clauses of the agreements read together make it absolutely clear that the appellant was merely a procuring agent and it was his responsibility to ensure that proper goods are supplied in proper packing to the satisfaction of the principal.

“Even if certain information was sent by the assessee to the principals, the information did not fall in the category of such professional services or information which could justify its claim for deduction under Section 80-O of the Act.”

The Court, hence, upheld the verdict of the High Court.

[Ramnath and Co. v. Commissioner of Income Tax, 2020 SCC OnLine SC 484 , decided on 05.06.2020]

Case BriefsSupreme Court

Supreme Court: The bench of Dr. DY Chandrachud and Ajay Rastogi, JJ Section 37 of the Architects Act 1972 does not prohibit individuals not registered under the Architects Act from undertaking the practice of architecture and its cognate activities.

The Court was hearing an appeal against the Allahabad High Court verdict where it was held that Section 37 only prohibits unregistered individuals from using the title “architect”. As a necessary adjunct of this reasoning, the High Court held that the Promotion Policy 2005, which allowed for individuals not holding a degree in architecture being appointed to the Class II post of Associate Architect, did not contravene Section 37 of the Architects Act in so far as they would be carrying out the activities of an architect. It said,

“mere nomenclature of the particular post will not in any way be said to violate the provisions of the Architects Act 1971.”

However, when the matter reached the Supreme Court, it noticed that where a plain reading of the text of the statute leads to an absurd or unreasonable meaning, the text of the statute must be construed in light of the object and purpose with which the legislature enacted the statute as a whole. It said,

“The Statement of Objects and Reasons of the Architects Act makes it evident that the legislature was undoubtedly concerned with the risk of unqualified persons undertaking the construction of buildings leading to costly and dangerous buildings. In guarding against this risk, the legislature first set out a minimum standard of statutorily recognised qualifications to be met before an individual is designated as an architect under the Architects Act.”

Architecture undoubtedly constitutes a highly specialised profession requiring the possession of minimum educational qualifications. However, architects are by and large engaged by means of a contract for services. In other words, architects provide a set of specialised services towards the larger goal of construction. Architects are not embarking on construction independently of other actors. By virtue of the Architects Act, anybody engaging the services of an individual calling themselves an “Architect” is assured that such an individual possesses statutorily recognised educational qualifications and is competent to complete the task at hand.

The Court further explained that the legislature chose to define an “architect” as an individual registered under the Architects Act and not as an individual practicing architecture or any cognate activities. Thus, the legislature limited the regulatory regime created by the Architects Act to the first class of individuals.

“In protecting the public from the risk of the second class, untrained individuals, the legislature had two options: first it could bar this second class of individuals from engaging in the profession altogether (as it had done with physicians and advocates); or alternatively it could prevent this second class of individuals from calling themselves “Architects”.”

The Court, hence, held that the Statement of Objects and Reasons make it clear that the legislature chose the second option and in fact went to great lengths to clarify that choice. The legislature stated that with the passing of the legislation, it shall be unlawful for an unregistered individual to designate himself as an “architect”.

[Council of Architecture v. Mukesh Goyal, 2020 SCC OnLine SC 329, decided on 17.03.2020]

Hot Off The PressNews

Supreme Court:  The bench of Arun Mishra and MR Shah, JJ has dismissed a petition filed by Vodafone against the levy of one-time spectrum charges (OTSC).

When Senior advocate Abhishek Manu Singhvi, appearing for Vodafone, told a bench that the charges are related to the adjusted gross revenue (AGR), a rather furious Justice Mishra said,

“Don’t pay anything… not this, not AGR. You will still not be touched,”

The Department of Telecommunications (DoT) had sought to levy a one-time spectrum charge on telecom service providers. This comes after the telecom companies paid their AGR dues to the Central government after the Supreme Court pulled them up for violating its earlier order and not paying the money on time.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393the bench of Arun Mishra, SA Nazeer and MR Shah, JJ had refused to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers. It had held,

“The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue.”

Vodafone Idea’s total AGR dues, as estimated by the DoT stand at Rs 53,038 crore, which includes Rs 24,729 crore of spectrum dues and Rs 28,309 crore as the license fee. On the other hand, Bharti Airtel’s total AGR dues reportedly amount to Rs 35,586 crore.

(Source: ANI)

Case BriefsSupreme Court (Constitution Benches)

Supreme Court: In a landmark ruling the 5-judge bench of Arun Mishra, Indira Banerjee, Vineet Saran, MR Shah, and Ravindra Bhat, JJ has unanimously held that the land owners who had refused to accept compensation or who sought reference for higher compensation, cannot claim that the acquisition proceedings had lapsed under Section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (Land Acquisition Act, 2013).

The bench also held that under the provisions of Section 24(1)(a) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, in case the award is not made as on 1.1.2014, the date of commencement of Act of 2013, there is no lapse of proceedings. Compensation has to be determined under the provisions of Act of 2013.

Giving elaborate explanation to the provision under Section 24 of the Land Acquisition Act, 2013, the Court, further, held,

  • In case the award has been passed within the window period of five years excluding the period covered by an interim order of the court, then proceedings shall continue as provided under Section 24(1)(b) of the Act of 2013 under the Act of 1894 as if it has not been repealed.
  • The word ‘or’ used in Section 24(2) between possession and compensation has to be read as ‘nor’ or as ‘and’. The deemed lapse of land acquisition proceedings under Section 24(2) of the Act of 2013 takes place where due to inaction of authorities for five years or more prior to commencement of the said Act, the possession of land has not been taken nor compensation has been paid.

“in case possession has been taken, compensation has not been paid then there is no lapse. Similarly, if compensation has been paid, possession has not been taken then there is no lapse.”

  • The expression ‘paid’ in the main part of Section 24(2) of the Act of 2013 does not include a deposit of compensation in court.

“Non-deposit of compensation (in court) does not result in the lapse of land acquisition proceedings. In case of non-deposit with respect to the majority of holdings for five years or more, compensation under the Act of 2013 has to be paid to the “landowners” as on the date of notification for land acquisition under Section 4 of the Act of 1894.”

  • In case a person has been tendered the compensation as provided under Section 31(1) of the Act of 1894, it is not open to him to claim that acquisition has lapsed under Section 24(2) due to non-payment or non-deposit of compensation in court. The obligation to pay is complete by tendering the amount under Section 31(1).
  • The proviso to Section 24(2) of the Act of 2013 is to be treated as part of Section 24(2) not part of Section 24(1)(b).
  • The mode of taking possession under the Act of 1894 and as contemplated under Section 24(2) is by drawing of inquest report/ memorandum. Once award has been passed on taking possession under Section 16 of the Act of 1894, the land vests in State there is no divesting provided under Section 24(2) of the Act of 2013, as once possession has been taken there is no lapse under Section 24(2).
  • The provisions of Section 24(2) providing for a deemed lapse of proceedings are applicable in case authorities have failed due to their inaction to take possession and pay compensation for five years or more before the Act of 2013 came into force, in a proceeding for land acquisition pending with concerned authority as on 1.1.2014. The period of subsistence of interim orders passed by court has to be excluded in the computation of five years.
  • Section 24(2) of the Act of 2013 does not give rise to new cause of action to question the legality of concluded proceedings of land 319 acquisition. Section 24 applies to a proceeding pending on the date of enforcement of the Act of 2013, i.e., 1.1.2014. It does not revive stale and time-barred claims and does not reopen concluded proceedings nor allow landowners to question the legality of mode of taking possession to reopen proceedings or mode of deposit of compensation in the treasury instead of court to invalidate acquisition.

Last year, Justice Arun Mishra, heading the Bench, had refused to recuse himself from hearing the case and had said,

“I would be committing a grave blunder by recusal in the circumstances, on the grounds prayed for, and posterity will not forgive me down the line for setting a bad precedent. It is only for the interest of the judiciary (which is supreme) and the system (which is nulli secundus) that has compelled me not to recuse.”

Justice Mishra’s recusal was sought on the ground that he was heading a Bench meant to re-examine a judgment that he had himself given in 2018 in in Indore Development Authority v. Shailendra, (2018) 3 SCC 412. 

He, however, said that if recusal is made, it would tantamount to giving room to unscrupulous litigant to have a Judge of their choice who can share the views which are to be canvassed by them. The plea cannot be termed anything other than Bench hunting, if it is said that until and unless the one which suits a litigant is found the matters are not to be argued.

[Indore Development Authority v. Manohar Lal Sharma, 2020 SCC OnLine SC 316, decided on 06.03.2020]

Case BriefsSupreme Court

Supreme Court: A 3-judge bench of RF Nariman, Aniruddha Bose and V. Ramasubramanian, JJ has held that enforcement of a foreign award may under Section 48 of the Arbitration and Conciliation Act, 1996 be refused only if the party resisting enforcement furnishes to the Court proof that any of the stated grounds has been made out to resist enforcement. The said grounds are watertight – no ground outside Section 48 can be looked at.

Stating that Court’s power under Article 142 ought not to be used to circumvent the legislative policy contained in Section 48 of the Arbitration Act, the bench said,

“nothing in Section 48 of the Arbitration Act would permit an enforcing court to add to or subtract from a foreign award that must either be enforced or rejected by reason of any of the grounds under Section 48 being made out to resist enforcement of such foreign award.”

Some of the important considerations highlighted by the Court for enforcement of a foreign award

  • Unlike Section 37 of the Arbitration Act, which is contained in Part I of the said Act, and which provides an appeal against either setting aside or refusing to set aside a ‘domestic’ arbitration award, the legislative policy so far as recognition and enforcement of foreign awards is that an appeal is provided against a judgment refusing to recognise and enforce a foreign award but not the other way around (i.e. an order recognising and enforcing an award).

“This is because the policy of the legislature is that there ought to be only one bite at the cherry in a case where objections are made to the foreign award on the extremely narrow grounds contained in Section 48 of the Act and which have been rejected.”

  • The foreign award must be read as a whole, fairly, and without nit-picking. If read as a whole, the said award has addressed the basic issues raised by the parties and has, in substance, decided the claims and counter-claims of the parties, enforcement must follow.
  • Grounds for resisting enforcement of a foreign award under Section 48
    • Enforcement of a foreign award made without jurisdiction cannot possibly be weighed in the scales for a discretion to be exercised to enforce such award if the scales are tilted in its favour.
    • Where the grounds taken to resist enforcement can be said to be linked to party interest alone, for example, that a party has been unable to present its case before the arbitrator, and which ground is capable of waiver or abandonment, or, the ground being made out, no prejudice has been caused to the party on such ground being made out, a Court may well enforce a foreign award, even if such ground is made out.
    • When it comes to the “public policy of India” ground there would be no discretion in enforcing an award which is induced by fraud or corruption, or which violates the fundamental policy of Indian law, or is in conflict with the most basic notions of morality or justice.
  • The expression “may” in Section 48 can, depending upon the context, mean “shall” or as connoting that a residual discretion remains in the Court to enforce a foreign award, despite grounds for its resistance having been made out. In that case a balancing act may be performed by the Court enforcing a foreign award.
  • Given the fact that the object of Section 48 is to enforce foreign awards subject to certain well-defined narrow exceptions, the 108 expression “was otherwise unable to present his case” occurring in Section 48(1)(b) cannot be given an expansive meaning and would have to be read in the context and colour of the words preceding the said phrase. In short, this expression would be a facet of natural justice, which would be breached only if a fair hearing was not given by the arbitrator to the parties.
  • If a foreign award fails to determine a material issue which goes to the root of the matter or fails to decide a claim or counter-claim in its entirety, the award may shock the conscience of the Court and may be set aside.

[Vijay Karia v. Prysmian Cavi E Sistemi Srl, 2020 SCC OnLine SC 177, decided on 13.02.2020]

Case BriefsSupreme Court

Supreme Court: Taking a strong note of non-compliance of its order asking telecom companies to pay adjusted gross revenue of Rs 1.47 lakh crore to DoT, a bench headed by Justice Arun Mishra, JJ has issued contempt notice to the telecom companies. The managing directors of Bharti Airtel , Vodafone, MTNL, BSNL, Reliance Communications, Tata Telecommunication and others have been summoned to the court on March 17.

The Court said that the telecom companies have violated the order passed by this Court in pith and substance as in spite of the dismissal of the Review application, they have not deposited any amount so far.

“Shocked” over the non-compliance of it’s 2019 order, the bench said,

“It appears the way in which things are happening that they have scant respect to the directions issued by this court.”

The Court also issued notice to a DoT Desk Officer who asked the Attorney General to not insist on payment of dues as directed by the Supreme Court.  On this, a furious Justice Mishra said,

“A Desk Officer of the Department of Telecommunications has the temerity to pass the order to the effect of issuing a direction to the Accountant General, another Constitutional Authority”

The Desk Officer had asked the Attorney General

“not to insist for any payment pursuant to the order passed by this Court and not to take any coercive steps till further orders.”

The Court said that this kind of order was nothing but a device to scuttle order of the Supreme Court.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393the bench of Arun Mishra, SA Nazeer and MR Shah, JJ had refused to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers. It had held,

“The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue.”

According to DoT, Bharti Airtel owes around Rs 23,000 crore, Vodafone Idea Rs 19,823 crore and Reliance Communications Rs 16,456 crore.

[Union of India v. Association of Unified Telecom Service Providers of India, 2020 SCC OnLine SC 182, order dated 14.02.2020]

Case BriefsSupreme Court

Supreme Court: Refusing to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers, the 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ has said,

“The definition of revenue has been taken in a broad, comprehensive, and inclusive manner to pose fewer problems of interpretation, and exclusion of certain items was avoided.”

The Court agreed that to a certain extent, it cannot be disputed that to have clarity, uniformity, and definitiveness; the accounting standards lay down guidelines with respect to financial terms. It, however, said that when the financial terms in the agreement are clear in the form of definition of gross revenue governed by Clause 19.1 of the agreement, the definition of Accounting Standard­9 cannot supersede it which is a general one.

“The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue.”

The Court further noticed that the parties had agreed to various inclusions in the agreement and have willingly switched over to revenue­ sharing regime under the National Telecom Policy, 1999. TSPs agreed to interpretation and accepted it as held by this Court in 2011 judgment.

“The deliberations were held with the licensees, experts, and then finally migration package, revenue sharing regime is being consented to, was worked out in which the definition of adjusted gross revenue as a part of the financial condition of the licence is mentioned.”

Going through the chequered history on the case, the Court noticed:

  • The demand was raised for the first time in the year 2003 despite the fact that the definition of gross revenue was clear. Licensees were aware that these items concerning which they have raised the dispute were included in the definition of gross revenue, as such, they had initially questioned inclusion on the basis of the validity of the definition of gross revenue. The challenge was found to be sans any basis by this Court.
  • The objections raised concerning the validity of the gross revenue, were wholly unsustainable and on the face of it, were liable to be rejected, and came to be rejected finally and conclusively by this Court in the year 2011.
  • After that, again the objections have been repeated to exclude those very revenue items which were held to be included once over an effort has been made to get rid of the definition of gross revenue. The objections which have been raised pertained to the definition of gross revenue for which the court held they are part of revenue.

“Now, relying upon AS­9 standards, an attempt has been made by an indirect method for excluding items, which are expressly included in the definition of gross revenue. Objections are too tenuous, and, as a matter of fact, there was no scope to raise such objections in 2003 itself.”

In the over 150 pages long verdict, the Court has discussed at length the various revenue heads not being revenue and has held that they all fall within the purview of gross revenue.

[Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393, decided on 24.10.2019]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ranjan Gogoi, CJ and Deepak Gupta and Sanjiv Khanna, JJ has held that the power of a police officer under Section 102 of the Criminal Procedure Code, 1973 to seize any property, which may be found under circumstances that create suspicion of the commission of any offence, would not include the power to attach, seize and seal an immovable property. Khanna, J, writing the judgment for the bench, however, clarified,

“This, however, would not bar or prohibit the police officer from seizing documents/ papers of title relating to immovable property, as it is distinct and different from seizure of immovable property.”

The verdict came in a reference made by a Division Bench of Jagdish Singh Khehar and Arun Mishra, JJ vide order dated November 18, 2014, noticing that the issues that arise have far reaching and serious consequences.

Interpreting Section 102, the bench said that the language of Section 102 of the Code does not support the interpretation that the police officer has the power to dispossess a person in occupation and take possession of an immovable property in order to seize it. Section 102 is not, per se, an enabling provision by which the police officer acts to seize the property to do justice and to hand over the property to a person whom the police officer feels is the rightful and true owner.

It further explained that the expression ‘circumstances which create suspicion of the commission of any offence’ in Section 102 does not refer to a firm opinion or an adjudication/finding by a police officer to ascertain whether or not ‘any property’ is required to be seized. The word ‘suspicion’ is a weaker and a broader expression than ‘reasonable belief’ or ‘satisfaction’. The police officer is an investigator and not an adjudicator or a decision maker. This is the reason why the Ordinance was enacted to deal with attachment of money and immovable properties in cases of scheduled offences.

“In case and if we allow the police officer to ‘seize’ immovable property on a mere ‘suspicion of the commission of any offence’, it would mean and imply giving a drastic and extreme power to dispossess etc. to the police officer on a mere conjecture and surmise, that is, on suspicion, which has hitherto not been exercised.”

It was further held that the disputes relating to title, possession, etc., of immovable property are civil disputes which have to be decided and adjudicated in Civil Courts. The Court said,

“We must discourage and stall any attempt to convert civil disputes into criminal cases to put pressure on the other side.”

Gupta, J wrote a separate concurring verdict where he highlighted that the Code of Criminal Procedure itself the Legislature has in various provisions specifically used the words ‘movable’ and ‘immovable’ property as opposed to the words ‘any property’ under in Section 102, hence, the phrase ‘any property’ in Section 102 will only cover moveable property and not immovable property.

[Nevada Properties Pvt. Ltd. State of Maharashtra, 2019 SCC OnLine SC 1247, decided on 24.09.2019]

Case BriefsSupreme Court

Supreme Court: The bench of Dr DY Chandrachud and Aniruddha Bose, JJ has held that the words “by another year” in Rule 105(1) of Delhi School Education Rules 1973 stipulate that the maximum period of probation permissible is two years.

Amending History of Rule 105 of the Delhi School Education Rules, 1973

Rule 105 of the 1973 Rules, as originally enacted, stipulated that an employee shall be appointed on initial probation for a period of one year which may be extended by the appointing authority “by another year”. No separate provision was stipulated for minority institutions. Two amendments were subsequently incorporated to the 1973 Rules. On 30 January 1985, the Delhi School Education (Amendment) Rules 1984 were notified. 12 By this amendment, Rule 110 of the 1973 Rules was substituted. The Court noticed that the amending history of the 1973 Rules shows that the words “by another year” appearing in the principal part of Rule 105 has not been omitted.

“By another year” – Meaning

The consistent meaning imparted to the word “another” is a single addition or one more. The ordinary and literal construction of the words “another” read with the words “for a period of one year” in Rule 105(1) implies that the appointing authority may extend the period of probation by one additional year.

“The contention that the words “by another year” imply that the appointing authority can extend the period of probation by one year at a time without any limit cannot be accepted as this would amount to rewriting the provision by substituting the words “by another year” with the words “by one year at a time”, which is impermissible in law.”

Hence, the Court said that had the delegate of the legislature intended that there is no limit on the permissible probationary period, the words “by another year” would have been omitted.

The limit placed on the permissible extension of the probationary period draws a balance between the opportunity that must be afforded to a probationer to modify and improve the quality of service and a mandate that the appointing authority of an educational institute hires qualified teachers. To impart a meaning to the words “by another year” that the appointing authority may extend the probationary period one year at a time without a limit will allow an appointing authority to extend the probationary period, with the prior approval of the Director, of a probationer ad nauseum.

Prior approval of Director

The prior approval of the Director, save and except for minority institutions, is mandatory and must be complied with as a condition precedent for the valid exercise of the power to extend the period of probation. The Director is required to assess the determination of the appointment authority and based on that assessment, to decide whether to approve an extension of the probationary period. The provision which mandates that the prior approval of the Director shall be sought before extending the period of probation ensures that the appointing authority may not extend the probationary period without legitimate reason.

Conclusion

  • The words “by another year” in Rule 105(1) of the 1973 Rules stipulate that the maximum period of probation permissible is two years. The limit equally applies to minority institutions covered by the first proviso to Rule 105; and
  • Rule 105(2) stipulates a condition precedent to the issuance of an order of confirmation. The continuation of the services of a probationer beyond the period of probation does not amount to a deemed confirmation of service. It is only upon the issuance of an order of confirmation by the appointing authority that a probationer is confirmed in service

[Durgabhai Deshmukh Memorial Sr. Sec. School v. JAJ Vasu Sena, 2019 SCC OnLine SC 1075, decided on 21.08.2019]

Legislation UpdatesNotifications

Several queries have been received in the Ministry with respect to interpretation of the provision of Section 232(6) of the Companies Act, 2013.

Clarification has been sought on whether it is mandatory to indicate a specific calendar date as ‘appointed date’ in the schemes referred to in the section. Further, requests have also been received to confirm whether the acquisition date’ for the purpose of Ind-AS 103 (Business combinations) would be the ‘appointed date’ referred to in Section 232(6).

The matter has been examined in detail in the Ministry in the light of the provisions of the Act, applicable rules, prevalent practices and orders passed by Courts/NCLT. It is noted that companies have been filing schemes under sections 230-232 of the Act indicating ‘appointed date’ either as a specific calendar date or an event-based date, as may have been mutually agreed upon by the parties to the scheme. Section 232(5) also requires that every company in relation to which the order is made shall file a certified copy of the order with the Registrar of Companies for registration within 30 days of the receipt of a certified copy of the order’.

In Marshall Sons & Co. India Ltd. v. ITO [1223 ITR 8091], it was held by the Hon’ble Supreme Court that every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place, and that such date may precede the date of sanctioning of the scheme by the Court, the date of filing of certified copies of the orders of the Court before the Registrar of Companies, and the date of allotment of shares, etc. It was observed therein that, the scheme, however, would be given effect from the transfer date (appointed date) itself.

In another case, in the matter of amalgamation of Equitas Housing Finance Limited and Equitas Micro Finance Limited with Equitas Finance Limited in C.P. Nos. 119 to 121 of 2016, the Hon’ble Madras High Court held that the provisions of Section 394 (1) of the Companies Act, 1956 (corresponding to Section 232 of the Companies Act, 2013) provided enough leeway to a company to delay the date on which the scheme of amalgamation shall take effect and tie the same to the occurrence of an event. Thus, the Court rejected the argument that the ‘appointed date’ in the scheme should necessarily be a specific calendar date.

Section 232(6) of the Act states that the scheme shall be deemed to be effective from the ‘appointed date’ and not a date subsequent to the ‘appointed date’. This is an enabling provision to allow the companies to decide and agree upon an ‘appointed date’ from which the scheme shall come into force.

In view of the above, it is hereby clarified that:

a) The provision of Section 232(6) of the Act enables the companies in question to choose and state in the scheme an ‘appointed date’. This date may be a specific calendar date or may be tied to the occurrence of an event such as the grant of license by a competent authority or fulfillment of any preconditions agreed upon by the parties, or meeting any other requirement as agreed upon between the parties, etc., which are relevant to the scheme.

b) The ‘appointed date’ identified under the scheme shall also be deemed to be the ‘acquisition date’ and date of transfer of control for the purpose of conforming to accounting standards (including Ind-AS 103 Business Combinations).

c) Where the ‘appointed date’ is chosen as a specific calendar date, it may precede the date of filing of the application for a scheme of merger/amalgamation in NCLT. However, if the ‘appointed date’ is significantly ante-dated beyond a year from
the date of filing, the justification for the same would have to be specifically brought out in the scheme and it should not be against the public interest.

d) The scheme may identify the ‘appointed date’ based on the occurrence of a trigger event which is key to the proposed scheme and agreed upon by the parties to the scheme. This event would have to be indicated in the scheme itself upon
occurrence of which the scheme would become effective. However, in case of such event-based date being a date subsequent to the date of filing the order with the Registrar under Section 232(5), the company shall file an intimation of the same with the Registrar within 30 days of such scheme coming into force.


Ministry of Corporate Affairs

[General Circular No. 04/2019]

[Circular dt. 21-08-2019]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of RF Nariman, Sanjiv Khanna and Surya Kant, JJ has held the Amendment Act to Insolvency and Bankruptcy Code, 2016 made pursuant to a report prepared by the Insolvency Law Committee dated 26th March, 2018 does not infringe Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution of India.

The amendments so made deem allottees of real estate projects to be “financial creditors” so that they may trigger the Code, under Section 7 thereof, against the real estate developer. In addition, being financial creditors, they are entitled to be represented in the Committee of Creditors by authorised representatives.

HOMEBUYERS AS FINANCIAL CREDITORS

The Amendment was challenged on ground that the treatment of allottees as financial creditors violates two facets of Article 14. One, that the amendment is discriminatory inasmuch as it treats unequals equally, and equals unequally, having no intelligible differentia; and two, that there is no nexus with the objects sought to be achieved by the Code.

On this the Court said that like other financial creditors, be they banks and financial institutions, or other individuals, all persons who have advanced monies to the corporate debtor should have the right to be on the Committee of Creditors.

“True, allottees are unsecured creditors, but they have a vital interest in amounts that are advanced for completion of the project, maybe to the extent of 100% of the project being funded by them alone.”

The Court further said that given the fact that allottees may not be a homogenous group, yet there are only two ways in which they can vote on the Committee of Creditors – either to approve or to disapprove of a proposed resolution plan.

“Sub-section (3A) goes a long way to ironing out any creases that may have been felt in the working of Section 25A in that the authorised representative now casts his vote on behalf of all financial creditors that he represents. If a decision taken by a vote of more than 50% of the voting share of the financial creditors that he represents is that a particular plan be either 145 accepted or rejected, it is clear that the minority of those who vote, and all others, will now be bound by this decision.”

DEEMING PROVISION

The Court noticed that although a deeming provision is to deem what is not there in reality, thereby requiring the subject matter to be treated as if it were real, yet several authorities and judgments show that a deeming fiction can also be used to put beyond doubt a particular construction that might otherwise be uncertain. It held,

“the deeming fiction that is used by the explanation is to put beyond doubt the fact that allottees are to be regarded as financial creditors within the enacting part contained in Section 5(8)(f) of the Code.”

EXPLANATION ADDED TO SECTION 5(8)(f)

The Court further noticed that an explanation does not ordinarily enlarge the scope of the original Section. But if it does, effect must be given to the legislative intent notwithstanding the fact that the legislature has named a provision as an explanation. It, hence, held,

“the explanation was added by the Amendment Act only to clarify doubts that had arisen as to whether home buyers/allottees were subsumed within Section 5(8)(f). The explanation added to Section 5(8)(f) of the Code by the Amendment Act does not in fact enlarge the scope of the original Section as home buyers/allottees would be subsumed within Section 5(8)(f) as it originally stood.”

RULING

  • The Amendment Act to Insolvency and Bankruptcy Code, 2016 made pursuant to a report prepared by the Insolvency Law Committee dated 26th March, 2018 does not infringe Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution of India.
  • The RERA is to be read harmoniously with the Code, as amended by the Amendment Act. It is only in the event of conflict that the Code will prevail over the RERA. Remedies that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code.
  • Section 5(8)(f) as it originally appeared in the Code being a residuary provision, always subsumed within it allottees of flats/apartments. The explanation together with the deeming fiction added by the Amendment Act is only clarificatory of this position in law.

[Pioneer Urban Land and Infrastructure Ltd. v. Union of India, 2019 SCC OnLine SC 1005, decided on 09.08.2019]

Case BriefsSupreme Court

Supreme Court: When the bench of AM Khanwilkar and Ajay Rastogi, JJ was called upon to decide whether the condition of ‘use in the same form in which such goods are purchased’ under Rule 6(4)(m)(i) of the KST Rules expands the scope of charging section i.e. Section 5B under KST Act, 1957, it held,

“there is no variance between Rules 6(4)(m)(i) read with Explanation III and Section 5B of the KST Act, 1957.”

The Court said,

“We are clear, in our view, that Section 5B of the KST Act and Rule 6(4)(m)(i) of the KST Rules operate in different spheres. Section 5B is a charging provision for levy of sales tax whereas Rule 6(4)(m)(i) is a provision for deduction from tax. Under Section 5B, tax can be levied on transfer of property in the goods whether as goods or in some other form whereas Rule 6(4)(m)(i) provides for  a deduction in respect of the goods which have already suffered tax and which are used in the same form.”

It was explained that Section 5B of the KST Act is a charging provision which empowers the State to levy tax on the transfer of property in goods involved in works contract. At the same time Rule 6(4)(m)(i) read with Explanation III to Rule 6(4) of the KST Rules clarifies that the same goods can be taxed only once and cannot be made subject matter of multiple incidence of tax and the goods which have suffered   taxation undergoes transformation into a different commodity altogether and is then used in the execution of a works contract, the same being a different commercial commodity is liable to be taxed.

The Court explained that Rule 6(4)(m)(i) purports to grant benefit to the assessee by allowing deductions for the value of goods which have already suffered taxation and which goods substantially retain their original identity while being used in the execution of a works contract.  Explanation III to Rule 6(4) clarifies it further by categorically providing that in case the goods are transformed into a different commodity which then is used in the execution of works contract, then the benefit of deduction cannot be availed.

The Court also referred to a recent verdict in Achal Industries v. State of Karnataka, 2019 SCC OnLine SC 428 and said that it is trite law that tax provisions granting exemptions/concessions are required to be strictly construed.

[Craft Interiors v. Joint Commissioner of Commercial Taxes (Intelligence), 2019 SCC OnLine SC 815, decided on 02.07.2019]


Also read:

SC explains meaning of “total turnover” under the Karnataka Sales Tax Act

Case BriefsHigh Courts

Delhi High Court: Dealing with the scope and ambit of the Seeds Act, 1966, Vibhu Bakhru, J held that the Seeds Act is not concerned with where and how the seeds are used. He said,

“Once a person dealing with notified variety of seeds conforms to the requirement of Section 7 of the Seeds Act, there is no restriction as to where and how the crop is to be grown. The Seeds Act is limited to ensuring that the seeds available to farmers conform to the minimum limits of germination and purity and the marks or label affixed thereon correctly indicate so.”

The Court was hearing the petition filed by State of Madhya Pradesh challenging 2 Office Memorandums (OMs)

  • By OM-I, Ministry has set forth the standards of the “Basmati” variety of rice. Apart from setting forth the characteristics of Basmati Rice, OM-I also expressly provides that it would be necessary to ensure the linkage between the variety and the Geographical Indication and only Basmati varieties with prescribed characteristic grown in Indo-Gangetic region would qualify for such description.
  • By OM-II, Ministry had issued a direction to ensure that the registration of Basmati varieties for certified and foundation seeds is not undertaken outside geographical area detailed under the Geographical Indication (GI)for Basmati rice.
  • By the impugned letter, Ministry has withdrawn the allocation of seeds for Basmati allotted during the Kharif-2016, pursuant to the decision that production of Basmati variety seeds would not be taken outside the GI defined areas (areas included in the State of Punjab, Haryana, Himachal Pradesh, Delhi, Uttarakhand, Western Uttar Pradesh, Jammu and Kathua District of Jammu and Kashmir).

State had challenged the OMs on the grounds that:

  • it is outside the scope of the Seeds Act
  • the OMs encroach upon State’s power to pass laws in relation to agriculture, which is a state subject;
  • it ventures into the statutory field of the Geographical Indications of Goods (Registration and Protection) Act, 1999.

Noticing that the Ministry has sought to ascribe the advice or recommendations made by the Central Seeds Committee to Rule 3(c) of the Seeds Rules, the Court said that this is, obviously, without merit as Rule 3(c) only pertains to sending recommendations concerning records to the Central Government.

“the Central Seed Committee is a Committee constituted under the Seeds Act, and the provisions of the Seeds Act and the Rules made therein circumscribe its role and functions. Clearly, the Central Seeds Committee cannot exercise any other function. Its role to act in an advisory capacity to the Central Government and the State Governments is also limited only to the matters arising out of the administration of the Seeds Act and/or other functions that are specified under the Seeds Act. Any advice or recommendation made by the Central Seeds Committee outside the scope of its functions, and role as specified under the Seeds Act and the Rules made thereunder, would be wholly without jurisdiction and the authority of law.”

Restricting Basmati production to only regions in the Indo-Gangetic plain was also outside the scope of the Seeds Act, the Court said,

“The import of the OMs is not to ensure that the quality of seeds produced is maintained, but to restrict the area where the seeds could be used for production of crops. The effect of the impugned notifications is that breeder seeds would not be available for production outside the specified areas. The clear object is to ensure that the crop of Basmati rice is only grown in specified areas. This would not only be outside the scope of the Seeds Act but ? …  ? relates to the field of agriculture, which is a state subject.”

The Court said that the legislative competence for enacting the Seeds Act is traceable to Entry 33 of List III of the Seventh Schedule to the Constitution of India. It is, perhaps, for this reason that the Seeds Act also incorporates due participation by the State Government.

The Court, hence, set aside the impugned OM-I and OM-II (the Office Memorandum dated 29.05.2008 and Office Memorandum No.3- 35/2014-SD-IV dated 07.02.2014) along with the impugned Notification.

[State Govt. of Madhya Pradesh v. Union of India, 2019 SCC OnLine Del 8259, decided on 25.04.2019]