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

Case BriefsSupreme Court

Supreme Court: While holding that the term “school children” will include college and university as well while interpreting government memo exempting passengers tax in respect of Stage Carriage (buses) owned by educational institution and used for the transportation of children to and from such institutions, the Division Bench of Dinesh Maheshwari and Vikram Nath, JJ., remarked,

“It gets perforce reiterated that the broad expression “children”, obviously, refers to the students taking instructions in educational institutions, irrespective of their class or standard or level.”

The petition was filed by the State of Haryana through its Assistant Excise and Taxation Officer seek leave to appeal against the judgment of the High Court of Punjab and Haryana by which the High Court had quashed the6 Show Cause Notice proposing to deny the benefit of exemption to the respondents from payment of passengers tax in terms of Memo dated 22-09-1970 issued under Section 10 of the Punjab Passengers and Goods Taxation Act, 1952.

The State contended that the approach of the High Court was not in conformity with the requirement of law as regards taxing statutes and further as regards the exemption notification or clauses. Reliance, in this regard was placed on the case of Novopan India Ltd. v. Collector of Central Excise and Customs, (1994) Supp. (3) SCC 606, wherein it had been held that,

“16…..The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee – assuming that the said principle is good and sound – does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State.”

Exempting Provision

The provision empowering the State to grant exemption, occurring in Section 10 of Punjab Passengers and Goods Taxation Act, 1952 reads as under:

“10.Exemptions: The State Government may, by general or special order and subject to specific conditions, if any, exempt any person or class of persons from the operation of all or any of the  provisions of this Act, if in its opinion, such exemption would promote national or public interest.”

The Memo dated 22-09-1970, which provided the exemption in question reads as under:

Subject: Exemption of Stage Carriages (Buses) owned and operated by Educational Institutions in carrying School children from the levy of Passengers Tax under Section 10 of the Punjab Passengers and Goods Taxation Act, 1952.

In exercise of the powers conferred by Section 10 of the Punjab Passengers and Goods Taxation Act, 1952, the Governor of Haryana hereby exempts the educational institutions from the payment of Passengers Tax under the Act, ibid, in respect of Stage Carriage(buses) owned by them and used for the transportation of children to and from such institutions.”

High Court’s Interpretation of the Exempting Provision

The submission of the State had essentially been that in the said notification, exemption was granted to the educational institutions in carrying “school children” from the levy of passengers tax; and, therefore, extending this exemption to any other institution, not transporting children of the schools, was impermissible. This submission had been found unworthy of credence and the High Court had rejected the same while observing, inter alia,

“….Once the Government itself has taken a decision as such, the Authorities below are not justified in trying to deny the benefit of exemption which was granted in public interest to the educational institutions under Section 10 of the Act and thus would frustrate the purpose of the exemption granted. Merely because in the heading, the word schoolchildren had been written, would not mean that the exemption was only granted to the children of schools and not to other educational institutions. If the State wanted to make a distinction as such, it would have specified that the institutions imparting education up to certain level i.e. primary or secondary were entitled for the benefit. The distinction, thus, sought to be made out is not justified and a liberal interpretation is to be given once exemption has been granted to the educational institutions.”

Observation and Analysis

The Supreme Court observed that even when nothing is to be intended and only plain language of the notification is to be examined, with reference to the powers under which, and the purpose for which, it has been issued, it is more than evident that the use of expression “school children” in the subject-caption of the said Memo can never be taken as decisive of the matter.

Noticeably, in the body of the said Memo, the exemption was extended to the educational institutions from payment of passengers tax in respect of the stage carriage (buses) owned by them and “used for the transportation of children to and from such institutions”. Opining that the expression “children” used in the body of the said Memo directly referred to the students taking instructions in educational institutions; the Bench stated,

“…there is no reason or logic to restrict the operation of this exemption notification only for the purpose of the vehicles used for transportation of the children going to schools and not to apply the same in respect of the vehicles used for transportation of the students going to other educational institutions, like colleges and universities.”

Further, noticing that the exemption had been granted only in respect of stage carriage (buses), which were being used for transportation of students to and from such institutions and not indiscriminately to all the vehicles used for the purpose of any such institution, the Bench explained that it had not been the case of the State that exemption was being claimed in relation to any vehicle used for any other purpose except transporting students to and from the educational institution, therefore, the exemption claimed by the university was held to be just and proper.

Conclusion

Consequently, holding that the construction of the exemption notification by the High Court had been only on its plain language and while taking note of the purpose for which it was issued, the Bench denied interfering with the impugned judgment. Hence, the special leave was dismissed.

[State of Haryana v. Daronacharya College of Engineering, Special Leave to Appeal (C) No(s). 31730 of 2016, decided on 27-09-2021]


Appearance by:

For the State: Nidhi Gupta, AAG Haryana, Sanjay Kumar Visen, AOR and Bhanwar Jadon, Advocate

For the Respondent: Manoj Kumar Sharma, Advocate and T. Mahipal, AOR


Kamini Sharma, Editorial Assistant has put this report together


Case BriefsSupreme Court

Supreme Court: Explaining the provision of remission under Section 34 (4) of the Arbitration and Conciliation Act, 1996, the bench of R. Subhash Reddy* and Hrishikesh Roy, JJ has held that under guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the Arbitrator, where there are no findings on the contentious issues in the award.

Factual Background

I-Pay Clearing Services Private Limited, the appellant, entered into an agreement with ICICI Bank Limited, the respondent, to provide technology and manage the operations and processing of the Smart Card based loyalty programs for HPCL. It was for HPCL, which was to improve fuel sales at their retail outlets. The appellant was required to develop various software application packages for management of Smart Card based loyalty programs. The said agreement was followed by another agreement, as per which, the appellant was to develop a software for postpaid Smart Card Loyalty Program akin to a Credit Card under the name “Drive Smart Software”. To further expand their customer base, the respondent requested the appellant to also develop a “Drive Track Fleet Card” management solution for the fleet industry. However, in view of sudden move by the Respondent in abruptly terminating the Service Provider Agreement dated 04.11.2002, it was alleged by the appellant that all its operations were paralyzed and that it has suffered losses of over Rs.50 crores, on account of loss of jobs of its employees, losses on account of employee retrenchment compensation, etc. The appellant made a total claim of Rs.95 crores against the respondent.

Justice R.G.Sindhakar (Retd.), who was appointed as Sole Arbitrator, passed award dated 13.11.2017, directing the respondent to pay to the appellant Rs. 50 Crores, together with interest @18% per annum from the date of award till payment and further directed to pay an amount of Rs.50,000/- towards the costs.

Aggrieved by the award of learned Sole Arbitrator, the respondent filed application under Section 34(1) of the Act for setting aside the award claiming that there was accord and satisfaction between the parties and the contractual obligations between the parties was closed mutually and amicably.

The award of the learned Arbitrator was mainly questioned on the ground that it suffers from patent illegality, inasmuch as there is no finding recorded in the award to show that the respondent-ICICI Bank has illegally and abruptly terminated the contract. It was argued that without addressing the vital issue viz. whether there was an illegal and abrupt termination of the contract or not, as pleaded, the Arbitrator has allowed the claim to the extent of Rs.50 crores, as such, the same is patently illegal and erroneous. Thus, it is pleaded that in view of settled legal position that lack of reasons or gaps in the reasoning, is a curable defect under Section 34(4) of the Act, award can be remitted to the arbitrator to give reasons.

The Bombay High Court, however, was of the view that the defect in the award is not curable, as such, there is no merit in the application filed by the appellant under Section 34(4) of the Act and dismissed the same.

Analysis

  • Section 31 of the Act deals with ‘form and contents of arbitral award’. As per the same, an arbitral award shall be made in writing and shall be signed by the members of the Arbitral Tribunal. The arbitral award shall state the reasons, upon which it is based, unless parties agree that no reasons are to be given, or the award is an arbitral award on agreed terms under Section 30 of the Act.
  • The recourse to a Court against an arbitral award is to be in terms of Section 34(1) of the Act. As per Section 34(2A) of the Act, if the arbitral award arising out of arbitrations other than international commercial arbitrations, is vitiated by patent illegality, same is a ground for setting aside the award.
  • As per Section 34(4) of the Act, on receipt of an application under subsection (1), in appropriate cases on a request by a party, Court may adjourn the proceedings for a period determined by it in the order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal, will eliminate the grounds for setting aside the arbitral award.

Considering the abovementioned provisions, the Court held that when it is the specific case of the respondent that there is no finding at all, on the question as to “whether the contract was illegally and abruptly terminated by the respondent?”, remission under Section 34(4) of the Act, is not permissible.

It was explained that Section 34(4) of the Act, can be resorted to record reasons on the finding already given in the award or to fill up the gaps in the reasoning of the award.

Explaining the difference between ‘finding’ and ‘reasons’, the Court noticed that ‘finding is a decision on an issue’[1] and ‘reasons are the links between the materials on which certain conclusions are based and the actual conclusions’[2].

Hence, in absence of any finding on the question as to “whether the contract was illegally and abruptly terminated by the respondent?”, it cannot be said that it is a case where additional reasons are to be given or gaps in the reasoning.

Further, Section 34(4) of the Act itself makes it clear that it is the discretion vested with the Court for remitting the matter to Arbitral Tribunal to give an opportunity to resume the proceedings or not. The words “where it is appropriate” itself indicate that it is the discretion to be exercised by the Court, to remit the matter when requested by a party.

When application is filed under Section 34(4) of the Act, the same is to be considered keeping in mind the grounds raised in the application under Section 34(1) of the Act by the party, who has questioned the award of the Arbitral Tribunal and the grounds raised in the application filed under Section 34(4) of the Act and the reply thereto. Merely because an application is filed under Section 34(4) of the Act by a party, it is not always obligatory on the part of the Court to remit the matter to Arbitral Tribunal.

It was explained that the discretionary power conferred under Section 34(4) of the Act, is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award.

“Under guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the Arbitrator, where there are no findings on the contentious issues in the award. If there are no findings on the contentious issues in the award or if any findings are recorded ignoring the material evidence on record, the same are acceptable grounds for setting aside the award itself. Under guise of either additional reasons or filling up the gaps in the reasoning, the power conferred on the Court cannot be relegated to the Arbitrator. In absence of any finding on contentious issue, no amount of reasons can cure the defect in the award. “

[I-Pay Clearing Services Private Limited v. ICICI Bank Limited, 2022 SCC OnLine SC 4, decided on 03.01.2021]


*Judgment by: Justice R. Subhash Reddy


Counsels

For Appellant: Senior Advocates Dr. Abhishek Manu Singhvi and Nakul Dewan,

For Respondent: Senior Advocate K.V.Vishwanathan


[1] Income Tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das, AIR 1965 SC 342

[2] J. Ashoka v. University of Agricultural Sciences, (2017) 2 SCC 609

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of NV Ramana, CJI and AS Bopanna* and Hima Kohli, JJ has elaborated on the question as to whether to be charged under Section 397 IPC, it is necessary to prove that the offender has put the weapon to “use”.

The law laid down by the Bench can be summarized as follows:

  • the use of the weapon to constitute the offence under Section 397 IPC does not require that the ‘offender’ should actually fire from the firearm or actually stab if it is a knife or a dagger but the mere exhibition of the same, brandishing or holding it openly to threaten and create fear or apprehension in the mind of the victim is sufficient.
  • if the charge of committing the offence is alleged against all the accused and only one among the ‘offenders’ had used the firearm or deadly weapon, only such of the ‘offender’ who has used the firearm or deadly weapon alone would be liable to be charged under Section 397 IPC.
  • in the teeth of the offence under Section 397 IPC being applicable to the offender alone, the vicariability of the same will also have to be noted if the charge against the accused under Sections 34, 149 IPC and   such other provisions of law, which may become relevant, is also invoked along with Section 397 IPC. In such event, it will have to be looked at differently in the totality of the facts, evidence and circumstances involved in that case and the provisions invoked in that particular case to frame a charge against the accused. In the instant case, the charge under Section 34 IPC was not framed against the appellant nor was such an allegation raised and proved against the appellant.
  • benefit of the interpretation raised on the scope of Section 397 IPC to hold the aggressor alone as being guilty, will be available to the appellant if there is no specific allegation against him.

Important Rulings

Shri Phool Kumar v. Delhi Administration(1975) 1 SCC 797

“The term ‘offender’ in that section, as rightly held by several High Courts, is confined to the offender who uses any deadly weapon. The use of a deadly weapon by one offender at the time of   committing robbery cannot attract Section 397 for the imposition of the minimum punishment on another offender who had not used any deadly weapon.”

Dilawar Singh v. State of Delhi(2007) 12 SCC 641

““Offender” refers to only culprit who actually used deadly weapon. When only one has used the deadly weapon, others cannot be awarded the minimum punishment. It only envisages the individual liability and not any constructive liability. Section 397 IPC is attracted only against the particular accused who uses the deadly weapon or does any of the acts mentioned in the provision. But the other accused are not vicariously liable under that section for acts of the co-accused.”

Ganesan v. State, 2021 SCC OnLine SC 1023

“… the term ‘offender’ under Section 397 IPC is confined to the ‘offender’ who uses any deadly weapon and use of deadly weapon by one offender at the time of committing robbery cannot attract Section   397 IPC for the imposition of minimum punishment on another offender who has not used any deadly weapon. Even there is distinction and difference between Section 397 and Section 398 IPC. The word used in Section 397 IPC is ‘uses’ any deadly weapon and the word used in Section 398 IPC is ‘offender is armed with any deadly weapon’. Therefore, for the purpose of attracting Section 397 IPC the ‘offender’ who ‘uses’ any deadly weapon Section 397 IPC shall be attracted.”

[Ram Ratan v. State of Madhya Pradesh, 2021 SCC OnLine SC 1279, decided on 17.12.2021]

Counsels

For Appellant: Advocate Shishir Kumar Saxena

For respondent: Advocate Sunny Choudhary

Case BriefsSupreme Court

Supreme Court: In a case where it was alleged that more than one consumer cannot institute a complaint unless they come within the definition of the word “complainant” of Section 2(5) of the Consumer Protection Act, 2019 and also satisfy the requirements of Section 38(11) read with Order I Rule 8 CPC, the bench of Hemant Gupta and V. Ramasubramanian*, JJ has held that it is wrong to contend that wherever there are more consumers than one, they must only take recourse to Order I Rule 8 CPC, even if the complaint is not on behalf of or for the benefit of, all the consumers interested in the matter.

Relevant Provisions

Section 2(5) of the Consumer Protection Act, 2019 reads as under:

“(5) “complainant” means—

(i) a consumer; or

(ii) any voluntary consumer association registered under any law for the time being in force; or

(iii) the Central Government or any State Government; or

(iv) the Central Authority; or

(v) one or more consumers, where there are numerous consumers having the same interest; or

(vi) in case of death of a consumer, his legal heir or legal representative; or

(vii) in case of a consumer being a minor, his parent or legal guardian;

35. Manner in  which  complaint  shall  be  made.­

(1) A complaint, in relation to any goods sold or delivered or agreed to be sold or delivered or any service provided or agreed to be provided, may be filed with a District Commission by—

(c)  one or more consumers, where there are numerous consumers having the same interest, with the permission of the District Commission, on behalf of, or for the benefit of, all consumers so interested.

38. Procedure on admission of complaint.

(11)  Where the complainant is a consumer referred to in sub-clause (v) of clause (5) of section 2, the provisions of Order I Rule 8 of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908) shall apply subject to the modification that every reference therein to a suit or decree shall be construed as a reference to a complaint or the order of the District Commission thereon.

Analysis

The Court agreed to the fact that the definition of the word “complainant” is little misleading. It, however, explained,

“There may be cases where only “a few consumers” and not “numerous consumers” have the same interest. There is nothing in the Act to prohibit these few consumers from joining together and filing a joint complaint.”

It is true that Section 2(5)(i) uses the expression “a consumer”. If the vowel “a” and the word “consumer” appearing in Section 2(5)(i) are to be understood to exclude more than one person, it will result in a disastrous consequence while reading Section 2(5)(vi). Section 2(5)(vi) states that in the case of death of a consumer, “his legal heir or legal representative” will be a complainant. Unless the words “legal heir” and “legal representative” are understood to mean ‘legal heirs’ and ‘legal representatives’, a meaningful reading of the provision may not be there.

The Court also took note of Section 13(2) of the General Clauses Act, 1897, which provides that words in the singular shall include the plural and vice versa in all Central Acts and Regulations, unless there is anything repugnant in the subject or context. Hence, it said that,

“We cannot read anything repugnant in the subject or context of Section 2(5) or 35(1)(c) or 38(11) of the Consumer Protection Act, 2019 to hold that the word in the singular, namely, “consumer” will not include the plural.”

Further, a joint complaint stands in contrast to a complaint filed in a representative capacity. For attracting the provisions of Section 35(1)(c), the complaint filed by one or more consumers should be on behalf of or for the benefit of numerous consumers having same interest. It does not mean that where there are only very few consumers having the same interest, they cannot even join together and file a single complaint but should take recourse only to independent and separate complaints.

Explaining by way of an example, the Court said,

“… a case where a residential apartment is purchased by the husband and wife jointly or by a parent and child jointly. If they have a grievance against the builder, both of them are entitled to file a complaint jointly. Such a complaint will not fall under Section 35(1)(c) but fall under Section 35(1)(a). Persons filing such a complaint cannot be excluded from Section 2(5)(i) on the ground that it is not by a single consumer. It cannot also be treated as one by persons falling under Section 2(5)(v) attracting the application of Order I Rule 8 CPC read with Section 38(11).”

Therefore, the proper way of interpreting Section 35(1) read with section 2(5), would be to say that a complaint may be filed by:

  1. a single consumer;
  2. a recognised consumer Association;
  3. one or more consumers jointly, seeking the redressal of their own grievances without representing other consumers who may or may not have the same interest;
  4. one or more consumers on behalf of or for the benefit of numerous consumers; and
  5. the Central Government, Central Authority or State Authority.

Further, it must be remembered that the provisions of the Consumer Protection Act are in addition to and not in derogation of the provisions of any other law for the time being in force, by virtue of Section 100. Even Section 38 which prescribes the procedure to be followed by the Commission for enquiring into the complaint, does not expressly exclude the application of the provisions of CPC. Though Sub-sections (9), (11) and (12) of Section 38 make specific reference only to a few provisions of the Code of Civil Procedure, the principle behind Order I Rule 1 enabling more than one person to join in a suit as plaintiff is not expressly excluded.

[Brigade Enterprises Ltd. v. Anil Kumar Virmani, 2021 SCC OnLine SC 1283, decided on 17.12.2021]


Counsels

For appellant: Senior Advocate Jayant Bhushan,

For Respondent: Senior Advocate Ajit Kumar Sinha

For intervenors: Advocate Omanakuttan K. K.


*Judgment by: Justice V. Ramasubramanian

Case BriefsSupreme Court

Supreme Court: Clearing the air over the applicability of a new or modified Compassionate Appointment Scheme that comes into force after the death of the employee, the bench of Hemant Gupta and V. Ramasubramanian*, JJ the interpretation as to the applicability of a modified Scheme should depend only upon a determinate and fixed criteria such as the date of death and not an indeterminate and variable factor such as the date of consideration of the application of the dependant.

Factual Background

The sister of the respondent died as an unmarried female Government servant on 8.12.2010.

The appointment on compassionate grounds in the State of Karnataka is governed by a set of Rules known as Karnataka Civil Services (Appointment on Compassionate grounds) Rules, 1996, issued in exercise of the powers conferred by Section 3(1) read with Section 8 of the Karnataka State Civil Services Act, 1978.

The Rules as they stood, on the date on which the sister of the respondent died in harness, did not include an unmarried brother, within the definition of the expression “dependant of a deceased Government servant” under Rule 2(1)(a) of the said Rules  vis¬a-vis  a deceased female unmarried Government servant.

It was only by way of way of a draft notification on 20.06.2012 that an unmarried brother of a deceased female unmarried Government servant was included within the definition. The final notification was issued on 11.07.2012.

While the competent authority rejected the respondent’s claim for compassionate appointment, the Karnataka State Administrative Tribunal allowed the application on the ground that the amendment   made to the Rules on 20.06.2012 would apply retrospectively covering the case of the respondent, though his sister died in harness on 8.12.2010. The said order was affirmed by the High Court.

Analysis

The Court analysed various judgments where the applicability of a new or modified Scheme that comes into force after the death of the employee was interpreted. It noticed that in cases where the benefit under the existing Scheme was taken away or substituted with a lesser benefit, the Supreme Court directed the application of the new Scheme. But in cases where the benefits under an existing Scheme were enlarged by a modified Scheme after the death of the employee, the Court applied only the Scheme that was in force on the date of death of the employee. This was fundamentally due to the fact that compassionate appointment was always considered to be an exception to the normal method of recruitment and perhaps looked down upon with lesser compassion for the individual and greater concern for the rule of law.

“Though there is a conflict as to whether the Scheme in force on the date of death of the employee would apply or the Scheme in force on the date of consideration of the application of appointment on compassionate grounds would apply, there is certainly no conflict about the underlying concern reflected in the above decisions. Wherever the modified Schemes diluted the existing benefits, this Court applied those benefits, but wherever the modified Scheme granted larger benefits, the old Scheme was made applicable.”

The Court noticed that the conflict of opinion in all the cases revolved around two dates, namely,

  1. date of death of the employee; and
  2. date of consideration of the application of the dependant.

Out of these two dates, only one, namely, the date of death alone is a fixed factor that does not change. The next date namely the date of consideration of the claim, is something that depends upon many variables such as the date of filing of application, the date of attaining of majority of the claimant and the date on which the file is put up to the competent authority.

“There is no principle of statutory interpretation which permits a decision on the applicability of a rule, to be based upon an indeterminate or variable factor.”

To put things not perspective, the Court explained by way of a hypothetical case where 2 Government servants die in harness on January 01, 2020.

“Let us assume that the dependants of these 2 deceased   Government servants make applications for appointment on 2 different dates say 29.05.2020 and 02.06.2020 and a modified Scheme comes into force on June 01, 2020. If the date of consideration of the claim is taken to be the criteria for determining whether the modified Scheme applies or not, it will lead to two different results, one in respect of the person who made the application before June 1, 2020 and another in respect of the person who applied after June 01, 2020.”

Hence, if two employees die on the same date and the dependants of those employees apply on two different dates, one before the modified Scheme comes into force and another thereafter, they will come in for differential treatment if the date of application and the date of consideration of the same are taken to be the deciding factor.

“A rule of interpretation which produces different results, depending upon what the individuals do or do not do, is inconceivable.”

It was, hence, held that the interpretation as to the applicability of a modified Scheme should depend only upon a determinate and fixed criteria such as the date of death and not an indeterminate and variable factor.

Ruling

Since, in the case at hand, the employee had died on 8.12.2010 and the amendment to the Rules was proposed by way of a draft notification on 20.06.2012, the Court noticed that merely because the application for appointment was taken up for consideration after the issue of the amendment, the respondent could not have sought the benefit of the amendment.

[Secretary to Govt. Department of Education (Primary) v. Bheemesh, 2021 SCC OnLine SC 1264, decided on 16.12.2021]


Counsels

For appellants: Advocate V. N. Raghupathy

For respondent: Senior Advocate Jayanth Muthraj


*Judgment by: Justice V. Ramasubramanian

Know Thy Judge | Justice V. Ramasubramanian

Case BriefsSupreme Court

Supreme Court: In a case where the bench of AM Khanwilkar* and Sanjiv Khanna, JJ was called upon to decide whether it is mandatory to issue a primary notice under Section 6 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 to the convict and not merely to the relatives of the convict who hold the properties proposed to be forfeited, the Court has elaborately interpreted the provision and has held that Section 6(1) of the 1976 Act nowhere provides that it is “mandatory” to serve the convict or detenu with a primary notice under that provision whilst initiating action against the relative of the convict.

The Court explained that,

“Section 6(1) posits that notice must be given to the person who is holding the tainted property and is likely to be affected by the proposed forfeiture of the property. The person immediately and directly to be affected is the person who is the recorded owner of the property and in possession thereof himself or through some other person on his behalf.”

What does the law state?

Section 4 prohibits holding of illegally acquired property. It provides that the person to whom the Act applies shall not hold any illegally acquired property and there is a corresponding duty on the Competent Authority to initiate process after due inquiry under Section 18 of the 1976 Act for   forfeiture of such property — whether acquired before the commencement of the Act or thereafter.

This process has to be initiated by the Competent Authority by issuing notice under Section 6 to such person who holds the properties proposed to be forfeited being illegally acquired properties. That person may hold the property either by himself or through any other person on his behalf.

If the property is held by person concerned, the notice under Section 6(1) needs to be issued to such person to whom the Act applies calling upon him to disclose the sources of his income, earnings or assets out of which or by means of which he has acquired such property, the evidence on which he relies and other relevant information and particulars.

Analysis of Section 6

The notice under Section 6(1) is required to be issued to any person to whom the Act applies.  As is evident from Section 2(2) of the 1976 Act, the Act applies not only to convict or detenu, but also to their relative, associate including holder of any property being Section 2(2)(c), 2(2)(d) and 2(2)(e) respectively.  The purpose of issuing notice is to enable the person concerned (noticee) to discharge the burden of proof as propounded in Section 8 of the 1976 Act. It is then open to him to prove that the property referred to in the notice is his legally acquired property.

“Held” – Explained

The expression “held” in Section 6 means that the person is entitled to possession of property being owner of the property in the relevant record or even because he is in  legal possession thereof.   In other words. A person may be holding the property also when he (at the relevant time) is in legal possession of the stated property, even if he is not a recorded owner thereof. In either case, it would be a matter within the ambit of expression “held” occurring in Section 6 of the 1976 Act.

Further, the noticee may hold the property either by himself or through any other person on his behalf.

Mere legal possession by the person holding the property

In a given case, however, if the property is held by a person owing to merely being in legal possession   thereof, but the ownership of the property at the relevant time is that of the convict or detenu or his/her relative, as the case may be, it would become necessary for the Competent Authority to not only give notice to the person in possession of the property in question but also to the person shown as owner thereof in the relevant records.

Subsequent purchase of property from the convict or detenu

In a case where the person shown as owner in the relevant records had purchased the subject property from the convict or detenu and is a subsequent purchaser, notice is required to be issued to both — the present owner and the erstwhile owner (convict or detenu), as the case may be. However, if the ownership of the property in the relevant records at the relevant time is that of the person in possession, and not being the convict or detenu, the question of issuing notice to the latter would serve no purpose. The convict or detenu cannot be heard to claim any right in such property including proprietary rights and for the same reason, he is not expected to discharge the burden of proof under Section 8 of the 1976 Act as to whether it is his legally acquired property nor can he be said to be the person affected with the proposed action of forfeiture as such.

De facto possession by “such other person”

If the illegally acquired property is held in the name of the relative, but the de facto  possession thereof is with some other person, who is not covered by the expression “person” as given in Section 2(2), in such a case primary notice under Section 6 is required to be issued to the relative of the convict or detenu and copy thereof served upon “such other person” who is in de facto possession thereof (albeit for and on behalf of the relative of the convict or detenu).

“Even in this situation, notice to the convict or detenu may not be necessary much less mandatory. For, the 1976 Act applies even to the relative of the convict or detenu holding illegally acquired property either by himself or through any other person on his behalf.”

“Such other person” will be a person other than a person to whom the Act applies being merely a holder of illegally acquired property on behalf of the person to whom Act applies. Thus, he may be a person other than a person referred to in Section 2(2) of the 1976 Act.

“The legislative intent is to cover “such other person” so as to reach up to “illegally acquired property” of the convict/detenu and unravel/lift the veil created by the person to whom the Act applies.”

This is to ensure that the persons to whom the Act applies referred to in Section 2(2), do not use mechanism to shield illegally acquired properties from the proposed action of forfeiture.

However, if “such other person” is claiming ownership of the property through the relative of the convict or detenu in relation to illegally acquired property, who was earlier owner thereof upon receipt of notice under Section 6(2) can certainly impress upon the Competent Authority that he is a purchaser in good faith for adequate consideration of the stated property. Such a plea can be considered by the   Competent Authority on its own merits.

Requirement of “reasons to believe”

Notice under Section 6(1) cannot be issued in respect of properties for which the Competent Authority has no evidence or material to record “reasons to believe” that the properties were acquired from the assets or money provided by the convict/detenu. The satisfaction should be based upon objective material and not mere feeling or inkling.

“The requirement is deliberately legislated as a check against frivolous and rowing inquiries based upon mere suspicion and pretence.”

Recording of the reasons to believe and satisfaction of the aforesaid conditions is an important condition precedent – a sine qua non – and its violation would have legal consequences. It is a jurisdictional requirement, which, unlike a procedural requirement, would affect the proceedings if not complied with. Therefore, in such cases, the question of no prejudice is unavailable as the provision for issue of notice and satisfaction of the precondition for the issue of notice, i.e., “reasons to believe”, is mandatory and not optional or directory.

Conclusion

Section 6(1) of the 1976 Act nowhere provides that it is “mandatory” to serve the convict or detenu with a primary notice under that provision whilst initiating action against the relative of the convict.  Indubitably, if the illegally acquired property is held by a person in his name and is also in possession thereof, being the relative of the convict and who is also a person to whom the Act applies, there is no need to issue notice to the convict or detenu much less primary notice as held by the High Court in the impugned judgment.  For, Section 6(1) posits that notice must be given to the person who is holding the tainted property and is likely to be affected by the proposed forfeiture of the property.  The person immediately and directly to be affected is the person who is the recorded owner of the property and in possession thereof himself or through some other person on his behalf.  In the latter case, the burden of proof under Section 8 is not to be discharged by the convict or detenu, but by the person who   holds   the illegally acquired property either by himself or through any other person on his behalf.

The expression “such other person” in Section 6(2) is, thus, referable to a person falling in class “through any other person on his behalf”. That is the person to whom the Act applies, as noted in the opening part of Section 6(1) of the Act.  In such a case, the convict or detenu is not expected to nor can be called upon to discharge the burden of proof under Section 8.

[Income Tax Officer v. V. Mohan, 2021 SCC OnLine SC 1240, decided on 14.12.2021]


Counsels

For appellants:  Additional Solicitor General of India Aman Lekhi and Senior Advocate AK Srivastava

For Respondents: Advocate Atul Shankar Vinod


*Judgment by: Justice AM Khanwilkar

Know Thy Judge| Justice AM Khanwilkar

Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of M.R. Shah* and B.V. Nagarathna, JJ., held that where it is specifically barred in the contract, the Arbitrator cannot award any interest pendente lite or future interest on the amounts due and payable to the contractor under the contract. Rejecting the claim of the respondent that the government having claimed interest itself could not oppose the same, the Bench stated,

“Even if the government would have been awarded interest, the same also was not permissible and could have been a subject matter of challenge. In short, there cannot be an estoppel against law.”

Factual Matrix

A dispute had arisen between the parties with regard to three work contracts and both the parties went into arbitration for the resolution of the dispute. The sole arbitrator awarded an amount of Rs.78,81,553.08  along with pendente lite and future interest at the rate of 12% and 18% respectively on the entire awarded amount except for the earnest money deposit and security deposit. That the Union of India preferred an appeal challenging the award pertaining to pre-suit, pendente lite and future interest awarded on the balance due payment. The High Court dismissed the appeal and confirmed the award. By being aggrieved and dissatisfied with the impugned judgment of the Delhi High Court, the Union of India had preferred the present appeal.

The Union Government argued that as agreed between the parties and as per clause 16(2) of the General Conditions of Contract (GCC), there was a bar against payment of interest and no interest should be payable upon the earnest money or the security deposit or the amounts payable to the contractor under the contract. The government further argued that if there is an expression “agreed between the parties” governing the contract that no interest shall be payable, parties are bound by such an agreement and no interest either pendente lite or future interest on the amount due and payable under the contract shall be awarded.

Bar on the Arbitrator to award interest pendent lite

Rejecting the contention of the respondent that the bar was on the parties from claiming interest on security deposits and earnest money and not on the arbitrator from awarding it, the Bench observed, once the contractor agrees that he shall not be entitled to interest on the amounts payable under the contract, including the interest upon the earnest money and the security deposit as mentioned in clause 16(2) of the agreement/contract between the parties herein, the arbitrator in the arbitration proceedings being the creature of the contract has no power to award interest, contrary to the terms of the agreement/contract between the parties and contrary to clause 16(2) of the agreement/contract in question in this case.

Reliance was placed by the Court on Union of India v. Bright Power Projects (India) (P) Ltd., (2015) 9 SCC 695, wherein it was held that Section 31(7) of the 1996 Act, by using the words “unless otherwise agreed by the parties” categorically specifies that the arbitrator is bound by the terms of the contract insofar as award of interest from the date of cause of action to date of the award is concerned. It was further observed and held that where the parties had agreed that no interest shall be payable, the Arbitral Tribunal cannot award interest.

Therefore, the Bench held that the contention raised by the respondent that de hors the bar under clause 16(2), the Arbitral Tribunal independently and on equitable ground and/or to do justice can award interest pendente lite or future interest had no substance and could not be accepted. The Bench stated, once the contractor agrees that he shall not be entitled to interest on the amounts payable under the contract, including the interest upon the earnest money and the security deposit as mentioned in clause 16(2) of the agreement/contract between the parties, the arbitrator in the arbitration proceedings being the creature of the contract has no power to award interest, contrary to the terms of the agreement/contract between the parties and contrary to clause 16(2) of the agreement/contract.

Applicability of ejusdem generis

Regarding the contention of the respondent that the entire clause 16 of GCC specifically deals with to earnest money and security deposits and the same could in no way be read in a manner to imply a bar on pendente lite interest or other amounts as contended on behalf of the government, the Bench stated that it was required to be noted that clause 16(1) was with respect to earnest money/security deposit. However, clause 16(2) was specifically with respect to interest payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract. Similarly,

The words used in clause 16(2) is “or”. Therefore, the expression “amounts payable to the contractor under the contract” cannot be read in conjunction with “earnest money deposit” or “security deposit” by applying the principle of ejusdem generis.

Hence, the expression “amounts payable to the contractor under the contract” had to be read independently and disjunctively to earnest money deposit and security deposit as the word used was “or” and not “and” between “earnest money deposit”, “security deposit” and “amounts payable to the contractor under the contract”. Therefore, the principle of ejusdem generis was not applicable in the instant case.

Estoppel

The respondent had argued that the issue raised was covered by the judgment in Union of India v. Pradeep Vinod Construction Co., Civil Appeal No. 2099 of 2017, and therefore once it had been conceded, it was not open for the government to raise the same issue after having made a clear concession, and that the government  too had claimed interest at the rate of 18% from the respondent by way of counter-claim, hence it could not be permitted to say that no interest pendente lite was liable to be awarded by the arbitrator. The Bench opined that it was required to be noted that the concession if any which is contrary to the law laid down by this Court shall not be binding on the parties. Further, the Bench held that merely because the appellant had claimed interest, it did not imply that the contractor shall be entitled to interest pendente lite.

Verdict

Hence, the Bench held that the Arbitrator had erred in awarding pendente lite and future interest on the amount due and payable to the contractor under the contract in question and the same had been erroneously confirmed by the High Court. Accordingly, due and payable to the contractor under the contract were quashed and set aside. [Union of India v. Manraj Enterprises, 2021 SCC OnLine SC 1081, decided on 18-11-2021]


Kamini Sharma, Editorial Assistant has put this report together 


Appearance by:

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

For the Respondent: Vikas Singh, Senior Advocate


*Judgment by: Justice M. R. Shah

Know Thy Judge | Justice M. R. Shah

 

 

 

 

 

 

 

 

 

 

 

 

Case BriefsSupreme Court

Supreme Court: In an important ruling on POCSO Act, the 3-judge bench of UU Lalit, Bela Trivedi* and S. Ravindra Bhat**, JJ has set aside the Bombay High Court (Nagpur Bench) judgment that had acquitted the accused under Section 8 of the POCSO Act, 2012 on the ground that no direct physical contact i.e. skin to skin with sexual intent without penetration would not amount to ‘sexual assault’.


Case Trajectory


  • In the case at hand, the accused had taken the 12-year-old victim to his house on the pretext of giving her guava, tried to remove her salwar and pressed her breast. He then pressed her mouth when she started shouting.
  • On 05.02.2020, the Special Court convicted and sentenced the accused-Satish for the offences under Sections 342, 354 and 363 of the Indian Penal Code (for short ‘IPC’) and Section 8 of the Protection of Children from Sexual Offences Act, 2012.
  • On 19.01.2021, Bombay High Court’s Nagpur Bench acquitted the accused for the offence under Section 8 of the POCSO Act and convicted him for the offence under Sections 342 and 354 of the IPC, sentencing him to undergo rigorous imprisonment for a period of one year and fine of Rs. 500/- for offence under Section 354 and six months imprisonment and fine of Rs. 500/- for the offence under Section 342 of IPC.
  • Pushpa V. Ganediwala, J., of Bombay High Court’s Nagpur Bench had expressed that the act of pressing of the breast of the child aged 12 years, in the absence of any specific detail as to whether the top was removed or whether he inserted his hand inside top and pressed her breast, would not fall in the definition of ‘sexual assault’. The said judgment had caused a huge uproar in January 2021, especially since the “shocking” opinion had come from a woman judge.
  • This prompted Attorney General for India K. K. Venugopal to approach the Supreme Court wherein he brought to the Court’s notice that the said judgment was likely to set “a dangerous precedent”.
  • On 01.2021, the 3-judge bench of former CJ SA Bobde and AS Bopanna and V. Ramasubramanian, JJ had then stayed the said judgment

Justice Bela Trivedi, for herself and Justice Lalit


“The most important ingredient for constituting the offence of sexual assault under Section 7 of the Act is the “sexual intent” and not the “skin to skin” contact with the child.”

-Justice Bela Trivedi


Interpretation of Section 7 of the POCSO Act

“The act of touching any sexual part of the body of a child with sexual intent or any other act involving physical contact with sexual intent, could not be trivialized or held insignificant or peripheral so as to exclude such act from the purview of “sexual assault” under Section 7.”

Restricting the interpretation of the words “touch” or “physical contact” to “skin to skin contact” would not only be a narrow and pedantic interpretation of the provision contained in Section 7 of the POCSO Act, but it would lead to an absurd interpretation of the said provision. “Skin to skin contact” for constituting an offence of “sexual assault” could not have been intended or contemplated by the Legislature.

“The very object of enacting the POCSO Act is to protect the children from sexual abuse, and if such a narrow interpretation is accepted, it would lead to a very detrimental situation, frustrating the very object of the Act, inasmuch as in that case touching the sexual or non sexual parts of the body of a child with gloves, condoms, sheets or with cloth, though done with sexual intent would not amount to an offence of sexual assault under Section 7 of the POCSO Act.”

Further, the first part of Section exhausts a class of act of sexual assault using specific words, and the other part uses the general act beyond the class denoted by the specific words. In other words, whoever, with sexual intent touches the vagina, penis, anus or breast of the child or makes the child touch the vagina, penis, anus or breast of such person or any other person, would be committing an offence of “sexual assault”. Similarly, whoever does any other act with sexual intent which involves physical contact without penetration, would also be committing the offence of “sexual assault” under Section 7 of the POCSO Act.

Why High Court’s “skin to skin” order was erroneous?

The High Court fell into error in case of the accused-Satish in holding him guilty for the minor offences under Sections 342 and 354 of IPC and acquitting him for the offence under Section 8 of the POCSO 30 Act. The High Court while specifically accepting the consistent versions of the victim and her mother i.e. informant about the accused having taken the victim to his house, having pressed the breast of the victim, having attempted to remove her salwar and pressing her mouth, had committed gross error in holding that the act of pressing of breast of the child aged 12 years in absence of any specific details as to whether the top was removed or whether he inserted his hands inside the top and pressed her breast, would not fall in the definition of sexual assault, and would fall within the definition of offence under Section 354 of the IPC.

The High Court further erred in holding that there was no offence since there was no direct physical contact i.e. “skin to skin” with sexual intent.

The interpretation of Section 7 at the instance of the High Court on the premise of the principle of “ejusdem generis” is also thoroughly misconceived. The prosecution was not required to prove a “skin to skin” contact for the purpose of proving the charge of sexual assault under Section 7 of the Act.

The surrounding circumstances like the accused having taken the victim to his house, the accused having lied to the mother of the victim that the victim was not in his house, the mother having found her daughter in the room on the first floor of the house of the accused and the victim having narrated the incident to her mother, were proved by the prosecution, rather the said facts had remained unchallenged at the instance of the accused. All these acts were the acts of “sexual assault” as contemplated under section 7, punishable under Section 8 of the POCSO Act.

“Such basic facts having been proved by the prosecution, the Court was entitled to raise the statutory presumption about the culpable mental state of the accused as permitted to be raised under Section 30 of the said Act.”


Justice S. Ravindra Bhat’s concurring opinion


“It is no part of any judge’s duty to strain the plain words of a statute, beyond recognition and to the point of its destruction, thereby denying the cry of the times that children desperately need the assurance of a law designed to protect their autonomy and dignity, as POCSO does.”

-Justice S. Ravindra Bhat


Not speaking for the sake of speaking, and thereby adding little value to Justice Trivedi’s analysis, Justice Bhat wrote a concurrent opinion, analysing the true import of Section 7 of the POCSO Act.

  1. Touching by a person – with sexual intent – of four specific body parts (vagina, penis, anus or breast) of a child, or making a child touch any of those body parts of “such person” (i.e. a clear reference to the offender) or of “any other person” (i.e. other than the child, or the offender).
  2. Any other act with sexual intent which involves physical contact without penetration.

“Contact”, which is used in the second limb, has a wider connotation; encompasses – but is not always limited to – ‘touch’. While it is not immediately apparent why the term ‘physical contact’ has been used in the second limb, its use in conjunction with “any other act” (controlled by the overarching expression “with sexual intent”), indicates that ‘physical contact’ means something which is of wider import than ‘touching’. Viewed so, physical contact without penetration, may not necessarily involve touch. The “other act” involving “physical contact” may involve: direct physical contact by the offender, with any other body part (not mentioned in the first limb) of the victim; other acts, such as use of an object by the offender, engaging physical contact with the victim; or in the given circumstances of the case, even no contact by the offender (the expression “any other act” is sufficiently wide to connote, for instance, the victim being coerced to touch oneself).

“Parliament moved beyond the four sexual body parts, and covered acts of a general nature, which when done with sexual intent, are criminalized by the second limb of Section 7. The specific mention of the four body parts of the child in the first limb, and the use of the controlling expression “sexual intent” mean that every touch of those four body parts is prima facie suspect.”

The idea of ‘contact’ by a person with another through their clothing would hence, imply a physical contact. This is because of a combined operation of Section 2(2) of POCSO and Section 349 of IPC. Crucially, neither Section 7 nor any other provision of POCSO even remotely suggests that ‘direct’ physical contact unimpeded by clothing is essential for an offence to be committed.

The fallacy in the High Court’s reasoning is that it assumes that indirect touch is not covered by Section 7- or in other words is no “touch” at all. That provision covers and is meant to cover both direct and indirect touch.

“The reasoning in the High Court’s judgment quite insensitively trivializes – indeed legitimizes – an entire range of unacceptable behaviour which undermines a child’s dignity and autonomy, through unwanted intrusions.”

[Attorney General for India v. Satish, 2021 SCC OnLine SC 1076, decided on 18.11.2021]


Counsels:

K.K. Venugopal, Attorney General for India,

Senior Advocate Siddharth Luthra, appearing on behalf of the accused through Supreme Court Legal Services Committee,

Amicus curiae: Senior Advocate Siddhartha Dave


Judgment by*Justice Bela Trivedi and **Justice S. Ravindra Bhat

Case BriefsSupreme Court

Supreme Court: On the question as to ‘whether time is of the essence in a contract’, the bench of NV Ramana, CJ* and Surya Kant, J has held that merely having an explicit clause may not be sufficient to make time the essence of the contract. The same has to be culled out from the reading of the entire contract as well as the surrounding circumstances.

Factual Background

A global tender was floated by the ONGC for purchase of aggregate quantity of 3,93,297 metres of seamless steel casing pipes. Remi Metals was a successful bidder who had bid to supply pipes as a supplier on behalf of Volski Tube Mills, Russia. In furtherance of the same, 4 purchase orders (POs) No. 275, 276, 277 and 286 were issued.

During the execution of contract, there were certain delays in meeting the obligation as required under the contract. In this context, various extensions were given by the ONGC to fulfil their obligation.

The ONGC had deducted an aggregate amount of US $8,07,804.03 and Rs.1,05,367/- as liquidated damages from various bills submitted by the Remi Metals. There were other claims which were disputed by the Remi Metals which were claimed before a panel of arbitrators.

Arbitral Tribunal’s observations

The Arbitral Tribunal, at the outset, held that merely having a clause in the contract making time the essence of it would not be determinative; rather, an overall view having regard to all the terms of contract are to be taken into consideration. Further, contracts containing provision for extension of time or payment of penalty on default would dilute the obligation of timely performance and render the clauses imbuing time as essence of the contract ineffective. Additionally, the Arbitral Tribunal also noted that generally, under construction contracts, time is not the essence.

Basic principles to consider the relevancy of time conditioned obligations

  1. Subject to the nature of contract, general rule is that promisor is bound to complete the obligation by the date for completion stated in the contract. [Percy Bilton Ltd. v. Greater London Council, [1982] 1 WLR 794]
  2. That is subject to the exception that the promisee is not entitled to liquidated damages, if by his act or omissions he has prevented the promisor from completing the work by the completion date. [Holme v. Guppy, (1838) 3 M & W 387]
  3. These general principles may be amended by the express terms of the contract as stipulated in this case.

“‘Whether time is of the essence in a contract’, has to be culled out from the reading of the entire contract as well as the surrounding circumstances. Merely having an explicit clause may not be sufficient to make time the essence of the contract.”

Ruling on facts

Upholding the award of the Arbitral Tribunal, the Court noticed that as the contract was spread over a long tenure, the intention of the parties to provide for extensions surely reinforces the fact that timely performance was necessary. The fact that such extensions were granted indicates ONGC’s effort to uphold the integrity of the contract instead of repudiating the same. Further, Clause 9(i) of the Purchase Order reproduced made clear that time is the essence of the contract, subject to extension granted without prejudicing the right of ONGC to recover damages.

Applying the aforementioned principles and considering the facts of the case, the Court, hence, concluded that the Arbitral Tribunal’s interpretation of contractual clauses having extension procedure and imposition of liquidated damages, are good indicators that ‘time was not the essence of the contract’.

[Welspun Specialty Solutions Limited v. ONGC, 2021 SCC OnLine SC 1053, decided on 13.11.2021]


For Remi Metals: Senior Advocate Shyam Divan


*Judgment by: Chief Justice NV Ramana

Case BriefsSupreme Court

Supreme Court: The 3-Judges Bench comprising of L. Nageswara Rao, Sanjiv Khanna, B.R. Gavai*, JJ., held that when parties deliberately put their agreement into writing, it is conclusively presumed that they intended the writing to form a full and final statement of their intentions, and one which should be placed beyond the reach of future controversy, bad faith and treacherous memory.

“It would be inconvenient that matters in writing made by advice and on consideration, and which finally import the certain truth of the agreement of parties should be controlled by averment the parties to be proved by the uncertain testimony of slippery memory.”

Factual Fulcrum

The partnership firm in question, i.e. M/s Selwel Combines was constituted in the year 1986 vide Partnership Deed dated 30-10-1992. As per the 1992 Deed, the plaintiff 1 was to have 50% share in the profits and losses of the partnership firm. It was however provided in the 1992 Deed, that if the plaintiff 1 fails to bring in an amount of Rs.50,00,000 as his capital contribution to the partnership firm on or before 31-03-1993, his share in the profits and losses of the partnership firm would be only to the extent of 10%.

Noticeably, vide the Deed of Amendment of Partnership dated 18-08-1995, the partnership firm was again reconstituted, whereby the plaintiff 2, son of the plaintiff 1, and defendant 6 to 11 were inducted as partners and defendant 12 to 16 were admitted to the benefit of the partnership firm. Learned counsel further submits that as per the 1992 Deed, the plaintiff No.1 was entitled only to 10% share in the profits and losses of the partnership firm since he failed to invest an amount of Rs.50,00,000/( Rupees Fifty lakh). By the 1995 Deed, the plaintiff No.2, who is son of the plaintiff No.1, came to be inducted and the 10% share of the plaintiff No.1 was to be divided amongst them. However, inadvertently, it came to be mentioned in the 1995 Deed that the plaintiffs will have 25% share each.

Dispute

The instant suit was filed by the plaintiffs for rendition of accounts and for releasing a sum of Rs.5,48,06,729, being their 50% share in the profits of the partnership firm. The Trial Court had held that the plaintiffs together were entitled to 10% share in the profits and losses of the partnership firm till 18-06-2004, and that from 18-06-2004, they were expelled partners of the partnership firm. The appeal against the impugned order was dismissed by the Karnataka High Court.

Findings

Though the 1992 Deed had provided that the share of the plaintiff 1 in the profits and losses of the partnership firm was 50% and it will be reduced to 10% in the event the plaintiff 1 does not contribute an amount of Rs.50,00,000 towards capital of the partnership firm, there was no such stipulation in the 1995 Deed, as the 1995 Deed clearly provided that the plaintiff 1 and the plaintiff 2 would be entitled to 25% share each in the profits and losses of the partnership firm. The Bench observed that if it was the case of the defendants that the terms mentioned in the 1995 Deed were inadvertent or a mistake in fact, then the burden to prove the same shifted upon the defendants. The Bench remarked,

“The contention of the defendants, that the share of the plaintiff Nos. 1 and 2 in the profits and losses of the partnership firm, mentioned as 25% each, is by mistake and, in fact, is only 5% each, does not sound logical and reasoned. If it was by mistake or inadvertence, nothing precluded the defendants from rectifying the same between 1995 and 2004.”

The Bench opined that what had happened between 1992 and 1995 was exclusively within the knowledge of the parties as, though the plaintiffs had averred that an amount of Rs.50,00,000 was invested by the plaintiff in the intervening period, the same was denied by the defendants. Therefore, in view of Section 91 of the Evidence Act, the Bench held that the evidentiary value of the 1995 Deed would stand on a much higher pedestal, as against the oral testimony of the parties.

“The written contracts presume deliberation on the part of the contracting parties and it is natural that they should be treated with careful consideration by the courts and with a disinclination to disturb the conditions of matters as embodied in them by the act of the parties.”

Hence, the Bench concluded that Trial Court as well as the High Court had erred in holding that the plaintiffs together were entitled to only 10% share in the profits and losses of the partnership firm till 18-06-2004. However, with regard to the challenge of the appellants to their expulsion from the partnership firm the Bench held that perusal of clause 17 of the 1992 deed would reveal that the partners had right to expel an erring partner/partners on the grounds specified therein. Since the 1995 Deed did not have any conflicting provision, it was held that the clauses in the 1992 Deed, which are not superseded by the 1995 Deed, would still continue to operate.

In the light of the above, the Bench declared that the plaintiffs together were entitled to 50% share in the profits and losses of the partnership firm till 18-06-2004. [V. Anantha Raju v. T.M. Narasimhan, 2021 SCC OnLine SC 969, decided on 26-10-2021]


Kamini Sharma, Editorial Assistant has put this report together 


Appearance by:

For the Appellants: Advocate R. Basant

For the Defendants: Advocate Balaji Srinivasan


*Judgment by: Justice B.R. Gavai

 

Case BriefsSupreme Court

Supreme Court: In an important ruling on Land Acquisition and Requisition law, the bench of AM Khanwilkar and Sanjiv Khanna*, JJ has held that Section 25 of the 2013 Act applies to awards made under Section 24(1)(a) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and the period of limitation of twelve months would commence from 1st January 2014.

“In cases covered by clause (a) to Section 24(1) of the 2013 Act, the limitation period for passing/making of an award under Section 25 of the 2013 Act would commence from 1st January 2014, that is, the date when the 2013 Act came into force. Awards passed under clause (a) to Section 24(1) would be valid if made within twelve months from 1st January 2014.”

Issue

Whether the two-year period specified under Section 11A of the Land Acquisition Act, 1894 will apply even after the repeal of the 1894 Act, or the twelve-month period specified in Section 25 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 will apply for the awards made under clause (a) of Section 24(1) of the 2013 Act?

Discussion

Interpretation of “all the provisions of this Act relating to the determination of compensation” under clause (a) to Section 24(1) of the 2013 Act

Generally, the expression ‘relating to’ when used in legislation has to be construed to give effect to the legislative intent when required and necessary by giving an expansive and wider meaning. Keeping this in mind, the Court noticed that the words “all the provisions of this Act relating to the determination of compensation” must not be imputed a restricted understanding of the word ‘relating’ only to the substantial provisions on calculation of compensation, that is, Sections 26 to 30 of the 2013 Act. Rather, the expression should be given an expansive meaning so as to include the provision on limitation period for calculation of compensation, that is, Section 25 of the 2013 Act.

Further, the said clause would apply only if the period for making of an award had not ended and time was available as on 1st January 2014. Where and if the period for making of the award had already lapsed before 1st January 2014, clause (a) to Section 24(1) would not apply so as to deprive and deny the vested rights which have already accrued in favour of the landowners.

“Section 25 is a rule of procedure immediately following Section 24 and a part of fasciculus of “all the provisions”, from Sections 25 to 30, “relating to determination of compensation”. Hence, the expression “all the provisions relating to the determination of compensation” under the 2013 Act will encompass Section 25 of the 2013 Act.”

The determination of compensation is never simple. It is a complex factual and legal exercise.

Two-year period for making of an award in terms of Section 11A of the 1894 Act – If Practical

Given the object and purpose behind Sections 24, and 26 to 30 of the 2013 Act, the Court noticed that practical absurdities and anomalies may arise if the two-year period for making of an award in terms of Section 11A of the 1894 Act commencing from the date of issue of the declaration is applied to the awards to be made under Section 24(1)(a) of the 2013 Act.

This would mitigate against the underlying legislative intent behind prescription of time for making of an award in respect of saved acquisition proceedings initiated under the repealed 1894 Act, which is two-fold:

  • to give sufficient time to the authorities to determine compensation payable under the 2013 Act; and
  • to ensure early and expedited payment to the landowners by reducing the period from two years under Section 11A of the 1894 Act to twelve months under Section 25 of the 2013 Act.

In case of declarations issued in January 2012, on application of Section 11A of the 1894 Act, the time to determine compensation under the 2013 Act would vary from a day to a month, and while in cases where the declarations were issued within twelve months of the repeal of the 1894 Act, the landowners would be at a disadvantage as an award beyond the twelve-month period specified in Section 25 of the 2013 Act would be valid.

In the first set of cases, given the onerous factual and legal exercise involved in determination of compensation and the need to issue notification under Section 26(2) of the 2013 Act, publication of the awards would be impractical. Hasty and incorrect awards would be deleterious for the landowners.

If the awards are not pronounced, the acquisition proceedings would lapse defeating the legislative intent behind Section 24(1)(a) of the 2013 Act to save such proceedings.

Exercising it’s choice to arrive at a just, fair and harmonious construction consistent with the legislative intent, the Court noticed that a rational approach so as to further the object and purpose of Sections 24 and 26 to 30 of the 2013 Act is required.

“We are conscious that Section 25 refers to publication of a notification under Section 19 as the starting point of limitation. In the context of clause (a) to Section 24(1) of the 2013 Act there would be no notification under Section 19, but declaration under Section 6 of the 1894 Act. When the declarations under Section 6 are valid as on 1st January 2014, it is necessary to give effect to the legislative intention and reckon the starting point. In the context of Section 24(1)(a) of the 2013 Act, declarations under Section 6 of the 1894 Act are no different and serve the same purpose as the declarations under Section 19 of the 2013 Act.”

Conclusion

Consequently, the Court held that in cases covered by clause (a) to Section 24(1) of the 2013 Act, the limitation period for passing/making of an award under Section 25 of the 2013 Act would commence from 1st January 2014, that is, the date when the 2013 Act came into force. Awards passed under clause (a) to Section 24(1) would be valid if made within twelve months from 1st January 2014. This dictum is subject to the caveat stated that a declaration which has lapsed in terms of Section 11A of the 1894 Act before or on 31st December 2013 would not get revived.

(i)Section 25 of the 2013 Act would apply to the awards made and published under Section 24(1)(a) of the 2013 Act.

(ii) The limitation period for passing/making of an award under Section 24(1)(a) in terms of Section 25 of the 2013 Act would commence from 1st January 2014, that is, the date when the 2013 Act came into force.

(iii) Period during which the Court order would inhibit action on the part of the authorities to proceed with the making of the award would be excluded while computing the period under Section 25 of the 2013 Act.

[Executive Engineer, Gosikhurd Project Ambadi, Bhandara, Maharashtra Vidarbha Irrigation Development Corporation v. Mahesh, 2021 SCC OnLine SC 1034, decided on 10.11.02021]


*Judgment by: Justice Sanjiv Khanna

Know Thy Judge | Justice Sanjiv Khanna