Hot Off The PressNews

Competition Commission of India (CCI): In its recent press release, Competition Commission of India, while giving benefit of reduction in penalty under the provisions of Section 46 of the Competition Act, 2002  of 100%, 40% and 20%   to AB InBev, United Breweries Ltd. (UBL) and  Carlsberg India Private Limited (CIPL), and all their individuals respectively besides passing a cease-and-desist order. a final order against three beer companies namely United Breweries Limited (‘UBL’), SABMiller India Limited (now renamed as Anheuser Busch InBev India Ltd. after being acquired by Anheuser Busch InBev SA/NV) (‘AB InBev’) and (‘CIPL’) for indulging in cartelisation in the sale and supply of beer in various States and Union Territories in India, including through the platform of All India Brewers’ Association (‘AIBA’). The period of cartel was held to be from 2009 to at least 10.10.2018 (the date on which the Director General (‘DG’) conducted search and seizure operations at the premises of the beer companies), with CIPL joining in from 2012 and AIBA serving as a platform for facilitating such cartelisation since 2013. All three beer companies were lesser penalty applicants before CCI.

Engaged in price co-ordination in contravention of the provisions of Section 3(3)(a) of the Competition Act, 2002 (the ‘Act’) in the States of Andhra Pradesh, Karnataka, Maharashtra, Odisha, Rajasthan, West Bengal, National Capital Territory of Delhi and the Union Territory of Puducherry, in collectively restricting supply of beer in the States of Maharashtra, Odisha and West Bengal in contravention of the provisions of Section 3(3)(b) of the Act, and in sharing of market in the State of Maharashtra as well as co-ordination with respect to supply of beer to premium institutions in the city of Bengaluru in contravention of the provisions of Section 3(3)(c) of the Act. CCI also found co-ordination amongst UBL and AB InBev with respect to purchase of second-hand bottles.


PR40-2021-22


Agatha Shukla, Editorial Assistant has reported this news.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Noting that Maruti Suzuki India Limited used to impose penalties on its dealers for the reason of the violation of its ‘Discount Control Policy’, Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) held that,

Maruti Suzuki India Limited was not a third-party in the enforcement of the Discount Control Mechanism.

When a significant player such as MSIL imposes minimum selling price restrictions in the form of maximum discount that can be offered by the dealers, RPM can decrease the pricing pressure on competing manufacturers.

Factual Matrix

Instant matter was taken up suo motu by the Commission based on an anonymous e-mail received from a purported Maruti Suzuki India Limited (MSIL) dealer, wherein it was alleged that MSIL’s sales policy was against the interest of customers as well as the provisions of the Competition Act, 2002.

Discount Control Policy

Further, it was alleged that, in the West-2 Region, (Maharashtra State other than Mumbai & Goa) the dealers of MSIL were not permitted to give discounts to their customers beyond that prescribed by MSIL is the announced ‘consumer offer’. In case, a dealer was found giving extra discounts, a penalty was levied upon the dealer by the MSIL.

Penalty amount imposed was required to be paid via cheque in the name of Swati Kale, wife of Vinod Kale who was the Vice-President of Wonder Cars Pvt. Ltd., an MSIL dealership in Pune, Maharashtra. Prior to charging the penalty, MSIL management would send an email with a ‘Mystery Shopping Audit Report’ to the errant dealership asking for clarification.

The above-said similar Discount Control Policy was implemented by MSIL all across India – specifically in cities where more than 4 to 5 dealerships operated.

Commission vide an order dated 4-7-2019 passed under Section 26(1) of the Act, formed an opinion that there exists a prima facie case of contravention of the provisions of Section 3(4)(e) of the Act, i.e. Resale Price Maintenance, by MSIL.

In view of the above background, Commission had directed the Director General to cause an investigation into the matter and submit a report.

The Commission directed MSIL to furnish its audited balance sheets and profit and loss accounts/turnover details for FYs 2017–18, 2018–19 and 2019–20 along with details of the revenue and profits generated by it from the sale of ‘passenger vehicles in India’ during these FYs by way of Affidavits supported by certificates from Chartered Accountants.

Analysis Law and Decision

Commission noted that MSIL was the manufacturer dealing in the upstream market while its dealers were distributors dealing in the downstream market.

Manufacturer and dealers entered into an agreement which could be examined within the scope of Section 3(4) of the Act, being an agreement amongst enterprises engaged at different stages or levels of the production chain in different markets.

Whether there was an agreement between MSIL and its dealers in terms of Section 3(4) on restricting discounts that may be offered by dealers?

‘Agreement’ for the purposes of Competition Law, is not the same as ‘agreement’ for the purposes of Contract Law.

The definition of ‘agreement’ under Section 2(b) of the Act is very wide and covers all possible agreements/ arrangements/understanding, not only in written form but also in tacit and informal form.

Since MSIL argued that only agreement between them with the dealers was the Dealership Agreement and the same contained no clause restricting discounts but rather allowed dealers to offer any discounts as they deem fit.

Coram opined that such agreement/arrangement/understanding with regard to discount control policy between MSIL and its dealers may exist dehors the Dealership Agreement entered into on writing between them.

Did MSIL have a Discount Control Policy? DG’s investigation

DG in its investigation while looking through the email dump found multiple email exchanged between MSIL and its dealers which showed that MSIL did, in fact, have an agreement with its dealers to not let them offer discounts to customers beyond those permitted from time to time by MSIL without MSIL’s prior approval.

“…dealers were discouraged from giving extra discounts, freebies, etc. to consumers beyond what was permitted by MSIL.” 

“If found to be violating the Discount Control Policy, the dealers were threatened with imposition of penalty, not only upon the dealership, but also upon its individual persons, including Direct Sales Executive, Regional Manager, Showroom Manager, Team Leader, etc., and stopping of supplies.”

MSIL’s contention:

Discount Control Policy, even if found to be existing in certain region, was only a form of policing amongst the dealers themselves inter se, and MSIL had no role in formulating such a policy, except to enforce the same on behalf of the dealers as an independent third-party.

Commission’s Opinion:

Commission noted that, meetings on Discount Control Policy were conducted by MSIL and it formulated policies wherein discounts were defined by way of limiting maximum discount allowed in cash or in terms of accessories, etc.

Adding to the above, it was noted that, MSIL dictated that any dealership, after price rise, if found selling/billing on old price, will be considered violating selling norms and it will be treated as a discount offered to customers

MSIL circulated communications of warning and threats of imposing high penalties in case dealers offered extra discounts without prior approval

Hence, Coram opined that MSIL did not seem to be merely a third-party in the Discount Control mechanism as contended.

MSIL nowhere could establish that the discounts were given by the dealers without seeking any prior approval from MSIL.

Significantly, the Commission observed that MSIL was the approving authority of the maximum discounts that may be offered by its dealers to customers, despite its claim that it had a principal-to-principal relationship with the dealers.

MSAs Role with respect to Discounting Policy

To enforce its Discount Control Policy, MSIL used to appoint MSAs who used to pose as customers to MSIL dealerships to find out if any additional discounts were being offered by such dealerships to customers or not. If found offered, the MSA would report to MSIL management with proof (audio/video recording) who, in turn, would send an e-mail to the errant dealership with a ‘Mystery Shopping Audit Report’, confronting them with the additional discount offered and asking for clarification.

If clarification was not to the satisfaction of MSIL, penalty would be imposed on the dealership and its employees, accompanied in some cases, by the threat of stopping supplies. MSIL would even dictate to the dealership where the penalty had to be deposited.

MSIL contended:

Appointment of MSAs was done by the dealers only and MSIL had no role to play in this regard.

Commission’s view:

Commission opined that MSIL had tried to pick-up isolated statements from its emails, which appeared to be self-serving statements, to allege that it was the dealers who has appointed the MSAs.

Adding to its opinion, Coram stated that there was absolutely no indication in the e-mails that the appointment of MSAs was done by the dealers themselves.

DG when questioned Swati Kale, she submitted that her role was to receive cheques as per the instructions of Regional Manager of MSIL and deposit the same in her account and issue cheques as per his instructions when required.

It was further noted that the amount collected in the account of Ms Swati Kale was used by MSIL to pay the bills of advertisements.

Whether any AAEC in the market had been caused or was likely to be caused as aresult of such an agreement between MSIL and its dealers?

In Commission’s opinion, the imposition of maximum discount limits by MSIL upon its dealers amounted to Resale Price Management (RPM) as defined under Explanation (e) to Section 3(4) of the Competition Act.

RPM can prevent effective competition both at the intra- brand level as well as at the inter-brand level.

 Present Scenario

In the present matter, RPM imposed upon the dealers led to the denial of benefits to the consumers in terms of competitive prices being offered by MSIL dealers.

Restriction on intra-band competition

Coram stated that, when all the dealers are controlled by a Discount Control Policy, they are forced to sell the same product at the same price which, to a large extent, eliminates price competition amongst them.

Due to almost nil intra-brand competition amongst MSIL dealers, the consumers would have had to purchase MSIL vehicles at fixed prices without flexible discounts being offered to them by MSIL dealers, thereby leading to charging of higher prices/ denial of discounts in kind, to them.

Hence, had there been no discount control policy enforced by MSIL, customers of MSIL would have been able to buy MSIL vehicles at lower prices.

Anti-competitive impact of the above practice of MSIL was reinforced by the fact that MSIL had more than 50% market share in the passenger vehicles segment, as observed by the DG.

Commission, however, opined that, imposition and enforcement of RPM by a player like MSIL, having a significant market share, not only thwarts intra-brand competition but also leads to the lowering of inter-brand competition in the passenger vehicles market.

Noting the above discussion, Coram expressed that RPM as a practice by multiple manufacturers is conducive for monitoring of tacit collusion among such manufacturers.

Arrangement/ Agreement perpetuated by MSIL hindered in the distribution of goods and the provision of services in relation to new cars, further it resulted in creating barriers to new entrants/dealers in the market as the new dealers would take into consideration restrictions on their ability to compete with respect to prices in the intra-brand competition of MSIL brand of cars.

Another significant observation made by the Commission was that by controlling the dealers’ margin, inter brand competition softens due to ease of monitoring of retail prices by the competitors, providing the manufacturer more liberty to regulate its own margin freely.

All dealers of MSIL are subjected to the SOP/SPG and non-compliance with the same also results in the imposition of penalties. As such, the justification put forth by MSIL, that RPM is required to eliminate the problem of free-riding, is not tenable.

Conclusion

Commission concluded that Maruti Suzuki India Limited not only entered into an agreement with its dealers across India for the imposition of ‘Discount Control Policy’ amounting to RPM, but also monitored the same by appointing MSAs and enforced the same through the imposition of penalties, which resulted in Appreciable Adverse Effect on Competition (AAEC) within India, thereby committing contravention of the provisions of Section 3(4)(e) read with Section 3(1) of the Act.

Competition Commission of India having considered the nature of infringing conduct and the post-pandemic phase of recovery of automobile section, deemed it fit to appropriate to impose a penalty of Rs 200 Crores upon MSIL as against a maximum penalty permissible under the provisions of the Act which may extend upto ten percent of the average of the turnover of the entity for the last three preceding financial years.

Order

Commission directed MSIL in terms of Section 27(a) to cease and desist from indulging in RPM directly and or indirectly.  [Alleged anti-competitive conduct by Maruti Suzuki India Ltd. in implementing discount control policy vis-a vis dealers, In re.;    2021 SCC OnLine CCI 45, decided on 23-08-2021]


Advocates before the Commission:

For Maruti Suzuki India Limited (MSIL): Dr. Abhishek Manu Singhvi and Mr. Rajshekhar Rao, Senior Advocates, with Ms. Shweta Shroff Chopra, Mr. Rohan Arora and Ms. Supritha Prodaturi, Authorized Representatives of MSIL and Ms. Manjaree Chowdhary, Executive Director and General Counsel of MSIL

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Rachna Gupta (Judicial Member) allowed an appeal in relation to evasion of payment of duty.

Appellants were registered under the category of legal consultancy service, work contract service, manpower recruitment/ supply agency service, maintenance or repair service and security/ detective agency service. During the scrutiny of ST-3 Returns of the appellant by AG (Audit), the Department noticed that the appellant had received services of manpower recruitment or supply agency during the period of April, 2015 to March, 2016 and had paid Service Tax under manpower recruitment or supply agency service on 75% of gross service value under reverse charge mechanism as per the provisions of Notification No.30/2012-ST dated 20-06-2012. It was observed that the appellant was otherwise liable to pay Service Tax on 100% of gross service value in terms of the aforesaid Notification being amended vide Notification No. 07/2015-ST dated 01-03-2015 with effect from 01-04-2015.

Short payment of Service Tax of Rs 71,440/- was proposed by the department alongwith the interest and the penalty.

It was submitted on the behalf of the appellant that he was liable to pay Service tax on 75% of gross service value of the services received under reverse charge mechanism. It was submitted that the period in dispute was immediately after the said amended Notification i.e. w.e.f. April 2015 to March, 2016 and the amendment had also to take effect from 01-04-2015. In the given circumstances, intentional evasion may not be alleged against the appellant. The authorities below were alleged to have wrongly held suppression of facts on part of the appellant.

The Tribunal observed that appellant admitted his liability of paying Service Tax for receiving manpower recruitment and supply agency service to the extent of 75% on the gross value of service received under reverse charge mechanism and further opined that non-payment by the appellant for the said period is merely due to his bonafide belief of his liability to the extent of paying the service tax at 75% of the service value. Once there is no apparent malafide on part of the appellant and in view of the aforesaid bonafide belief of the appellant, fastening the allegations as that of concealment fraud and suppression are held to be highly unjustified.

The Tribunal relied on the judgments of the Supreme court in Pushpam Pharmaceuticals Co. v. Collector of Central Excise, 1995 (78) ELT 401 (S.C.) and Continental Foundation Jt. Venture v. CCE, 2007 (216) ELT 177 (SC) explaining the term “suppression of facts”.

When the Revenue invokes the extended period of limitation under Section 11A, the burden is cast upon it to prove the suppression of fact as far as fraud and collusion are concerned, it is evident that intent to evade duty is built into these very words so far as misstatement or suppression or facts are concerned, they are clearly qualified by the word “willful” preceding the words “mis-statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or Rules” are again qualified by the immediately following words” with intent to evade payment of duty”. Therefore, there cannot be suppression or misstatement of fact which is not willful.

The Tribunal allowing the appeal held that alleged non-payment cannot be called as willful or intentional act of the appellant to evade the payment of duty. The findings of Commissioner (Appeals) that there was no documentary evidence to prove the payment of service tax twice in support of appellants contention was therefore held, not at all sustainable.[Mahatma Gandhi University of Medical Sciences and Technology v. CCE & CGST, Service Tax Appeal No. 50962 of 2020 [SM], decided on 08-09-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

“The nation continues to wait, and is losing patience. Cleansing the polluted stream of politics is obviously not one of the immediate pressing concerns of the legislative branch of government.”

Supreme Court: A Division Bench comprising of R.F. Nariman and B.R. Gavai, JJ. found several political parties guilty of contempt of court for non-compliance of directions given by the Supreme Court in Rambabu Singh Thakur v. Sunil Arora, (2020) 3 SCC 733 in connection with disclosure of information of candidates with criminal antecedents. Penalties have been imposed on the political parties found guilty. The Court also issued further directions in order to make the right of information of a voter more effective and meaningful.

The instant contempt petition arose out of elections held to the Bihar Legislative Assembly in October/November 2020. Brajesh Singh, Advocate registered with the Bar Council of Delhi, filed the contempt petition bringing to the Court’s notice that its directions given vide Rambabu Singh Thakur, (2020) 3 SCC 733 were being flouted.

Earlier Directions

It is seemly to note that the Constitution Bench in Public Interest Foundation v. Union of India, (2019) 3 SCC 224 had issued several directions to the effect that the candidates and political parties were obligated to disclose information pertaining to criminal antecedents of candidates. As a sequel, following directions were issued in Rambabu Singh Thakur, (2020) 3 SCC 733:

(i) It shall be mandatory for political parties (at the Central and State election level) to upload on their website detailed information regarding individuals with pending criminal cases (including the nature of the offences, and relevant particulars such as whether charges have been framed, the Court concerned, the case number, etc.) who have been selected as candidates, along with the reasons for such selection, as also as to why other individuals without criminal antecedents could not be selected as candidates.

(ii) The reasons as to selection shall be with reference to the qualifications, achievements and merit of the candidate concerned, and not mere “winnability” at the polls.

(iii) This information shall also be published in: (a) one local vernacular newspaper and one national newspaper; (b) on the official social media platforms of the political party, including Facebook and Twitter.

(iv) These details shall be published within 48 hours of the selection of the candidate or not less than two weeks before the first date for filing of nominations, whichever is earlier.

(v) The political party concerned shall then submit a report of compliance with these directions with the Election Commission within 72 hours of the selection of the said candidate.

(vi) If a political party fails to submit such compliance report with the Election Commission, the Election Commission shall bring such non-compliance by the political party concerned to the notice of the Supreme Court as being in contempt of the Court’s orders/directions.

Pursuant to the order in Rambabu Singh Thakur, (2020) 3 SCC 733, the Election Commission of India (“ECI”) issued a letter to all National and State level recognised political parties asking them to comply with the directions of the Supreme Court, and also issued a new Form C-7 in which the political parties have to publish the reason for selection of candidates with criminal antecedents in addition to all other relevant information. Also, in Form C-8, the political parties were then to report compliance of the Supreme Court’s order and the directions contained therein within 72 hours of selection of the candidate.

Bihar Legislative Assembly Elections, 2020

Assembly Elections in Bihar were held in October/November 2020. As per the report issued by Association for Democratic Reforms, it was found that 32% contesting candidates had criminal antecedents. Further, 68% of winning candidates had criminal antecedents. Out of these winning candidates who had criminal antecedents, 51% had serious criminal cases against them including cases related to murder, kidnapping, attempt to murder, crime against women including rape, etc.

ECI filed a report in the Supreme Court informing that out of 10 recognised political parties which contested general elections to the Bihar Legislative Assembly in 2020, 8 political parties submitted information about criminal antecedents of the contesting candidates and only 2 political parties, namely Communist Party of India (Marxist ) and Nationalist Congress Party that fielded 4 and 26 candidates respectively with criminal antecedents, did not furnish the requisite information.

Political parties found in contempt of Supreme Court directions

Senior Advocate K.V. Viswanathan, acting as Amicus Curiae, prepared a chart (appended as Annexure I to the judgment) to show how all the political parties have been flouting the Court’s directions, and fielding persons whose criminal antecedents show that they have been charge-sheeted or charged with serious offences, with no real reason as to why such person has been preferred over other more deserving candidates. In addition, he also brought to Court’s notice that in the concluded Bihar Assembly Elections, 2020, the required forms were either not filled by the political parties or were filled without disclosing particulars.

Foremost, the Supreme Court referred to provisions of the Representation of the People Act, 1951 including Section 33-A (Right to information). Then, after recording the evolution of law on the subject through several judicial pronouncements, the Court stated:

“The nation continues to wait, and is losing patience. Cleansing the polluted stream of politics is obviously not one of the immediate pressing concerns of the legislative branch of government.”

The Court considered the facts pointed out by the petitioner in the instant contempt petition and found several political parties to be in contempt of the order in Rambabu Singh Thakur, (2020) 3 SCC 733. The reasons for such finding is indicated below:

Janta Dal (United): Reasons given by the party for the nomination of a candidate from the Belaganj Assembly were inadequate and not in consonance with the Supreme Court directions. Further, the party filled Form C-1 and C-2, which specifies the format for publication of criminal antecedents of candidates in newspapers, in a vague and mechanical manner.

Rashtriya Janta Dal: The party cited ‘winnability’ as the only reason for selection of candidates, which is in the teeth of the Supreme Court directions.

Lok Janshakti Party: The party gave identical reasons for selection of 5 of its candidates and had also filled Form C-2 in a mechanical manner.

Indian National Congress: Criminal antecedents were published in newspapers of low circulation and the forms in which details of criminal antecedents have to be published were filled in a mechanical manner. The party gave reasons along the lines of ‘winnability’ for selection of candidates accused of serious offences. Supreme Court’s were directions not followed in letter and spirit.

Bharatiya Janata Party: The party failed to submit Form C-7 in respect of one of its candidates without acceptable reason and the party did not provide reasons for selection of its candidates which were in line with Supreme Court directions.

Communist Party of India (Marxist): The party was one of the two parties that did not submit Form C-7 or C-8 for any of its candidates and, therefore, was fully non-compliant with Supreme Court directions. An oversight on part of the State Committee of the party cannot be a ground for non-compliance of the directions.

Nationalist Congress Party: The party was one of the two parties that did not submit Form C-7 or C-8 for any of its candidates and, therefore, was fully non-compliant with Supreme Court directions. The dissolution of the State Committee of the party a few months prior to the election in the State of Bihar cannot be a ground for non-compliance of the directions.

Communist Party of India: Criminal antecedents were published in newspapers of low circulation and the forms in which details of criminal antecedents have to be published were filled in a mechanical manner. The party justified selection of some candidates accused of serious offences by stating that the cases “do not have any substance”. The party did not follow Supreme Court directions in letter and spirit.

Rashtriya Lok Samta Party: The party gave same reason for selection of 5 of its candidates in a stereotyped manner.

Penalty

Taking into consideration that these were the first elections which were conducted after issuance of the  directions in Rambabu Singh Thakur, (2020) 3 SCC 733, the Supreme Court was inclined to take a lenient view in the matter. It, however, warned the political parties that they should be cautious in future and ensure that the directions issued by the Supreme Court as well as ECI are followed in letter and spirit.

Since Communist Party of India (Marxist) and Nationalist Congress Party did not at all comply with the directions, the Court ordered them to deposit an amount of Rs 5 lakh each in a specified account. All other parties found in contempt were ordered to deposit an amount of Rs 1 lakh each.

It may be noted that the Court found in all 9 parties to be guilty of contempt; but as per the direction, penalty was levied only on 8 parties. No penalty was specified for Rashtriya Lok Samta Party (Respondent 12).

Caution to the Election Commission of India

The Court accepted ECI’s argument that it cannot be said to have committed any contempt of the directions in Rambabu Singh Thakur, (2020) 3 SCC 733 as ECI did bring flouting of directions to Court’s notice. The Court, however, cautioned ECI to do so as promptly as possible in future so that prompt action may be taken by the Court.

Incidental Discussion

Political party’s freedom to select candidate of choice

Recapitulating the directions given in Rambabu Singh Thakur, (2020) 3 SCC 733, the Court said that the directions were given so as to enable the voter to have an informed choice while exercising his right to vote. What had been directed, was only to provide information to the voter so that his right to have information as to why a particular political party has chosen a candidate having criminal antecedents and as to why a political party has not chosen a candidate without criminal antecedents, is effectively guaranteed. The Court was of the view that such a requirement would only enable the voter to have complete information and exercise his right to vote effectively.

It was clarified that a political party can always give a reason that a candidate with criminal antecedents is found to be more suitable than a person who does not have criminal antecedents. What was directed is that the reasons should not be with regard to “mere winnability at the polls”. The Court observed:

“The directions in no way impinge upon the right of a political party to choose a candidate of its own choice.”

Court cannot direct ECI to invoke powers under Clause 16-A of Symbols Order

The Amicus Curiae strenuously submitted that Supreme Court should issue a direction to ECI to invoke powers under Clause 16-A of the Election Symbols (Reservation and Allotment) Order, 1968 and take requisite action under the said clause to suspend, subject to terms and conditions, or withdraw recognition of political party that flouts the directions given by the Court in Rambabu Singh Thakur, (2020) 3 SCC 733.

The Court followed the law laid down in Public Interest Foundation, (2019) 3 SCC 224 wherein it was held that the prescription as regards disqualification is complete in view of provisions of the Representation of the People Act, 1951. The Constitution Bench had said that it is clear as noon day and that there is no ambiguity. It had further held that the legislature has very clearly enumerated the grounds for disqualification and the language of the said provision leaves no room for any new ground to be added or introduced.

Opining that the Court could not accede to the submission of the Amicus Curiae, it was reiterated that:

“The court cannot legislate”

Further Directions

Before concluding, the Court said that no one can deny that the menace of criminalisation in the Indian political system is growing day by day. Also, no one can deny that for maintaining purity of political system, persons with criminal antecedents and who are involved in criminalisation of political system should not be permitted to be the law-makers. It was observed:

“This Court, time and again, has appealed to the law-makers of the Country to rise to the occasion and take steps for bringing out necessary amendments so that the involvement of persons with criminal antecedents in polity is prohibited. All these appeals have fallen on the deaf ears. The political parties refuse to wake up from deep slumber.”

It was added that though the Court desired that something urgently requires to be done in the matter, its hands are tied and it cannot transgress into the area reserved for the legislative arm of the State. The Court commented:

“We can only appeal to the conscience of the law-makers and hope that they will wake up soon and carry out a major surgery for weeding out the malignancy of criminalisation in politics.”

In furtherance of the directions issued in Public Interest Foundation, (2019) 3 SCC 224 and Rambabu Singh Thakur, (2020) 3 SCC 733, in order to make the right of information of a voter more effective and meaningful, the Court found it necessary to issue following further directions:

(i) Political parties are to publish information regarding criminal antecedents of candidates on the homepage of their websites, thus making it easier for the voter to get to the information that has to be supplied. It will also become necessary now to have on the homepage a caption which states “candidates with criminal antecedents”;

(ii) The ECI is directed to create a dedicated mobile application containing information published by candidates regarding their criminal antecedents, so that at one stroke, each voter gets such information on his/her mobile phone;

(iii) The ECI is directed to carry out an extensive awareness campaign to make every voter aware about his right to know and the availability of information regarding criminal antecedents of all contesting candidates. This shall be done across various platforms, including social media, websites, TV ads, prime time debates, pamphlets, etc. A fund must be created for this purpose within a period of 4 weeks into which fines for contempt of Court may be directed to be paid;

(iv) For the aforesaid purposes, ECI is also directed to create a separate cell which will also monitor the required compliances so that the Supreme Court can be apprised promptly of non-compliance by any political party of the directions contained in the Court’s orders, as fleshed out by ECI, in instructions, letters and circulars issued in this behalf;

(v) The direction in paragraph 4.4 of the order in Rambabu Singh Thakur, (2020) 3 SCC 733 be modified and it is clarified that the details which are required to be published, shall be published within 48 hours of the selection of the candidate and not prior to two weeks before the first date of filing of nominations; and

(vi) If such a political party fails to submit such compliance report with ECI, ECI shall bring such non-compliance by the political party to the notice of the Supreme Court as being in contempt of the Court’s orders/directions, which shall in future be viewed very seriously.

The contempt petition was disposed of in above terms. [Brajesh Singh v. Sunil Arora, 2021 SCC OnLine SC 571, decided on 10-8-2020]


Tejaswi Pandit, Senior Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Rachna Gupta (Judicial Member) allowed an appeal which was filed aggrieved by the order-in-original asking the appellants for recovery of Central Excise Duty amounting to Rs 16,22,501 along with the appropriate interest and proportionate penalty.

The appellant was engaged in the manufacture of organic compound and enzymes. During the course of audit, the Department observed that the appellant had sent 1,41,396.180 litres of chemical for job work under job work Challan for processing. They had received only 90620.290 litres of chemicals. The chemical not received by the appellant i.e. 50775.890 litres was alleged to have the value of Rs. 1,01,15,903/- involving Central Excise duty of Rs.16,22,501/- from their job worker. The said amount of excise duty during the period from 1-3-2003 to 31-3-2005 has accordingly been alleged to have not been paid in contravention to the provisions of Rule 4(5) of CENVAT Credit Rules, 2002.

The appellant submitted that in the manufacture of organic compound into antibiotics and enzymes, the appellant has used Hexa methyl Di-Silioxane (HMDS). After the manufacture of said antibiotic, there remain a by-product namely, (Hexa-Methyl Di-Silixane) HMDSO which contains 75% of HMDS, the raw material for the appellant’s final product and about 25% Toluene. They did not have recovery plant in their factory premises to recover said 75% of HMDS from the said by-product HMDSO. Accordingly, the said product was given to the job worker with an agreement that the yield returnable product would be 90% calculated on 100% basis of HMDS in case the purity is more than 80%. However, if the purity was less than 80%, the yield returnable would be 85%. It was submitted that it is because of that difference in yield returnable that quantity of HMDS received back by the appellant from the job worker was less by about 32-36% of total quantity of HMDSO.

The main issue deduced by the tribunal was that whether Rule 4(5) of CCR was applicable to the given facts and circumstances. The Tribunal perused Rule 4 (5) and explained that:

  • where the manufacturer need to sent those inputs for any kind of processing either inputs as such or after partially processing those inputs, then also those inputs shall be eligible for Cenvat Credit to the extent of duty paid on those inputs provided job workers returned the reprocessed inputs within one hundred eighty days, else the manufacturer shall be liable to pay the amount equivalent to the Cenvat Credit attributable to such inputs by debiting the Cenvat Credit or otherwise.
  • It also stand, abundantly clear from this provisions that this Rule applies to such inputs which have been sent to the job worker before the manufacturer is able to manufacture its final product.
  • This provision applies Thus to a situation where final product cannot be manufactured unless and until the inputs has to undergo such further processing, testing, repairing, reconditioning or any other such treatment which is not available with the manufacturer himself and it has to be got down from the job worker that Rule 4(5) of CCR is invokable. That too in case when Job worker fails to return the processed input within 180 days of receipt thereof.

The Tribunal was of the opinion that there was no denial of the fact that the by-product / waste (HMDSO) which has emerged with the final product (anti-biotic/ organic compound ) of the appellant from the inputs HMDS is sent to the job worker for the reason that this by-product has a potential of releasing the inputs i.e. HMDS by further recovery process as 75% of such HMDS is still contained in the said by-product i.e. HMDSO and this was sufficient to hold that Rule 4(5) of Cenvat Credit Rules is not applicable to the given facts and circumstances. The Tribunal held that what was given to the job worker was the waste which emerged along with final product and not the inputs as such, used by the appellant for manufacturing anti-biotic as a final product. The Tribunal relied on the rulings of Rocket Engineering Corporation Pvt. Ltd. v. CC Pune, 2005 (191) ELT 483 which has been based upon the earlier decision of this Tribunal in the case of Preetam Enterprises v. CCE, 2004 (173) ELT 26. It was held in these decisions that Rule 4(5)(a) of the Cenvat Credit Rules, 2002 does not cover the return of waste and scraps.

The Tribunal further stated that the Commissioner (Appeals) had rejected the appeal solely on the ground that Rule 4(5) does not differentiate between product and by-product however findings are apparently wrong on the face of it.

The Tribunal allowed the appeal and set aside the order-in-original canceling the recovery of Central Excise duty along with interest and penalty.[Dalas Biotech Ltd. v. Commr. Of CE & CGST,  2021 SCC OnLine CESTAT 2523, decided on 03-08-2021]


Suchita Shukla, Editorial Assistant has reported this brief.


Counsel appearing for the Appellant: Ms Jwaria Kainath

Authorised Representative appearing for the Department: Shri Yashbir Singh

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities and Exchange Board of India (SEBI): Soma Majumder, Adjudicating Officer, imposed a 25 crore penalty on Yes Bank Ltd. (YBL), and separate penalties on the three senior executives of its private wealth management team for perpetrating fraud on its customers by influencing them to alter their investment positions from fixed deposits (FD) to risky AT-1 bonds.

In the pertinent matter, the Bank was allegedly involved in the sale of AT1 bond fraudulently, which started in 2016 and continued till 2019. It appeared that YBL wanted to free up ‘shelf space’ for institutional investors to subscribe to further capital of YBL. Therefore, the Noticees devised a devious scheme to dump the AT1 bonds on their hapless customers acted through its employees including the three senior executives to perpetrate such fraudulent acts on its hapless and unsuspecting customers, some of whom were influenced to even alter their investment positions from FDs to these risky AT1 bonds. In order to do that, the Noticees highlighted the AT1 bonds as earning high interest vis-à-vis the FDs. The omission on the part of the Noticees to forward the relevant documentation to the investors customers indicated suppression of material facts and thus misrepresentation Some of the customers also closed the FDs and used the money to buy the AT1 bonds.

Noticee 1 had put forth 52 submissions and Noticee 2 had put 15 additional submissions.

While addressing the demand of the Noticees to cross-examine the complainants, it was held that, “…I note that while the impugned complaints have been the basis of initiation of investigation by SEBI, the charges in the SCN have been alleged on the basis of the detailed fact-finding which investigation conducted. Cross-examination is meant for assisting the Noticees to rebut the evidence against them while contesting the matter. However, since the complaints of the investors are not primarily relied upon in this proceedings, the question of cross-examination does not arise and hence no prejudice is caused to the Noticees by not acceding to their request for cross-examination…”.

The tribunal after looking into all the submissions so made, took note of all the evidences, documents and the proximate facts and circumstances, and was thus of the opinion that “It is clear that to further their own cause, the Noticees devised a scheme to purposely suppress the risk factors of the AT-1 bonds and to highlight the attractive features and also distorted and misrepresented the material facts, so that their customers could be influenced to invest in these risky bonds, some of who also shifted their investments from FDs to these bonds. It is clear that the Noticees had an intention to defraud the customers while making the sales pitch to their customers which is why they did not institute any of the aforesaid safeguards. It cannot be a matter of coincidence that such a large number of customers, i.e. 1311, were influenced and induced to invest in these risky bonds…”.

It further observed that, “It is seen from the facts of the instant case that these AT-1 bonds were ‘down sold’ in order to make ‘shelf space’ for the Institutional Investors to subscribe to further capital which may be issued by the YBL. So it was in the interest of Noticee1 to make shelf space and make the Institutional investors to subscribe to further capital and therefore Noticee 1 decided to facilitate the down selling of these AT-1 bonds…”.

It also took note of the fact that I note that initially, AT1 bonds were allowed to be issued only to institutional investors. Thereafter, vide its circular dated September 01, 2014, RBI allowed Banks to issue AT1 Bonds to individual investors but also mandated issuers to appropriately disclose to the investors, the unique features along with the risks associated with the bonds. And therefore, the issuer had the fiduciary duty to make sure that the features and risks of the instrument were known to the investors. And the difference between a subordinated bond and a fixed deposit should have been made clear while highlighting that it is not covered by deposit insurance.

Therefore the Tribunal exclaimed that,“ I conclude that the AT-1 bonds were sold to the customers of YBL by the Noticees without adopting adequate safeguards to protect their interests and without sufficient due diligence”. “…I conclude that the allegation that Noticees 1 to 4 violated Regulations 3(a), 3(c), 3(d) and 4(1) of PFUTP Regulations and Sections 12A(b) & 12A(c) of the SEBI Act and Noticees 1 and 2 also violated Regulation 4(2)(s) of PFUTP Regulations, read with Explanation (1) to Regulation 4(2) of PFUTP Regulations stands established. Further, Noticees 3 and 4 have submitted that the amendment to Section 4(2)(s) of PFUTP Regulations came into effect only in February 2019 after they had left the employment of YBL…”.

Resultantly a penalty of 25 crores was imposed on Yes Bank Ltd. a penalty of Rs 1 crore on Vivek Kanwar, head of private wealth management, and Rs 50 lakh each on Ashish Nasa and Jasjit Singh Banga.[Yes Bank Limited, In re, Order/SM/MG/2021-22/11306-11309, decided on 12-04-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Ramesh Nair (Judicial Member) partly allowed an appeal where the issue was whether the appellant was entitled to Cenvat credit of Service Tax paid on Outward Transportation Service for clearance of Excisable Goods by the appellant.

The appellant raised the sale invoice in respect of sale of goods wherein after calculating the excise duty on the assessable value an amount of Rs 45000/- was added and recovered from the buyer of the goods. On this freight, the service tax was paid and the same was claimed as Cenvat Credit which was not in dispute in the present case.

Counsel for the appellant, Mr Dhaval K. Shah submitted that freight was included in the invoice value of the goods and the sale was on FOR basis therefore, the service tax paid on such transportation charges was admissible for Cenvat Credit, he further submitted that the issue involved was of interpretation of Cenvat Credit Rules and there was a bunch of litigation on the same issue of admissibility of Cenvat Credit on outward transportation, therefore being the pure question of law involved there was no intention to evade excise duty.

The Tribunal after perusing all the records found that issue of Cenvat Credit on outward transportation has been considered by this tribunal in detail in the case of Ultratech Cement Ltd. v. C.C.E Kutch, 2019 (2) TMI 1487- CESTAT Ahmedabad and in the case of Sanghi Industries Ltd. v. C.C.E Kutch, 2019 (2) TMI 1488 – CESTAT Ahmedabad. The Tribunal observed that in the above cases Cenvat credit was allowed on one of the important facts that the freight element was included in the assessable value and excise duty was paid there upon. It was also a fact in those cases that the assessee had not charged the freight separately to the customers, however in the present case it was seen that freight amount of Rs 45,000 was charged by the appellant to their customers separately, the said amount of the freight was also not included in the assessable value.

The Tribunal found that the appellant on merit was not entitled to the Cenvat Credit however the Tribunal emphasized that the issue involved was of interpretation of Cenvat Credit Rules and on this issue, there were a number of cases made out by the department. In these circumstances, it could not be said that the appellant had a mala fide intention to evade the excise duty by taking the wrong credit.

The Tribunal while partly allowing the appeal set aside the demand for the extended period stating that the remaining demand may be re-quantified by the adjudicating authority and recovered the same from the appellant in accordance with law, the Tribunal further held that appellant was not liable for penalty under Rule 15(2) of Cenvat Credit Rule 2004 read with section 11 AC of the Central Excise Act 1944 as there was no intention to evade duty.[Inox (INDIA) (P) Ltd. v. C.C.E. & S.T., 2021 SCC OnLine CESTAT 157, decided on 25-03-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Patna High Court: Birendra Kumar, J., heard the instant revision application challenging the validity of ex-post facto approval of search and seizure operations effected by the police.

“…entire exercise of action of seizure from the house of accused Kundan Mandal and its confirmation by the Designated Authority suffers from arbitrariness and illegality.”

On 26-07-2012, the SHO of Naya Ram Nagar Police Station registered a case for offences under Section 414 of the Indian Penal Code, Sections 10/13 of the Unlawful Activities (Prevention) Act, 1967 and Sections 25(1-AA)/(1-AAA), 26(2) and 35 of the Arms Act, 1959 on the basis of self-statement.

The accused were reported to be moving to supply arms and explosives to the Nuxals. The police arrested the accused, though nothing was recovered from the physical possession of the accused. However, from the vehicle, a pistol along with other accessories was recovered for which the arrested accused could not show any paper. Besides that some Nuxal literature were also seized from the vehicle and the arrested persons disclosed that they used to supply arms to the Nuxals. Pursuant to the arrest of the house of Kundan Mundal, one of the accused was searched from where laptop, cash, ATM cards, Pan Cards and 34 deposit bonds were recovered. Additionally, a tractor was also seized without the approval of the Designated Authority which was a prerequisite under Section 25 of UAP Act, 1967. Interestingly, the Designated Authority granted ex post facto approval for the seizure made above and confirmed the same.

Noticing that the Investigating Officer could exercise power of seizure only if the offence had been committed under Chapter IV or Chapter VI of the UAP Act and no such offence was alleged to had been committed in the instant case In this case, the Bench remarked,

“…the exercise entered into by the Investigating Officer in making seizure of property from the house of accused Kundan Mandal is wholly illegal and without jurisdiction. Section 25 of the UAP Act requires that the Investigating Officer must have “reason to believe”

Section 25 of the UAP Act requires that the Investigating Officer must have “reason to believe” that any property in relation to which an investigation is being conducted represents “proceeds of terrorism”. “The reason to believe” must be on the basis of specific, reliable and relevant information. The police report did not show, specially, the evidence collected till the date of making of the prayer for confirmation of seizure that any specific reliable or relevant information was there to form a belief that the property seized from the house of the accused were proceeds of terrorism. Thus,

In absence of any connection between the act alleged and the property recovered, it cannot be assumed that those properties were acquired by the terrorist act.”

The Bench opined that to attract the mischief of penalty for being member of an unlawful association under Section 10 of the UAP Act, it must be established that the association was declared unlawful by a notification issued under Section 3 of the Act. In the case on hand, there was no evidence that to which of the unlawful association the accused were supplying the arms. Hence, it could not be ascertained whether that association was declared unlawful association or not.

Hence, the entire seizure exercise and its confirmation, as well as the order of the Lower Appellate Court, was set aside and the police officials were directed to release the property in favour of the petitioners at the earliest preferably within ten days. In case of default compensation of rupees ten thousand to the petitioners for each day delay was also granted.  [Ramchandra Mandal v. State of Bihar,  2021 SCC OnLine Pat 670, decided on 22-03-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance before the Court:

 For the Petitioner/s: Adv. Sandeep Kumar, Adv. Arvind Kumar and Adv. Anil Kumar Roy,

For the Respondent/s: A.P.P. Umanath Mishra

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): A Coram of Tarun Agarwala, J., (Presiding Officer) and M.T. Joshi, J., (Judicial Member) while dismissing an appeal held that separate penalties by the stock exchanges could be imposed.

In the present matter, BSE and NSE separately imposed a penalty of Rs 12 lakh for violation of Regulation 17 and 19 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), in two consecutive quarters. The stock exchanges suspended the trading activities of the appellant considering the non-payment of penalty amount.  The appellant contended that the default was made only in the first quarter. Further, contended that, separate penalties for the same offence cannot be imposed by the two stock exchanges separately.

The Coram resultantly found defaults in both consecutive quarters. While relying on the SEBI’s conscious decision in W.S. Industries (India) Limited v. BSE Ltd. (Appeal No. 8 of 2019 decided on 19.09.2019) held that, separate penalties by the stock exchanges could be imposed.[PVP Ventures Ltd. v. Bombay Stock Exchange Ltd., 2021 SCC OnLine SAT 90, decided on 17-03-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Ashok Jindal (Judicial Member) allowed an appeal which was filed against the impugned order wherein the penalty of Rs 50,000 had been imposed under Section 112 read with Section 114AA of the Customs Act, 1962.

The appellant was a customs broker and handled import consignment of the importer, namely, Inder International. The appellant had filed 4 Bills of entry declaring the goods as cold-rolled coil (non-alloy) alongwith invoices, test certificate and other relevant documents for clearance of the same. After filing bills of entry, the importer filed a declaration that the exporter had intimated to the appellant that the goods is of prime in nature. Thereafter, the goods were examined and found to be prime in nature, therefore, a case had been booked against the importer for mis-declaration of the goods to evade payment of duty on the said goods. It was alleged that the appellant has made a false declaration in respect of the said consignments.

The Counsel for the appellant, Mr Sudhir Malhotra submitted that the appellant had filed bills of entry as per the directions of the importer who had imported the said goods on high-seas sale basis the relevant documents, namely, invoices, high-seas agreement, test certificate were also filed by the appellant alongwith the bills of entry and the appellant had never examined the goods before filing the bills of entry, in that circumstances, it cannot be alleged that the appellant had knowingly mis-declared the goods on behalf of the importer. Therefore, there was no mens-rea of the appellant to have undue benefit of mis-declaration, in that circumstances, the penalty cannot be imposed on the appellant.

The Tribunal observed that no where it had been placed on record that the appellant was having prior knowledge of defective/secondary material. In fact, in the invoices, high-seas agreements, test certificates, it was mentioned that the material was of prime nature. It further held that the Revenue had further failed to establish the fact that the appellant about the doing omission of the act which would render the goods liable for confiscation.

The Tribunal while allowing the appeal held that act of filing the test certificate showed that the appellant had no mens rea and filed the documents being a bonafide facilitator and in view of the same no penalty was imposable upon the appellant, therefore, the penalty imposed on the appellant under Section 112 along with 114AA of the Customs Act, 1962 was set-aside.[MS Exim Services v. C.C. Ludhiana, 2021 SCC OnLine CESTAT 14, decided on 04-02-2021]


Suchita Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Delhi High Court: Prathiba M. Singh, J., upheld that order of the Central Information Commission whereby a penalty of Rs 10000 was imposed on the petitioners for changing stands while not providing the information as sought by the applicant under the RTI Act.

The instant petition was filed by two officers working with the Union Bank of India as Central Public Information Officers (CPIO).

The above-two officers challenged the impugned Order passed by the Central Information Commission vide which penalties amounting to Rs 10,000 were imposed upon them.

Background

An RTI application was filed by the applicant who was the Chief Manager at the Union Bank of India wherein he sought the following information:

Details of the Board approval along with justification for giving exemption with regard to 3 years branch head service.

The Office of the CPIO had informed the applicant that copy of the board note, being an internal document of commercial confidence would be exempted from disclosure.

Even the appellant authority stated that the copy of the board approval was exempted from being disclosed under Section 8(1)(d) of the RTI Act.

In the second appeal with regard to the matter, CIC found that there was no reason why complete information was not provided to the applicant and held that the responses provided were rather incomplete and evasive. Therefore, a show-cause notice to the CPIOs of the bank was issued.

On receiving the above show cause notice, the CPIOs responded stating that the information which was sought could not be found on record. Due to the change in stand by the petitioners, CIC imposed a penalty of Rs 10,000 under Section 20 of the RTI Act.

Analysis and Decision

Bench referred to this Court’s decision in R.K Jain v. Union of India, 2018 SCC OnLine Del 10957  wherein it was recognized that the CPIO, being the custodian of information or documents sought for, is primarily responsible under the scheme of the RTI Act to supply the information, and in cases of default, the penal action is to be invoked against the CPIO only.

In the decision of Registrar of Companies v. Dharmendra Kumar Garg (WP(C) 11271/2009, decided on 1st June, 2012), the role of CPIOs under the RTI Act was elaborately dealt with.

Further, in the decision of J.P. Agrawal v. Union of India, (WP(C) 7232/2009, decided on 4th August, 2011) the Single Judge recognized that:

CPIOs/PIOs are not merely “post offices” and have a crucial responsibility in facilitating the purpose of the RTI Act.

 In light of the above decisions, the High Court laid down the following principles:

i)  CPIO/PIOs cannot withhold information without reasonable cause;

ii)  A PIO/CPIO cannot be held responsible if they have genuinely rejected the information sought on valid grounds permissible under the Act. A mere difference of opinion on the part of CIC cannot lead to an imposition of penalty under Section 20 of the RTI Act;

iii)  Government departments ought not to be permitted to evade disclosure of information. Diligence has to be exercised by the said departments, by conducting a thorough search and enquiry, before concluding that the information is not available or traceable;

iv) Every effort should be made to locate information, and the fear of disciplinary action would work as a deterrent against the suppression of information for vested interests;

v) PIO/CPIO cannot function merely as “post offices” but instead are responsible to ensure that the information sought under the RTI Act is provided;

vi) A PIO/CPIO has to apply their mind, analyze the material, and then direct disclosure or give reasons for non-disclosure. The PIO cannot rely upon subordinate officers;

vii) Duty of compliance lies upon the PIO/CPIO. The exercise of power by the PIO/CPIO has to be with objectivity and seriousness the PIO/CPIO cannot be casual in their approach.

viii) Information cannot be refused without reasonable cause.

Conclusion

Hence, the Court held that under the RTI Act, the CPIOs have a solemn responsibility.

Section 5(3) requires that every CPIO or SPIO shall deal with requests for information and `render reasonable assistance’ to the persons seeking information.

CPIOs or SPIOs can seek assistance from higher/other officials in the organisation in order to enable them to furnish the information sought for the `proper discharge’ of their duties, as per Section 5(4).

 In the present matter, CPIOs changed their stands which would go on to show that there was an intention to withhold certain important documents or information, leading to the finding of mala fides and unreasonable conduct.

In light of the above, Court opined that the penalty imposed could not be faulted with. However, considering the fact that both the CPIOs since retired from the service of the Bank, the penalty was reduced to Rs 5,000 each. [Rakesh Kumar Gupta (Erstwhile CPIO) Union Bank of India v. CIC, 2021 SCC OnLine Del 194, decided on 22-01-2021]


Advocates for the parties:

For the Petitioners: Mr O.P. Gaggar, Advocate.

For the Respondents: Mr Gaurang Kanth, Standing Counsel with Mr Aman Singh Bakhshi, Advocate.

Case BriefsHigh Courts

Chhattisgarh High Court: A Division Bench of P.R. Ramchandra Menon and Parth Prateem Sahu JJ., dismissed the appeal being devoid of merits.

The facts of the case are such that one Rajendra Sharma was employed as Driver in the truck owned by non-applicant 1 and insured by non-applicant 2 who while driving from Bilaspur to Raigarh carrying dolomite was attacked and assaulted by some unknown persons with the intention to cause robbery and thereby eventually succumbed to death. FIR was lodged and an application under Section 10 of the Employees Compensation Act 1923 was filed before the Commissioner seeking compensation by the wife and children of the deceased which was thereby granted on grounds that the death happened during the course of employment and fastened the liability to pay on the employer.  Assailing the said order, employer appellant filed an appeal before High Court on grounds that the penalty was imposed without issuing show-cause notice and without affording opportunity of hearing to the employer as envisaged under Section 4A (3) (b) of the Employees’ Compensation Act 1923 wherein appeal was allowed and impugned order was set aside in part relating to the amount of penalty and remitted the matter back to pass award afresh after affording reasonable opportunity of hearing to the employer. The Commissioner had fresh proceedings and issued notice to the parties and awarded 50% of the awarded amount of compensation as penalty and held the employer liable to pay amount of penalty.

Counsel for the appellants-employer submitted that there was again non-compliance of the provisions of Section 4A (3) (b) of Employees Compensation Act 1923. He contended that unless and until there is specific notice in this regard, as directed in MA No.148/2003, the impugned order awarding penalty to the extent of 50% and fastening liability upon appellant is bad in law and liable to be set aside.

Counsel for the respondents submitted that the Commissioner after receipt of the case back on remand, drawn fresh proceeding, granted opportunity of hearing and producing evidence, but appellant employer failed to produce any evidence on the issue. He submitted that the Commissioner is well within four corners of law in awarding penalty of 50% as provided under Section 4A (3) (b) of the Employees’ Compensation Act 1923.

The Court observed that the only ground relevant to the facts is that whether without issuance of notice the entire proceeding drawn by the Commissioner would be considered vitiated or not. The Court further observed that the Appellant was well aware of the fact that the case has been remanded back to the Commissioner with a specific direction for appearance of the parties before the Commissioner and to decide the issue of penalty afresh. It was further observed that the issuance of notice as provided under Section 4A (3) (b) of the Act of 1923 to be mandatory is only to bring it to the knowledge of the employer that the penalty is to be imposed, so that the employer may submit explanation and evidence for the delay occurred in depositing amount of compensation and satisfy the Commissioner on the said issue.

The Court thus held that “In the case at hand, earlier appeal was filed by appellant challenging the order of award of penalty by the Commissioner on the ground of non-issuance of show-cause notice as envisaged under Section 4A(3)(b) of the Act of 1923, which was allowed and the case was remitted back to the Commissioner. Appellant was well aware as to why the case has been remanded back to the Commissioner and also about the proceeding drawn by the Commissioner, but even then appellant has not submitted any explanation nor produced any evidence in this regard. When once the case is remitted back to the Commissioner for limited purpose of considering award of penalty; the appellant appeared before the Commissioner and participated in the proceeding but failed to submit any explanation or bring on record any evidence on issue, then he cannot be permitted to again raise the same ground that specific notice in terms of Section 4A (3) (b) of the Act of 1923 has not been issued.”

 The Court thus dismissed the appeal as the appeal did not involve any question of law which is a prerequisite for entertaining appeal under Section 30 of Employees’ Compensation Act 1923.[Ramjilal Jagannath Partnership Firm v. Kusumdevi, 2020 SCC OnLine Chh 2051, decided on 17-11-2020]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Ramesh Nair (Judicial Member) and Raju (Technical Member) allowed an appeal which was filed against in demand of reversal Cenvat Credit, Interest, and Imposition of penalty.

The issue involved in appeal was that whether Rule 6 (3) (b) and Rule 6 (3)(i)(ii) of Cenvat Credit Rules,2004 would be applicable to the removal of byproducts (i.e spent sulphuric Acid) which were removed under serial No 32 of Notification No. 04/2006 –CE dated 1st March 2006 to fertilizer manufacturing units following the procedure laid down under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods)Rule 2001. Notices were issued for recovery of CENVAT under Rule 6(3)(b) and Rule 6(3)(i)(ii) of Cenvat Credit Rules,2004 by treating the removal of Spent Sulphuric Acid under Notification No.04/2006-CE dated 1st March,2006 as exempted goods. The Adjudicating Authority had not accepted the contention of the Appellant that the by-Products were removed at Nil rate of duty on receipt of Annexure-1 from fertilizer manufacturing units.

The Tribunal allowed the appeal and observed that the appellant were engaged in manufacture of Chemicals namely Dichloro Nitro Benzene, etc. and were availing Cenvat Credit in respect of certain inputs and inputs services during the process of manufacture Sulphuric Acid also came into existence. They further observed that appellants were clearing such Sulphuric acid to manufacturers of fertilizers by availing benefit of Procedure Chapter X (Cleared at Nil Rate of Duty). The appellants had contended that they procured Sulphuric Acid from outside and used the same in the process of manufacturing their final products. What is left after the process was nothing but the spent sulphuric acid which was waste/refuse. They claimed that the spent sulphuric acid was not a by-product. The appellant had claimed that spent sulphuric acid was the residue of the input sulphuric acid procured from outside and used in the processing within the factory. The appellant claimed that they had cleared only such Sulphuric Acid under Notification No. 4/2006 – CE. The Tribunal found that a similar issue was decided upon in the case of Nirma Limited – 2012(276) ELT 283.[Panoli Intermediate (India) (P) Ltd. v. C.C.E. & S.T., 2021 SCC OnLine CESTAT 5 , decided on 18-01-2021]


Suchita Shukla, Editorial Assistant ahs put this story together

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): P.K. Choudhary (Judicial Member) partly allowed an appeal which was filed against the Order-in-Appeal whereby two separate appeals of the appellant against two Orders-in-Original had been dismissed. The basic issue recorded by the Commissioner (Appeals) was whether confiscation of goods and imposition of fine and penalty by the Lower Authority in absence of valid PSI certificate was maintainable.

It was contended on behalf of the appellant that the imported goods were declared as Tin Waste and Scrap (Light Melting Scrap) in accordance with the import documents provided by the foreign supplier. Only during 100% examination after import, a Chartered Engineer was appointed who opined on visual examination that the goods are Tin Plated Steel Scrap as steel predominates by weight. It was contended that prior to such inspection, it was not possible for the appellant to verify the actual nature of goods being supplied by the foreign supplier. The counsel for the appellant further submitted that there was neither any knowledge nor reason to believe on the part of the appellant herein w.r.t. the alleged mis-declaration of the goods so imported. He further submitted that the goods imported during January, 2013 were of no material value as on date and as such, the appellant was no more interested in getting release of the goods against the redemption fine as imposed by the Adjudicating Authority.

The Tribunal after perusing the records found that the goods declared as Tin Waste and Scrap (Light Melting Scrap) were on verification by the qualified Chartered Engineer certified as Tin Plated Steel Scrap since steel predominates by weight. The appellant had not asked for any re-test or alike at the relevant point of time. On the contrary the appellant/ importer had waived his right of show cause notice and/or hearing at the stage of adjudication and hence, the contention on behalf of the appellant before me that the certificate was issued by the Chartered Engineer on visual examination, cannot come to rescue of the appellant with regard to the proper description of the goods. The Tribunal reminded that importation was permitted only against Pre Shipment Inspection

Certificates and it was settled position of law that conditions for import, if not fulfilled, the importation was not permitted. The Tribunal further explained that when goods imported or exported without complying with the conditions subject to which such goods are permitted for export and import, the goods shall be rendered as ‘Prohibited Goods’.

The Tribunal while partly allowing the appeal explained that at the time of importation of the goods, admittedly, Pre Shipment Inspection Certificates were not available and the goods were wrongly described as scrap of tin instead of scrap of steel. The appellant could not even produce such certificates prior to adjudication and thus the order of confiscation of the imported goods was proper and correct under Section 111(d) of the Customs Act, 1962 and thus upheld on the other hand the law requires existence of mens rea and maintenance of balance of convenience prior to imposition of penalty upon any person and in the present case there was no existence of ingredient of section 112 of the Customs Act, 1962 nor any mens rea and hence, the imposition of penalty upon the appellant was bad in law and liable to be quashed.[Sanjay Kumar Agarwal v. Commr. Of Customs, 2020 SCC OnLine CESTAT 397 ; decided on 23-12-2020]


Suchita Shukla, Editorial Assistant has put this story together

Case BriefsTribunals/Commissions/Regulatory Bodies

Security and Exchange Board of India (SEBI): B J Dilip, (Adjudicating Officer) imposed the penalty of 25 crores and 15 crore respectively on Reliance Industries Ltd. (RIL) and its MD,  Mukesh D. Ambani for making unfair and undue profits by means of fraudulent trade practices.

SEBI conducted an investigation into trading in the scrip of Reliance Petroleum Ltd. (RPL) to ascertain whether there was any violation of the provisions of SEBI Act, 1992.

A resolution was passed by BoD of RIL on 29-03-2007 which inter alia approved the operating plan for the year 2007-08 and resource requirements for the next two years, i.e., approximately Rs. 87,000 crore. Thereafter, RIL had entered into a scheme of manipulative trades in respect of the sale of 5% (up to 22.5 crore RPL shares) of RIL stake in RPL. However, before undertaking sale transactions in the Cash Segment, RIL fraudulently booked large short positions in the RPL November Futures through 12 Agents with whom it had entered into an agreement to circumvent position limits for a commission payment. Consequently, RIL fraudulently earned nearly 93% of open interest in RPL November Futures. RIL also undertook transactions in RPL shares in the cash segment. By employing these devices and acting through its 12 Agents, RIL had clandestinely accumulated position limits far in excess of limits permissible for a single client. The above steps in the F&O segment in view of its planned sale of 22.5 crore of RPL Shares in the cash segment was naturally expected to trigger steep price declines in the cash segment and alongside in the futures segment. The only way to take advantage of the sharp price decline would be by taking large positions in futures markets. By roping in 12 agent entities to act on its behalf, RIL had proportionately amplified its position taking capacity in futures which was fraudulent in nature as defined in section 12A (a), (b) & (c) of the SEBI Act and Regulations 3 and 4 of Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market (PFUTP Regulations) Regulations, 2003.

The Board observed that after the sale of shares on 29-11-2007, RIL still had 2.21 crore shares left to sell out of the 22.50 crores shares which suggested that RIL’s real objective was to bring down the RPL share price by dumping huge quantity of shares in the cash segment during the last 10 minutes to influence the settlement price in F&O segment. The manipulative and deceptive transactions of RIL were prima-facie, covered under the definition of ‘fraud’ and therefore were “fraudulent”, as defined under regulation 2(1) (c) of the PFUTP Regulations, 2003

Managing Director of RIL,  Mukesh D. Ambani had been held liable for manipulative trading done by RIL. SEBI observed that it was difficult to believe that entire asset sale to raise Rs 87,000 crore could be done without the supervision of MD, that too when the said amount was a substantial percentage of its total assets and its turnover. It was held that Mukesh D. Ambani, being the Chairman and Managing Director of RIL, was responsible for its day-to-day affairs and thereby, liable under Section 15HA of SEBI Act for the manipulative trading done by RIL.

In view of the above, the Board imposed the penalty of 25 crore and 15 crore on RIL and its MD respectively. It was also observed that Navi Mumbai SEZ Pvt. Ltd. and Mumbai SEZ Ltd. had allegedly aided and abetted RIL by providing funds to agents appointed by RIL, for making the margin payments for the short positions in RPL November Futures. Therefore, penalty of 20 crore and 10 crore respectively were imposed on them as well. The Board disposed of the matter with further directions that the said amount of penalty should be remitted or paid within 45 days of receipt of order. [Reliance Petroleum Ltd. In Re.,  2021 SCC OnLine SEBI 1, decided on 01-01-2021]

Case BriefsHigh Courts

Allahabad High Court: Dr Kaushal Jayendra Thaker, J., observed that if the insurance co. will not be liable to pay interest, then it will be against the spirit of taking an insurance policy, and the very object for introducing insurance policy will get frustrated.

Appeals in the instant matter are out of the decision and award passed by the Commissioner, Workmen’s Compensation Act, 1923 being Additional Labour Commissioner, Kanpur awarding a sum of Rs 6,30,062 with interest at the rate of 9% in favour the claimants.

The owner was saddled with the liability to pay interest.

Question of law in the instant case:

Whether in the given facts and circumstances of the case, the Commission has committed a manifest error of law holding that if the respondent has failed to deposit the awarded amount within 30 days from the date of judgment then only claimants are entitled to the interest at the rate of 9% from the date of award till the amount is deposited.

Owner’s Counsel submitted that the Commissioner committed patent error directing the owner to pay interest.

Counsel for the insurance Company tried to point out that the judgment and order impugned was just and proper as it was the duty of the owner to notify the insurance company about the accident which was not done and hence the owner was saddled with the payment of interest till the date of the decision.

While dealing with the above question of law, the Court found it appropriate to reproduce Section 4A of the Act. 

Section 4A. Compensation to be paid when due and the penalty for default.

Supreme Court’s decision in Oriental Insurance Company v. Siby George, 2012 (4) T.A.C 4(SC) wherein it was held that the payment of interest is a consequence of default and it has to be directed to be paid without going into the reasons for the delay and only in case where the delay is without justification, the employer might also be held liable to a penalty after giving him a show-cause notice. Thus, just because the owner had not intimated to the Insurance Company, it cannot be the reason for not directing the Insurance Company to pay the interest.

Hence, in the findings that the Insurance Company will not be liable for interest is against the spirit of taking the insurance policy and the very object for introducing insurance policy would get frustrated.

High Court in view of the several Supreme Court decisions partly allowed the appeals.

Hence Judgment and award of the Commissioner shall stand modified to the aforesaid extent namely to the extent that the Insurance Company shall deposit the decretal amount with interest at the rate of 12% from one month after the date of accident till the amount is deposited.

In the present matter, it is the parents who were demanding from one son for the death of another son and they have claimed from Insurance Company with whom the vehicle was insured to make payment. Therefore, the minimum penalty of Rs 10,000 would suffice on the Insurance Company. 

Appellants shall deposit a sum of Rs 10,000 which would be a substitution for the penalty. [Chanda Begum v. Shahnawaz, 2020 SCC OnLine All 1487, decided on 16-12-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Bench of Justice Venugopal M. (Judicial Member) and V.P. Singh (Technical Member) and Shreesha Merla (Technical Member), while addressing the present Company Appeal observed that:

No penalty can be saddled either under Section 65(1) or (2) of the Code without recording an opinion that a prima facie case is established to suggest that a person ‘fraudulently’ or with malicious intent for the purpose other than the resolution of Insolvency or Liquidation or with an intent to defraud any person has filed the Application.

The instant appeal emanates from the Order passed by National Company Law Tribunal Delhi whereby application under Section 7 of the Insolvency and Bankruptcy Code 2016 was admitted.

Factual Matrix

Corporate Debtor is a builder of High-End Project wherein a flat was booked for a total sale consideration of Rs 3,80,10,000. 

Respondents were the second purchasers of the above-stated flat booked vide Agreement Buyer Agreement. As per Agreement, the completion period was 36 months plus six months as a grace period, i.e. February 2015.

Appellant contended that after adjusting the payments made by the Original buyer, the respondent paid a total sum of Rs 2,75,55,186 as against the total cost of the flat as Rs 3,80,10,000. The last payment was made by the respondents on 26-08-2013, and after that, despite several reminders, no payment was made.

Respondents opted for a Construction linked plan but failed to pay the instalments on time.

Appellants submitted that the respondents are defaulters. Therefore, Corporate Debtor was constrained to cancel their allotment.

Respondents initiated the proceedings under Section 7 of the Insolvency and Bankruptcy Code against the appellant.

Appellant pleaded that the proceedings initiated by respondents 1 and 2 are against the provisions of the Code and have been done so, to pressurise the Corporate Debtor.

Further, respondent 1/Homebuyer submitted that as per the Agreement, possession was to be handed over within 36 months from the date of commencement of the construction or execution of the Agreement, whichever is later.

Despite the assurances, the Appellant failed to deliver the possession of the said unit to the Respondents. Therefore, the Respondents/Financial Creditor had filed the Application under Section 7 of the Code.

NCLT observed that the Corporate Debtor did not hand over the possession of the flat to the Financial Creditor as the construction work could not be completed within the stipulated time and there was no proof of extension of time by the Authority concerned. A debt of more than Rs 1 lakh was due and payable, which the Corporate Debtor failed to pay.

In view of the above circumstances, application wad admitted by NCLT and the same has been challenged in the instant appeal.

Issues for Consideration:

  1. Whether the Corporate Debtor has committed default in not completing the Construction of the flat in time and handing over possession of the same in terms of Agreement?
  2. Whether Financial Creditor/Home Buyer committed default in making payment of the instalments as per ‘ABA’ under construction link Plan?
  3. Whether the Application under Section 7 of the Code is filed fraudulently with malicious intent for the purposes other than for the Resolution of Insolvency or liquidation, as defined under Section 65 of the I&B Code, 2016?
  4. Whether the application is barred by limitation?

Analysis and Decision

On considering the above-stated issues, Bench observed that the Corporate had committed default in completing the construction work of the flat n time and failed to deliver the possession on the stipulated date as per the Agreement.

In a reply to a notice, Corporate Debtor himself admitted that unlike other builders who have abandoned the project and stopped the work, it is completing the Project which is at the final stage where flooring and finishing work is underway.

It was observed from the Agreement that under the Construction linked payment plan, it is mandatory to issue demand notice for instalments in the commencement of respective stages of Construction by speed post or courier.

In the instant case, there was no evidence to show that the demand notice at the respective stages of Construction was ever sent to the Allottee. Whereas, Clause 2.18 of the Agreement makes it mandatory to send the Notice to the Allottee under Construction linked plan. No compliance of conditions of Clause 2.17 and 2.18 were made in the instant case.

Hence, in the present case, it is difficult to ascertain as to when Instalment became due, at the start of the respective stage of the Construction.

Bench observed that:

Mandatory condition of issuing Notice through speed post or courier to the Allottee, at every stage of Construction as per Agreement has not been followed.

Hence, it cannot be concluded that the allotted committed any default in paying the instalment when due and the fact that the flat was to be delivered latest by 2nd week of February 2016, but construction work was still going on in the year 2018 also cannot be denied.

Justification for Invoking Section 65 of the Code

In accordance with the Supreme Court decision in Pioneer’ Urban Land Infrastructure v. Union of India, (2019) 8 S SCC 416, Corporate Debtor has the responsibility to furnish the details of default. It was held that:

“Under Section 65 of the Code, the real estate developer can also point out that the insolvency resolution process under the Code has been invoked fraudulently, with malicious intent, or for any purpose other than the resolution of Insolvency. The Allottee does not, in fact, want to go ahead with its obligation to take possession of the flat/Apartment under RERA, but wants to jump ship and really get back, by way of this coercive measure, monies already paid by it. The Allottee does not, in fact, want to go ahead with its obligation to take possession of the flat/Apartment under RERA, but wants to jump ship and really get back, by way of this coercive measure, monies already paid by it.”

Bench stressed upon the point that Section 65 of the Code is not meant to negate the process under Section 7 or 9 of the Code. Penal action under Section 65 can be taken only when the provision of the Code has been invoked fraudulently, with malicious intent.

In the Supreme Court decision of Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17, it was held that:

“…in order to protect the corporate debtor from being dragged into the corporate insolvency resolution process mala fide, the Code prescribes penalties.”

Hence, from the above discussion, it is clear that

the Code provides stringent action under Section 65 against the person who initiates proceedings under the Code fraudulently or with malicious intent, for the purpose other than the resolution of Insolvency or liquidation under the Code.

Requirement for levying penalty under Section 65 IBC is that a ‘prima facie’ opinion is required to be arrived at that a person has filed the petition for initiation of proceedings fraudulently or with malicious intent.

While parting with the decision, Tribunal held that the Real Estate Developer failed to prove that Allottee is a speculative Investor and is not genuinely interested in purchasing the flat and initiated proceeding under the Code to pressurise the Corporate Debtor.

Thus, Tribunal found no justification to invoke Section 65 of the I&B Code against the Allottee.

Decision

NCLT’s order requires no interference. [Amit Katyal v. Meera Ahuja, 2020 SCC OnLine NCLAT 748, decided on 09-11-2020]

Case BriefsSupreme Court

Supreme Court: The bench of Ashok Bhushan and MR Shah*, JJ has held that Magistrate can in exercise of powers under Section 156(3) of the Criminal Procedure Code order/direct the concerned Incharge/SHO of the police station to lodge/register crime case/FIR even for the offences under the the Mines & Minerals (Development & Regulation) Act, 1957 (MMDR Act) and the Rules framed thereunder and at this stage the bar under Section 22 of the MMDR Act shall not be attracted.

The Court was hearing a case relating to offences under Sections 379 and 414 IPC, Sections 4/21 of the MMDR Act and Rule 18 of the M.P. Minerals (Prevention of illegal Mining, Transportation and Storage) Rules, 2006 where the Magistrate in exercise of powers conferred under Section 156(3), Cr.P.C. suo motu directed to register criminal case under Section 156(3) Cr.P.C. for initiation of investigation and for submitting of report after due investigation is conducted. The concerned In-charge/SHOs of the concerned police stations was also directed to register the first information report and a copy of the first information report be sent to the learned Magistrate as per the provisions of Section 157, Cr.P.C. The Madhya Pradesh High Court had refused to quash the criminal proceedings.

It hence, concluded

i) that the Magistrate can in exercise of powers under Section 156(3) of the Code order/direct the concerned Incharge/SHO of the police station to lodge/register crime case/FIR even for the offences under the MMDR Act and the Rules made thereunder and at this stage the bar under Section 22 of the MMDR Act shall not be attracted;

ii) the bar under Section 22 of the MMDR Act shall be attracted only when the Magistrate takes cognizance of the offences under the MMDR Act and Rules made thereunder and orders issuance of process/summons for the offences under the MMDR Act and Rules made thereunder;

iii) for commission of the offence under the IPC, on receipt of the police report, the Magistrate having jurisdiction can take cognizance of the said offence without awaiting the receipt of complaint that may be filed by the authorised officer for taking cognizance in respect of violation of various provisions of the MMDR Act and Rules made thereunder; and

iv) that in respect of violation of various provisions of the MMDR Act and the Rules made thereunder, when a Magistrate passes an order under Section 156(3) of the Code and directs the concerned In-charge/SHO of the police station to register/lodge the crime case/FIR in respect of the violation of various provisions of the Act and Rules made thereunder and thereafter after investigation the concerned In-charge of the police station/investigating officer submits a report, the same can be sent to the concerned Magistrate as well as to the concerned authorised officer as mentioned in Section 22 of the MMDR Act and thereafter the concerned authorised officer may file the complaint before the Magistrate along with the report submitted by the concerned investigating officer and thereafter it will be open for the learned Magistrate to take cognizance after following due procedure, issue process/summons in respect of the violations of the various provisions of the MMDR Act and Rules made thereunder and at that stage it can be said that cognizance has been taken by the learned Magistrate.

v) in a case where the violator is permitted to compound the offences on payment of penalty as per sub-section 1 of Section 23A, considering sub-section 2 of Section 23A of the MMDR Act, there shall not be any proceedings or further proceedings against the offender in respect of the offences punishable under the MMDR Act or any rule made thereunder so compounded. However, the bar under sub-section 2 of Section 23A shall not affect any proceedings for the offences under the IPC, such as, Sections 379 and 414 IPC and the same shall be proceeded with further.

Considering the need for stringent provisions which may have deterrent effect so that the violators may think twice before causing damage to the earth and the nature, the Supreme Court said

“It might be true that by permitting the violators to compound the offences under the MMDR Act or the rules made thereunder, the State may get the revenue and the same shall be on the principle of person who causes the damage shall have to compensate the damage and shall have to pay the penalty like the principle of polluters to pay in case of damage to the environment. However, in view of the large scale damages being caused to the nature, the policy and object of MMDR Act and Rules are the result of an increasing awareness of the compelling need to restore the serious ecological imbalance and to stop the damages being caused to the nature.”

In the present case, on a surprise inspection, the respective Mining Inspectors checked the tractor/trolleys of the private appellants along with the minor mineral (sand/storage/yellow soil etc.) loaded in them.

[Jayant v. State of Madhya Pradesh, 2020 SCC OnLine SC 989, decided on 03.12.2020]


*Justice MR Shah has penned this judgment 

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): Justice Tarun Agarwal allowed the appeal and substituted the penalty imposed by the impugned order with a warning.

The facts of the case are such that the appellant in the instant case is National Highway Authority of India i.e. NHAI an autonomous body set up by the Parliament under ‘NHAI Act’. It is also listed on the Bombay Stock Exchange and National Stock Exchange and is subject to the provisions of the (Listing Obligations and Disclosure Requirements) Regulations, 2015 i.e. LODR Regulations, 2015. Regulation 52(1) of the LODR Regulations, 2015 mandates filing of the unaudited half-yearly financial results within 45 days from the end of the half financial year. An extension application under Regulation 102 of LODR Regulation 2015 was filed on two occasions with a  procedural fee of Rs 1 lakh pursuant to which SEBI asked for certain clarification which were given therewith yet the request was rejected. The appellants failing which, as there was a delay in filing the half-yearly financial results for the period ending 30-09- 2018 and 31-03-2019, has been slapped with a penalty of Rs 7 lakh by SEBI Board vide order dated 26-05-2020. Being aggrieved by the said order present appeal has been filed.

Counsel for the petitioners Rajesh Ranjan and Neeraj Matta submitted that the delay was a procedural delay which was beyond the control of the officers of NHAI as the NHAI body constituted under the NHAI Act mandates the composition to be from among the high level secretaries from the Union Ministries which makes it difficult for regular meetings to be convened due to lack of adequate quorum and it is also mandated under Regulation 4 of NHAI (Transaction of Business) Regulations, 1997 that no meeting of the Board would be legal or valid unless it was approved by two-third of the members failing which even after the financial results being ready on time it could not been signed and submitted/ furnished. It was further submitted that in view of Section 27 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’) no proceedings could have been initiated for imposing penalty under Section 15A of the SEBI Act unless and until the Officers in default were identified and prosecuted under Section 27 of the Act. It was also submitted that the extension application was rejected without giving proper reasons for doing so and hence is against principles of natural justice and Section 15 J was not taken into consideration before imposing penalty.

Counsel for the respondents Abhiraj Arora and Rashi Dalmia opposed the submissions by petitioners stating that the penalty has been imposed as per Regulation 52 of the LODR Regulations and there being no provision for relaxation, relaxation has not been granted and penalty imposed keeping in mind that such callousness has been shown by NHAI on previous 7 instances and thereby 7 Lakh has been imposed.

Regulation 52(1) “Financial Results.

52(1) The listed entity shall prepare and submit un-audited or audited financial results on a half yearly basis in the format as specified by the Board within forty five days from the end of the half year to the recognised stock exchange(s).”

 Regulation 102 “Power to relax strict enforcement of the regulations. 102.The Board may in the interest of investors and securities market and for the development of the securities market, relax the strict enforcement of any requirement of these regulations, if the Board is satisfied that: (a) any provision of Act(s), Rule(s), regulation(s) under which the listed entity is established or is governed by, is required to be given precedence to; or (b) the requirement may cause undue hardship to investors; or (c) the disclosure requirement is not relevant for a particular industry or class of listed entities; or (d) the requirement is technical in nature; or (e) the non-compliance is caused due to factors affecting a class of entities but being beyond the control of the entities.”

 The Tribunal stated that in the instant case penalty became leviable under Section 15A (b) of the SEBI Act as the unaudited half-yearly financial results were not filed within the stipulated period. The Tribunal observed that prosecution under Section 27 of the SEBI Act can be initiated against the Company and its Directors/Officers and persons responsible for the default but penalty proceedings can be initiated under Section 15A for non-filing of the financial results without taking recourse to Sec. 27 of the Act. However, there is an exception to the rule and exemption can be granted by extending the time to comply with the provisions Regulation 102 of the LODR Regulations. It was further observed that the Appellate Authority consists of senior government functionaries who are entrusted with multifarious functions in the Union Government and hence strict compliance must be subject to consideration for the extension of time under Regulation 102 of the LODR Regulations.

The Tribunal held that imposing 7 lakh as penalty without assigning reasons as well as the reason cited by the authorities that the amount so fined is due to his default 7 times is wholly arbitrary as not filing the financial results for the financial years 2015-2016 to 2018-2019 cannot be taken into consideration as a ground for imposition as the violation was only for non-filing of the unaudited half-yearly financial results for the year ending 30-09-2018 and 31-03-2019. The delay in the filing of the returns for the earlier financial years stood exempted and condoned by the respondent themselves which cannot be taken as a mitigating circumstance for the imposition of penalty.

The Tribunal also relied on judgment titled Adjudicating Officer, SEBI v. Bhavesh Pabari, (2019) 5 SCC 90 which held that the conditions stipulated in clause (a), (b), and (c) of Section 15-J SEBI Act, 1992 are not exhaustive and, in a given case, the AO can take note of other factors which are not specified in clause (a), (b), and (c) of Section 15-J of the Act. The Adjudicating Officer also could have taken into consideration the mitigating circumstances in addition to the factors mentioned under Section 15J while considering the imposition of penalty.

The Tribunal held that the Adjudicating Officer failed to take into consideration the mitigating circumstances as a factor under Section 15-J while considering the imposition of penalty.

In view of the above, the Court allowed the appeal and found the imposition of Rs 7 lakhs as unsustainable.[National Highway Authority of India v. Securities Exchange Board of India, 2020 SCC OnLine SAT 158, decided on 27-08-2020]


Arunima Bose, Editorial Assistant has put this story together