Case BriefsHigh Courts

Delhi High Court: Sanjeev Narula, J., refused to interfere in the interim arbitral award whereby the sole arbitrator had allowed certain claims of the respondent in arbitration proceedings against the appellant-IRCTC.

IRCTC sought the setting aside of the interim arbitral award, whereby Sole Arbitrator had allowed certain claims of the Respondent in arbitration proceedings.

Summary of Facts

Respondent, a private railway catering service provider empanelled with IRCTC and entitled to be considered for allotment of temporary licenses on category ‘A’ trains. on 07th September, 2016, IRCTC published a limited tender inviting bids from empanelled parties for providing on-board catering services in respect of Train No. 12951- 52/12953-54 (Rajdhani/August Kranti Express) for six months.

On being the highest bidder, respondent was awarded a temporary license.

What was the dispute?

Welcome drink served to the passengers was provided by IRCTC. Later, IRCTC decided that:

  • service provider to provide welcome drink to passengers at no extra-charge receivable by it, and if unwilling to do so, it could opt to exit the temporary license;
  • where service provider was providing meals to passengers on account of short supply by IRCTC, it would be reimbursed production charges @ Rs. 84/- (inclusive of taxes) per passenger for lunch/dinner for 2nd and 3rd A.C. passengers.
  • where additional meals were being served due to late running of train for more than 2 hours, service provider would be reimbursed @ Rs. 26.40 + service tax, per passenger.

For the above-stated policy decision, DC raised the following concerns:

  • DC reasoned that welcome drink was not included in the tender document;
  • expressed reservation with regard to reimbursement of charges on account of late running of trains for more than 2 hours.
  • emphasised that having made a substantial investment in setting up a base kitchen and infrastructure, it was unwilling to exit from the contract.

Later, on 13-2-2017, respondent intimated that it would provide the welcome drink in case the same would not be provided by IRCTC, but it would be charging for services as well as production charges for the same. In the event of train being late, charge of Rs 30 would be applied along with service tax for additional meal.

From 5-03-2017, the above-said service commenced. Further, in the month of April, IRCTC sought an unconditional acceptance of the policy decision from respondent and unless unconditional acceptance would be tendered, it would be presumed that respondent are not interested in extension of the license.

Further, it was added that, for a certain period when respondent did not provide the welcome drink and IRCTC had to provide the same, the charges in that respect would be adjusted against the bills raised by respondent.

Respondent raised an issue with regard to the above-stated, asserting that it was not liable for the charges. It further raised the issue of non-payment of service tax on service charge for food and drink for the period from 19th December 2016 to 04th March 2017, as well as other charges allegedly payable to it.

Respondent unconditionally accepted the policy decision and a 6-month extension of license was granted.

Respondent invoked arbitration with regard to deductions made on account of welcome drink as well as other issues. Hence, a petition was filed under Section 11 of the Arbitration and Conciliation Act.

What all were the claims?

  • Claim towards non-payment for a welcome drink: DC contended that the welcome drink did not form part of the tender document. It should not be liable to serve the same or reimburse the expenses incurred by IRCTC for serving the same from 19th December, 2016 to 04th March, 2017.
  • Reimbursement of GST on production charges/supply of meals with effect from 1st July 2017.
  • Claim towards wastage of food due to cancellation/non-turning- up of passengers.

Two claims of respondent were allowed: (i) payment with respect to welcome drink; and (ii) reimbursement of GST on production charges.

IRCTC filed an objection against the impugned award before District Judge at Patiala House Court Complex, Delhi, however, the claim calculated by IRCTC exceeded its pecuniary jurisdiction as per the provision of Section 12(2) of the Commercial Courts Acts, 2015.

Analysis, Law and Decision

Whether welcome drink formed a part of initial period of contract?

As per the tender document which refers to CC No. 32 of 14 states the Clause 2.1 requires the service provider to deliver free of cost catering to passengers.

Arbitrator meticulously examined the tender conditions, circulars issued by Railway Board, IRCTC’s policy, contractual provisions and testimonies of the witnesses and went on to answer the question in negative.

CC No. 32 of 14 dated 6-08-2014 laid down rates of composite contract for the service provider and noting the admitted position that catering services under the tender were invited through the mode of partial unbundling of services, the learned Arbitrator noted that respondent was required to provide quotations for the sector-wise services mentioned in Annexures, which had no direct or specific reference to the condition of providing a welcome drink. In the said circumstances, it was concluded that the bid was not invited for the service of provision of welcome drink, and thus no charge was quoted towards the same.

Arbitrator gave a finding that there was no contractual stipulation in the tender document that specifically put the obligation on respondent to provide welcome drink and the said finding was held to be sound, credible and comprehensive by the High Court.

 Binding Effect of Respondent’s ‘unconditional acceptance’

the policy decision dated 07-02-2017 became a part of the contract between the parties has rightly been disallowed by the learned Arbitrator, by holding the same to be a fresh policy decision brought in by IRCTC post entering into the licensing agreement with DC. IRCTC could not give any justification for bearing the burden for the initial period between 19-12-2016 to 4-03-2017, despite it’s alleged understanding to the contrary. Its continued supply of welcome drink without expressly affirming that the contractual obligation for the job lay on DC, reaffirms the uncertainty of contractual obligations.

On the basis of the conduct and the testimony of witnesses, the Arbitrator rightly held that the actions of IRCTC exhibit ambiguity about DC’s contractually stipulated obligations, which were then redressed by way of the ex post facto policy decision.

GST

The GST laws has replaced the erstwhile indirect taxation regime.

Respondent had explained that since the trains were moving through several states and each state had a different rate of tax under State VAT laws, it was not feasible to account for the same, therefore production charges were paid inclusive of taxes.

Besides, no Input Tax Credit was available to IRCTC for VAT.

However, the position underwent a change with the introduction of GST laws.

GST is available as Input Tax Credit for paying the outgoing tax liability. With restructuring of indirect tax system, railways introduced CC No. 44/17 which specifically provides for GST on catering services in the subject trains. The bifurcation of production charges was done under the afore-noted circular and it was advised that GST is to be reimbursed to the service provider on submission of proof of deposit.

the said circular specifies the revised catering apportionment charges for the trains in question where catering charges are built-in to the ticket fare. The table thereunder shows ‘catering charges disbursed to the service provider’ both with and without 18% GST in separate columns.

 Hence, IRCTC’s contention that claim of service tax on production charges was identical and since the same had been given up, the claim of GST would not survive.

Further, it was added that,

Applicability of service tax on production charges is a different plea intertwined with determination of factual position of whether there is an incidence of service in the activity of production or if the nature of service could be held as a composite supply.

GST is clearly attracted on supply of food. 

The claim of service tax over and above the amounts agreed to, was premised on a different footing and cannot be read at par with the claim of GST.

Arbitrator has given a finding that GST has been deposited by DC and proof thereof had been furnished to IRCTC. Court found no fault in interpretation of terms of contract.

Hence no ground for interference was made out. [Indian Railway Catering & Tourism Corporation Ltd. v. Deepak & Co., 2021 SCC OnLine Del 3609, decided on 5-07-2021]


Advocates before the Court:

For the Petitioner: Mr Nikhil Majithia and Mr Piyush Gautam, Advocates

For the Respondent: Mr Naresh Thanai and Ms Khushboo Singh, Advocates


About Justice Sanjeev Narula

Born on 24th August, 1970. Studied at St. Mary’s Presentation Convent School, Jammu. Graduated in B.Sc.(Computer Science) from Kirorimal College, University of Delhi. He acquired Degree in Law in 1994 from Law Faculty, University of Jammu and got enrolled with Bar Council of Delhi in 1995.

Practiced primarily before the Delhi High Court and also before the Supreme Court of India, District Courts of Delhi and various judicial forums in Delhi. Advised and represented clients in litigation relating to Civil, Commercial, Corporate, Criminal, Customs, Indirect taxes, Service, Banking & Finance, Land &Property, Arbitration, Indirect Taxes, GST, Intellectual Property, Constitutional, Cyber, E-Commerce, Consumer and Family Laws.

He was appointed as Central Government Standing Counsel; Senior Standing Counsel (Customs and Indirect Taxes) and Standing Counsel for Central Information Commission (CIC) for the Delhi High Court, positions he retained until he was appointed as a Judge.

Appointed as Permanent Judge of Delhi High Court on 22nd October 2018.


Source: Delhi High Court Website

Op EdsOP. ED.

Introduction

The Supreme Court of India, vide its recent and very detailed judgment dated 13-4-2021 in Ghanashyam Mishra and Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.[1] (GMSPL order) has settled the long pending question of whether statutory creditors, including the Central Government, State Government and any local authority, are bound by a resolution plan, once it is approved by an adjudicating authority under sub­-section (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016[2] (IBC/the Code) [as amended vide IBC (Amendment) Act, 2019[3] dated 5-8-2019 (the 2019 Amendment)].

The relevant extracts from the GMSPL order[4], containing the ratio of the judgment, have been reproduced as it is below, for ease of understanding:

95. … (i) Once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of the resolution plan shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;

(ii) 2019 Amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the Code has come into effect;

(iii) consequently, all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior   to   the   date   on   which the adjudicating authority grants its approval under Section 31 could be continued.

(emphasis supplied)

Along with the ratio abovementioned, it has also been clarified by the Supreme Court that with respect to any statutory dues owed/claims raised in relation to the period prior to the 2019 Amendment, the resolution plan shall still be binding on the statutory creditors concerned, and the statutory dues owed to them, which were not included in the resolution plan, and such claims shall stand extinguished.

This article attempts to analyse the GMSPL order[5], taking into consideration the various judicial precedents that led up to the said order, as well as whether the analysis of the  Supreme Court has addressed the pending issues in totality. The aftermath of the order has also been explored in brief, to understand whether the Supreme Court has been interpreted in the spirit of the Code, or if there exist gaps in the law that are yet to be considered by the courts.

History of the decision in GMSPL order

It is important to note, for the purpose of understanding the relevance of GMSPL order, that Section 14(1)(a) of the Code[6] prohibits the institution of suits or the continuation of pending suits or proceedings against the corporate debtor (including the execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority), upon admission of the petitions filed under Section 7[7] (by financial creditors), Section 9[8] (by operational creditors) or Section 10[9] (by the corporate debtor itself), and passing of orders for initiation of corporate insolvency resolution process (CIRP). Thus, in terms of Section 14 of the Code, a “moratorium” is imposed against initiation or continuation of legal proceedings against the corporate debtor.

Over the past few years, there have been many landmark judgments passed by the Courts in India clarifying the type of “proceedings” that fall under the bar imposed by Section 14, including criminal, arbitral or writ proceedings, as well as proceedings initiated against a corporate guarantor of the corporate debtor, etc. whether or not the same come within the ambit.

Some of these proceedings considered as hit by the moratorium have been initiated based on disputes inter se two parties, arising out of contract/arrangement between them. Whereas, other proceedings concern debts owed to the Government exchequer viz. debts or dues owed under a statute/imposed by the statutory authorities under a statute, being tax arrears, or customs duties arrears, etc. The latter are colloquially known as “crown debts” or statutory debts.

In earlier judgments of the Supreme Court, including in Essar Steel (India) Ltd. v. Satish Kumar Gupta[10], K. Shashidhar v. Indian Overseas Bank[11], Maharashtra Seamless Limited v. Padmanabhan Venkatesh[12], Karad Urban Coop. Bank Ltd. v. Swapnil Bhingardevay[13] and Kalpraj Dharamshi  v. Kotak Investment Advisors Ltd.[14], on account of the imposition of the moratorium under Section 14, legal proceedings have been held to not continue and be adjudicated upon/determined against the corporate debtor. The Courts had held that all such claims, being undecided and disputed claims, are to be submitted to the resolution professional, in order to be addressed in the resolution plan, and that the resolution plan shall be the final authority on such claims if the plan is approved subsequently by the adjudicating authority.

The details with regard to all material litigation and an ongoing investigation or proceedings initiated by Government and statutory authorities are required to be contained in the Information Memorandum as disseminated to the prospective resolution applicants, for their reference. In Essar Steels[15], it has been categorically laid down that “a successful resolution applicant cannot suddenly be faced with ‘undecided’ claims after the resolution plan submitted by him has been accepted”. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order and that it may then take over and run the business of the corporate debtor.

Therefore, for all intents and purposes, in terms of the various judgments mentioned hereinabove, the undecided claims have been dealt with by resolution professionals and included/precluded from the resolution plan accordingly. However, no differentiation has been made out by the courts, between claims raised by financial and operational creditors, arising from contract, and claims raised by statutory creditors, as imposed and recoverable under a statute/application of law created explicitly. A general understanding has been taken by the courts, in terms of IBC alone, leaving much room for interpretation.

Treatment of undecided claims/disputed claims by governmental authorities

Section 31 of the Code deals with the implications of the approval of a resolution plan, as per which, if the adjudicating authority is satisfied that the resolution plan as approved by the Committee of creditors, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.

The entire ambiguity in treatment of undecided or disputed claims by Government/statutory creditors began with the amendment made to the Code, vide S.O. 2953(E) dated 16-8-2019[16], being the 2019 Amendment, as per which the following words were inserted in Section 31 of the Code:

“including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed”.

Due to this specific and explicit inclusion, at such later date in the Code, there has been quite some confusion with regard to how the claims/statutory debts pertaining to the period prior to the 2019 Amendment are to be treated. Therefore, several statutory authorities, due to the lack of differentiation between the types of claims, have decided unilaterally as follows:

(a) their claims should not be rejected by the resolution professional; or

(b) if their claims are not provided for in the resolution plan, as ultimately approved by the adjudicating authority; or if no claims have been submitted to the resolution professional at all by such statutory authorities as creditors, they can initiate afresh/continue proceedings after approval of the resolution plan, since the moratorium under Section 14 of the Code is lifted upon approval of the plan.

Judicial precedents prior to the GMSPL order

i. Director General of Income Tax v. Synergies Dooray Automotive Ltd.[17] The National Company Law Appellate Tribunal(NCLAT) in the order dated 20-3-2019[18] has held that statutory dues such as “income tax”, “value added tax” and other statutory dues arising out of the existing laws, arise when a company is operational, and hence are “operational debt” under the Code. As per the facts of the case, the grievance of the appellant statutory creditor was that the income tax liability/demand in respect of the corporate debtor therein amounting to INR 338 crores approximately had been settled for 1% of the “crystallised demand” to a maximum of INR 2.58 crores approximately in the resolution plan as approved by the CoC. This was challenged before NCLAT as being against the mandate of the Income Tax Act, 1961[19] (the IT Act) and that the dues under the IT Act cannot render the IT authorities as an “operational creditor” of the corporate debtor. It is relevant to note that this order was passed prior to the 2019 Amendment, and categorically held that the resolution plan, as approved, shall be final and not subject to modification, even if the statutory claims are not included in the plan. However, while the resolution plan explains that the statutory dues are admitted by the resolution applicant “shall be reduced to the extent already paid by the corporate debtor”, the order does not deal with any refunds of the amounts already paid and not admitted under the plan, if any.

ii. Ultra Tech Nathdwara Cement Ltd. v. Union of India[20] – The Rajasthan High Court vide its order dated 7-4-2020, has taken a similar view. Thereunder, the claims of the GST Department of the State of Rajasthan were verified by the resolution professional and included in the plan. However, further statutory dues were raised by the tax authorities, after the finalisation and approval of the resolution plan. The writ petition filed, seeking relief, was dismissed by the Division Bench on account of the interpretation of amended Section 31 of the Code. It was held that any debts that do not already form part of the approved resolution plan will stand invalidated and that the statutory creditors have no right to audience. The Court held that “evaluation of all the dues and liabilities, as they exist on the date of finalisation of the resolution plan, has been left in the exclusive domain of the resolution professional, with the approval of the Committee of creditors”, and cannot be interfered with by courts/tribunals.

iii. Ultra Tech Nathdwara Cement Ltd. State of U.P.[21] – As per the facts of this case, the Commissioner (Appeals) concerned under the U.P. Value Added Tax Act, 2008[22] (the U.P. VAT Act) had passed an appellate order much after the approval of the resolution plan by the adjudicating authority under Section 31 of the Code. In the order dated 6-7-2020 passed by the Allahabad High Court, where the petitioner sought for a declaration that all other proceedings pending before different authorities be declared to have abated in terms of the  resolution plan approved, as well as sought the refund of the tax already deposited by it with the statutory tax authorities, the Court held that:

(a) the petitioner has a remedy of filing a second appeal against the appellate order before the Commissioner Tax Tribunal under Section 57 of the U.P. VAT Act[23]; and

(b) in connection with the refund of amounts deposited, the petitioner may apply to the authorities concerned.

iv. Electrosteels Limited v. State of Jharkhand[24] (Division Bench) – A separate view was taken vide judgment dated 1-5-2020 of the Jharkhand High Court, as per which, if

(a) the authority was not aware of the initiation of the corporate insolvency resolution process (CIRP) against the corporate debtor i.e. if the Government was not a part of the resolution process, they can continue proceedings against the corporate debtor;

(b) if such tax amounts have already been collected by a company and not remitted to the tax authorities, the statutory dues may still be claimed from the corporate debtor, and the amounts can be still be recovered from the corporate debtor after the approval of the resolution plan, since the same amounts to criminal misappropriation of the government money entrusted to the corporate debtor;

(c) dues on account of non-remission of VAT, as collected from customers cannot be termed as “operational debt” under the Code; and

(d) the 2019 Amendment is applicable prospectively and hence, cannot be applicable to CIRPs initiated prior to the amendment. It is relevant to note that though no payments have been made/pre-deposited by the corporate debtor, under the Jharkhand Value Added Tax Act, 2005[25] (the JVAT Act) in the facts of the case, on account of a garnishee order issued by the VAT authorities to the banker of the corporate debtor, under Section 87 of the Finance Act, 1994[26] (the Finance Act), substantial amounts have been transferred to the VAT authorities, after the resolution plan has been admitted.

A glance at the conflicting judgments passed by various High Courts, as abovementioned, would reveal multiple issues addressed vide those judgments, with regard to the treatment of undecided/disputed claims of statutory creditors after approval of the resolution plan. The GMSPL order[27], which is a combined order also dealing with appeals filed against the orders in Electrosteels case[28] and Ultra Tech Nathdwara case[29] (the Uttar Pradesh order), should ideally have set at rest all such issues. However, the following points have not been considered or addressed by the Supreme Court:

A. Refund of the pre-deposit amounts/pre-maturely appropriated amounts by the authorities

Various statutes provide for a mandatory pre-deposit of amounts (whether pertaining to tax matters or otherwise) when preferring appellate proceedings. While the IT Act does not invite any pre-deposit for invoking the appellate jurisdiction, pre-deposit for appeals can be trailed from the Central Excise Act, 1944[30], the Central Goods and Services Tax Act, 2017[31], the Real Estate (Regulation and Development) Act, 2016[32], the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002[33], the Recovery of Debts and Bankruptcy Act, 1993[34], the Employees’ Provident Funds and [Miscellaneous Provisions] Act, 1952[35], the Negotiable Instruments Act, 1881[36] as well as the Consumer Protection Act, 2019[37]. The difference lies in the nature of the proceedings viz. as far as the tax, customs duties, etc. are concerned, the payments are statutory debts owed directly to the exchequer and any pre-deposits made are also directly deposited with the same.

While the statutes themselves prescribe a procedure for refund of pre-deposited amounts upon the appeal proceedings being decided in favour of the appellant, there remains a doubt as to whether a refund of amounts would be allowed in the event of extinguishment of proceedings after approval of the resolution plan. At the outset, a direction for refund of the amount, particularly from fora such as consumer fora or the Debts Recovery Tribunal (DRT), etc., where the award has already been made in the favour of the creditor party and now pending in appellate stage, makes the entire judicial proceeding futile.

There are various instances, such as in Ultra Tech Nathdwara case[38] (Uttar Pradesh order) and Electrosteels case[39]  hereinabove, as well as by the appellants in GMSPL order[40], where they have deposited partial amounts of the duties or penalties passed against them, in order to prefer an appeal before the appellate authorities/amounts under such duties and penalties levied have been partially appropriated by the authorities unilaterally.

It is necessary to note that, vide paras 132 and 149 of the GMSPL Order[41], when faced with the question of refund of amounts already paid, the Supreme Court has held that:

“We hold and declare, that the respondents are not entitled to recover any claims or claim any debts owed to them from the corporate debtor accruing prior to the transfer date. Needless to state, that the consequences thereof shall follow.”

 There is no specific direction as such to the statutory authorities to refund the amounts already deposited.

It may be noted that, in GMSPL order[42], the Supreme Court while relying on the transcripts of the Rajya Sabha Debates held on 29-7-2019, had noted the legislative intent of the 2019 Amendment as “The Government will not raise or make any ‘further claim’ after resolution plan is approved.” This stress on the term “further claims” is rendering the status of refunds very uncertain since it does not clarify if the pre-deposited amounts/already appropriated amounts are to be forfeited or refunded back to the corporate debtor since no “further claims” made by such creditors shall involve the sums already paid.

The Bombay High Court in the recent judgment dated 22-12-2020, in GGS Infrastructure (P) Ltd. v. Commissioner of CGST & Central Excise[43], has categorically held that the statutory authority shall be duty-bound to refund any balance amounts to the corporate debtor, in terms of the approved resolution plan, after deduction of the amounts determined under the said plan, and that the same is in accordance with law and the Code. The Court observed that there is no question of retaining the said amount and that “it cannot be argued that the State having recovered certain money even though such recovery may be illegal or questionable cannot be compelled to refund the same. Once it is determined that the State is holding money beyond what is legally permissible, it has a binding duty to refund the same”. A reference was made to the Supreme Court judgment in New India Industries Ltd. v. Union of India[44], whereunder it was held that an application under Article 226 of the Constitution of India[45] would lie for enforcing the obligation of the State to refund and/or return the money collected towards illegal tax or dues, and thatit would be abhorrent to the principles of justice if the State is permitted to retain money unjustly gained or recovered. The same would have to be refunded”.

As per the facts of the case, since the authorities had already recovered substantial amounts against the service tax debt that had not yet crystallised, from the bankers of the corporate debtor, by initiating recovery proceedings under Section 87(b)(i) of the Finance Act, the Court ordered for refund of the recovered amounts.

A similar stance has been taken by the NCLT, Mumbai Bench in Sundaresh Bhatt v. Associate Commissioner of Income Tax[46], whereunder the Bench held that a conjoint reading of Section 14(1)(a) and Section 238 of the Code[47], clearly shows that the Code overrides Section 44 of the Gujarat Value Added Tax Act, 2003 (GVAT) and that any proceedings initiated under the same would be hit by the moratorium under Section 14. That being so, the VAT authorities thereunder had issued letters to the bankers of the corporate debtor and recovered substantial amounts, without any adjudication of the claims under the GVAT. The NCLT had ordered refund of the amounts so appropriated by the VAT authorities back to the corporate debtor.

 B. Non-inclusion of statutory claims in the resolution plan due to lapse in intimation under Section 13 of the Code

The Supreme Court, based on the facts of Electrosteels case[48]  whereunder the VAT authorities have claimed being uninformed about the CIRP proceedings, in para 146 of the GMSPL order[49], has merely noted that another branch of the State Government has filed its claim before the resolution professional. On account of the same, the Court has deemed it impossible that the VAT Department authorities would not have knowledge of the proceedings. Therefore, in the event that there is a lapse in intimation of any governmental authorities, under Section 13 of the Code[50], read with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016[51], whether they can continue proceedings/initiate proceedings afresh against the corporate debtor is not clear from the order.

It is relevant to note that the Madras High Court vide an order dated 26-4-2021 in Ruchi Soya Industries Ltd. v. Union of India[52], had partly accepted the contention of the assessee-corporate debtor relating to the extinguishment of the rights of the Customs Department to claim customs duty in light of the GMSPL order[53]. The High Court, while observing that “Corporate restructuring of financial debt under IBC, 2016 does not mean a waiver of extinguishing of sovereign debts”, ordered the corporate debtor to file an application before the NCLT concerned to get the issue clarified that crown debts like the differential “customs duty” payable to the Department under the bill of entry which is the subject-matter of that writ petition were treated as “operational debt” before the NCLT by the corporate debtor, and whether or not the same have been factored in while approving the resolution plan. In the absence of being included in the plan, the customs authorities have been permitted to proceed with recovering the pending duties from the corporate debtor. This exposes that even though the issue has been settled by the Supreme Court, the ambiguity continues with regard to inclusion and non-inclusion of statutory dues or claims in the Plan.

C. Differentiation between the types of statutory claims 

Though a clear differentiation has been made in Electrosteels case[54]  between statutory debts that are directly owed under the statute, such as income tax dues, and VAT dues which are merely to be collected from customers by the corporate debtor and remitted to the authorities concerned, this issue has not been addressed by the Supreme Court. In a limited reference, Synergies Dooray case[55]  equates statutory debt towards income tax dues and VAT under the same bracket of “operational debt”. The GMSPL order[56] is also silent on the point of criminal misappropriation committed by the corporate debtor, on account of collecting funds and failing to remit the same. Therefore, this opens the Pandora’s Box, as to whether companies that deduct tax, provident fund (PF), VAT amounts from their customers/employers and fail to remit the same can now go scot-free, due to the approval of the resolution plan. In terms of the Electrosteels case[57], an additional remedy has been offered to the statutory authorities to initiate criminal proceedings against such defaulting corporate debtors and their erstwhile management. This can stand even in the event that their claims have become extinguished after approval of the resolution plan.

In fact, vide a recent order dated 12-5-2021, as passed by the NCLAT, Chennai Bench, in Regional Provident Commissioner, Employees Provident Fund Organisation, Telangana v. Vandana Garg, Resolution Professional of M/s GVR Infra Projects Limited[58], the GMSPL order[59] has been invoked to hold that the provident fund dues as included in the approved resolution plan shall only be considered for payment, and no person is entitled to initiate or continue any proceedings regarding a claim not forming a part thereof. It is relevant to note that this indirectly deals with the question of the nature of statutory debts such as VAT, which are not direct debts of the corporate debtor itself, but debts owed by a third party that are collected and to be remitted to the statutory authority. Further, this order further establishes that corporate debtors that fail to remit funds shall not be held accountable, placing all the payers of tax, PF, etc. in a difficult position with the Government.

Conclusion and way forward

Though the GMSPL order dated 13-4-2021[60] strives to remove legal hurdles with respect to dues owed to or claims made by statutory creditors, there are some glaring issues with respect to the actions to be taken by statutory creditors, as discussed in this article. Litigations continue to be instituted by wary corporate debtors and/or the successful resolution applicants, to reach closure of all statutory claims and revive their companies.

Post the passing of the said order, various High Courts and even NCLAT have interpreted the order in their own ways. The Calcutta High Court in the order dated 7-5-2021 in Sirpur Paper Mills Ltd. v. I.K. Merchants (P) Ltd.[61], has relied on the GMSPL order[62] to explain that extinguishment of appellate proceedings does not mean the award already granted shall become confirmed. In the context of deciding whether an arbitral award is confirmed in favour of the award-holder during the pendency of an appeal against Section 34 of the Arbitration and Conciliation Act, 1996[63] (the Arbitration Act), after the approval of the resolution plan, the High Court stated that same is not possible since the award amounts have not been included in the resolution plan. The High Court, while observing that “In essence, an operational creditor who fails to lodge a claim in the CIRP literally missed boarding the claims-bus for chasing the fruits of award even where a challenge to the award is pending in a civil court”, disposed of the petition under Section 34 of the Arbitration Act as infructuous.

The Madras High Court in Ruchi Soya Industries case[64]  has clearly taken a different view altogether, as mentioned above, whereas the NCLAT in Vandana Garg case[65] has expanded the ambit of what kind of statutory debts shall be waived off after approval of the resolution plan. Thus, the matter is still left in limbo.

At this juncture, litigants may remember that most of the erroneous and adverse judgments passed by the High Courts so far have been set aside through the GMSPL Order[66] and all claims thereunder have been pronounced “extinguished”, with a direction that consequences of such extinguishment shall follow. Stakeholders may rely upon the said order, read with the abovementioned precedents, to demand refunds of pre-deposited amounts/prematurely appropriated amounts with statutory creditors. However, the resolution applicants along with the corporate debtors have to be diligent with the intimation of initiation of CIRP, and approval of resolution plan, to all creditors including the statutory authorities, to avoid any unpleasant issue of notices or claims, even after approval of the resolution plan and handing over of the management to the successor. It is needless to state that the threat of criminal prosecution still rides over the erstwhile management in the event of collection of tax dues/PF/VAT amounts and failure to remit the same to the authorities.


* Joint Partner, Lakshmikumaran & Sridharan Attorneys.

** Associate, Lakshmikumaran & Sridharan  Attorneys.

[1] 2021 SCC OnLine SC 313

[2] http://www.scconline.com/DocumentLink/gvPKCciX.

[3] http://www.scconline.com/DocumentLink/bV8o94ba.

[4] Supra Note 1.

[5] Ibid.

[6] http://www.scconline.com/DocumentLink/e2E5pU46.

[7] http://www.scconline.com/DocumentLink/K60PW5A6.

[8] http://www.scconline.com/DocumentLink/09ftZIDF.

[9] http://www.scconline.com/DocumentLink/Kp5IKPzm.

[10] (2020) 8 SCC 531.

[11] (2019) 12 SCC 150.

[12] (2020) 11 SCC 467.

[13] (2020) 9 SCC 729.

[14] 2021 SCC OnLine SC 204.

[15] Supra Note 8.

[16] http://www.scconline.com/DocumentLink/Suf357ZI.

[17] 2017 SCC OnLine NCLAT 317.

[18] Pr. Director General of Income Tax v. Synergies Dooray Automotive Ltd., 2019 SCC OnLine NCLAT 691.

[19] http://www.scconline.com/DocumentLink/7VAV83wS.

[20]  2020 SCC OnLine Raj 1097.

[21] 2020 SCC OnLine All 1724. .

[22] http://www.scconline.com/DocumentLink/wff5uR85.

[23] Ibid.

[24]  2020 SCC OnLine Jhar 454

[25] http://www.scconline.com/DocumentLink/EauO9DT1.

[26] http://www.scconline.com/DocumentLink/PqGcOrHZ.

[27] Supra Note 1.

[28] Supra Note 24.

[29] Supra Note 21.

[30] http://www.scconline.com/DocumentLink/E4zd0gLl.

[31]http://www.scconline.com/DocumentLink/ZN57RKH6.

[32] http://www.scconline.com/DocumentLink/u5bCT3Hd.

[33] http://www.scconline.com/DocumentLink/1hbkvwWJ.

[34] http://www.scconline.com/DocumentLink/2zlK12A4.

[35] http://www.scconline.com/DocumentLink/0JY49FoX.

[36] http://www.scconline.com/DocumentLink/wgV2j1VM.

[37] http://www.scconline.com/DocumentLink/P62rNTsE.

[38] Supra Note 21.

[39] Supra Note 24.

[40] Supra Note 1.

[41] Ibid.

[42] Ibid.

[43]GGS Infrastructure (P) Ltd. v. Commissioner of CGST & Central Excise, 2020 SCC OnLine Bom 10477.

[44] 1990 Mh LJ 5.

[45] http://www.scconline.com/DocumentLink/22VRSLhE.

[46] 2020 SCC OnLine NCLT 938.

[47] http://www.scconline.com/DocumentLink/dQ5LC1RE.

[48] Supra Note 24.

[49] Supra Note 1.

[50] http://www.scconline.com/DocumentLink/vmKEerI1.

[51] http://www.scconline.com/DocumentLink/1Uw56FFO.

[52] Ruchi Soya Industries Ltd. v. Union of India, 2021 SCC OnLine Mad 2181

[53] Ibid.

[54] Supra Note 24.

[55] Supra Note 17.

[56] Supra Note 1.

[57] Supra Note 24.

[58] 2021 SCC OnLine NCLAT 163.

[59] Supra Note 1.

[60]Ibid.

[61] 2021 SCC OnLine Cal 1601.

[62] Supra Note 1.

[63] http://www.scconline.com/DocumentLink/teuo89l3.

[64] Ruchi Soya Industries Ltd. v. Union of India, 2021 SCC OnLine Mad 2181.

[65]  2021 SCC OnLine NCLAT 163.

[66] Supra Note 1.

Case BriefsHigh Courts

Himachal Pradesh High Court: A Division Bench of Tarlok Singh Chauhan and Jyotsna Rewal Dua, JJ., while allowing the present petition in part, discussed the right of selected candidates against State advertised vacancies relying on similar precedents.

Background

The Himachal Pradesh Staff Selection Commissioner, Hamirpur (hereinafter referred as “the Commission”), in September 2017, issued an advertisement for filling up 154 posts of Radiographers, wherein essential educational qualification prescribed was as per the Recruitment and Promotion Rules, that is, (a)(i) 10+2 pass in science from a recognized Board of School Education/University (ii) Diploma in Radiology from an institution recognized by the Central/HP Government or B.Sc. Degree in Radiology from a recognized University b) must be registered with Himachal Pradesh Para Medical Council, Shimla. In July 2018, the Commission conducted direct evaluation process for these advertised posts of Radiographers and thereafter, on 15-12-2018, the Commission declared the result, wherein two candidates Beli Ram and Yogita Chauhan, respondents 7 and 8 in CWP No. 3371 of 2019 were selected, whereas candidatures of the petitioners were rejected by the Commission, which compelled the petitioners and similarly situated persons to challenge the rejection order before the erstwhile Himachal Pradesh Administrative Tribunal by filing various Original Applications (OAs). These OAs were listed in December 2018 and the Tribunal passed interim direction holding the petitioners eligible for the post in question and directed their results to be prepared by the Commission.

All these petitions were eventually disposed by a common order dated 22-05-2019 by directing the State Government to constitute a committee of experts to examine equivalence of the academic/technical qualifications possessed by the petitioners and recognition thereof and the Commission was directed to proceed with the matter in light of the report of the committee of experts. The State, in turn, by notification dated 16-08-2019, constituted an expert committee as directed. The expert committee conveyed its report dated 25-09-2019 holding the degrees possessed by the petitioners to be valid for the purpose of recruitment/appointment. However, since the State failed to act even on the basis of the expert committee, the petitioners were constrained to approach this Court by filing instant petitions.

Claims raised

The claims raised in the instant petition can be classified into three main categories;

  1. Claim regarding seniority.
  2. Claims considered and placed in the waiting list.
  3. Claims of petitioners who did not fulfil the eligibility criteria or their names had not been registered with Himachal Pradesh Para Medical Council, Shimla.

 Observation

With respect to claims regarding seniority the Court referred the case of, C. Jayachandran v. State of Kerala, (2020) 5 SCC 230, and said, It is more than settled that if a candidate has been wrongly excluded from the process of appointment on account of illegal and arbitrary action on behalf of the State, then he is entitled to notional seniority from the date, the similarly situated persons have been appointed. Accordingly, the claims of the petitioners in first category are allowed and these petitioners are held entitled for grant of seniority from the date when respondents No. 7 and 8 Beli Ram and Yogita Chauhan were appointed i.e. 15-12-2018.”

Allowing the second category of claims as well, Court considered the case of Neelima Shangla v. State of Haryana, (1986) 4 SCC 268, wherein the Supreme Court observed that it is always open to the Government not to fill up all the vacancies for a valid reason, but the selection cannot arbitrarily be restricted to a few candidates, notwithstanding the number of vacancies and the availability of qualified candidates. The ratio laid down in the said judgment was further substantiated as well as elaborated by Shankarsan Dash v. Union of India, (1991) 3 SCC 47, wherein it was held that if a number of vacancies are notified for appointment and adequate number of candidates are found fit, still the successful candidates acquire an indefeasible right to be appointed. According to the Supreme Court, notification merely amounts to an invitation to qualified candidates to apply or recruitment and on their selection they do not acquire any right to the post. Unless the relevant recruitment rules so indicate, the State is under no legal duty to fill up all or any of the vacancies. However, the Court also stated that it does not mean that the State has the license of acting in an arbitrary manner and the decision not to fill up the vacancies has to be taken bona fide for appropriate reasons. It was declared that if the vacancies or any of them are filled up, the State is bound to respect the comparative merit of the candidates, as reflected at the recruitment test, and no discrimination can be permitted. Reliance was also placed on Asha Kaul v. State of Jammu and Kashmir, (1993) SCC 2 573, where the Supreme Court again said that “mere inclusion in the select list does not confer upon the candidates included therein an indefeasible right to appointment. It was further stated, that there is obligation of the Government to act fairly and the whole exercise cannot be reduced to a mere farce”. Court also made a special mention of the recent judgment in Dinesh Kumar Kashyap v. South East Central Railway, (2019) 12 SCC 798.

Finding no merits, the Court rejected the third category of claims.

 Decision

Allowing the present petition in part, Court made a systematic evaluation of the three categories of claims and further issued necessary directions.[Robin Singh v. State of Himachal Pradesh, 2020 SCC OnLine HP 2998, decided on 12-11-2020]


Sakshi Shukla, Editorial Assistant has put this story together

OP. ED.Practical Lawyer Archives

“Confidentiality is a virtue of the loyal, as loyalty is the virtue of faithfulness.”

—Edwin Louis Cole

Introduction

The principle of confidentiality and privacy are two basic requirements of commercial arbitration. It is, thus, quite imperative for the antitrust laws to include scope for confidentiality and privacy within its ambit. In India, the statutory provisions for confidentiality are provided in the Competition Act, 2002 (Section 57) and the Competition Commission of India (General) Regulations, 2009 (Regulation 35). The mandate for privacy has been provided under Regulation 47 of the Competition Commission of India (General) Regulations, 2009.

The Legislative Mandate to Confidentiality

A. The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969

Section 60(1) of the MRTP Act, 1969 corresponds with Section 57 of the Competition Act, 2002. However, the MRTP Act listed down several limitations to this provision under sub-sections (2) and (3) of this section. These limitations formed exceptions where the protection from disclosure was not available:

(i) when disclosure is made in connection with legal proceedings under the MRTP Act;

(ii) when disclosure is made for any criminal proceedings under the MRTP Act; and

(iii) when the disclosure is made for the purposes of any report relating to any proceedings, as stated above.[1]

However, these limitations have not been included in the Competition Act.

B. The Competition Act, 2002

The Competition Bill, 2001— notes on Clause 55 stipulates “This clause deals with restriction on disclosure of information by the Commission.”

C. The Competition (Amendment) Act, 2007

Later an amendment was brought to the Section 57 of the Competition Law in 2007, and the Competition (Amendment) Bill, 2007—notes on Clause 44 states “This clause seeks to amend Section 57 of the Competition Act, 2002 relating to restriction on disclosure of information. It is proposed to bring the Appellate Tribunal within the scope of Section 57 of the Competition Act, 2002 consequent to the proposal to insert a new Chapter VIII-A vide Clause 43 of the Bill. The proposed amendment is consequential in nature.”

Purpose of Confidentiality Clause

A. Protection of Trade Secrets

The purpose of the provision for confidentiality in the Act is to preserve commercial secrecy as such information if it comes to the knowledge of business rivals, may injure the interest of the enterprise concerned[2].

In Sterlite Industries (India) Ltd. v. Designated Authority[3], the Court held that in antitrust cases preservation of confidential information by the designated authority is necessary as the trade competitors would otherwise obtain information which are not made available to them for preserving competition in the market.

The section aims at protecting the information obtained by the Commission during its investigation. Section 41(3) of the Competition Act provides for the application of Sections 240 (Section 217 of the Companies Act, 2013) and 240-A (Section 220 of the Companies Act, 2013) of the Companies Act, 1956 in pursuance of the investigation activities undertaken by the Director General (DG) or any other person investigating under his authority[4].

Thus, the DG or any other person acting under his authority has complete access to the documents of any enterprise under investigation which might contain confidential and sensitive information. So, the company runs the risk of this information being leaked or disclosed.

In Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India[5], on the issue of apprehension as to a breach of confidentiality in relation to the confidential information provided to the Commission, the Delhi High Court held that it was the duty of the DG and the employees of the Commission to protect the confidential information of Ericsson for which adequate measures must be taken.

B. Protection of Identity of the Informant

Another aspect of this principle is to protect the identity of the informant or the applicant[6]. This is done so as to not put the informant in a position of disadvantage. Also, this ensures that the fundamental right of privacy guaranteed under Article 21 is also protected.

However, the DG may disclose the information, documents and evidence furnished by the enterprise if he deems it necessary but only after recording the reasons for the same and taking prior approval of the Commission[7].

C. Reputation Loss

Loss of reputation and consequent exposure to civil suits against them is another aspect of maintain confidentiality. It could also expose the financial position of a company or the existence of a defective product, situations that could compromise the image of a company in front of the public and favour its competitors.

Conditions Waiving Confidentiality Claims

Section 57 of the Competition Act, 2002 carves out an exception wherein the confidential information can be disclosed. Hence, the right can be taken away on two grounds:

(i) waving of the right by the enterprise itself; and

(ii) for the purpose of this Act or any other law for the time being in force.

Disclosure of the Identity of the Informant—The proviso to Regulation 6(a) of the Competition Commission of India (Lesser Penalty) Regulations, 2009 provides for the conditions under which the identity of the applicant may be disclosed, if:

(a) the disclosure is mandated by law; or

(b) the applicant has voluntarily consented to disclose in writing; or

(c) the applicant discloses it publically.

Grounds for Taking Away the Privacy of an Enterprise During a Proceeding—Regulation 47 of the Competition Commission of India (General) Regulations, 2009 requires the proceedings before Commission not to be open to public. However, the Commission may direct otherwise and record the reasons for the same. The factors to be taken into account by the Competition Commission of India (CCI) while deciding on this matter are:

(a) If no significant harm is caused to party owing to the disclosure.

(b) Level of encouragement in publishing the information.

(c) Efficiency and smooth functioning of the proceeding.

(d) Considerations for the Commissions such as its resources.

According to Rule 7(3) of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, if the designated authority comes to the conclusion that the information does not need protection of confidentiality, he can “disregard that information”.

In Sterlite Industries (India) Ltd. v. Designated Authority[8], the Court held that whether an information warrants confidentiality depends on a case-to-case basis which is to be decided by the designated authority. Also, the Appellate Authority, Customs, Excise and Gold (Control) Appellate Tribunal (Cegat), can look into the information even where confidentiality is required.

In Shamsher Kataria v. Honda Siel Cars India Ltd.[9], the CCI agreed with the DG on his statement that “confidential information must be in fact confidential and backed by an obligation/duty of confidence owed between the parties sharing such information.” It held that party must satisfactorily prove that the information provided to the other party qualified to be protected as “trade secret”.

The ICN Guiding Principles for Procedural Fairness in Competition Agency Enforcement stipulates for the inclusion of a system for better identification and shielding the business information that is considered to be confidential and those covered within the ambit of privileged information.

Various determinants such as rights of defence, confidentiality claims, third-party rights, influence on the competition should be considered while disclosing any information mentioned as above.

Liability for Non-Compliance of Confidentiality

In case of negligence leading to a failure to maintain confidentiality and secrecy of the sensitive information provided to the Commission or the DG, a claim for loss or damages could lie against the Commission/DG[10].

According to Regulation 9 of the Competition Commission of India (Procedure for Engagement of Experts and Professionals) Regulations, 2009, any breach of agreement by or on behalf of any expert or professional, executed under sub-regulation (1), requiring the experts and professionals engaged in the proceeding to sign an agreement containing a clause of secrecy, shall be considered a sufficient ground for termination of the engagement made under contract and may further debar such expert or experts and professionals.

Conclusion: Balancing Confidentiality Claims with Due Process

The conflict between confidentiality laws and natural justice was long pending. Thus, the development of leniency regime in India has been welcomed from all quarters of the corporate sphere. Pursuant to Section 46 of the Competition Act, 2002, the Commission is empowered to impose lesser penalty in certain cases where “full and true disclosure” has been made and such disclosure is deemed to be vital. Interestingly, there has been an increase in the number of applications filed for leniency before the CCI in the recent years. The decision regarding what is “full” and “vital” disclosure lies with the Commission. The Commission rewarded its first 100% reduction in penalty in Anticompetitive conduct in the Dry-Cell Batteries Market in India v. Panasonic Corpn.[11]

Further, inspired by the EU, CCI has initiated the process to set up “confidentiality ring” in some cases.[12] This allows a restrictive use of information by the opposite party’s counsel in a manner not prejudicial to the party concerned. Also, efforts have been made by the CCI to facilitate a bilateral exchange of information allowing a speedy investigation process. In light of the above observations, it is thus concluded that the approach of India meets the best practices already implemented in other jurisdictions.


Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in.

Shashank Saurabh is a Student Researcher, 4th year student, BA LL.B. (Hons.) from NUSRL, Ranchi.

[1] S.M. Dugar, Guide to Competition Law 1002 (8th edn., 2019).

[2] ibid

[3]  (2006) 10 SCC 386 : (2003) 158 ELT 673.

[4]. S. 240 of the Companies Act, 1956 enjoins a company to produce to an inspector all books and papers relating to the company or any other body corporate and provide any other assistance required by the inspector for his investigation. Sub-s. (1-B) of S. 240 also empowers the inspector to retain the books and papers for a period of six months.

S. 240-A empowers the inspector to apply for an order of seizure of books and papers relating to a company or managing director or manager of such company which he has reasonable grounds to believe would be destroyed, mutilated, altered, falsified or secreted.
He has the power to retain these books and papers till the conclusion of the investigation.

S. 2(8) of the Companies Act, 2013 provides an expansive definition of the expression “book and paper” which includes “acts or accounts, deeds, vouchers, writing and documents”.

[5] 2016 SCC OnLine Del 1951.

[6]. Regn. 35, Competition Commission of India (General) Regulations, 2009. Also, Regn. 6(a) of the Competition Commission of India (Lesser Penalty) Regulations, 2009.

[7].Proviso to Regn. 6(a) of the Competition Commission of India (Lesser Penalty) Regulations, 2009.

[8]. Supra note 3.

[9]. 2014 SCC OnLine CCI 95 : 2014 Comp LR 1.

[10]. Supra note 5.

[11]. 2018 SCC OnLine CCI 81.

[12]. AZB & Partners, India: Balancing Confidentiality Claims with Due Process Requirements, Mondaq (26-9-2019 <https://www.mondaq.com/india/ Anti-trustCompetition-Law/848748/ Balancing-Confi dentiality-Claims-With-Due-Process-Requirements>.

Case BriefsHigh Courts

‘Vigilantibus, non-dermientibus, jura subveniunt’

(the law helps those who are watchful and not those who are asleep)

Delhi High Court: Vinod Goel, J., dismissed Delhi Waqf Board’s applications for condoning the delay of 21 years and restoring a revision petition.

Hashmat Nabi and Swathi, Advocates for the Waqf Board submitted that on 15-05-2018, the newly constituted management took notice of the disposal of the present petition after instructing its standing counsel to prepare a list of matters which have been disposed of. The petition was originally filed though Raman Kapur, Advocate; and B.D. Sharma, Advocate appeared for the Board from 1989 till 1994. However, after that, no appearance was made o behalf of the Board and therefore, the petition was dismissed for non-prosecution. In such background of the case, the application for condonation of 21 years’ delay along with the application for restoration of revision petition was filed.

At the outset, the High Court observed, “it is a well-settled principle of law that a litigant, whether it is an individual or a government body or any legal entity, it owes a duty to be vigilant of its rights and is also expected to be equally vigilant about the judicial proceedings pending in the court of law against it or initiated at its instance.”Holding that the Board could not be permitted to blame the previous counsel after 21 years for not providing the case record, the Court stated, “it appears that the blame is being attributed to the previous counsel with a view to get the delay condoned. After filing the revision petition, the applicant cannot go off to sleep and wake up from a deep slumber after the passage of a long period of 21 years as if the court is a storage of the petitions filed by such negligent litigants. Simply because there is a change in the management cannot give sufficient cause to the applicant to file such an application for restoration after a long period of 21 years has elapsed.” Relying on N. Balakrishnan v. M. Krishnamurthy, (1998) 7 SCC 123, the court reiterated, “the object of the law of limitation is to compel a person to exercise his right of action within a reasonable time as also to discourage and suppress stale, fake or fraudulent claims.” In such view of the matter, the court did not find any merit in the applications and therefore dismissed them. [Delhi Wakf Board v. Mohd. Bi, 2019 SCC OnLine Del 7178, dated 25-01-2019]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Pratibha M. Singh, J., allowed a petition filed by the Food Corporation of India challenging the award passed by the Arbitrator whereby its claim was dismissed by a cryptic award.

The matter arose out of an agreement between the petitioner and the respondent whereby the respondent had agreed to store, mill and supply certain quantity of paddy to the petitioner. Due to default on the part of the respondent in the performance of terms of agreement, the petitioner incurred a huge loss. Consequently, in pursuance of the arbitration clause as contained in the agreement, the petitioner moved for arbitration. However, even after more than 30 hearings of the matter before the arbitrator, the respondent did not appear even once. Hence, the arbitrator, vide the award impugned, dismissed the claim of the petitioner observing that since the respondent did not appear, nothing remained to be adjudicated. Aggrieved thereby, the instant petition was filed.

The High Court, on perusal of the award impugned, held that it was unsustainable. It was noted that the petitioner had deposited, before the arbitrator, detailed accounts of dealings which formed the basis of its claim. The Court was of the view that the reasoning given by the arbitrator for dismissal was quite cryptic. Detailedaffidavit was filed by the petitioner, however, none of the facts were considered by the arbitrator. The Court observed that without giving any findings on the claim of the petitioner, the arbitration could not have been terminated. Non-appearance of a party-respondent cannot result in dismissal of claims. Such a course of action defies basic logic. A claimant cannot be punished for non-appearance of the respondent. An arbitrator has a duty to decide claims in accordance with law. Therefore, the petition was allowed and the award impugned set aside. [FCI, Ludhiana v. Gupta Rice & General Mills, Ludhiana,2018 SCC OnLine Del 11961, decided on 13-09-2018]

Case BriefsHigh Courts

Allahabad High Court: The petition had been filed before a Single Judge Bench comprising of Anjani Kumar Mishra, J., from the proceeding going on under Section 34 of the Land Revenue Act, for mutation. This order of mutation was filed by Tehsildar in favour of respondent. Petitioner contended that the above order was passed ex-parte in a restoration application which was rejected by Tehsildar.

Petitioner aggrieved by the rejection of the restoration application filed a revision petition before Additional Commissioner which was allowed. Later, the order which rejected the recall application and order of mutation was set aside. The restoration application reveals that petitioner claimed to be the second wife of one Bhunesh after whose death the mutation proceedings were filed. It was found that petitioner failed to show that she was the second wife of Bhunesh thus her restoration application was rejected.

The High Court observed that the order in question seemed perverse where petitioner failed to provide evidence to establish her position as the second wife. Court was of the view that this matter requires consideration and the matter was disposed of. [Mamta v. State of U.P.,2018 SCC OnLine All 1784, dated 05-10-2018]

Case BriefsSupreme Court

Supreme Court: The Bench comprising of Ranjan Gogoi and Rohinton Fali Nariman, JJ., after hearing the learned counsels for the parties stated that at present the situation demands for an order to be passed that would open the process for receipt of claims and objections in respect of the final draft NRC.

The present order stated that the process for receipt of claims and objections in respect of entries in the final draft of NRC to be open and further the stated process to be started by 25-09-2018 and would remain effective for a period of 60 days. List of documents on which the claimant could rely for the process were also mentioned.

Further, Additional Solicitor General appearing for the State of Assam, Mr Prateek Hajela would provide his opinion on the permissibility of introduction of one or more above-mentioned documents. The confidential reports filed by Mr Hajela have been placed before the Court in a sealed cover. For the said report, AG Venugopal stated that a copy be made available to the Union of India. Court in its opinion stated that the report contains some confidential and sensitive data which may affect the entire process, so no information pertaining to the exercise be circulated amongst Executive, Legislature or Judicial authority; therefore it should just remain in the Court’s custody for now.  Mr Hajela’s views are to be filed within a span of 15 days. [Assam Public Works v. Union of India, WP(C) No. 274 of 2009, Order dated 19-09-2018]