NCLAT
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal, New Delhi: The Bench of Rakesh Kumar, J., Judicial Member, and Dr. Ashok Kumar Mishra, Technical Member, while dismissing a company appeal, imposed a cost of Rs 1 lakh on the appellant for not disclosing his status, to avoid court fees and appearing before the Bench through a third party, who pretended to be an advocate.

Factual Background

The Appellant had filed Information Application under Section 19 (1) (a) of the Competition Act, 2002 before the Competition Commission of India (CCI) against 37 different government agencies. The Appellant alleged in the Information Application that Respondent, National Accreditation Board for Testing and Calibration Laboratories (NABL) had formed various exclusive supply agreements in violation of Section 3(4)(b) of the Competition Act, 2002 with the remaining 36 respondents where no other accreditation service other than that of NABL was allowed.

On 24-02-2022, the CCI passed an order under Section 26(2) of the Competition Act, 2002, and was of the view that there was no contravention of the provisions of Section 3 and 4 of the Competition Act. Aggrieved with the order passed, the Appellant filed the Company Appeal under Section 53B against the order given by the CCI. The Company Appeal was taken up for hearing on 01-06-2022.

Observation, Analysis, and Decision

While hearing the Appeal, the Bench suspected the status of the Appellant and thereof directed his counsel to submit a detailed affidavit verifying the status of his client. After the Affidavit was submitted, the Bench observed that the appellant evaded the applicable court by not mentioning before either the CCI or the Bench that he was a proprietor of an accreditation agency.

Further, the Bench observed that not only the Appellant as well as his acting Counsel, Sumit Jain, misled the court as he was neither a lawyer nor a Chartered Accountant, Company Secretary, or Cost Accountant.

At this juncture, the Bench referred to the provisions under Section 35 and Section 53(s) of the Competition Act and was of the view that a party cannot be represented by any third person who is not included in either of the aforesaid statutory provisions. Therefore, the Bench held that Mr. Sumit Jain had not only unauthorisedly represented the Appellant but impersonated himself to be counsel for the Appellant.

Hence, the Bench opined that neither the Appellant was competent, nor the Company Appeal was competent to be taken note of.

Thereby, the Bench dismissed the Company Appeal on the grounds of non-maintainability and said, “To preserve sanctity of the court proceeding and confidence of the public in the system, simply dismissal of this Appeal may not serve the purpose. Further to prevent recurrence of such activity, while dismissing the appeal it is appropriate to impose cost on the appellant.” Hence, imposed a cost of Rs.1 lakh on the appellant.

Further, the Bench directed CCI to remain vigilant while entertaining Information applications.

[Dushyant v. CCI, 2022 SCC OnLine NCLAT 337, decided on 29-07-2022]


Advocates who appeared in this case :

Sumit Jain, Advocate, for the Appellant;

Shama Nargis, Dy. Director, Law, CCI, and Krishan Kumar, Nital Pal, Swikritmala Dubey, Arun Kumar, and Prema Priyadarshini, Advocates, for the Respondent.

Case BriefsSupreme Court

Supreme Court: The 3-Judge Bench comprising of Dr. Dhananjaya Y Chandrachud*, Surya Kant and Vikram Nath, JJ., affirmed the impugned order of the Telecom Disputes Settlement and Appellate Tribunal whereby the Tribunal had dismissed appellant’s claim for refund of Rs 1454.94 crores Entry Fee paid by it for 2G licences. The Bench stated,

“…as a beneficiary and confederate of fraud, the appellant could not be lent the assistance of this Court for obtaining the refund of the Entry Fee.”

The instant appeals were filed under Section 18 of the Telecom Regulatory Authority of India Act 1997 against the judgments of the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). The appellant claimed a refund of Rs 1454.94 crores Entry Fee paid by it for 2G licences for twenty-one service areas.

Noticeably, the Supreme Court by its judgment in Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1 (CPIL), had quashed 2G licences granted by the Union of India, including to the appellant. The Court had declared that the policy of the Union government for allocation of 2G spectrum on a ―First Come First Serve‖ basis was illegal.

Decision of TDSAT

As a consequence, the appellant approached the TDSAT to claim refund of its Entry Fee on the principles of civil, contractual and constitutional law which was dismissed by the TDSAT holding that the quashing of the appellant’s licences by the Supreme Court in its judgment in CPIL could not be equated with the Unified Access Service Licences (UASL) agreements becoming void within the meaning of Section 65 of the Indian Contract Act 1872.

The appellant then instituted another petition before the TDSAT7 raising the issue of a refund of the Entry Fee, on the ground that it had been exonerated by the Special Judge, CBI for charges under Section 120-B and 420 of the Indian Penal Code 1860 in a case relating to the grant of UASLs. However, it met with the same fate as the TDSAT dismissed the second petition noting that the appellant had made a second attempt for claiming the same relief which had been sought earlier in the First Telecom Petition.

Contention of the Appellant

It was against the impugned judgment of the TDSAT that the appellant had approached the Supreme Court contending that the fraud in the First Come First Serve policy for 2G spectrum allotment existed at the doorstep of the Union government alone and that the appellant was free from taint or wrong doing.

The CPIL Judgment

In CPIL, the Supreme Court had held that that the First Come First Serve policy was writ large with arbitrariness, and was intended to favour certain specific entities at a grave detriment to the public exchequer as the then Minister of Communications and Information Technology wanted to favour some companies and that as a matter of fact the entire process was stage-managed to favour those who had access to the nitty-gritties of the policy in advance. The Bench had observed,

“Undoubtedly, the authors of the ―First Come First Serve policy were the official actors comprised within the Union government. But equally, the decision did not exculpate the private business entities who obtained UASLs and became the beneficiaries of their decision.

Noticing that the appellant was amongst the four licensees who were directed to pay a cost of Rs 50 lakhs each because they too had been benefited by the wholly arbitrary and unconstitutional exercise undertaken by Department of Telecommunication (DoT) for grant of UASL and allocation of spectrum of 2G band, the Bench opined that the appellant was also complicit in the illegal exercise of obtaining favours by the indulgence of those in power. Thus, the the appellant was held to be in pari delicto along with the Union government.

Whether the Entry Fee was Refundable?

Clause 619 of the UASL Guidelines issued by the DoT required each applicant seeking a UASL for a given service area to deposit a non-refundable entry fee. Accordingly, the appellant paid paid the amount of Rs 1454.94 crores as entry fee and it was only upon the payment of Entry Fee the appellant became eligible to be issued UASLs in the twenty-one service areas. Additionally, Clause 18.121 of the UASL agreement acknowledged the payment of a onetime non-refundable entry fee prior to the signing of the agreement.

Thus, the Bench noted that the Entry Fee was a onetime non-refundable fee payable by an applicant for participating in the process of obtaining the UASL and was distinguishable from the licence fee under Clause 10.122, which was relatable to the actual operation of the licence.

Doctrine of frustration and restitution

The appellant had relied on the provisions of Sections 56 and 65 of the Contract Act to claim benefits of restitution and frustration contending that when a licence is granted under the proviso to Section (4)(1) of the Telegraph Act, the licence is in the nature of a contract between the government and licensee, thus bringing it within the ambit of the Indian Contract Act.

The Bench referred to Graham Virgo’s, “The Principles of Law of Restitution”, to observed that all claims for restitution are subject to a defence of illegality. The genesis of which is in the legal maxim ex turpi causa non oritur actio (no action can arise from a bad cause). Further, that a court will not assist those who aim to perpetuate illegality.

Thus, relying on the principle that when the party claiming restitution is equally or more responsible for the illegality of a contract, they are considered in pari delicto, the Bench held that unless the party claiming restitution participated in the illegal act involuntarily or the rule of law offers them protection against the defendant, they would be held to be in pari delicto and therefore, their claim for restitution will fail. The Bench expressed,

If the party claiming restitution was equally or more responsible for the illegality (in comparison to the defendant), there shall be no cause for restitution.”

Verdict

Consequently, the Bench concluded that the appellant was in pari delicto with DoT and the then officials of the Union government. Hence, as a beneficiary and confederate of fraud, the appellant could not be lent the assistance of this Court for obtaining the refund of the Entry Fee. Accordingly, the appeal was dismissed.

[Loop Telecom & Trading Ltd. v. Union of India, 2022 SCC OnLine SC 260, decided on 03-03-2022]


*Judgment by: Justice Dhananjaya Y Chandrachud


Appearance by:

For the Appellant: A M Singhvi and Huzefa A Ahmadi, Senior Advocates

For the Union of India: Vikramjit Banerjee, Additional Solicitor General


Kamini Sharma, Editorial Assistant has put this report together 

Case BriefsSupreme Court

Supreme Court: The Division Bench of Hemant Gupta* and V. Ramasubramanian, JJ., held that a person who misleads the Authority in obtaining allotment of a plot is not entitled to any relief.

While adjudicating a case where the plaintiff had filed a false affidavit to obtain a plot, the Bench rejected the benefit of equity to the plaintiff holding that,

“…affidavits filed were not mere sheet of paper but a solemn statement made before a person authorized to administer oath or to accept affirmation. The plaintiff had breached such solemn statement made on oath.”

Factual Matrix

The plaintiff-respondent was allotted a residential plot in Sector- 30, Noida as a member of the Defence Services Cooperative Housing Society; however, prior to the allotment of the said plot, another plot in Sector- 15A, Noida was already allotted to wife of the plaintiff. Consequently, the plaintiff was served with a notice that the Sector 30 plot had been obtained by him by submitting a false affidavit as Sector 15A plot was already allotted to his wife.

The grievance of the plaintiff was that since the Sector 15A plot had been sold after obtaining permission from the appellant, therefore, the Sector 30 plot was the only plot in his possession. With the said claim, the plaintiff filed a suit for declaration, restraining the defendant from re-allocating the Sector 30 plot and from dispossessing the plaintiff from the same. After considering the reply, and the factum that the plaintiff intentionally concealed information of allotment and filed a false affidavit for the Sector 30 plot, the authority concerned cancelled the allotment of Sector 30 plot.

Concurrent Findings of the Courts Below

The Trial Court held that the lease executed in favour of the plaintiff could not be determined merely by passing the subject order in terms of Section 111 (g) of the Transfer of Property Act, 1887 as no notice for determination of lease under the said section had been issued. Therefore, all rights in the lease would survive. The findings of the Trial Court were concurrently upheld by the first Appellate Court and the High Court. The High Court further held that plaintiff and his wife had no ulterior motive to perpetrate fraud on the appellants as there was no willful or dishonest intention on the part of the plaintiff and his wife.

Submissions of the Plaintiff

The plaintiff submitted that the plot at Sector 15A was applied for because there was an uncertainty on account of litigation between the society of which he was a member with the appellant authority. It was pleaded that since the plaintiff was interested in Sector 30 plot as member of the Society, therefore the wife of the plaintiff had transferred the Sector 15A plot after obtaining permission from the appellant.

Findings and Conclusion

Contrary to the concurrent findings of the Courts below, the Bench observed the following faults on the part of the plaintiff:

  • Though the wife of the plaintiff was allotted Sector 15A plot on 10-03-1981, she had sworn an affidavit on 04-03-1983 that neither she nor her spouse owned any other plot in Noida.
  • The relevant extract from such terms and conditions of the allotment clearly show that a person himself owning, or in case of his spouse or dependent children owning a plot within the Municipal Corporation of Delhi or New Delhi or Noida complex, will not be eligible for allotment of a plot in Noida.
  • The affidavit of the wife of the plaintiff was false as the plot measuring 450 sq. yards stood allotted to the plaintiff on 06-10-1981. Therefore, on the date the wife of the plaintiff had sworn the affidavit, the Sector 30 plot was already allotted to the plaintiff.
  • The argument that plot might have been allotted but the possession was not with the wife of the plaintiff was incorrect as the affidavit was to the effect that she had not been allotted any plot either in her name or in the name of her husband.
  • The plaintiff had sworn an affidavit, enclosed on letter dated 01-12-1988 that he, his spouse and dependent children do not own in full or in part on leasehold or freehold basis any residential plot.

Rejecting the argument of the plaintiff that as per the decision in ITC Ltd. v. State of U.P., (2011) 7 SCC 493, and Section 14 of U.P. Industrial Development Act, 1976, the Chief Executive Officer alone could cancel the lease, the Bench held that the determination of lease by the Chief Executive Officer would arise if in case there was any violation of the terms of lease. The Bench stated,

“If the condition precedent for grant of lease itself was fraudulent, the cancellation of lease was not required to be preceeded by permission of the Chief Executive Officer.”

Further, the Bench noted that the Chief Executive Officer had granted permission on 13-09-1998, though the cancellation order was passed on 18-10-1996. Therefore, the Bench held that it was a case of irregularity at best which stood removed with the permission of the Chief Executive Officer. Emphasising on the terms and conditions of allotment conveyed to the plaintiff on 01-12-1988 that if allotment is obtained by any misrepresentation or misstatement or fraud, the lease may be cancelled and the possession of the plot and the building thereon may be taken by the Authority, the Bench held that cancellation of allotment of plot obtained after filing false affidavit was a legitimate ground of cancellation of lease.

In the light of above, the Bench concluded that since the second plot allotted to the plaintiff had been allotted against the express terms of allotment, therefore, there was neither equity nor any law in favor of the plaintiff. Consequently, the appeal was allowed and the judgment and decree of the courts below were set aside.

[New Okhla Industrial Development Authority v. Ravindra Kumar Singhvi, 2022 SCC OnLine SC 186, decided on 15-02-2022]


*Judgment by: Justice Hemant Gupta


Appearance by:

For the Plaintiff: Senior Advocate P.S. Patwalia

For the Appellant:   Advocate Binay Kumar Das


Kamini Sharma, Editorial Assistant has put this report together 


Case BriefsSupreme Court

Supreme Court: The 3-Judge Bench comprising of N.V. Ramana, CJ., A.S. Bopanna* and Hima Kohli, JJ.,  held that non-members of cooperative societies have no right to seek remedy under Section 61 of the Andhra Pradesh Cooperative Societies Act, 1964 (APCS Act).

The land in question had been allotted to the N.G.O. Cooperative Building Society Ltd. by the State for the purpose of formation of Layout and to allot sites to its members. Accordingly, the land a layout was formed and 625 members were allotted plots. The disputed plot measuring 3.2 cents was allotted to the respondent 1, one M.V. Ramana.

The grievance of the appellants was that the plot in question should not be allotted to the respondent 1 alleging that the said plot was reserved as parking area in the layout plan. The appellants were, a Welfare Association which was a part of the same layout and a couple i.e. plaintiff 4 and 5 who own shop premises in the layout which was situated opposite the plot in issue. Noticeably, the plaintiffs 4 and 5 were not members but were persons interested in purchasing the same plot that was allotted to respondent 1, ostensibly to retain the same as parking area in front of their shops on plot Nos.27, 35 and 36. The appellant along with the others had raised the dispute before the Divisional Cooperative Officer invoking Section 61 of the APCS Act.

The Divisional Cooperative Officer, on perusal of the material and evidence, noted the said plot to be a vacant commercial plot as denoted in the plan. However, on providing his own analysis, he had proceeded to term the plot in issue as a ‘parking area’ and had accordingly passed the award in favour of the plaintiffs. However, in appeal, the High Court held it against the appellants and set aside the award of the Divisional Cooperative Officer.

Factual Analysis

Though subsequently, certain parties had been deleted and the appellant who was a former President of the Society was alone prosecuting the appeals, the Bench opined that “what will have to be noted is the frame of the dispute, the parties to the dispute at the point in time when it was raised and the context in which it was done.”

The respondent 1, a member of the society who was allotted a plot in another layout formed by the N.G.O. Society, sought for an exchange of the plot. Accordingly, the earlier allotted plot was surrendered to the Society. In lieu thereof, the Society allotted the plot measuring 3.25 8 cents to respondent 1 and a sale deed was also executed and registered. The plot allotted to the defendant No.2 is located in front of the shops belonging to the plaintiffs No.4 and 5, private parties.

The Plaintiffs No.4 and 5 had earlier requested the NGO Society to allot the plot in their favour but were aggrieved when it was allotted to the respondent 1. Rejecting the explanation of the plaintiffs that they had sought to purchase the plot and retain it as a parking area, the Bench stated,

“Such an explanation cannot be accepted on face value. If in fact a plot was earmarked in the layout plan as a parking area, it is the bounden duty of the authorities concerned to maintain the same as such. It is difficult to fathom that a private individual who owns shop premises in the layout would invest money and purchase the vacant plot to retain it as a parking area for the benefit of the general public.”

Can Non-members invoke Provisions of Andhra Pradesh Cooperative Societies Act, 1964?

The APCS Act has made a provision for members of a Cooperative Society to approach the cooperative Officer designated, when there is a dispute amongst the members of a society or the member/members against the Society etc.

Observing that the plaintiffs apart from being non-members, who could not have invoked the provisions of the APCS Act, were also rival claimants and competitors for allotment of the same plot, the Bench held that the members i.e. former office bearers had made a common case with the non-members and in furtherance of the same, the plaintiffs had sought for a declaratory relief to declare the registered sale deed as null and void which is impermissible under the Act. Hence, keeping in perspective the subject matter, the relief sought and the parties involved, the Bench opined that the High Court was justified in rejecting the relief claimed by the appellants.

Whether the Plot was reserved for Parking Area?

Holding that grant of relief would have arisen only if there was definite material to indicate that the plot in question was reserved as a parking area in the layout plan, the Bench observed that there was no definite material to delineate from the layout plan that it was a parking area rather it had been shown as commercial plot/vacant plot. The Bench observed,

Keeping in view the location of the property owned by the plaintiffs No.4 and 5, the original authority had deemed it fit to keep the disputed plot vacant for being maintained as a parking area which is only an assumption based on the own analogy of the Divisional Cooperative Officer and amounts to modifying the approved layout plan.

The consideration in that regard made by the original authority, based on the said assumption was:

“b) For visitors coming to the shopping complex by bicycles, scooters, or cars there must be some space for parking the vehicles, particularly because it is obviously a commercial area. Vacant site viewed in the proper context and from a correct perspective means necessarily a parking place because parking place is a ‘must’ in a commercial area.”

In order to render a quietus to the issue, the Bench sought a report from the District Judge, Kadapa on the whole conspectus of the matter, which nowhere indicated that the plot in question was reserved or earmarked as a parking area. On the other hand, it had been referred to as the area earmarked for commercial purpose.

Conclusion

In the light of the above and considering the fact that the allotment being of the year 2000, construction had also been raised, more than two decades had elapsed by now, hence any intervention or action at this juncture would not be justified, the Bench dismissed the instant appeals. [Velagacharla Jayaram Reddy v. M. Venkata Ramana, 2022 SCC OnLine SC 34, decided on 11-01-2022]


*Judgment by: Justice A.S. Bopanna


Appearance by:

For the Appellants: B. Narayana Reddy, Senior Advocate

For the Respondent 1: Annam D.N. Rao, Advocate

For Respondent 5: K. Ravindra Kumar, Senior Advocate


Kamini Sharma, Editorial Assistant has put this report together


Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of Dr Dhananjaya Y Chandrachud* and A S Bopanna, JJ., held that the powers of NCLT under S. 7(5) of IBC are limited to verifying existence of default and then accordingly, either admit or reject an application. Holding that the Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute, the Bench remarked,

“While the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.”

The question before the Bench for adjudication was whether, in terms of the provisions of the IBC, the Adjudicating Authority (NCLT) can without applying its mind to the merits of the petition under Section 7, simply dismiss the petition on the basis that the corporate debtor has initiated the process of settlement with the financial creditors?

The grievance of the appellants was that on a petition instituted under Section 7 of the IBC for initiating the Corporate Insolvency Resolution Process (CIRP) in respect of the respondent, the NCLT declined to admit the petition and instead directed the respondent to settle the claims within three months which was further affirmed by the NCLAT.

Noticeably, a Master Agreement to sell was entered into between the respondent, IDBI Trusteeship Ltd. and Karvy Realty (India) Ltd. in order to raise an amount of Rs 50 crores for the development of 100 acres of agricultural land. Since the requisite funds could not be generated through the Master Agreement, a Syndicate Loan Agreement was entered into between the respondent, IDBI Trusteeship Ltd. and the Facility Agent for availing a term loan of Rs 18 crores from prospective lenders. It was in that background that the petitioners-appellants had instituted a petition under Section 7 of the IBC before the NCLT due to the respondent’s default in making the re-payment of an amount of Rs 33,84,32,493.

Decisions of NCLT

The Adjudicating Authority listed the petition for admission on diverse dates and had adjourned it, inter alia, to allow the parties to explore the possibility of a settlement yet no settlement was arrived at by all the original petitioners who had instituted the proceedings. Though, the Adjudicating Authority noticed that joint consent terms had been filed before it but it was common ground that those consent terms did not cover all the original petitioners who were before the Adjudicating Authority. Eventually, the Adjudicating Authority did not entertain the petition due to following factors:

  • Respondent’s efforts to settle the dispute were bona fide, as evinced by the fact that they had already settled with 140 investors, including 13 petitioners before it;
  • The settlement process was underway with 40 other petitioners;
  • The procedure under the IBC was summary in nature, and could not be used to individually manage the case of each of the 83 petitioners before it; and
  • Initiation of CIRP in respect of the respondent would put in jeopardy the interests of home buyers and creditors, who have invested in the respondent’s project, which was in advanced stages of completion.

IBC Mandate

On a bare reading of the provision, Section 7 (5) Clauses (a) and (b) use the expression “it may, by order” while referring to the power of the Adjudicating Authority. Section 7(5)(a) states that the Adjudicating Authority may, by order, admit the application while Section 7(5)(b) states that it may, by order, reject such an application.

Thus, two courses of action are available to the Adjudicating Authority in a petition under Section 7. The Adjudicating Authority must either admit the application under Clause (a) of sub-Section (5) or it must reject the application under Clause (b) of sub-Section (5). The statute does not provide for the Adjudicating Authority to undertake any other action, but for the two choices available.

Factual Analysis

Observing that no settlement had been arrived at by the respondent with all the appellants and impleadment applications had also been filed on behalf of an additional set of individuals claiming non-payment of their dues by the respondent, the Bench held that the order of the Adjudicating Authority, and the directions which eventually came to be issued, suffered from an abdication of jurisdiction.

The Appellate Authority was cognizant of the fact that even the time schedule for settlement which had been indicated by the Adjudicating Authority had elapsed, but then noted the impact of the outbreak of COVID-19 pandemic on the real estate market, including on the respondent. Therefore, the Adjudicating Authority failed to exercise the jurisdiction which was entrusted to it. Furthering, holding that the Adjudicating Authority’s observation that the appeal was not maintainable was erroneous, the Bench remarked,

“While acknowledging that the consent terms were “filed by some of the stake holders though may not be all encompassing”, the Appellate Authority nonetheless proceeded to dismiss the appeal as not maintainable.”

Findings of the Court

IBC is a complete code in itself and the Adjudicating Authority and the Appellate Authority are creatures of the statute and their jurisdiction is statutorily conferred, the Bench stated that the statute which confers jurisdiction also structures, channelises and circumscribes the ambit of such jurisdiction. Thus, while the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.

Referring to the IBC mandate, the Bench opined that the Adjudicating Authority had clearly acted outside the terms of its jurisdiction as it is empowered only to verify whether a default has occurred or if a default has not occurred and accordingly, it must then either admit or reject an application.

There are the only two courses of action which are open to the Adjudicating Authority in accordance with Section 7(5), therefore, the Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute.”

Further, opining that undoubtedly, settlements have to be encouraged because the ultimate purpose of the IBC is to facilitate the continuance and rehabilitation of a corporate debtor, as distinct from allowing it to go into liquidation, the Bench stated, what the Adjudicating Authority and Appellate Authority, however, had proceeded to do was to abdicate their jurisdiction to decide a petition under Section 7 by directing the respondent to settle the remaining claims within three months and leaving it open to the original petitioners, who were aggrieved by the settlement process, to move fresh proceedings in accordance with law.

Conclusion

Consequently, the appeal was allowed and the impugned judgments of NCLT and NCLT were set aside. The petition was restored to the NCLT for disposal afresh. [E S Krishnamurthy v. Bharath Hi Tech Builders Pvt. Ltd, 2021 SCC OnLine SC 1242, decided on 14-12-2021]


Kamini Sharma, Editorial Assistant has put this report together


Appearance by:

For the Appellants: Srijan Sinha, Advovate

For the Respondent: Aakanksha Nehra, Advocate


*Judgment by: Justice Dhananjaya Y Chandrachud

Legislation UpdatesNotifications

The Securities and Exchange Board of India has notified revised guidelines for Liquidity Enhancement Scheme in the Equity Cash and Equity Derivatives Segments vide circular dated September 1, 2021

 

Initially, on April 23, 2014, SEBI had issued circular permitting stock exchanges to introduce liquidity enhancement schemes in the equity cash and equity derivatives segments to enhance liquidity in illiquid securities. Observing the stock exchanges, SEBI has decided to modify clauses 3.1 and 4.1 of said Circular in the following manner:

  • The Scheme shall have prior approval of the Governing Board of the Stock Exchange which will be valid for one year. The Governing Board of the Stock Exchange may give yearly approval till the time the scheme is in operation. Further, its implementation and outcome shall be monitored by the Governing Board at quarterly intervals.
  • The Stock Exchange shall introduce liquidity enhancement schemes on any security. Once the scheme is discontinued, the scheme can be re-introduced on the same security.

 

These changes shall also be applicable to existing schemes. Other conditions prescribed in aforesaid SEBI Circular dated April 23, 2014 shall remain unchanged.

 


*Tanvi Singh, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Orissa High Court: A Division Bench of Mohammed Rafiq and B. R. Sarangi, JJ., disposed off the writ petition holding that equity has to be maintained between industrialization and eco-system itself.

The facts of the case are such that the petitioner-club New Light Yubak Sangha, registered under the Cooperative Society Act was established for the purpose of development of the poor, unemployed and downtrodden persons as well as the welfare and social public works of village Sodamal and its nearby area and also put grievance before the authority for their fundamental rights of enjoyment of pollution-free water and air for full enjoyment of their life as well as other inhabitants of the locality. In 2011 and 2015, Tahasildar, Kolabira issued a public notice that the land in question would be handed over to IDCO, Bhubaneswar for the establishment of industry on a permanent lease basis as it is government land which was opposed by the local people especially scheduled caste and scheduled which was thereby cancelled. But, again in the year 2019, a notification has been issued stating that the land is jungle kisam, would be handed over to IDCO on a lease basis so that IDCO would hand over the same to opposite party 8 for setting up of the industry by allotting the area measuring Ac. 8.00 decimals for the project. The District Level Single Window Clearance Committee without giving the opportunity of hearing to the local villagers approved the application of opposite party 8 for allotment of forest land in which newly planted valuable trees are growing. Aggrieved by the same, instant writ petition has been filed seeking direction to the opposite parties to cause an inquiry on the basis of the grievance made by the villagers of Sodamal and further seeks to cancel the notification.

Counsel for the petitioners submitted that the area having been located in the district of Jharsuguda wherein full-grown forest has been undergone with the help of local people, it helps the people to get free air and water. In the event the industry of opposite party 8 is established, it will destroy the eco-system and people will be deprived of getting free air and water, which will affect their right to live with dignity enshrined under Article 21 of the Constitution of India.

The Court observed that “steps taken by opposite party 8 at the cost of local people is serious one, thereby as has been stated earlier if the lease was allotted in the year 2011 and 2015 and the said proposal was cancelled, subsequently there was no valid justifiable reason to set up the industry by opposite party no.8 in the said land by destroying the eco-system without hearing the grievance of the local people. No doubt, industrialization is required for enhancement of revenue, but that does not mean at the cost of the lives of human being by destroying eco-system. Thereby, equity has to be maintained between industrialization and eco-system itself. Unless there is equilibrium between the two systems, ultimate result will be devastated.”

The Court directed  opposite party 2 “to pass a reasoned and speaking order by affording opportunity of hearing the petitioner vis-à-vis opposite party 8 and other affected persons, if any, as expeditiously as possible preferably within a period of three months from the date of production of this order.”

In view of the above, writ petition was disposed off.[New Light Yubak Sangha v. State of Odisha, 2020 SCC OnLine Ori 931, decided on 18-12-2020]


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Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for Electricity (APTEL): A Coram of Manjula Chellur, J. (Chairperson) and S.D. Dubey (Technical Member), allowed an appeal which was filed under Section 111 of the Electricity Act, 2003 against order passed by the Uttar Pradesh Electricity Regulatory Commission (State Commission) whereby the State Commission had rejected the petition of the Appellant seeking loss of fixed charges on account of the lower plant availability of 54.78% only, during the year 2017-18, which was directly due to the Appellant being not able to declare capacity to the full extent wholly and exclusively due to the persistent non-payment of the bills in accordance with the terms of Power Purchase Agreement (PPA) by the Respondent No. 2, Uttar Pradesh Power Corporation Limited (UPPCL) for the Electricity generated and supplied by the Appellant.

Facts:

The Appellant is a generating company within the meaning of Section 2(28) of the Electricity Act, 2003 having established a 3 x 660 MW power plant in villages, existing under the provisions of the Companies Act, 2013 in the State of Uttar Pradesh. The Respondent 1 – State Commission is the Electricity Regulatory Commission for the State of Uttar Pradesh exercising powers and discharging its functions under the provisions of the Electricity Act, 2003, it determined the tariff for the supply of electricity and also exercises the powers to adjudicate and decide on any disputes that arise between the Appellant and UPPCL. The Respondent 2 UPPCL is the Apex Body in the State of Uttar Pradesh which is overseeing the distribution and supply of electricity for and on behalf of the Distribution Companies (Respondents 3-6). They have authorized UPPCL to execute/sign the Power Purchase Agreements and also to carry out all necessary actions on their behalf in relation to the power purchase and supply. For the establishment of the generating station of the appellant, a Memorandum of Understanding (MoU) dated 22-04-2010 was entered into between the Government of Uttar Pradesh (GoUP) and a consortium of companies led by Bajaj Hindusthan Sugar Limited (BHSL) under a Special Purpose Vehicle (SPV), the Appellant which had already been incorporated by Respondent 2. The Appellant and UPPCL had entered into a PPA. The State Commission had allowed provisional tariff of Rs 1.88 towards fixed cost and Rs 2.95 as variable charge computed on capital expenditure of Rs 12,868 crores incurred. The said provisional tariff of fixed charges was further revised to Rs 2.24 with effect from 07-03-2018. The final tariff of the Appellant was pending determination from the date of commercial operation. The Appellant had been supplying the entire capacity of the generating station to UPPCL in terms of the PPA however UPPCL had been making substantial delays in making payment of the Appellant’s invoices as per the provisions of the PPA and not been providing and maintaining the payment security mechanism as per PPA. The Appellant had filed a petition before the State Commission seeking directions for payments of the outstanding dues. The State Commission had dismissed the petition based on the undertaking of UPPCL to clear all the dues forthwith and that the escrow mechanism would be created at the earliest. during the year for the purchase of coal and the Appellant was left with only a sum of Rs 2,833 crore out of which the Appellant had to meet its debt service obligations, working capital cost and O&M Charges including salary payment as essential and inevitable cash outgo prior to incurring any amount on procurement of coal. The Appellant kept on financing the coal purchase during the period from working capital facilities to the extent best possible and finally consumed the entire working capital facilities limits as available from time to time. Due to non-payment by UPPCL and the Appellant became a defaulter of its lenders with respect to working capital facilities also in addition to the default of payment of interest and installments of its term loans. This forced the Appellant in a financially stressed situation and the lenders started adjusting the entire money they received towards their dues, owing to which there was no or very little money available with the Appellant.

Arguments:

The Counsel for the appellant, submitted that due to default on the part of UPPCL the appellant has suffered financial misery and was required to pay the coal companies 100% of the cost of coal and also pay 100% of the railway freight in advance, for which the Appellant is required to be paid in time to ensure adequate working capital. The UPPCL have not disputed the fact that it has continuously defaulted in payment of the monthly bills of the Appellant for continuously 10 months in a row. The only defense of UPPCL was that the Appellant was compensated by Late Payment Surcharge (LPSC).

Issues:

  1. Whether the Appellant has changed its prayers during the course of the proceedings in the matter and if so, should the change of prayer be allowed?
  2. Whether Second Respondent has paid the outstanding amounts to the Appellant in accordance with the terms of the PPA and the Regulations specifically in light of the contention of UPPCL that the average payment made during the period was never more than 90 days;
  3. If not, whether the Appellant has actually suffered losses solely due to the non-payment of its outstanding dues in time;
  4. Whether the Regulations can be relaxed to allow the Appellant to recover its full fixed cost for the impugned period and as a consequence, can the PAF of Appellant be reduced to 54.78% from 85%;
  5. Whether late payment surcharge as envisaged in the Regulations and PPA are adequate to compensate the loss;
  6. Whether in facts and circumstances of the case, the Appellant is entitled to carrying cost?

Findings:

The Tribunal while setting aside the order of the State Commission allowed the appeal explaining all the issues at length. The Court relied on the principle founded in 1848 in Robinson v. Harman which supported innocent parties in the event of breach of contract. The Court further answered the issues at length as follows:

Issue No. 1: that the Appellant has not changed its prayer during the course of the proceedings either through its short Rejoinder Note or in Final Written submissions, as alleged by the Second Respondent.

Issue No. 2: that the second Respondent (UPPCL) has not paid the outstanding amounts to the Appellant in accordance with the terms of the PPA and the Regulations. We dismiss the concept of average payments introduced by R2 to justify its default of non-payment. We further observe that the outstanding of the Appellant remained substantial during most of the period in financial year 2017-18. Further, Respondent UPPCL has failed to establish Escrow/ Payment Security Mechanism as yet despite repeated categorical directions by the State Commission in its various orders.

Issue No. 3: Having established a clear correlation between delayed payments and coal shortage, we hold that the Appellant has actually suffered losses solely due to the non-payment of its outstanding dues in time by R-2. As a result, the applicant was not able to procure sufficient coal to declare full Capacity in spite of its generating units being technically available.

Issue No. 4: Having regard to various rulings of his Tribunal and the Hon’ble Apex Court, we are of the view that the instant case is a fit case to relax the Norms to allow the Appellant to recover its full fixed cost for the impugned period at actual PAF of 54.78% instead of normative 85% in the interest of justice and equity.

Issue No. 5: that in view of the facts& circumstances of the matter, late payment surcharge as envisaged in the Regulations and PPA is not meant for or otherwise, adequate to compensate the consequential loss suffered by the Appellant in full. Hence, it is entitled to further relief over and above LPSC.

Issue No. 6: that as per the settled principles of law, the Appellant is entitled to restitution and thus, to carrying cost from the date of capacity lost to date of actual payment at the prevailing rate of interest in accordance with UPERC Regulations.

[Lalitpur Power Generation Co. Ltd. v. Uttar Pradesh Electricity Regulatory Commission, 2020 SCC OnLine APTEL 82, decided on 28-09-2020]


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