Case BriefsHigh Courts

Karnataka High Court: M.I. Arun, J. allowed the writ petition and declared the show cause notice or any subsequent proceeding as null and void.

According to the brief facts of the case, the petitioners were granted the impugned land in 1975 for non-agricultural purposes and had since been in peaceful possession.

The petitioners contended that the respondents had been issuing show-cause notices and had been pursuing proceedings against them since 2016 alleging that the said land was allotted to them, not in accordance with law. The petitioners had been defending themselves since the very inception of the dispute in 2016, and finally filing the present writ petition against the latest notice issued in August 2020. Further, the petitioners also sought the order passed by the respondent Commissioner cancelling their land grant to be quashed as it had been passed while the present appeal was still being adjudicated upon.

The Court held that since the land was granted to the petitioner in the year 1975 and the show cause notice has been issued in 2020, thus a lapse or delay of 45 years is not reasonable or just. The Court further pointed out that Article 112 of the Limitation Act prescribes 30 years limitation period for suits by or on behalf of the central or state government.

Furthermore, fraud may vitiate everything, but the respondents failed in indicating fraudulent acts by the petitioners in the notice. Thus the incessant delay in issuing the notice was held to be bad in law.[G. Chitra Poornima v. State of Karnataka, 2020 SCC OnLine Kar 1393, decided on 10-09-2020]

Case BriefsHigh Courts

Orissa High Court: S. K. Panigrahi J., granted bail and directed the petitioner company to pay the amount in accordance with the manner indicated.

The facts of the case as per the FIR lodged alleging charges under Sections 406/420/120-B of Penal Code, 1860 read with Section 6 of the Odisha Protection of Interests of Depositors (in Financial Establishments) Act, 2011 (O.P.I.D.) are that, one Biswa Bhushan Biswal husband of the petitioner herein, 6-7 years back approached the informant and introduced himself as a land broker doing business in plotting, land development, construction of buildings and flats through his company B. N. Infra Services Pvt. Ltd. where petitioner is the Managing Director. Br. Biswal insisted the informant to invest in the company and promised him assured returns vide agreement dated 19-5-2014, pursuant to which disbursal of Rs 1,89,00,000 was made by the informant. Biswas defaulted with return payments and consented to give one of his plots having Plot No. 3/441 to the informant in case of further default in payment vide a written letter. The said plot was later revealed to be already sold to someone else, subsequent to which another agreement dated 25-01-2017, wherein Biswas committed to pay Rs 1,76,00,000 out of which Rs 1 Lac was paid at the time of signing. The petitioner issued 10 cheques each amounting to Rs 1,50,00,000 which were dishonored by the bank due to insufficient funds. Thereafter FIR was lodged and during the investigation, Mr. Biswal and petitioner were arrested and later filed for bail which was rejected by Trial Court. Aggrieved by the same, an instant bail petition has been filed for seeking regular bail under Section 439 CrPC, 1973.

Counsel for the petitioner D.P. Dhal submitted that the petitioner is a housewife and Biswas is responsible for managing the day to day affairs of the company. It was further submitted that the company is a real estate company and hence comes within the ambit of Real Estate Regulation & Development Act, 2016 and Odisha Real Estate (Regulation and Development) Rule, 2017, hence Section 6 of the O.P.I.D. Act will not be attracted. He also prayed for the relief of bail to be granted.

Counsel for the respondent opposed all the arguments and stated that the instant case makes out for a clear offence of cheating and fraud and provisions of the O.P.I.D Act will squarely apply in the present case.

The Court after hearing both sides observed that characteristics of the agreement entered into between the parties is in the nature of an “agreement to sale” of a flat that was to be constructed by the defaulting petitioners company and hence is a simple flat buyer agreement. It was also observed that the defaulting company is registered under the Companies Act, 1956 and its MOA and AOA clearly states that it is not a “Financial Establishment” instead comes under the purview of the Real Estate (Regulation and Development) Act, 2016.

The Court also observed that it is imperative that the background of the Act needs to be understood before dealing with the legislation.

Whether the instant case falls under O.P.I.D Act or not?

Section 2 (d) of O.P.I.D Act defines “Financial Establishment” as a company registered under the Companies Act carrying on the business of receiving deposits under any scheme or arrangement or in any other manner.

It clearly states that in MOA and AOA it has to be mentioned that the primary business is receiving “deposits” pursuant to any “scheme or arrangement”. On a conjoint reading of Sections 2(d), 3 and 5 of O.P.I.D Act it is clear that the business should be in the nature of accepting or receiving “deposits”.
Section 10 of O.P.I.D Act provides for attachment of the Financial Establishments in case of default payment. Hence the operation of Section 10 of the Act would result in a piquant situation where one lone buyer while claiming refund of his deposit would cause the attachment of the other flats so constructed, irrespective of the fact as to whether such flats have been transferred to other transferees by the builder and corresponding rights thereupon have been created or not.

In case of flat buyer agreement, it provides for the consideration to be paid for the flat/apartment purchased which are sale transactions and are mandatorily registerable under the relevant laws wherein the question of the return of deposit or payment of interest on such deposits does not arise.

The Court relied on various judgments titled Viswapriya [India] Limited v. Government of T.N, 2015 SCC OnLine Mad 10349 and Prasan Kumar Patra v. State of Odisha, 2019 SCC OnLine Ori 93 and held that an inevitable situation will invariably arise when the provisions of the O.P.I.D Act are invoked in real estate transactions especially where a builder has constructed multiple flats/apartments. This kind of situation could not have been the intention of the legislature considering the practices, problems and complexities involved in the real estate sector. Hence the instant case is a classic example of a transaction gone awry which has been strenuously given the color of a criminal offence.

The Court also relied on a judgment titled Tetra Pak India (P) Ltd. v. Tristar Beverages (P) Ltd., 2015 SCC OnLine Bom 4707 and held that though a case of breach of trust may be both a civil wrong and a criminal offence there would be certain situations where it would predominantly be a civil wrong and may or may not amount to a criminal offence and giving colour of criminal case to dispute which is otherwise purely civil and commercial in nature would tantamount to an abuse of the process of court.

The Court further directed the State Government to give wide publicity to the provisions of the said RERA Act, 2016 in order to injunct any such unnecessary litigations arising out of builder-buyer relations.

In view of the facts and overall circumstances, the bail was granted.[Mahasweta Biswal v. State of Odisha, 2020 SCC OnLine Ori 633, decided on 25-08-2020]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of SA Kaul, Aniruddha Bose and Krishna Murari, JJ ‘reluctantly’ dismissed an SLP arising out of a Allahabad High Court order which held that the students with certificates from ‘bogus and fictitious’ organisations cannot be allowed to continue pursuing their courses at Dr APJ Abdul Kalam Technical University (APJAKTU).

The Court said,

“We do have sympathy but this is not a case where we can really translate our sympathy to a relief in the present case, more so, in view of the fact that since this exam system is found to be fraudulent, the petitioners before us will never have a recognized plus two status and to give such students the opportunity to get a degree from the University will create a great anomaly.”

The Court also took noticed that the Jharkhand State open exam process itself appears to be a complete fraud. It also faulted the University for not carrying out an appropriate verification as also the State Government “which should have kept a watch for such fraudulent exam systems which operate out of one room”.

The Court, hence, asked the University and the State Government to take immediate corrective action and also bring the defaulters to book.

On being apprised that the continuation on the website of the recognition of the Board is not only creating a problem in Jharkhand but also in other Universities and hence immediate steps should be taken in this behalf, the Court asked all concerned to do the needful within three days.

[Sahil Sohail v. Dr. APJ Abdul Kalam Technical University, 2020 SCC OnLine SC 719, order dated 07.09.2020]

Case BriefsSupreme Court

Supreme Court: The bench of RF Nariman and Navin Sinha, JJ has held that “serious allegations of fraud” as a ground for exemption from arbitral proceedings arise only if either of the two tests laid down are satisfied, and not otherwise.

  • The first test is satisfied only when it can be said that the arbitration clause or agreement itself cannot be said to exist in a clear case in which the court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all.
  • The second test can be said to have been met in cases in which allegations are made against the State or its instrumentalities of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case by a writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain.

BACKGROUND OF THE CASE

The Court was hearing an appeal from the interlocutory judgment and order passed in the appeal under section 9 of the Arbitration and Conciliation Act, 1996 by the Bombay High Court in a dispute between HSBC and Avitel India.

HSBC made an investment in the equity capital of Avitel India for a consideration of USD 60 million in order to acquire 7.8% of its paid-up capital. This was done after Avitel India told HSBC that it was at a very advanced stage of finalising a contract with the British Broadcasting Corporation [BBC] to convert the BBC’s film library from 2D to 3D. This contract was expected to generate a revenue of USD 300 million in the first phase, and ultimately over USD 1 billion and hence, an investment of USD 60 million was required. HSBC, however, discovered that he purported BBC contract was non-existent and was set up by the Appellants to induce HSBC into investing the aforesaid money. Though Avitel Dubai received the entire investment proceeds of USD 60 million, it appeared that around USD 51 million were not used to purchase any equipment to service the BBC contract, but appeared to have been siphoned off to companies in which its promoters, the Jain family, had a stake.

RELEVANT PROVISIONS UNDER CONTRACT ACT

Section 10 of the Contract Act states that all agreements are contracts if they are made with the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Section 14 states that consent is said to be free when it is not caused inter alia by fraud as defined in section 17. Importantly, the section goes on to say that consent is said to be so caused when it would not have been given but for the existence, inter alia, of such fraud. Where such fraud is proved, and consent to an agreement is caused by fraud, the contract is voidable at the option of the party whose consent was so caused.

EFFECT OF INSTITUTION OF CRIMINAL PROCEEDINGS

If it is clear that a civil dispute involves questions of fraud, misrepresentation, etc. which can be the subject matter of such proceeding under section 17 of the Contract Act, and/or the tort of deceit, the mere fact that criminal proceedings can or have been instituted in respect of the same subject matter would not lead to the conclusion that a dispute which is otherwise arbitrable, ceases to be so.

DISTINCTION BETWEEN CONTRACT BEING OBTAINED BY FRAUD AND PERFORMANCE OF A BEING VITIATED BY FRAUD

Explaining the difference between a contract being obtained by fraud and performance of a contract (which is perfectly valid) being vitiated by fraud or cheating, the Court said that the latter would fall outside section 17 of the Contract Act, in which the remedy for damages would be available, but not the remedy for treating the contract itself as being void. This is for the reason that the words “with intent to deceive another party thereto or his agent” must be read with the words “or to induce him to enter into the contract”, both sets of expressions speaking in relation to the formation of the contract itself. This is further made clear by sections 10, 14 and 19, all of which deal with “fraud” at the stage of entering into the contract. Even section 17(5) which speaks of “any such act or omission as the law specially deals to be fraudulent” must mean such act or omission under such law at the stage of entering into the contract.

Thus, fraud that is practiced outside of section 17 of the Contract Act, i.e., in the performance of the contract, may be governed by the tort of deceit, which would lead to damages, but not rescission of the contract itself. Both kinds of fraud are subsumed within the expression “fraud” when it comes to arbitrability of an agreement which contains an arbitration clause.

RULING ON THE FACTS

After reading the issues and some of the material findings in the Foreign Final Award, the Court came to the conclusion that the issues raised and answered are the subject matter of civil as opposed to criminal proceedings. The Court said that the fact that a separate criminal proceeding was sought to be started and may have failed was of no consequence whatsoever.

The Court further held that a reading of the Foreign Final Award in this case would show that a strong prima facie case has indeed been made out as the Award holds the BBC transaction as a basis on which the contract was entered into and the USD 60 million paid by HSBC, which would clearly fall within fraudulent inducement to enter into a contract under section 17 of the Contract Act. Such a contract would be voidable at the instance of HSBC. Also, the findings on the siphoning off of monies that were meant to be allocated for the performance of the BBC contract would attract the tort of deceit.

It, hence, concluded:

  • That there is no such fraud as would vitiate the arbitration clause in the SSA entered into between the parties as it is clear that this clause has to be read as an independent clause. Further, any finding that the contract itself is either null and void or voidable as a result of fraud or misrepresentation does not entail the invalidity of the arbitration clause which is extremely wide
  • That the impersonation, false representations made, and diversion of funds are all inter parties, having no “public flavour” as explained in paragraph 14 so as to attract the “fraud exception”.

[Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd., 2020 SCC OnLine SC 656, decided on 19.08.2020]

Case BriefsHigh Courts

Kerala High Court: A Division Bench of S.V. Bhati and Bechu Kurian Thomas, JJ., addressed an issue pertaining to the following terms,

Total deprivation, through a partition deed and a release deed, of the property of a deaf and dumb sister forced her to approach the Court to restore her rights in her property and claim partition.

In the present matter, Court held that persons having physical infirmities like deafness or dumbness which seriously affect their cognitive functions can file a suit through “next friend”.

Mental infirmity in the context of Order 32 Rule 15 is not mental disorder, insanity or mental illness.

Facts

Mary, Leelamma, and Aani are sisters. Mary being the eldest and Aani the youngest. Leelamma, the second amongst the sisters, is a deaf and dumb person. She is also illiterate.

The eldest sister claimed to have brought up Leelamma under her care and custody, conducted her marriage, and that of her daughter too. Leelamma’s conjugal life with her husband did not last long as she came back along with her daughter to Mary’s care.

Allegation

Leelamma alleged that partition deed and the release deed were executed on account of fraud and undue influence exerted over the plaintiff and thus sought to set aside the documents.

Partition Deed

As per the partition deed, the properties left behind the mother were divided between the three sisters.

Defendant 1 was allotted A schedule comprising 60 cents, while B schedule comprising just 5 cents, was allotted to the share of both plaintiff and defendant 1. Youngest sister and defendant 2 recited in the document that she is relinquishing her share in the properties.

Mary, defendant 1 the absolute owner of the entire 65 cents property.

Fraud and Dishonesty

Plaintiff conveyed to her daughter through gestures that she had been taken to some place to give her signature and that her thumb impression was taken.

Plaintiff alleged that release deed was cerated by undue influence, fraudulently, dishonestly, and without her knowledge or consent.

Next Friend

Defendant 1 questioned the right of the next friend to file the suit and also denied the incapacity of the plaintiff as far as her ability to comprehend and do things by herself was concerned and also denied the allegation of fraud, cheating and undue influence exerted by the defendants over the plaintiff.

Analysis and Decision

Next Friend

Order 32 Rule 15 of the Code of Civil Procedure, 1908 deal with Suits by or Against Minors and Persons of Unsound Mind. Appointment of next friend for a person with an unsound mind.

Further, the said provision deals with persons of mental infirmity, who are, by the said reason, incapable of protecting their interests, except with the assistance of a next friend, when suing or being sued.

Mental Infirmity

Living as a deaf and dumb person, has a debilitating effect on the mental faculties of comprehension, thought, communication and even response. These faculties when affected will have an effect on the person’s capacity to protect his civil rights.

Fraud, Undue Influence or Coercion

There is no dispute with the proposition that the burden of proof in respect of the plea of fraud, undue influence or coercion is upon the person who alleges the same.

Valid Contract

Free consent, competency to contract, lawful consideration, lawful object and agreement not declared to be void, are the main ingredients for a valid contract. It is a consensual act and the parties are free to settle any terms as they please.

Whether consent for partition and for the release deed has been obtained by undue influence or fraud played by the defendants upon the plaintiff?

High Court observed that, taking care of one’s own sister is a gratuitous or magnanimous act for which it cannot be believed that the entire property will be given away.

Position of Dominance

In the present matter, the defendants failed to prove good faith in the transaction and the execution of release deed documents was proved to have been done exploiting the position of dominance in which defendant 1 wielded over the plaintiff.

Principle of Undue Influence

Hence Court being of firm view stated that the said transactions relating to the share right of the plaintiff are void on the principle of undue influence.

Court also observed that nowhere does the document recite as to why more than 95% of the property (62.5 cents out of a total of 65 cents) left behind by mother of the parties to the document has been allotted to the share of the defendant 1, while the plaintiff is left with a meagre 4% (2.5 cents). Even the 2.5 cents allotted to the plaintiff was released in favour of the defendant1, within a period of five days of execution of Ext.A1. Though the document mentions payment of Rs 2.5 lakhs as consideration for the said transaction, it has come out in evidence that no such payment was received by the plaintiff.

“Fraud in the present case is evident and it has been deployed to exploit a hapless lady of her properties.”

Fraud

Referring to Section 34 of the Indian Registration Act, 1908 and the Rules made thereunder may be apposite in the present context and Court found that the failure to inform the Sub-Registrar about the deafness and dumbness of one of the parties to the document was a deft method in playing fraud.

Hence, defendant 1 is entitled to 2/3rd share in the plaint schedule property and held that defendant 2 is not entitled to any share. [Mary v. Leelamma, 2020 SCC OnLine Ker 2491, decided on 30-06-2020]

Case BriefsHigh Courts

Orissa High Court: S.K. Paigrahi, J., while addressing a matter, observed that,

One cannot lose sight of the fact that GST regime is relatively new and is still evolving.

“…attempts to dampen the spirit of GST proper implementation are already assuming huge proportions and need to be curbed with an iron fist so that the contours of fiscal compass will be extended to the advantage of the people.”

Petitioner filed the bail application under Section 439 of the Criminal Procedure Code, 1973 for being punishable under Section 132(1)(b)(c) and (1) of the OGST Act, 2017.

Business transactions were made using several fictitious firms including G.S Unitrade,  G.S. Steels and Alloys Co., B.B Associates, Om Shri Ganesh Traders. Petitioner, Ronak Beriwal, Subhash Chandra Swain and Basanta Kumar are the proprietors of GS Unitrade, G.S. Steels & Alloys Co, B.B. Associates and Omm Shree Ganesh Traders respectively.

Above persons, individually and in collusion with each other alleged to have created several dummy and non-existent entities to avail bogus Input Tax Credit (ITC), for the purpose of defrauding the Revenue.

Concern 

Creation of dummy and non-existent firms was the matter of concern.

Fake and fraudulent transactions have, among others, caused huge loss to the State exchequer at least to the tune of Rs 122.67 crores.

Fraud

After intensive analysis of data from GSTN/e-way bill portal and inputs from various sources, the Joint Commissioner of State Tax, CT & GST Enforcement Range, Sambalpur detected the fraud committed by the accused.

Several incriminating documents, containing business transactions of such business entities, were unearthed and seized.

Petitioner, in his capacity as the proprietor of G.S. Unitrade, had shown to have purchased goods from many bogus firms and has availed ITC on the strength of fake invoices, without actual transfer of goods.

“…manner in which the accused, in collusion with other accused, had been operating would suggest that there are certain inherent flaws in the GST system, which is prone to such abuse.”

“Fraudsters are taking advantage of the inadequacy of electronic trails of all transactions by employing ingenious methods.”

The search and inspection conducted by the State Authorities revealed that no business was actually being conducted by the declared place of business.

Fictitious firms were created in the name of many daily labourers, private tutors, housewives etc., with the help of their identity documents like PAN, Aadhaar Card, Mobile phone, Voter Card, etc.

Hence accused was alleged to have committed of offences under Section 132(1)(i) read with Section 132(5) of the OGST Act, 2017, which are a non-bailable and cognizable.

Decision

In the instant case, the alleged GST fraud committed by the petitioner is having humongous ramification on the revenue collection by the State.

Further the bench added that, the possibility of the accused tampering the evidence and/or influencing/intimidating the witnesses also cannot be ruled out.

Moreover, the Courts cannot lose sight of the adverse impact such activities would have in the economy.

Bench stated that a large number of cases emerged in different parts of the country where such persons, with vested interests, have created a host of unscrupulous and bogus entities.

Fake entities are then used for the purpose of indulging in issuances of false and fabricated invoices, without actual movement or supply of goods and services and without payment of any GST to the public exchequer, but for the purpose of claiming ITC, by defrauding the Revenue.

Enormity of such devious activities touch the raw nerve of the economic system and strike at the root of the proper and effective functioning of the GST regime, which has been set up with the laudable object of “One Nation, One Tax, One Market”.

High Court stated that a countrywide cartel specializing in defrauding the GST system is operating to bring the economy to its knees.

High Court declined the release of the accused petitioner on bail at this stage. Accordingly, the bail petition filed on behalf of the accused/petitioner was rejected. [Amit Beriwal v. State of Odisha, 2020 SCC OnLine Ori 546 , decided on 27-07-2020]

Case BriefsHigh Courts

Orissa High Court: S.K. Panigrahi, J., while addressing a matter with regard to money laundering by way of ponzi schemes, stated that,

“Act of money laundering is done in an exotic fashion encompassing a series of actions by the proverbial renting of credibility from the innocent investors.”

Petitioner has sought bail in a complaint case pending before Sessions Judge, Special Court under PMLA.

Cheating

Case under Sections 406, 420, 468, 471 and 34 of Penal Code and Sections 4, 5 and 6 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 was registered on the basis of a complaint alleging that the complainant had been cheated and defrauded by alluring to invest Rs 10,000 in the attractive investment scheme of Fine Indiasales (P) Ltd.

Complainant further submitted that he had introduced 20 more people to invest in the said scheme.

Complainant neither received the financial product nor the product voucher as per the agreement with FIPL.

FIPL collected huge amounts of money from the public and ultimately duped huge amount from innocent public by giving false assurance of high return for their deposit of money.

In view of the above, complainant requested for an investigation.

FIPL floated a fraudulent scheme

According to the investigation it was found that, FIPL had floated a fraudulent scheme with a terminal ulterior motive to siphon off the funds collected from public.

Ponzi Scheme

The advertised scheme of FIPL, ex-facie appeared to be a bodacious Ponzi scheme, inducing the susceptible depositors by way of misrepresentation, promising immediate refund in case of any default and timely payment of return on the part of FIPL.

Investigation prima facie established that the accused persons connected with  FIPL not only criminally conspired and cheated the depositors but also lured them into the scheme with a rogue mindset.

Machiavellian Layering | Shell Companies

Investigation revealed that the said money, stained with the sweat, tears and blood of multitudes of innocent people has since been moved around and subjected to Machiavellian layering through a myriad of shell companies and bogus transactions.

The collected amount was immediately transferred to different bank accounts of individuals as well as firms under the management and control of the Promotors/Directors/Shareholders of the said FIPL which is nothing but an act of sheltering.

Money Laundering

Modus Operandi adopted while transferring the prodigious sum of ill-gotten wealth with the singular intention of concealing the original source of funds and to project the tainted money as untainted ex facie constitute the offence of money laundering.

Court’s Observation

On the cursory look, Court prima facie observed that dishonesty, untruth and greed eroded the faith of common investors.

One of the significant stages of money laundering is “layering”, and in the present case, multiple use of corporate vehicles was done and the amount was layered further.

The act money laundering involves the process of placement, layering and integration of “proceeds of crime” as envisaged under Section 2 (u) of the Act, derived from criminal activity into mainstream fiscal markets and transmuted into legitimate assets.

“…laundering of tainted money having its origins in large scale economic crimes pose a solemn threat not only to the economic stability of nations but also to their integrity and sovereignty.”

Proceeds of Crime

Petitioner along with others attempted to project the “proceeds of crime” as untainted money by transferring the same to different bank accounts in a bid to camouflage it and project it to be genuine transactions.

Financial Terrorism

Bench added to its analysis that, offence of money laundering is nothing but an act of “financial terrorism” that poses a serious threat not only to the financial system of the country but also to the integrity and sovereignty of a nation.

Supreme Court’s opinion

Supreme Court of India has consistently held that economic offences are sui generis in nature as they stifle the delicate economic fabric of a society.

Faustain bargain

Perpetrators of such deviant “schemes,” including the petitioner in the present case, who promise utopia to their unsuspecting investors seem to have entered in a proverbial “Faustian bargain” and are grossly unmindful of untold miseries of the faceless multitudes who are left high and dry and consigned to the flames of suffering.

Reputational Damage of the Country

Abuse of financial system in the manner that occurred in the present case can inflict the reputation of the country in the world of business and commerce.

Alleged offence of money laundering committed by the petitioner is serious in nature and the petitioner’s role is not unblemished.

Hence, Court refused bail to the accused/petitioner. [Mohammad Arif v. Directorate of Enforcement, Govt. of India, 2020 SCC OnLine Ori 544 , decided on 13-07-2020]


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Case BriefsHigh Courts

Delhi High Court:  Suresh Kumar Kait, J. rejected the bail plea of the petitioner, accused of fraud, after finding him to be at risk of tampering evidence pending against him.

Petitioner a Managing Director and CEO of Religare Enterprises Limited, was found to be accused of fraud worth over Rs 2000 crores by means of extending fraud loans and falsifying books of accounts. He and another member (Anil Saxena) of his Company were arrested on 10th October, 2019, under the course of investigation. Anil Saxena, was further granted bail but Kavi Arora was refused. Hence, he came before the Delhi High court under under Section 439 read with Section 482 of the Code of Criminal Procedure, 1973 seeking the relief of regular bail.

Senior Advocate, Puneet Bali on behalf of the petitioner with Vibhav Jain, Aditya Soni and Mayank Datta, Advocates and the State was represented by Amit Chadha, APP for State.

The petitioner’s case based on two grounds which were, first, that he was chargesheeted on wholly false premises of misconceived facts against him and, second, that on the ground of parity, he should be awarded bail on the fact that Anil Saxena, a co-accused, was granted bail. The respondents argued that the petitioner is trying to mislead the Court and that Anil Saxena was not holding an executive position but petitioner was and by virtue of his position, petitioner was responsible.

High Court rejected the plea to grant bail to the petitioner after rejecting the claims of the petitioner. The Court decided, relying on the judgement presented by the respondents, “It is settled law that economic offences are considered to be grave offences especially when public money is involved and that the Courts have to be careful in granting bail in such cases”. It found the investigation to be at a crucial stage and since, the petitioner was at a position where he could influence prosecution witnesses and tamper evidence, the Court rejected the first claim of the petitioner. On the issue of parity, the High Court decided not to intervene in that matter, as the granting of bail to co-accused Anil Saxena was challenged before the Supreme Court and has been disposed. It found that the grant of bail to co-accused cannot be granted to petitioner as precedent/parity to the bail does not apply to other accused. Therefore, the High Court, dismissed the petition. [Kavi Arora v. State, 2020 SCC OnLine Del 768 , decided on 23-07-2020]

Case BriefsSupreme Court

Supreme Court: The bench of Dr. DY Chandrachud and MR Shah, JJ has granted bail to former Unitech MD Sanjay Chandra after he told the Court that both his parents, who are 81 years and 78 years of age respectively, have tested positive for Covid-19 and have been hospitalised.

Senior Advocate Mukul Rohatgi, appearing for Chandra, told the Court that

“The applicant has stated that his spouse is presently abroad and has been unable to return due to the lock down. The brother of the applicant, Ajay Chandra, is also in judicial custody.”

Considering the facts and circumstances, the Court said,

“a case for the grant of interim bail has been made out on humanitarian grounds since both the parents of the applicant have tested positive for COVID-19 and having regard to their advanced age.”

The Court, hence, released Chandra on interim bail for a period of thirty days from the date of his actual release, subject to the following conditions:

  • The passport of the applicant shall be deposited with the trial court
  • The applicant shall report on every Sunday before the nearest local police station;
  • The applicant shall furnish bail bonds of Rs 1 lakh to the satisfaction of the trial court; and
  • The applicant shall surrender immediately on the expiry of the period of thirty days specified above.

[Bhupinder Singh v. Unitech Limited, 2020 SCC OnLine SC 559 , order dated 07.07.2020]


Also read

SC to Unitech MD Sanjay Chandra: Deposit Rs. 750 Cr by December-end or stay in jail

Case BriefsHigh Courts

Orissa High Court: S.K. Panigrahi, J., while addressing the present petition held that the present case to be a clear case of forum shopping.

Present petition challenges the termination letter by OP 1/ Hindustan Petroleum Corporation Ltd. (HPCL) on ground of violation of natural justice.

Facts of the Case

Petitioner was appointed as Distributor of LPG under Rajiv Gandhi Gramin LPG Vitarak through a Selection Process by way of an open advertisement issued by HPCL.

Core issue surrounding the present dispute is the submission of “Residence Certificate” of the advertised location. Accordingly, he submitted a “Residence Certificate” issued in his favour by the Tahasildar, Dharmasala.  Further it was noted that, Dharmashala Tahasil underwent a bifurcation namely Dharashala Tahasil and Rasulpur Tahasil.

In the meantime, the HPCL authority, during the Field Verification of Credential (FVC), asked the petitioner to submit Residential Certificate issued by the Tahasildar, Rasulpur since the new jurisdictional Tahasil is Rasulpur. Accordingly, the petitioner submitted another “Residence Certificate.”

Finally, he was found suitable for final award of distributorship.

Upon a complaint made by one of the unsuccessful complainants (OP 6), it was discovered that the furnished “Residential Certificate” mentioned him to be the resident of Brahmabarada alleged to be false and incorrect as he is not an ordinary resident of advertised location “Brahmabarada” which is under Rasulpur Block.

Upon perusal of records, petitioner was found to be the resident of village Chandapur and not Brahmabarada

Residential Certificate issued to the petitioner by the Tahasildar, Rasulpur was issued by OP 6 before Sub-Collector, Jaipur, though the Sub-Collector had allowed the appeal and concluded that the petitioner is a resident of “Chandapur” and not ” Brahamabarada”. Further aggrieved by the same, petitioner had approached this Court and the same was dismissed confirming Sub-Collector’s decision.

Petitioner further invoked the provisions of intra-court Appeal, further the Division Bench took the confirmatory view taken by Single Judge.

Thus, the findings of Appellate Authority-cum-Sub-Collector, Jajpur attained finality.

Conclusion

Bench stated that, petitioner secured the distributorship by means of illegal Residential Certificate and thereby he violated the terms of Distributorship Agreement.

There is sufficient convolution in the instant lis making it a clear case of forum shopping at the behest of the petitioner, who, having lost in the earlier round of litigation which attained finality, has sought similar remedy in the instant proceedings.

Court has time and again deprecated the practice of forum shopping by litigants and viewed it as an abuse of law

Court observed that, Selection alleged to have been done through Residence Certificate shrouded with doubts and smacks a fraudulent behavior on the part of the Petitioner. Fraud and justice cannot go together.

It is a settled law that “Fraud” vitiates every solemn act.

Time and again, it has been reiterated by the Apex Court that the contract between private party and the State or instrumentality of State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies available under ordinary civil law rather than approaching the High Court

Procedural formalities for the termination of contract need to be performed in fairness and good faith.

In the instant case, the employer has faithfully attempted to observe the principle of natural justice vide its show-cause letter dated 22.11.2017 and dated 11.01.2018; hence the plea of violating the principles of natural justice is ill-founded.

The instant issue has sufficiently occupied the time of this Court and there have been attempts to circumvent the spirit of litigation by using different forums, hence no substantial miscarriage of justice shall be caused if the instant Writ Petition is dismissed.

In view of the above, petition stands dismissed. [Talim Ali v. HPCL,  2020 SCC OnLine Ori 323 , decided on 24-04-2020]

Case BriefsSupreme Court

Supreme Court: The bench of Arun Mishra and UU Lalit, JJ has cancelled the registration of Amrapali Group of Companies under RERA for defrauding homebuyers. The Court also cancelled the various lease deeds granted in favour of Amrapali Group of Companies by Noida and Greater Noida Authorities for projects in question.

“Because of their failure to fulfil the obligations towards the buyers and the serious kind of fraud which has been played by them upon the home buyers, the registration of Amrapali group of companies under the Real Estate Regulation and Development Act, 2016 deserves to be cancelled.”

The Court noticed that no accounts were prepared w.e.f. the years 2015-2018 and money withdrawn was diverted during the said period. The Statutory Auditor, Anil Mittal failed in duty and was part of fraudulent activities as found in the Forensic Report. The money obtained from banks was diverted to unapproved uses such as for the creation of personal assets of Directors, creation of assets in closely held companies by the Directors along with their partners and relatives, for personal expenses of Directors, to give advances without carrying interest for several years. There was total non-monitoring by the bankers.

“The Noida and Greater Noida Authorities were grossly negligent in reviewing and monitoring the progress of the projects and in collusion with leaseholders failed to take action concerning nonpayment of dues and illegally permitted the group to sub-lease the land without payment of dues. Bogus allotments of flats were made. There were other irregularities galore.”

Below are some of the important directions issued by the Court,

  • Noida and Greater Noida Authorities shall have no right to sell the flats of the home buyers or the land leased out for the realization of their dues. Their dues shall have to be recovered from the sale of other properties which have been attached. The direction holds good for the recovery of the dues of the various Banks also.
  • NBCC has been appointed to complete the various projects and hand over the possession to the buyers. The percentage of commission of NBCC is fixed at 8 percent.
  • The home buyers are directed to deposit the outstanding amount under the Agreement entered with the promoters within 3 months from today in the Bank account opened in UCO Bank in the Branch of this Court. The amount deposited by them shall be invested in the fixed deposit to be disbursed under the order of this Court on phase-wise completion of the projects/work by the NBCC.
  • Various Companies/ Directors and other incumbents in whose hands money of the home buyers is available as per the report of Forensic Auditors, should deposit the same in the Court within one month. The last opportunity of one month is granted to deposit the amount and to do the needful failing which appropriate action shall be taken against them.
  • Concerned Ministry of Central Government, as well as the State Government and the Secretary of Housing and Urban Development, should ensure that appropriate action is taken as against leaseholders concerning such similar projects at Noida and Greater Noida and other places in various States, where projects have not been completed.
  • Senior Advocate R. Venkataramani has been appointed as the Court Receiver. The right of the lessee shall vest in the Court Receiver and he shall execute through authorized person on his behalf, the tripartite agreement and do all other acts as may be necessary and also to ensure that title is passed on to home buyers and possession is handed over to them.
  • Noida and Greater Noida Authorities are also directed to execute the tripartite agreement within one month concerning the projects where homebuyers are residing and issue completion certificate notwithstanding that the dues are to be recovered under this order by the sale of the other attached properties. Registered conveyance deed shall also be executed in favour of homebuyers, they are to be placed in the possession and they shall continue to do so in future on completion of projects or in part as the case may be.

The Court also said,

“In view of the finding recorded by the Forensic Auditors and fraud unearthed, indicating prima facie violation of the FEMA and other fraudulent activities, money laundering, we direct Enforcement Directorate and concerned authorities to investigate and fix liability on persons responsible for such violation and submit the progress report in the Court and let the police also submit the report of the investigation made by them so far.”

It also directed the Institute of Chartered Accountants of India to initiate the appropriate disciplinary action against Anil Mittal, CA for his conduct as reflected in various transactions and the findings recorded in the order and his overall conduct as found on Forensic Audit. The proceedings are to be completed within 6 months.

[Bikram Chatterjee v. Union of India, 2019 SCC OnLine SC 901, decided on 23.07.2019]

Case BriefsHigh Courts

Orissa High Court: Dr A.K. Rath J., quashed the order passed by Civil Judge (Junior Division) and order by Tahsildar due to fraudulent practices of the parties in a consolidation matter.

In the present case, a plot of land came into the purview of consolidation operation, wherein the Opposite Party 1 filed a consolidation revision before the Commissioner. The Commissioner had remanded the matter to the Consolidation Officer for effecting a compromise. The Opposite Party 2 had filed a compromise petition along with a trace map for partition and the Consolidation Officer had allotted 1/3rd of land to each in accordance with the trace map. The Opposite Party 2 had filed another application before the Tahsildar for the conversion of the agricultural land into a homestead.

Senior Advocate, Rajat Kumar Rath and Advocate, Sandipani Nayak representing the petitioners, submitted before the High Court that the trace map which was submitted by the Opposite Party 1 was a fraudulent copy. He put forth that the copy was forged and was an imaginary vertical sketch map; therefore the orders passed by the respective authorities were based on fabricated factual scenarios. The Senior Advocate also placed reliance on two apex court decisions which were discussed by the High Court in its order.

The Advocate representing the Opposite Party 1, Bikram Rath submitted that they were constrained in filing for a permanent injunction due to the disturbed possession in the land by the Opposite Party 2.

The High Court, before delving into the matter, discussed the two apex court decision in order to distinguish between when proceedings shall be considered “collusive and fraudulent”. It stated that in Nagubai Ammal v. B. Shama Rao, AIR 1956 SC 593, the apex court had come to a decision that in “collusive proceedings the combat is a mere sham, in a fraudulent suit it is real and earnest.” Thus stating that in collusive proceedings the claim is fictitious in nature whereas, in a fraudulent suit, the claim is untrue. Placing reliance to another two Supreme Court decisions it stated that both in S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1 and Badami v. Bhali, (2012) 11 SCC 574, the Apex Court had stated that a judgment obtained by fraudulent means should be treated with nullity notwithstanding the hierarchy of court, whether superior or inferior court passing the order/decree. It quoted Chief Justice Edward Coke of England, “Fraud avoids all judicial acts, ecclesiastical or temporal.”  The Court upon perusal of documents produced stated that it was evident that the diagram produced in the compromise petition was diametrically opposite to the consolidation case. Therefore, the court quashed both the orders passed by the Civil Judge and Tahsildar, stating that the Opposite party 1 had fraudulently induced the authorities for a favourable order and also provided an option for the Opposite Party 1 to make a fresh application for conversion of land.[Prafulla Kumar Nayak v. Khetramohan Nayak, 2019 SCC OnLine Ori 238, decided on 10-07-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities and Exchange Board of India (SEBI): S.K. Mohanty, Whole Time Member, passed an order finding the promoters of New Delhi Television Ltd. (“NDTV”)  Dr Prannoy Roy, Chairman (“Noticee 2”), Radhika Roy, Managing Director (“Noticee 3”) and RRPR Holdings (P) Ltd. (“Noticee 1”)  grossly violated the provisions of Section 12-A(a), (b) and (c) of the Securities and Exchange Board of India Act, 1992 read with Regulations 3(a), (b), (c), and (d) and 4(1) of the SEBI (Prohibition of Fraudulent Trade Practices relating to Securities Market) Regulations, 2003. Further, Dr Pronnoy Roy and Radhika Roy were additionally found to have violated Clause 49(1)(d) of the Equity Listing Agreement read with Section 21 of the Securities Contracts (Regulation) Act, 1956. 

In view of such findings and in order to protect the interest of investors and the securities market the Board passed following Directions against the Noticees:

(i) All the Noticees are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of 2 years. During the said period of restraint/prohibition, the existing holding, including units of mutual funds, of the Noticees shall remain frozen; 

(ii) Dr Prannoy Roy and Radhika Roy are restrained from holding or occupying position as Director or any key managerial personnel in NDTV for a period of 2 years; and 

(iii) Dr Prannoy Roy and Radhika Roy are restrained from holding or occupying position as Director or any key managerial personnel in any other listed company for a period of 1 year.

The backdrop

In August and December of 2017, SEBI received complaints from a shareholder of NDTV alleging, inter alia, that RRPR Holdings, which is one of the promoters of NDTV, and Dr Pronnoy Roy and Radhika Roy, who are promoters as well as Directors of NDTV, have violated the provisions of SEBI Act and the rules and regulations made thereunder by omitting to disclose material information to the shareholders of NDTV about certain loan agreements entered into by them. 

NDTV is a company listed on BSE and NSE, and the three Noticees together constituted for 63.17% aggregate promoters shareholding in NDTV during the period of investigation, i.e., 14-10-2008 to 22-11-2017. 

Upshot of findings in the investigation

(a) The Noticees entered into three loan agreements, one with ICICI Bank Ltd. (a rupee term loan not exceeding Rs 375 crores) and two with Vishvapradhan Commercial Private Ltd. (“VCPL”) (total amounting to more than Rs 400 crores, interest-free and payable at the end of 10 years period). These loan agreements contained material and price sensitive information, in as much as action/decision on many important matters pertaining to NDTV were made subject to prior written consent of the ostensible lender and without the knowledge of the minority shareholders of NDTV. 

(b) Further, under the VCPL agreements and the two call option agreements executed as supplementary to the said loan agreements, beneficial interest in 30% shares of NDTV was effectively vested in VCPL. All these information were profoundly material and price sensitive information which would have influenced the investment decision of the investors in the shares of NDTV, had they been made aware of this information at that time. 

(c) Terms of the loan agreements were devised to affect the interest of shareholders of NDTV. Although various clauses in the loan agreements deceitfully created binding obligations on NDTV, the Noticees consented to such clauses behind the back of the shareholders of NDTV to further their own private interests. 

(d) Having held the dominant position and being majority shareholders of NDTV, the Noticees manifestly assured VCPL to ensure swift compliance of such clauses of the loan agreements pertaining to NDTV, thereby taking all other shareholders for granted and also compromising the interest of shareholders of NDTV. 

(e) In order to conceal the said information from the investors so that the investors continue to trade in the shares of NDTV blissfully ignorant of the fact that the promoters of the company have already vested their voting rights to the extent of 30% in favour of a third external party, Noticees 2 and 3 chose to act in flagrant breach of Code of Conduct of NDTV. If the said information regarding loan agreements had been disclosed by Noticees 2 and 3 to the Board of Directors of NDTV, then the company was bound to intimate the same to the stock exchanges which in turn, would have disseminated such information on their websites for information of the general public. 

(f) The loan agreements were unmistakably structured as a scheme to defraud the investors by camouflaging the information about the adversarial terms and conditions impinging upon the interest of NDTV’s shareholders, thereby inducing innocent investors to continue to trade in the shares of NDTV oblivious to such adversarial developments in the shareholding of NDTV.  

Observation on fiduciary duty and conflict of interest

It was argued that Noticees 2 and 3 could not have acted in terms of the loan agreements in view of their statutory fiduciary duty towards NDTV. That even if the agreements entered into by Noticees 2 and 3 contained provisions prejudicial to NDTV or its investors, yet such agreements were unenforceable if they were in violation of the statutory fiduciary duty of Noticees 2 and 3 as Directors of NDTV.  

In Board’s opinion, the question of enforceability of an agreement by the Courts would arise only in case of breach of the agreement by any of the parties. However, if the parties to an agreement decide to honour the undertakings and covenants provided for in such agreement out of their own volition, such agreements can always be performed by the parties, provided agreement is not prohibited by law. In the present case, the VCPL loan agreements, even though prejudicial to the interest of NDTV and creating conflict for Noticees 2 and 3 in the discharge of their fiduciary duties on the Board of NDTV, these agreements had been dutifully complied by the Noticees, till date. The Noticees, being fully aware and conscious about their pivotal role and positions in NDTV, still agreed/consented and executed agreements containing clauses which have an adversarial effect on the shareholders of NDTV. It restricts NDTV from raising fresh capital, making any restructuring, going for a merger, etc., without the prior written consent of ICICI/VCPL. It certainly amounts to acting in breach of fiduciary duties by Noticees 2 and 3. 

Shareholder’s vote, right to property, and freedom to exercise thereof

It was also contended that Noticess were also shareholders of NDTV, and a shareholder’s vote being a right to property, prima facie may be exercised by him as he thinks fit in his own interest. 

Rejecting the contention, the Board stated that it is to be understood that the case against the Noticees was not that they could not have entered into such loan agreements or exercised their voting rights the way they desired to, but the case against the Noticees was that they entered into certain transactions with a third party whereby they agreed to comply with certain conditions which bind NDTV and the interest of its shareholders too. In other words, by entering into such transaction, Noticees brought their personal interest in conflict with the interest of NDTV.

Based on such findings, the Securities and Exchange Board of India passed directions as aforementioned against Dr Prannoy Roy, Chairman, NDTV Ltd.; Radhika Roy, Managing Director, NDTV Ltd.; and RRPR Holdings (P) Ltd. all promoters of NDTV Ltd. It was directed that the directions made in the order shall come into effect with immediate effect. [NDTV Ltd, In re, 2019 SCC OnLine SEBI 47, decided on 14-6-2019]  

Case BriefsSupreme Court

Supreme Court: The bench of L Nageswara Rao and MR Shah, JJ held that a man, by virtue of the disciplinary proceedings being dropped, the Appellant becomes entitled to claim full salary for the period from the date of his suspension till the date of closure of the departmental inquiry.

Factual Background

  • The Court was hearing the case of a Sorting Assistant in Railway Mail Service against whom disciplinary proceedings were initiated on the allegations of involvement in forged payments of high value money orders.
  • He was suspended on 23.10.1979 and an FIR under Sections 409, 420 and 467 IPC was filed.
  • The order of suspension was revoked on 21.10.1987 pursuant to which he joined duty and worked till 28.02.1997, when he was dismissed from service in view of his conviction under Section 409, 467 and 420 IPC. He was sentenced to imprisonment for three years.
  • His appeal against conviction was allowed and he was acquitted of the charges for offences under Section 409, 420 and 467 IPC.
  • He claimed that he should be entitled to full back wages from the date of the order of his acquittal i.e. 31.08.2001 till the date of his reinstatement i.e. 20.01.2003.

Ruling

After perusing various judgments, the Court said that the department would become liable for back wages in the event of a finding that the initiation of the criminal proceedings was mala fide or with vexatious intent. It, however, clarified:

“If an employee is involved in embezzlement of funds or is found indulging in demand and acceptance of illegal gratification, the employer cannot be mulcted with full back wages on the acquittal of the person by a criminal Court, unless it is found that the prosecution is malicious.”

Noticing that it was the Appellant who was seeking postponement of the departmental inquiry in view of the pendency of criminal case and that the order of suspension was in contemplation of disciplinary proceedings, the Court said:

“the Respondents took four years to reinstate him by revoking his suspension. The order of suspension dated 23.10.1979 came to an end on 21.03.1983 which is the date on which disciplinary proceedings were dropped. The Appellant ought to have been reinstated immediately thereafter unless a fresh order was passed, placing him under suspension during the pendency of the criminal trial which did not happen.”

The Court, hence, held that the Appellant is entitled for full wages from 23.10.1979 to 21.10.1987 after adjustment of the amounts already paid towards subsistence allowance.

[Raj Narain v. Union of India, 2019 SCC OnLine SC 452, decided on 01.04.2019]

Case BriefsSupreme Court

Supreme Court: The bench of Abhay Manohar Sapre and UU Lalit, JJ has held that Section 212 of the Companies Act, 2013 does not prescribe any period within which a report has to be submitted by Serious Fraud Investigation Office (SFIO) to the Central Government.

Lalit, J, writing for himself and Sapre, J listed down the ‘basic features’ that were considered while coming to this conclusion:

  1. Absolute transfer of investigation in terms of Section 212(2) of 2013 Act in favour of SFIO and upon such transfer all documents and records are required to be transferred to SFIO by every other Investigating Agency.
  2. For completion of investigation, sub-Section (12) of Section 212 does not contemplate any period.
  3. Under sub-Section (11) of Section 212 there could be interim reports as and when directed.

He said that in the face of these three salient features it cannot be said that the prescription of period within which a report is to be submitted by SFIO under sub-Section (3) of Section 212 is for completion of period of investigation and on the expiry of that period the mandate in favour of SFIO must come to an end. If it was to come to an end, the legislation would have contemplated it.

“In the absence of any clear stipulation, in our view, an interpretation that with the expiry of the period, the mandate in favour of SFIO must come to an end, will cause great violence to the scheme of legislation. If such interpretation is accepted, with the transfer of investigation in terms of sub Section (2) of Section 212 the original Investigating Agencies would be denuded of power to investigate and with the expiry of mandate SFIO would also be powerless which would lead to an incongruous situation that serious frauds would remain beyond investigation. That could never have been the idea.”

The Court hence concluded that the only construction which was, possible therefore, was that the prescription of period within which a report has to be submitted to the Central Government under sub-Section (3) of Section 212 is purely directory. It added:

“Even after the expiry of such stipulated period, the mandate in favour of the SFIO and the assignment of investigation under sub-Section (1) would not come to an end. The only logical end as contemplated is after completion of investigation when a final report or “investigation report” is submitted in terms of sub-Section (12) of Section 212.”

Sapre, J in his concurrent opinion said:

“If the submission of the learned counsel for the respondents (writ petitioners) that the compliance of sub-section (3) of Section 212 of the Act in relation to the submission of the report be held mandatory is accepted (which I am afraid, I cannot accept) in our view, the very purpose of enacting Section 212 of the Act would get defeated and will become nugatory.”

[Serious Fraud Investigation Office v. Rahul Modi, 2019 SCC OnLine SC 423, decided on 27.03.2019]

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]

Hot Off The PressNews

As reported by the media, Sajid Javid the UK Home Secretary signed the extradition order of Vijay Mallya on 04-02-2019.

Westminster Magistrates’ Court had sent Vijay Mallya’s case to the Home Secretary for a decision on whether to order extradition.

Mallya said he intends to appeal the decision, “After the decision was handed down on December 10, 2018, by Westminster Magistrates Court, I stated my intention to appeal. I couldn’t initiate appeal process before a decision by Home Secretary. Now I’ll initiate the appeal process”.

Mallya has 14 days’ time to appeal against his extradition in a higher court.

Vijay Mallya was facing charges of fraud, money laundering and violation of Foreign Exchange Management Act (FEMA).

[Source: Economic Times]
Case BriefsForeign Courts

Westminster Magistrates’ Court: A Single Judge Bench comprising of Senior District Judge (the Chief Magistrate) Emma Arbuthnot accepted the Government of India’s (GoI) extradition request for tycoon Vijay Mallya to face trial on charges of fraud and money laundering.

The Court considered the vast evidence placed on record by GoI and relying on the case of Devani v. Republic of Kenya, [2015] EWHC 3535 opined that there was a prima facie case that the funds loaned by Indian banks to Mallya were misused. A number of email trails were relied on to rule that he had misrepresented his net worth to the banks.

It was further held that there was a prima facie case of a conspiracy to defraud which involved not just the Kingfisher Airlines executives but also some bankers. There was clear evidence of misapplication of loan funds and thus there was a prima facie case of conspiracy to launder money was found against Mallya.

The Court also took note of Mallya’s concerns that the Central Bureau of Investigation (CBI) which had investigated this case was susceptible to political interference and was a “caged parrot” speaking with its master’s voice, especially by the ruling party BJP. The said concern was dismissed holding that there was no evidence showing that the present extradition request was, in fact, being made to prosecute him for his political opinions.

It was ruled that Mallya’s allegations against the professional integrity of Mr Rakesh Asthana, who leads the CBI and was the prosecutor of his case, was without any basis since the Supreme Court of India had cleared Mr. Asthana of allegations made against his integrity and there was no reliable or significant evidence produced by Mallya to support his averment.

Mallya argued against his extradition, saying Indian jails do not have proper air and light. The Court applied Othman criteria of Othman v. UK, (2012) 55 EHRR 1 to decide whether Mallya’s extradition would be compatible with his Convention rights within the meaning of the Human Rights Act, 1998. It viewed the video submitted by GoI and found clear assurance that the cell for Mallya’s lodging – Barrack No. 12 in Arthur Road Jail, Mumbai – had requisite living conditions where he would be able to obtain his medical treatment.

One might recall that the learned Judge’s demand for a video of Mallya’s barrack did not go down well with India and earlier this year PM Modi had told his British counterpart Theresa May that it was not right for Courts in her country to ask about the condition of Indian jails “as we still have the prisons where they jailed our leaders like Mahatma Gandhi and Jawaharlal Nehru.”[1]

Bearing in mind the findings of prima facie case, no evidence that the prosecution was politically motivated, and no lack of fair trial, Mallya’s contention of abuse of process was also dismissed.

In view of the above, Mallya’s case was sent to the United Kingdom Home Office (the British equivalent of Home Ministry) where Home Secretary, Sajid Javid would decide whether to order his extradition based on the verdict of the Magistrates’ Court.[Govt. of India v. Vijay Mallya, decided on 10-12-2018]

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[1] https://www.ndtv.com/india-news/pm-narendra-modis-sharp-retort-to-theresa-may-on-indian-jails-revealed-1858878

Case BriefsHigh Courts

Patna High Court: A Single Judge Bench comprising of Sanjay Kumar, J. set aside a trial court order abating a title suit ruling that declaration of voidability of a document is within the jurisdiction of a Civil Court.

Petitioner before this Court was the plaintiff in a title suit filed in trial court for cancellation of registered sale deed allegedly executed by her father in favour of the respondent-defendant. The petitioner’s submission before trial court was that the land in dispute is joint family property and that her aged had lost his consciousness for the last six months before his death. The respondent-defendant taking advantage of his mental condition executed the sale deed by committing fraud and forgery. The trial court, noting the submissions of the petitioner, abated the said suit in terms of Section 4(c) of Bihar Consolidation of Holdings and Prevention of Fragmentation Act, 1956. Aggrieved thereby, the instant petition was filed for quashing the said order.

The High Court noted that the petitioner’s father neither received any consideration money nor executed any document nor affixed his thumb impression on the purported sale deed. The court relied on full bench decision in Ramkrit Singh v. State of Bihar, 1979 SCC OnLine Pat 30 and observed that if a document has to be set aside, civil suit would be maintainable; but a mere declaration of title or a mere declaration that the document is void can be done by the consideration authority. In the instant case, the purported sale deed was voidable and therefore it was within the jurisdiction of civil court to cancel or set aside the said document.

The Court noted that cancellation of purported sale deed was sought by petitioner on the grounds of fraud and forgery which could be determined only after recording evidence of the parties. As such, the impugned order was set aside and trial court was directed to proceed with the suit. [Gangotri Devi v. Bhukhan Singh,2018 SCC OnLine Pat 1984, decided on 02-11-2018]

 

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): A Division Bench of S.M. Kantikar and Dinesh Singh, Members, allowed an appeal filed against the order of Delhi State Consumer Disputes Redressal Commission whereby the appellant’s petition was dismissed at the stage of maintainability itself.

The appellant had filed a complaint against the respondents for medical negligence. One of the respondents had prescribed a medicine for appellant’s husband; however, the pharmacist (OP-2) gave the wrong medicine. The appellant’s husband died because of taking the wrong medicine.

The main issue that arose before the Commission was whether the present dispute amounts to a consumer dispute and hence whether it can be adjudicated upon under the provisions of Consumer Protection Act, 1986.

The Commission observed that the State Commission had cited the case of Bright Transport Co. Ltd. v. Sangli Sehkari Bank Ltd., II (2012) CPJ 151 (NC) wherein it was held that complaints which are based on allegations of fraud, forgery, etc. and trial of which would require voluminous evidence and consideration are not to be entertained by the consumer fora. However, in the instant case the appellant had neither alleged fraud nor did she allege forgery on the part of respondents.

The Commission held that it was a case of medical negligence and deficiency in services and it does not require recording of voluminous evidence and consideration, as may make the adjudication of this case unfeasible or prescribed in consumer fora. The allegations of medical negligence and deficiency of services is a complaint within the meaning of Section 2(1)(c) of the 1986 Act and would convert into a “consumer dispute” within the meaning of Section 2(1)(e) if the opposite parties dispute or deny the allegations contained in the complaint. [Vimla v. Ashwani Gupta, First Appeal No. 1062 of 2018, order dated 05-08-2018]