Case BriefsDistrict Court

Dwarka Courts, New Delhi: Deeksha Sethi, MM (NI Act)—06, reiterated that, even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, 1881.

In the present matter, Raj Singh was referred to as ‘complainant’ and the accused were relatives as the marriage of the son of the complainant and daughter of the brother of the accused was solemnized.

The complainant’s case was that in the second week of April 2015 accused along with his brother approached him and requested a sum of Rs 12 lakhs and 8 lakhs respectively as they were in dire need of money. It was assured to the complainant that they would return the money within 12 months along with interest @ 2% per month.

It was stated that, the accused and his brother paid the interest only on two occasions and thereafter neither paid the interest nor principal amount despite repeated requests.

Thereafter, in the discharge of their liability accused’s brother gave a cheque amounting to Rs 8 lakhs as part payment and accused Yashpal Singh also gave a cheque amounting to Rs 12 lakhs.

Both the above cheques were dishonoured with the remarks ‘Insufficient Funds’.

The complainant had informed about the dishonouring of the cheque by the accused and his brother, however, the accused and his brother refused to return the amount and threatened the complainant with dire consequences.

Later, since the accused failed to make payment despite the notice, therefore liability to be tried and punished for an offence under Section 138 NI Act.

Analysis, Law and Decision

Court noted that the accused had admitted the fact that the cheque in question had his signatures and in such scenario, a presumption was raised under Section 139 read with Sections 118/20 of the NI Act, that cheque was issued in discharge of debt or liability.

With regard to the contention of the accused regarding certain particulars of the cheque were not filled by the accused and hence it was difficult to believe the complainant’s version, Court expressed that, even it was admitted for the sake of argument that blank cheque was given by the accused to the complainant, it is a well-settled principle of law that,

“…even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, 1881, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.”

Hence, the contention of the accused could not be accepted.

Misuse of Cheque

The Bench noted that the accused neither placed on record any complaint made to the police or bank in the said regard nor led any other evidence in support of the misuse of the cheque.

Further, the Bench added that, it is well settled that bare statements and story-telling would not help the accused to rebut the presumption raised under Sections 118 and 139 of the NI Act.

Whether the accused had been able to shake the version given by the complainant in his evidence affidavit and had been able to point out discrepancies or contradictions which may throw doubt on his version?

The only suggestion that had been given was that a blank signed cheque was issued by the accused to the complainant as it was agreed in Panchayat that the accused and his brother would give the cheque in question and the complainant’s son would take back the accused’s niece. Thus, no discrepancy had emerged out of the cross-examination which may demolish the complainant’s version even on the touchstone of preponderance of probabilities.

The Court concluded that the accused was not able to prove any probable defence and had failed to rebut the presumption raised under Sections 118/139 of the NI Act.

Therefore, Yashpal Singh was held guilty and convicted for the commission of an offence punishable under Section 138 of the NI Act in respect of the cheque in question. [Raj Singh v. Yashpal Singh Parmar, CC No. 5006687 of 2016, decided on 25-4-2022]

Case BriefsDistrict Court

Dwarka Courts, Delhi: Rahul Jain, Metropolitan Magistrate, while addressing a matter regarding dishonour of cheque, held that mere assertion of non-receipt of legal notice cannot help the accused in escaping liability under Section 138 Negotiable Instruments Act, 1881.

It was alleged in complaint that accused had approached the complainant to purchase a car. It was sold vide an agreement for Rs 7 lakhs only to be paid in 35 EMIs of Rs 20,000.

After default in the instalments, the accused issued a cheque which was returned dishonoured with remark “funds insufficient”. Thereafter, the complainant approached the accused repeatedly about the dishonour of the cheque and then the accused agreed to repay the consideration at one time and issue one cheque which was dishonoured.

Since no response was made within the statutory period regarding the demand notice, the present complaint was filed.

Analysis, Law and Decision


Legal Notice

The Court stated that the assertion of non-receipt of legal notice cannot help the accused in escaping liability under Section 138 NI Act, especially keeping in mind that firstly the accused has admitted his address mentioned on legal demand notice to be correct and secondly that the accused entered appearance in the court pursuant to service upon the same address as was mentioned in the legal demand notice.

It was settled in the decision of the Supreme Court in C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555,  that an accused who claimed that he did not receive legal notice, can within 15 days on receipt of summons from the Court, make payment of the cheque amount, and an accused who does not make such payment cannot contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the General Clauses Act and Section 114 of the Evidence Act.

Legal Enforceable Debt

Bench noted that the initial defence of the accused had been that he had not purchased any car from the complainant and denied his signatures on the vehicle agreement. Further, he stated that car was purchased by his brother from the complainant, and he had just stood as a guarantor in the transaction and issued the cheque as security. The said defence was not even a defence but rather an admission to the liability to pay the cheques.

Liability of Guarantor under Section 138 NI Act

Section 138 NI Act uses the words “where any cheque” and therefore, the cheque could be drawn for whatever reason and the drawer would be liable if it is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability.

“The cheque could be issued for the discharge of the debt or liability of the drawer or of any other person including a guarantor.”

Section 128 of the Indian Contract Act provides that the liability of the surety is coextensive with that of the principal debtor, unless it is otherwise provided in the contract.

Hence, as per the Indian Contract Act, the liability of the guarantor is coextensive with that of the borrower which means that lender can enforce his right against either the principal borrower or the guarantor of the principal borrower.

Therefore,

On a joint reading of section 138 of Negotiable Instruments Act and Section 128 of Indian Contract act, it is now crystal clear that the liability of the guarantor of a loan fall within the provisions of Section 138 NI Act.

Court added that, with the presumption under Section 139 NI Act raised in the favour of the complainant as the accused admitted his signatures on the cheque, the burden of proof was on the accused to raise a probable defence.

Such burden is only to the extent of the preponderance of probabilities but mere verbal denial won’t discharge even this burden. The onus was on the accused to prove that the signatures on the agreement were not his.

In the absence of evidence for the above, Court used its power under Section 73 of the Evidence Act to compare his signatures on the vehicle agreement with the admitted signatures on the cheque.

In view of the above discussion, a presumption existed in the favour of the complainant, and it was the accused who had to discharge the onus, but he miserably failed to do so.

Therefore, the complainant duly proved his case against the accused for offence punishable under Section 138 NI Act, 1881 beyond the shadow of any reasonable doubt. [Anju Devi v. Mukesh, CC No. 37173/2019, decided on 9-5-2022]

Case BriefsHigh Courts

Delhi High Court: Asha Menon, J., held that if no offence is attributed to the company, its Directors and other persons responsible for the conduct of its business cannot eb saddled with any liability.

The petitioner had filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the respondent. It was stated that, the commercial space owned by the petitioner had been let out upon terms and conditions in the Rent Agreement.

The above-said rent agreement was executed between the petitioner and the respondent’s company. Further, in March-April, 2013 the respondent was alleged to have issued five cheques duly signed by the Managing Director to discharge the company’s liability to pay the rent.

The above-said cheques were bounced; hence the complaint was filed.

Analysis and Decision

High Court observed that the Company upon which the primary liability rests and a person who is sought to be made vicariously liable for an offence of which the principal accused is a company, would need to have a role to play in relation to the incriminating act.

Section 141 of the N.I. Act operates only when the offence under Section 138 of the N.I. Act is committed by a company.

Further, Court stated that the Company being the primary accused must be found to have committed an offence. Thereafter, through the legal fiction created by Section 141 of the N.I. Act, the Directors and other persons responsible for the conduct of its business also become vicarious liable.

In the present matter, all the averments were against the respondent, who was described as Managing Director.

There was no pleading which suggested that the Company had committed any offence.

When no offence is attributable to the Company, it is not possible to attach liability on the Managing Director by the deeming provisions of Section 141 of the N.I. Act.

Bench added that, amendments of simple technical infirmities alone can be allowed but not the filing of a fresh complaint with improved pleadings in the garb of the amendment.

Hence, in view of the above discussion, Court denied grant permission to amend the complaint.

Therefore, the petition was dismissed. [Hari Shamsher Kaushik v. Jasbir Singh, 2022 SCC OnLine Del 1379, decided on 9-5-2022]


Advocates before the Court:

For the Petitioner: Mahesh K. Mehta, Advocate

For the Respondent: None

OP. ED.Practical Lawyer Archives

To pursue corporate relationships and transactions, it is very common for parties to enter into a confidentiality agreement on a non-disclosure agreement (NDA). The primary intent of executing such an NDA is to facilitate exchange of confidential information among parties and to that the confidential information disclosed thereunder will be safeguarded during the term of and (sometimes even) post-termination of the NDA.

Typically, there are certain provisions in an NDA which enable the discloser in protecting confidential information from unauthorised use or disclosure by the recipient, the latter’s representatives and any third parties and to limit liability of the contracting parties (as applicable) with respect to confidential information.

We are discussing some of these provisions in this article as under:

Return or destruction of confidential information

Discloser typically shares the confidential information to recipient for a designated business or professional purpose. Therefore, from discloser’s perspective, it is crucial to ensure confidential information is safeguarded and secured after accomplishment of intended purpose of disclosure of confidential information.

Prospect to return or destruction of confidential information is instrumental in ensuring recipient will not make any unauthorised use of confidential information post completion of intended purpose of disclosure of confidential information or termination of the NDA.

Triggering point: There are different triggering points wherein discloser can make recipient return or destroy confidential information. The following are such triggering points:

(a) Upon termination or expiry of the agreement.

(b) Upon termination or expiry of discussions between discloser and recipient.

(c) Upon request (oral or written) of the discloser or its representatives.

From discloser’s perspective, triggering of return or destruction of confidential information obligation based on termination or expiry of the agreement or discussions will be beneficial, so that discloser has no need to specifically request recipient to return or destroy confidential information as the recipient is implied to do so following the occurrence of stipulated event.

From recipient’s perspective, return or destruction of confidential information obligation qualified by a written request of discloser is useful to recipient as there is no onus on recipient to return or destroy confidential information unless and until the same is requested by the discloser in writing.

Return or destruction of notes

Notes means any notes, summaries, analysis, materials, etc. prepared by recipient or its representatives based on the confidential information. Inclusion of return or destruction of notes depends on parties. Generally discloser prefers to include the same and sometimes recipient prefers to exclude the same.

Certification or confirmation

Proof of such return or destruction of confidential information can be established with an obligation on recipient either to certify or confirm such return or destruction of confidential information. This will make discloser feel comfortable to learn its confidential information is either returned or destroyed.

From liability perspective, certification of return or destruction of confidential information is a bit more obligatory in nature. Confirmation of return or destruction of confidential information is less obligatory. For recipient’s benefit, certification or confirmation of return or destruction of confidential information can be tied to a written request of the discloser. This will ensure that recipient will be required only to confirm or certify of return or destruction of confidential information only if requested in writing by the discloser.

Retained confidential information

Like every rule comes with an exception, in certain cases, recipient will be exempted from this obligation to return or destroy confidential information. This is to enable recipient to retain confidential information in permitted cases for legal, compliance and regulatory purposes. Typically, a recipient will be permitted to retain copies of confidential information as required by law, compliance or record retention policies or as part of automated archival or backup copies.

Restricted access

To ensure recipient will not make use of retained copies of confidential information beyond permitted purposes, discloser may prefer to include a provision of restricted access to retained copies and use such copies for permitted copies only. This is to ensure only certain permitted personnel (i.e. legal, compliance or IT personnel) will have right to access such retained confidential information and such permitted personnel will further use such retained copies of confidential information only for permitted purposes only.

Survival

Survival of confidentiality obligations with respect to retained copies of confidential information is another parameter that will influence time period for which recipient will have to protect such retained copies of confidential information.

Typically, obligations (confidentiality, non-use or other, as applicable) with respect to retained copies of confidential information may survive:

(a) In perpetuity.

(b) For so long as the confidential information is retained by recipient.

(c) For the term of the NDA.

Term and protection period

Term of NDA is time duration for which the NDA will be in effect.

Protection period will be term for which the confidentiality obligations will be in effect without giving consideration to the fact that NDA is in effect or expired.

Triggering point: For an NDA to become effective or application of confidentiality obligations may begin from the effective date of agreement or date of disclosure or receipt of confidential information.

Tenure: Term or protection period can be a fixed term or perpetual. For protection period, sometimes confidentiality obligations will survive for so long as confidential information is retained by recipient.

Representations and warranties

Common representations and warranties in NDAs are discloser’s representation or warranty as to discloser’s right to disclose confidential information—this is to comfort the recipient that discloser is competent to disclose the confidential information to recipient.

One common caveat in representation and warranty segment is that information is provided on “as is” basis. This reflects that discloser passed on confidential information to recipient as it is without substantiating veracity of confidential information as it will be highly impossible for discloser to guarantee every piece of confidential information is true and accurate as the confidential information may be complied from different channels over which the discloser may have no control.

Among other representations and warranties, NDAs may contain the following:

(a) Parties’ authority to enter into the confidentiality agreement.

(b) Parties will comply with applicable laws and rules.

(c) Execution of the NDA will not violate any third party agreements or intellectual properties.

Generally, will contain disclaimer about accuracy or completeness of confidential information. Core purpose of such disclaimer is to say discloser does not warranty or guarantee about accuracy or truthfulness of confidential information as said above, confidential information will be compiled or received from multiple sources.

Disclaimer of liability: From discloser’s perspective, liability disclaimer is crucial as discloser will disclaim liability for any claims based on use of confidential information by recipient. However, this can be caveated for recipient’s benefit, with addition of “except for matters specifically agreed in the agreement”. This caveat will ensure that discloser will be liable for any claims based on matters specified in the confidentiality agreement and recipient will have leverage to make successful claims based on matters specifically agreed therein.

Injunctive relief

It is crucial for discloser to have right to seek injunctive relief or specific performance of the confidentiality agreement to prevent unauthorised use or disclosure of confidential information by recipient or its representatives or to limit damage related to any commission of unauthorised use or disclosure of confidential information.

From discloser’s perspective, qualifiers (without necessity of posting bond or without necessity of proof of damages) will make life of discloser easy to seek injunctive or other relief without the necessity of proof to backup damages claimed and without necessity of giving security with respect to such claim.

This is a special right given to discloser to seek remedies for any unauthorised use or disclosure of confidential information. At the same time, this right can also be mutual to discloser and recipient as a non-breaching party to claim relief for commission of breach of confidentiality agreement by breaching party.

Compensation for breach

Typically, in NDAs, either party does not prefer to have an obligation to indemnify the other party for any breach of the confidentiality agreement. Instead, a party may agree to pay compensation to a prevailing party in a litigation as awarded by court of competent jurisdiction in a final, non-appealable order.  Such compensation may include reimbursement of legal and miscellaneous expenses also. One way to limit liability for paying compensation is qualifying such expenses and fees by caveat of reasonable and documented. As a reason, non-prevailing party will only have to pay such expenses provided they are reasonable in nature and substantiated by proof of documentation.


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

Legal RoundUpWeekly Rewind

 


Top Story


 Thane Court

Man allegedly cheats a woman by suppressing material fact of him being homosexual: Will Thane Court grant him bail? Read

Noting the fact that a man suppressed the material fact of his private life before marriage i.e., about him being a homosexual, Rajesh S. Gupta, J., found that, the whole life of a young girl had been spoiled due to the material suppression, if the same would have been shared prior to the marriage then the consequence would be different.

Bench expressed that,

No doubt, every individual has its dignity to live in the society. No other person can interfere into lifestyle but that does not mean that a person gets liberty to spoil the life of either of spouse.

https://www.scconline.com/blog/post/2022/04/12/man-cheats-woman-not-disclosing-homosexuality/


Supreme Court | Updates


Husband suspects paternity of child; Supreme Court allows DNA test while granting conditional compensation of 30 lakhs to wife if suspicion proves to be wrong

In a very interesting case where the husband had disputed paternity of child on suspicion, though the Supreme Court has allowed the DNA test, it has also granted a conditional compensation of thirty lakhs to the wife if the suspicion proves to be wrong and husband turns out to be the father of the child.

The couple got married on 05-02-2014 and the marriage was consummated on 09-02-2014. The child was born after 261 days, i.e., about 17 days earlier which was almost after 9 months, therefore, the wife had contended that there was no reason to presume that the petitioner was pregnant when she married the respondent.

Before the Supreme Court, the Bombay High Court had also directed the DNA test.

https://www.scconline.com/blog/post/2022/04/12/paternity-dna-test-compnesation-husband-wife-family-supreme-court/

2006 Meerut Fire Tragedy| Organizers held guilty! 60:40 liability to compensate victims fixed on Organizers & State

In the 2006 Meerut fire case, the Supreme Court has held the Organizers responsible for the incident and not the Contractor as the Contractor was only responsible for executing work as assigned to him by the Organizers.

The victims can finally see some ray of hope after 16 years of the unfortunate incident that claimed 65 lives and left 161 or more with burn injuries as the Supreme Court has now directed the Chief Justice of the Allahabad High Court to entrust the work of determination of compensation to a Judicial Officer in the rank of District Judge/Additional District Judge at Meerut within two weeks of the present order to work exclusively on the question of determination of the compensation on day-to-day basis.

https://www.scconline.com/blog/post/2022/04/13/meerut-fire-tragedy-compensation-organizers-supreme-court-judgments-legal-research-updates-news/


High Court | Updates


Bombay High Court

Whether absence of President of State Commission or District Forum for reasons beyond control is sufficient for striking down S. 29A as unconstitutional? Bom HC decides

Stating that, the Courts cannot examine the constitutional validity if a situation created by impugned legislation is irremediable, the Division Bench of Bombay HC, addressed a matter wherein the constitutional validity of Section 29A of the Consumer Protection Act, 1986 was challenged.

High Court observed that, the language of Section 29A of the Consumer protection Act is intended to provide for a situation where a President of State Commission or District Forum is non-functional, either having not been appointed in time or is on leave due to reasons beyond his control.

The scheme of appointment and adjudication of consumer disputes is laid down under the Act to make the District Forum or State Commission continuously functional, allowing the Members in the absence of the President to function in a situation beyond the control of the Members of the Forum.

https://www.scconline.com/blog/post/2022/04/12/constitutional-validity-of-section-29a-of-consumer-protection-act-district-forum-state-commision-president/

Lawyer-client relationship is a fiduciary one; any act which is detrimental to legal rights of clients’ needs to be punished 

Stating that it is the duty of every Advocate to uphold professional integrity so that citizens can legally secure justicethe Division Bench of V.M. Deshpande and Amit B. Borkar, JJ., expressed that, professional misconduct refers to its disgraceful conduct not befitting the profession concerning the legal profession, which is not a business or trade and therefore, it must remain decontaminated

In this case, the Court was perturbed by the act of the Advocate to keep valuable security owned by the Client with him.”

Bench also observed that, The Advocates owe a social obligation to the Society while discharging professional services to the litigant. The Advocate should not commit any act by which a litigant could be deprived of his statutory and constitutional rights on account of the sublime position conferred upon him under the judicial system in the country.

https://www.scconline.com/blog/post/2022/04/12/lawyer-client-relationship-is-a-fiduciary-one/

Every partner is liable, jointly with all other partners and also severally for all acts of firm done while he is a partner: Is it true? Bom HC answers

Expressing that, a firm is not a legal entity, the Bombay High court, held that a partnership firm is only a collective or compendious name for all the partners. A partnership firm does not have any existence apart from its partners. Therefore, a decree in favour of or against the firm in the name of the firm has the same effect like a decree in favour of or against the partners.

Hence, when a firm incurs a liability, it can be assumed that all the partners have incurred that liability and so the partners remain liable jointly and severally for all the acts of the firm.

https://www.scconliane.com/blog/post/2022/04/15/every-partner-is-liable-jointly-with-all-other-partners-and-also-severally-for-all-acts-of-firm-done-while-he-is-a-partner/


 Punjab & Haryana High Court

Wife makes unfounded, indecent and defamatory allegations against husband to his senior officers, destroying his career & reputation: Mental Cruelty or not? P&H HC elaborates

Expressing that, Matrimonial cases are matters of delicate human and emotional relationshipthe Division Bench of P&H HC., expressed that, the Court no doubt should seriously make an endeavour to reconcile the parties, yet, if it is found that the breakdown is irreparable, then divorce should not be withheld.

The Court remarked that, The consequences of preservation in law of the unworkable marriage which has long ceased to be effective are bound to be a source of greater misery for the parties

https://www.scconline.com/blog/post/2022/04/11/wife-destroying-career-and-reputation-of-the-husband-irretrievable-breakdown-of-marriage-mental-cruelty/


Rajasthan High Court

Raj HC reiterated “Right to Procreation survives during incarceration” and “is traceable and squarely falls within the ambit of Article 21 of our Constitution; Parole granted

Rajasthan High Court granted parole to a convict whose wife sought 15 days of emergent parole for want of progeny.

High Court observed that, having progeny for the purpose of preservation of lineage has been recognized through religious philosophies, the Indian culture and various judicial pronouncements. the right of progeny can be performed by conjugal association; the same has an effect of normalizing the convict and also helps to alter the behavior of the convict prisoner.

https://www.scconline.com/blog/post/2022/04/11/raj-hc-reiterated-right-to-procreation-survives-during-incarceration/


Legislation Updates 


Income-tax (8th Amendment) Rules, 2022 

Ministry of Finance notified Income Tax (8th Amendment) Rule, 2022 in order to amend the guidelines of Infrastructure Debt Fund in the parent rules of Income Tax Rules, 1961. The 8th amendment will be in force with immediate effect. The amendment set up the Infrastructure Debt Fund as a Non-Banking Financial Company (NBFC) according to the conditions set by the Reserve Bank of India in the Infrastructure-Debt Fund–Non-Banking Financial Companies (Reserve Bank) Directions, 2011.

https://www.scconline.com/blog/post/2022/04/09/infrastructure-debt-fund-guidelines-modified-vide-income-tax-8th-amendment-rules-2022/

SEBI (Listing Obligations and Disclosure Requirements) (3rd Amendment) Regulations, 2022 

On 11th April, 2022, Securities and Exchange Board of India issues Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (3rd Amendment) Regulations, 2022. This regulation comes into effect with immediate effect and aims to replace “asset cover” with “security cover” for the listed debt with Securities and Exchange Board of India (SEBI). Asset cover certificate is used to monitor the adequacy of assets charged against the debt obligations of the person issuing it. It is submitted to the Debenture Trustee.

https://www.scconline.com/blog/post/2022/04/12/asset-cover-sebi-security-cover-legal-research/

Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2022 

On April 12, 2022, the Department of Economic Affairs (DEA) has issued the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2022 to further amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The amendment modifies the period of “Convertible note”from 5 years to 10 years.

https://www.scconline.com/blog/post/2022/04/15/foreign-exchange-management-non-debt-instruments-amendment-rules-2022/

National Insurance Company Limited (Merger) Amendment Scheme, 2022 

The Central Government notifies National Insurance Company Limited (Merger) Amendment Scheme, 2022 to amend the National Insurance Company Limited (Merger) Scheme, 1973.

In the National Insurance Company Limited (Merger) Scheme, 1973, the authorised share capital of three public sector general insurance companies has been enhanced from ‘seven thousand five hundred crore divided into seven hundred fifty crore’ to ‘fifteen thousand crore divided into fifteen hundred crore’.

https://www.scconline.com/blog/post/2022/04/15/authorised-share-capital-of-three-public-sector-general-insurance-companies-enhanced-vide-national-insurance-company-limited-merger-amendment-scheme-2022/

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): After forceps delivery, a woman lost her control over passing urine and stool due to the negligence of a doctor, the Coram of R.K. Agrawal (President) and Dr S.M. Kantikar (Member) upheld the decision of State Commission with respect to compensation of Rs 8 lakhs.

The complainant (referred to as the patient) during pregnancy was under Antenatal care of Dr Vartika Mishra (OP). It was alleged that the OP conducted her forceps delivery, which resulted in 4th degree tear in the perineum (area between the vaginal canal and anus), further, the OP stitched the skin only, without muscle repairs, hence the patient lost her control over passing the urine and stool.

Thereafter, the complainant consulted another doctor who diagnosed ‘poor tone’ and ‘very poor anal squeeze’. Later the patient consulted various doctors but did not get full recovery in fact the patient was deprived of marital happiness for 2 years and lost her chance for normal delivery in future.

On being aggrieved, the Consumer complaint was filed before the State Commission and claimed Rs 35 lakhs as compensation.

State Commission partly allowed the complaint and directed the OP to pay a sum of Rs 8,00,000.

Being aggrieved with the above, an instant first appeal was filed.

Analysis and Decision

Commission held that there was negligence during outlet forceps delivery.

In addition to the above, there was a failure of duty of care during post-delivery period and medical record of the OP including Dr Abha Singh failed to convince the Commission about proper post-partum care.

“…the patient was complaining repeatedly about pain in the suture site but both the doctors have simply prescribed medicines, but ignored or not carefully examined the suture site for induration or infection, surprisingly advised to use ‘coconut oil with kapoor’ for about 6 months.”

Coram noted that the patient was a young woman and in primi gravida (first pregnancy). She, after delivery, for her sufferings ran from pillar to post to various hospitals in Raipur and Mumbai.

While concluding the matter, the Commission held that, the patient developed 4th-degree perineal tear after forceps delivery, which squarely attributed to the failure of duty of care, thus, medical negligence. Also, she did not get post-partum care as per accepted reasonable standards.

Therefore, State Commission’s order was affirmed. [ Dr Vartika Mishra v. Rachana Agrawal, FA No. 948 of 2015, decided on 25-2-2022]


Advocates before the Court:

Appeared at the time of arguments through Video Conferencing

For the Appellant : Mr. Vaibhav Agnihotri, Advocate Mr. Dhruv Chawla, Advocate

For the Respondents : Mr. Mohammad Sajid, Advocate

Case BriefsHigh Courts

Bombay High Court: Expressing that, a firm is not a legal entity, N.J. Jamadar, J., held that a partnership firm is only a collective or compendious name for all the partners.

The present matter was filed to recover the amount which the plaintiffs claimed to have invested in defendant 1 – firm, along with the interest at the rate of 24% p.a. on the basis of the credit notes.

The plaintiffs asserted that defendant 1 was a registered partnership firm and defendants 2 to 4 were its partner and in charge of day-to-day affairs of defendant 1 -firm and otherwise responsible for the conduct of the affairs and business of defendant 1—firm.

Plaintiffs’ case was that upon the representation of defendants 2 to 4 that the plaintiffs would get a handsome return on the investment made with the defendants, the plaintiffs had invested a sum of Rs 1 crore, over a period of time. The said amount was to be repaid on demand along with interest.

Further, the defendant committed default in repayment, hence the suit was filed.

Analysis and Decision

Defendant 1—firm has 8 partners and the names of the partners are reflected in the record maintained by the Registrar of Firms. Hence, it was incumbent upon the plaintiffs to implead all the partners of defendant 1 – firm.

The Bench stated that, there is no qualm over the claim of the plaintiffs that defendant 1 is a registered partnership firm and defendants 2 to 4 are its partners.

Section 25 of the Partnership Act, 1932, provides that every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner. 

High Court stated that, a partnership firm does not have any existence apart from its partners. Therefore, a decree in favour of or against the firm in the name of the firm has the same effect like a decree in favour of or against the partners.

Hence, when a firm incurs a liability, it can be assumed that all the partners have incurred that liability and so the partners remain liable jointly and severally for all the acts of the firm.

In view of the above, Court concluded by stating that the plaintiffs are not enjoined to implead all the partners of the firm.

Impleadment of the rest of the partners is not necessary. [Aziz Amirali Ghensani v. Ibrahim Currim & Sons, Interim Application (L) No. 1897 of 2022, decided on 8-4-2022]


Advocates before the Court:

Mr. Rashmin Knandekar, a/w Ms. Karishni Khanna, i/b Amit Tungare, Ms. Jill Rodricks, Mr. Vineet Jain and Mr. Deep Dighe,for the Plaintiffs.

Mr. Siddha Pamesha, a/w Declan Fernandez, i/b Purazar Fouzdar, for Defendant no.4/Applicant in IA.

Mr. Jamsheed Master, i/b Natasha Bhot, for Defendant no.3. Mr. Zain Mookhi, a/w Ms. Janhavi Doshi, i/b Manir  Srivastava Associates, for Defendant no.2.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Division Coram of P. Anjani Kumar (Technical Member) and P. Dinesha (Judicial Member) allowed appeals against the order of First Appellate Authority which upheld the demand of service tax by the adjudicating authority.

Show cause notices were issued based on the agreement between players and franchisee and MOU between M/s. United Breweries Limited (UBL for short) and M/s. Royal Challengers Sports Private Limited (RCSPL for short), alleging thereby that the appellant had provided the services of promotion or marketing of goods/services by engaging himself in carrying advertising, promotional activity, team endorsement provided by M/s. RCSPL/franchisee/co-sponsors and hence, the same was taxable in terms of Section 65(105)(zzb) of the Finance Act, 1994. It was further proposed that the appellant had also provided the services under the category of “Business Auxiliary Service” as the services provided by the appellant were covered under (i) and (ii) to Section 65(19) of the 1994 Act. Thus, service tax was demanded for the period 2009-10 and 2008-09, apart from interest under Section 75 and penalties under Sections 76 and 77.

In the reply the appellant had denied of any liability however, the adjudicating authority chose to confirm the demand of service tax as well as interest and penalties. Appeal was made to the first appellate authority wherein the order of the adjudicating authority was upheld, thus the instant appeal was filed.

The Tribunal agreed with the contention of the senior advocate for the appellant that the issue was no more res integra as the very same issue was considered by the Kolkata Bench of the CESTAT in Sourav Ganguly v. Commissioner of Central Goods & Service Tax, Kolkata, 2020 SCC OnLine CESTAT 378 wherein, the issue has been decided in favour of a similarly placed taxpayer. The Kolkata Bench had taken into account the decision of Bombay High Court in the case of Indian National Shipowners’ Association v. Union of India, 2008 SCC Online Bom 1187 wherein it had been held that the activity of the appellant therein could not be subjected to levy of service tax under Business Auxiliary Service prior to July 1st, 2010.

The Tribunal finally relying on the order of the Kolkata Bench decision allowed the appeal and held that there is no liability on the appellant and hence, demands raised for both the periods cannot sustain.[Anil Kumble v. Commr. of Central Excise, Customs & Service Tax, 2022 SCC OnLine CESTAT 105, decided on 31-03-2022]


Mr. V. Raghuraman, Senior Advocate For the Appellants

Mr. P. Gopakumar, Additional Commissioner (AR)


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal: The Coram of Bachu Venkat Balaram Das (Judicial Member) and Narender Kumar Bhola (Technical Member) initiates insolvency proceedings against Logix City Developers due to default in payment.

The Operational Creditors, Colliers International (India) Property Services Private Limited sought an order to initiate the Corporate Insolvency Resolution Process of the Corporate Debtor viz., Logix City Developers Private Limited, declare  moratorium and appoint Interim Resolution Professional.

Background

The Operational Creditor’s case was that the parties entered into an agreement for providing construction for Bloom Zest Project at Noida and appointed the operational creditor as its project manager. On providing various services, the Operational Creditor raised various invoices and against some of the invoices raised, the Corporate Debtor being unable to pay its obligations allotted a residential unit to the Operational Creditor.

Vide an email, the Corporate Debtor was requested to pay the Operational Debt. However, he failed to do so. Hence, a demand notice was issued to him.

Corporate Debtor acknowledged and admitted its liability to pay the Operational Debt. Therefore, the present petition was filed.

Corporate Debtor on realizing the prevalent real estate conditions caused due to COVID-19 pandemic, failed in paying the amounts as claimed by the Operational Creditor under Demand Notice. Further, it stated that the delay in payment of installment amounts was due to the fact that the construction of the said project was stopped due to various EPCAJ NGT Orders and thereafter unprecedented conditions created due to COVID-19 Pandemic.

Additionally, the Corporate Debtor stated that it is an indisputable fact that the Real Estate Business is going through slump whereby all the builders and promoters of the real estate projects are experiencing heavy economic losses.

Analysis and Decision

Tribunal found that the Corporate Debtor failed to discharge its liability as the admitted amount remained unpaid as on date.

“…this authority has to only satisfy itself regarding default in payment by the corporate debtor towards the operational creditor and there is no pre-existing dispute”

In the present matter, the above two conditions are fulfilled, hence it deserves to be admitted. Therefore, the Tribunal initiated the CIR Process of Corporate Debtor.

Tribunal appointed Insolvency Resolution Professional Yogesh Kumar Gupta as Interim Resolution Professional as proposed by the Operational Creditor.

Further, Moratorium was declared which shall have effect from this Order till the completion of CIRP for the purposes referred to in Section 14 of the IBC, 2016. [Colliers International (India) Property Services (P) Ltd. v. Logix City Developers (P) Ltd., 2022 SCC OnLine NCLT 37, decided on 22-3-2022]


Advocates before the Tribunal:

Operational Creditor: Adv. S. Sriranga, Adv. Balaji Srinivasan, Adv. Garima Jain and Adv. Gayatri Mohite

Corporate Debtor: Adv. Vijay Kaundal

Case BriefsDistrict Court

Patiala House Courts, New Delhi: Shreya Arora Mehta, Metropolitan Magistrate, while addressing a matter with regard to Section 138 of the Negotiable Instruments Act stressed the liability of a Director for such offences.

Accused Company through accused 2 – Chairman cum Managing Director along with accused 3 its Managing Director and accused 4 Deputy Managing Director approached the complainant in the year 2006 to engage their services for releasing advertisement of the accused company in various newspapers and publications.

The complainant agreed to extend a credit period of 60 days for payment of the bills with statutory taxes and services charges/commission. The accused persons sent a release order to the complainant for advertisement in various print media. Bills were raised on monthly basis for service provided.

It was stated that till the second quarter of 2008 the complainant received most of the payment but thereafter there was a default by the accused persons in making the time-bound scheduled payment. Later bills of 6 months were kept pending due to which the complainant was forced to ask the Indian Newspaper Society to issue a caution notice to its members regarding the accused company.

The accused company issued 84 cheques with the assurance that on presentation the same would be encashed, but all the cheques were dishonoured and returned unpaid for the reasons either “funds insufficient” and or exceeding arrangement.

Accused persons did not reply to the legal notice under Section 138 of the Negotiable Instruments Act, 1881. Hence the present complaint was filed.

Accused 3 admitted his signatures on all the cheques but stated that the same was done under the pretext of accused 2 who was the chairman cum director of the accused 1. The accused 4 submitted that he had no dealings whatsoever with the complainant company.

Section 141 of the Negotiable Instruments Act, 1881, does not say that a Director of a company shall automatically be vicariously liable for commission of an offence on behalf of the company.

“…the complainant has to make specific averments in the complaint that the accused persons were incharge or were responsible to the company or conduct of the business of the company. And prosecution could be launched not only against the company on behalf of which the cheque issued has been dishonoured, but it could also be initiated against every person who at the time the offence was committed, was in charge of and was responsible for the conduct of the business of the company.”

In the present case, specific averments were made against accused 3 and 4 that they are in charge of and responsible to the accused 1 company for the conduct of the business of the company and were looking after the business of the company and the offence under Section 138 NI Act had been committed with the knowledge, consent and connivance of the accused 3 and 4 besides other and was attributable to neglect on their part.

“…under Section 139 of the Negotiable Instrument Act, 1881 there is a presumption in favour of the complainant that the cheques in question were issued by the accused in discharge of his lawful liability. It is mandatory for the court to draw a presumption against the drawer/accused. However, the said presumption is rebuttable.” 

Accused persons raised arguments that no work order, release order or publication bill was placed on record nor the complainant produce the details of the newspapers etc. To substantiate the same, the accused person had failed to prove on record any admissible and reliable evidence to discharge their onus of rebutting the initial presumption in favour of the complainant as enshrined under Section 139 NI Act.

In view of the above, the essentials of Section 138 NI Act stand duly established and accused persons failed to rebut the same.[Prominent Advertising Services v. Koutons Retail India Ltd., 2022 SCC OnLine Dis Crt (Del) 12, decided on 22-3-2022]

Case BriefsHigh Courts

Delhi High Court: While addressing a matter revolving around Section 138 of the Negotiable Instruments Act, 1881, Subramonium Prasad, J., held that Courts should primarily proceed on the averments in the complaint, and the defence of the accused cannot be looked at the stage of issuing summons unless it can be shown on admitted documents which the Supreme Court described as “unimpeachable in nature and sterling in quality” to substantiate that there was no debt due and payable by the person who has issued the cheque or that the cheque amount is large than the debt due.

Petitioner sought to call for record and quash complaint about the offence under Section 138 of the Negotiable Instruments Act, 1881.

Averments made in the complaint were:

Petitioner had approached the complainant/respondent and requested for a friendly loan of Rs 9,00,000, later after a few months he again approached for a loan of Rs 6,00,000 and in the said amount, Rs 4,90,000 was given through RTGS and Rs 1,10,000 was given in cash.

Further, while returning the amount, the petitioner issued a cheque, which was returned by the bank with the remark “Exceeds Arrangement”. Even after notice, the petitioner did not pay the amount, hence a complaint under Section 138 of the NI Act was registered.

Petitioner submitted that he had given instructions to his nephew who deposited a sum of Rs 2,69,000 through UP in the bank account of the wife of the complainant, hence the cheque of Rs 15,00,000 presented by the complainant was greater than the amount due, hence the complaint shall be quashed.

Analysis, Law and Decision

High Court expressed that the purpose of inserting Chapter XVII in the Negotiable Instruments Act, 1881 was to bring out sanctity in commercial transactions.

In the present matter, it was noted the petitioner had issued a cheque for a sum of Rs 15,00,000.

Section 139 of the Negotiable Instrument Act, 1881, creates a presumption that unless contrary is proved, the holder of a cheque has received the cheque for discharge in whole or in part of any debt or other liability.

The Supreme Court’s decision in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197, was also cited.

Petitioner contended that the cheque deposited by the complainant was for a greater amount as a sum of Rs 2,69,000 had already been paid.

Further, it was stated that the details of the UPI (Unified Payment Interface), which has been filed by the petitioner, show that the amounts deposited in the bank account of the wife of the complainant by the nephew of the petitioner cannot be taken as evidence which is unimpeachable in nature and sterling in quality so as to demolish the case of the respondent and to substantiate the contention of the petitioner that the proceedings initiated under Section 138 of the Negotiable Instrument Act, 1881 is a complete abuse of the process of law.

The Bench stated that the Courts should primarily proceed on the averments in the complaint, and the defence of the accused cannot be looked at the stage of issuing summons unless it can be shown on admitted documents which the Supreme Court described as “unimpeachable in nature and sterling in quality”.

“It is well settled that the inherent powers should be exercised sparingly, with circumspection and in the rarest of rare cases when the Court is convinced, on the basis of material on record, that allowing the proceedings to continue would be an abuse of process of law or if the ends of justice is required that the proceedings ought not to be quashed.”

Hence, High Court denied accepting that the amounts deposited by the nephew of the petitioner in the bank account of the wife of the complainant was towards the debt incurred by the petitioner.

Therefore, no case for quashing the complaint was made out. [Satinderjeet Singh v. Sameer Sondhi, 2022 SCC OnLine Del 635, decided on 28-2-2022]


Advocates before the Court:

For the Petitioner: Deepak Kohli, Advocate

For the Respondent: None

Case BriefsDistrict Court

Saket District Court, Delhi: Sonam Singh, MM (NI Act) acquitted the accused who was charged with an offence under Section 138 of the Negotiable Instruments Act, on finding that he raised sufficient doubt about the existence of a legally sustainable liability.

Factual Background

Complainant was the daughter-in-law of the accused. She alleged that in August 2020, the accused who was her father-in-law promised to pay her maintenance of Rs 45,000 every month for his grandson.

Further, she alleged that in lieu of the promised amount he handed over a cheque. On not receiving the amount in her bank account, she enquired with the bank and got to know that initially the cheque was cleared but due to the accused being hand-in-glove with certain officials from the said bank, the amount of Rs 45,000 which was credited in her account was subsequently debited from her account.

Complainant alleged that since she suspected that the accused had cheated her, she requested the bank to disclose the status of her cheque and after much inconvenience, the bank told her that due to the difference between words and figures written on the cheque, it was wrongly cleared by them initially.

Adding to the above allegations, she also stated that the amount was debited from her account as the accused had conspired with the bank official and alleged that she was appalled when she got to know that the cheque was dishonored on the ground of “CHEQUE IRREGULARLY DRAWN/AMOUNT IN WORDS AND FIGURES DIFFERS” and further on contacting the accused, he refused to pay the amount of cheque in question.

It was also alleged by her that she got to know from the Bank that the accused had personally asked the bank to stop the payment of the cheque in question and he had deliberately written the wrong amount in words on the cheque.

Since the accused did not pay the complainant within 15 days of service of legal notice, the present complaint was filed seeking prosecution of the accused of the offence punishable under Section 138 NI Act.

Analysis, Law and Decision

After referring to the provisions of Negotiable Instruments Act, Bench referred to the Supreme Court decision in Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., (2000) 2 SCC 745, wherein the Court discussed the conditions of Section 138 NI Act which are to be fulfilled for a cause of action to arise in favour of the complainant.

Court expressed that,

The object underlying Section 138 of the NI Act is to promote faith in the efficacy of the banking system and give credibility to negotiable instruments, in business transactions. The intention is to punish those unscrupulous persons, who issued cheques for discharging their liabilities, without really intending to honour the promise.

Issues in the present matter:

  • Service of legal demand notice
  • Cheque being valid and return memo being fabricated
  • Whether the cheque in question can be said to have been issued in discharge of a legally enforceable debt or liability or not

Service of legal demand notice

Court stated that considering the presumption of due service, the accused was under an obligation to lead evidence to prove that the notice was not served on him. However, he has failed to bring any evidence to rebut the presumption of due service of legal demand notice.

Mere denial of not receiving the legal demand notice would not amount to proving his defence.

 Validity of Cheque and genuineness of the return memo

It was proved that the cheque was dishonoured on the instructions of the accused who gave instructions to the bank to reverse the entry, admitted by him in his statement under Section 313 CrPC.

The Court witness brought a letter issued by the bank that erroneously the cheque number mentioned in the return memo dated 11.09.2020 was 682148 instead of 682146. He further explained in his cross-examination conducted by the counsel for the complainant that the typographical mistake of the cheque number in the return memo is a “clerical mistake and should not have occurred.”

 Accused did not bring any evidence to show that there was any conspiracy between the complainant and the bank to issue a fabricated return memo. The Bench stated that it was relevant to note that the accused had admitted having signed the cheque on a bank account maintained in his name and filled all the particulars of the cheque except the name of the complainant.

Question of Liability

It is well-settled position of law that when a negotiable instrument is drawn, two statutory presumptions arise in favour of the complainant, one under Section 139 NI Act and another under Section 118(a) of the NI Act, which is a presumption of the cheque having been issued in discharge of legal liability and drawn for good consideration, arises.

Bench observed that it is explicit that on proof of foundational facts, the Court will presume that cheque was made or drawn for consideration and that it was executed for discharge of debt or liability, once the execution of negotiable instrument is either proved or admitted and the burden of proof lies upon the accused to rebut the said presumption.

This is an example of the rule of ‘reverse onus’ in action, where it is an obligation on the accused to lead what can be called ‘negative evidence’. The accused is not to prove a fact affirmatively, but to lead evidence to demonstrate the non-existence of debt or liability. Since, this rule is against the general principle of the criminal law of ‘presumption of innocence in favour of the accused’ and considering that such negative evidence, by character is difficult to lead, the threshold for the accused to rebut the presumption is on the scale of the preponderance of probabilities.

Court opined that, in the present matter, the accused succeeded in rebutting the presumption of legal liability, by exposing the inherent improbability of the case of the complainant.

Bench stated that, the improbability of the complainant’s story was further manifest from the fact that she had not filed any case for maintenance and only a case under DV Act had been filed. She failed to bring on record any document or court order to show that the accused promised her the maintenance of Rs 45,000 for his grandson.

Further, the accused, in his defence had argued that the cheque was not handed over to the complainant. In his statement under Section 313 CrPC, he stated that only when he received a message from his bank that an amount of Rs 45,000 was debited from his account, then he contacted his bank and told the bank he had not issued any such cheque. Any reasonable man would do as what accused did and direct his bank to stop the payment or reverse the entry.

The reason for not filing a police complaint with respect to misuse of the cheque by the accused was not filed as the complainant was his daughter-in-law and in Court’s opinion the said explanation was believable as the same could have caused him social embarrassment.

Conclusion

Accused raised sufficient doubt about the existence of a legally sustainable liability, which the complainant failed to prove after the onus shifted on her and therefore the end result was that the accused was acquitted of offence under Section 138 NI Act.

In view of the above complaint was dismissed. [Shakun Singh v. Chandeshwar Singh, CC No. 397 of 2020, decided on 24-12-2021]

Case BriefsDistrict Court

Dwarka Court, New Delhi: Shipra Dhankar, MM (NI Act) on noting that the dishonour of cheque occurred in consequence of an illegal and void agreement, dismissed the complaint under Section 138 of the Negotiable Instrument Act, 1881.

What are we dealing with in the present matter?

The Complainant was approached by the accused with the proposal that, in return for a commission/liaison fee, the accused can obtain in the complainant’s favour a tender issued by the NTPC where the accused enjoys “good links” with the higher authorities.

Thereafter, the complainant, after having applied for the said tender and paid the amount demanded from him, received from the accused a tender award letter, however, the said letter was later found to be forged.

In view of the above incident, the complainant demanded his money back from the accused, pursuant to which certain cheques were drawn in his favour out of which one got dishonoured.

Complainant approached the Court due to the dishonour of the above-said one cheque.

Analysis, Law and Decision

Section 138 NI Act clarifies that “debt or other liability” means a legally enforceable debt or other liability. The said legal position was fortified by the decision of Delhi High Court in Virender Singh v. Laxmi Narain, 2006 SCC OnLine Del 1328 wherein it was found that if the consideration or object of an agreement is unlawful, illegal or against the public policy, the agreement itself is void and legally unenforceable, as a result of this, any cheque issued in discharge of a liability under such a void agreement, cannot be said to be issued in discharge of a legally enforceable debt o liability.

The Bench also relied on Section 23 of the Indian Contract Act to see whether the agreement entered into by both the parties was for a lawful consideration/object or not.

Court on noting the fact that the sole purpose of the agreement was to obtain a tender in favour of the complainant, not on the basis of its intrinsic merit, but on the basis of “good links” of the accused with the NTPC higher authorities. Such agreements are expressly rendered void and of no legal consequence by virtue of Section 23 of the Indian Contract Act.

Hence the agreement was illegal and void.

In the present matter, presumption stood rebutted by the Complainant’s own version. The complainant’s own depiction of the transaction disclosed that the same was legally unenforceable and void.

Lastly, the Court referred to the maxim “in pari delicito portior est conditio defendantis”, which embodies the principle: “the Courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to a illegality or fraud”.

In light of the above discussion, the cognizance in the present complaint was declined and the complaint was dismissed. [Virender Dahiya v. Keshav Kumar, CC No. 11747 of 2021, decided on 10-1-2022]

Case BriefsHigh Courts

Bombay High Court: Bharati Dangre, J., Whether the Insurance Company can be absolved of its liability to pay compensation under the Employees Compensation Act, 1923, if the employee who has succumbed to an accident which took place during the course of employment, is a minor?

Appellants filed a claim based on the premise that the deceased was aged 18 at the time of the accident and was receiving wages of Rs 5,500 per month and compensation of Rs 6,22,545 was assessed.

The insurer opposed the above-said claim before the Commissioner/Labour Court, and it was disputed that the accident suffered by the deceased arose out of or in the course of employment with the OP.

Further, it was denied that there was any nexus between the alleged injury and the alleged accident and since the police papers revealed the deceased’s age was 15 years, it was stated that the claim was not maintainable under the Workmen’s Compensation Act, 1923, hence the same shall be dismissed.

Analysis, Law and Decision

Workmen’s Compensation Act, 1923 does not prohibit payment of compensation to a minor.

There is no age limit for a person to be employed as an employee under the Workmen’s Compensation Act, though Article of the Constitution of India, employment of child labour before 14 years in any factory or mine or any hazardous employment, there are enactments in the form of Child & Adolescent Labour (Prohibition & Regulation Act), 1986 where engaging services of children below 14, in any hazardous avocation, is an offence.

Elaborating further, it was stated that Workmen’s Compensation Act is a beneficial piece of legislation and if a person engaged by an employer, as an employee is a minor and his appointment, though is prohibited by any law in existence, meet with an accident and sustain a disability which can be a total or partial disability, the moot question is:

Whether an employee should be denied the compensation merely on the ground that the employer had engaged him by contravening the law and he shall be kept out of the benefits which would have been otherwise available to him on account of an accident which he has suffered, which occurred in his workplace and out of the course of his employment or whether his family can be denied compensation on his death?

Bench expressed that the impugned decision took a harsh stand and refused to fasten liability of compensation on the Insurance Company by recording that the deceased was a minor and insurance company was not liable to pay compensation on the said ground.

The insurance policy in the present matter clearly covered two persons and the liability covered a person employed by the insured for operation and maintenance or loading/unloading which covered a cleaner.

Labour Court’s approach defeated the very spirit and rationale behind the Employees Compensation Act and the claimants who were the parents of the deceased were held entitled to recover compensation only from the employer with very negligible chance of recovering the compensation.

High Court disapproved the above approach of the labour court and opined that the Insurance Company cannot be absolved of its liability to pay compensation to the claimants, the dependents of the deceased. Therefore, the impugned judgment of the Commissioner was modified to the limited extent of fixing the liability jointly and severally upon the employer and the Insurance Company.

First Appeal No. 246 of 2015

In this matter, Insurance Company was aggrieved by the award of compensation to the parents of the deceased, who succumbed to the injuries in the accident.

Labour Court had directed the employer and the Insurance company jointly and severally liable to pay compensation.

Claimant 1 had set up a claim under the Workmen’s Compensation Act by filing the application claiming that his son was employed by the OP on his Motor Tempo as loader and the said tempo met with an accident due to which the son died.

High Court stated that when the written statement on oath before the Commissioner and the certificate issued by the employer is juxtaposed against his statement recorded by the police during the course of investigation, the statement recorded under oath, admitting that deceased Deepak was his employee, assumed importance.

Bench expressed that in view of the inconsistency in the statement given to the police by the employer, denying any employer-employee relationship on one hand and the statement on oath filed in the form of written statement before the Commissioner, the Commissioner has rightly given weightage to the statement on oath and accepted the employer-employee relationship.

In view of the above, Court found no reason to interfere with finding of the Commissioner. [Mohammed Ali Abdul Samad Khan v. Dawood Mohd. Khati, 2021 SCC OnLine Bom 6670, decided on 10-12-2021]


Advocates before the Court:

Mr. Amol Gatne i/b Ms. Swati Mehta for the appellants in First Appeal No.169 of 2014 and for the respondents in First Appeal No.246 of 2015.

Mr. D.R. Mahadik for the appellant in FA No.246/2015 and for respondent in FA No.169/2014.

Case BriefsDistrict Court

XVIII Addl. Chief Metropolitan Magistrate, Bengaluru City: Manjunatha, XVII Addl. C.M.M., found the accused guilty for the offence under Section 138 of the Negotiable Instruments Act, on his failure to rebut the statutory presumption in favour of the holder of cheque.

Background

The complainant had filed the instant complaint under Section 200 of Code of Criminal Procedure read with Section 138 of the Negotiable Instruments Act against the accused alleging that, she had committed the offence punishable under Section 138 NI Act.

Complainants and the accused were well known to each other as they were residing in the same locality and in 2018, the accused had approached the complainant for a loan of Rs 4,00,000 for the purpose of urgent legal and domestic necessities and promised to repay the same within 6 months.

Considering her request the complainant had paid Rs 4,00,000 to the accused by way of cash.

The accused and her husband had executed an undertaking by acknowledging the receipt of the amount, but she failed to keep up her promises. On repeated demand and request, the accused issued a cheque but the same was returned unpaid with an endorsement “Funds Insufficient” in the drawer’s account.

Further, despite the notice, the accused had not paid the cheque amount and thereby she had committed an offence punishable under Section 138 NI Act.

Court had issued summons and later, the accused was enlarged on bail.

As per the direction of the Supreme Court in Indian Bank Assn. v. Union of India, (2014) 5 SCC 590, this Court treated the sworn in statement of the complainant as complainant evidence.

Analysis, Law and Decision

Court cited the decision of Sukur Ali v. State of Assam, (2011) 4 SCC 729, in which the Supreme Court opined that even assuming that the counsel for the accused does not appear because of the counsel’s negligence or deliberately, even then the Court should not decide a criminal case against the accused in the absence of his counsel since an accused in a criminal case should not suffer for the fault of his counsel and in such a situation the Court should appoint another counsel and in such a situation the Court should appoint another counsel as amicus curiae to defend the accused.

In the decision of K.S. Panduranga v. State of Karnataka, (2013) 3 SCC 721, Supreme Court held that, “regard being had to the principles pertaining to binding precedent, there is no trace of doubt that the principle laid down in Mohd. Sukur Ali (supra) by the learned Judges that the court should not decide a criminal case in the absence of the counsel of the accused as an accused in a criminal case should not suffer for the fault of his counsel and the court should, in such a situation, must appoint another counsel as amicus curiae to defend the accused and further if the counsel does not appear deliberately, even then the court should not decide the appeal on merit is not in accord with the pronouncement by the larger Bench in Bani Singh” .

The Court further held that in view of the aforesaid annunciation of law, it can safely be concluded that the dictum in Mohd. Sukur Ali (supra) to the effect that the court cannot decide a criminal appeal in the absence of counsel for the accused and that too if the counsel does not appear deliberately or shows negligence in appearing, being contrary to the ratio laid down by the larger Bench in Bani Singh (supra), is per incuriam. Furthermore, the transaction alleged in the case is purely a commercial transaction enetered into between two private individuals and the accused is not in judicial custody and he is not fall under any of the parameter under legal services authorities Act to get free legal aid. Under such circumstance question of appointing advocate for accused at the state cost may not arise at all.”

 Question for Consideration:

Whether the complainant proves that, accused issued cheque for Rs 4,00,000 towards discharge of her liability, which was returned unpaid on presentation for the reason “Fund Insufficient” and despite of notice she had not paid the cheque amount and thereby committed an offence punishable under Section 138 of NI Act?

Analysis, Law and Decision

Court stated that, Sections 118 and 139 of NI Act raises a presumption in favour of the holder of the cheque that he had received the same for discharge in whole or in part of any debt or other liability.

Further, it was added that the accused can take probable defence on the scale of the preponderance of probability to rebut the presumption available to the complainant.

Whether the accused had successfully rebutted the said presumptions of law?

Court observed that the accused had not disputed the issuance of cheque and her signature in the cheque.

When the drawer has admitted the issuance of the cheque as well as the signature present therein, the presumptions envisaged under section 118 read with section 139 of NI Act, would operate in favour of the Complainant.

 The Bench added that the above-said provisions laid down a special rule of evidence applicable to negotiable instruments. The presumption is one of law and thereunder the court shall presume that the instrument was endorsed for consideration.

“…when the complainant has relied upon the statutory presumptions enshrined under section 118 read with section 139 of NI Act, it is for the accused to rebut the presumptions with cogent and convincing evidence.”

It is worth noting that, Section 106 of Indian Evidence Act postulates that, the burden is on the accused to establish the fact which was especially within his special knowledge.

Hence, the burden is on the accused to prove that the cheque in question was not issued for discharge of any liability.

With regard to proof of existence of legally enforceable debt was concerned, Court referred to the decision of Supreme Court in Rangappa v. Mohan, (2010) 11 SCC 441, wherein it was observed that,

“In the light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by section 139 of the Act does indeed include the existence of the legally enforceable debt or liability”

 In another decision in, T. Vasanthakumar v. Vijayakumari, (2015) 8 SCC 378, it was held that once the accused has admitted the issuance of Cheque, as well as signature on it, the presumption under Section 139, would be attracted.

In the present matter, despite giving sufficient time, the accused neither led defence evidence nor cross-examined PW1, therefore the evidence placed by the complainant remained unchallenged and there was no reason to disbelieve the version of the complainant.

The complainant had not produced any document regarding the lending of the amount to the accused, but in the absence of any contrary evidence, the unchallenged testimony of the complainant had to be believed. As such there was no rebuttal evidence on behalf of the accused to rebut the presumption available under Sections 118 and 139 of the NI Act.

Therefore, the complainant’s case was acceptable.

The complainant proved that, for discharge of liability accused had issued a cheque and she had intentionally not maintained a sufficient amount in her account to honour the said cheque.

In view of the above discussion, the complainant had proved the guilt of the accused punishable under Section 138 NI Act.

Supreme Court in a decision of H. Pukhraj v. D. Parasmal, (2015) 17 SCC 368, observed that having regard to the length of the trial and date of issuance of cheque, it was necessary to award reasonable interest on the cheque amount along with cost of litigation.

The Bench held that rather than imposing punitive sentence if sentence of fine is imposed with a direction to compensate the complainant for its monetary loss, by awarding compensation under Section 357 CrPC, would meet the ends of justice.

Lastly, Court opined that it was just and proper to impose fine of the amount of Rs 4,55,000 which included interest and cost of litigation. [N. Muniraju v. Manjula, Criminal Case No. 25494 of 2019, decided on 1-1-2022]


Advocates before the Court:

For the complainant: S.K

For the accused: G.V.K

Case BriefsDistrict Court

Dwarka Courts, New Delhi: Medha Arya, MM (NI Act-03), resolved the dispute pertaining to Section 138 of Negotiable Instruments Act, 1881 in light of the 4 conditions laid down under the said Section.

Complainant was friends with one Lata Bhola for a number of years and the accused, son of Lata Bhola alongwith his mother told the complainant that they want to purchase a house but they were facing paucity of funds and requested the complainant to advance to them a friendly loan of Rs 6,30,000. Both son and mother agreed to repay the loan of complainant within 15 days, however, they avoided the repayment of the loan even after the expiry of the 15 days period.

Later, the cheque in question was issued by the accused with the assurance that it shall be duly honoured upon presentation. However, to the utter shock and dismay of the complainant, the said cheque in question was dishonoured vide cheque returning memo with remarks ‘payment stopped by drawer’.

When the accused failed to repay the cheque amount even after expiry of the 15 days from the date of service of legal notice, the complaint was filed by the complainant seeking the summoning, trial and conviction of the accused of the offence punishable under Section 138 NI Act.

Complainant’s case was that the period of limitation as per Section 142 of the N.I. Act, and the territorial jurisdiction to try the present complaint vests with this Court.

By virtue of Section 146 of NI Act, this Court is bound to presume the fact that the cheque was dishonoured for the reason mentioned in the returning memo, and this presumption has also not been dislodged by the accused.

Analysis, Law and Decision

Section 138 NI Act:

Before finding of conviction with the offence punishable under Section 138 N.I. Act can be returned against the accused, it has to be established, cumulatively-

(i) that the cheque in question was issued by the accused in favour of the complainant for the discharge of legally enforceable liability.

(ii) presentation of the cheque to the bank within three months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(iii) a demand being made in writing by the payee or holder in due course by the issuance of a notice in writing to the drawer of the cheque within thirty days of the receipt of information from the bank of the return of the cheques; and

(iv) the failure of the drawer to make payment of the amount of money to the payee or the holder in due course within fifteen days of the receipt of the notice.

In the opinion of this Court, the complainant proved on record that the cheque in question was presented by the complainant with her bank for encashment within the period of its validity. Accordingly, condition no. (ii) of Section 138 NI Act was satisfied.

Accused did not dispute that the legal notice was served upon him within the statutory period of limitation, hence condition (iii) was satisfied.

Further, the accused axiomatically admitted that he did not pay the amount of cheque in question to the complainant even after the expiry of 15 days from the date of receipt of legal notice. Therefore condition no. (iv) was satisfied.

Whether the cheque in question was issued by the accused to the complainant in discharge of legally enforceable liability?

Section 139 of the NI Act, 1881 carves out a presumption in favour of the drawee that the cheque was issued to him in discharge of a debt or other liability of a legally enforceable nature. Also, the said provision must be read along with Section 118 of the same enactment which spells out another presumption in favour of the drawee that every negotiable instrument was drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.

Whether presumption under Section 139 N.I. Act read with Section 118 N.I. Act can be raised against the accused?

Court opined that such presumption can be duly raised against the accused as he has admitted his signatures on the cheque in question and has also admitted that the particulars on the same were filled by him.

Whether the accused has been able to discharge the onus of proof placed upon him?

Court stated that the journey of trial qua a complaint under Section 138 NI Act commences after a determination is made that the presumption as per Sections 139/118 NI Act can be raised against the accused, from the point of the accused who is required to prove that the cheque in question was not given for consideration or for the discharge of any legally enforceable debt.

The accused took the stand all along that he had obtained a loan of Rs 2,50,000/- from the brother of the complainant, Sanjeev Nagpal, but he was not examined as a witness by the accused. The evaluation of the testimonies of the above witnesses as well as the aforementioned circumstance clearly establishes that the accused has not been successful in proving his defense in the affirmative.

Whether the accused has been able to dislodge the presumption against him under Section 139 of the NI Act, by perforating the case of the complainant?

Even if it is so conceded, the fact that the cheque in question was given to the complainant as a security cheque, in postdated condition or otherwise, does not dent the case of the complainant sufficiently.

Further, even if it is conceded that the loan was advanced by the complainant only to the mother of the accused and not to the accused and his mother together, the cheque issued by the accused can still be construed to be issued in discharge of “any other liability”, and the accused cannot avoid penal consequences of the dishonour of the cheque merely because the loan amount was not advanced to him by the complainant.

Elaborating further, the Court stated that the offence punishable under Section 138 NI Act is premised on theory of reverse onus of proof, and the complainant was not required, as she would have been required in a civil trial of recovery perhaps, to prove a loan transaction, as she had a valid cheque in question made in her favour by the accused. With the presumptions stacked against him, the first order of business required the accused to plug loopholes in the case of the complainant, and only thereafter would the requirement for the complainant to prove her case beyond reasonable doubt have arisen.

Concluding the matter, Court held that the accused failed to establish the version that he set forth in the affirmative, and in perforating the case of the complainant and dislodging the presumption of Sections 139/118 NI Act stacked against him.

Therefore, accused was convicted for the offence punishable under Section 138 NI Act. [Geetika Mehra v. Satyam Bhola, Ct. Case No. 28164 of 2018, decided on 18-11-2021]

Case BriefsHigh Courts

Bombay High Court: Noting that the Motor Accident Claims Tribunal Member did not properly determine just and proper compensation, V.M. Deshpande, J., while partly allowing the appeal enhanced compensation.

Instant appeal was filed by the claimants for enhancement of compensation.

Factual Matrix

Appellants were the widow, sons and daughters of the deceased. Deceased when proceeding to his house on foot after closing his shop was crushed to death by the offending vehicle. The offence was registered against the driver of the offending vehicle.

Further, the appellants had approached the Motor Accident Claims Tribunal by filing a petition under Section 166 of the Motor Vehicles Act. In the said petition, it was averred by the claimants that when the deceased met an untimely death, he was 40 years old and a self-employed person.

Claimants added that the monthly income of the deceased was Rs 10,000 and the aggregate compensation claimed was Rs 5,00,000 with interest at 12% pa from the date of the accident.

MACT passed the judgment and award holding that the claimants were entitled to total compensation of Rs 1,89,500/- inclusive of no-fault liability amount of Rs 50,000/- along with interest at the rate of 7.5% per annum from the date of filing of petition.

On being dissatisfied with the compensation amount that was awarded, present appeal was filed.

Issue

According to the counsel for the appellant, the Tribunal committed an error in determining the monthly income of the deceased as Rs 15000/-. She submitted that in any case, the income of the deceased was not less than Rs 10,000/- per month. She also submitted that the judgment of tribunal cannot stand to the scrutiny of law inasmuch as nothing is granted in favour of the claimants under the head of future prospects. Along with this, Tribunal had wrongly deducted 1/3rd amount towards personal expenses.

Did member of the MACT grant just and adequate compensation to the claimants?

Analysis, Law and Decision

In Court’s opinion, Member of the Tribunal had rightly reached the conclusion that at the time of the death, the age of the deceased was 45 years.

Adding to the above analysis, Court stated that there was no documentary evidence that could throw light on the daily income of the deceased.  However, from the evidence of the widow, it was clear that the deceased was engaged in repairing tubes and tyres of various vehicles and not the bicycles. In that view of the matter, the Judge had determined the daily income of the deceased on very lower side.

Once it is established that the deceased was not unemployed and he was engaged in the business of vulcanization, without there being any documentary proof about his income, his monthly income will have to be determined as notional income.

Moving further, High Court elaborated stating that in absence of any documentary evidence and keeping aside the exaggeration in respect of earning per month income of the deceased, looking to the nature of self-employment of the deceased, the Court reached the conclusion that monthly income of deceased was Rs 5,000.

Claimants were entitled to 25% towards future prospects.

In Court’s opinion, the Tribunal committed an error in deducting 1/3rd income. Seven persons were dependent on the deceased. Therefore, a proper deduction would be 1/5th.

The inadequate amount was granted in favour of the claimants on account of loss of consortium for which they were entitled at the rate of Rs 44,000/- per dependent in view of the law laid down in Magma General Insurance Co. Ltd v. Nanu Ram, (2018) 18 SCC 130. Similarly, less compensation was granted to the claimants in respect of the loss of estate and future expenses which appellants will be entitled. Therefore, the claimants were surely entitled to enhancement.[Sahana Khatoon v. New India Assurance Co. Ltd., 2021 SCC OnLine Bom 3695, decided on 28-10-2021]


Advocates before the Court:

Ms Mitisha Kotecha, Advocate for appellants.

Mr M. B. Joshi, Advocate for respondent 1.

None for respondents. 2 and 3, though served.

Case BriefsDistrict Court

Additional Chief Metropolitan Magistrate, Mayo Hall Unit, Bengaluru: Vani A. Shetty, XVII Additional Judge, Court of Small Causes & ACMM, addressed a matter with respect to the liability of the accused in a case of dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881.

In the present case, the accused was tried for the offence punishable under Section 138 of the Negotiable Instruments Act.

Factual Background

Complainant with an intention to have a South Africa trip paid Rs 24 lakhs to the accused to book the tickets. But the accused failed to book the tickets and repaid a sum of Rs 14.5 lakhs to the complainant and sought time for the payment of balance amount of Rs 9.5 lakhs. Towards the discharge of the said liability, the accused issued a cheque for Rs 4,50,000 assuring that the cheque would be honoured if presented for payment.

But the cheque came to be dishonoured on the grounds of ‘payment stopped by drawer’. Thereafter the complainant got issued a legal notice demanding repayment of the cheque amount within 15 days. Due to no response from the accused, an instant complaint was filed.

In view of sufficient ground to proceed further, a criminal case was registered against the accused, and she was summoned.

Question for Consideration:

Whether the complainant proved that the accused has committed an offence punishable under Section 138 of the NI Act, 1881?

Analysis, Law and Decision

While analyzing the matter, Bench stated that in order to constitute an offence under Section 138 NI Act, the cheque shall be presented to the bank within a period of 3 months from its date. On dishonour of cheque, the drawer or holder of the cheque may cause demand notice within 30 days from the date of dishonour, demanding to repay within 15 days from the date of service of the notice.

“If the drawer of the cheque fails to repay the amount within 15 days from the date of service of notice, the cause of action arises for filing the complaint.”

In the present matter, the complainant had complied with all the mandatory requirements of Section 138 and 142 of the NI Act.

Section 118 of the NI Act lays down that until the contrary Is proved, it shall be presumed that every Negotiable Instrument was made or drawn for consideration.

Section 139 NI Act contemplated that unless the contrary is proved, it shall be presumed that the holder of the cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole of any debt or liability.

In a catena of decisions, it has been repeatedly observed that in the proceeding under Section 138 of NI Act, the complainant is not required to establish either the legality or the enforceability of the debt or liability since he can avail the benefit of presumption under Sections 118 and 139 of the NI Act in his favour.

Further, it was observed that by virtue of the presumptions, accused had to establish that the cheque in question was not issued towards any legally enforceable debt or liability.

Later in the year 2006, the Supreme Court in the decision of M.S. Narayan Menon v. State of Kerala, (2006 SAR Crl. 616), has held that the presumption available under Section 118 and 139 of N.I. Act can be rebutted by raising a probable defence and the onus cast upon the accused is not as heavy as that of the prosecution.

Further, in the Supreme Court decision of Krishna Janarshana Bhat v. Dattatreya G. Hegde, (2008 Vo.II SCC Crl.166), the Supreme Court held that the existence of legally recoverable debt was not a presumption under Section 138 NI Act and the accused has a constitutional right to maintain silence and therefore, the doctrine of reverse burden introduced by Section 139 of the NI Act should be delicately balanced.

Bench, in conclusion, observed that the presumption mandated by Section 139 of NI Act does indeed include the existence of legally enforceable debt or liability, it is a rebuttable presumption, open to the accused to raise defence wherein the existence of the legally enforceable debt or liability can be contested.

If the accused is able to raise a probable defence, which creates doubt about the existence of legally enforceable debt or liability, the onus shifts back to the complainant.

Court stated that if the accused was able to probabalise that the disputed cheque was issued due to the intervention and pressure of the police, it may not be justified to draw the presumption contemplated under Section 139 NI Act.

It was added that if the police would have really interfered, the accused could have produced some evidence to show the intervention of the police. But there was absolutely no evidence on record to show that cheque was issued either due to pressure of police or due to some other compulsion.

In Court’s opinion, the Court was required to draw the presumption under Section 139 NI Act in favour of the complainant.

Court noted that in the present matter, accused at no point in time asked the complainant to pay the balance amount. Instead, she had kept quiet by enjoying the huge amount of Rs 24 lakhs which clearly indicated that the non-purchase of the ticket was not on account of the non-payment of the remaining amount. Further, there was no forfeiture clause.

For the above, Bench stated that in the absence of the forfeiture clause, the accused could not have retained the amount of the complainant with her, the said was barred by the doctrine of unlawful enrichment under Section 70 of the Indian Contract Act, 1872.

Hence, even if it was held that the complainant was a defaulter in respect of the payment of the remaining amount, the accused was legally liable to repay the amount received by her from the complainant.

In view of the above reasons, guilt of the accused was proved under Section 138 NI Act. [Srinivas Builders and Developers v. Shyalaja, CC No. 57792 of 2018, decided on 13-10-201]


Advocates before the Court:

For the Complainant: V.N.R., Advocate

For the Accused: J.R., Advocate

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Noting a nationwide cartel amongst certain Beer companies, Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma, Bhagwant Singh Bishnoi (Members) imposed penalty on three beer companies on finding regular communications with respect to planning and coordinating of price hikes to propose to State authorities

CCI initiated the present matter suo motu, pursuant to the filing of an application by Crown Beers India Private Limited (OP-2) and SABMiller India Limited (OP-3), both ultimately held by Anheuser Busch InBev SA/NV (Ab InBev) against the captioned parties (OPs) for alleged cartelization in relation to the production, marketing, distribution and sale of Beer in India.

Commission noted that there appeared existence of collusion amongst OPs 2 and 3 along with United Breweries (OP-1) and Carlsberg India Private Limited (OP-4) to:

  • Align the prices of Beer
  • Seek/implement price adjustments in several States and Union Territories of India, irrespective of whether the model of distribution of alcohol (including Beer) therein was of corporation market, auction market or free market.

The aim of the companies appeared to be to ensure consistency in their pricing policies, in particular, price increases and to achieve this aim, OP1 to OP-4 appeared to have coordinated by way of series of multilateral and bilateral meetings and e-mail exchanges amongst themselves as well as through common platform of All India Brewers’ Association (OP-5).

On 31-10-2017, Commission passed an order forming an opinion that prima facie, the conduct of the OPs appears to be in contravention of the provisions of Section 3(1) read with Section 3(3)(a) of the Act and consequently, directed DG to cause an investigation into the matter. 

DG’s Report

DG noted that the sale of liquor (including Beer) does not fall within the ambit of the Goods and Services Tax (‘GST’). As such, each State/UT in India has its own unique method of regulating the sale of liquor (including Beer) within its territory, leading to differences in pricing regulations and approvals, imposition of different taxes, different excise duties and differing terms of licensing, among others.

Issue

  • Whether the OP’s indulge in cartelization in the domestic Beer market I India in contravention of the provisions of Section 3 of the Act?

DG concluded that OPs 1,3 and 4 indulged in the exchange of vital information amongst themselves about pricing and other confidential and business-sensitive information. These companies approached the State Governments collectively through the common platform of OP-5 to get price revisions to agreed levels so as to avoid price wars among themselves.

Hence, they contravened the provisions of Section 3(3)(a) read with Section 3(1) of the Act.

Analysis

Commission noted that the DG has established cartelization amongst the OPs in 10 States/UTs out of total 36 States/UTs in India.

In view of evidences collected by the DG, and analysed by the Commission, in the following States/UTs, cartelization amongst the OPs stood established:

(1) Andhra Pradesh – Price co-ordination between OP-1 and OP-3 in 2009 and 2013, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act;

(2) Delhi – Price co-ordination between OP-1, OP-3 and OP-4 through OP-5 in 2013, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act;

(3) Karnataka – Price-co-ordination between OP-1 and OP-3 from 2011 to 2018 with OP-4 joining in from 2012, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act; and cartelisation between OP-1 and OP-3 with respect to supply of Beer to premium institutions in the city of Bengaluru in 2010, in contravention of the provisions of Section 3(3)(c) read with Section 3(1) of the Act;

(4) Maharashtra – Price co-ordination between OP-1 and OP-3 from 2011 to 2018 with OP-4 joining in from 2012, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act; cartelisation between OP-1 and OP-4 to restrict/limit the supply of Beer in 2017, in contravention of the provisions of Section 3(3)(b) read with Section 3(1) of the Act; and sharing of market between OP-1, OP-3 and OP-4 from 2013 to 2017, in contravention of the provisions of Section 3(3)(c) read with Section 3(1) of the Act;

(5) Odisha – Price co-ordination between OP-1 and OP-3 in 2009 and 2010, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act; price co-ordination by OP-4 in 2015 and 2016, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act; and cartelisation between OP-1, OP-3 and OP-4, through OP-5, to restrict/limit the supply of Beer in 2015–16, in contravention of the provisions of Section 3(3)(b) read with Section 3(1) of the Act;

(6) Puducherry – Price co-ordination between OP-1, OP-3 and OP-4 in 2017, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act;

(7) Rajasthan – Price co-ordination between OP-1, OP-3 and OP-4 through OP-5 from 2011 to 2018 with OP-4 joining in from 2014, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act; and

(8) West Bengal – Price co-ordination between OP-1 and OP-4 through OP-5, from 2012 to 2018, in contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act; and cartelisation between OP-1 and OP-4, through OP-5, to restrict/limit the supply of Beer in 2018, in contravention of the provisions of Section 3(3)(b) read with Section 3(1) of the Act.

Second-Hand Bottles

Further, apart from price co-ordination and limiting/restricting supply of Beer in various States/UTs, the DG also reached to a finding of co-ordination amongst OP-1 and OP-3 with respect to purchasing of second-hand bottles.

Commission observed that the provisions of the Act do not just pertain to the end-consumers of goods/services.

“No distinction in the Act, for the purposes of assessment of anti-competitive conduct, is made between the end-consumers, and intermediaries falling in the supply chain.”

 Coram opined that given the sheer magnitude and size of the OP companies, their countervailing buying power over small time bottle collectors, would have been substantial.

Hence, cartelization amongst OP-1 and OP-3 from at least 2009 to 2012 in the purchase of second-hand bottles was clearly established.

OP-1 and OP-3 had an ‘understanding’ to share their off-take of old bottles from the market for re-use in their breweries. They had also agreed upon the rate at which they would procure such bottles from the bottle collectors. They closely monitored each other’s purchase of old bottles. Such conduct of OP-1 and OP-3 may have resulted in limiting and controlling the supply of second-hand Beer bottles in the market, amounting to contravention of the provisions of Section 3(3)(b) read with Section 3(1) of the Act.

 OP-4 was not found guilty of cartelization with respect to second-hand Beer bottles.

Commission stated that OP-1 and OP-3 indulged into nation-wide cartelisation from 2009 to at least 10.10.2018 (till the DG conducted search and seizure operation at the premises of the OPs), with OP-4 joining in from 2012 and with OP-5, since 2013, serving as a platform for facilitating such cartelisation, which is in contravention of the provisions of Section 3(3)(a), 3(3)(b) and 3(3)(c) read with Section 3(1) of the Act.

15 individuals were liable for the anti-competitive conduct of their respective companies.

Conclusion

In terms of proviso to Section 27(b) of the Competition Act, in cases of catelisation, Commission is empowered to impose upon the contravening entities penalty of upto 3 times of the profit of each year of the continuance of the cartel, or 10% of its turnover for each year of the continuance of the cartel, whichever is higher.

Commission determined the quantum of penalty imposed on the parties @ 0.5 times profit for each year of the continuance of the cartel or 2% of the turnover for each year of the continuance of the cartel, whichever is higher.

Lastly, the Coram directed the parties to cease and desist in future from indulging in any practice/conduct/activity, which has been found in the present order to be in contravention of the provisions of Section 3 of the Act. [Alleged anti-competitive conduct in the Beer Market in India, In Re.; 2021 SCC OnLine CCI 53, decided on 24-9-2021]


Advocates before the Commission:

For United Breweries Ltd. (UBL), Mr. Kalyan Ganguly of UBL, Mr. Kiran Kumar of UBL, Mr. Perry Goes of UBL and Mr. Shekhar Ramamurthy of UBL:

Mr. Amit Sibal, Senior Advocate alongwith Mr. Ravishekhar Nair, Ms. Avantika Kakkar, Mr. Sahil Khanna, Mr. Abhay Joshi, Mr. Kirthi Srinivas, Mr. Ambar Bhushan, Mr. Saksham Dhingra, Mr. Animesh Kumar, Ms. Shreya Joshi and Ms. Sree Ramya Hari, Advocates and Mr. Govind Iyengar, Senior VP Legal of UBL, Mr. Kiran Kumar in person, Mr. Perry Goes in person and Mr. Shekhar Ramamurthy in person

For Mr. Shalabh Seth of UBL:

Mr. Ramji Srinivasan, Senior Advocate alongwith Mr. Gaurav Desai, Ms. Apurva Badoni and Mr. Shivkrit Rai, Advocates

For Mr. Steven Bosch of UBL:

Mr. Prashanto Chandra Sen, Senior Advocate alongwith Ms. Nisha Kaur Oberoi, Mr. Gautam Chawla, Mr. Rishabh Juneja and Ms. Shambhavi Sinha, Advocates

For Anheuser Busch InBev SA/NV (i.e., Crown Beers India Private Limited and SABMiller India Limited):

Mr. Manas Kumar Chaudhari, Mr. Pranjal Prateek, Mr. Sagardeep Rathi and Ms. Radhika Seth, Advocates alongwith Ms. Ajita Pichaipillai, Legal and Compliance Director of AB InBev

For Mr. Anil Arya of SABMiller India Ltd.: For Mr. Nilojit Guha of SABMiller India Ltd.:

Mr. Talha Abdul Rahman, Advocate
Mr. Tahir Ashraf Siddiqui, Advocate with Mr. Nilojit Guha in person

For Mr. S. Diwakaran of SABMiller India Ltd.:

Mr. Shreyas Mehrotra, Advocate

For Carlsberg India Pvt. Ltd. (CIPL), Mr. Anil Bahl of CIPL, Mr. Dhiraj Kapur of CIPL, Mr. Mahesh Kanchan of CIPL, Mr. Michael Jensen of CIPL and Mr. Nilesh Patel of CIPL

Mr. Rajshekhar Rao, Ms. Manika Brar, Ms. Atrayee Sarkar, Mr. Anandh Venkataramani, Mr. Nilav Banerjee, Ms. Kajori De, Ms. Afreen Abbassi and Ms. Raveena Sethia, Advocates alongwith Mr. Amit Sethi of CIPL

For Mr. Pawan Jagetia of CIPL:

Ms. Deeksha Manchanda and Mr. Shruti Rao, Advocates

For All India Brewers’ Association (AIBA): For Mr. Sovan Roy of AIBA:

Mr. Subodh Prasad Deo and Ms. Rinki Singh, Advocates, with Mr. Sovan Roy in person

Legislation UpdatesStatutes/Bills/Ordinances

The Ministry of Finance has passed the Taxation Laws (Amendment) Act, 2021 on August 13, 2021. The Act amends the Income Tax Act, 1961 and the Finance Act, 2012.

Key amendments under the Act are:

Levy of Tax on income earned from the sale of shares outside India: 

Under the Income Tax Act, 1961 the non-residents are required to pay tax on the income accruing through or arising from any business connection, property, asset, or source of income situated in India. The Finance Act, 2012 amended the Income Tax Act, 1961 and clarified that if a company is registered or incorporated outside India, its shares will be deemed to be or have always been situated in India if they derive their value substantially from the assets located in India.  As a result, the persons who sold such shares of foreign companies before the enactment of the Finance Act, 2012, also became liable to pay tax on the income earned from such sale. The Taxation Laws (Amendment) Act, 2021, omits this tax liability if following conditions are met:

  1. An appeal or petition filed in this regard must be withdrawn or the person must submit an undertaking to withdraw it
  2. The notices or claims under such proceedings must be withdrawn or the person must submit an undertaking to withdraw them
  3. The person should submit an undertaking to waive the right to seek or pursue any remedy or claim in this regard, which may otherwise be available under any law in force or any bilateral agreement.

The Act prescribes that if all the above conditions are fulfilled by the concerned person, then all the assessment or reassessment orders issued with respect to such tax liability will be deemed to have never been issued. Also, if a person becomes eligible for refund after fulfilling these conditions, the amount will be refunded to him, without any interest.


*Tanvi Singh, Editorial Assistant has reported this brief.