Case BriefsTribunals/Commissions/Regulatory Bodies

State Consumer Disputes Redressal Commission, Telangana: Justice MSK Jaiswal (President) and Meena Ramanathan (Member) upheld the District Commission’s Order observing the consequence of suppressing the material fact while taking an insurance policy.

If the insurer can show that prior to the date of declaration of being healthy, the insured was suffering with ailment which was within her knowledge but was suppressed, then the insurance company is well within its right to repudiate the claim on the ground of suppression veri.

Complainant had submitted that his wife has obtained new money back policy from the OPs with a duration of 20 years for an assured sum of Rs 10,00,000. At the time of accepting the policy, the OPs carried out mandatory medical tests on the proponent and issued the policy in question.

While the policy was in force, the holder died due to cardiorespiratory arrest.

Being the nominee, complainant made the claim with the OPs and to the utter shock and surprise, the OPs repudiated the claim on the ground that the deceased life assured was suffering from lung cancer and took treatment prior to obtaining the policy, hence the claim was repudiated.

Complainant prayed to direct the OPs to pay the amount.

It was stated that OPs investigated the matter, and it was revealed that the deceased life assured suppressed the material fact relating to her health condition giving incorrect answers in the proposal form.

Analysis, Law and Decision

Bench noted that OPs submission was that the insured was suffering from serious ailment viz., lung cancer and suppressed the said fact.

Commission reiterated the legal position that if the insured is found to have suppressed the information which was material for the insurer to decide about the issuance of the policy is made out, the insurance company cannot be made liable to indemnify the insured on the ground that contractual obligations between insured and insurer are based purely on good faith and if insured has knowingly failed to reveal the information which was within her exclusive knowledge, the insurer could not be said to be liable to indemnify the insured.

In the present case, the insurance company contended that even before taking the policy, the insured was suffering from a serious ailment and was undergoing treatment and evidence was placed on record with regard to the said contention.

Coram held that perusal of the crucial documents on record leaves no room for doubt that the insured was aware that she was suffering from a serious ailment for more than 6 months prior to taking the insurance policy and suppressing all those facts, she took the policy.

Therefore, District Commission’s Order holding that complainant was not entitled to any relief was upheld and the complaint was dismissed.[K.N. Vidyakarji v. Life Insurance Corporation of India, FA No. 402 of 2020, decided on 15-06-2021]

Advocates before the Commission:

Counsel for the Appellant: Karakot Nagekar Sai Kumar

Counsel for the Respondents: KRL Sarma

Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal, Mumbai: Dealing with the issue on the validity of the reassessment proceedings objecting to the reasons based on which the A.O had assumed jurisdiction the tribunal has reiterated that A.O had failed to independently apply his mind to the “material” available on his record and mechanically acting on the information supplied by the Directorate of Income-tax (Inv.) had on the basis of incomplete and incorrect facts reopened the case of the Assessee u/s 147 of the Act.

The Assessee, in the present case, was engaged in the business of trading in shares and derivatives. The original assessment was framed by the A.O vide his order passed under Sec. 143(3). Whereby, an appeal against the original assessment was partly allowed by the CIT(A). Vide his order the assessed income of the Assessee was reduced. Subsequently, information was received by the A.O through a letter from the DIT(I&CI), New Delhi. Wherein it was intimated that search and seizure proceedings were conducted and the name of the Assessee had figured as one of the beneficiaries that had invested in shares of different securities amounting through a broker, during the financial year 2007-08.

In the backdrop of the aforesaid information, the A.O reopened the case of the Assessee under Sec. 147 of the Act. Notice under Sec. 148 was issued and served upon the Assessee. In compliance, the Assessee e-filed its return declaring the income as was determined pursuant to the order of the CIT(A).

The Assessee assailed the validity of the reassessment proceedings objecting to the reasons based on which the A.O had assumed jurisdiction. However, not finding favor with the objections raised by the Assessee the A.O rejected the same.

Aggrieved, the Assessee assailed the assessment framed by the A.O in appeal before the CIT(A). The Assessee assailed the validity of the jurisdiction that was assumed by the A.O under Sec.147 of the Act, as well as the disallowance of its F&O loss on merits. The CIT(A) did not find favour with the claim of the Assessee that the A.O had wrongly assumed jurisdiction u/s 147 of the Act and rejected the same. Accordingly, the CIT(A) partly allowed the appeal and vacated the disallowance of F&O loss.

The revenue being aggrieved with the order of the CIT(A) whereby the addition was deleted on account of loss on future & options, carried the matter in appeal before the LD. ITAT. The Assessee preferred a cross-appeal and assailed the order of the CIT(A) to the extent he had upheld the validity of the jurisdiction assumed by the A.O for framing the reassessment. Whereby, the tribunal was pleased to Dismiss the Appeal filed by the Revenue and conclude that A.O had failed to independently apply his mind to the “material” available on his record and mechanically acting on the information supplied by the Directorate of Income-tax (Inv.) had on the basis of incomplete and incorrect facts reopened the case of the Assessee u/s 147 of the Act

“Though the A.O had referred to the material/information on the basis of which the case of the Assessee was sought to be reopened under Sec. 147 of the Act i.e the information received from the DDIT(Inv.), Unit-1(4), Mumbai, but then, there is nothing discernible therefrom on the basis of which it could be gathered that there was any independent formation of a bonafide belief by the A.O that the income of the Assessee chargeable to tax had escaped assessment.”

“That the A.O had mechanically acted upon the information received from the DDIT(Inv.), Unit 1(4), Mumbai, and without even doing the bare minimum i.e consulting the assessment records of the Assessee for the year in question as was indispensably required on his part for arriving at a bonafide belief that the income of the Assessee chargeable to tax had escaped assessment therein reopened its concluded assessment.”

[DCIT Vs. M/s Shradha Tradelinks Pvt. Ltd ITA No. 656/Mum/2016 AND C.O No. 323/Mum/2017]

† Advocate, Supreme Court of India and Delhi High Court  

Case BriefsHigh Courts

Kerala High Court: A Division Bench of A.M. Shaffique and Mary Joseph, JJ., upheld the Family Court’s decision wherein the wife obtained the consent of husband by fraud.

Husband in the original petition sought a perpetual injunction restraining respondents and their men from trespassing into the petition schedule property and general damages for loss suffered.

Marriage | Null & Void

Another petition by the husband was filed seeking to declare the marriage between himself and respondent null and void for the reason that it was not consummated due to the heart ailment of the wife, suppressing which factum the consent for marriage was obtained

Another petition was filed by the wife seeking to get back money and gold ornaments given to her at the time of marriage, taken custody of and misappropriated by her husband.

Wife had also sought monthly maintenance under Section 125 of Criminal Procedure Code, 1973.

Husband’s petitions were allowed and marriage was declared null and void with a direction to pay damages, whereas the petitions filed by the wife seeking maintenance and return of gold were dismissed.

Aggrieved by the orders issued, the wife preferred the appeals as stated above.

Analysis and Decision

Suppressing Material Factum | Foul Play and Fraud

Bench stated that it is constrained to take a view that without revealing the cardiac ailments the wife had, the consent of the husband for marriage was obtained and suppressing of a material factum is undoubtedly a foul play and nothing short of fraud.

Consent of the husband for the marriage was obtained by playing fraud on him.

Hence Court found no fault in the family court’s decision in granting a decree declaring the marriage as null and void on the strength of the evidence already discussed with.

With regard to the damages being allowed to the husband, Court stated that as discussed above, husband had every reason for the claim made to succeed.

Family Court declined the wife for getting back the money and gold ornaments given to the husband at the time of marriage.

Bench stated that after scrutiny of Ext.A6 it was of a view that all articles belonging to the wife were already received by her from the husband.

With regard to the maintenance being denied by the Family Court, the bench observed that since the marriage was declared as null and void, the lady cannot claim the status of a wife so as to be entitled to raise a claim for maintenance.

The arguments advanced by the wife to get a reversal of the impugned common order being untenable ones, bench discarded those. [Ajitha v. Harshan, Mat. Appeal No. 734 of 2012, decided on 25-09-2020]

Case BriefsHigh Courts

Orissa High Court: A Division Bench of S. Panda, ACJ and S.K. Sahoo, J.  did not entertain the writ petition because the petitioners had suppressed material facts and approached the court with unclean hands.

In the present case, the petitioners are the representatives of the villagers of Matha Sahi who have applied for grant of license to open a new IMFL ‘ON’ liquor shop at Hotel Florence under Bhadrak Municipality. On enquiry by Inspector of Excise, Bhadrak Range revealed that the proposed building for the liquor shop violates Rule 26 of the Odisha Excise Rules, 2017 and is at a distance of 103 mtrs. away from Dream India School, 330 mtrs. from Presidency College, 380 mtrs. from State Highway, 550 mtrs. from National Highway and 514 mtrs. of NH service lane. The violation was subject to relaxation by the State Government under Special Circumstances. The Collector, Bhadrak invited objection from the public and after inquiring the objections, the Inspector reported that Saraswati Sishu Mandir is at the back side of the proposed shop and such shop had been constructed as per planning with approval of Town Planning Authorities as some local people demanded opening of the proposed shop.

Hence a writ petition was filed under Article 226 of the Constitution to direct the opposite parties to cancel the license granted in favor of OP-5.

In the face of protests by the people at large, the Inquiring Inspector submitted the opinion of two persons demanding opening of proposed shop reveals the malafide intention and the Government still chose to grant license to open the liquor shop at the objectionable site. 

The opposite party averred through counter affidavit that the petitioners have no cause of action to file the writ application and they have no locus standi to file the writ application and they are not residents of the ward where the ‘ON’ shop is functioning. It was further stated that the petitioners have not approached the Court with clean hands and as such, the writ application is liable to be dismissed. 

It was further stated that the Collector, Bhadrak after receiving all objections pursuant to Form-VIII notice, submitted the entire papers to the Commissioner of Excise for onward recommendation to the Government for grant of license and the Collector, Bhadrak has suggested relaxation of the restrictions in exercise of power conferred under Rule-26 of the Odisha Excise Rules, 2017. The Superintendent of Excise, Bhadrak filed a counter-affidavit on behalf of OPs- 1, 2 and 3 wherein it stated that the Government after considering the objection petitions have relaxed the restrictions mentioned in Rule 26(1) of Odisha Excise Rules, 2017.

It was further stated that the school building of Saraswati Sishu Vidya Mandir is under construction and is non-functional presently and has no direct connection to the proposed ‘ON’ shop. 

The Court held that IMFL ‘ON’ shop of the is functioning after obtaining necessary permission from the Government and the petitioners-institution has not yet been made functional and the petitioner has suppressed material facts and hence it is not inclined to entertain the writ petition.

In view of the above, the writ petition stand dismissed.[M.M. Saraswati Sishu Vidya Mandir v. State of Odisha, 2020 SCC OnLine Ori 56, decided on 24-02-2020]

Case BriefsHigh Courts

Allahabad High Court: A Division Bench of Pankaj Kumar Jaiswal and Jaspreet Singh, JJ. dismissed the special appeal as it had no merit after having heard the Counsel for the appellants, Prem Shanker Pandey and Q.H. Rizvi, Addl. Chief Standing Counsel for the Respondent.

In the instant case, three people Paramjeet Singh, Jagjeet Singh and Baj Singh took a loan from Union Bank of India, for purchase of a truck. The Bank authorities sanctioned the loan on the security of 2/3rd land given by Paramjeet Singh and Jagjeet Singh. Baj Singh had mortgaged 1/4th share of another piece of land. When they could not repay the loan, a recovery certificate was issued by the Bank and thereafter an auction was held by the Naib Tehsildar. The land was auctioned to Major Singh. The land was again going to be re-auctioned. Therefore, Major Singh challenged the aforesaid re-auction by filing a writ petition which was later dismissed.

The second auction took place and yet again Major Singh became the highest bidder and the land was confirmed in his favour. Thereafter, Paramjeet Singh and Jagjeet Singh filed a Writ Petition thereby an order of the Court was passed. The Court observed that if the writ petitioners deposit 25% of the outstanding amount within one month from the date of the order, their property would not be attached and put to auction and if auctioned, the same will not be confirmed and the same may be kept in abeyance. Further to this, a review was filed by Major Singh which was entertained and the aforesaid order was modified as the material facts that land in question was already sold or auctioned were concealed to get such an order at the first place.

The Court rejected the recall application against the above order filed by the appellants. The sale was confirmed in favour of Major Singh on the basis of an order passed by this Court giving due consideration as to the fact that the appellants had obtained an order by concealing the material facts that land in question was already sold/auctioned.[Paramjeet Singh v. State of U.P., 2019 SCC OnLine All 3145, decided on 29-08-2019]

Case BriefsForeign Courts

Pakistan Supreme Court:  A Full Bench of Asif Saeed Khan Khosa, CJ, Mushir Alam and Syed Mansoor Ali Shah, JJ. extended benefit of doubt to the appellant herein and set aside his conviction and sentence under Section 9(c) of Control of Narcotic Substances Act, 1997.

In the present case, 1500 grams of heroin was found under the car seat of Suzuki van of the appellant. After a regular trial, the appellant was convicted. The appeal filed in the High Court was dismissed. Afterwards, the appeal with the leave of the Supreme Court was granted.

It was noted by the Court that the report of Punjab Forensic Agency was deficient in material facts. While it mentioned the names of the three tests performed, it did not provide results of these tests. Also, there was no mention of the protocol taken while conducting the test.

Referring to State v. Imam Bakhsh, 2018 SCMR 2039 while discussing Rule 6 of the Act, it was noted that the Report of Government Analyst, prepared in consequence of Rule 6, must provide for (i) tests and analysis of the alleged drug (ii) the results of the test(s) carried out and (iii) the test protocols applied to carry out these tests. Not abiding by the said rules reduced the reliability and evidentiary value of the report.

It was opined that credible testing and analysis of the alleged drug was fundamental to actualizing the provisions of the Act as it determined the true nature of the seized drug, and thus it was mandatory. The report of the Forensic Agency, if admitted in evidence without formal proof, could be rebutted and questioned by the accused on the ground of non-compliance of the above information required under Rule 6. Also, the report did not specify the protocols applied. Hence the mandatory requirements were not fulfilled and it would have been unsafe to rely on the report of Forensic Agency. Retesting of the drugs would amount to giving a premium to the prosecution for its mistakes and lapses.

Thus, the Court extended benefit of doubt to the appellant in the absence of a proper report and set aside his conviction order with the direction that he be released from custody.[Khair-ul-Bashar v. State, 2019 SCC OnLine Pak SC 8, decided on 08-04-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Mumbai: The Bench of V.P. Singh, Member (Judicial) and Ravikumar Duraisami, Member (Technical) ordered for prosecution to be lodged against the Corporate Debtor / Corporate Applicant on the ground that it suppressed material information while filing a petition under Section 10 of the Insolvency and Bankruptcy Code, 2016  for initiating corporate insolvency resolution process.

The matter had reached upto the stage of the Resolution Professional filing the application for approval of the Resolution Plan by NCLT. During arguments, one of the Financial Creditors, IDBI Bank, brought to NCLT’s notice that the Bombay High Court had already ordered winding-up of the Corporate Debtor and this material fact was suppressed while filing the petition under Section 10.

Extensive arguments were made by both the sides and reliance was placed on various Supreme Court decisions. S. Purohit, Advocate appeared for the Corporate Debtor. On the other hand, Advocates Shavey Mukri along with Nishitha Manbiar  and Almira Lasrado of IndiaLaw represented IDBI Bank; Advocates Ashish and Priyanak Upadhyaya of Ethos Legal Alliance represented SBI Global Factors (P) Ltd.; Advocate Sugatya Chaudhary represented Axis Bank; Nikhil Rajani and Jyoti of V. Deshpande & Co. along with Naman Awasthi, Authorised Signatory represented Edelweiss ARC; Advocates Bhupesh V. Samant and Ganesh Kale represented Saraswat Coop. Bank; Sushmita Gandhi and Anamika of HSA Advocates represented ICICI Bank (all creditors). Another creditor, Ramkumar Birendrakumar (P) Ltd. was represented by Counsel Subir Kumar and Priyanka Sinha of A&P Partners.

The question before NCLT was whether disclosure of the Bombay High Court’s order was material for applying under Section 10 for initiation of corporate insolvency resolution process?

NCLT noted that the Corporate Debtor was fully aware that the company stood wound up by the order of the High Court. According to NCLT, this fact was without an iota of doubt, a material fact for presenting a petition under Section 10. Further, relying on Forech (India) (P) Ltd. v. Edelweiss ARC, 2019 SCC OnLine SC 87, NCLT observed that a Corporate Debtor is barred from filing a Section 10 petition after passing of liquidation orders in winding-up proceedings. The act of the Corporate Debtor in suppressing the information known to it to be material for filing Section 10 petition was held to be punishable under Section 77(a) IBC. Accordingly, the Registrar of Companies, Mumbai was directed to lodge prosecution against the Corporate Debtor under Section 77(a). Furthermore, cost of Rs 10 lakhs was imposed on Corporate Debtor and the petition was dismissed. [Amar Remedies Ltd., In re, 2019 SCC OnLine NCLT 1, Order dated 29-01-2019]

Case BriefsHigh Courts

Karnataka High Court: While deciding a writ petition filed under Articles 226 and 227 of the Constitution, a Single Judge Bench of Raghvendra S. Chauhan, J. dismissed the petition holding that there is a difference between ‘material facts’ and ‘particulars’ and it was sufficient if the respondent proved the material facts.

The petitioner challenged the order of the Senior Civil Judge whereby he allowed the Election Petition filed by Respondent 1. The dispute related to the election to the post of President of the Gram Panchayat. Initially, the petitioner was elected to the said post, however, respondent 1 challenged the said election and consequently, the Election Tribunal set aside the election of the petitioner to the said post.

The petitioner submitted that while filing the election petition, respondent 1 was required to prove his submission through material facts. However, Respondent 1 had not mentioned all the material facts in the petition. There was no mention of the placement and type of marks alleged to be marked on the ballot papers.

The High Court referred to a few decisions of the Supreme Court and observed that there is a difference between ‘material facts’ and ‘particulars’. ‘Material facts’ are the primary basic facts which must be pleaded by the plaintiff to prove his cause of action. ‘Particulars’ on the other hand, are the details in support of the material facts pleaded by the parties. In the instant case, Respondent 1 as the plaintiff clearly pleaded the material fact that there were extra marks on the ballot papers. And the particulars regarding the type and placing of marks, even if not pleaded, would not undermine the validity and veracity of the election petition.

The High Court found no irregularity in the impugned order and accordingly dismissed the petition. [H.B. Shamithkumar v. A.M. Somanna, 2017 SCC OnLine Kar 3020, order dated 16.10.2017]

Case BriefsSupreme Court

Supreme Court: Dealing with the appeal by Navjot Singh Sidhu, the returned candidate in the election held on 13th May, 2009 for the 02-Amritsar Parliamentary Constituency, where he had argued that there was no ground to proceed with the trial against him as no triable issue has been disclosed in the election petition, the Bench of Ranjan Gogoi and Abhay Manohar Sapre, JJ partly allowed the appeal and directed that the trial should recommence in respect of the allegations relating to election expenses incurred by the appellant on account of campaign through electronic/print media.

Explaining the law, the Court said that in case of an Election Petition founded on allegations of corrupt practice not only the ‘material facts’ have to be pleaded but even the full particulars thereof have to be furnished at the stage of filing of the Election Petition itself. This is specifically provided for in Section 83(1)(b) of the R.P. Act. In the present case, it was noticed that the dates on which the advertisements had appeared; the particulars of the newspapers in which such advertisements were published; the cost incurred for each type of advertisement in each newspaper, have all been mentioned by the election petitioner. The Court, hence, held that when details to the above extent have been mentioned in the Election Petition, it cannot be said that full particulars as required under Section 83(1)(b) of the R.P. Act have not been furnished by the election petitioner.

Regarding the contention of the election petitioner that the expenses incurred on these public meetings is much more than what has been shown in the return of election expenses under the said head (Rs.1,83,466/-), the Court said that while the details of the meetings i.e. the time, date and venue are mentioned and so is the number of persons who are claimed to have attended the meetings, there is no basis as to how the election petitioner had arrived at the quantum of expenses which he alleges to have been incurred by the returned candidate in holding each of the said meetings. What are the source(s) of information of the election petitioner with regard to the details furnished; whether he has personal knowledge of any of the said meetings; who are the persons who informed him of the details of such meetings; what is the basis of the estimate of the number of persons present and the facilities (chairs etc.) that were hired and the particulars of the refreshments served are nowhere pleaded. All such particulars that are an integral part of the allegation of corrupt practice alleged are absent. Hence, the Court said that the allegation of commission of corrupt practice of submission of false/incorrect return of election expenses is struck off. [Navjot Singh Sidhu v. Om Prakash Soni, 2016 SCC OnLine SC 1204, decided on 26.10.2016]