Case BriefsSupreme Court

Supreme Court: The 3-judge bench of RF Nariman, Navin Sinha and KM Joseph has reiterated the principles of natural justice as follows:

(1) Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused.

(2) Where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest, but also in public interest.

(3) No prejudice is caused to the person complaining of the breach of natural justice where such person does not dispute the case against him or it. This can happen by reason of estoppel, acquiescence, waiver and by way of non-challenge or non-denial or admission of facts, in cases in which the Court finds on facts that no real prejudice can therefore be said to have been caused to the person complaining of the breach of natural justice.

(4) In cases where facts can be stated to be admitted or indisputable, and only one conclusion is possible, the Court does not pass futile orders of setting aside or remand when there is, in fact, no prejudice caused. This conclusion must be drawn by the Court on an appraisal of the facts of a case, and not by the authority who denies natural justice to a person.

(5) The “prejudice” exception must be more than a mere apprehension or even a reasonable suspicion of a litigant. It should exist as a matter of fact, or be based upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice

The court was hearing the challenging the cancellation of tender on the ground that it was “impractical” to go ahead with such tender. It was argued that such cancellation was illegal and arbitrary and against the principles of natural justice.

Applying the aforementioned principles to the facts of the case, the Court came to the conclusion that the respondent has been kept completely in the dark so far as the cancellation of the award of tender in his favour is concerned, the audi alteram partem rule having been breached in its entirety. Prejudice has indeed been caused to his client from the fact that one year of the contract period has been taken away.

[State of UP v. Sudhir Kumar Singh, CIVIL APPEAL NO. 3498 OF 2020, decided on 16.10.2020]

Op EdsOP. ED.

“A Judge of the Supreme Court is not entitled after retirement to plead or act in any court or before any authority within the territory of India. He has to depend during the declining years of his life on his savings and the pension to which he is entitled as a retired Judge. The meagre pension has thus also the undesirable consequence of driving some of the Judges who have retired to find remunerative occupation which affects the dignity of the high judicial office they held.”

The above is an extract from the 14th Report of the Law Commission of India on ‘Reform of Judicial Administration’ submitted merely a decade after independence. Evidently, more than sixty years ago to the day when a former Chief Justice of the Supreme Court would be nominated to the Rajya Sabha, the Law Commission of India, then headed by none other than M.C. Setalvad himself, came to express grave misgivings precisely regarding what has transpired by way of the Home Ministry’s Notification dated March 16, 2020.

The events as have unfolded herein may not be the first instance of such a brazen assault on judicial propriety and dignity. In fact, as far back as 1958, government employment of Judges after they had superannuated from the Bench had been expressly deprecated as one having a debilitating impact on judicial independence, with the Law Commission recommending a complete prohibition thereof.[1]

However, in the years that have ensued, nothing justifies the utter disregard and oversight on part of the framers of the Constitution as well as successive elected governments insofar as this gaping void in Chapter IV of Part V[2] of the Constitution is concerned. A perusal of the Constituent Assembly (CA) Debates clearly points towards a perceptible acceptance and imbibing of the best traditions of judicial independence as well as propriety. Paramountcy was given to ensuring that the Indian Republic is bestowed with a truly independent and free thinking judiciary.

Nevertheless, one cannot but notice the disproportionate preoccupation of the Constituent Assembly with the manner and mode of ‘appointments’ and ‘conditions of service’ of Judges to the detriment of other subliminal pressures acting upon them. Perhaps the thought ran that if citizens of high moral character are appointed and allowed to function in a sufficiently insulated and isolated environment, the pressures of the other gubernatorial branches would be unable to render pliable an ‘untouchable’ judicial setup.

In fact, Granville Austin in his seminal work on the workings of the Constitution of India while stoutly defending the appointment of Judges as it transpired in the pre-Indira era has laid out several instances of the grim reality of executive inter reference based on regional, communal, linguistic as well as caste based considerations.[3] Therefore, though no outward fault may be attributed to the Constituent Assembly’s oversight, it must be accepted that with evolution in gubernatorial functioning, judicial sanctity must also assume a dynamic, varied and evolved response. 

It is bewildering to note that a constitutional prohibition on holding of any government office post-superannuation has in fact been enacted in the very next chapter of the Constitution of India[4]; Article 148 providing thereby that,

“(4) The Comptroller and Auditor-General shall not be eligible for further office either under the Government of India or under the Government of any State after he has ceased to hold his office.”

Similarly, vide Article 319, insofar as the Chairman of the Union Public Service Commission is concerned, it has been provided that,

“(a) the Chairman of the Union Public Service Commission shall be ineligible for further employment either under the Government of India or under the Government of a State.”

Evidently, thus, there exists ample precedence for a constitutional bar/prohibition on further employment under any government for those occupying certain constitutional posts. Perhaps an argument can be made out as nomination as a member of the Rajya Sabha strictly does not amount to ‘further employment under any Government’. Nevertheless, the manner in which a former chief of the Indian judiciary has been nominated to a legislative post shall surely dent the resolute confidence that the aware public reposes in those who occupy the highest echelons of our judicial setup.

In conclusion, it is put forth that if the state of affairs betrays a predisposed inclination, erosion of faith and confidence in the judicial establishment is indubitable. Only a bipartisan resolution to ensure that this failure and complete oversight on part of the framers of the Constitution is undone may possibly ensure restoration of judicial dignity. It is grossly undesirable that those sitting in judgment over a litigant should then be permitted to seek employment with the same litigant; such quid pro quo will surely be the death knell of natural justice.


* The authors are practising advocates in Delhi.

[1] Law Commission of India, Reform of Judicial Administration (14th Report, Vol. I,1958).

[2] Part V, Chapter IV of the Constitution of India consists of provisions establishing the ‘Union Judiciary’.

[3] Granville Austin, Working a Democratic Constitution: The Indian Experience (OUP; 2003; pp. 123-142)

[4] Part V, Chapter V of the Constitution of India pertains to the ‘Comptroller and Auditor General of India’.

Case BriefsHigh Courts

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

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

Facts of the Case

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

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

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

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

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

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

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

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

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

Conclusion

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

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

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

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

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

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

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

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

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

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

Op EdsOP. ED.

The National Company Law Appellate Tribunal (“NCLAT”) on 12.03.2020, in Union of India v. Infrastructure Leasing & Financial Services Ltd. [1], (“ILFS”) jumped the wall from West Berlin to East Berlin, despite the law enunciated by the Supreme Court under Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [2] (“Essar Steel”) and Swiss Ribbons Pvt.  Ltd.  v. Union of India[3] (“Swiss Ribbons”).

The judgment is not only shocking but also calls for profound reflexion on the various glaring issues including:

A. Judicial propriety,

B. constitutional morality,

C. rules of natural justice,

D. rules of law and the manner in which proceedings before the quasi-judicial forums are being conducted in India. 

The  NCLAT, in ILFS[3], held that the Tribunal/Appellate Tribunal has ample power to pass interim order in terms of Section 242(4) of the Companies Act, 2013 (“the CA 2013”). As a consequence of such interpretation, the interim order dated 15.10.2018 requires no modification/ recall as opined by several parties, on the following grounds:

  1. The Tribunal/Appellate Tribunal is required to follow the principles of natural justice alongwith other provisions of the CA 2013 or the Insolvency and Bankruptcy Code, 2016 (“IBC”) and any Rules made thereunder for regulating its own procedure. Since the amendment of Section 424 of the CA 2013 came into effect from 15-11-2016, the Tribunal/Appellate Tribunal is vested with the power to follow the procedure of IBC, in addition to the procedure laid down in the CA 2013 and the Rules framed thereunder. (para 50)
  2.  It cannot be said that the NCLTs while dealing with the winding up matter or a matter under Section 241 read with Section 242 of the CA 2013 particularly in a case under Section 241(2), which relates to public interest cannot follow the principle of IBC. (para 52)
  3. It is true that the power of moratorium under Section 14 of the IBC cannot be exercised under the CA 2013, but the same power can be exercised by the Tribunal under Section 242(4) of the CA 2013 by way of an interim order. Such power shall be exercised only if the Tribunal thinks fit for regulating the conduct of the Company’s affair upon such terms and conditions, which are just and equitable. (para 54)
  4. In India, there is no provision for ‘group insolvency’. Infrastructure Leasing & Financial Services Ltd. (IL&FS”) and its entities (“IL&FS Group Entity(ies)/ IL&FS Group”), being financial service providers, no application under Sections 7,  9 or 10 of IBC can be filed against them. Parties have to move before the Tribunal by filing a petition for winding-up. (para 56)

With regard to the procedure to be followed for resolution of debts, the Tribunal referred to the Resolution Framework dated 25-1-2019 and limited reference to the affidavit dated 7-2-2020 for ‘Public Interest Rationale for Fair and Equitable Distribution to Creditor’ and held that:

  1. It is not inclined to follow the procedure of IBC including Section 53, as this is a case where public interest is involved. (para 64)
  2. It cannot be said that ‘shareholders’ including Life Insurance Corporation, IL&FS Employees’ Welfare Trust, Housing Development Finance Corporation Ltd., Central Bank of India, State Bank of India, UTI-Unit Linked Insurance Plan, etc. should not be paid by following the procedure under Section 53 of IBC. (para 65)
  3. Following Section 53 would be against the public interest as the money invested by purchasing shares by Life Insurance Corporation of India, IL&FS Employees’ Welfare Trust, Central Bank of India, State Bank of India are public money, who are the shareholders and also to protect the interest of IL&FS group entities (who are also creditors). (para 65)
  4. There shall be pro rata distribution as suggested by Union of India for the purpose of completing resolution process. (para 66)
  5. Union of India, the Board of Directors of IL&FS and the ‘Committee of Creditors’ already constituted or which may be constituted were directed to conclude resolution of all the Entities preferably within 90 days.

The NCLAT has not only given contradictory findings, but also has contradicted the settled principles of law. This is apparent from the very fact that NCLAT, on 07-02-2020, directed the matters to be listed on 17-02-2020 for further arguments, however, on 15-02-2020, the matter was notified to have been deleted from the cause list of NCLAT for 17-02-2020. Thereafter, the matter was listed only on 12-03-2020. Upon being informed of the order (yet to be passed at that time), when the parties requested NCLAT to allow them to complete their submissions in all respects, the parties were told that the order is ready and shall be passed as it cannot wait for the parties to finish their submissions and in any way, they can approach the Supreme Court of India. 

The appeal was as a consequence of IL&FS Union of India (“UoI”) challenging the order passed by the  NCLT, Mumbai, whereby the  NCLT declined to pass an order akin to moratorium under Section 14 of IBC. The  NCLAT, while framing the issues on 15-10-2018, imposed a stay inter alia on the lenders to the IL&FS Group from taking any enforcement actions against any entity of the IL&FS Group ‘taking into consideration, the nature of the case; larger public interest; economy of the nation; and interest of the IL&FS entities’.

The first and foremost issue which needs to be pondered upon is whether NCLAT, despite holding that while considering the matter under Section 241 read with Section 242 of the CA 2013, the principles of IBC is to be followed, could have refused to follow the procedure of IBC on the ground that ‘public interest’ is involved? The answer to this issue lies into deeper questions as to –

-whether the provisions of the CA 2013 will override the provisions of IBC.

-whether the entire “corporate insolvency/insolvency resolution/restructure mechanism process” by whatever name be it called as such can be equated with “proceedings arising out or relating to prevention of oppression and mismanagement”;

-whether the mechanical time extension by NCLAT is justifiable in law;

-what does the phrase ‘public interest’ mean in relation to insolvency/restructure mechanism, etc.

Procedure envisaged under the IBC ought to be strictly followed to ensure effective resolution

Section 241 of the CA 2013 lists out the events when an application for relief in case of oppression and mismanagement can be made to the Tribunal. Further, Section 242 of the CA 2013 enlists the nature of relief which can be granted by the Tribunal. Provisions of clauses (a) to (l) to sub-section (2) of Section 242, being exhaustive in nature, specifically mentions the nature of relief which can be granted by the Tribunal and the only residuary provision is clause (m) to sub-section (2)of Section 242, which provides relief for ‘any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made’. The said provision of aforesaid clause (m) cannot be extended beyond its purport and object.

It is relevant to point out that the manner in which the resolution process has been undertaken falls foul of clause (f) to sub-section (2) to Section 242 of the CA 2013, which states that no agreement between the company and any person other than those mentioned in clause (e) i.e. creditors/debenture-holders in the instant case, shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned. Therefore, without obtaining due and appropriate consent of the creditors, the resolution process mechanism including the mechanism of distribution of amount cannot be forced upon creditors, which is apparently done in the instant case.

At the time of consideration of the Companies Bill leading to the enactment of the CA 2013, neither the Bankruptcy Law Reforms Committee Reports nor the Insolvency and Bankruptcy Bill were available before Parliament. The CA 2013 received the assent of the President on 29-8-2013 and the same was published in the Gazette of India. Whereas the Bankruptcy Law Reforms Committee Report was available only on 4-11-2015 and the Insolvency and Bankruptcy Bill, 2015 was introduced in the Lok Sabha on 21-12-2015). It is submitted that in interpreting an Act of Parliament, it is proper, and indeed necessary, to have regard to the state of affairs existing, and known by Parliament to be existing, at the time. Therefore, it was never the intention of Parliament to provide for or deal with the mechanism for resolution plan or plan which would have the effect of re-organisation and/or resolution of stressed entity such as IL&FS Group Entities.

IBC being a special law dealing with mechanism for resolution of the entities in a time-bound manner for maximisation of value of assets of such entity, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders, would have an overriding effect over any other provision of the general law such as Section 242 of the CA 2013. Assuming that the CA 2013 is to be treated as special, even in such a case, provisions of IBC shall have an overriding effect over the CA 2013. It is settled law that in case of an inconsistency arising between two special legislations, the special law enacted later in time would have an overriding effect on the previously enacted law[4]. This rule, read with the non obstante clause enshrined under Section 238 of IBC, makes it clear that IBC shall prevail over the provisions of the CA 2013. In this regard, reference is being made to Innoventive Industries Ltd v. ICICI Bank [5], and Jaipur Metals and Electricals Employees’ Organization v. Jaipur Metals and Electricals Ltd.[6]

At this stage, it is relevant to point out the rationale(s) for enacting the consolidated and complete code dealing with resolution of entities, as set out under the Bankruptcy Law Reforms Committee Report dated 4-11-2015 (“the BLRC Report of 2015”), as follows:

“In such an environment of legislative and judicial uncertainty, the outcomes on insolvency and bankruptcy are poor. World Bank (2014) reports that the average time to resolve insolvency is four years in India, compared to 0.8 years in Singapore and 1 year in London…If we are to bring financing patterns back on track with the global norm, we must create a legal framework to make debt contracts credible channels of financing.

…Yet these game changers and growth drivers are crippled by an environment that takes some of the longest times and highest costs by world 18 standards to resolve any problems that arise while repaying dues on debt. This problem leads to grave consequences: India has some of the lowest credit compared to the size of the economy. This is a troublesome state to be in, particularly for a young emerging economy with the entrepreneurial dynamism of India.

*                           *                                *

Speed is of essence for the working of the Bankruptcy Code, for two reasons. First, while the ‘calm period’ can help keep an organsation afloat, without the full clarity of ownership and control, significant decisions cannot be made. Without effective leadership, the firm will tend to atrophy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay. This same idea is found in FSLRC‘s (Financial Sector Legislative Reforms Commission) treatment of the failure of financial firms. The most important objective in designing a legal framework for dealing with firm failure is the need for speed.

  (emphasis supplied)

Relying upon Innoventive Industries Ltd. v. ICICI Bank[7] and ArcelorMittal India Pvt. Ltd.v. Satish Kumar Gupta[8], the Supreme Court, in Swiss Ribbons[9], explained the raison d’être for the IBC, which is set out as under: (SCC paras 27, 28)

“27. …the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme—workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern.

28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor’s assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends.”

    (emphasis supplied)

As observed by the Supreme Court in Swiss Ribbons (supra), referred to hereinabove, the primary focus of the legislation while enacting the IBC is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from liquidation. Further, the corporate insolvency resolution process is to be completed in a time­bound manner. Therefore, the entire “corporate insolvency/insolvency resolution/restructure mechanism process” by whatever name be it called as such cannot be equated with “proceedings arising out or relating to prevention of oppression and mismanagement”. Considering that IBC was a subsequent Act to the CA, 2013, Section 238 of IBC shall be applicable and the provisions of the IBC shall have an over­riding effect over the CA 2013. Any other view would frustrate the object and purpose of IBC and the settled position of law. In this regard, reliance is placed upon Duncans Industries Ltd. v. A. J. Agrochem[10]. What is more surprising is that NCLAT despite having referred to aforesaid paragraphs of Swiss Ribbons (supra) failed to follow the same in its true spirit.

IBC inter alia provides for the time-limit for completion of corporate insolvency resolution process/resolution process. IBC originally provided that the entire process was to be completed within a period of 180 days from the date of admission of the application and could only be extended beyond 180 days for a further period of not exceeding 90 days if the committee of creditors so decides. Thereafter, through the Insolvency and Bankruptcy Code (Amendment) Act, 2019 (“the 2019 Amendment”), the timelines were changed and CIRP must be completed have now been extended to 330 days, which is 60 days more than the initial stipulated period of 180 days plus 90 days (which is equal to 270 days). But this 330-day period includes the time taken in legal proceedings in relation to such resolution process of the corporate debtor/stressed entity unlike the earlier position. The constitutional validity of the 2019 Amendment was examined by the  Supreme Court, in Essar Steel [11](supra) and it was inter alia held as under: (SCC Online paras 105 & 108)

105. Given the fact that timely resolution of stressed assets is a key factor in the successful working of the Code, the only real argument against the amendment is that the time taken in legal proceedings cannot ever be put against the parties before the NCLT and NCLAT based upon a Latin maxim which sub-serves the cause of justice, namely, actus curiae neminem gravabit.                           

* * *

108. …The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days…It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation.

      (emphasis supplied)

Approximately 481 days (i.e. 1 year, 3 months & 24 days) already stands expired from 15-10-2018 (NCLAT order granting moratorium) until 7-2-2020 (last date of hearing before NCLAT). Therefore, the extension of resolution time period, being the exceptional rule, couldn’t have been mechanically granted. Such mechanical extension of time, without satisfying the test laid in Essar Steel (supra), is in the teeth of the law pronounced by the Supreme Court.

Having regard to the raison d’être for IBC along with the aforesaid observations of the  Supreme Court, any deviations from the principles of IBC would be violative of Articles 14, 19 and 21 of the Constitution of India since this would have an effect of treating similarly placed stressed entities in different manners. IBC exhaustively lays out the process and mechanism, which is to be followed for an effectively and timely resolution process of the stressed entity. Once resolution process is being undertaken following the principles of IBC, it would result into a time bound maximisation of value of assets of such entity. Whereas, another stressed entity for which resolution process is being undertaken dehors the principles of IBC would not be able ensure a time bound maximization of value of assets of such entity. It is undisputed that unless the time bound maximization of value of assets of the stressed entity is achieved, it would not be

possible to keep the entity as a going concern. Therefore, it is not only incomprehensible but also beyond any imagination to even suggest that the resolution process of any entity may be carried out, at its own whims and fancies, without following the IBC and/or principles arising out of IBC, which has been enacted by Parliament, after considering the Bankruptcy Law Reforms Committee Reports, to clear off the environment of legislative and judicial uncertainty and to ensure that average time period for resolution process/insolvency would be much shorter than what existed under the pre-existing state of laws.    

Approbation and reprobation by IL&FS

Further, IL&FS cannot be allowed to approbate and reprobate at the same time. On one hand, it has taken a stand that under the Resolution Framework (which is prepared by IL&FS only and is nothing more than a self-serving document) the provisions of the IBC shall not apply, whereas on the other hand, in the same breath, it has relied upon the provisions of IBC and Regulations framed thereunder, wherever the same is convenient to it. In this regard, reference may be drawn (including but not limited to) to the following:

(a) Payment of financial bid amount to bind stakeholders This principle arises out of sub-section (1) to Section 31 of IBC (p. 10 of Further Affidavit dated 9-1-2020).

(b) Process for admission of claims IBC like process had been followed for inviting, verifying and admitting claims in respect of 70 entities that were identified for sale in Phase-I (p. 40 of Further Affidavit dated 9-1-2020).

(c) Voting percentage required for approval from CoC This principle arises out of sub-section (4) to Section 30 of IBC (p. 98 of Further Affidavit dated 9-1-2020).

(d) Protection to Successful Bidders The Resolution Framework seeks the permission of this Tribunal to grant suitable relief to the successful bidders as contemplated in Section 32-A. It is submitted that the said provision has been recently introduced by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 dated 28-12-2019[12] (p.99 of Further Affidavit dated 9-1-2020).

Invitation for EOIs

Procedure for invitation of Expression of Interest (“EOIs”), as adopted under the Resolution Framework, is contrary to the provisions of the IBC and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“the CIRP Regulations”) as the same warrants that Information Memorandum (“IM”) and EOIs are to be prepared and published only after due consideration of the same by the CoC. Following the receipt of EOIs from potential investors, a request for proposal (“RFP”) is issued to eligible applicants pursuant to which, binding financial bids are sought after the due diligence exercise, as envisaged under the Resolution Framework is finished, in the form and manner and within the timelines prescribed in the relevant RFP. Whereas in the instant case, CoC (whose composition is not as per law and will be dealt with in the following section) was constituted only after receipt of H1 bid.

In order to ensure transparency in the entire process, it is essential that the CoC be constituted prior to issuance of the EOIs to ensure that the details stated in the EOIs are complete and accurate since the creditors in respect of the sale company have better technical knowledge, know-how of the workings of the sale company and would ensure maximisation of value of assets of the sale company.

Moreover, vide order dated 6-1-2020, NCLAT was constrained to pass a direction in this regard to include details of decrees or awards which have attained finality in the EOIs for the knowledge of the resolution applicants. It goes without saying that IL&FS entities excluded/ignored certain crucial details, even during the pendency of the issue before NCLAT. Only uncertainties lies ahead of us while we move forward with the resolution. 

Constitution of CoC

NCLAT failed to appreciate that the Resolution Framework fails to adhere to Section 21 of the IBC as related party lenders, namely, IL&FS Group Entities have been included in the CoC. By virtue of such inclusion, those related parties have been provided the right of representation, participation and voting in the said CoC meetings. The primary rationale provided for inclusion of related parties in the CoC is to ensure that the rights of the lenders are also protected those who have provided financial debt to the relevant IL&FS Group Creditors of the sale company.

CoC comprises of all financial creditors and authorised representatives of certain categories of persons and classes of creditors under Section 21(6) and Section 21(6-A) and the related parties are excluded from CoC as per first proviso to sub-section (2) of  Section 21[13]. The rationale for only financial creditor handling the affairs of the corporate debtor and resolving them have been deliberated upon by the BLRC Report of 2015, which formed the basis for the enactment of the IBC. The legislative intent under Section  21(2) of IBC in denying rights of representation, participation and voting to related parties is to ensure that the resolution process is driven by only those creditors who are not related to the stressed entity/corporate debtor. Even though related parties may have claims and may even file application for initiation of corporate insolvency resolution process and during such resolution process, may also file their respective claim, such parties cannot drive the resolution process, as that would be rife with conflicts of interest. Such a wholesome intent cannot be rendered infructuous by supplying a narrow or technical interpretation as adopted by the New Board of IL&FS and which has been now blessed by NCLAT.

The Resolution Framework has sought to make the futile attempt to justify the inclusion of related parties by stating that the purported ‘Resolution Framework specifically contemplates that every financial creditor is entitled to be part of the relevant Creditor’s Committee to safeguard interest of creditors at various levels of  Respondent 1 Group’. It has not been able to show as to how the self-serving document/process which is created by IL&FS, passes the scrutiny of settled law. The Resolution Framework prepared by the IL&FS Group for the resolution of IL&FS Group, which is being forced down the throat of the financial creditors, falls foul of the legislative intent and principles of IBC and the regulations framed thereunder. The constitution of the CoC, therefore, as envisaged under the Resolution Framework and blessed by NCLAT is perverse, illegal and bad in law.

Furthermore, the justification given by IL&FS, as mentioned in the affidavits filed before NCLAT, for inclusion of related parties, falls foul of basic principles of law and also compromises the autonomy and wisdom of CoC. It is most unfortunate that IL&FS is acting as the ultimate authority/regulator over the entire process inasmuch as the financial creditors forming part of the CoC have been reduced to a mere rubber stamp.

Related party creditors cannot be treated as ‘similarly situated creditors’ in comparison with other external financial creditors inasmuch as IBC itself deprives such creditors of the rights ordinarily available to other financial creditors. The inclusion of related parties cannot be forced upon the external financial creditors especially when IL&FS, other than specifying its desire and unsubstantiated sweeping assumptions, has not been able to point out any provision of law which enables it to include related parties in the first place, much less a scenario where such related parties have been conferred with the right of representation, participation and/or voting in the meeting of creditors. It defeats the principle of natural justice and leaves a wide scope of misuse of the remaining assets of the distressed corporate entity.

The assumption on the part of the IL&FS that the ‘interest of the creditors at the holding companies cannot be protected if IL&FS Group companies are not members of the COC’ casts aspersions on the integrity of CoC, which are uncalled for.

Such inclusion of related parties not only amounts to causing an inquiry in the commercial wisdom but also tantamount to issuing direction in relation to the exercise of commercial wisdom of CoC. NCLAT has literally adopted ‘equality for all’ approach without appreciating the nature of rights of different classes of creditors and their relationship qua the debtor.

Furthermore, in the recently concluded sale of the 51% shareholding of IWEL to Orix Corporation in the 7 wind SPVs, the CoC comprised solely of related party entities. In this precarious situation as well, IBC provides for a remedy under Section 21(8) which very well could have been adopted. The aforesaid sale is the subject-matter of challenge before NCLAT in Company Appeal (AT) No. 256 of 2019.

The issue of unfollowed principles underlying IBC and objections to Resolution Framework were consistently raised by the creditors prior to granting in-principle acceptance to the bid and a request was made to keep the voting process in abeyance until the issues were/are resolved to the satisfaction of the external creditors. However, no such step was taken by IL&FS and creditors were asked to vote on the bid since its validity was to expire shortly. At this stage, it is relevant to point out that under the Resolution Framework, even if the bid is rejected by the creditors, the IL&FS Board can still approve the same and forward it to the NCLAT for final approval. Therefore, creditors were put under the threat of an invisible gun in granting approval to the bid, wherever the approval has been granted by the creditors.

Given the aforesaid, IL&FS’s stand casting bias upon the CoC by stating that without inclusion of related party, the interest of creditors at the holding companies cannot be protected, is entirely misconceived. I say this since there have been umpteen number of cases of resolution, albeit under the IBC, where the CoC which does not include related party creditors, nevertheless it has offered such creditors a fair bargain under a resolution plan.

NCLAT failed to consider that CoC is not consulted while preparing the EOIs, appointment of valuer(s), consideration of their reports, etc. Furthermore, the CoC also consists of related party entities, who have been unjustifiably conferred upon the right of representation, participation and voting in the CoC meetings. Therefore, appropriate directions should have been issued by NCLAT for constitution of the CoC in accordance with the IBC, by excluding the related parties.

Resolution framework reducing the CoC to rubber stamp

Amongst other things, the resolution framework which was prepared by IL&FS for the resolution of the IL&FS entities specifically mentioned that ‘Approval of CoC will not be required for distribution, which will be as per Revised Distribution Framework’. It is shocking that NCLAT has approved such framework. It would be apt to mention at this stage the order passed by NCLAT lacks clarity especially with regard to resolution. Though the order makes reference to Resolution dated 25-1-2019, it does not make reference to any other amended resolution framework which was filed by IL&FS/UoI, other than making a limited reference to ‘public interest rationale for fair and equitable distribution to creditor’. Therefore, there is no clarity as to which resolution framework was approved by the NCLAT and pertinent to mention that UoI/IL&FS never prayed for pro rata distribution of the amount. It had envisaged for distribution of amount to secured creditor up to liquidation value in terms of Section 53 of IBC. NCLAT has clearly held that principles of Section 53 shall not be applicable. The issue of pro rata distribution has been dealt with in the following section.

The Resolution Framework falls foul of the law laid down in Essar Steel[14] read with the scheme of IBC and Regulations framed thereunder. The Resolution Framework is clearly in teeth of the settled principles of law which require the CoC to consider, evaluate, deliberate and decide, exercising their commercial wisdom, any resolution plan in entirety.

In light of the recent judgment passed by the  Supreme Court in Essar Steel (supra), the principle/procedure for distribution of the sale proceeds by the CoC to the creditors of the relevant sale company shall be in accordance with the same. The Supreme Court has held that it is the commercial wisdom of the CoC, which operates to approve what is deemed by a majority of such creditors to be the best resolution plan[15].  There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in the CoC meetings through voting is a collective business decision[16].

The legislature, therefore, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the Adjudicating Authority and accordingly, it is made non-justiciable[17].

What is left to the majority decision of the CoC is the “feasibility and viability” of a resolution plan, which takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. It is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place. Ultimate discretion of ‘what to pay and how much to pay each class or sub-class of creditors’ is with the CoC[18].

NCLT/NCLAT cannot interfere on merits with the commercial decision taken by the CoC, the limited judicial review available is to see that the CoC has taken into account the fact that[19]: (a) the corporate debtor needs to be maintained as a going concern during the resolution process; (b) it needs to maximise the value of its assets; and (c) the interests of all stakeholders including operational creditors has been taken care of[20].

If NCLT/NCLAT finds that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the CoC to re-submit such plan after satisfying the aforesaid parameters[21]. The reasons given by the CoC while approving a resolution plan may be looked at by NCLT/NCLAT only from this point of view, and once it is satisfied that the CoC has paid attention to these key features, it must then pass the resolution plan, other things being equal[22].

As stated earlier, in the present case, IL&FS has called upon the creditors to grant an in-principle approval on the bid, without even knowing, much less evaluating, the relevant particulars of the bid including the proposed manner of payout, the proposed distribution, the schedule of payment etc. CoC cannot be dictated by the IL&FS and be told that the distribution shall be as per the orders passed by the NCLAT, which as per settled law, has a limited jurisdiction in such matters. Such an action being preposterous and being in teeth of the law, is liable to be nipped in the bud itself and should not have been allowed by NCLAT.

Public Interest in insolvency process/restructuring process (by whatever name be it called)

The expressions ‘Public Interest’ cannot be extended beyond its purport and cannot be used to contradict the express provisions of special law i.e. IBC, enacted by Parliament. Public interest is an expression which is wide and amorphous and takes colour from the context in which it is used[23].

In Municipal Corporation of City of Ahmedabad v. Jan Mohd. Usmanbhai[24], the  Supreme Court held that the expression ‘in the interest of the general public’ is of wide import inter alia comprehending economic welfare of the community. In R. v. Bedfordshire[25], it was held that public interest is a matter in which a class of the community have a pecuniary interest, or some interest by which their legal rights or liabilities are affected.

The phrase ‘public interest’ in relation to resolution process commands protection of existing rights of stakeholders and by no stretch of imagination, the ‘public interest’ can be used to create a new right in favour of any of the stakeholders, which never existed in the law. Therefore, to say that for protection of rights of ‘shareholder’ and ‘related party creditors’, pro rata mechanism should be followed for distribution of the amount does not pass the muster of law. Provisions of the company law have treated shareholders differently from the creditors since its inception. Even the Companies Act also provides water fall mechanism and the shareholders and unsecured creditors (i.e. related party creditor in this case) are not treated at par with the other secured creditors. Therefore, at the time of purchasing the share and/or granting the unsecured loan, the respective parties were aware of their rights and such rights cannot be altered/modified under the pretext of ‘public interest’.

It is relevant to point out that the insolvency or resolution process of a stressed entity/ corporate debtor is not a private matter, but falls within the ambit of ‘public interest’[26].

The phrase ‘Public interest’ inter alia includes:

  1. protection of existing rights of stakeholders;
  2. debts would be taken and honored in accordance with the terms thereof[27];
  3. no action is undertaken which would affect the provision of credit in the economy[28]; and
  4. respect and follow the statutory framework for mechanism of distribution of the amount i.e. waterfall mechanism even if it provides for positive discrimination amongst the stakeholders.

Having left with no case law in India dealing with the issue, it would be appropriate to refer the judgments of Courts at Singapore, wherein it has been considered as to pari passu principle has any scope for operation in schemes of arrangement[29]. It has been held that adoption of pari passu principle would be tantamount to turning a blind eye to fundamental aspects of corporate rescue mechanisms outside liquidation in general and of a scheme of arrangement in particular (which in case of resolution process would be resolution framework/resolution plan)[30]. It was further held that a rescue mechanism may need, in order to be effective, to discriminate amongst creditors for example by repaying bigger creditors proportionately less than small creditors are repaid[31]. Dictating that the assets should be distributed in a pari passu manner would not only decrease the flexibility now available to planners of schemes but it may also put a dampener on what the scheme of arrangement could achieve and spell the death knell of the company prematurely[32]. The  Court further held that there are also instances where schemes of arrangement have nothing to do with insolvency at all. In relation thereto, it was held that extending the pari passu principle to such schemes of arrangement which do not lead to insolvency would be to go farther than is necessary[33].

In light of the aforesaid, whether the present IL&FS matter be termed as the one undergoing insolvency resolution process or mere resolution process, the application of pari passu principle falls foul of canons of law in Essar Steel (supra)[34], wherein it was inter alia held that equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the IBC – to resolve stressed assets. Equitable treatment has to be accorded to each creditor depending upon the class to which it belongs. Swiss Ribbons[35] referred to the UNCITRAL Legislative Guide which makes it clear that equitable treatment is only for similarly situated creditors.[36]

No power of moratorium under Sections 241 and 242 of CA 2013 especially de hors the principles of IBC

Another aspect to be considered as regards the IL&FS Group Companies is that the premise of Union of India to approach the  NCLT and NCLAT was to seek an order akin to moratorium under the CA 2013, as IL&FS being a financial service provider was excluded from the application of the IBC. Therefore, IL&FS could not avail moratorium under Section 14 of IBC.

The Union of India passed the notification under Section 227 of the IBC, whereby the Financial Service Provider Rules were notified on 15-11-2019. Therefore, the NCLAT erroneously observed at para 56 that ‘IL&FS and its Entities, being financial service providers, no application under Sections 7, or 9 or 10 of the I&B Code can be filed against them’. It is relevant to note that several group companies of IL&FS are not financial service providers and can avail of provisions of IBC. Therefore, the fundamental premise of the Union of India that IL&FS cannot avail of the process under the IBC and therefore an order ought to be passed under the CA 2013, does not apply to several group companies (Ref: Para 20 of NCLT order dated 12-1-2018).

Separate legal personality of IL&FS group entities/companies cannot be obliterated in proceedings under Sections 241/242 of the Act. Sections 241 and 242 of the CA 2013 does not provide for initiation of proceedings against multiple companies and is strictly confined to a single company. The definition of the expression ‘matters’ appearing in Section 242, as set out in Appendix II of the CA 2013, further strengthens this position as the same is limited to matters as regards the company complained of. Though the  Tribunal has the power to regulate its own procedure under Section 424 of the CA 2013, the same is subject to other provisions of the CA 2013, IBC and the Rules/Regulations made thereunder. Therefore, Section 242 of the CA 2013 as well as Rule 11 of the NCLAT Rules, 2016 cannot be construed to unjustifiably enlarge and expand the powers of the NCLAT.

Conclusion

The resolution mechanism, as set out in the Resolution Framework is in blatant violation and non-compliance of several provisions of IBC as well as the CA 2013. By the Resolution Framework, IL&FS proceeded to constitute CoC for the IL&FS Group Entities concerned, in contravention of the IBC and further called upon the CoC to grant an in-principle approval on the bid, without even knowing, much less evaluating, the relevant particulars of the bid including the proposed manner of waterfall mechanism, the proposed distribution, the schedule of payment, etc.

The Resolution Framework, as framed by IL&FS and blessed by NCLAT, has chosen to adopt a procedure as per its whims and fancies without any backing whatsoever in law. It is surprising to note as to how NCLAT while ignoring the aforesaid has gone ahead and blessed the IL&FS’ action, in a hurried manner.

The order dated 15-10-2018 stands challenged before the Supreme Court in L&T Infrastructure Finance Company Ltd.v. Union of India[37], and the  Supreme Court was apprised of the order on jurisdiction was to be passed by NCLAT. The matter was, therefore, adjourned to be listed after the pronouncement of the order. Soon the  Supreme Court would consider the order in the pending matters as well as the fresh appeals which may be listed once the havoc of COVID-19 ends. It is now only with the  Supreme Court to examine the aforesaid issues which would result into setting aside of the order and further passing of stricture/directions, if necessary, to ensure that NCLAT does not jump the wall from West Berlin to East Berlin again.


*Anurag Tripathi, Alumni (2009-14) National Law University Odisha, now working as In-house Counsel at an Indian Conglomerate and may be reached at anuragnluo@gmail.com. The views expressed herein are personal and does not represent views of any organisation. 

[1] Union of India v. Infrastructure Leasing & Financial Services Ltd.., Company Appeal (AT) No. 346 of 2018 with IAs Nos. 3616, 3851, 3860, 3962, 4103, 4249 of 2019, 182 & 185 of 2020, order dated 12.03.2020.

[2] Essar Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478.

[3] Swiss Ribbons  Pvt. Ltd.  v. Union of India, (2019) 4 SCC 17.

[4] Solidaire India Ltd. v. Fairgrowth Financial Services Ltd., (2001) 3 SCC 71.

[5] Innoventive Industries Ltd v. ICICI Bank, (2018) 1 SCC 407.

[6] Jaipur Metals and Electricals Employees’ Organization v. Jaipur Metals and Electricals Ltd., (2019) 4 SCC 227.

[7] Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407.

[8] ArcelorMittal India Pvt. Ltd.  v. Satish Kumar Gupta, (2019) 2 SCC 1.

[9] Swiss Ribbons  Pvt. Ltd.  v. Union of India, (2019) 4 SCC 17, paras 27, 28.

[10] Duncans Industries Ltd.  v. A. J. Agrochem, (2019) 9 SCC 725.

[11] Essar Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478.

[12] The 2019 Ordinance now stands repealed by the Insolvency and Bankruptcy Code (Amendment) Act, 2020. Since the present order was passed on 12-3-2020 March 12, 2020 and the 2020 Amendment was enacted and notified on 13-3-2020 March 13, 2020, reference has been made to the 2019 Ordinance in the body and the 2020 Amendment is mentioned for sake of clarification.

[13] Chitra Sharma v. Union of India, (2018) 18 SCC 575 and Vijay Kumar Jain v. Standard Chartered Bank, 2019 SCC OnLine SC 103.

[14] Essar Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478, paras 33, 41, 42 and 58.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Moon Technology Ltd. v. Union of India, CA No.4476 of 2019.

[24] Municipal Corpn. of City of Ahmedabad v. Jan Mohd. Usmanbhai, (1986) 3 SCC 20.

[25] R. v. Bedfordshire, 24 LJ QB 84; Janata Dal v. H.S. Chowdhary, (1992) 4 SCC 305.

[26] U.K., Cork Committee, Insolvency Law and Practice (Cmnd. No. 8558) by Kenneth Cork et al. (London: Her Majesty’s Stationary Office, 1982) (“Cork Report”); In re Pantmaenog Timber Co. Ltd., [2004] 1 A.C. 158 at para 52 (H.L.) and Liquidator of W&P Piling Pte Ltd v. Chew Yin What [2004] 3 SLR  (R) 164 at para 26 (H.C.).

[27] Ian F. Fletcher, “Juggling with Norms: the Conflict Between Collective and Individual Rights Under Insolvency Law” in Ross Cranston, ed., Making Commercial Law: Essays in Honour of Roy Goode (Oxford: Clarendon Press, 1997) at 393.

[28] Fiscal and Financial Policy Sub-Committee, Report of the Fiscal and Financial Policy Sub-Committee by Keith Tay et al. (Singapore: Singapore National Printers Ltd, 1986) at 63 and Cork Report, supra note 26.

[29] Hitachi Plant Engineering & Construction Co. Ltd v. Eltraco International Pte Ltd.,  [2003] 4 SLR (R) 384 (CA); [2003] SGCA 38.

[30] Id., para 79

[31] Id., para 81

[32] Id.

[33].Id., para 85 and followed by Re Wan Soon Construction Pte Ltd., [2005] 3 SLR(R) 375: [2005] SGHC 102.

[34] Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478, paras 49, 51, 54,55, 56, 57, 58.

[35] Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, para 76.

[36] Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478.

[37] L&T Infrastructure Finance Company Ltd. v. Union of India, CAs Nos. 2397-98 of 2019; GHV (India) Pvt. Ltd. v. Union of India, CA (Diary) No. 6403 of 2019.

Case BriefsHigh Courts

Jharkhand High Court: Dr S.N. Pathak, J. dismissed the instant writ petition being devoid of merit.

The brief facts of the case are that the petitioner was appointed as an Assistant Teacher by the State Government in 1994 on qualifying BPSC exam for the same post. After a long service, he was given the charge of Headmaster in Upgraded Middle School, Khudgadda in Bokaro where he was performing his duties honestly and diligently. However, on 07.06.2010 an inspection was held in the petitioner’s school by the Block Development Officer, Gomiya on the basis of complain made by Gomiya Block President of Jharkhand Vikas Morcha on grounds of irregularity in civil work, irregularity in Mid-Day-Meal Scheme, and non-providing of the equipments of sports and instruments of music to the students under ‘Sarv Shiksha Abhiyan’, consequent to which DSE, Bokaro passed an order of suspension. However, the DSE, Bokaro, revoked suspension order and passed punishment order. Aggrieved by the same, the petitioner filed a Service Appeal before the Divisional Commissioner, North Chhotanagpur Division, Hazaribag , but the same was dismissed. Hence, the instant writ petition.

The counsel for the petitioner, Bhawesh Kumar placed reliance on Supreme Court’s decision in, M.V. Bijlani v. Union of India, (2006) 5 SCC 88 and submitted that the act of the respondents was beyond their jurisdiction and politically motivated as no opportunity of hearing was given to the petitioner, neither any explanation nor any show cause notice was issued to him, which amounts to violation of principles of natural justice. He further submitted that construction of building is under taken by the school committee constituted for this purpose under supervision of an engineer and there is no misappropriation by the petitioner.

The counsel for the respondents, Brij Bihari Sinha opposed and submitted that in response to charges, petitioner filed a show cause, which was not found satisfactory and a detailed enquiry was held and the petitioner was found guilty of the charges. Considering the enquiry report and other relevant facts, the DEO passed the order of minor punishment and as such, there is no illegality in the impugned order.

The Court relying on the judgment State of Bihar v. Phulpari Kumari held that the petitioner has been found guilty due to lack of evidence proving otherwise as there was no procedural laches in the proceedings rather a full-fledged enquiry was conducted following the provisions of natural justice and an ample opportunity was given to the petitioner. It was further observed that interference with orders passed pursuant to departmental enquiry can only be in case of ‘no evidence’; sufficiency of evidence not being within realm of judicial review.[Vinod Kumar Prasad v. State of Jharkhand,  2020 SCC OnLine Jhar 278, decided on 06-03-2020]

Case BriefsHigh Courts

Himachal Pradesh High Court: A Division Bench of L. Narayana Swamy, CJ and Jyotsna Rewal Dua, J., dismissed an application which was filed by the petitioners challenging an order dated 10-05-2016 given by the H.P. Administrative Tribunal, Shimla (Tribunal) whereby the T.A. was allowed and the termination against the respondent was quashed and set aside.

The respondent had been working as daily waged Chowkidar with the petitioners- Corporation and was posted at Sehral Depot of Forest Working Unit Kunihar under Forest Working Division, where theft of 229 of resin filled tins took place on the intervening night of 17th and 18th February, 1997 after which an enquiry was initiated against the respondent. The petitioners-Corporation had issued a show-cause notice to the respondent alleging that he had been willfully absent from duty on the intervening night of 17th and 18th February, 1997 following which the services of the respondent were dispensed. Being aggrieved by the order of termination the respondent had approached the Tribunal who had decided in favor of the respondent and thus the instant writ petition was filed by the petitioner.

The Court while dismissing the petition held that a person, who was working as a daily wager or on contract basis and if his services have been discontinued or terminated on the basis of any allegation of misconduct etc., the provisions of the Central Civil Services (Conduct) Rules, 1964 are not applicable to his case, however, even then the principles of natural justice are required to be followed and if an order was passed against a person without affording him an opportunity of hearing, it is in violation of natural justice. In addition, the petition needs to be dismissed on the ground of delay and laches because the writ was filed after three years of the order. [H.P. State Forest Development Corporation Ltd. v. Ishwar Dutt, 2019 SCC OnLine HP 2199, decided on 18-12-2019]

Case BriefsHigh Courts

Uttaranchal High Court: Sudhanshu Dhulia, J., contemplated a petition presented before him by the petitioner who was a member of Waqf Board and was subsequently disqualified, aggrieved by which he filed the instant petition.

The petitioner was disqualified in terms of Section 20 read with Section 16 of the Waqf Act, 1995. Section 16 talked about disqualification for being appointed or for continuing as a member of the Board if certain conditions are not followed also Section 20 talked about “removal of chairperson and member” when a person was subjected to disqualification under Section 16.

The case of the petitioner was that on the earlier occasion when he was a member of the Waqf Board for the term of five years (i.e. 22-06-2010 to 22-06-2015), but he was removed in 2012. The petitioner challenged the order before the Waqf Tribunal where his petition was allowed and the order by which he was removed as a member of the Waqf Board was set aside by the Waqf Tribunal.

The reason cited by the respondent was that on a previous occasion he was removed from his office as a member or as a Mutawalli. However, the order by which the petitioner was earlier removed as a member of the Waqf Board was set aside by the judicial order, and therefore, that order does not survive. It was contended that the order passed by the respondents was unreasonable and the petitioner was not given an opportunity of being heard.

Learned State counsel D.S. Patni and M.S. Rawat argued that the petitioner had an equally efficacious remedy to file an appeal before the Tribunal under Section 83 of the Waqf Act, 1995.

High Court observed that though the petitioner had a remedy under sub-section (2) of Section 83 of the Waqf Act, 1995 however, in this particular case the existence of an alternative remedy before the Tribunal not operated as a bar inasmuch as the present order had been passed without affording opportunity of hearing to the petitioner.

It was held that, “This is for the reason that in case the law provides a remedy at two stages i.e. one before the concerned authority and later before the appellate authority, both opportunities have to be fair and must comply with the norms of natural justice and fair play. It does not mean that the authority can pass an order in violation of principle of natural justice and fair play and the same shall stand cured if the appellate authority gives an opportunity of hearing to the petitioner. At both the stages, the petitioner was required to be given an opportunity of hearing in terms of principle of natural justice and fair play, which has not been given in the present case.”

Hence, the petition was allowed.[Haji Rao Sharafat Ali v. State of Uttarakhand, 2019 SCC OnLine Utt 893, decided on 23-08-2019]

Case BriefsHigh Courts

Uttaranchal High Court: Sudhanshu Dhulia, J. entertained a writ petition related to the enhancement of fee, where the petitioner who was a private institute initially took lesser fee from the student which was half of the enhanced fee, because the fee towards sports, internet, technology and personal effective and employability enhancement fee was waived. 

It was contended by the petitioner that the students took admission in the first year, completed studies and were promoted to the second year, but the same fee structure was continued for the second year as well. But the petitioner maintained that though a certain amount of fee was waived the fee structure was always same i.e. the enhanced fee. Learned counsel for the petitioners had fairly stated that they were not pressing the fee structure as that was futile and the only academic question was left before this Court.

On the contrary, the students-respondents contended that when the same reduced fee structure was charged in the second year as well they had a genuine expectation, in fact, a legitimate expectation that for the next year onwards the same fee would be charged. But the institute-petitioner insisted on payment of the fee, which was just double of what they were paying in the third year. 

Hence they moved an objection before the Ombudsman, who gave its decision in their favor and held that the demand for raised fee made by the institute was not justified. Aggrieved, the institute has filed the present petitions before this Court. By the time the petitioner forwarded his claim all the alleged respondents had completed their studies. 

The Court observed that the Ombudsman had been appointed by the Government notification to look into the disputes between the students and the management, which included the fee structure. There was no question on the jurisdiction of the Ombudsman in the instant petition.Hence the “writ petitions were disposed of with the direction that in future the Ombudsman though would always be at liberty to look into the matter including the matter regarding the fee structure, but while doing so he shall take into consideration whether the fee demanded by the institute was as per the approved fee structure i.e. what had been approved by the Fee Regulatory Committee of the students, whether the students were well apprised of the fee structure at the time when they took admission, any catalogue of such fee had been given and there was no change of fee during midstream. Suffice it to say that principles of natural justice would be followed in its letter and spirit”.[SelaQui Academy of Higher Education v. Lokpal, Uttarakhand Technical University, 2019 SCC OnLine Utt 586, decided on 05-07-2019]

Case BriefsHigh Courts

Jharkhand High Court: Ananda Sen, J. set aside the order of termination and the decision of the Screening Committee CISF, with a direction to reconsider the case of the petitioner.

The petitioner was appointed as constable in CISF. Later Assistant Commandant to CISF informed that the petitioner was involved in a criminal case earlier and this information was sought for by the screening committee. The petitioner submitted the relevant document stating that he had been involved in a land dispute between his family and others and a case had been instituted against him. He also submitted that he was never taken into custody and was finally acquitted. The services of the petitioner were terminated without any hearing. As the letter of termination did not follow the principle of natural justice, the termination order was set aside. Later the petitioner got a show cause notice as to why his services should not be terminated as in the attestation form it was asked that whether the petitioner was involved in any prosecution and he mentioned “no”. Thus on the ground of suppression of factual information and on the ground of furnishing false information, the petitioner was dismissed from service. This order was under challenge before Court.

The respondents filed a counter affidavit stating the petitioner had suppressed the fact that he was prosecuted. They brought on record the guidelines and submitted that a candidate was required to declare as to whether he had been arrested, prosecuted or convicted. If the candidate did not disclose the correct facts, his candidature and appointment could be cancelled.

Reliance was placed on judgment Avtar Singh v. Union of India, (2016) 8 SCC 471 where it was directed that if incumbent was of young age and had done some petty offence, which if disclosed, would not have rendered an incumbent unfit for the post in question, the employer may, in his discretion, ignore such suppression of fact or false information by condoning the lapses. Thus, discretion had been granted to the employer to decide whether in a case of suppression, the offence is trivial in nature or not.

The Court set aside the order of termination and the matter was sent before the screening committee again to decide whether suppression of the fact is fatal on the facts of the criminal case, which was instituted against the petitioner.[Sandeep Kumar v. Union of India, 2019 SCC OnLine Jhar 498, decided on 14-05-2019]

Case BriefsHigh Courts

Jharkhand High Court: Sujit Narayan Prasad, J. entertained a writ petition against the rejection of application for issuance of Caste certificate to the aggrieved petitioner.

Petitioner had categorically averred that a Caste certificate was issued to him, which proved ‘Ghatwar’ as his particular caste. Since he belonged to the area pertaining to the Santhal Pargana province, wherein, the competent authority while issuing the said Caste certificate had considered the survey settlement of the district of Mango, whereby ‘Ghatwar’ caste was treated to be the sub-caste of the ‘Bhumij’, but the said caste certificate had been rejected under impugned order, no reason was assigned to him for the said rejection.

Petitioner questioned the decision, mainly on the ground that the same was in violation of the principles of natural justice and the decision was without any reason and based upon the Notification of the State of Jharkhand which cannot override the Presidential Order by virtue of it the ‘Bhumij’ caste has been brought under the purview of the VIth Schedule and since ‘Ghatwar’ is sub-caste of ‘Bhumij’, hence the petitioner being ‘Ghatwar’ was of Scheduled Tribe category.

Rajendra Krishna, learned counsel for the petitioner had assailed the aforesaid order on the grounds, firstly that the caste certificate was cancelled without conferring show cause notice to the petitioner, therefore, the rejection order was in violation of the principles of natural justice and secondly, before rejecting, the competent authority had referred the matter to Caste Scrutiny Committee, as was previously decided by the Supreme Court in Kumari Madhuri Patil v. Addl. Commr., (1994) 6 SCC 241.

Respondent-State submitted that the State of Jharkhand had come out with a notification, as contained under Annexure-D, by which the ‘Ghatwar’ caste has been treated to be under the BC category and therefore, the competent authority by taking the aid of the said notification, had cancelled the caste certificate without any reasons.

The Court held, “It is settled position of law that a decision without any reason will be said to be not sustainable in the eyes of law, because the order in absence of any reason, also amounts to the violation of the principles of natural justice.” It further observed that no reason for rejection was assigned or reflected on the face of order; State had a duty to assign reason when it made such an adverse decision. Court, didn’t grant any relief as the Caste Scrutiny Committee had been constituted with the State of Jharkhand as informed, therefore, it was appropriate, just and proper to accord liberty to the petitioner to approach before the Caste Scrutiny Committee for redressal of his grievance.[Jit Lal Ray v. State of Jharkhand, 2019 SCC OnLine Jhar 660, decided on 26-04-2019]

Case BriefsHigh Courts

Orissa High Court: A Division Bench of S.K. Mishra and Dr A.K. Mishra, JJ., dismissed the writ petition against the judgment declining interference in the disciplinary proceeding and order imposing the punishment of compulsory retirement.

The facts of the case were that appellant-petitioner was appointed as an officer of the Indian Bank as Inspecting Manager at Kolkata. He was entrusted with the inspection of banks at different places for which the bank had to pay the bill for lodging. The Deputy Manager General, on finding the irregularity asked for the explanation which was duly submitted but was not appreciated and appellant-petitioner alleged to be dishonest under the Indian Bank Officer Employees’ (Conduct) Regulations, 1976. A disciplinary authority thus imposed a major penalty of compulsory retirement. The appeal and review petition filed before the reviewing authority was dismissed and hence, this writ.

The Judgment of the Single Judge Court after submission held that the court had the jurisdiction to entertain the writ petition. The court further held that the court could not interfere with the enquiry, appellate and reviewing authority in absence of the procedural irregularities. The Court further held that “The power of judicial review to scan the evidence, which had reached finality on the basis of concurrent finding, was found uncalled for in the facts placed and law analyzed.”

The matter was then called for Division Bench which observed the Judgment of Radhey Shyam v. Chhabi Nath, (2015) 5 SCC 423 in which the court made it clear that the writ of certiorari, under Article 226 of the Constitution, is issued for correcting gross errors of jurisdiction i.e. where lower courts either without jurisdiction, or in excess of jurisdiction or acting in flagrant disregard of law or rules of procedure or acting in violation of the principles of natural justice, pass an order thereby occasioning failure of justice. Thus, the impugned judgment of the learned single judge was found to have the support of law and facts. Thus, writ dismissed. [Abhiram Samal v. Indian Bank, 2019 SCC OnLine Ori 198, decided on 01-05-2019]

Case BriefsHigh Courts

Calcutta High Court: Debangsu Basak, J., dismissed a petition filed by State Fisheries Development Corporation relating to a land dispute with the State.

The petitioner was a Government of W.B. undertaking engaged in the business of pisciculture. It obtained land from the District Administration. According to the petitioner, the State was now wrongfully seeking to resume possession of land. It was stated that the State was not entitled to do so in view of Section 8 of the W.B. Inland Fisheries Act, 1984. However, the District Magistrate initiated proceedings for eviction of the petitioner. The petitioner filed a writ petition that resulted in requiring the DM to give fresh hearing to the petitioners. Accordingly, the DM heard the parties afresh. The petitioner was represented before the DM. A prayer for adjournment was made which was rejected. Thereafter, the DM ordered the eviction of the petitioner.

 Shanti Das, Advocate for the petitioner submitted that the said rejection resulted in the violation of principles of natural justice and therefore the order of the DM was not sustainable. Per contra, Sakya Sen, Advocate appearing for the respondent supported the eviction order passed by the DM.

Having regard to the rival submissions, the Court found that the State required the subject land for the purpose of eco-tourism project. It was noted that the petitioner was afforded a reasonable opportunity of hearing. Holding that there was no infirmity in rejection of the prayer, the Court observed, “An adjudicating authority is entitled to reject adjudicating authority did not allow the petitioners’ prayer for adjournment. There is no infirmity in the rejection of such prayer. Merely, because the adjudicating authority rejected a prayer for adjournment ipso facto does not mean that, the proceeding stands vitiated by breach of principles of natural justice. The petitioner was afforded a reasonable opportunity of hearing. The petitioner did not avail of the same. That does not tantamount to the adjudicating authority acting in breach of the principles of natural justice warranting intervention by the Writ Court.” Finding no reason to interfere in the decision of the DM, the Court dismissed the present petition. [State Fisheries Development Corpn. Ltd. v. DM, Purba Medinipur, 2019 SCC OnLine Cal 295, dated 01-03-2019]

Case BriefsHigh Courts

Patna High Court: The Bench of Madhuresh Prasad, J., allowed the writ petition which was filed against the act of arbitrary stoppage of the salary of the panchayat teachers.

The facts of the case are that petitioners were appointed as panchayat teachers in the year 2010 and they continued till April 2017. From the month of May, 2017 their salary had been arbitrarily stopped without issuing any order in respect thereof.

The respondents asserted that the petitioners’ degrees of integrated course from Central Board of Higher Education, New Delhi were not recognized in view of the letter issued by the Principal Secretary and as such the very appointment of the petitioners as panchayat teacher was bad.

The Court held that there was nothing in the counter affidavit to show that prior to withholding of such salary/stoppage of salary with effect from May, 2017 the petitioners were ever afforded any opportunity of being heard in the matter. It is trite law that when an order is violative of the principles of natural justice, the plea of alternative remedy would not be a bar to exercise of jurisdiction under Article 226 of the Constitution of India in such matter.

The Court observed that whether the petitioner’s degree obtained in 2010 on basis of which petitioners were appointed as panchayat teacher was recognized or not was an issue which was required to be looked into by the authority before inflicting such harsh penal consequence.[Kanchan Kumari v. State of Bihar, 2018 SCC OnLine Pat 2293, Decided on 06-12-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): A Two-Member Bench comprising of S.J. Mukhopadhaya(Chairperson) and Bansi Lal Bhatt (Member-Judicial), JJ. set aside an order passed by the National Company Law Tribunal (New Delhi) for being violative of principles of natural justice.

NCLAT had admitted the application filed by the respondent (operational creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016. The appellant submitted that the said application was admitted without any notice to the corporate debtor. It was contended that the order impugned was passed in contravention of rules of natural justice.

The Appellate Tribunal, after perusing the record, noted that admittedly the order impugned was passed by NCLT without notice to the corporate debtor which was indeed in violation of principles of natural justice. Furthermore, the parties had already settled the matter between themselves. in such view of the matter, the Appellate Tribunal was the view that in effect, the order impugned passed by NCLT and allotter orders passed pursuant thereof were illegal and therefore were set aside. The application preferred by the respondent under Section 9 was dismissed and NCLT was directed to close the proceedings. The appeal was, thus, allowed. [Rajesh Arora v. Sanjay Kumar Jaiswal, 2018 SCC OnLine NCLAT 837, dated 05-11-2018]

Case BriefsHigh Courts

“Water necessary for farmers’ survival”

Kerala High Court: A Single judge bench comprising of Shaji P. Chaly, J. while hearing a civil writ petition against order of forest authorities ruled that while drawing of water from a river in a reserved forest area might require permission of authorities, the same was not illegal inasmuch as it was a protected activity under the State’s ‘vested forest’ rules.

Petitioners – residents of a village located in hilly areas – drew water from Kottapuzha river by installing pipes as it was the only source of drinking water in the area. Since agriculture was their only source of livelihood, water for irrigational purpose was also drawn during specific months. Respondents, residing near lower stream of the river, filed a writ petition complaining that petitioner’s act was causing a shortage of water in their wells. The court, in that petition, directed the forest officials to pass appropriate orders after hearing all the interested parties. However, the officials passed an order directing removal of pipes installed in the river without hearing all the parties. The present petition was filed against this order.

Respondents submitted before the court the land in question was notified as ‘vested forest’ in a notification. It was further stated that despite the forest officials’ order, petitioners had again started laying pipes, which was again removed with a strict warning against persons illegally encroaching into the vested forest. The primary contention on behalf of petitioners was that the impugned order violated principles of natural justice.

The High Court observed that even though as per government notification the area in question was a ‘reserved forest’, but agricultural operations in reserved forest were protected under Rule 7(3) of the Kerala Vested Forests (Management of Reserved Areas) Rules, 1980. However, it remarked that agriculturists might need permission from forest authorities to draw water in a reserved forest area. Further, the court noted that forest officials had erred in passing the impugned order without hearing all the interested parties and as such the said order was arbitrary and illegal.

In view of the above, the impugned order was quashed with a direction to the forest officials to consider the matter afresh after hearing all the parties. The petition was disposed of directing the authorities to bear in mind the fact that petitioners were seeking use of water for drinking and agricultural purposes which are necessary for the survival of the farmers, and accordingly, consider the matter. [Rejilal T.S. v Principal Chief Conservator, Forest Land & Resources,2018 SCC OnLine Ker 4005, decided on 08-10-2018]

Case BriefsHigh Courts

Jharkhand High Court: A Single judge bench comprising of Anubha Rawat Choudhury, J. while dealing with a civil writ petition directed the State to follow principles of natural justice in proceedings for issuance of distress warrant against the petitioner.

Brief factual matrix of the matter was that in pursuance of a certificate case filed against the petitioner for recovery of a certain amount of money, the Certificate Officer issued a distress warrant against him without deciding the objection petition filed by the petitioner under Section 9 of the Bihar and Orissa Public Demands Recovery Act, 1914 and also without considering the explanation submitted by the petitioner. Aggrieved by the aforesaid, instant writ petition was filed by the petitioner praying for quashing of the entire proceeding in certificate case filed against him. The primary contention of the petitioner was that the said action of Certificate Officer was in total disregard to the provisions of Bihar and Orissa Public Demands Recovery Act, 1914 and was also a gross violation of principles of natural justice and fair play.

The court noted that as per the provisions of Bihar and Orissa Public Demands Recovery Act, upon issuance of notice in the certificate proceedings, the certificate-debtor has a right to file an objection under Section 9 of the said Act and the same is required to be disposed of by the Certificate Officer. It was observed that failure to follow the procedure prescribed in the statute was an arbitrary action and gross violation of the principles of natural justice. Therefore, the said action also impinged upon the petitioner’s fundamental right under Article 14 of the Constitution of India.

On the strength of aforesaid reasoning, the impugned order vide which distress warrant was issued against the petitioner was set aside with a direction to the Certificate Officer to hear the petitioner, consider his objection and pass a reasoned order within a period of one month thereafter. [Bhupender Singh v State of Jharkhand,2018 SCC OnLine Jhar 1233, decided on 27-09-2018]

Case BriefsForeign Courts

Court of Appeal of the Democratic Socialist Republic of SriLanka: A Single Judge Bench comprising of M.M.A. Gafoor, J. dismissed an appeal against the order of the district court filed under Section 754 of the Civil Procedure Code.

Appellant filed a petition to set aside the ex-parte judgment entered against him followed with evidence regarding his absence from the court which were not only inconsistent but he also failed to prove the same consequently questioning their credibility.

The High Court was of the view that a party who relies on Section 86 (2) of the Civil Procedure Code to vacate an ex-parte decree should establish a reasonable ground for default. Considering the decision in Sanicoch Group of Company v. Kala Traders (P) Ltd., 2015 SCC OnLine SL SC 52, which held that inquiry on application to set aside an ex-parte decree is not regulated by any specific provision of the CPC but such inquiries must be conducted consistent with rules of natural justice and the requirement of fairness, the court stated that the appellant cannot be relied upon as he failed to satisfy the court on the reasons for his default. [Howpe Liyanage Edmund Edirisinghe v. Ahangama Vithanage Sumanadasa, C.A. No. 1394/99(F), order dated 01-08-2018]

Case BriefsHigh Courts

Jharkhand High Court: A Single Judge Bench of Dr S.N. Pathak, J., partly allowed a writ petition filed against the order of the respondent authorities, whereby the authorities recovered the Academic Grade Pay (AGP) granted to the petitioner behind his back on the ground that only promoted employees are entitled for AGP.

The main issue for consideration, in this case, was whether the respondent authorities can recover the AGP granted to the petitioner without following the principles of natural justice.

The Court observed that if excess money is given to a government employee, then it can be duly recovered since such money does not belong to the payer or the payee, it belongs to the public at large. However, in the instant case the petitioner had superannuated on 31-03-2016 and without adhering to the provisions of law, the amount has been ordered to be recovered.

The Court held that it is a settled proposition of law that no recovery can be done from the retiral benefits without conforming to the principles of natural justice and without following the due process of law and hence the respondent authorities cannot recover the AGP granted to the petitioner in the present case. However, the pension of the petitioner was directed to be fixed as per the pay-scale which the petitioner was actually entitled to receive. Accordingly, the petition was allowed in part by the Court.[Ram Pyare Mishra v. State of Jharkhand,2018 SCC OnLine Jhar 781, order dated 03-07-2018]

Case BriefsHigh Courts

Calcutta High Court: A  Division Bench comprising of Joymalya Bagchi and Ravi Krishan Kapur, JJ.  disposed of the criminal appeal filed by the appellant by ordering his further examination under Section 313 CrPC.

In the case at hand, most of the prosecution witnesses turned hostile. However, the trial judge relied on the dying declaration of the victim, who, according to PW 15- the doctor who treated the victim, had suffered burn injuries due to the pouring of hot mustard oil. Learned counsel for the appellant was before the High Court assailing the said dying declaration on various grounds including that such circumstance was not placed before the appellant during his examination under Section 313 CrPC.

The High Court perused the record and found that in fact such circumstance was not put to the appellant during his examination. The Court held it to be settled law that any circumstance which may be used against an accused must be placed to him during his examination under Section 313. Such an exercise is not an empty formality but a facet of natural justice. While deciding the appeal, the Court was not unmindful of the fact that every infraction of the aforesaid requirement would not vitiate the trial. However, if such infraction is of a grave nature, and prejudices the accused or occasions failure of justice, it shall result in a mistrial. In the instant case, the Court noted, most of the PWs turned hostile, and as such, the dying declaration if believed by the court, would be the most vital circumstance pointing towards guilt of the appellant. In such circumstances, the Court ordered the further examination of the appellant under Section 313 by putting questions before him in relation to the dying declaration. The Sessions Judge was directed to complete the exercise within four weeks. [Sk. Anowar v. Moinak Bakshi, 2018 SCC OnLine Cal 3896, dated 22-6-2018]

Case BriefsHigh Courts

Madhya Pradesh High Court: The Court entertained a writ petition under Article 226 despite the availability of alternate remedies. The case before the Court was that license of the Petitioners, a kerosene dealership, was suspended without granting an opportunity to them. The petitioners claimed violation of natural justice as they had not been afforded the opportunity to put forward their side.

The Court accepted this petition despite the availability of alternate remedies on the ground that principles of natural justice had been violated, which fact had been admitted by both parties. The impugned order was set aside as ‘due process’ had not been followed while passing it. However, the respondents were given the liberty to proceed against the petitioner in accordance with law and the principles of natural justice. [M/s R.K. Dwivedi v. The State of Madhya Pradesh, 2017 SCC OnLine MP 1189, decided on 11.09.2017]