Calcutta High Court
Case BriefsHigh Courts

   

Calcutta High Court: Shekhar B. Saraf, J. upheld the award granted by the Arbitral Tribunal holding that the award holder should be secured for the entirety of the amount along with interest and other costs.

The petitioner had filed this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”) along with an application under Section 36(2) of the 1996 Act praying for stay of the award passed by the arbitral tribunal on 27-12-2021 where the respondent was entitled to a refund of Rs. 84.24 crores along with interest which it had deposited with the petitioner on 27-12-2006. Tribunal had also awarded a sum of Rs. 25,00,000/- towards reimbursement of litigation and arbitral costs.

The dispute between the parties had arisen out of an agreement to carry out a new township project for which the petitioner invited financial bids through a tender process. The financial bid of the respondent was accepted and the petitioner via letter dated 21-12-2006 issued a Letter of Award. Possession of 90.19 acres of land was handed to the respondent on 10-08-2007, however no lease deed was entered between the parties at the time of handing over of the possession. Even after a lapse of one year, the lease agreement for execution of work and the development agreement for the same were still not executed between the parties. Finally, in order to govern the relations between the parties a formal development agreement mentioning the terms and conditions were reduced in writing on 25-04-2008. Due to non-execution of the lease between the parties, the new township project was not commenced meanwhile, the petitioner demanded the remaining sums required to be paid by the respondent claimant. The respondent did not pay the remaining amount due to non-execution of the lease document. Finally, the petitioner terminated the development agreement due to nonpayment of the balance instalments constituting event of default by the respondent. Resultantly, arbitration clause was invoked for settlement of the dispute wherein the abovementioned order was passed by the Tribunal.

Senior Advocate appearing for the petitioner argued that the court has the discretion to decide the mode of security to be furnished by the petitioner. He stated that the land in possession of the respondent can be accepted as a valid security for granting stay of the arbitral award under Section 36 of the 1996 Act.

Advocate appearing for the respondent highlighted the default committed by the petitioner as per the development contract entered between them.

The Court perused the relevant clauses and provisions of law cited by the advocates and opined that proviso to Section 36(3) of the 1996 Act makes it clear that the Court must, while considering the stay application in proceedings under Section 34 of the Arbitration Act, have due regard to the provision for grant of stay of a money decree under the provisions of the Civil Procedure Code, 1908 (“CPC”). Order XLI, Rule 5(1) of the CPC grants the court discretion to stay the execution of a decree for ‘sufficient cause'.

The Court reiterated what was held in the case of Pam Developments (P) Ltd. v. State of West Bengal, (2019) 8 SCC 112 that the mandate of the amended Section 36 of the 1996 Act is such that the Court while considering an application for stay filed along with filing of quashing petitioner under Section 34 of the Arbitration Act can grant the stay subject to conditions as it deems fit. Section 36 also mandates recording of reasons for such stay being granted. The Court at the initial stage of proceeding, was satisfied that there does not appear to be any illegality, perversity or violation of any law on the face of the arbitral award as Arbitrator has duly considered the pleadings on behalf of the parties, and thereafter, framed issues and dealt with specific claims and counterclaims of the parties with reasons — hence, the award is a speaking award.

The petitioner was directed to deposit 50% of the arbitral award (including interest calculated till June, 2022) by way of cash security or its equivalent and the Registrar Original Side was directed to make a fixed deposit of the said amount with any nationalised bank and keep the same renewed till the disposal of the application under Section 34 of the Act or until further orders of Court. The remaining 50% of the awarded amount was directed to be secured by way of bank guarantee(s) of a nationalised bank by the petitioner to the satisfaction of the Registrar Original Side, High Court.

[Siliguri Jalpaiguri Development Authority v. Bengal Unitech Universal Siliguri Projects Ltd., I.A. G.A. No. 1 of 2022, decided on 22-06-2022]


Advocates who appeared in this case :

Mr S.N. Mookherjee, Senior Advocate, Mr Anirban Ray, Mr Raja Saha, Mr Chayan Gupta, Mr Sandip Dasgupta, Mr Saaqib Siddiqui, Mr Aviroop Mitra, Advocates, for the Plaintiff/Respondent;

Mr Siddharth Batra, Mr Ashish Shah, Mr Chinmay Dubey, Ms Moumita Chakraborti, Advocates, for the Respondent/Claimant.


*Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: After listing the Jahangirpuri demolition drive case for hearing on Thursday i.e. 21.04.2022, the 3-judge bench of NV Ramana, CJ and Krishna Murari and Hima Kohli, JJ has ordered that status quo be maintained till further orders.

The order reads,

“Upon being mentioned by Mr. Dushyant Dave, learned Senior counsel appearing for the petitioner, we direct the Registry to list the matter tomorrow i.e. on 21.04.2022 alongwith W.P.(Crl) Dy. No. 11955 of 2022 before an appropriate Bench.

Status quo, as exists today, shall be maintained, until further orders.”

The demolition drive has been launched by Delhi municipal authorities in Jahangirpuri area, which witnessed communal violence last week. According to a Hindustan Times report, NDMC sought 400 police personnel from the Delhi Police for the drive. In preparation for the demotion drive, heavy police and paramilitary forces were deployed in Jahangirpuri on Wednesday morning. When even after Supreme Court’s order, the demolition drive did not stop, Senior Advocate Dushyant Dave again mentioned the matter complaining regarding the same. The CJI then asked the SC registry to communicate the stay order to NDMC mayor, commissioner and Delhi police commissioner.

[JAMIAT ULAMA-I-HIND v. NDMC, WRIT PETITION (CIVIL) Diary No. 12239/2022, order dated 20.04.2022]

Case BriefsSupreme Court

Supreme Court: Explaining the scope of Section 51 of the Consumer Protection Act, 2019, the bench of MR Shah* and BV Nagarathna, JJ has held that National Commission can pass an order to deposit the entire amount and/or any amount higher than 50 per cent of the amount in terms of the order of the State Commission while staying the order passed by the State commission.

However, at the same time, while considering the stay application against the order passed by the State Commission and while passing the order to deposit the entire amount and/or any amount higher than 50 per cent of the amount, the National Commission has to assign some reasons and pass a speaking order why the conditional stay is being granted on condition of deposit of the entire amount and/or any amount higher than 50 per cent of the amount. Such an order on the stay application is not to be passed mechanically.

Issue

Whether in an appeal under Section 51 of the Consumer Protection Act, 2019 and while considering the stay application to stay the order passed by the State Commission, the National Commission can pass an order to deposit the entire amount and/or any amount higher than 50 per cent of the amount in terms of the order of the State Commission?

Analysis

Section 51 of the Consumer Protection Act, 2019 – Explained

As per Section 51 of the Act, 2019, more particularly, second proviso to Section 51, the appellant(s) in an appeal against the order passed by the State Commission may prefer an appeal, however, before the appeal is entertained by the National Commission, the appellant(s) has to deposit 50 per cent of the amount.

It is the pre-condition to deposit 50 per cent of the amount as ordered by the State Commission before his appeal is entertained by the National Commission. However, that does not take away the jurisdiction of the National Commission to order to deposit the entire amount and or any amount higher than 50 per cent of the amount while considering the stay application to stay the order passed by the State Commission.

“Rules for entertainment of an appeal on deposit of 50 per cent of the amount ordered by the State Commission, which is a statutory pre-deposit and the grant of interim order on the stay application subject to deposit of further amount are distinct and different. Pre-deposit condition as per second proviso to Section 51 has no nexus with the grant of interim order of stay by the National Commission subject to deposit of the amount awarded by the State Commission.”

Speaking order

In Shreenath Corporation v Consumer Education and Research Society, (2014) 8 SCC 657, the Court considered the Order XLI Rule 5 and Order XXXIX Rule 1 of the CPC alongwith the object and purpose of the deposit of the amount as a pre-deposit before the appeal is entertained under Section 19 of the Act, 1986 and held that,

“The order passed by the State Commission directing the appellant to refund the amount and/or pay any amount higher than 50 per cent can be said to be akin to a money decree. Even as per Order XLI Rule 5, the general rule is that normally there shall not be any unconditional stay of a money decree, however, at the same time, the Appellate Court may pass an appropriate conditional order while staying the impugned decree depending upon the facts of the case and by giving cogent reasons.”

Hence, if the National Commission after hearing the appeal of the parties in its discretion wants to stay the amount awarded by the State Commission, it is open to the National Commission to pass an appropriate interim order including a conditional order of stay.

However, the National Commission has to pass a speaking order giving some reasons why in the facts of the particular case the conditional stay of the order passed by the State Commission is to be passed subject to deposit of the entire amount and/or any amount higher than 50 per cent of the amount awarded by the State Commission and that too after giving an opportunity to the appellant as well as to the respondent.

“The order on the stay application is not to be passed mechanically. It must reflect an application of mind by the National Commission why the order passed by the State Commission is to be stayed on condition of deposit of the entire amount and/or any amount higher than 50 per cent of the amount awarded by the State Commission.”

However, at the same time, there is no discretion at all to stay the order passed by the State Commission subject to deposit of any amount less than 50 per cent of the amount which is required to be deposited as a pre-deposit before the appeal is entertained as per second proviso to Section 51 of the Act, 2019.

Conclusion

  • Pre-deposit of 50 per cent of amount as ordered by the State Commission under second proviso to Section 51 of the Consumer Protection Act, 2019 is mandatory for entertainment of an appeal by the National Commission;
  • the object of the said pre-deposit condition is to avoid frivolous appeals;
  • the said pre-deposit condition has no nexus with the grant of stay by the National Commission;
  • while considering the stay application in staying the order passed by the State Commission, the National Commission can grant a conditional stay directing the appellant(s) to deposit the entire amount and/or any amount higher than 50 per cent of the amount in terms of the order of the State Commission;
  • however, at the same time, the National Commission has to assign some cogent reasons and/or pass a speaking order when the conditional stay of the order passed by the State Commission is passed subject to deposit of the entire amount and/or any amount higher than 50 per cent of the amount either as an ex parte order or after hearing both sides and considering the facts and circumstances of the case.
  • Thus, the National Commission can grant a conditional stay of the order passed by the State Commission on deposit of the entire amount and/or any amount higher than 50 per cent of the amount as ordered by the State Commission.

[Manohar Infrastructure and Constructions Pvt. Ltd. v. Sanjeev Kumar Sharma, 2021 SCC OnLine SC 1182, decided on 07.12.2021]


Counsels

For appellants: Senior Advocate Sidharth Dave and Advocate Kanika Agnihotri


*Judgment by: Justice MR Shah

Know Thy Judge | Justice M. R. Shah

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT) -The Coram of Justice Jarat Kumar Jain and Alok Srivastava, Technical Member while deciding an appeal denied to put a stay on the CIRP proceedings. The Tribunal was of the opinion that the alleged ‘pre-existing-dispute’ was raised at such a late stage even though it was a spurious dispute, only with an intention to avoid action under IBC. The Tribunal further made it clear that the order will not have any effect on the final outcome of the

In the instant matter the Corporate Debtor (Appellant) alleged that the Appellant had repeatedly sought reconciliation of the invoices that were presented by the Operational Creditor (Respondent No. 1) and in the absence of non-production of work completion reports relating to the invoices under question, the requisite payments could not be made. His argument was that it was a ‘dispute’ as defined in Insolvency and Bankruptcy Code, 2016  and in accordance with the Supreme Court’s judgment in Mobilox Innovations vs. Kirusa Software Civil Appeal, (2018) 1 SCC 353 the application for insolvency under Section 9 of IBC cannot be admitted. While the counsel for the Appellant submitted that the it was only after the two letters of the Operational demanding pending payments and threat of legal action before the NCLT that the Corporate Debtor started sending communications for reconciliation and submission of supporting documents. And cited the same case, claiming that a spurious dispute cannot come in the way of admission of the operational creditor’s application u/s 9 of IBC.

The Tribunal considering the relevant arguments and the same case that both the parties referred to in favour of their arguments stated, “We are, therefore, at this stage persuaded by the argument of the Ld. Counsel of Respondent No. 1 that this alleged dispute has been raised at this late stage only after the Operational Creditor started asking for his pending payments to show that a pre-existing dispute was present even though it is a spurious dispute, to avoid action under IBC. Thus we find that a prima facie case doesn’t exist in favour of the Appellant”.

[Amit Wadhwani v. Global Advertisers, 2021 SCC OnLine NCLAT 325, decided on 28-09-2021]


Agatha Shukla, Editorial Assistant has put this report together 


Counsel for the Parties:

For Appellant:-

Mr. Ramji Srinivasan, Sr. Advocate, Mr. Dharam Jumani, Mr. Kunal Mehta, Mr. Rajshree Chaudhary, Mr. Suraj Iyer, Ms. Priyashree Sharma, Ms. Gauri Joshi, Mr. Kush Chaturvedi, Ms. Rushall Agarwal, Advocates

For Respondent:-

Mr. Krishnendu Datta, Sr. Advocate with Mr. Girish Kedia, Ms. Shivangi Kedia, Mr. Mohit Chaudhary, Ms. Garima Sharma, Mr. Amir Ariswala, Advocates for R1 Mr. Ami Jain, R2 for IRP

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of SA Bobde, CJ and AS Bopanna and V. Ramasubramanian, JJ has stayed the Allahabad High Court judgment issuing directions for “lockdown” in the State of Uttar Pradesh but has directed that the State Government to “immediately” report to the High Court about the steps it has taken and proposes to take in the immediate future within a period of one week in view of the current pandemic.

The Court has appointed Senior Advocate P.S. Narasimha as Amicus Curiae and has listed the matter after 2 weeks.

Solicitor General Tushar Mehta, appearing for the State had argued before the Court that the State Government has issued several directions to contain the spread of Corona Virus and are taking adequate precautions at their own and that the directions issued by the High Court vide the impugned order are as rigorous as a lockdown though the High Court has observed that “they are nowhere close to a complete lockdown”.

Yesterday, the Allahabad High Court had said that it was their constitutional duty to save innocent people from the pandemic and in order to break the chain of COVID-19 pandemic, people are to be restrained from going outside their homes for a week.

It said that,

“Those in the helm of affairs of governance are to be blamed for the present chaotic health problems and more so when there is a democracy which means a government of the people, by the people and for the people. It is a shame that while the Government knew of the magnitude of the second wave it never planned things in advance.”

While the High Court said that the directions issued by it were “nowhere close to a complete lockdown”, it remarked,

In this order if we have not imposed a lockdown it does not mean that we do not believe in it. We are still of the view that if we want to break the chain a lockdown for a duration of at least two weeks is a must.”

[State of Uttar Pradesh v. High Court of Judicature at Allahabad, 2021 SCC OnLine SC 336, order dated 20.04.2021]


For Petitioner(s): SG Tushar Mehta, AAG Garima Prashad, Adv. Rajat Nair and AOR Abhinav Agrawal

For Respondent(s): AOR Talha Abdul Rahman

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Case BriefsSupreme Court

Supreme Court: Dealing with an important question as to the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act, 1961, the 3-judge bench of RF Nariman*, BR Gavai and Hrishikesh Roy, JJ has held that any order of stay shall stand vacated after the expiry of the period or periods mentioned in the Section only if the delay in disposing of the appeal is attributable to the assessee.

Section 254 (2A) of the Income Tax Act states that “In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253”

However, the third proviso provides that “if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee.”

By a judgment dated 19.05.2015, the Delhi High Court struck down that part of the third proviso to Section 254(2A) of the Income Tax Act which did not permit the extension of a stay order beyond 365 days even if the assessee was not responsible for delay in hearing the appeal. The Revenue, hence, challenged the said judgment and several other judgments from various High Courts holding the same.

The Delhi High Court, in it’s judgment, held that

“Unequals have been treated equally so far as assessees who are responsible for delaying appellate proceedings and those who are not so responsible, resulting in a violation of Article 14 of the Constitution of India.”

Agreeing to the said reasoning, the Supreme Court added,

“This is a little peculiar in that the legislature itself has made the aforesaid differentiation in the second proviso to Section 254(2A) of the Income Tax Act, making it clear that a stay order may be extended upto a period of 365 days upon satisfaction that the delay in disposing of the appeal is not attributable to the assessee.”

It was further explained that ordinarily, the Appellate Tribunal, where possible, is to hear and decide appeals within a period of four years from the end of the financial year in which such appeal is filed. It is only when a stay of the impugned order before the Appellate Tribunal is granted, that the appeal is required to be disposed of within 365 days. So far as the disposal of an appeal by the Appellate Tribunal is concerned, this is a directory provision. However, so far as vacation of stay on expiry of the said period is concerned, this condition becomes mandatory so far as the assessee is concerned.

“The object sought to be achieved by the third proviso to Section 254(2A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee. But such object cannot itself be discriminatory or arbitrary…”

The Court, hence, concluded:

  • Since the object of the third proviso to Section 254(2A) of the Income Tax Act is the automatic vacation of a stay that has been granted on the completion of 365 days, whether or not the assessee is responsible for the delay caused in hearing the appeal, such object being itself discriminatory, was held liable to be struck down as violating Article 14 of the Constitution of India.
  • Also, the said proviso would result in the automatic vacation of a stay upon the expiry of 365 days even if the Appellate Tribunal could not take up the appeal in time for no fault of the assessee.
  • Further, vacation of stay in favour of the revenue would ensue even if the revenue is itself responsible for the delay in hearing the appeal. In this sense, the said proviso is also manifestly arbitrary being a provision which is capricious, irrational and disproportionate so far as the assessee is concerned.

Hence, partially upholding the validity of the third proviso to Section 254(2A) of the Income Tax Act, the Court held that the same will now be read without the word “even” and the words “is not” after the words “delay in disposing of the appeal”. Therefore, any order of stay shall stand vacated after the expiry of the period or periods mentioned in the Section only if the delay in disposing of the appeal is attributable to the assessee.

[Deputy Commissioner of Income Tax v. Pepsi Foods Ltd., 2021 SCC OnLine SC 283, decided on  06.04.2021]


*Judgment by Justice RF Nariman

Know Thy Judge| Justice Rohinton F. Nariman

Appearances before the Court by:

For Revenue: ASG Bikarma Banerjee

For Assessees: Senior Advocate Ajay Vohra and Advocates Himanshu S. Sinha, Deepak Chopra and  Sachit Jolly

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Jammu and Kashmir and Ladakh High Court
Case BriefsHigh Courts

Jammu and Kashmir High Court: A Single Judge Bench of Dhiraj Singh Thakur J., dismissed the petition filed under Article 104 of the Constitution of Jammu and Kashmir, and upheld the order passed by the 1st Additional District Judge.

The respondents, in this case, were owners and in possession of the land which was situated in Beli Azmat, Jammu. They agreed to alienate the land, and in furtherance of this, an agreement to sell was entered into. The petitioners contended that despite the said agreement being in force, the respondents did not execute the sale deed, as a result of which a suit for specific performance was filed.

After the order for specific performance was passed, it was challenged by one of the respondents by a suit of declaration. The previous order for specific performance was stayed till the time that the suit for declaration was adjudicated.

Rent was being paid to the respondents by the Department of Agriculture, and the petitioners argued that the same should not be paid till the time the suit for specific performance of the sale deed was settled. The 1st Additional District Judge rejected the argument on the ground that the sale deed was obtained by collusion and that there was no valid document for transfer of title to the petitioners.

Aggrieved by the order, the petitioner filed contempt proceedings, claiming that even though rent was only to be paid to respondent 1 to the extent of his share, yet the rental compensation was being distributed with regard to property. The contempt proceedings were also dismissed by the 1st Additional Judge.

In the present petition, the Court held that the order given did not suffer from any illegality, as whatever rights they claimed were as a result of the suit for specific performance, which had been stayed. Consequently, the petitioners had lost all rights to question the dispensation of rental compensation to the respondents. [Bansi Lal v. Vijay Chand Katoch,2018 SCC OnLine J&K 802, Order dated 03-11-2018]

Case BriefsForeign Courts

Supreme Court of Singapore: A Single Judge Bench of Choo Han Teck, J., dismissed appeals filed against the order of the Assistant Registrar, whereby the application for stay filed by the appellants on account of an arbitration clause, was dismissed.

The main issue that arose before the Court was whether a stay should be granted in favour of three defendants (appellants) on the ground of effective case management, even though they were not parties to arbitration.

The Court observed that effective case management is not a legal principle, it is rather an administrative term used to denote the administrative functions of the courts such as placing cases in order of priority, fixing the dates for hearing, no. of days for hearing etc. Although there is a possibility of conflicting findings by the arbitrator and the Court that should not be the only ground to stop the plaintiff from proceeding against all the four defendants collectively especially when the plaintiff claims that all the four defendants had conspired to cause him harm. The order of stay was granted in favour of defendant no.1 because it was a party to the arbitration while the rest of the defendants were not.

The Court held that whatever might be the outcome of the arbitration, it will not bind the plaintiff or the three defendants in an action before the Court. Further, there was no good reason to grant a stay in favour of the three defendants, who were not even parties to the arbitration, so that they can take their seats as spectators to the arbitration proceedings. Hence, the assistant registrar had rightly rejected the application of all the other defendants apart from defendant no.1. Resultantly, the appeals filed by the appellants were dismissed by the Court. [Epoch Minerals Pte Ltd. v. Raffles Asset Management (S) Pte Ltd., [2018] SGHC 223, order dated 08-10-2018]

Case BriefsSupreme Court

Supreme Court: A Bench comprising of Abhay Manohar Sapre and Uday U. Lalit, JJ. allowed an appeal filed against the order of Punjab and Haryana High Court wherein the application for stay as filed by the appellants herein was rejected.

The appellants had filed a writ petition against the State in the High Court, and during the pendency of the same, application was filed for grant of ad-interim stay in relation to the subject matter of the land in question. By the order impugned, the High Court declined to grant the ad-interim stay. Against the said order, the appellants filed the instant appeal by way of special leave.

The Supreme Court, on perusing the record of the case, observed that no adequate reason was given in the order impugned for not granting stay. The reason given did not justify the rejection, having regard to the nature of the controversy involved. In short, justifiable reasons to support either grant or rejection need to be stated, keeping in view the facts and the law applicable to the controversy involved. It was not so found in the order impugned. Resultantly, the Supreme Court allowed the appeal; set aside the order impugned, and remanded the case to the High Court to decide the matter afresh. [Birwati Chaudhary v. State of Haryana,2018 SCC OnLine SC 1020, dated 20-08-2018]

Case BriefsSupreme Court

Supreme Court: The bench of Dr. A.K. Sikri and Ashok Bhushan, JJ, upholding the validity of Section 139AA of Income Tax Act, 1961 that makes the linking of Aadhaar Card to the Permanent Account Number (PAN) mandatory, said that the provision is neither discriminatory nor it offends equality clause enshrined in Article 14 of the Constitution. The bench also said that Section 139AA is also not violative of Article 19(1)(g) of the Constitution insofar as it mandates giving of Aadhaar enrollment number for applying PAN cards in the income tax returns or notified Aadhaar enrollment number to the designated authorities.

Rejecting the contention that since enrollment under Aadhaar Act, 2016 is voluntary, it cannot be compulsory under the Income Tax Act, the Court said that in order to curb blackmoney, money laundering and tax evasion etc., if the Parliament chooses to make the provision mandatory under the Income Tax Act, the competence of the Parliament cannot be questioned on the ground that it is impermissible only because under Aadhaar Act, the provision is directory in nature. The Court also noticed that one of the main objectives of Aadhaar-PAN linkage is to de-duplicate PAN cards and to bring a situation where one person is not having more than one PAN card or a person is not able to get PAN cards in assumed/fictitious names and it is the prerogative of the Legislature to make penal provisions for violation of any law made by it.

The Court, however, clarified that the validity of the provision is upheld subject to the decision of the Constitution bench where the issue relating to Right to Privacy and data leakage due to Aadhaar-PAN linkage is under consideration. The Court said that till the said issue is decided there will be a partial stay on the operation of proviso to sub-section (2) of Section 139AA of the Act, that says that the PAN allotted to the person will be deemed to be invalid in case of failure to intimate the Aadhaar number.

Stating that the proviso to Section 139AA(2) cannot be read retrospectively, the Court said that if failure to intimate the Aadhaar number renders PAN void ab initio with the deeming provision that the PAN allotted would be invalid as if the person had not applied for allotment of PAN would have rippling effect of unsettling settled rights of the parties. It has the effect of undoing all the acts done by a person on the basis of such a PAN. It may have even the effect of incurring other penal consequences under the Act for earlier period on the ground that there was no PAN registration by a particular assessee. The Court also said that the Parliament may consider as to whether there is a need to tone down the effect of the said proviso by limiting the consequences.

As per the order of the Court, those who have already enrolled themselves under Aadhaar scheme would comply with the requirement of sub-section (2) of Section 139AA of the Act. Those who still want to enrol are free to do so. However, those assessees who are not Aadhaar card holders and do not comply with the provision of Section 139(2), their PAN cards be not treated as invalid for the time being. [Binoy Viswam v. Union of India, 2017 SCC OnLine SC 647, decided on 09.06.2017]