Read Order:BharatiyaKamgarKarmachariMahasanghv v. M/s. Jet Airways Ltd
Simran Singh
New Delhi, July 26, 2023: The Supreme Court, while allowing the appeal and setting aside a judgement passed by the Bombay High Court, observed that any settlement between an Employee Union and the Employer would not override the Model Standing Order provided under the Bombay Industrial Employment (Standing Orders) Rules, 1959 (Bombay Model Standing Order ), unless it was more beneficial to the employees.
The Division Bench comprising of Justice Abhay S. Oka and Justice Sanjay Karol stated that the employer and workman could not enter into a contract overriding the statutory contract embodied in the certified Standing Orders. The Bench noted that the High Court had held that the Model Standing Order was not a statutory provision but, at best, a statutorily imposed condition of service that a settlement or award could alter, however the Bench referred to the relevant Clauses of the Bombay Model Standing Order, and observed that "A cumulative reading of aforesaid clauses reveals that a workman who has worked for 240 days in an establishment would be entitled to be made permanent, and no contract/settlement which abridges such a right can be agreed upon, let alone be binding. The Act being the beneficial legislation provides that any agreement/contract/settlement wherein the rights of the employees are waived off would not override the Standing Orders."
In the matter at hand, the Bombay High Court affirmed the award passed by the Central Government Industrial Tribunal (‘CGIT’) which had rejected the demand of the appellant Union for reinstatement with full back wages.
The respondent company operates a commercial airline, flying aircraft for transporting passengers and cargo. The Appellant represented around 169 workmen temporarily engaged on a fixed-term contract by the Respondent in various cadres like loader-cum-cleaners, drivers and operators. The appellantcontended that the workmen were treated as temporary despite completing 240 days in service in terms of the Model Standing Order despite the nature of the work being permanent and regular. The Trade Union had raised a charter of demands which, after negotiations, resulted in a settlement dated 02.05.2002.
In the said charter of demands, Bhartiya KamgarSena gave up the demand for the grant of permanency and a comprehensive settlement dated 02.05.2002 was signed as a package deal that conferred many benefits on the workmen who gave up the said demand. The Respondent Company claimed that the workers were not entitled to permanency as per the settlement dated 02.05.2002 entered between the Union and Company. The workmen raised disputes and the matter landed up for adjudication. However, the CGIT, in its award dated 30.03.2017, while answering a reference framed the issue, whether the Union's demand for re-employment/reinstatement with full back wages of these 169 workmen in service of that first party was just and proper and answered it in the negative.
Relying upon Section 25-H of the Industrial Disputes Act, 1947 it was held that there was no retrenchment since the non-renewal of fixed term contract did not amount it to be so as provided under Section 2(oo)(bb) of the said Act. Thus, there was no question of re-employment of the workmen concerned.
The issue for consideration before the Supreme Court were:
- Which was the Appropriate Authority empowered to issue the Standing Order(s) under the Industrial Employment (Standing Orders) Act, 1946 ?
- Whether private agreement/settlement between the parties would override the Standing Order?
While navigating through the first issue, the Court stated that the appropriate government meant the state government and found that the Bombay Model Standing Order would be applicable to the parties and in regards to the secondissue at hand, the Court, referred to its earlier decision and observed that "On various occasions, this Court has observed that the certified standing orders have a statutory force. The Standing Order implies a contract between the employer and the workman. Therefore, the employer and workman cannot enter into a contract overriding the statutory contract embodied in the certified Standing Orders”
Read Order: Jagadheeswari v. B. BabuNaidu
Simran Singh
New Delhi, July 26, 2023: The Madras High Court stated that after the Tamil Nadu Village Panchayats (Provision of burial and burning grounds) Rules, 1999came into force, any burials in any place other than those already registered or licensed as Burial Grounds, contravenes Rule 7 (1) and any such bodies in contravention to the Rules 5 and 7 were to be exhumed and buried in the proper designated place.
The full Bench comprising of Justice R Mahadevan, Justice G Jayachandran, and Justice Mohammed Shaffiqanswered the reference made by the Bench of Chief Justice Sanjay V.Gangapurwalaand Justice P.D.Audikesavalu, in negative vis-a-vis the question whether, under the 1999 Rules, the burial could take place at a place other than the designated land, more particularly when a designated land existed in the village.
“If such violation is brought to the notice within the reasonable time and despite notice to exhume the body for to be buried in the designated place not adhered by the person concerned, the body is to be exhumed by the authority and collect the costs from the person who is cause for that illegal burial. The exhumed body must be buried in the designated place taking into consideration the public health. Person who defies the law and refuses to exhume the body, cannot take umbrage in the delay of enforcing the law and make the Court 'fait accompli’.”
In the matter at hand, one manhad died and his body was cremated by his family (appellants) in a private land, classified as Dry Land as per revenue records, with the consent of the landowner. However, the neighbour (respondent) approached the High Court seeking action against the appellants for burying the body in a place not designated and accordingly to exhume the said body. The afore stated prayer was allowed by the Single Judge after considering the Tamil NaduPanchayats Act, 1994(Act of 1994) and Rule of 1999.
The appellant preferred an appeal whereby theBench referred to the case of P.Muthusamy v. B.Vennilawherein the DivisionBench of the High Court had ordered against exhumation. Consequent to which the matter was then referred to the full bench which had noted that in the above case, the Court was dealing with a situation where bodies were buried at a non-designated place as part of customs prevailing in the village and there was no express bar or prohibition under the Act of 1994.
It was the case of the appellants that as per the Rules of 1999, there was no prohibition to bury a body in the subject land with the consent of the land owner provided it was buried 90 meters away from the dwelling place or source of drinking water supply. Since both these conditions were complied with in the present case, there was no grievance resultant to which the petition was liable to be rejected.
On the other hand, the respondent relied uponRule 7 which stated that the conditions could not be read in isolation and had to be read along with Rule 4 and 5 which mandated registration of burial grounds and conditions for opening of burial grounds respectively. It was contended that even the DivisionBench had noted that though there was no prohibition, the same could not be used as a license to bury or dispose of the dead body anywhere and everywhere.
The Bench stated that the Division Bench in P.Muthusamy's case (Supra) had not declared that body could be buried anywhere other than registered or licensed place in a village Panchayat. The Division Bench had only recognised the custom prevailing in that particular village. The observation made in the Muthusamy's case, was restricted only to the facts of that case and it could not have application in rem.
The Court noted that none of the judgments cited by either of the parties gave an absolute right to bury a body in a place other than a designated place. Further, in all the cases, the Courts had denied exhumation of the body. Thus, it was noted that though the Courts had noted that there was no prohibition, the Courts had also observed that when burial was to be made in a non-designated place, it had to be in accordance with the rules.
“For specific reason stated in each those cases, Courts have denied exhumation of the body. Otherwise, in unequivocal term, Courts have held that Rules 4, 5 and 7 of the Tamil Nadu Village Panchayat (Provision of Burial and Burning Grounds) Rules 1999 though not expressly prohibit the burying of corpse in non-designated place, implicitly the restrictions and conditions prohibit such burial. Even, if anybody wish to bury a body in a non-designated place, it shall be only in compliance with Rule 5 and not otherwise.”
The Bench noted that the restrictions in Rule 7 could not be construed as a right to bury the body anywhere and the same could not be read in isolation.
“The outcome of the above analysis of the Rules and case laws leads to the conclusion, that the condition of 90 meters restriction found in Rule 7(1) cannot be construed as right to bury body anywhere and everywhere. Burial or burning body is subject to the other provisions in the Rules. The conditions of distance restriction from the water body, cannot be read in isolation unmindful of the purpose of the Rules and other provisions thereunder.”
The Bech stated that both Rules 5 and 7 start with a negative clause prohibiting new place for burying or burning the dead without license obtained from villagePanchayat. Rule 7 prohibited burning or burying any corpse, in any place, within 90 meters of the dwelling place or source of drinking water supply.“The licensed as burial and burning ground is exempted from the 90 meters restriction. Rule 5(1) does not indicate that the place where a body is buried or burnt, will not carry the character of burial ground or burning ground. If, single body is burnt or buried and the land owner has no intention to allow burial of body in future. Whoever prefers a new place whether private or public to be used for burying or burning the dead, license from the Panchayat is a pre-requisite. Thus, it is very clear that except the place which has already been registered under Rule 4 or a new place where license is obtained following the procedures contemplated under Rules 5(2) (3) and (4), no body can be buried or burnt in the place which is neither been registered or granted license.”
The Bench further noted that Rule 6 mandated the village Panchayat to maintain a register at its office showing places which were provided, registered or licensed under Rules 3 to 5. “The framers of the Rules were conscious of the fact that there may be violation of Rule 7 (1). Therefore, the Rule prescribes punishment for contravention of Rule 7(1) but, prosecution shall be instituted only on written sanction by the Executive Authority of the village Panchayat concerned. The outcome of the above analysis of the Rules and case laws leads to the conclusion, that the condition of 90 meters restriction found in Rule 7(1) cannot be construed as right to bury body anywhere and everywhere. Burial or burning body is subject to the other provisions in the Rules. The conditions of distance restriction from the water body, cannot be read in isolation unmindful of the purpose of the Rules and other provisions thereunder.”
Read Order:VineetSaraf v. Rural Electrification Corporation Ltd
Simran Singh
New Delhi, July 26, 2023:Dealing with a petition seeking to quash a demand notice issued by the Rural Electrification Corporation Limited (RECL) under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 invoking the petitioner’s personal guarantees for an outstanding debt of Rs. 12,11,91,94,259 (impugned demand notice),the Delhi High Court examined the arguments from both sides around the interpretation of clauses in the resolution plan and assignment agreement, andfound that the petitioner's rights under Article 14 of the Constitutionhad not been violated. Ultimately, the Court dismissed the writ petition, allowing the National Company Law Tribunal (NCLT) to decide the matter on its own merits.
The Single Judge Bench of Justice Purushaindra Kumar Kauravstated that there were sound reasons for not entertaining a petition before a writ court, where the relief being prayed for could be sought from a statutorily established forum. If the writ courts routinely grantedreliefs—which could have been sought from an alternate forum established by way a statute—the court, in effect, obviates the will of the Parliament. It would be a disservice to the legislature and to the laws passed by it, to not give the requisite regard to its intention of dealing with a category of disputes through a specific procedure and specialised forums.
The Bench sated that the existence of an alternate remedy did not act as a bar to entertain a petition praying for a writ of prohibition. In cases where an alternate remedy was available to the petitioner, there was a higher threshold that needed to be met, it being of a total and absolute lack of jurisdiction, in order for a writ court to grant relief. The existence of a statutorily prescribed alternate remedy, where a specialised forum was competent to decide upon its own jurisdiction, the burden upon a petitioner was further compounded. In such a scenario, the petitioner needed to convince the Court, not merely that the proceedings or actions being taken were wholly without jurisdiction but also why the alternate forum must be deprived of an opportunity to decide upon its own jurisdiction.
The Bench stated that the respondent had merely issued a demand notice in order to comply with the statutory requirement of Section 95 of the IBC. This notice was issued in order to enable them to agitate before the NCLT that there was a debt that the petitioner owes to the respondent. There was nothing that the respondent had done, that could be elevated to the level of arbitrariness. “The respondent has not, in the instant case, done an act that can be especially attributable to the privileges that are enjoyed by virtue of it being a ‘State’, as defined under Article 12 of the Constitution of India. Even if it is assumed that the respondent is acting under a mis-interpretation of the law, this, in and of itself, cannot be a ground to claim a violation of Article 14 of the Constitution of India. Indeed, if this were the sole test, every act of a ‘State’ would be assailed before a writ court as being under a misconceived interpretation of the law. ”
In the matter at hand, the petitioner had given a personal guarantee for a loan taken by Ferro Alloys Corporation Limited (FACOR) Power Limited from RECL for a sun of Rs 517.90 crores. FACOR Power Limited defaulted on the loan repayment, and a Corporate Insolvency Resolution Process (CIRP) was initiated against FACOR in accordance with the provision of Insolvency and Bankruptcy Code, 2016, (IBC) which resulted in a resolution plan being approved.
The petitioner while placing its reliance on the Gujarat High Court decision in the case of Prashant Shashi Ruia v. State Bank of India argued that since RECL assigned the entire debt to FACOR while excluding the personal guarantees under the resolution plan and assignment agreement, RECL could not now invoke his guarantee.However, the Court noted that the Gujarat High Court judgment did not grant any relief to the petitioner in that case.
The petitioner primarily sought a writ of prohibition, preventing the respondent from approaching NCLT under the provisions of the IBC and an ancillary relief was also sought for, to quash the impugned demand notice. The Court discussed the law around prohibition writs and the existence of an alternate remedy. It noted that while an alternate remedy was not an absolute bar, a higher threshold of total lack of jurisdiction needed to be met.
The Bench held that a writ of prohibition could be issued when a petitioner had made out a case for want of jurisdiction. However, in cases where jurisdictional challenges could be agitated before an alternate forum, circumspection must be observed before a writ of prohibition could be granted. It was stated that existence of alternative remedy was not a bar to grant the writ of prohibition and the Court reiterated that cases where proceedings were wholly without jurisdiction, an alternate remedy did not bar relief.
The Bench relied upon Radha Krishan Industries v. State of Himachal Pradeshwhich had observed that “When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion.”
The Bench further stated that “Despite the existence of an alternate remedy not being a bar to grant the writ of prohibition, it is a valid consideration that needs to be given its due weightage while entertaining a petition praying for a writ of prohibition. ”
The Bench also relied upon State of Uttar Pradesh v Mohammad Nooh and stated that the said principle had application in the present case not merely because the petitioner prays for the impugned demand notice to be quashed, but also because the writs of certiorari and prohibition were complementary in nature, having a common ground of ‘lack of jurisdiction’. It was also of significance to consider that the standard a petitioner needed to meet became even stricter when an alternate remedy was provided through a statutorily established forum, specifically designed to address the kind of disputes the petitioner aimed to bring before a writ court.
The Bench opined that no right of the petitioner under Article 14 of the Constitution had been violated. It was, therefore not warranted to delve into, what the true import of specific clauses of contracts was. “It is for this reason that the other claim of the petitioner, relating to the exercise of the Exit Option, by the execution of the said Share Purchase Agreement is not being entertained. This claim, this court finds, is fundamentally based upon the interpretation of Clause 3(c)(iv)(g)(iv) of the Resolution Plan, however, there is a significant disagreement as to what the meaning and import of Clause 3(c)(iv)(g)(iv) of the Resolution Plan is. ”In light of the analysis above, the court did not consider it fit to delve into these issues.
The Court further discussed the law relating to reservation of right of creditor to proceed against surety. “A reservation of rights clause, inserted in the deed releasing or discharging the principal borrower, entered into by the creditor and the principal borrower, intends to preserve the right of the creditor to proceed against the surety. Notably, neither the Resolution Plan nor the said Assignment Agreement have been entered into by the principal borrower i.e., FPL. ”
The Bench stated that even in the case of an express reservation of rights by the creditor to proceed against the surety, a fine distinction must be drawn between a covenant not to sue and an absolute release. “A reservation clause is compatible with the former while being incompatible with the latter. The reason being that the reservation of rights clause becomes overridden by the release of the principal borrower. The Bench concluded that a reservation of rights clause is incompatible with an absolute release of a principal debtor. The concerned NCLT, if at all it thinks fit, may carefully delve into this aspect of the case.”
The Bench navigated through the issue whether the petitioner had established that the impugned demand notice was wholly without jurisdiction and the respondent must therefore be prevented from approaching the NCLT concerned under the provisions of the IBC.
In a petition praying for a writ of prohibition, where a petitioner was to demonstrate the absence of jurisdiction, the Court did not consider it fit, to develop an area of private contractual law, and then to use that development in order to establish a want of jurisdiction on the part of the respondent. It was not the case that the reliefs prayed for could not be granted by the NCLT concerned. The petitioner’s claim of the guarantor getting a right to be heard at a belated stage, was not sufficient to entertain the present petition. The legislature, in its wisdom, thought it fit to give the right of hearing at belated stage. Indeed, if in the present case the petition was entertained, it would subvert the procedure laid down under the IBC. The respondent in turn would be denied the opportunity to present their case before NCLT. TheCourt was, therefore, of the opinion that the present writ petition deserved to be dismissed.
Read Order:ChennupatiKranthi Kumar v. The State of Andhra Pradesh
Simran Singh
New Delhi, July 26, 2023:Considering an appealpreferred by a man whose passport was handed over to the Passport Authority by the Police as he was being prosecuted for offences under Sections 498-A, 403 and 406 of the Indian Penal Code, 1860 and Sections 3 and 4 of the Dowry Prohibition Act, 1961 in a matrimonial complaint filed by his wife, the Supreme Court held that the direction issued by the police under Section 91 Criminal Procedure Code, 1973(CrPC) to the husband to submit his passport was illegal and that the decision of the passport authorities to retain the document as illegal.
A division bench comprising of Justice Abhay S Oka and Justice Rajesh Bindal held that without impounding of the passport, the Passport Authority could notunauthorisedly retain a passport handed over by the Police in the name of a pending criminal case. “We fail to understand why the passport of the appellant was required for the purpose of the pending criminal case. Therefore, the exercise(of the police) of calling upon the appellant to submit his passport was not legal. Thereafter, the passport was never impounded in exercise of power under Section 10 of PP Act. There is nothing on record to show that the passport was seized under Section 102 of Cr.P.C. As there was neither a seizure of the passport nor impounding thereof, the appellant was entitled to return of the passport.”
In the matter at hand, the husband was working in the US and was visiting India for his father’s death anniversary, when his wife filed a complaint against him. The Police issued a notice under Section 91 CrPC to the husband to produce the passport and after taking custody of his passport, the police handed it over to the Passport Authority.
It was the case of the wife, that he was in possession of her passport and the Passport Authority asked him to return the same.
The husband approached the Additional Chief Metropolitan Magistrate for return of his passport, which was dismissed. He later approached the Andhra Pradesh High Court, which directed the passport authority to return his passport on the condition that
- he deposit a sum of ₹10 lakhs by way of a Fixed Deposit Receipt in the name of his wife
- he submit the original passports of wife and his minor son.
The husband applied for modification of the order of the High Court directing him to return the passport of his son, a US citizen and his wife contending that the passport of his son was lost in July 2021 and that he had complied with the necessary procedure to get a new passport issued. He also contended that he was not in possession of his wife’s passport. However, the husband agreed to comply with the condition requiring him to deposit Rs. 10 lakhs by way of Fixed Deposit in the name of his wife.
The High Court dismissed the modification application filed by the husband, following which he approached the Supreme Court.
The husband, while relying on Suresh Nanda v. Central Bureau of Investigation argued that there was no power vesting in the Police to impound a passport relying on the decision of the Supreme Court. The Additional Solicitor General appearing for the Regional Passport Office accepted that there was no order impounding of the husband’s passport in accordance with Section 10 (3) of the Passports Act, 1967 (PP Act).
On the other hand, the wife contends that the stand of the husband that her passport was never with him, was false and hence the High Court was justified in issuing such an order.
The Bench while relying on the decision in Suresh Nanda (Supra) observed that it was for the passport authority to impound the passport, not the police "In the said decision, it was held that the power under Section 104 of Cr.P.C. cannot be invoked to impound a passport. The reason is that the provisions of the PP Act which deal with the specific subject of impounding passports shall prevail over Section 104 of Cr.P.C. Moreover, it was held that under Section 102 (1) of Cr.P.C., the Police have the power to seize the passport but there is no power to impound the same. It was held that even if the power of seizure of a passport is exercised under Section 102, the Police cannot withhold the said document and the same must be forwarded to the Passport Authority. It is, thereafter, for the Passport Authority to decide whether the passport needs to be impounded.”
The Court observed that, it had been accepted that the Police took custody of the husband’s passport under Section 91 of Cr.P.C. and handed it over to the passport authority without there being an order of seizure or impounding of the passport and the same was unauthorisedly retained by the passport authority.
The Court held that the direction of the High Court to return the passports of his wife and son had no legal basis and observed that the act of retaining the husband's passport was illegal, imposing the condition that he return his wife's passport, was also not proper in law,
“The direction to return the passports of his wife and son as a condition for the release of the appellant’s passport was completely illegal. As regards the passport of the son, it is taken care of as the appellant has followed the prescribed procedure in USA regarding lost passports. The condition of returning the passport of the 4th respondent (wife) could not have been imposed at all as the act of the Passport Officer of retaining the appellant’s passport was completely illegal. Therefore, the said respondent can make an application in a prescribed form to the competent regional officer for the reissue of the passport. If the validity of the passport has expired and the period provided for renewal thereof has expired, she can apply for a fresh passport. If the 4th respondent wants some documents from the appellant only for the purposes of filing an application for the reissue of the passport or for grant of a fresh passport, the appellant shall cooperate by doing the needful”
The Court accordingly set aside the condition imposed on the husband to return the passport of his son and his wife and stated that it would be open to the wife to apply to the Regional Passport Office, for re-issuance of her passport or for a fresh passport. The application of the wife was to be processed on the ground that her passport had been lost. The Court further directed the husband to cooperate by providing necessary documents for the obtaining his wife’s passport.
Read Order: The Principal Commissioner of Income Tax 1, Ahmedabad V. Axis Bank Ltd.
Chahat Varma
New Delhi, July 26, 2023: In a significant ruling, the Gujarat High Court has upheld the order of the Income Tax Appellate Tribunal (ITAT) and provided relief to Axis Bank Ltd. (respondent assessee). The Court held that the addition made on account of excess depreciation claimed, which was voluntarily surrendered by the respondent assessee, without prior detection by the Revenue, and demonstrated to be made for bonafide reasons, did not warrant the imposition of a penalty under Section 271(1)(c) of the Income Tax Act.
Briefly stated, the Principal Commissioner of Income Tax, Ahmedabad (appellant), raised a substantial question of law regarding the deletion of a penalty of Rs. 2,30,45,220 levied under Section 271(1)(c) of the Act by the ITAT. The appellant argued that the CIT (A) had already observed that the respondent assessee had filed inaccurate particulars of income, making them liable for the penalty under Section 271(1)(c) of the Act. The appellant contended that the ITAT allowed the appeal of the respondent assessee without acknowledging the alleged inaccurate particulars of income filed in the return of income.
The division bench of Justice Vipul M. Pancholi and Justice Devan M. Desai referred to the Supreme Court's ruling in C.I.T., Ahmedabad v. Reliance Petroproducts Pvt. Ltd. [LQ/SC/2010/287], where it was clarified that for Section 271(1)(c) to be applicable, specific conditions must be met, including concealment of particulars of income or furnishing inaccurate particulars of income. In this case, the bench found that the appellant failed to establish either of these conditions.
The bench further observed that the ITAT's decision highlighted that the addition made on account of excess depreciation claimed was voluntarily surrendered by the respondent assessee itself, without prior detection by the Revenue. Additionally, the respondent assessee had disclosed all particulars related to the excess claim in alignment with MCA notification.
Based on these considerations, the bench concluded that no question of law, particularly any substantial question of law, arose for the court's consideration. As a result, the appeal was dismissed.
Chahat Varma
New Delhi, July 26, 2023: The Mumbai bench of the Income Tax Appellate Tribunal has confirmed the Transfer Pricing Officer's (TPO) action of treating the interest receivable on loans given by Parle Biscuits Private Limited (assessee) to its associated enterprise (AE) as a separate international transaction. The Tribunal found no error in the TPO's decision to charge interest on the outstanding loan amount.
Factual background of the case was that the assessee, a subsidiary of Parle Products Pvt. Ltd., engaged in manufacturing various products, including biscuits, confectionery, snacks, and bakery items, had entered into international transactions. During the Transfer Pricing proceedings, the TPO observed that the assessee had provided loans to its AE and charged interest at a rate of 5.5%. However, the Assessing Officer treated the interest receivable as a separate international transaction and levied interest accordingly. The assessee disputed this treatment before the Dispute Resolution Panel (DRP), arguing that interest on interest receivable should not be treated as a separate international transaction and that it was hypothetical income, not real income.
The Tribunal observed that the assessee had recorded the interest as receivable in its books of account, but the interest remained outstanding for an extended period, exceeding 14 years in some instances. The assessee cited that the delays in interest payment were due to the incurred losses by its AEs, particularly Equator Food Ghana Limited, from which a significant portion of the interest was outstanding. The assessee contended that the AE started repaying the interest once its financial position improved. However, the assessee failed to provide supporting details or evidence to substantiate these claims before the lower authorities. The Tribunal also observed that the assessee failed to provide any evidence or details regarding efforts made towards recovering the outstanding interest amount from its AE.
The Tribunal further stated that interest on a loan represented compensation received by the assessee for providing funds to its AE. The interest element on the loan, if not paid, contributed to improving the liquidity position of the AE and was an integral part of the loan transaction. Thus, the Tribunal found no issues with the TPO’s decision to treat the interest receivable as a loan outstanding and charging interest on it.
Read Order: In Re: Manappuram Finance Limited
Chahat Varma
New Delhi, July 26, 2023: The Kerala bench of the Authority for Advance Rulings has ruled that the reverse charge liability under Notification No. 13/2017 CT (Rate) dated 28.06.2017 was applicable to the payment made by Manappuram Finance Limited (applicant) to the Government of Kerala under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, 2018. The payment was made for changing the description of land from wetland to ordinary land in government records and obtaining permission for constructing an office complex for business purposes.
The applicant, a non-banking financial company, had contended that the activity undertaken by the State Government as a public authority, in relation to a function entrusted to a Panchayat under Article 243G of the Constitution, did not fall under the category of supply of goods or services according to Notification No. 14/2017 CT (Rate). Therefore, the applicant submitted that there was no supply attracting GST liability, and reverse charge liability should not be applicable.
The coram of S.L. Sreeparvathy (IRS) and Abraham Renn S. (IRS) noted that as per the definitions provided in the Kerala Conservation of Paddy Land and Wetland Act, and the provisions of Section 27A of the Act, the activity in question involved imposing restrictions and levying fees for permitting the use of unnotified land for various purposes, such as residential or commercial use. It was observed that the permission for conversion of unnotified land, which was previously categorized as paddy land or wetland in the basic tax register maintained in Village offices, was primarily for the benefit of the individuals applying for such conversion. The bench concluded that this activity cannot be considered as relating to any of the functions entrusted to the Panchayat under Article 243G of the Constitution. Therefore, the fees charged by the State Government for permitting the conversion of unnotified land should be seen as consideration or compensation for conferring a private benefit, rather than an activity in relation to the public function of conserving paddy land and wetland.
Based on the discussion, the bench concluded that although the activity of allowing the change of nature of unnotified land, subject to conditions and payment of prescribed fees under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, as amended, was undertaken by the State Government as a public authority, it cannot be considered as an activity related to any function entrusted to a Panchayat under Article 243G of the Constitution. Therefore, the said activity cannot be treated as ‘neither a supply of goods nor a supply of service’ as per Notification No. 14/2017 Central Tax (Rate) dated 28.06.2017.
Read Order: In Re: M/s. Malabar Gold Private Limited
Chahat Varma
New Delhi, July 26, 2023: The Kerala bench of the Authority for Advance Rulings (AAR) has ruled that M/s. Malabar Gold Private Limited (applicant) can make payments to vendors through netting off of receivables between different GSTINs of the same company or with payables of suppliers.
The applicant, was a flagship company of the Malabar group, engaged in the retail and wholesale of jewellery. It transferred gold bars to jewel makers for making ornaments and purchased ornaments from them. The jewel makers charged making charges in addition to the transaction value of the ornaments sold to the applicant. The applicant offset the value of the gold bars given to them against the purchase of ornaments through book adjustments, ultimately paying only the value of the making charges. On certain occasions, the sale of a gold bar was made by one GSTIN of the company, while the purchase of ornaments was made by another GSTIN within the same company. The applicant had sought an advance ruling on whether the netting off of receivables between different GSTINs of the same company, or the netting off of receivables with payables of suppliers, would be considered as payment to the vendor and meet the compliance requirements of Section 16(4) of the Central Goods and Services Tax Act (CGST Act). The applicant had also questioned whether such adjustments would trigger any type of supply between the two GSTINs.
The AAR emphasized that according to the definition of 'consideration', any form of payment, including the reduction of a debt liability, should be regarded as valid consideration for a supply. It was further noted that the provisions of the CGST Act, specifically Explanation 2 to sub-section (2) and clause (b) of sub-section (3) of Section 12, and Explanation (ii) to sub-section (2) and clause (a) of sub-section (3) of Section 13, recognized the entry in the books of accounts of the supplier/recipient as a mode of payment under GST law. Therefore, the reduction of a debt liability through book adjustments would be considered as a valid form of payment, making the recipient eligible for input tax credit.
Based on the combined reading of the provisions and the definition of consideration in Section 2 (31) of the CGST Act, the AAR concluded that settling mutual debts through book adjustments, such as netting off receivables between different GSTINs of the same company or netting off receivables with payables of suppliers, was considered a valid mode of payment of consideration for the receipt of goods and/or services. This method of payment satisfied the requirement of the second proviso to sub-section (2) of Section 16 of the CGST Act.
The AAR also held that the arrangement of settlement of dues or payment of consideration for goods and/or services received by one GSTIN from another GSTIN within the same company, or the payment of consideration by the Head Office for goods and/or services received by different branches with different GSTINs, did not fall within the scope of supply as defined in Section 7 of the CGST Act. Therefore, such transactions do not attract GST liability.
Read Order: Apex Remedies Pvt. Ltd. V. Income Tax Officer
Chahat Varma
New Delhi, July 26, 2023: The Gujarat High Court has ruled in favour of Apex Remedies Pvt. Ltd. (assessee), by quashing the notice issued by the Income Tax Officer under Section 148 of the Income Tax Act and the subsequent proceedings. The High court determined that in this particular case, it cannot be concluded that the income liable for taxation had escaped assessment in the hands of the assessee.
In this case, the assessee challenged the notice issued by the Income Tax Officer under Section 148 of the Income Tax Act for the assessment year 2014-15. The assessee had sold an industrial plot of land along with an industrial shed to M/s. Pooja Industries for Rs. 40,00,000. The sale consideration was divided, with Rs. 11,56,159 attributed to the land (resulting in Long Term Capital Gain) and Rs. 28,43,841 to the industrial shed (resulting in Short Term Capital Gain). These capital gains were duly reported in the original income tax return. The revenue claimed that the notice was issued based on information received, suggesting that M/s. Pooja Industries paid a total of Rs. 1,10,00,000 for the property, with Rs. 40,00,000 going to the assessee and the remaining Rs. 70,00,000 being paid to two confirming parties. The revenue contended that the income of Rs. 40,00,000 had escaped assessment in the hands of the assessee.
The bench comprising of Justice Vipul M. Pancholi and Justice Devan M. Desai observed that the assessee had submitted objections in response to the reopening of the assessment. Upon careful examination of the reply, it was evident that the assessee had clearly pointed out that the entire sum of Rs. 40,00,000 was duly shown in its return of income. Additionally, the return of income, which was available in the record, indicated that the assessee had declared both Long-Term Capital Gain and Short-Term Capital Gain on the sale of the property in question. It was noted that the Income Tax Officer also disposed of the objections raised by the assessee, and in doing so, did not question the fact that the receipt of Rs. 40,00,000 had been duly shown and offered for taxation by the assessee in the return of income.
The bench further placed reliance on Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [LQ/SC/2007/797] and noted that at the initiation stage of reopening an assessment, what is necessary is a reason to believe that income has escaped assessment, but it does not require the established fact of such escapement of income.
Thus, the bench concluded that in the present case, there was no basis to assert that the income chargeable to tax had escaped assessment in the hands of the assessee.
Read Order: Himangshu Kumar Ray V. State of West Bengal
Chahat Varma
New Delhi, July 26, 2023: The Division Bench of the Calcutta High has clarified the scope of a previous direction given by a Single Bench and emphasized the need for focused and individualized investigations in cases of revenue fraud.
The case revolved around a directive issued by the Single Bench to the police authorities, instructing them to investigate the extent of fake writ petitions filed in the past, that resulted in revenue loss and defrauded the government.
The Division bench comprising of Chief Justice T. S. Sivagnanam and Justice Hiranmay Bhattacharyya first addressed the maintainability of the appeal and concluded that it was indeed maintainable. This was based on the fact that soon after the impugned order was passed by the Single Bench, the Anti-Fraud Department of the Kolkata Police and the GST Department issued notices to the advocates who regularly appeared for clients in cases related to Goods and Services Tax, West Bengal Value Added Tax, West Bengal Sales Tax and other related enactments. However, when this matter was brought to the attention of the court, it was advised that the authorities had no jurisdiction to issue notices to the advocates seeking information about their clients, as, such information was privileged communication between clients and their advocates. Section 126 of the Evidence Act was cited, which prohibits attorneys from disclosing attorney-client communication without the express consent of the client concerned. The bench noted that after receiving proper advice from the State counsel, the notices sent to the advocates were withdrawn by emails dated 5th June 2023.
Next, the bench observed that the police authorities were directed to investigate the filing of fake cases, but the Anti-Fraud Department misunderstood the scope of the direction. The department had issued notices under Section 160 Cr.P.C. to the directors of various assesses without disclosing any details about the concerned assessee, using a standardized format. The bench clarified that investigations should be assessee-centric and issuing generalized public notices, should be avoided. Thus, the notices issued under Section 160 Cr.P.C., which were in a standardized form, were set aside. The authorities, both revenue and police, were directed to conduct a thorough study of the documents available with the GST Department and then proceed with a proper investigation that was accordance with the law. The bench emphasized that the approach of considering all assesses throughout the State of West Bengal as fraudsters was not in accordance with the law.
Lastly, the bench held that the GST authorities should conduct a thorough study and investigation to determine whether there had been any illegal availment of GST. If they find any violations, they can initiate proceedings under the provisions of the GST Act. However, if the authorities suspect the involvement of a criminal overt act, they should hand over the matter to the appropriate investigation authority to proceed in accordance with the law.
With the above directions, the appeal was disposed of.
Read Order: M/s Gyan Cement House V. The State of Madhya Pradesh and Ors
Chahat Varma
New Delhi, July 26, 2023: In a recent ruling, the Madhya Pradesh High Court has clarified the time limit for filing appeals under the Central Goods and Services Tax Act, 2017 (CGST Act). The Court held that the Appellate Authority cannot entertain an appeal filed beyond the original three-month period, with an additional one-month extension, as there is no provision for condonation of delay in the statute.
In the matter at hand, M/s Gyan Cement House (petitioner) did not dispute the availability of an alternative statutory remedy of appeal under Section 107 of the CGST Act. However, they argued that they recently became aware of the impugned order, and by that time, the prescribed time period for filing the appeal had already expired. Therefore, the petitioner approached the High Court seeking redress.
The case in question pertained to the year 2023, and the bench of Justice Sheel Nagu and Justice Avanindra Kumar Singh emphasized that nearly six years had passed since the new regime of the CGST Act came into effect on 01.07.2017. It was noted that teething issues are over, and the provisions of Section 169(1) of the Act must be strictly followed without implying or reading into it anything that is not expressly provided.
Upon examining the statutory provisions under Section 107 of the Act, the bench found that the Appellate Authority could not entertain an appeal filed beyond the original three-month period, plus the one-month extension. The timeframe for filing the appeal was to be calculated from the day the decision or order appealed against was communicated to the aggrieved person.
However, there was a factual dispute about the date of communication of the impugned order to the petitioner. The bench declined to delve into the merits of the matter and directed the petitioner to file an appeal before the Competent Authority. The bench held that the Authority will examine the date of communication of the impugned order to determine whether the appeal was filed within the prescribed limitation period or not. If the appeal is found to be within the limitation period and no other legal bars exist, the Competent Authority will then proceed to decide the appeal on its merits.
Time for judiciary to introspect and see what can be done to restore people’s faith – Justice Lokur
Justice Madan B Lokur, was a Supreme Court judge from June 2012 to December 2018. He is now a judge of the non-resident panel of the Supreme Court of Fiji. He spoke to LegitQuest on January 25, 2020.
Q: You were a Supreme Court judge for more than 6 years. Do SC judges have their own ups and downs, in the sense that do you have any frustrations about cases, things not working out, the kind of issues that come to you?
A: There are no ups and downs in that sense but sometimes you do get a little upset at the pace of justice delivery. I felt that there were occasions when justice could have been delivered much faster, a case could have been decided much faster than it actually was. (When there is) resistance in that regard normally from the state, from the establishment, then you kind of feel what’s happening, what can I do about it.
Q: So you have had the feeling that the establishment is trying to interfere in the matters?
A: No, not interfering in matters but not giving the necessary importance to some cases. So if something has to be done in four weeks, for example if reply has to be filed within four weeks and they don’t file it in four weeks just because they feel that it doesn’t matter, and it’s ok if we file it within six weeks how does it make a difference. But it does make a difference.
Q: Do you think this attitude is merely a lax attitude or is it an infrastructure related problem?
A: I don’t know. Sometimes on some issues the government or the establishment takes it easy. They don’t realise the urgency. So that’s one. Sometimes there are systemic issues, for example, you may have a case that takes much longer than anticipated and therefore you can’t take up some other case. Then that necessarily has to be adjourned. So these things have to be planned very carefully.
Q: Are there any cases that you have special memories of in terms of your personal experiences while dealing with the case? It might have moved you or it may have made you feel that this case is really important though it may not be considered important by the government or may have escaped the media glare?
A: All the cases that I did with regard to social justice, cases which concern social justice and which concern the environment, I think all of them were important. They gave me some satisfaction, some frustration also, in the sense of time, but I would certainly remember all these cases.
Q: Even though you were at the Supreme Court as a jurist, were there any learning experiences for you that may have surprised you?
A: There were learning experiences, yes. And plenty of them. Every case is a learning experience because you tend to look at the same case with two different perspectives. So every case is a great learning experience. You know how society functions, how the state functions, what is going on in the minds of the people, what is it that has prompted them to come the court. There is a great learning, not only in terms of people and institutions but also in terms of law.
Q: You are a Judge of the Supreme Court of Fiji, though a Non-Resident Judge. How different is it in comparison to being a Judge in India?
A: There are some procedural distinctions. For example, there is a great reliance in Fiji on written submissions and for the oral submissions they give 45 minutes to a side. So the case is over within 1 1/2 hours maximum. That’s not the situation here in India. The number of cases in Fiji are very few. Yes, it’s a small country, with a small number of cases. Cases are very few so it’s only when they have an adequate number of cases that they will have a session and as far as I am aware they do not have more than two or three sessions in a year and the session lasts for maybe about three weeks. So it’s not that the court sits every day or that I have to shift to Fiji. When it is necessary and there are a good number of cases then they will have a session, unlike here. It is then that I am required to go to Fiji for three weeks. The other difference is that in every case that comes to the (Fiji) Supreme Court, even if special leave is not granted, you have to give a detailed judgement which is not the practice here.
Q: There is a lot of backlog in the lower courts in India which creates a problem for the justice delivery system. One reason is definitely shortage of judges. What are the other reasons as to why there is so much backlog of cases in the trial courts?
A: I think case management is absolutely necessary and unless we introduce case management and alternative methods of dispute resolution, we will not be able to solve the problem. I will give you a very recent example about the Muzaffarpur children’s home case (in Bihar) where about 34 girls were systematically raped. There were about 17 or 18 accused persons but the entire trial finished within six months. Now that was only because of the management and the efforts of the trial judge and I think that needs to be studied how he could do it. If he could do such a complex case with so many eyewitnesses and so many accused persons in a short frame of time, I don’t see why other cases cannot be decided within a specified time frame. That’s case management. The second thing is so far as other methods of disposal of cases are concerned, we have had a very good experience in trial courts in Delhi where more than one lakh cases have been disposed of through mediation. So, mediation must be encouraged at the trial level because if you can dispose so many cases you can reduce the workload. For criminal cases, you have Plea Bargaining that has been introduced in 2009 but not put into practice. We did make an attempt in the Tis Hazari Courts. It worked to some extent but after that it fell into disuse. So, plea bargaining can take care of a lot of cases. And there will be certain categories of cases which we need to look at carefully. For example, you have cases of compoundable offences, you have cases where fine is the punishment and not necessarily imprisonment, or maybe it’s imprisonment say one month or two month’s imprisonment. Do we need to actually go through a regular trial for these kind of cases? Can they not be resolved or adjudicated through Plea Bargaining? This will help the system, it will help in Prison Reforms, (prevent) overcrowding in prisons. So there are a lot of avenues available for reducing the backlog. But I think an effort has to be made to resolve all that.
Q: Do you think there are any systemic flaws in the country’s justice system, or the way trial courts work?
A: I don’t think there are any major systemic flaws. It’s just that case management has not been given importance. If case management is given importance, then whatever systematic flaws are existing, they will certainly come down.
Q; And what about technology. Do you think technology can play a role in improving the functioning of the justice delivery system?
I think technology is very important. You are aware of the e-courts project. Now I have been told by many judges and many judicial academies that the e-courts project has brought about sort of a revolution in the trial courts. There is a lot of information that is available for the litigants, judges, lawyers and researchers and if it is put to optimum use or even semi optimum use, it can make a huge difference. Today there are many judges who are using technology and particularly the benefits of the e-courts project is an adjunct to their work. Some studies on how technology can be used or the e-courts project can be used to improve the system will make a huge difference.
Q: What kind of technology would you recommend that courts should have?
A: The work that was assigned to the e-committee I think has been taken care of, if not fully, then largely to the maximum possible extent. Now having done the work you have to try and take advantage of the work that’s been done, find out all the flaws and see how you can rectify it or remove those flaws. For example, we came across a case where 94 adjournments were given in a criminal case. Now why were 94 adjournments given? Somebody needs to study that, so that information is available. And unless you process that information, things will just continue, you will just be collecting information. So as far as I am concerned, the task of collecting information is over. We now need to improve information collection and process available information and that is something I think should be done.
Q: There is a debate going on about the rights of death row convicts. CJI Justice Bobde recently objected to death row convicts filing lot of petitions, making use of every legal remedy available to them. He said the rights of the victim should be given more importance over the rights of the accused. But a lot of legal experts have said that these remedies are available to correct the anomalies, if any, in the justice delivery. Even the Centre has urged the court to adopt a more victim-centric approach. What is your opinion on that?
You see so far as procedures are concerned, when a person knows that s/he is going to die in a few days or a few months, s/he will do everything possible to live. Now you can’t tell a person who has got terminal cancer that there is no point in undergoing chemotherapy because you are going to die anyway. A person is going to fight for her/his life to the maximum extent. So if a person is on death row s/he will do everything possible to survive. You have very exceptional people like Bhagat Singh who are ready to face (the gallows) but that’s why they are exceptional. So an ordinary person will do everything possible (to survive). So if the law permits them to do all this, they will do it.
Q: Do you think law should permit this to death row convicts?
A: That is for the Parliament to decide. The law is there, the Constitution is there. Now if the Parliament chooses not to enact a law which takes into consideration the rights of the victims and the people who are on death row, what can anyone do? You can’t tell a person on death row that listen, if you don’t file a review petition within one week, I will hang you. If you do not file a curative petition within three days, then I will hang you. You also have to look at the frame of mind of a person facing death. Victims certainly, but also the convict.
Q: From the point of jurisprudence, do you think death row convicts’ rights are essential? Or can their rights be done away with?
A: I don’t know you can take away the right of a person fighting for his life but you have to strike a balance somewhere. To say that you must file a review or curative or mercy petition in one week, it’s very difficult. You tell somebody else who is not on a death row that you can file a review petition within 30 days but a person who is on death row you tell him that I will give you only one week, it doesn’t make any sense to me. In fact it should probably be the other way round.
Q: What about capital punishment as a means of punishment itself?
A: There has been a lot of debate and discussion about capital punishment but I think that world over it has now been accepted, more or less, that death penalty has not served the purpose for which it was intended. So, there are very few countries that are executing people. The United States, Saudi Arabia, China, Pakistan also, but it hasn’t brought down the crime rate. And India has been very conservative in imposing the death penalty. I think the last 3-4 executions have happened for the persons who were terrorists. And apart from that there was one from Calcutta who was hanged for rape and murder. But the fact that he was hanged for rape and murder has not deterred people (from committing rape and murder). So the accepted view is that death penalty has not served the purpose. We certainly need to rethink the continuance of capital punishment. On the other hand, if capital punishment is abolished, there might be fake encounter killings or extra judicial killings.
Q: These days there is the psyche among people of ‘instant justice’, like we saw in the case of the Hyderabad vet who was raped and murdered. The four accused in the case were killed in an encounter and the public at large and even politicians hailed it as justice being delivery. Do you think this ‘lynch mob mentality’ reflects people’s lack of faith in the justice system?
A: I think in this particular case about what happened in Telangana, investigation was still going on. About what actually happened there, an enquiry is going on. So no definite conclusions have come out. According to the police these people tried to snatch weapons so they had to be shot. Now it is very difficult to believe, as far as I am concerned, that 10 armed policeman could not overpower four unarmed accused persons. This is very difficult to believe. And assuming one of them happened to have snatched a (cop’s) weapon, maybe he could have been incapacitated but why the other three? So there are a lot of questions that are unanswered. So far as the celebrations are concerned, the people who are celebrating, do they know for certain that they (those killed in the encounter) were the ones who did the crime? How can they be so sure about it? They were not eye witnesses. Even witnesses sometimes make mistakes. This is really not a cause for celebration. Certainly not.
Q: It seems some people are losing their faith in the country’s justice delivery system. How to repose people’s faith in the legal process?
A: You see we again come back to case management and speedy justice. Suppose the Nirbhaya case would have been decided within two or three years, would this (Telangana) incident have happened? One can’t say. The attack on Parliament case was decided in two or three years but that has not wiped out terrorism. There are a lot of factors that go into all this, so there is a need to find ways of improving justice delivery so that you don’t have any extremes – where a case takes 10 years or another extreme where there is instant justice. There has to be something in between, some balance has to be drawn. Now you have that case where Phoolan Devi was gangraped followed by the Behmai massacre. Now this is a case of 1981, it has been 40 years and the trial court has still not delivered a judgement. It’s due any day now, (but) whose fault is that. You have another case in Maharashtra that has been transferred to National Investigating Agency two years after the incident, the Bhima-Koregaon case. Investigation is supposedly not complete after two years also. Whose fault is that? So you have to look at the entire system in a holistic manner. There are many players – the investigation agency is one player, the prosecution is one player, the defence is one player, the justice delivery system is one player. So unless all of them are in a position to coordinate… you cannot blame only the justice delivery system. If the Telangana police was so sure that the persons they have caught are guilty, why did they not file the charge sheet immediately? If they were so sure the charge sheet should have been filed within one day. Why didn’t they do it?
Q: At the trial level, there are many instances of flaws in evidence collection. Do you think the police or whoever the investigators are, do they lack training?
A: Yes they do! The police lacks training. I think there is a recent report that has come out last week which says very few people (in the police) have been trained (to collect evidence).
Q: You think giving proper training to police to prepare a case will make a difference?
A: Yes, it will make a difference.
Q: You have a keen interest in juvenile justice. Unfortunately, a lot of heinous crimes are committed by juveniles. How can we correct that?
A: You see it depends upon what perspective we are looking at. Now these heinous crimes are committed by juveniles. Heinous crimes are committed by adults also, so why pick upon juveniles alone and say something should be done because juveniles are committing heinous crimes. Why is it that people are not saying that something should be done when adults are committing heinous crimes? That’s one perspective. There are a lot of heinous crimes that are committed against juveniles. The number of crimes committed against juveniles or children are much more than the crimes committed by juveniles. How come nobody is talking about that? And the people committing heinous crimes against children are adults. So is it okay to say that the State has imposed death penalty for an offence against the child? So that’s good enough, nothing more needs to be done? I don’t think that’s a valid answer. The establishment must keep in mind the fact that the number of heinous crimes against children are much more than those committed by juveniles. We must shift focus.
Q: Coming to NRC and CAA. Protests have been happening since December last year, the SC is waiting for the Centre’s reply, the Delhi HC has refused to directly intervene. Neither the protesters nor the government is budging. How do we achieve a breakthrough?
A: It is for the government to decide what they want to do. If the government says it is not going to budge, and the people say they are not going to budge, the stalemate could continue forever.
Q: Do you think the CAA and the NRC will have an impact on civil liberties, personal liberties and people’s rights?
A: Yes, and that is one of the reasons why there is protest all over the country. And people have realised that it is going to happen, it is going to have an impact on their lives, on their rights and that’s why they are protesting. So the answer to your question is yes.
Q: Across the world and in India, we are seeing an erosion of the value system upholding rights and liberties. How important is it for the healthy functioning of a country that social justice, people’s liberties, people’s rights are maintained?
A: I think social justice issues, fundamental rights are of prime importance in our country, in any democracy, and the preamble to our Constitution makes it absolutely clear and the judgement of the Supreme Court in Kesavananda Bharati and many other subsequent judgments also make it clear that you cannot change the basic structure of the Constitution. If you cannot do that then obviously you cannot take away some basic democratic rights like freedom of assembly, freedom of movement, you cannot take them away. So if you have to live in a democracy, we have to accept the fact that these rights cannot be taken away. Otherwise there are many countries where there is no democracy. I don’t know whether those people are happy or not happy.
Q: What will happen if in a democracy these rights are controlled by hook or by crook?
A: It depends upon how much they are controlled. If the control is excessive then that is wrong. The Constitution says there must be a reasonable restriction. So reasonable restriction by law is very important.
Q: The way in which the sexual harassment case against Justice Gogoi was handled was pretty controversial. The woman has now been reinstated in the Supreme Court as a staffer. Does this action of the Supreme Court sort of vindicate her?
A: I find this very confusing you know. There is an old joke among lawyers: Lawyer for the petitioner argued before the judge and the judge said you are right; then the lawyer for the respondent argued before the judge and the judge said you’re right; then a third person sitting over there says how can both of them be right and the judge says you’re also right. So this is what has happened in this case. It was found (by the SC committee) that what she said had no substance. And therefore, she was wrong and the accused was right. Now she has been reinstated with back wages and all. I don’t know, I find it very confusing.
Q: Do you think the retirement age of Supreme Court Judges should be raised to 70 years and there should be a fixed tenure?
A: I haven’t thought about it as yet. There are some advantages, there are some disadvantages. (When) You have extended age or life tenure as in the United States, and the Supreme Court has a particular point of view, it will continue for a long time. So in the United States you have liberal judges and conservative judges, so if the number of conservative judges is high then the court will always be conservative. If the number of liberal judges is high, the court will always be liberal. There is this disadvantage but there is also an advantage that if it’s a liberal court and if it is a liberal democracy then it will work for the benefit of the people. But I have not given any serious thought onthis.
Q: Is there any other thing you would like to say?
A: I think the time has come for the judiciary to sit down, introspect and see what can be done, because people have faith in the judiciary. A lot of that faith has been eroded in the last couple of years. So one has to restore that faith and then increase that faith. I think the judiciary definitely needs to introspect.
‘A major issue for startups, especially during fund raising, is their compliance with extant RBI foreign exchange regulations, pricing guidelines, and the Companies Act 2013.’- Aakash Parihar
Aakash Parihar is Partner at Triumvir Law, a firm specializing in M&A, PE/VC, startup advisory, international commercial arbitration, and corporate disputes. He is an alumnus of the National Law School of India University, Bangalore.
How did you come across law as a career? Tell us about what made you decide law as an option.
Growing up in a small town in Madhya Pradesh, wedid not have many options.There you either study to become a doctor or an engineer. As the sheep follows the herd, I too jumped into 11th grade with PCM (Physics, Chemistry and Mathematics).However, shortly after, I came across the Common Law Admission Test (CLAT) and the prospect of law as a career. Being a law aspirant without any background of legal field, I hardly knew anything about the legal profession leave alone the niche areas of corporate lawor dispute resolution. Thereafter, I interacted with students from various law schools in India to understand law as a career and I opted to sit for CLAT. Fortunately, my hard work paid off and I made it to the hallowed National Law School of India University, Bangalore (NSLIU). Joining NLSIU and moving to Bangalorewas an overwhelming experience. However, after a few months, I settled in and became accustomed to the rigorous academic curriculum. Needless to mention that it was an absolute pleasure to study with and from someof the brightest minds in legal academia. NLSIU, Bangalore broadened my perspective about law and provided me with a new set of lenses to comprehend the world around me. Through this newly acquired perspective and a great amount of hard work (which is of course irreplaceable), I was able to procure a job in my fourth year at law school and thus began my journey.
As a lawyer carving a niche for himself, tell us about your professional journey so far. What are the challenges that new lawyers face while starting out in the legal field?
I started my professional journey as an Associate at Samvad Partners, Bangalore, where I primarily worked in the corporate team. Prior to Samvad Partners, through my internship, I had developed an interest towards corporate law,especially the PE/VC and M&A practice area. In the initial years as an associate at Samvad Partners and later at AZB & Partners, Mumbai, I had the opportunity to work on various aspects of corporate law, i.e., from PE/VC and M&A with respect to listed as well as unlisted companies. My work experience at these firms equipped and provided me the know-how to deal with cutting edge transactional lawyering. At this point, it is important to mention that I always had aspirations to join and develop a boutique firm. While I was working at AZB, sometime around March 2019, I got a call from Anubhab, Founder of Triumvir Law, who told me about the great work Triumvir Law was doing in the start-up and emerging companies’ ecosystem in Bangalore. The ambition of the firm aligned with mine,so I took a leap of faith to move to Bangalore to join Triumvir Law.
Anyone who is a first-generation lawyer in the legal industry will agree with my statement that it is never easy to build a firm, that too so early in your career. However, that is precisely the notion that Triumvir Law wanted to disrupt. To provide quality corporate and dispute resolution advisory to clients across India and abroad at an affordable price point.
Once you start your professional journey, you need to apply everything that you learnt in law schoolwith a practical perspective. Therefore, in my opinion, in addition to learning the practical aspects of law, a young lawyer needs to be accustomed with various practices of law before choosing one specific field to practice.
India has been doing reallywell in the field of M&A and PE/VC. Since you specialize in M&A and PE/VC dealmaking, what according to you has been working well for the country in this sphere? What does the future look like?
India is a developing economy, andM&A and PE/VC transactions form the backbone of the same. Since liberalization, there has been an influx of foreign investment in India, and we have seen an exponential rise in PC/VA and M&A deals. Indian investment market growth especially M&A and PE/VC aspects can be attributed to the advent of startup culture in India. The increase in M&A and PE/VC deals require corporate lawyersto handle the legal aspects of these deals.
As a corporate lawyer working in M&A and PE/VC space, my work ranges from drafting term-sheets to the transaction documents (SPA, SSA, SHA, BTA, etc.). TheM&A and PE/VC deal space experienced a slump during the first few months of the pandemic, but since June 2021, there has been a significant growth in M&A and PE/VC deal space in India. The growth and consistence of the M&A and PE/VC deal space in India can be attributed to several factors such as foreign investment, uncapped demands in the Indian market and exceptional performance of Indian startups.
During the pandemic many businesses were shut down but surprisingly many new businesses started, which adapted to the challenges imposed by the pandemic. Since we are in the recovery mode, I think the M&A and PE/VC deal space will reach bigger heights in the comingyears. We as a firm look forward to being part of this recovery mode by being part of the more M&A and PE/VC deals in future.
You also advice start-ups. What are the legal issues or challenges that the start-ups usually face specifically in India? Do these issues/challenges have long-term consequences?
We do a considerable amount of work with startupswhich range from day-to-day legal advisory to transaction documentation during a funding round. In India, we have noticed that a sizeable amount of clientele approach counsels only when there is a default or breach, more often than not in a state of panic. The same principle applies to startups in India, they normally approach us at a stage when they are about to receive investment or are undergoing due diligence. At that point of time, we need to understand their legal issues as well as manage the demands of the investor’s legal team. The majornon-compliances by startups usually involve not maintaining proper agreements, delaying regulatory filings and secretarial compliances, and not focusing on proper corporate governance.
Another major issue for startups, especially during fund raising, is their compliance with extant RBI foreign exchange regulations, pricing guidelines, and the Companies Act 2013. Keeping up with these requirements can be time-consuming for even seasoned lawyers, and we can only imagine how difficult it would be for startups. Startups spend their initial years focusing on fund-raising, marketing, minimum viable products, and scaling their businesses. Legal advice does not usually factor in as a necessity. Our firm aims to help startups even before they get off the ground, and through their initial years of growth. We wanted to be the ones bringing in that change in the legal sector, and we hope to help many more such startups in the future.
In your opinion, are there any specific India-related problems that corporate/ commercial firms face as far as the company laws are concerned? Is there scope for improvement on this front?
The Indian legal system which corporate/commercial firms deal with is a living breathing organism, evolving each year. Due to this evolving nature, we lawyers are always on our toes.From a minor amendment to the Companies Act to the overhaul of the foreign exchange regime by the Reserve Bank of India, each of these changes affect the compliance and regulatory regime of corporates. For instance, when India changed the investment route for countries sharing land border with India,whereby any country sharing land border with India including Hong Kong cannot invest in India without approval of the RBI in consultation with the central government,it impacted a lot of ongoing transactions and we as lawyers had to be the first ones to inform our clients about such a change in the country’s foreign investment policy. In my opinion, there is huge scope of improvement in legal regime in India, I think a stable regulatory and tax regime is the need for the hour so far as the Indian system is concerned. The biggest example of such a market with stable regulatory and tax regime is Singapore, and we must work towards emulating the same.
Your boutique law firm has offices in three different cities — Delhi NCR, Mumbai and Bangalore. Have the Covid-induced restrictions such as WFH affected your firm’s operations? How has your firm adapted to the professional challenges imposed by the pandemic-related lifestyle changes?
We have offices in New Delhi NCR and Mumbai, and our main office is in Bangalore. Before the pandemic, our work schedule involved a fair bit of travelling across these cities. But post the lockdowns we shifted to a hybrid model, and unless absolutely necessary, we usually work from home.
In relation to the professional challenges during the pandemic, I think it was a difficult time for most young professionals. We do acknowledge the fact that our firm survived the pandemic. Our work as lawyers/ law firms also involves client outreach and getting new clients, which was difficult during the lockdowns. We expanded our client outreach through digital means and by conducting webinars, including one with King’s College London on International Treaty Arbitration. Further, we also focused on client outreach and knowledge management during the pandemic to educate and create legal awareness among our clients.
‘It’s a myth that good legal advice comes at prohibitive costs. A lot of heartburn can be avoided if documents are entered into with proper legal advice and with due negotiations.’ – Archana Balasubramanian
Archana Balasubramanian is the founding partner of Agama Law Associates, a Mumbai-based corporate law firm which she started in 2014. She specialises in general corporate commercial transaction and advisory as well as deep sectoral expertise across manufacturing, logistics, media, pharmaceuticals, financial services, shipping, real estate, technology, engineering, infrastructure and health.
August 13, 2021:
Lawyers see companies ill-prepared for conflict, often, in India. When large corporates take a remedial instead of mitigative approach to legal issues – an approach utterly incoherent to both their size and the compliance ecosystem in their sector – it is there where the concept of costs on legal becomes problematic. Pre-dispute management strategy is much more rationalized on the business’ pocket than the costs of going in the red on conflict and compliances.
Corporates often focus on business and let go of backend maintenance of paperwork, raising issues as and when they arise and resolving conflicts / client queries in a manner that will promote dispute avoidance.
Corporate risk and compliance management is yet another elephant in India, which in addition to commercial disputes can be a drain on a company’s resources. It can be clubbed under four major heads – labour, industrial, financial and corporate laws. There are around 20 Central Acts and then specific state-laws by which corporates are governed under these four categories.
Risk and compliance management is also significantly dependent on the sector, size, scale and nature of the business and the activities being carried out.
The woes of a large number of promoters from the ecommerce ecosystem are to do with streamlining systems to navigate legal. India has certain heavily regulated sectors and, like I mentioned earlier, an intricate web of corporate risk and compliance legislation that can result in prohibitive costs in the remedial phase. To tackle the web in the preventive or mitigative phase, start-ups end up lacking the arsenal due to sheer intimidation from legal. Promoters face sectoral risks in sectors which are heavily regulated, risks of heavy penalties and fines under company law or foreign exchange laws, if fund raise is not done in a compliant manner.
It is a myth that good legal advice comes at prohibitive costs. Promoters are quick to sign on the dotted line and approach lawyers with a tick the box approach. A lot of heartburn can be avoided if documents are entered into with proper legal advice and with due negotiations.
Investment contracts, large celebrity endorsement contracts and CXO contracts are some key areas where legal advice should be obtained. Online contracts is also emerging as an important area of concern.
When we talk of scope, arbitration is pretty much a default mechanism at this stage for adjudicating commercial disputes in India, especially given the fixation of timelines for closure of arbitration proceedings in India. The autonomy it allows the parties in dispute to pick a neutral and flexible forum for resolution is substantial. Lower courts being what they are in India, arbitration emerges as the only viable mode of dispute resolution in the Indian commercial context.
The arbitrability of disputes has evolved significantly in the last 10 years. The courts are essentially pro-arbitration when it comes to judging the arbitrability of subject matter and sending matters to arbitration quickly.
The Supreme Court’s ruling in the Vidya Drolia case has significantly clarified the position in respect of tenancy disputes, frauds and consumer disputes. It reflects upon the progressive approach of the court and aims to enable an efficient, autonomous and effective arbitration environment in India.
Law firms stand for ensuring that the law works for business and not against it. Whatever the scope of our mandate, the bottom line is to ensure a risk-free, conflict-free, compliant and prepared enterprise for our client, in a manner that does not intimidate the client or bog them down, regardless of the intricacy of the legal and regulatory web it takes to navigate to get to that end result. Lawyers need to dissect the business of law from the work.
This really involves meticulous, detail-oriented, sheer hard work on the facts, figures, dates and all other countless coordinates of each mandate, repetitively and even to a, so-called, “dull” routine rhythm – with consistent single-mindedness and unflinching resolve.
As a firm, multiply that effort into volumes, most of it against-the-clock given the compliance heavy ecosystem often riddled with uncertainties in a number of jurisdictions. So the same meticulous streamlining of mandate deliverables has to be extrapolated by the management of the firm to the junior most staff.
Further, the process of streamlining itself has to be more dynamic than ever now given the pace at which the new economy, tech-ecosystem, business climate as well as business development processes turn a new leaf.
Finally, but above all, we need to find a way to feel happy, positive and energized together as a team while chasing all of the aforesaid dreams. The competitive timelines and volumes at which a law firm works, this too is a real challenge. But we are happy to face it and evolve as we grow.
We always as a firm operated on the work from anywhere principle. We believed in it and inculcated this through document management processes to the last trainee. This helped us shut shop one day and continue from wherever we are operating.
The team has been regularly meeting online (at least once a day). We have been able to channel the time spent in travelling to and attending meetings in developing our internal knowledge banks further, streamline our processes, and work on integrating various tech to make the practice more cost-effective for our clients.
Right to Disclosure – Importance & Challenges in Criminal Justice System – By Manu Sharma
Personal liberty is the most cherished value of human life which thrives on the anvil of Articles 14 and 21 of the Constitution of India (“the Constitution”). Once a person is named an accused, he faces the spectre of deprivation of his personal liberty and criminal trial. This threat is balanced by Constitutional safeguards which mandate adherence to the rule of law by the investigating agencies as well as the Court. Thus, any procedure which seeks to impinge on personal liberty must also be fair and reasonable. The right to life and personal liberty enshrined under article 21 of the Constitution, expanded in scope post Maneka Gandhi[1], yields the right to a fair trial and fair investigation. Fairness demands disclosure of anything relevant that may be of benefit to an accused. Further, the all-pervading principles of natural justice envisage the right to a fair hearing, which entails the right to a full defence. The right to a fair defence stems from full disclosure. Therefore, the right of an accused to disclosure emanates from this Constitutional philosophy embellished by the principles of natural justice and is codified under the Code of Criminal Procedure, 1973 (“Code”).
Under English jurisprudence, the duty of disclosure is delineated in the Criminal Procedure and Investigations Act, 1996, which provides that the prosecutor must disclose to the accused any prosecution material which has not previously been disclosed to the accused and which might reasonably be considered capable of undermining the case for the prosecution against the accused or of assisting the case for the accused, except if such disclosure undermines public interest.[2] Fairness ordinarily requires that any material held by the prosecution which weakens its case or strengthens that of the defendant, if not relied on as part of its formal case against the defendant, should be disclosed to the defence.[3] The duty of disclosure under common law contemplates disclosure of anything which might assist the defence[4], even if such material was not to be used as evidence[5]. Under Indian criminal jurisprudence, which has borrowed liberally from common law, the duty of disclosure is embodied in sections 170(2), 173, 207 and 208 of the Code, which entail the forwarding of material to the Court and supply of copies thereof to the accused, subject to statutory exceptions.
II. Challenges in Enforcement
The right to disclosure is a salient feature of criminal justice, but its provenance and significance appear to be lost on the Indian criminal justice system. The woes of investigative bias and prosecutorial misconduct threaten to render this right otiose. That is not to say that the right of an accused to disclosure is indefeasible, as certain exceptions are cast in the Code itself, chief among them being public interest immunity under section 173(6). However, it is the mischief of the concept of ‘relied upon’ emerging from section 173(5) of the Code, which is wreaking havoc on the right to disclosure and is the central focus of this article. The rampant misuse of the words “on which the prosecution proposes to rely’ appearing in section 173(5) of the Code, to suppress material favourable to the accused or unfavourable to the prosecution in the garb of ‘un-relied documents’ has clogged criminal courts with avoidable litigation at the very nascent stage of supply of copies of documents under section 207 of the Code. The erosion of the right of an accused to disclosure through such subterfuge is exacerbated by the limited and restrictive validation of this right by criminal Courts. The dominant issues highlighted in the article, which stifle the right to disclosure are; tainted investigation, unscrupulous withholding of material beneficial to the accused by the prosecution, narrow interpretation by Courts of section 207 of the Code, and denial of the right to an accused to bring material on record in the pre-charge stage.
A. Tainted Investigation
Fair investigation is concomitant to the preservation of the right to fair disclosure and fair trial. It envisages collection of all material, irrespective of its inculpatory or exculpatory nature. However, investigation is often vitiated by the tendencies of overzealous investigating officers who detract from the ultimate objective of unearthing truth, with the aim of establishing guilt. Such proclivities result in collecting only incriminating material during investigation or ignoring the material favourable to the accused. This leads to suppression of material and scuttles the right of the accused to disclosure at the very inception. A tainted investigation leads to miscarriage of justice. Fortunately, the Courts are not bereft of power to supervise investigation and ensure that the right of an accused to fair disclosure remains protected. The Magistrate is conferred with wide amplitude of powers under section 156(3) of the Code to monitor investigation, and inheres all such powers which are incidental or implied to ensure proper investigation. This power can be exercised suo moto by the Magistrate at all stages of a criminal proceeding prior to the commencement of trial, so that an innocent person is not wrongly arraigned or a prima facie guilty person is not left out.[6]
B. Suppression of Material
Indian courts commonly witness that the prosecution is partisan while conducting the trial and is invariably driven by the lust for concluding in conviction. Such predisposition impels the prosecution to take advantage by selectively picking up words from the Code and excluding material favouring the accused or negating the prosecution case, with the aid of the concept of ‘relied upon’ within section 173(5) of the Code. However, the power of the prosecution to withhold material is not unbridled as the Constitutional mandate and statutory rights given to an accused place an implied obligation on the prosecution to make fair disclosure.[7] If the prosecution withholds vital evidence from the Court, it is liable to adverse inference flowing from section 114 of the Indian Evidence Act, 1872 (“Evidence Act). The prosecutor is expected to be guided by the Bar Council of India Rules which prescribe that an advocate appearing for the prosecution of a criminal trial shall so conduct the prosecution that it does not lead to conviction of the innocent. The suppression of material capable of establishment of the innocence of the accused shall be scrupulously avoided. [8]
C. Scope of S. 207
The scope of disclosure under section 207 has been the subject of fierce challenge in Indian Courts on account of the prosecution selectively supplying documents under the garb of ‘relied upon’ documents, to the prejudice of the defence of an accused. The earlier judicial trend had been to limit the supply of documents under section 207 of the Code to only those documents which were proposed to be relied upon by the prosecution. This view acquiesced the exclusion of documents which were seized during investigation, but not filed before the Court along with the charge sheet, rendering the right to disclosure a farce. This restrictive sweep fails to reconcile with the objective of a fair trial viz. discovery of truth. The scheme of the code discloses that Courts have been vested with extensive powers inter alia under sections 91, 156(3) and 311 to elicit the truth. Towards the same end, Courts are also empowered under Section 165 of the Evidence Act. Thus, the principle of harmonious construction warrants a more purposive interpretation of section 207 of the code. The Hon’ble Supreme Court expounded on the scope of Section 207 of the Code in the case of Manu Sharma[9] and held that documents submitted to the Magistrate under section 173(5) would deem to include the documents which have to be sent to the magistrate during the course of investigation under section 170(2). A document which has been obtained bona fide and has a bearing on the case of the prosecution should be disclosed to the accused and furnished to him to enable him to prepare a fair defence, particularly when non production or disclosure would affect administration of justice or prejudice the defence of the accused. It is not for the prosecution or the court to comprehend the prejudice that is likely to be caused to the accused. The perception of prejudice is for the accused to develop on reasonable basis.[10] Manu Sharma’s [supra] case has been relied upon in Sasikala [11] wherein it was held that the Court must concede a right to the accused to have access to the documents which were forwarded to the Court but not exhibited by the prosecution as they favoured the accused. These judgments seem more in consonance with the true spirit of fair disclosure and fair trial. However, despite such clear statements of law, courts are grappling with the judicial propensity of deviating from this expansive interpretation and regressing to the concept of relied upon. The same is evident from a recent pronouncement of the Delhi High Court where the ratios laid down in Manu Sharma & Sasikala [supra] were not followed by erroneously distinguishing from those cases.[12] Such “per incuriam” aberrations by High Court not only undermine the supremacy of the Apex Court, but also adversely impact the functioning of the district courts over which they exercise supervisory jurisdiction. Hopefully in future Judges shall be more circumspect and strictly follow the law declared by the Apex Court.
D. Pre-Charge Embargo
Another obstacle encountered in the enforcement of the right to disclosure is the earlier judicial approach to stave off production or consideration of any additional documents not filed alongwith the charge sheet at the pre-charge stage, as the right to file such material was available to the accused only upon the commencement of trial after framing of charge.[13] At the pre-charge stage, Court could not direct the prosecution to furnish copies of other documents[14] It was for the accused to do so during trial or at the time of entering his defence. However, the evolution of law has seen that at the stage of framing charge, Courts can rely upon the material which has been withheld by the prosecutor, even if such material is not part of the charge sheet, but is of such sterling quality demolishing the case of the prosecution.[15] Courts are not handicapped to consider relevant material at the stage of framing charge, which is not relied upon by the prosecution. It is no argument that the accused can ask for the documents withheld at the time of entering his defence.[16] The framing of charge is a serious matter in a criminal trial as it ordains an accused to face a long and arduous trial affecting his liberty. Therefore, the Court must have all relevant material before the stage of framing charge to ascertain if grave suspicion is made out or not. Full disclosure at the stage of section 207 of the code, which immediately precedes discharging or charging an accused, enables an accused to seek a discharge, if the documents, including those not relied upon by the prosecution, create an equally possible view in favour of the accused.[17] On the other hand, delaying the reception of documents postpones the vindication of the accused in an unworthy trial and causes injustice by subjecting him to the trauma of trial. There is no gainsaying that justice delayed is justice denied, therefore, such an approach ought not to receive judicial consent. A timely discharge also travels a long way in saving precious time of the judiciary, which is already overburdened by the burgeoning pendency of cases. Thus, delayed or piecemeal disclosure not only prejudices the defence of the accused, but also protracts the trial and occasions travesty of justice.
III. Duties of the stakeholders in criminal justice system
The foregoing analysis reveals that participation of the investigating agency, the prosecution and the Court is inextricably linked to the enforcement of the right to disclosure. The duties cast on these three stakeholders in the criminal justice system, are critical to the protection of this right. It is incumbent upon the investigating agencies to investigate cases fairly and to place on record all the material irrespective of its implication on the case of prosecution case. Investigation must be carried out with equal alacrity and fairness irrespective of status of accused or complainant.[18] An onerous duty is cast on the prosecution as an independent statutory officer, to conduct the trial with the objective of determination of truth and to ensure that material favourable to the defence is supplied to the accused. Ultimately, it is the overarching duty of the Court to ensure a fair trial towards the administration of justice for all parties. The principles of fair trial require the Court to strike a delicate balance between competing interests in a system of adversarial advocacy. Therefore, the court ought to exercise its power under section 156(3) of the Code to monitor investigation and ensure that all material, including that which enures to the benefit of the accused, is brought on record. Even at the stage of supply of copies of police report and documents under section 207 of the Code, it is the duty of the Court to give effect to the law laid down by the Hon’ble Supreme Court in Manu Sharma (supra) and Sasikala (supra), and ensure that all such material is supplied to the accused irrespective of whether it is “relied upon” by the prosecution or not.
IV. Alternate Remedy
The conundrum of supply of copies under section 207 of the code abounds criminal trials. Fairness is an evolving concept. There is no doubt that disclosure of all material which goes to establish the innocence of an accused is the sine qua non of a fair trial.[19] Effort is evidently underway to expand the concept in alignment with English jurisprudence. In the meanwhile, does the right of an accused to disclosure have another limb to stand on? Section 91 of the Code comes to the rescue of an accused, which confers wide discretionary powers on the Court, independent of section 173 of the Code, to summon the production of things or documents, relevant for the just adjudication of the case. In case the Court is of the opinion that the prosecution has withheld vital, relevant and admissible evidence from the Court, it can legitimately use its power under section 91 of the Code to discover the truth and to do complete justice to the accused.[20]
V. Conclusion
A society’s progress and advancement are judged on many parameters, an important one among them being the manner in which it administers criminal justice. Conversely, the ironic sacrilege of the core virtues of criminal jurisprudence in the temples of justice evinces social decadence. The Indian legislature of the twenty first century has given birth to several draconian statutes which place iron shackles on personal liberty, evoking widespread fear of police abuses and malicious prosecution. These statutes not only entail presumptions which reverse the burden of proof, but also include impediments to the grant of bail. Thus, a very heavy burden to dislodge the prosecution case is imposed on the accused, rendering the right to disclosure of paramount importance. It is the duty of the Court to keep vigil over this Constitutional and statutory right conferred on an accused by repudiating any procedure which prejudices his defence. Notable advancement has been made by the Apex Court in interpreting section 207 of the Code in conformity with the Constitutional mandate, including the right to disclosure. Strict adherence to the afore-noted principles will go a long way in ensuring real and substantial justice. Any departure will not only lead to judicial anarchy, but also further diminish the already dwindling faith of the public in the justice delivery system.
**
Advocate Manu Sharma has been practising at the bar for over sixteen years. He specialises in Criminal Defence. Some of the high profile cases he has represented are – the 2G scam case for former Union minister A Raja; the Religare/Fortis case for Malvinder Singh; Peter Mukerjee in the P Chidambaram/ INX Media case; Devas Multimedia in ISRO corruption act case; Om Prakash Chautala in PMLA case; Aditya Talwar in the aviation scam case; Dilip Ray, former Coal Minister in one of the coal scam cases; Suhaib Illyasi case.
**
Disclaimer: The views or opinions expressed are solely of the author.
[1] Maneka Gandhi and Another v. Union of India, (1978) 1 SCC 248
[2] S. 3 of the Criminal Procedure and Investigations Act, 1996
[3] R v. H and R v. C, 2004 (1) ALL ER 1269
[4] R v. Ward (Judith), (1993) 1 WLR 619 : (1993) 2 ALL ER 577 (CA)
[5] R v. Preston, (1994) 2 AC 130 : (1993) 3 WLR 891 : (1993) 4 ALL ER 638 (HL), R v. Stinchcome,
(1991), 68 C.C.C. (3d) 1 (S.C.C.)
[6] Vinubhai Haribhai Malaviya and Others v. State of Gujarat and Another, 2019 SCC Online SC 1346
[7] Sidhartha Vashishth alias Manu Sharma v. State (NCT of Delhi), (2010) 6 SCC 1
[8] R. 16, part II, Ch. VI of the Bar Council of India Rules
[9] Manu Sharma, (2010) 6 SCC 1
[10] V.K. Sasikala v. State, (2012) 9 SCC 771 : AIR 2013 SC 613
[11] Sasikala, (2012) 9 SCC 771 : AIR 2013 SC 613
[12] Sala Gupta and Another v. Directorate of Enforcement, (2019) 262 DLT 661
[13] State of Orissa v. Debendra Nath Padhi¸(2005) 1 SCC 568
[14] Dharambir v. Central Bureau of Investigation, ILR (2008) 2 Del 842 : (2008) 148 DLT 289
[15] Nitya Dharmananda alias K. Lenin and Another v. Gopal Sheelum Reddy, (2018) 2 SCC 93
[16] Neelesh Jain v. State of Rajasthan, 2006 Cri LJ 2151
[17] Dilwar Balu Kurane v. State of Maharashtra, (2002) 2 SCC 135, Yogesh alias Sachin Jagdish Joshi v. State of Maharashtra, (2008) 10 SCC 394
[18] Karan Singh v. State of Haryana, (2013) 12 SCC 529
[19] Kanwar Jagat Singh v. Directorate of Enforcement & Anr, (2007) 142 DLT 49
[20] Neelesh, 2006 Cri LJ 2151
Disclaimer: The views or opinions expressed are solely of the author.
Validity & Existence of an Arbitration Clause in an Unstamped Agreement
By Kunal Kumar
January 8, 2024
In a recent ruling, a seven-judge bench of the Supreme Court of India in its judgment in re: Interplay between arbitration agreements under the Arbitration & Conciliation Act 1996 and the Indian Stamp Act 1899, overruled the constitutional bench decision of the Supreme Court of India in N. N. Mercantile Private Limited v. Indo Unique Flame Ltd. & Ors. and has settled the issue concerning the validity and existence of an arbitration clause in an unstamped agreement. (‘N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III’)
Background to N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III
One of the first instances concerning the issue of the validity of an unstamped agreement arose in the case of SMS Tea Estate Pvt. Ltd. v. Chandmari Tea Company Pvt. Ltd. In this case, the Hon’ble Apex Court held that if an instrument/document lacks proper stamping, the exercising Court must preclude itself from acting upon it, including the arbitration clause. It further emphasized that it is imperative for the Court to impound such documents/instruments and must accordingly adhere to the prescribed procedure outlined in the Indian Stamp Act 1899.
With the introduction of the 2015 Amendment, Section 11(6A) was inserted in the Arbitration & Conciliation Act 1996 (A&C Act) which stated whilst appointing an arbitrator under the A&C Act, the Court must confine itself to the examination of the existence of an arbitration agreement.
In the case of M/s Duro Felguera S.A. v. M/s Gangavaram Port Limited, the Supreme Court of India made a noteworthy observation, affirming that the legislative intent behind the 2015 Amendment to the A&C Act was necessitated to minimise the Court's involvement during the stage of appointing an arbitrator and that the purpose embodied in Section 11(6A) of A&C Act, deserves due acknowledgement & respect.
In the case of Garware Wall Ropes Ltd. v. Cosatal Marine Constructions & Engineering Ltd., a divisional bench of the Apex Court reaffirmed its previous decision held in SMS Tea Estates (supra) and concluded that the inclusion of an arbitration clause in a contract assumes significance, emphasizing that the agreement transforms into a contract only when it holds legal enforceability. The Apex Court observed that an agreement fails to attain the status of a contract and would not be legally enforceable unless it bears the requisite stamp as mandated under the Indian Stamp Act 1899. Accordingly, the Court concluded that Section 11(6A) read in conjunction with Section 7(2) of the A&C Act and Section 2(h) of the Indian Contract Act 1872, clarified that the existence of an arbitration clause within an agreement is contingent on its legal enforceability and that the 2015 Amendment of the A&C Act to Section 11(6A) had not altered the principles laid out in SMS Tea Estates (supra).
Brief Factual Matrix – N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.
Indo Unique Flame Ltd. (‘Indo Unique’) was awarded a contract for a coal beneficiation/washing project with Karnataka Power Corporation Ltd. (‘KPCL’). In the course of the project, Indo Unique entered into a subcontract in the form of a Work Order with N.N. Global Mercantile Pvt. Ltd. (‘N.N. Global’) for coal transportation, coal handling and loading. Subsequently, certain disputes arose with KPCL, leading to KPCL invoking Bank Guarantees of Indo Unique under the main contract, after which Indo Unique invoked the Bank Guarantee of N. N. Global as supplied under the Work Order.
Top of FormS
Subsequently, N.N. Global initiated legal proceedings against the cashing of the Bank Guarantee in a Commercial Court. In response thereto, Indo Unique moved an application under Section 8 of the A&C Act, requesting that the Parties to the dispute be referred for arbitration. The Commercial Court dismissed the Section 8 application, citing the unstamped status of the Work Order as one of the grounds. Dissatisfied with the Commercial Court's decision on 18 January 2018, Indo Unique filed a Writ Petition before the High Court of Bombay seeking that the Order passed by the Commercial Court be quashed or set aside. The Hon’ble Bombay High Court on 30 September 2020 allowed the Writ Petition filed by Indo Unique, aggrieved by which, N.N. Global filed a Special Leave Petition before the Supreme Court of India.
N. N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. – I
The issue in the matter of M/s N.N. Global Mercantile Pvt. Ltd. v. M/s Indo Unqiue Flame Ltd. & Ors. came up before a three-bench of the Supreme Court of India i.e. in a situation when an underlying contract is not stamped or is insufficiently stamped, as required under the Indian Stamp Act 1899, would that also render the arbitration clause as non-existent and/or unenforceable (‘N.N. Global Mercantile Pvt. Ltd. v. Indo Flame Ltd. – I’).
The Hon’ble Supreme Court of India whilst emphasizing the 'Doctrine of Separability' of an arbitration agreement held that the non-payment of stamp duty on the commercial contract would not invalidate, vitiate, or render the arbitration clause as unenforceable, because the arbitration agreement is considered an independent contract from the main contract, and the existence and/or validity of an arbitration clause is not conditional on the stamping of a contract. The Hon’ble Supreme Court further held that deficiency in stamp duty of a contract is a curable defect and that the deficiency in stamp duty on the work order, would not affect the validity and/or enforceability of the arbitration clause, thus applying the Doctrine of Separability. The arbitration agreement remains valid and enforceable even if the main contract, within which it is embedded, is not admissible in evidence owing to lack of stamping.
The Hon’ble Apex Court, however, considered it appropriate to refer the issue i.e. whether unstamped instrument/document, would also render an arbitration clause as non-existent, unenforceable, to a constitutional bench of five-bench of the Supreme Court.
N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II
On 25 April 2023, a five-judge bench of the Hon’ble Supreme Court of India in the matter of N. N. Mercantile Private Limited v. Indo Unique Flame Ltd. & Ors. held that (1) An unstamped instrument containing an arbitration agreement cannot be said to be a contract which is enforceable in law within the meaning of Section 2(h) of the Indian Contract Act 1872 and would be void under Section 2(g) of the Indian Contract Act 1872, (2) an unstamped instrument which is not a contract nor enforceable cannot be acted upon unless it is duly stamped, and would not otherwise exist in the eyes of the law, (3) the certified copy of the arbitration agreement produced before a Court, must clearly indicate the stamp duty paid on the instrument, (4) the Court exercising its power in appointing an arbitration under Section 11 of the A&C Act, is required to act in terms of Section 33 and Section 35 of the Indian Stamp Act 1899 (N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II).
N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III
A seven-judge bench of the Supreme Court of India on 13 December 2023 in its recent judgment in re: Interplay between arbitration agreements under the Arbitration & Conciliation Act 1996 and the Indian Stamp Act 1899, (1) Agreements lacking proper stamping or inadequately stamped are deemed inadmissible as evidence under Section 35 of the Stamp Act. However, such agreements are not automatically rendered void or unenforceable ab initio; (2) non-stamping or insufficient stamping of a contract is a curable defect, (2) the issue of stamping is not subject to determination under Sections 8 or 11 of the A&C Act by a Court. The concerned Court is only required to assess the prima facie existence of the arbitration agreement, separate from concerns related to stamping, and (3) any objections pertaining to the stamping of the agreement would fall within the jurisdiction of the arbitral tribunal. Accordingly, the decision in N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II and SMS Tea (supra) was overruled, by the seven-judge bench of the Supreme Court of India.
Kunal is a qualified lawyer with more than nine years of experience and has completed his LL.M. in Dispute Resolution (specialisation in International Commercial Arbitration) from Straus Institute for Dispute Resolution, Pepperdine University, California.
Kunal currently has his own independent practice and specializes in commercial/construction arbitration as well as civil litigation. He has handled several matters relating to Civil Law and arbitrations (both domestic and international) and has appeared before the Supreme Court of India, High Court of Delhi, District Courts of Delhi and various other tribunals.
No Safe Harbour For Google On Trademark Infringement
By Mayank Grover & Pratibha Vyas
October 9, 2023
Innovation, patience, dedication and uniqueness culminate in establishing a distinct identity. A trademark aids in identifying the source and quality, shaping perceptions about the identity's essence. When values accompany a product or service's trademark, safeguarding against misuse and infringement becomes crucial. A recent pronouncement of a Division Bench of the Delhi High Court dated August 10, 2023 in Google LLC v. DRS Logistics (P) Ltd. & Ors. and Google India Private Limited v. DRS Logistics (P) Ltd. & Ors. directed that Google’s use of trademarks as keywords for its Google Ads Programme does amount to ‘use’ in advertising under the Trademarks Act and the benefit of safe harbour would not be available to Google if such keywords infringe on the concerned trademark.
Factual Background
Google LLC manages and operates the Google Search Engine and Ads Programme, while, Google India Private Limited is a subsidiary of Google that has been appointed as a non-exclusive reseller of the Ads Programme in India. The Respondents, DRS Logistics and Agarwal Packers and Movers Pvt. Ltd. are leading packaging, moving and logistics service providers in India.
On 22.12.2011, DRS filed a suit against Google and Just Dial Ltd. under provisions of the Trademarks Act, 1999 (‘TM Act’) inter alia seeking a permanent injunction against Google from permitting third parties from infringing, passing off etc. the relevant trademarks of DRS. The core of the dispute revolved around Google’s Ads Programme. DRS claimed that its trade name 'AGARWAL PACKERS AND MOVERS' is widely recognized and a 'well-known' trademark. Use of DRS’s trademark as a keyword diverts internet traffic from its website to that of its competitors and they were entitled to seek restraint against Google for permitting third parties who are not authorized to use the said trademark. DRS further argued that Google benefits from these trademark infringements. This practice involved charging a higher amount for displaying these ads, constituting an infringement of their trademarks. Whereas, Google contended that the use of the keyword in the Ads Programme does not amount to ‘use’ under the TM Act notwithstanding that the keyword is/or similar to a trademark. Thus, the use of a term as a keyword cannot be construed as an infringement of a trademark under the TM Act, and being an intermediary, it claimed a safe harbour under Section 79 of the Information Technology Act, 2000. (‘IT Act’).
In essence, the dispute between the parties was rooted in DRS’s grievance concerning the Ads Programme. The Learned Single Judge vide judgment dated 30.10.2021interpreted relevant provisions of the TM Act and drew on multiple legal precedents to arrive at the decision that DRS can seek protection of its trademarks which were registered under Section 28 of the TM Act and issued directions to investigate complaints alleging the use of trademark and/or to ascertain whether a sponsored result has an effect of infringing a trademark or passing off.
Being aggrieved, Google LLC and Google Pvt. Ltd. filed appeals before the Division Bench. Google LLC argued that the Single Judge’s findings were erroneous and the directions issued were liable to be set aside. Google India claimed that it doesn’t control and operate the Search Engine and the Ads Programme making it unable to comply with the directions passed in the impugned judgment.
Analysis & Decision of Court
The Division Bench found Single Judge’s rationale for assessing trademark infringement through keywords and meta-tags valid. Meta-tags are a list of words/code in a website, not readily visible to the naked eye. It serves as a tool for indexing the website by a search engine. If a trademark of a third party is used as a meta-tag, the same would serve as identifying the website as relevant to the search query that includes the trademark as a search term. The use of keywords in the Ads Programme also serves similar purpose. The Division Bench was unable to accept that using a trademark as a keyword, even if not visible, would not be considered trademark use under the TM Act.
Google placed heavy reliance on the decisions rendered by Courts across jurisdictions of United Kingdom, United States of America, European Union, Australia, New Zealand, Russia, South Africa, Canada, Spain, Italy, Japan and China; in the cases of Google France SARL and Google Inc. v. Louis Vitton SA & Ors.[1], Interflora Inc. v. Marks & Spencer Plc.[2], and L’Oreal SA v. eBay International AG[3] in support of the contention that the use of trade marks is by the advertiser and not by Google. However, the Division Bench rejected Google’s passive role; highlighting its active involvement in recommending and promoting trademark keywords for higher clicks in its Ads Programme. Division Bench referred to a few judicial decisions rendered in the United States of America that captured the essence of the controversy for perspective, concluding that Google actively promotes and encourages trademarks associated with major goods and services, rather than having a passive role.
It was held that the contention that the use of trademarks as keywords, per se constitutes an infringement of the trademark is unmerited; the assumption that an internet user is merely searching the address of the proprietor of the trademark when he feeds in a search query that may contain a trademark, is erroneous.
The Doctrine of 'Initial Interest Confusion' addresses trademark infringement based on pre-purchase confusion. The doctrine is applied when meta-tags, keywords, or domain names cause initial confusion similar to a registered trademark. If users are misled to access unrelated websites, trademark use in internet advertising may be actionable and reliance was placed on US precedents. Referring to Section 29 of the TM Act, it was directed that Section 29 does not specify the duration for which the confusion lasts but, even if the confusion is for a short duration and an internet user is able to recover from the same, the trade mark would be infringed and would offend Section 29(2) of the TM Act.
It was held that the Ads Programme is a platform for displaying advertisements. Google, being an architect and operator of its own programme makes it an active participant in the use of trademarks and determining the advertisements displayed on search pages. Their use of proprietary software makes them utilize trademarks and control the distribution of information related to potentially infringing links, ultimately leading to revenue maximization. Hence, a substantial link exists between Google LLC and Google India, rendering it impossible for Google India to deny its role in operating the Ads Programme. It was further held that Google sells trademarks as keywords to advertisers and encourages users to use trademarks as keywords for ads. It is contradictory for Google to encourage trademark use while claiming data belongs to third parties for exemption. After 2004, Google changed policies to boost revenue and subsequently, introduced a tool that searches effective terms, including trademarks. Google's active involvement in its advertising business and online nature does not necessarily qualify it for benefits under Section 79 of the IT Act. The Division Bench agreed with the view of the Single Judge that Google would not be eligible for protection of safe harbour under Section 79(1) of the IT Act, if its alleged activities infringe trademarks.
Conclusion
This is a seminal decision governing (and rather, restricting) the operations of intermediaries and redefining the jurisprudence of safe harbour under the IT Act. The decision is well-reasoned and establishes a significant precedent for safeguarding trademarks by uniquely holding Google accountable under its Ads Programme. The same will prevent usage of tradenames as a third-party trademark in keyword search or metatags by advertisers on Google’s search engine. While keywords and meta-tags have different levels of visibility, their purpose is similar i.e. advertising and attracting internet traffic. The use of trademarks as meta-tags by a person who is neither a proprietor of the trademark nor permitted to use the same leads to confusion amongst public at large due to the automated processes of search engines and consequently, constitutes trademark infringement.
About the Authors: Mayank Grover is a Partner and Pratibha Vyas is an Associate at Seraphic Advisors, Advocates & Solicitors
[1] C-236/08 to C-238/08 (2010) [2011] All ER (EC) 41
[2] [2014] EWCA Civ 1403
[3] 2C- 324/09 (2010)
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