Read Order: Capt. K. Phool Singh (deceased) Represented By His LRs Vs. Rajinder Kumar Kalia
Tulip Kanth
Chandigarh, May 22, 2023: The Punjab and Haryana High Court has directed the tenants to handover vacant possession of the demised premises within 3 months to the owner while observing that the petitioners were deliberately seeking to obfuscate the issue and they had also failed to establish any fraud on part of the respondent-landlord before the Rent Controller.
Referring to the judgment of the Top Court in Precision Steel and Engineering Works v Prem Deva Niranjan Deva Tayal, wherein it has been held that at the stage of granting leave, affidavit of tenant is the only relevant document, the Single-Judge Bench of Justice Nidhi Gupta asserted, “In my view, it is a very clear proposition of law that leave to contest can be granted only and only on the basis of grounds contained in the application filed by the tenant under Section 18-A of the Act.”
The respondent/landlord had filed a petition u/s 13-B of the East Punjab Urban Rent Restriction Act, 1949 seeking ejectment of the petitioner from the tenanted premises on grounds of bona-fide personal necessity, as also arrears of rent.
It was the pleaded case of the respondent-landlord that he is an NRI who had settled in England since past several years, and he was owner of the demised premises by way of Sale Deed. It was submitted that he was now 58 years of age and wanted to settle in Chandigarh with his family in the last years of his life. Therefore, he required the demised premises for his own personal use and bonafide necessity.
In the rent petition the respondent also stated that he did not occupy any residential premises i.e. residential building in the urban area of Chandigarh, nor had he vacated any such premises after the commencement of the Act. Upon receipt of summons in the ejectment petition, the petitioner herein filed instant application u/s 18-A for grant of leave to contest n within the stipulated period of 15 days from the date of receipt of summons.
In the said application the petitioner raised the objection that he had received the summons along with copy of petition only, without any Annexures/documents as mentioned in the petition. The petitioner contended that the respondent’s ownership over the demised premises was not proved as no document of ownership had been supplied and bona fide personal necessity of the respondent was not made out.
It was this application filed by the petitioner for leave to contest u/s 18-A which had been dismissed vide impugned order. Hence, the revision petition was filed.
Noting that an application for leave to contest is maintainable u/s 18-A, the Bench said, “A bare perusal of the above provision leads to the irresistible conclusion that Leave to Contest can only be granted on the basis of the affidavit filed by the tenant before the Rent Controller, and the Rent Controller cannot travel beyond the grounds contained in the said affidavit.”
The Bench also noticed that the grounds now sought to be raised by the petitioner before the High Court in the revision petition were not pleaded by him before the Rent Controller. As per the Bench, leave to contest can be granted only on the basis of grounds contained in the application filed by the tenant under Section 18-A.
According to the Bench, it was not open to the Rent Controller to travel beyond the grounds raised by the tenant in his application for leave to contest, and as per law, petitioner was not to be permitted to raise the present issues. “Therefore, at this stage the petitioner cannot be permitted to raise the extraneous grounds, which are beyond the pleadings as contained in the application u/s 18-A of the Act”, the Bench held.
The petitioner had doubted the Indian origin of the respondent as, his passport did not state that the birthplace of the respondent ‘Mulewalkhera’ is in India. Considering that there was nothing on record to show that Mulewalkhera does not fall within India, the Bench made it clear that the respondent is of Indian origin, as required under Section 2(dd) and thus, it couldnot be said that respondent is not an NRI. Therefore, ejectment petition filed by the respondent u/s 13B of the Act was maintainable, the Bench held.
It was also observed that Sections 13 and 13B are two distinct remedies available to the landlord, and proceedings filed by the landlord under general provisions of the Act would not bar him from pursuing remedy available to him u/s 13B.
“ However, prima facie, in my considered opinion, the petitioner is deliberately seeking to obfuscate the issue, whereas the facts are clear and unambiguous on record. Moreover, nothing whatsoever has been produced by the petitioner to controvert these facts as noticed above”, the Bench held while noting, “As regards the judgments cited on behalf of the petitioner, the same pertain to and are in support of the contention that a judgment or decree obtained by playing fraud upon the Court is a nullity. However, petitioner can derive no support from the same, as petitioner has failed to establish any fraud on part of the respondent before the ld. Rent Controller.”
Thus dismissing the petition, the Bench ordered, “Petitioners are directed to handover vacant possession of the demised premises within three months from date of receipt of certified copy of this order.”
Read Order: Kanta Govind Singh, v. Asstt. Commissioner of Income Tax
LE Correspondent
Mumbai, May 22, 2023: The Ahmedabad bench of the Income Tax Appellate Tribunal has ruled that the mere fact that the assessee did not file Form 27Q by the specified deadline should not be the sole criterion for levying fees under section 234E of the Income Tax Act.
In the matter at hand, the assessee, due to old age and health issues, forgot to file the TDS return within the prescribed deadline. It was later discovered in January, 2021 that the return for the quarter ending June 2019 had not been filed. The assessee promptly filed the return to comply with the income tax procedures. However, a late filing fee of Rs. 1,05,400/- was levied by the Assessing Officer (AO) under section 234E of the Income Tax Act. The department contended that section 234E of the Income Tax Act mandates the filing of TDS statements and, therefore, the Commissioner of Income Tax (Appeals) (CIT(A)) was correct in confirming the levy of fee under section 234E.
The Tribunal noted that the assessee, being a senior citizen, promptly deposited the TDS amount upon receiving the sale consideration. It was also noted that there was no lapse on the part of the assessee in depositing the TDS amount to the Government of India's Treasury. Although the assessee could not file Form 27Q within the specified time frame due to unforeseen circumstances, the intention of the assessee was clear as he eventually filed it in January 2021.
Considering the circumstances, the Tribunal held that it would be appropriate to delete the levy of fee.
Read Order: Sarita Konda v. The Pr. Commissioner of Income Tax, Raipur
Chahat Varma
New Delhi, May 22, 2023: The Raipur bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the amount received by the assessee in consequence of her divorce from her ex-husband cannot be considered an unexplained cash credit under section 68 of the Income Tax Act, and therefore, it cannot be brought to tax under section 115BBE of the Act.
The issue involved in the case was that the Assessing Officer (AO) had observed during the assessment proceedings that the assessee had received deposits from her ex-husband in her bank account. The AO requested an explanation regarding the source of these deposits. The assessee explained that the amount was received as a result of her divorce. However, the AO disagreed, considering that the amount could not be considered as alimony since it would have been either a periodic receipt or a combination of both. The AO concluded that the amount, being a revenue receipt, was taxable in the hands of the assessee. Additionally, the AO noted that the assessee had received deposits on various dates in her bank account as a death claim of her husband. The assessee claimed that this amount, being a death claim of her ex-husband, should not be taxed. However, the AO did not agree and considered it as income outside the regular source, bringing it to tax in the assessee's hands. Upon examining the records, Principal Commissioner of Income Tax (Pr. CIT) found that the AO had made an error in not treating the two additions made to the assessee's income, as unexplained credits under section 68 of the Income Tax Act and the same should have been taxed in the hands of the assessee under section 115BBE of the Act.
The two-member bench of Ravish Sood (Judicial) and Arun Khodpia (Accountant) highlighted that the provisions of section 68 of the Act can be triggered only where either the assessee fails to come forth with any explanation as regards the nature and source of the cash credit; or the explanation so offered was not found to be satisfactory.
In the matter at hand, the bench observed that there was no dispute regarding the nature and source of the amount received by the assessee in her bank account over the year, as a consequence of her divorce. Therefore, the bench concluded that there was no justification for treating the amount as an unexplained cash credit and bringing it to tax.
With respect to the amount received by the assessee as a death claim of her ex-husband, the bench held that since the nature and source of the receipt were duly explained and not doubted by the AO, it could not be considered as an unexplained cash credit.
However, the bench opined that the AO’s acceptance of the assessee's claims without conducting necessary verifications was an erroneous action that was prejudicial to the interest of the Revenue, as per Explanation 2 to section 263 of the Income Tax Act.
Read Order: Assistant Commissioner of Income Tax, v. V. Krishnamurthy
LE Correspondent
Chennai, May 22, 2023: The Chennai bench of the Income Tax Appellate Tribunal has held that the written-off irrecoverable advances partake the nature of a business loss and can be allowed as a deduction.
In the case at hand, the assessee, had debited a sum of Rs. 6,32,96,032/- under the head 'investment written-off' in the profit & loss account of Meena Enterprises, a proprietary concern. The Assessing Officer (AO) questioned the nature of these expenses and asked for an explanation from the assessee. The assessee explained that he had advanced a loan of Rs. 7.5 crores to M/s. Samjass IT Services India Ltd for the development of software related to his proprietary concern. However, due to global setbacks, the business of the company failed, and the assessee had to take over its fixed assets. The outstanding amount was adjusted against these assets, and the remaining balance was treated as a business loss. The AO noted that while the assessee claimed to have paid the amount to the company for the development of software for his proprietary concern, the company had classified the loss as unsecured loans in its books of accounts. Based on this, the AO concluded that the write-off of advances was in the nature of a capital loss and disallowed it as a deduction. On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additions made by the AO. The CIT(A) held that the assessee had provided relevant evidence to prove that the written-off advances were revenue expenditure. It was evident that the loss was a business loss of a revenue nature.
The bench comprising of V. Durga Rao (Judicial) and Manjunatha. G (Accountant) observed that there was a direct connection between the advances given by the assessee to the company and the assessee's business. Additionally, it was found that the assessee had obtained a business advantage by providing the loan to the company.
Based on these findings, the bench concluded that the written-off irrecoverable advances given to the company were in the nature of a business loss. As such, it was deemed allowable as a deduction.
The bench ruled that the CIT(A) had rightly held that the assessee had filed all evidences to prove that how advances given to company were in the nature of revenue loss. Therefore, there was no error in the reasons given by the ld. CIT(A) to delete the additions made towards disallowance of written off of advances.
Read Order: Bhootpurva Sainik Kalyan Sangh v. Commissioner of Central Excise & Service Tax
Chahat Varma
New Delhi, May 22, 2023: Allowing the appeal filed by Bhootpurva Sainik Kalyan Sangh (appellants), the Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has held that there was no intention to evade payment of service tax and no mens rea present in the case, therefore, the show cause notice issued on 09.10.2009, invoking the extended period of limitation, was not sustainable.
Factual matrix of the case was that the appellants were a Welfare and Rehabilitation Organization of Ex-Servicemen providing Security Agency Service mainly to Government departments/Public Sector Undertakings. The appellants were not including the wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance etc in the taxable value for the purpose of payment of service tax. A show cause notice was issued to the appellants, demanding service tax for the period from April 2004 to March 2006. The notice was adjudicated by the Adjudicating Authority, and the demand raised in the notice was confirmed through an Order-in-Original. In addition to the service tax, the authority also demanded interest and imposed a penalty equal to the duty under section 78 of the Finance Act, 1994. The appellants subsequently filed an appeal before the Commissioner (Appeals), who upheld the demand confirmed in the Order-in-Original.
The appellants argued that as they were not a commercial concern, no service tax was payable by them for the period prior to 16.06.2005. They further contended that they were unaware that reimbursement charges such as wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance were to be included in the taxable value for the purpose of payment of service tax. They claimed that they had regularly paid service tax on the service charges received and filed ST-3 returns, where they clearly indicated the value on which service tax was paid. The appellants contended that the notice issued on 09.10.2009, invoking the extended period of limitation, was not sustainable as there was no suppression of facts and they had not withheld any information from the department.
The two-member bench of P.K. Choudhary (Judicial) and K. Anpazhakan (Technical) observed that the appellants did not dispute their liability to pay service tax for the security agency services provided by them. They had been regularly filing service tax returns during the relevant period and declaring the gross value on which they paid service tax.
The bench further noted that the appellants had not suppressed any information from the department and had fulfilled their obligation by declaring the taxable value in their ST-3 returns. Therefore, it was concluded that the allegation of suppression of information with an intention to evade service tax payment was unfounded.
The bench also held that the demand for service tax and interest, as well as the penalty imposed under section 78 of the Finance Act 1994, were not sustainable on the ground of limitation.
Read Order: Tata Motors Limited v Brihan Mumbai Electric Supply and Transport Undertaking
Simran Singh
New Delhi, May 22, 2023- In a Civil Writ Petition, the Supreme Court dismissed the challenge put forward by Tata Motors to the impugned order of the Bombay High Court, which had rejected its claim to be an eligible bidder for a transport contract due to disqualification. The Top Court, nonetheless, set aside a part of the judgment through which the decisions of the Brihan Mumbai Electric Supply & Transport Undertaking (BEST) to accept the tender of EVEY Trans Private Limited was set aside. It was further left it to the discretion of BEST to undertake a fresh tender process.
“The High Court has rightly observed in its impugned judgment that the bid of the TATA Motors failed to comply with the said clause. TATA Motors deviated from the material and the essential term of the Tender. It may not be out of place to state at this stage that it is only TATA Motors who deviated from the conditions.…However, we are of the view that the High Court having once declared TATA Motors as non-responsive and having stood disqualified from the Tender process should not have entered into the fray of investigating into the decision of BEST to declare EVEY as the eligible bidder. We are saying so because the High Court was not exercising its writ jurisdiction in public interest. The High Court looked into a petition filed by a party trying to assert its own rights,” said a Bench comprising Chief Justice Dhananjaya Y. Chandrachud, Justice PS Narasimha and Justice J.B. Pardiwala
In the matter at hand, the tender process was for supplying 1,400 electric buses worth INR 2,450 crores whose first and foremost requirement was the prescribed operating range of the single-decker buses which would operate for around an average of 200 Kms in a single charge in ‘actual conditions' with 80% State of Charge without any interruption. The High Court in its impugned order had upheld the disqualification of TATA Motors and rejected their claim from being considered as an eligible bidder as they failed to comply with the technical requirements of the Tender.
"It is unambiguous that operating range provided in the tender document is that the electric vehicles manufacturers have to provide the vehicles which can run 200 kms in single charge…in actual conditions with 80% SoC without any interruption….Petitioner No.1 did not submit its bid for 200 Kms@ 80% SoC in single charge on actual condition but at standard test conditions as per AIS 040…The tender of the Petitioner certainly was not compliant with the said clause. The Petitioner has deviated from the material and the substantial term of the tender. The Petitioner, as such, is rightly disqualified for deviating from the material requirements stipulated in the tender.” had held the High Court.
The High Court in its impugned order had declared EVEY as an unsuccessful bidder and had stated that the principle of equity and natural justice stay at a distance and no judicial interference was warranted in case of an error in assessment. However, the same holds good, if the decision is bona fide. “We are also aware that interference of the Court would lead to some delay…The Courts upon coming to the conclusion that the decision making process was not fair. The same lacked fair play in action and arbitrary, will have to step in.”
The issue for consideration for the Bench was the whether the High Court after upholding the disqualification of TATA Motors from the Tender was justified in undertaking further exercise to ascertain whether EVEY also stood disqualified and that BEST in its discretion may undertake a fresh tender process.
The Court opined that it was the guardian of fundamental right who was duty bound to interfere when there was arbitrariness, irrationality, mala fides and bias. “However, this Court has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters.”
The Bench stated that in todays time many public sector undertakings compete with the private industry and the contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. “No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The courts must realise their limitations and the havoc which needless interference in commercial matters can cause.”
The Court stated that the Courts should be even more reluctant in contracts involving technical issues “because most of us in Judges robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. The courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder…”
The Bench navigated through Jagdish Mandal v. State of Orissa which had stated that "while invoking power of judicial review in matters as to tenders or award of contracts, certain special features should be borne in mind that evaluations of tenders and awarding of contracts are essentially commercial functions and principles of equity and natural justice stay at a distance in such matters.”
It was the opinion of the Bench that the Court should exercise a lot of restraint while exercising judicial review in contractual or commercial matters. Further noted, that the contracts entered into between private parties were not subject to scrutiny under writ jurisdiction. The Court, accordingly, dismissed the challenge put forward by the Tata Motors to the impugned order of the Bombay High Court, which had rejected its claim to be an eligible bidder due to disqualification.
Read Order: Anilkumar Champalal Jain v. ITO
LE Correspondent
Mumbai, May 22, 2023: Taking note of the assessee's delinquent and lethargic behaviour in pursuing his matter before the tax authorities, the Mumbai bench of the Income Tax Appellate Tribunal has imposed a cost of Rs. 2000/- upon the assessee.
Briefly stated facts of the case was that the Assessing Officer (AO) had received information that the assessee had sold shares amounting to Rs. 18.71 crores during the relevant assessment year of 2016-17. However, the assessee failed to provide any details regarding the purchase and sale of shares. As a result, the AO made an estimation that the income from these transactions would be 5% of the sale value and assessed a sum of Rs. 93,59,330/- under section 144 of the Income Tax Act, 1961. During the proceedings before the CIT(A), the assessee did not appear, leading to the confirmation of the AO’s order by the CIT(A).
The Tribunal, while imposing the cost upon the assessee, however, in the interest of justice, recognized the importance of providing the assessee with an opportunity to present his case properly before the CIT(A). Therefore, the issues have been restored to the file of CIT(A), for adjudicating them afresh, after hearing the assessee.
Tulip Kanth
Ahmedabad, May 22,2023: Considering the fact that the plea of the petitioner-society for inclusion of the names of the members of the Managing Committee could be heard before the forum provided under the Gujarat Agriculture Produce Market Rules, 1965, the Gujarat High Court has dismissed a Society's petition filed under Article 226 of the Constitution.
Referring to Rule 28, Justice J.C. Doshi said, "Aforesaid provision indicates that the issue of inclusion/ exclusion from the voters list could be effectively ventilated before the forum provided by Statute."
In this matter,the petitioner-society, functioning as per the provisions of the Gujarat Agriculture Produce and Marketing (Promotion and Facilitation) Act, 1963 and Gujarat Agriculture Produce Market Rules, 1965 as well as the bylaws of the society, are carrying on activities of selling and purchasing of agricultural produce within the market area and they are holding the general licence.
The election of the APMC, Godhra has been declared and as per the election programme, the voters’ name were forwarded for the voters list. In the preliminary voters list, the names of the petitioners were included, however, two respondents filed objections against the inclusion of the names of the petitioner society in the voters list.
Consequent to the objections and issuance of the show cause notice, the petitioners appeared before the authorized officer and filed reply stating that they are engaged in the business of selling and purchasing of agricultural produce and are holding general licence of the market committee and therefore, the objections preferred by the respondents were vague.
As per the petitioner, the authorized officer who had no jurisdiction to initiate the fishy or rowing inquiry for the fact finding under the Rule 8 of the Rules, transgressed its jurisdiction and decided that the petitioners are not engaged in the business of agriculture produce and therefore, their names cannot remain in preliminary voters list. This act of the authorized officers was de hors the provisions of the APMC Act.
It was the society’s plea before the High Court that to issue a direction quashing and setting aside the order passed by the fourth respondent and direct the respondent to continue the name of the members of the Managing Committee of the petitioner societies in the voters list for Godhra APMC and allow the members of the Managing Committee of the petitioner societies to take part in the election.
The Bench opined that to arrive at the conclusion that whether names of the petitioners are to be included in the voters list or otherwise is a finding of fact. Rule 28 of the Rules provides the forum created under the statute and would adjudicate any such issue on the fact based on the oral as well as documentary evidence produced before such authority.
The Bench referred to the judgment in Mandropur (Fatehpur) Juth Seva Sahkari Mandali Limited, wherein it has been held that inquiry of summary nature is an inquiry into minimum necessary facts to find out a thing or to ascertain a state of affair in respect of a fact or aspect for which derivation of knowledge, and for that purpose the inquiry is intended. A summary inquiry would indeed include availing and knowing bare minimum facts and to find out whether the requisite rootfacts exist. It is not the process of adjudication.
The High Court also noted that the issue of inclusion/ exclusion from the voters list could be effectively ventilated before the forum provided by the Statute.
Thus, the Bench was not inclined the entertain present Special Civil Applications as the petitioners failed to make out any exceptional case warranting interference of this Court under Article 226, more particularly in view of alternative and efficacious remedy available to the petitioners society and more particularly in absence of any extraordinary circumstances.
“For the foregoing reasons, this Court finds no merit in the petitions warranting the interference of this Court under Article 226 of the Constitution of India. This Court makes it clear that this Court has not examined the merits of the contention raised by learned advocates for both the sides and it would be open for the petitioners to canvass the same before the competent authority if the petitioners are advised to choose forum under Rule 28 of the Rules”, the Bench said while dismissing the petition.
Read Order: Atul Agarwal v Union of India
Simran Singh
New Delhi, May 22, 2023- In a Public Interest Litigation pertaining to the issue of delisting of securities without protecting the investors and praying for appropriate action against those who dupe such investors, the Delhi High Court while disposing of the matter was of the view that statutory provisions appropriately provide for a robust mechanism to safeguard the interests of investors, and that “by no stretch of imagination can it be said that the interest of investors is not protected in law”.
A Bench of Chief Justice Satish Chandra Sharma and Justice Tushar Rao Gedela stated that there is a transparent legal mechanism in place to deal with the process of delisting of securities, including a remedy to an investor aggrieved by such delisting, under the Securities Contract (Regulations) Act, 1956 (‘Act of 1956’) “Not only this, even in case of compulsory delisting, which is a disciplinary mechanism, an aggrieved investor may file an Appeal before the Securities Appellate Tribunal (‘SAT’) against the decision of the recognised stock exchange delisting the securities under Section 21A(2) of the Act of 1956.”
In the matter at hand, the petitioner had sought directing the Securities and Exchange Board of India (‘SEBI’) to direct Bombay Stock Exchange (‘BSE’) to make more stringent and effective alternative penal provisions against promoters and management of the errant listed companies. It was contended that a large number of companies had been suspended from continued listing by and that many of them had been de-listed without ensuring any protection to investors. It was pleaded that an appropriate mechanism be put in place to take action against those who were duping the investors.
SEBI vehemently opposed the contention of the petitioner that the regulatory body had failed to take any action against the promoters and management of the errant listed companies or compliance of the listing agreement and stated that that action had already been taken against the vanishing companies. It was submitted that the Centre had set up a co-ordination and monitoring Committee which had arrived at a certain criteria for identifying a company as a vanishing company. The Union had also set up certain regional task forces for undertaking verification of compliance of criteria at the operational level.
In view of the above, the Bench observed that the interest of the investors was certainly protected under the statutory provisions of the Act of 1956 and Securities and Exchange Board of India Act, 1992 (‘SEBI Act’). It was noted that SEBI was empowered to take measures in the interest of investors, which included regulating the business in the stock exchange and registering and regulating the working of stock brokers.
The Court stated that the Act of 1956 conferred ample amount of power to any recognised stock exchange for providing conditions for listing of securities. Section 21, 21A, 23 and 30 of the Act of 1956 provided for delisting of the securities and the mechanism to protect the interest of investors. It was further pointed out that the aggrieved investor could also file an appeal before SAT in case of delisting of the security under Section 21A(2) of the Act of 1956.
The Bench navigated through Rule 19 of the Securities Contract (Regulation) Rules, 1957 (‘Rules of 1957’) and stated that it provides for a requirement with respect to the delisting of securities on recognised stock exchange which empowers the stock exchange to suspend or withdraw admission to the dealings in the securities of a company for breach of or non-compliance of any of the conditions of admission to dealings or any other reason, to be recorded in writing.
The Bench in conclusion stated that the statutory provisions governing the field made it very clear that a transparent mechanism of delisting the securities, adequate participation and/ or representation of public shareholders in the process of delisting was in place, and remedies were also available to the aggrieved investor in the matter of delisting.
Read Order: Ms. Meenu Rathore CB v. CCE and ST, Ludhiana
Chahat Varma
New Delhi, May 22, 2023: The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal has found the appellant, Ms Meenu Rathore, guilty of violating Regulation 10(b), 10(d), and 10(n) of the Customs Brokers Licensing Regulation, 2018 (CBLR). The Tribunal has emphasized that customs brokers are expected to act responsibly and safeguard the interests of both their clients and the Revenue.
Factual background of the case was that the appellant was involved in the customs clearance of imports and exports and she was granted a customs broker license by the Commissioner of Customs, Amritsar. The license authorized the appellant to work as a customs broker at various customs stations. The Commissioner of Customs revoked the license of the appellant under Regulation 17(1) of CBLR, citing non-compliance with the provisions of Regulation 10 and 13(12). Additionally, the Commissioner imposed a penalty of Rs. 50,000/- under Regulation 18, read with Regulation 14 and ordered the forfeiture of security under Regulation 14 of CBLR.
The bench S.S. Garg (Judicial) and P. Anjani Kumar (Technical) noted that serious allegations were made against the appellant in the show cause notice and the Commissioner in the impugned order had considered each and every submission made by the appellant and had given reasoned finding.
The bench examined the decision rendered in Swastik Cargo Agency v. Commissioner of Customs [LQ/CESTAT/2023/175], wherein it was observed that, “The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/ exporters as well as by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed. Regulation 14 of the CHA Licensing Regulations lists out obligations of the CHA. Any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulations….”
The bench also placed reliance on the judgment of the High Court of Madras, in Sri Kamakshi Agency Vs Commissioner of Customs, Madras [LQ/MadHC/2000/1092], wherein it has been ruled that, “The grant of licence to a person to act as Custom House Agent is to some extent to assist the department with the various procedures such as scrutinising the various documents to be presented in the course of transaction of business for entry and exit of conveyance or the import or export of the goods. In such circumstances, great confidence is reposed in a Custom House Agent. Any misuse of such position by the Custom House Agent will have far reaching consequences in the transaction of business by the Custom House officials.”
Based on the preceding discussion, the impugned order passed by the Commissioner of Ludhiana was upheld.
Read Judgment: Government of NCT of Delhi v. Ravinder Kumar Jain & Ors
Tulip Kanth
New Delhi, May 22, 2023: Reiterating its settled law that a subsequent buyer of the property after issuance of the notification under Section 4 the Land Acquisition Act, 1894 Act has no locus to invoke Section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, the Supreme Court has dismissed the petition of the subsequent purchaser who didn’t have the right to invoke jurisdiction of the High Court to claim that the acquisition in question had lapsed.
The Division Bench of Justice Abhay S. Oka and Justice Rajesh Bindal referred to the Apex Court’s judgment in Shiv Kumar and Ors. v. Union of India and Ors. wherein it has been held that subsequent purchasers cannot be said to be landowners entitled to restoration of land and cannot be termed to be affected persons within the provisions of the 2013 Act. It is not open to them to claim that the proceedings have lapsed under Section 24(2).
The factual background of this case was that the process of acquisition of land in question started with the issuance of notification of Section 4 of the Land Acquisition Act, 1894. Subsequently, notification under Section 6 but the owner of the land at that stage challenged the acquisition by filing a petition. Award under Section 11 of the 1894 Act was announced on June 5,1987 and the petition was dismissed for non-prosecution on December 9,2004.
The first respondent- Ravinder Kumar Jain had purchased the land in question vide a registered sale deed dated June 18, 2003. The fact that he had knowledge about the acquisition of land was evident from the fact that his counsel pointed out that he had obtained permission from the competent authority in terms of the provisions of the 1972 Act for transfer of the land, which had already been acquired. Though, a vague averment had been made in that regard in that sale deed, however, no such certificate was produced.
Secondly, the writ petition was filed by the first respondent challenging the acquisition proceedings and the same was dismissed as withdrawn in 2008 with liberty to the petitioner therein to avail of the remedy of review/ recall of the order dated December 9,2004 but this application for reviewing/ recalling was dismissed.
The petitioners approached the Top Court challenging the order passed by the Delhi High Court vide which the writ petition filed by the first respondent invoking Section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 was allowed and it was held that the acquisition in question had lapsed for the reason that neither the possession of the land was taken nor the compensation therefor was paid.
It was the Govt’s stand that a subsequent buyer of the land after the process of acquisition is complete does not have any locus to invoke Section 24(2), to claim that the acquisition in question has lapsed. Reference was made to the judgment of the Top Court in.
On the issue of locus of a subsequent purchaser to invoke Section 24(2) of the 2013 Act to claim that the acquisition had lapsed, the Apex Court referred to its judgment in Indore Development Authority v. Manoharlal and Others wherein it has been reiterated that a subsequent buyer of the property after issuance of the notification under Section 4 the 1894 Act has no locus to invoke Section 24(2) of the 2013 Act.
Taking note of the admitted position that notification under Section 4 of 1894 Act was issued on November 25, 1980 and the sale deed in favour of the first respondent was registered in the year 2003.
Reliance was placed upon the affidavit filed by the Land Acquisition Collector in the High Court that the first respondent purchased the land from Behl Brothers vide registered sale deed dated June 18,2003, who had purchased the same from M/s. Ansal Housing and Estates (P) Ltd. in 1981, which itself was after the issuance of notification under Section 4 of the 1894 Act on November 25, 1980.
“Hence, the respondent will not have right to invoke jurisdiction of the High Court to claim that the acquisition in question had lapsed in view of Section 24(2) of the 2013 Act”,the Bench held.
Thus, the Bench allowed the appeal and set aside the impugned order passed by the High Court while dismissing the writ petition filed in the High Court by the first respondent.
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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