The Lawyer's Digest: Supreme Court Judgments passed in April 2021

A summary of Judgments passed by the Supreme Court in April, 2021.
Supreme Court Lawyers Digest
Supreme Court Lawyers Digest

The Lawyer's Digest is a collection of concise summaries of all the judgments passed by the Supreme Court of India over the course of a month.

Topics have been sub-divided into areas of law including arbitration, criminal law, consumer law, service and administrative law, etc. for ease of reading.

Here are the summaries of judgments passed in April 2021.

Arbitration

In PASL Wind Solutions Private Ltd. v. GE Power Conversion India Pvt. Ltd., the legal question was whether two companies incorporated in India can choose a forum for arbitration outside India – and whether such an award made at such forum outside India, to which the New York Convention applies, can be said to be a “foreign award” under Part II of the Arbitration and Conciliation Act, 1996 and be enforceable as such. The Court held that nothing stands in the way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals. This was also held not to be violative of the public policy of India. On the second question, it was held that the Award in the present case fulfils the requirements under Section 44 to be designated a foreign award. It further held that there is no clash between Section 10 of the Commercial Courts Act and the Explanation to Section 47 of the Arbitration Act, as an arbitration resulting in a foreign award, as defined under Section 44 of the Arbitration Act, will be enforceable only in a High Court under Section 10(1) of the Commercial Courts Act, and not in a district court under Section 10(2) or Section 10(3). [Key Words: Foreign Award, New York Convention, Commercial Courts Act, Arbitration and Conciliation Act, 1996, international commercial arbitration, public policy, enforcement] [Coram: R.F. Nariman, J., B.R. Gavai, J., Hrishikesh Roy, J.]

In Sanjiv Prakash v. Seema Kukreja and Ors., the Bench held that detailed arguments on whether an agreement which contains an arbitration clause has been novated could not be decided in exercise of a limited prima facie review under Section 11 of the Arbitration and Conciliation Act 1996. A detailed discussion of the MoU and SHA was held to be within the domain of the Arbitrator and not the Section 11 Court. [Key Words: kompetenz-komeptenz, Duro Felguera, Mayavati Trading, ANI, Reuters, artificial deadlock, pre-emptive right, family settlement, novation, Section 62 of the Indian Contract Act 1872, Vidya Drolia] [Coram: R.F. Nariman, J., B.R. Gavai, J., Hrishikesh Roy, J.]

Criminal Law

In State of Rajasthan v Ashok Kumar Kashyap, the Court ruled that at the stage of Section 227, CrPC, the Judge has merely to sift evidence to find out whether there is sufficient ground for proceeding against the accused, and it is sufficient if the nature of evidence recorded or documents produced before the court ex facie disclose suspicious circumstances against the accused so as to frame a charge against the accused. It is unnecessary for the Court to enter into the pros and cons of the matter or into a weighing and balancing of evidence and probabilities which is the function of trial. [Key Words: Section 7 of the Prevention of Corruption Act, Chitresh Kumar Chopta v State (Govt of NCT of Delhi AIR 2010 SC 1446, ][Coram: D.Y. Chandrachud, J., M.R. Shah, J.]

In Sonu v. Sonu Yadav and another, the Court set aside the High Court’s order granting bail. The Court ruled that the seriousness of the alleged offence has to be evaluated in the backdrop of the allegation that she was being harassed for dowry, that a telephone call was received from the accused in close proximity to the time of death, making a demand. [Key Words: Sections 498-A and 304-B IPC, Sections 3 and 4 of the Dowry Prohibition Act 1861][Coram: D.Y. Chandrachud, J., M.R. Shah, J.]

In Gurdev Singh v. State of Punjab, the Bench held that public interest demanded that the sentence of 15 years not be reduced for the accused-appellant as those who deal in narcotics are instruments in causing death and inflicting a death blow to a number of innocent young victims. It was held that the accused could not be held to be a mere carrier when he carried almost four times the commercial quantity. It was observed that the Special Court had complied with Section 32B of the Narcotic Drugs and Psychotropic Substances Act 1985 inasmuch as all relevant factors were taken into consideration while not awarding the maximum sentence. [Key Words: Section 21 and 32B of the NDPS, commercial quantity, mitigating factors, Rafiq Qureshi vs. Narcotic Control Bureau, Eastern Zonal Unit, (2019) 6 SCC 492, “such factors as it may deem fit”, transit traffic of drugs] [Coram: DY Chandrachud, J., M.R. Shah, J.]

In Sudha Singh v. The State of Uttar Pradesh & Anr. the wife of a deceased victim had appealed against the order of the Allahabad High Court granting bail to the accused, against whom a charge sheet for offences under Sections 120-B and 302 of the IPC and Sections 3 and 25 of the Arms Act, 1959 had been filed. The accused was alleged to be a contract killer and a sharpshooter and had previously been prosecuted in fifteen cases for serious offences including murder, attempt to murder, and criminal conspiracy. The Court held that the High Court had granted bail to the accused on “very liberal terms, such as the execution of a personal bond to the satisfaction of the jail Authorities and the furnishing of sureties within a month of his release” and had “ignored the antecedents of the accused and the potential to repeat his acts by organising his criminal activities.” The appellant-wife submitted that the conduct of the accused during the trial of the case was one of non-cooperation, the accused’s henchmen had threatened witnesses, and that the conduct of the accused had impelled the Sessions court to direct the police to provide security in the court during the trial and provide security to the witnesses. It was further submitted that courts must be extremely careful in releasing history-sheeters who have been charged with serious offences and that the grant of bail in a routine manner to gangsters, had an adverse effect upon the law and order situation. The Supreme Court referred to several decisions which held the requirement to analyze the criminal antecedents of the accused prior to the grant of bail, and allowed the appeal and set aside the order of the High Court granting bail to the accused. [Key Words: Section 302 IPC, Arms Act 1959, UP Gangster and Anti-Social Activities (Prevention) Act 1986, Conspiracy, wrongful grant of bail, threat to witness][Coram: S. A. Bobde, CJI, A.S. Bopanna, J., V. Ramasubramanian, J.]

In Patan Jamal Vali v. The State of Andhra Pradesh the Division Bench of the High Court of Andhra Pradesh had affirmed the conviction of the appellant for offences punishable under Section 3(2)(v) of the Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act 1989 and Section 376(1) of the IPC and the appellant had been sentenced to life imprisonment. In appeal before the Supreme Court, it was contended that the ingredients of the offence under Section 3(2)(v) were not established. Before proceeding to analyze such submission, the Court recorded that it was unequivocally of the view that the offence under Section 376(1) had been proved beyond reasonable doubt. Thereafter, the Court considered the concept of “intersectionality”, as coined by Kimberly Crenshaw, in the context of crime against African-American women in the USA. The Court held that intersectionality is a form of “oppression [that] arises out of the combination of various oppressions which, together, produce something unique and distinct from any one form of discrimination standing alone...” The Court referred to Navtej Johar v. Union of India, (2018) 10 SCC 1 opining that the said judgment had applied the intersectional lens to Article 15(1) of the Constitution. Reference was also made to the Report of the Justice JS Verma Committee appointed in the aftermath of the Nirbhaya incident, noting how the discrimination caused by intersecting identities amplifies the violence against certain communities (gendered/religious/otherwise). The Court discussed the vulnerability of women and girls with disabilities as being the victims of crime, specifically sexual violence, and held that while changes in the law marked a significant step, much work still needs to be done in order to ensure that their fruits are realized by those for whose benefit they were brought, and laid down several guidelines to make the criminal justice system more disabled-friendly. After a detailed discussion on Section 3(2)(v), the Court concluded that the offence was not committed “on the ground” that the prosecutrix belongs to a Scheduled Caste. The Court set aside the conviction of the appellant and the sentence imposed in respect for the offence under Section 3(2)(v) of the SC and ST Act. It, however, upheld the conviction for the offence under Section 376(1) of the Penal Code and the corresponding sentence of imprisonment for life. [Key Words: Rape, Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act 1989, intersectionality, disability and gender, caste][Coram: D.Y. Chandrachud, J., M.R. Shah, J.]

In Sandeep Khaitan, Resolution Professional For National Plywood Industries Ltd. v. JSVM Plywood Industries Ltd. & Anr., the Bench held that the High Court could not exercise its powers under Section 482, CrPC in such a manner that would go against the provisions of other statutes - Section 14 and 17 of the Insolvency and Bankruptcy Code 2016 in the present case. [Key Words: freezing of account, “to secure the ends of justice”] [Coram: U.U. Lalit, J., K.M. Joseph, J.]

In Ram Kishan v State of Rajasthan & Ors, the Court ruled that the finding of the High Court that the FIR was not registered immediately was unjustified, as the matter relating to that FIR was under investigation and it was not for the High Court to substitute its own opinion in this regard by holding that the FIR was filed as a counterblast and set aside the quashing of the FIR by the High Court. [Key Words: FIR, first information report, Final report under Section 173 CrPC ][Coram: S.A. Bobde, CJI, L. Nageswara Rao, J., Vineet Saran, J.]

In M/s Neeharika Infrastructure Pvt ltd v. State of Maharashtra and others, the Court ruled that the inherent powers of the High Court under Section 561 of the earlier CrPC cannot be exercised in regard to the matters specifically covered by the other provisions of the CrPC. However, some exceptions to this rule where it manifestly appears that there is a legal bar against the institution or continuance of proceedings, when the allegations in the FIR or complaint even if accepted, do not constitute the alleged offence, where there is no legal evidence adduced or where the adduced evidence clearly or manifestly fails to prove the charge. The Court also reiterated that while the Court would not thwart any investigation into cognizable offences, in cases where no cognizable offence is disclosed in the FIR, then the Court will not permit an investigation to go on. However, where the High Court passes such orders, it must disclose reasons why it has passed an ad-interim direction during the pendency of proceedings under Section 482, CrPC. Moreover, High Courts could not pass orders directing that the accused not be arrested or no coercive steps be taken while quashing the application under Section 482, CrPC or Article 226 of the Constitution. [Key Words: Art 226 Constitution, Section 482, 156 CrPC, Sections 406, 465, 420, 468, 471, 120B IPC, forgery and fabrication of Board Resolution, Economic Offences Wing, powers scope and ambit of High Court under Section 482 CrPC, ][Coram: D.Y. Chandrachud, J., M.R. Shah, J., Sanjiv Khanna, J.]

In Sudesh Kedia v. Union of India, the Supreme Court ruled that for grant of bail under Section 43(5)D of the UA(P) Act, the Court must apply its mind to examine the entire material on record for satisfying itself whether a prima facie case is made out against the accused. On facts, the Court ruled that payment of extortion money would not amount to terror funding and merely because the accused paid extortion money and met the members of the terror organization, a case of conspiracy would not be made out. [Key Words: Sections 120B, 414, 384, 386, 387 IPC, Sections 17, 18, 21 of the Unlawful Activities (Prevention) Act 1967, Sections 25(1B)(a)/26/35 Arms Act, Section 17(1)(2) Criminal Law Amendment Act, application for bail, Section 164 CrPC, Supplementary charge sheet, National Investigation Agency v. Zahoor Ahmad Shah Watali (2019) 5 SCC 1, ][Coram: L. Nageswara Rao, J., S. Ravindra Bhat, J.]

In M Sampat v. The State of Chhatisgarh, an appeal was filed against a judgment of the High Court upholding the conviction of the appellant under Section 20(b)(ii)(c) of the NDPS Act 1985. The Court held that where three tons of ganja were being carried on the truck, and the appellant, a helper/conductor travelling on the truck was unaware of ganja being carried on the truck. However, as the appellant filed a jail petition showing his poor financial condition, as he was a helper with a meager salary and as he could not have had any say with regard to the articles loaded in the truck, reduced the sentence of imprisonment to the period already undergone, which had exceeded the minimum sentence of 10 years. [Key Words: Narcotic Drugs and Psychotropic Substances Act 1985, ganja, cannabis][Coram: Indira Banerjee, J., Krishna Murari, J.]

In Ramesh Bhavan Rathod v. Vishanbhai Hirabhai Makwana (Koli) & Anr. arose from orders of the Gujarat High Court granting bail, under Section 439 CrPC, 1973 to six persons who had been implicated in five homicidal deaths. The Court noted that the order of the High Court was conspicuous in the absence of any elaboration of the serious nature and gravity of the offence. It held that in Ram Govind Upadhyay (2002) 3 SCC 598, the nature of the offence was recorded as “one of the basic considerations” which has a bearing on the grant or denial of bail. It further relied on Neeru Yadav (2014) 16 SCC 508 to hold that while applying the principle of parity, the High Court cannot exercise its powers in a capricious manner and has to consider the totality of circumstances before granting bail. Further, merely observing that another accused who was granted bail was armed with a similar weapon is not sufficient to ascertain parity. In deciding the aspect of parity, the role attached to the accused, their position in relation to the incident and to the victims is of utmost importance. Since the High Court failed to apply these principles, the orders granting bail were held to be perverse, and accordingly, set aside. [Key Words: Regular Bail, Section 439 CrPC., non-application of mind, principle of parity, speaking order, nature and gravity of offence, relevant factors][Coram: D.Y. Chandrachud, J., M.R. Shah, J.]

In Kalabhai Hamirbai Kachhot v. State of Gujarat, the challenge was to the conviction by the Trial Court and its confirmation by the High Court of Gujarat for offences under Sections 302, 326, 324 and 34 of Indian Penal Code (IPC) and Section 135 of the Bombay Police Act. The appellant inter alia argued that there were major contradictions in the depositions of PWs 18 and 19 and that there was no head injury. Upon scrutiny of the evidence on record and the findings recorded by the trial court, the Court did not find any reason to interfere with the conviction. It was held by the Court that since there were only minor contradictions and omissions like not seizing the motorcycle and not seizing the gold chain of one of the victims, that by itself would not be a ground to discredit the testimony of key witnesses, whose say was consistent, natural, and trustworthy. [Key Words: Sections 302, 326, 324 and 34 of Indian Penal Code and Section 135 of the Bombay Police Act, minor contradictions, discrediting testimony of key witnesses] [Coram: L. Nageswara Rao, J., Vineet Saran, J.]

In Re. : Expeditious Trial of Cases under Section 138 of N.I. Act, 1881, a five-judge Bench of the Court was concerned with the large number of cases filed under Section 138 of the Negotiable Instruments Act, 1881 pending at various levels. The Court examined the reasons for delay in disposal of such cases, and, inter alia, directed as follows:

i. The High Courts are requested to issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 of the Act from summary trial to summons trial.

ii. Inquiry shall be conducted on receipt of complaints under Section 138 to arrive at sufficient grounds to proceed against the accused, when such accused resides beyond the territorial jurisdiction of the court.

iii. For the conduct of inquiry under Section 202 of the Code, evidence of witnesses on behalf of the complainant shall be permitted to be taken on affidavit. In suitable cases, the Magistrate can restrict the inquiry to the examination of documents without insisting for examination of witnesses.

iv. Suitable amendments were recommended to be made to the Act for provision of one trial against a person for multiple offences under Section 138 of the Act committed within a period of 12 months, notwithstanding the restriction in Section 219 of the Code.

v. The High Courts were requested to issue practice directions to the Trial Courts to treat service of summons in one complaint under Section 138 forming part of a transaction, as deemed service in respect of all the complaints filed before the same court relating to dishonour of cheques issued as part of the said transaction.

vi. Judgments of the Court in Adalat Prasad (2004) 7 SCC 338 and Subramanium Sethuraman (2004) 13 SCC 324 have interpreted the law correctly and there is no inherent power of Trial Courts to review or recall the issue of summons.

vii. Section 258 of the Code is not applicable to complaints under Section 138 of the Act and findings to the contrary in Meters and Instruments (2018) 1 SCC 560 do not lay down correct law.

[Key Words: Delay, Section 138 Negotiable Instruments Act, 1881, deemed service, inherent power, summons case, mediation] [Coram: S.A. Bobde, CJI, L. Nageswara Rao, J., B.R. Gavai, J., A.S. Bopanna, J., S. Ravindra Bhat, J.]

In Boota Singha and Ors. v. State of Haryana, the challenge was to the judgment passed by the High Court of Punjab & Haryana at Chandigarh dismissing the appeal filed by the appellants and affirming their conviction and sentence under Section 15 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (“NDPS Act”). It was argued by the appellants, inter alia, that the instant case would be governed by Section 42 and not Section 43 of the NDPS Act and since the provisions of Section 42 had not been complied with, the Appellants were entitled to be acquitted. Agreeing with the same, the Court set aside the judgment passed by the High Court by stating that evidence in the present case showed that the vehicle was a private vehicle belonging to one of the accused and was thus not a public conveyance. The Court relied on its judgment in Karnail Singh (2009) 8 SCC 539 and Jagraj Singh alias Hansa (2009) 8 SCC 539 to hold that total non-compliance of Section 42 was impermissible and thus acquitted the Appellants. [Key Words: Section 42 of NDPS Act, Section 43 of NDPS Act, private vehicle, acquittal, non-compliance of Section 42] [Coram: U.U. Lalit, J., K.M Joseph, J.]

Service Law

In Central Coalfields Limited through its Chairman and Managing Director & Ors. V. Smt Parden Oraon, the respondent sought the appointment of her son in the place of his father was missing since 2002 with the appellant and was rejected. Subsequently, she filed a writ before the High Court which was allowed and the company appealed to the Supreme Court. After the respondent’s husband went missing in 2002, he was dismissed from duty by the appellants for desertion of duty. The Court held that compassionate appointment may be granted only if the concerned authority examines the financial conditions of the family of the deceased and finds that but for the provision of employment, the family will not be able to meet the crisis. However, the Court rejected the reasons given by the company that there was a bar in the National Coal Wage Agreement for appointing the son of an employee who suffered civil death. However, the Court found that there was no financial crisis created immediately after the respondent’s husband went missing and as the application for compassionate appointment was filed more than 10 years after the husband went missing, there was no entitlement to compassionate appointment [Key Words: Operator, Helper Category (Category II), declaration of civil death, compassionate appointment][Coram: L. Nageswara Rao, J., S. Ravindra Bhat, J.]

In Puneet Sharma & Ors. v. Himachal Pradesh State Electricity Board Ltd. & Anr the question before the Court was whether an Engineering “degree” was a higher qualification than a diploma in the said discipline and, whether degree holders were eligible for appointment to the post of Junior Engineer (Electrical). Under the relevant recruitment rules the minimum essential qualification provided for recruitment to the said post was "matriculation with Diploma in Electrical/ Electronics/Electronics and Communication/ Computer Science from the recognized Institution/ Board/University duly recognized by the Central or State Government". The High Court held that the degree holders did not possess higher qualification which would meet the requirement of the qualifications specified in the rules and in the advertisement issued by the HP Staff Selection Commission. After considering several earlier decisions in which similar questions had arisen, the Supreme Court referred to the decision passed in Chief Manager, Punjab National Bank and Another v. Anit Kumar Das in which it had been observed that the qualifications applicable to posts for recruitment were a matter of discretion to be exercised by the employer, and the courts would be slow to interdict. It was held that in the present case the employer, HP State Electricity Board, submitted that it considers degree holders eligible for appointment to the post Accordingly, the Court held that the term “with” in the rules had to be read as conjunctive. Regarding the merits of the main question i.e. whether degree holders could apply for the post, the Court conclusively established that, in the absence of any rule specifically prohibiting candidates with higher qualifications, what the rule making authority undoubtedly had in mind was that degree holders could also compete for the position of JEs since the promotion rules from the post of JE to AE provided a quota of 5% for JEs who hold degrees before joining as Junior Engineers. Thus held, the appeal preferred by the degree holders was allowed. [Key Words: Recruitment, equivalency of degree with diplomat, prescribed minimum qualifications][Coram: U.U. Lalit, J., S. Ravindra Bhat, J.]

In State of Odisha and Ors. v. Kamalini Khilar and Anr., on facts, it was held that the failure to afford an opportunity to the respondent No. 1 to show cause as to why her services should not be terminated cannot be held to be fatal. This was held on the premise that the termination was not on account of any disciplinary proceedings, and therefore, no stigma was attached to the respondent No. 1. However, costs of Rs. 50,000 were granted by the Court to the Respondent in view of a delay of 247 days in filing of the SLP by the State. [Key Words: Termination, Show Cause Notice, Back Wages, Government Teachers, audi alteram partem, supernumerary post] [Coram: U.U. Lalit, J., K.M. Joseph, J.]

In Union of India v. RK Sharma and Ors., the question before the Court was to determine if the Government of India was justified in implementing the Modified Assured Career Progression Scheme (for short, ‘MACPS’) for civilian employees of the Central Government in Groups ‘A’, ‘B’, ‘C’, ‘D’ and officers in the All-India Services, Chairpersons, Members of the Regulatory Bodies (except the Reserve Bank of India) with effect from 01.09.2008 and not from 01.01.2006. The Court examined its judgments in Balbir Singh Turn &Anr. (2018) 11 SCC 99 and M.V Mohanan Nair (2020) 5 SCC 421 and held that since MACP was an incentive which was not part of the pay of an employee, the effective date for the implementation of allowances other than Pay and DA was from 01.09.2008. Allowing the Appeal, the Court further observed that the implementation of MACPS by granting financial upgradation only to the next grade pay in the pay band and not granting pay of the next promotional post w.e.f. 01.01.2006 would be detrimental to a large number of employees, particularly those who have retired. [Key Words: Modified Assured Career Progression Scheme (MACP), implementation of MACPS, incentive not part of pay, pay band, financial upgradation] [Coram: L. Nageswara Rao, J., Vineet Saran, J.]

IBC

In Ghanashyam Mishra and Sons Private Limited through the authorized signatory v. Edelweiss Asset Reconstruction Company Limited through the Director & Ors, the Court noted that a dominant object of the IBC is to revive the Corporate Debtor and make it a running concern. Relying on a catena of decisions, the Court reiterated that paramount importance is given to the commercial wisdom of the Committee of Creditors (CoC) and the scope of judicial review by the Adjudicating authority is limited under Section 31, IBC. Once approved by the Adjudicating Authority, the plan would be binding on the Corporate Debtor, its employees, other stakeholders. Where Section 7, IBC petitions were submitted to 16.08.2019 (date of amendment to Section 7, IBC), the Court held that the 2019 amendment was clarificatory in nature and thus the IBC would override other laws, even prior to the amendment in this context. Therefore, once the plan was approved by the adjudicating authority, all claims owed to the state/central government or any local authority, include tax authorities, which were not plan of the resolution plan would stand extinguished. [Key Words: binding nature of resolution plan once approved by adjudicating authority under Section 31(1) IBC, Bankruptcy Law Reforms Committee Report 2015, ][Coram: R.F. Nariman, J., B.R. Gavai, J., Hrishikesh Roy, J.]

In Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal & Anr. the question before the Court was whether the balance sheets of the corporate debtor would amount to an acknowledgment of debt due for the purposes of section 18 of the Limitation Act, 1963 (“Act”). Before the NCLAT, an appeal had been preferred against the order admitting the financial creditor’s application filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). The said appeal was heard by a three-member Bench, and it was observed that in a Full Bench judgment of NCLAT in V. Padmakumar v. Stresses Assets Stabilisation Fund, decided on 12.03.2020, a majority of four members held that entries in balance sheets would not amount to acknowledgement of debt for the purpose of extending limitation under Section 18 of the Limitation Act. After a preliminary hearing, the three-Member Bench passed an order doubting the correctness of the majority judgment of the Full Bench and referred the matter to the Acting Chairman of the NCLAT to constitute a Bench of coordinate strength to reconsider the judgment in V. Padmakumar. Vide the impugned judgment a five-Member Bench of the NCLAT refused to adjudicate the question referred, stating that the reference to the Bench was itself incompetent against which the appeal to the Supreme Court had been preferred. The Court referred to Report of the Insolvency Law Committee of March, 2018, which led to the introduction of Section 238A to the IBC and held that it was clear that the application of the IBC should not result in the resurrection of time-barred debts. The Court held that the issue whether section 18 of the Act would be applicable to proceedings under the IBC was no longer res integra in light of the Court’s recent judgments in Sesh Nath Singh v. Baidyabati Sheoraphuli Co-operative Bank Ltd., Civil Appeal No. 9198 of 2019 (decided on 22.03.2021) and Laxmi Pat Surana v. Union Bank of India, Civil Appeal No. 2734 of 2020, a judgment delivered on 26.03.2021. On the issue of whether an entry made in a balance sheet of a corporate debtor would amount to an acknowledgement of liability under Section 18 of the Limitation Act, the Court referred to several of its earlier decisions and other judgments of the High Courts and held that filing of a balance sheet in accordance with the provisions of the Companies Act, 2013 is mandatory however, notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7) and the auditor’s report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet. The Court placed reliance on the judgment of the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 which laid down that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission and hence it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act. The Court concluded that the Full Bench decision of NCLAT in V. Padmakumar was contrary to a catena of judgments and the same was set aside. The impugned judgment was also set aside and the matter was remanded to NCLAT, along with the other connected appeals. [Key Words: Limitation, extension of period, acknowledgment of debt, statutory requirements of balance sheet, stare decisis, per incuriam, remanded to NCLT][Coram: R.F. Nariman, J., B.R. Gavai, J., Hrishikesh Roy, J.]

Constitutional Law

In M/s Utkal Suppliers v M/s Maa Kanak Durga Enterprises & Ors, the Supreme Court set aside the High Court’s decision in second-guessing the Labour Department’s authority to determine the requirement of a license under the Contract Labour Act. The Court ruled that in judicial review, only the manner in which a decision has made may be considered and not the decision itself. [Key Words: Tender Call Notice (TCN), Section 4 of the Orissa Contract Labour Act][Coram: R.F. Nariman, J., B.R. Gavai, J.]

In Kiran Devi v The Bihar State Sunni Wakf Board, the Supreme Court ruled that when a petition was filed against an order of the Wakf Tribunal before the High Court, the High Court exercises jurisdiction under Article 227 of the Constitution of India. In such a scenario, the High Court is restricted to only examine, the correctness, legality, or propriety of the findings of the Tribunal. Further, even if the petition is styled as one under Article 226, it would not bar the High Court from exercising jurisdiction under Article 227. The Supreme Court further ruled that where a male member takes premises on rent, he is tenant in individual capacity and in the absence of evidence, it cannot be assumed that he is doing so as the Karta of a Hindu Undivided Family. Such a presumption cannot be raised merely because of payment of rent by the grandfather or great grandfather of the male member. [Key Words: Sections 83, 83(9), 85 and 85A of Wakf Act 1995][Coram: Ashok Bhushan, J., S. Abdul Nazeer, J., Hemant Gupta, J.]

In Lok Prahari Through its General Secretary S.N. Shukla IAS (Retd.) v. Union of India, the Court was concerned with the possibility of recourse to Article 224A of the Constitution of India for the appointment of ad hoc judges to the higher judiciary in order to deal with the issue of backlog of cases. The Court held that Article 224A ought to be invoked and laid certain guidelines for such invocation, including as follows:

i. The trigger point for activation could be if the vacancies are more than 20% of the sanctioned strength, or if cases in a particular category are pending for over five years, or if more than 10% of the pending cases are over 5 years old, etc.

ii. If recommendations have not been made for more than 20% of the regular vacancies, then the trigger for recourse to Article 224A would not arise.

iii. The procedure prescribed in para 24 of the MoP ought to be adopted.

iv. Ideally, a Chief Justice should start the process three months in advance for such appointment.

v. Generally, the tenure should be for a period of two to three years in order to give an element of certainty.

vi. Ad hoc judges should be in the range of two to five in a High Court. Such ad hoc Judges shall not be a part of the sanctioned strength of the High Court.

vii. The objective of appointment shall be subserved by generally assigning more than five year old cases to the ad hoc judges.

viii. The emoluments and allowances of an ad hoc Judge should be at par with a permanent Judge of that Court minus the pension. [Key Words: Ad hoc judges, retired judges, backlog of cases, continuous mandamus, MoP, vacancies] [Coram: S.A. Bobde, CJI, S.K. Kaul, J., Surya Kant, J.]

Taxation

In M/s Radha Krishan Industries v. State of Himachal Pradesh & Ors., the issue, inter alia, was whether the provisional attachment ordered under Section 83 of the Himachal Pradesh Goods and Service Tax Act (HPGST) 2007 could be challenged in a writ petition under Article 226. Relying upon Whirlpool Corporation (1998) 8 SCC 1 and Harbanslal Sahnia (2003) 2 SCC 107, it was reiterated that existence of an alternative remedy by itself does not divest the High Court of its powers under Article 226, and that the rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion. Further, it was held that the power for ordering a provisional attachment must be preceded by the formulation of an opinion by the Commissioner, on the basis of tangible material, that it is necessary so to do for the purpose of protecting the interest of the government revenue. On the question of legality of the provisional attachment order, the same was held to be ultra vires Section 83 of the HPGST Act since no proceedings were pending against the appellant itself (i.e., against the person whose property is to be attached), as was the requirement under Section 83. [Key Words: Maintainability of Writ Petition under Article 226, alternative remedy, reason to believe, reason to believe, opinion, tangible material, provisional attachment, taxable person][Coram: D.Y. Chandrachud, J., M.R. Shah, J.]

In Commissioner of Income Tax-1 v. M/s Reliance Energy Limited, the issue before the Court was in reference to the amount of deduction that could be allowed under Section 80-IA of the Income Tax Act 1961. The Assessing Officer had stated that the amount of deduction should be limited to the business income of the respondent and thus limited the aggregate deductions under Section 80-IA of the Act while the respondent contended that the deduction under Section 80-IA should be allowed to the extent of their entire gross total income. The Court upheld the judgment of the Appellate Authority and stated there is no limitation on deduction admissible under Section 80-IA of the Act to income under the head ‘business’ only. The Court also relied upon its judgments in Synco Industries Ltd (2008) 4 SCC 22 and Canara Workshops (P) Ltd (1986) 3 SCC 538 to hold that the scope of Section 80-IA (5) cannot be read as a limitation of deduction to only ‘business income’ and its true scope for determining the quantum of deduction under Section 80-IA (1) of the Act is by treating all eligible business as the only source of income. [Key Words: Section 80 IA Income Tax Act 1961, deductions, business income, gross total income, quantum of deduction] [Coram: L. Nageswara Rao, J., Vineet Saran, J.]

In Deputy Commissioner of Income Tax & Anr. v. M/s. Pepsi Foods Ltd. (now Pepsico India Holdings Pvt. Ltd.), the Court was asked to determine the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act 1961. The Bench observed that the third proviso was arbitrary inasmuch as it did not differentiate between assessees who were responsible for the delay in disposal of their appeals and assessees who were not responsible. Furthermore, while the vacation of the stay was mandatory, it was only directory upon the Appellate Tribunal to decide the appeal in a time-bound manner. The Bench reiterated that “…challenges to tax statutes made under Article 14 of the Constitution of India can be on grounds relatable to discrimination as well as grounds relatable to manifest arbitrariness” and that the grounds may procedural or substantive in nature. The Bench read down the provision and held:

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

[Key Words: stay, discretionary remedy, Income Tax Officer v. M.K. Mohammed Kunhi (1969) 2 SCR 65, speedy disposal of appeals] [Coram: R.F. Nariman, J., B.R. Gavai, J., Hrishikesh Roy, J.]

Insurance Law

In Iffco Tokio General Insurance Company Ltd. v. Pearl Beverages Ltd., the issue was whether the Insurance company was entitled to invoke the shield of clause (2c) of the Contract of Insurance, under which, it was not liable, if the person driving the vehicle, was under the influence of intoxicating liquor, or drugs. Whereas the State Commission rejected the claim of the respondent, the NCDRC allowed it. Even though the Court found no evidence as to the exact nature and quantity of the alcohol consumed by the driver of the car, it relied upon the contents of the FIR and the MLC report which clearly stated that the driver smelt of alcohol. The Court analysed the English and American case law on the subject and particularly as to whether mere presence of alcohol in the body would suffice to attract the exclusion clause, or such presence of alcohol must lead to the person ‘acting under the influence of alcohol’. It was held that the case set up by the respondent that the person driving the car had not consumed alcohol, was clearly false, and that there was no explanation for the accident, other than that it occurred because the Respondent was driving under the influence of alcohol. Accordingly, the judgment of the NCDRC was set aside, and the exclusion clause was held to be applicable in the facts of the case. [Key Words: Insurance company, repudiation of claim, acting under the influence of intoxicating liquor, NCDRC, exclusion clause, Motor Vehicles Act, 1988, res ipsa loquitur, MLC, FIR] [Coram: U.U. Lalit, J., Indira Banerjee, J., K.M. Joseph, J.]

Land Laws

In M/s Acquainted Realtors LLP v. State of Haryana and Ors, the challenge was to the judgment and order dated 01.06.2018 passed by the High Court of Punjab and Haryana and the question before the Court was to consider whether the landholders are entitled to any enhancement in compensation. The Court relied inter alia relied on its judgment in General Manager, Oil and Natural Gas Corporation Limited (2008) 14 SCC 745 and after taking into account the totality of the circumstances, held that the landholders were entitled to 8% flat increase over the market value assessed in respect of lands from villages, which were found to be comparable. [Key Words: enhancement of compensation, increase in market value, proximity to highway, comparable villages, sale deeds ] [Coram: U.U. Lalit, J., Vineet Saran, J.]

In Ved and Anr. v. State of Haryana and Anr., the challenge arose from the Judgment and Order dated 25.05.2018 passed by the High Court of Punjab and Haryana where only some villages were acquired at an enhanced rate inter alia due to their proximity to the highway and while some others were not. The question before the court was to consider if the landholders were entitled to any enhancement in compensation. Dismissing the appeal, the Court held that the High Court had rightly arrived at the market value of the land with reference to its decision in Madan Pal III 2018 SCC Online P & H 2871 and on the basis of two Sale Deeds that had been filed. The Court further held that the adoption of the method of annual increase over the values determined in connection with acquisition was not possible in light of the law laid down in General Manager, Oil and Natural Gas Corporation Limited (2008) 14 SCC 745. [Key Words: enhancement of compensation, land acquisition, method of annual increase, market value, sale deeds, proximity to the highway] [Coram: U.U. Lalit, J., Vineet Saran, J.]

Miscellaneous

In Justice V. Eswaraiah (Retd.) v. Union of India and Ors, the challenge was to the order passed by the High Court in a PIL filed before it, directing an enquiry to find out the authenticity and genuineness of a conversation between the Petitioner and a suspended District Munsif Magistrate of Andhra Pradesh, dated 20.07.2020, which was submitted in a pen drive before the Court. The petitioner provided a corrected transcript of the talk contained in the pen drive but stated that he could not authenticate the conversation contained in the pen drive. It was argued by the petitioner, inter alia, that there was no need to hold any enquiry since the transcript had already been filed. The Court agreed with the same and allowed the Petition by stating that the High Court ought not to have embarked on any other enquiry in the matter except as to the maintainability of the PIL before it. [Key Words: authenticity and genuineness of pen drive, corrected transcript, enquiry, maintainability of PIL] [Coram: Ashok Bhushan , J., R. Subhash Reddy, J.]

Contract Law

In AR Madana Gopal etc v. M/s Ramnath Publications Pvt Ltd, the Court ruled that mere fixation of time within which the contract was to be performed does not make the stipulation as to time being of the essence of the contract. Further, a suit for specific performance could not be dismissed on the sole ground of delay or laches. However, an exception would be where immovable property is to be sold within a time, where time is of the essence and it is not found that owing to some default of the plaintiff, the sale could not take place within the stipulated time.

[Key Words: Decree for specific performance, injunction restraining alienation or encumbrance of suit property, State of Bihar v Tata Iron (2019) 7 SCC 99, Anglo American Metallurgical Coal Pty Ltd v MMTC Ltd 2020 SCC OnLine SC 1030, ][Coram: L. Nageswara Rao, J., S. Ravindra Bhat, J.]

CPC, Specific Relief, Evidence, and Registration

In Rahul S Shah v. Jinendra Kumar Gandhi & Ors., the Bench lamented that as far as back in 1872 did the Privy Council remark in The General Manager of the Raja Durbhunga v. Maharaja Coomar Ramaput Sing (1871-1872) MIA 605 which observed that the actual difficulties of a litigant in India began when he has obtained a decree. Noting the dismal situation in India, the Bench issued a slew of directions to the High Courts in order to expedite the process of execution in the country. [Key Words: Order 1, Order 2, Order 10, Order 11, Order 27, Order 21 Rules 2, 11, 22 and 97, Order 22, Order 26, Order 40, Sections 35A, 47, 51, 60, 122, 151 CPC] [Coram: SA Bobde, J., L Nageswara Rao, J., S. Ravindra Bhat, J.]

In Sukhbir v. Ajit Singh, the Bench faced a situation where the plaintiff/Respondent had advanced monies to the defendant/appellant for an agreement to sell a parcel of land from which the latter resiled. The respondent instituted a suit, but before a decree could be passed, the land was acquired by the state. Unaware that the land had been acquired, the Trial Court issued a decree for specific performance. In appeal, the High Court agreed with the Trial Court on merits but modified the decree and held that “…the plaintiff shall be deemed to have stepped into the shoes of the defendant – original land owner and shall be entitled to the entire amount of compensation along with solatium and interest etc., owing to the acquisition of the land in question.” The Supreme Court upheld the judgment of the High Court. [Key Words: agreement to sell, Specific Relief Act 1963, alternative decree] [Coram: D.Y. Chandrachud, J., M.R. Shah, J.]

Commercial Law

In M/s. Oriental Structural Engineers Pvt. Ltd. v. State of Kerala, the Bench disagreed with the finding of the courts below inasmuch as they held the parties did not intend the element of interest to be awarded in case of a dispute since they did not put any figure in the “blank space provided for filling in the interest rate”. The Bench held that since the Agreement was silent on the rate of interest but provides for payment of interest on delayed payment, the Tribunal was justified in fixing the rate as per paragraph 43.1 of G.C. Roy. The Bench reduced the interest from LIBOR + 2% to 8% per annum. [Key Words: Disputes Review Board, London Interbank On-lending Rate, interest] [Coram: Surya Kant, J., Aniruddha Bose, J.]

Covid-19 Pandemic

In, Distribution of Essential Supplies and Services and Services During Pandemic, the Bench sought to address the outbreak of the second wave of the pandemic in the country, the Bench passed a lengthy 64-page order where is passed numerous directions with regard to oxygen, vaccination etc. [Key Words: Covid, pandemic, essential drugs, disaster management] [Coram: D.Y. Chandrachud, J., L. Nageswara Rao, J., S. Ravindra Bhat, J.]

Electricity

In Jharkhand State Electricity Board and Others v. M/s Ramkrishna Forging Limited, the Bench held that the appellant Board ought to have allowed the Respondent’s application for reduction of load as it was facing load shedding and tripping, all of which affected the expensive machines. The Bench held that the Board ought to have allowed the application under Regulation 9.3 under the Jharkhand State Electricity Regulatory Commission (Electricity Supply Code) Regulations 2005 as the same was beyond the period of three years from the date of execution of the agreement by which electricity connection was initially granted. Noting the power imbalance between the parties, the Bench observed that the appellant was a “…monopoly supplier of electricity which has laid down its own terms and conditions, regarding which the consumer has no say or choice but to sign on the dotted lines, if it wants of get electricity load varied for running its industry”. [Key Words: demand/sanctioned load, Electricity Act 2003, Jharkhand State Electricity Regulatory Commission (Electricity Supply Code) Regulations 2005] [Coram: L. Nageswara Rao, J., Vineet Saran, J.]

Winding Up

In Shital Fibers Ltd. v. Indian Acrylics Limited, the Bench reiterated that if the debt was bona fide disputed and the defence substantial, the Company Court would not wind up the Company. When the debt was undisputed, the court would not act upon the debtor’s plea that while it has the ability to pay off the debt, it chose not to. The principles guiding the exercise of the court’s discretion were (a) defence of the debtor was in good faith and had substance, (b) defence was likely to succeed in point of law, and (c) the debtor company adduced prima facie proof of the facts on which the defence depends. In the facts before it, the Bench disallowed the debtor company’s petition and held that for the purpose of deciding the petition, it was irrelevant that the debtor-company was profit-making. [Key Words: Section 433 and 434 of the Companies Act 1956] [Coram: R.F. Nariman, J., B.R. Gavai, J., Hrishikesh Roy, J.]

Education

In VIIT Pharmacy College & Anr. v. DR. A.P.J. Abdul Kalam Technical University & Anr. the Court directed the respondent University to grant affiliation to the petitioner colleges, and also permit the students of the petitioner colleges to participate in the special examinations to be organized, for the academic year 2020-21. The Court referred to its decision in Pharmacy Council of India v. Dr. S.K. Toshiwal Educational Trusts Vidarbha Institute of Pharmacy & Ors. in which the Court had held that “in the field of Pharmacy Education and more particularly so far as the recognition of degrees and diplomas of Pharmacy Education is concerned, the Pharmacy Act, 1948 shall prevail. The norms and regulations set by the PCI and other specified authorities under the Pharmacy Act would have to be followed by the concerned institutions imparting education for degrees and diplomas in Pharmacy.” In the present case, in light of (i) the fact that the PCI had granted approval to the petitioner colleges for intake of students; (ii) the petitions filed by the petitioners challenging the policy decision of the State Government had been allowed by the High Court, and; (iii) the State Government had issued a notification granting the petitioner colleges conditional affiliation after considering the recommendations made by the Affiliation Committee, the Court allowed the petitions. [Key Words: Education, affiliation of college, conditional affiliation, permission to conduct examinations][Coram: R.F. Nariman, B.R. Gavai, J., Hrishikesh Roy, J.]

Environment

In M.K. Ranjitsinh & Ors. v. Union of India & Ors. a public interest litigation was filed seeking to protect two species of birds, the Great Indian Bustard and the Lesser Florican were are on the verge of extinction. The petitioners sought directions against the States of Rajasthan and Gujarat to ensure predator proof fencing, controlled grazing in the enclosure development and to not to permit installation of overhead power lines and also not permit further construction of windmills and installation of solar infrastructure habitat identified by the Wildlife Institute of India (WI), and also a direction to install divertors for the powerlines which were currently installed. Relying on a 2018 WII Report, the Court noted that 1 lakh birds die due to collision with power lines annually. The Court also noted that under the Centrally Sponsored Integrated Development of Wildlife Habitats Scheme, 2009 provided that financial outlay was to be shared between the Central Government and States. The Court referred to Centre for Environmental Law, World Wide Fund–India v. Union of India & Ors., (2013) 8 SCC 234 to hold that a duty was cast on the Central Government to preserve endangered species. The Court noted that a balance between the concept of sustainable development and protection of rare species needs to be struck, and accordingly directed for bird divertors to be installed around power lines and for feasibility studies to be conducted to assess underground installation of future transmission lines. The Court opined that regarding the funds required for such underground installation, under the Compensatory Afforestation Fund Act, 2016 substantial funds were available with the National and State Authorities. With regard to the conservation of the habitat to secure the safety of the eggs laid by the birds the Court earmarked an area and directed the same to be fenced and protected from invasion by predators. The Court also directed for certain power lines running through priority conservation areas to be converted into underground lines. The Court concluded by directing that in all such cases where it is found feasible to convert overhead cables into underground powerlines the same shall be undertaken and completed within a period of one year and till such time the divertors shall be hung from the existing powerlines, and ordered accordingly. [Key Words: public interest litigation, PIL, Wildlife Habitats Scheme 2009, Preservation, protection of nearly extinct species, electricity, undergrounding of transmission lines][Coram: S. A. Bobde, CJI, A.S. Bopanna, J., V. Ramasubramanian, J.]

Management of Temple

In Ramachnadrapura Math v. Sri Samsthana Mahabaleshwara Devaru & Ors. and connected Civil Appeals the petitioners were aggrieved by the order dated 10.08.2018 passed by the High Court of Karnataka regarding the status of the Gokarna Mahabaleshwara Temple. In 2003 a notification had been issued under section 23 of the Karnataka Hindu Religious Institutions and Charitable Endowments Act, 1997 notifying the temples mentioned therein as coming within the purview of the said Act, including the Gokarna Mahabaleshwara Temple. The petitioners, made a representation seeking that the temple be deleted from the notification since it was attached to their “Mutt” and was therefore not covered by the Act in view of Section 1(4) of the Act. By Government Order dated 12.08.2008 ‘Shri Mahabaleshwara Temple’, Gokarna was ordered to be deleted from the list of notified temples. Writ petitions were filed in the High Court by the devotees and representatives of the former trustees assailing the Government Order dated 12.08.2008, which upon detailed consideration by a Division Bench, quashed the Government Order dated 12.08.2008, as a result of which the temple continued to be a notified temple under the 1997 Act, and held that a determination was required to be made as to whether the temple belonged to the ‘Mutt’ by a competent Civil Court since disputed questions of fact cannot be decided in a writ petition. However as the validity of the 1997 Act was pending before the Supreme Court, the High Court constituted an “Overseeing Committee” which arrangement was to continue till the committee prescribed by the 1997 Act was constituted. Upon the petitioner’s request, the Division Bench of the High Court had stayed the implementation of the order for one month, following which the Supreme Court extended the benefit of the interim order granted by the High Court, and the petitioner continued to be in charge of the temple. After briefly highlighting various factual aspects which would require detailed consideration, the Supreme Court opined that till a final determination is made, the appropriate course in the interest of the temple as well as the devotees, as also the ‘Mutt’, would be to allow the administration of the temple by an independent committee. Since the validity of the 1997 Act was also pending in collateral proceedings, the Supreme Court modified the composition of the “Overseeing Committee” formed by the High Court and directed the Committee to function under the Chairmanship of Hon’ble Justice Sri. B.N. Srikrishna, Former Judge, Supreme Court of India. Accordingly, the appeals were admitted and notice was issued to the respondents. [Key Words: Temple management and administration, Gokarna Mahabaleshwara Temple, Karnataka Hindu Religious Institutions and Charitable Endowments Act 1997, Bombay Public Trust Act 1950, Prima Facie View, Final decisions, interim arrangement, overseeing committee] [Coram: S. A. Bobde, CJI, A.S. Bopanna & V. Ramasubramanian, JJ.]

About the authors: Subhro Prokas Mukherjee, Tanveer Oberoi and Sahil Tagotra are advocates practicing in Delhi. Abhinav Hansaraman works with a law firm in Bombay and the views expressed are personal.

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