Stay abreast with the latest developments in the professional domain along with in-depth analysis through the monthly BCA Journal. Get access to an engaging library of researched publications from the BCAS stable.
Learn MoreBCAJ Brieficles are short-format, web-only articles on contemporary topics of professional importance that are open-for-all to read & share.
Explore BrieficlesExplore past issues of BCA Journal & indulge in a treasure trove of high-quality professional content across format of print, videos & learning events from the BCAS stable.
Learn More
The Bill, proposes significant changes to the existing corporate law provisions. The Bill has 470 clauses as against 658 sections in the existing Companies Act, 1956.
The Rules shall come into force on the date of their publication in the Official Gazette.
The MCA has notified vide its Notification dated 16th December 2011 the respective regions under the 6 regional Directors and their headquarters.
Further, to ascertain whether a DIN holder needs to submit such details, the same can be done through the Quick Link on the MCA 21 homepage by entering the DIN no. and his PAN card.
2) Companies falling under the said Rules 2011 for the first time shall keep cost records and cost details, statements, schedules, etc. in good order for the next eight financial years beginning with first year of application of the said Rules.
3) To maintain the appointment of Cost Auditor under the rules as independent and at arm’s length, it is clarified that cost auditor(s) appointed u/s.233B(2) of the Companies Act, 1956 (whether for one or all of the company’s products covered under cost audit), shall not provide any other services to the company relating to
i) design and implementation of cost accounting system; or
ii) the maintenance of cost accounting records, or
iii) act as internal auditor, whether acting individually, or through the same firm or through other group firms where he or any partner has any common interest.
However it is clarified that cost auditors are allowed to certify the compliance report or provide any other services as may be assigned by the company, but which shall not include any of the services mentioned above.
The plaintiff was a minor and filed the suit through his grandfather. An application had been moved by the defendant before the Trial Court that the suit was not maintainable on the ground that it had not been filed through the next friend and, therefore, it was not maintainable under Order XXXII, Rule 2 of the Code of Civil Procedure.
The Court observed that the father was not alive though the mother was alive, but the suit had been filed through the grandfather. Under Order XXXII, Rule 2 of the Code of Civil Procedure, the word used is ‘next friend’. The ‘next friend’ is not confined to the natural guardian only. The Patna High Court in the case of Narain Singh v. Sapurna Kuer and Ors., AIR 1968 Pat. 318 had observed that a next friend can be any person, not necessarily any of the guardians enumerated in section 4 of the Hindu Minority and Guardianship Act, 1956. Therefore, the suit filed by the minor through grandfather cannot be said to be not maintainable.
On an application filed seeking disclosure of order sheets and note sheets of public authority relat-ing to matter of encroachment, the State Chief Information Commissioner had directed the Public Information Officer of the Raipur Development Authority to supply the information in the form of order sheets.
The petitioner filed the petition challenging the le-gality of the order. The Court observed that as far as clause 8(j) of the Act is concerned, it would not come in the way of disclosure of information of the nature, which has been directed by the Chief Information Commissioner. The exemption from disclosure of the information under clause 8(j) of the Act is in relation to those categories of information, which are personal, the disclosure of which has no relationship to any public activity or interest or which would cause unwarranted invasion of the privacy of the individual. The disclosure of order sheets and note sheets of a public authority with regard to various actions taken by it, cannot be said to be a matter relating to personal information of the petitioner, having no relation to any public activity or interest. Moreover, it cannot be said that the disclosure of note sheets of the public functionary with regard to whatsoever activity it has undertaken in its capacity as such, would cause unwarranted invasion of the privacy of the petitioner. In any case, such exemption is not absolute, because even assuming that the information is personal in nature, disclosure of such, would be permissible, if the Information Officer is satisfied that the larger public interest justifies the disclosure of such information. The Court held that the disclosure of the order sheets or note sheets of the Development Authority with regard to steps, if any, taken after the order of the Court, would not be in any manner, a matter relating to disclosure of personal information of the category as stated under clause 8(j) of the Act.
The Court further observed that as far as violation of section 11 of the Act is concerned, the contents of note sheets and order sheets maintained by public authority, cannot be said to be information supplied by a third party to the Public Information Officer as confidential. From the fact there was no material disclosed to the Court to show that any confidential information given by the petitioner to the Development Authority was sought to be disclosed under the order impugned. In the order, the Chief Information Commissioner had not directed the Public Information Officer to disclose any information disclosed by the petitioner and treated by the Development Authority as confidential. There was no information sought by the respondent which is of the nature as contemplated u/s.11 of the Act, though the order of the Chief Information Commissioner is merely confined to disclosure of order sheets and note sheets after the order of the Court.
The provisions of section 3 of the Act state that subject to the provisions of the Act, all citizens shall have the right to information. If the same is read along with section 6 of the Act, it would be clear that in order to seek dis-closure of information, an information seeker is neither required to disclose invasion of any of his rights, nor any legal injury much less state reasons as to why he is seeking such information. The right is only subject to the provisions of the Act. Therefore, whatever may be the motive of the respondent and whether or not, any of his rights are affected, there is an obligation to provide information by the Information Officer, which of course, would be subject to other provisions of the Act.
The instrument in question was a deed of gift dated 11 -2-2009 executed by one Ramesh Chand Lohia in favour of his grandson in respect of a property of Rs.61 lakh in value, as disclosed in the gift deed. However, on the objection of Sub-Registrar its value was enhanced to Rs.61 lakh for the purposes of stamp duty and on the said value stamp duty of Rs.4,27,100 was duly paid.
The matter was referred u/s.33/47-A of the (Indian) Stamp Act, 1899 for determination of the market value and the deficiency in payment of stamp duty was determined.
The said order was challenged and upheld in ap-peal. The important aspect involved in the petition was whether the authorities under the Act are competent u/s.47-A of the Act to determine the market value of the property referred to in the gift deed in question for the purposes of levy of stamp duty.
The Court observed that a gift deed is chargeable to stamp duty under Article 33 of Schedule 1-B of the Act. It provides that a gift is chargeable to stamp duty as a conveyance provided under Article 23 Clause (a) for a consideration equal to the value of the property.
In the said Article words used are ‘value of the property’ as distinguished from the ‘market value’, meaning thereby that for the purposes of determining stamp duty on a gift deed, market value is not required to be mentioned/determined. The disclosure of the value of the property in the gift is sufficient for the purposes of payment of stamp duty.
Thus, there is a clear departure in the language used in Article 33 of the Schedule 1-B of the Act and section 47-A of the Act. Section 47-A of the Act uses the expression in ‘market value’, whereas for levying stamp duty on a gift deed Article 33 of Schedule 1-B of the Act uses the expression ‘value of the property’.
The Legislature in its wisdom has differently used the words ‘value of the property’ and ‘market value’ in the Act. It is not without purpose. ‘Market value’ refers to the value of the property prevailing in the market on which the prospective purchaser is ready and willing to purchase and seller is ready and willing to sell the property in the ordinary course of business. Therefore, market value is a bilateral transaction depended upon the will of two persons. On the other hand, ‘value’ simply connotes the estimated monetary worth of the property in the eyes of the seller and is in the nature of a unilateral act.
Therefore, the market value is not at all relevant for levying stamp duty on a gift deed and the provisions of section 47-A of the Act does not come into play which necessitate determination of market value.
It was alleged that as per family personal law, daughters (respondent No. 1 and 2) had no right in ancestral property. It was alleged that daughters were claiming their rights illegally. Undisputedly, the appellants and respondents were members of one family and were legal representatives of de-ceased Shri Chhaganlal. The suit was dismissed.
The Court observed that the right which was be-ing claimed by the appellants was based on family customs. As per Clause (a) of s.s (1) of section 4 of the Hindu Succession Act, 1956 any text, rule or interpretation of Hindu Law or any custom or usage as part of that law in force immediately before commencement of this Act, shall cease to have effect with respect to any matter for which provision is made in that Act. After coming into force of the Hindu Succession Act, any custom or usage as part of that law prevailing in the family automatically ceased to have effect. Apart from this, the appellants had failed to establish any rule prevailing in the family, which denied rights of daughter in the ancestral property. In view of the above, the appeal was dismissed.
The complainant gave Rs.50,000 as friendly loan to the petitioner vide cheque dated 7-9-2004 for an amount of Rs.20,000 drawn on ICICI Bank, Dhanbad Branch and he gave Rs.30,000 in cash to the petitioner. It was further disclosed that the petitioner subsequently on 4-2-2005 issued a cheque of Rs.50,000 dated 4-1-2005 drawn on Bank of Baroda, Patna Branch. However, at the time of handing over the cheque, it was requested by the petitioner to present the same after a fortnight. As appears from the complaint-petition that in the meanwhile the petitioner was kidnapped and he was released after a week and as such the complainant kept the presentation of the cheque in abeyance. Subsequently, the petitioner periodically requested the complainant not to present the cheque. After confirmation given by the petitioner that there was sufficient amount in his account, the cheque was presented in Bank. However, on 16-7-2005, the cheque was returned to the complainant unpaid due to the reason of insufficient funds in account of the petitioner. The complainant again contacted the petitioner, who promised to deposit sufficient amount in his account by 25-7-2005. Accordingly, the complain-ant again produced the cheque on 26-7-2005 for its encashment, but the same again bounced back. The complainant received such intimation on 6-8-2005. The complainant further disclosed that on 25-8- 2005, the complainant got a legal notice issued to the petitioner and despite that the petitioner did not clear the due amount. The learned Sub- Divisional Judicial Magistrate, Patna, by its order dated 19-12- 2005, took cognizance of offence u/s.420 of the Indian Penal Code and section 138 of the Negotiable Instruments Act. The petitioner challenged the said order before the High Court, wherein the Court held that since the cheque itself was presented after expiry of six months from the date of issuance, section 138 of the Negotiable Instruments Act will not attract. The Magistrate committed an error in passing the impugned order of the cognizance moreso when the facts disclosed in the complaint-petition do not make a case for either application of section 420 of the Penal Code or section 138 of the Negotiable Instruments Act. The impugned order of cognizance was therefore quashed.
4 New plea —
Pure question of law can be raised at any time — Civil Procedure Code section
96.
[ Ashok Kumar Dulichand
Sharma v. Jethmal Motilal Jedia & Ors., AIR 2010 (NOC) 36 Bom.]
The plaintiff had filed a
suit for declaration that the sale deed executed in favour of the defendant No.
1 was void. The plaintiff had also prayed that the agreement of sale and the
power of attorney executed were null and void. The suit was dismissed. In appeal
before the Court, the appellant plaintiff contented that the registration of
sale deed is void, since the power of attorney itself was not registered as
contemplated by section 32 and section 33 of the Registration Act, 1908. The ld.
counsel for the respondent objected to such a plea being considered on two
counts. First, that such a plea is not raised in the Trial Court and second; had
such plea been raised in the Trial Court, the respondent would have shown that
his case falls in the proviso to section 33.
The Court held that the
first ground needs to be rejected because this was purely a question of law and
could be raised at any time and in any case. As far as the second ground is
concerned, such exemption is granted to a person executing power of attorney and
not to the person in whose favour it is executed. The plaintiff never claimed
such an exemption and was a fit person. Thus the person authorised must hold
registered power of attorney and if he does not hold registered power of
attorney, the registration at his instance is void. The registration of the sale
deed is, therefore, void.
3 Precedent
— Binding nature — Only ratio
decidendi of judgment which
constitutes binding precedent.
[Amar Kumar Mahto & Anr. v.
State of Bihar & Ors., AIR 2010 Patna 19]
A review application had
been filed by the petitioner for review of order of the learned Single Judge
passed even in absence of the learned counsel for the petitioner, writ
application of the
petitioner was dismissed on merits.
The petitioner relied upon
the decision of a Division Bench of this Court in the case of Kishori Prasad v.
State of Bihar, [reported in 2008(2) PLJR 458] and contended that when the
counsel for the petitioner was not present, the ordinary course open to the
learned Single Judge was either to postpone the hearing of the case or dismiss
it for want of prosecution. But in no circumstance could the same be decided on
merits.
The respondents, in reply,
referred to a later decision of a Division Bench of this Court in the case of
Kedar Nath Tripathi v. The State of Bihar, [reported in 2008(3) PLJR 470]. He
submitted that the later Division Bench in the case of Kedar Nath Tripathi
(supra) considered the decision of the earlier Division Bench in the case of
Kishori Prasad (supra), and explained the same as not laying down correct
proposition of law.
The Court observed that the
doctrines of ‘binding precedent’ and ‘per incurium’ are deeply embedded
in the judicial system and have been discussed and explained in long series of
judicial pronouncements of English Courts as well as the Supreme Court and the
different High Courts of this country.
Doctrines of ‘decision
per incuriam’ and ‘decision sub silentio’ are exceptions to the fundamental
rules of administration of justice, which require certainty in law and
consistency in judicial decisions for the system to work efficiently and in the
interest of society. Hence, the doctrine of binding precedent was evolved by the
English Courts, laying down that judicial propriety and decorum demand the same
to be followed by the Judges as a rule to ensure uniformity in law and judicial
decisions, unless certain exceptional circumstances are held to exist. Thus,
judicial discipline requires a Co-ordinate Bench to follow the judgment of an
earlier Co-ordinate Bench rendered on the issues of law for general application.
That is why in absence of a law laid down or interpreted by the Apex Court under
Article 141 for universal application, the law laid down by one High Court on
the same issue also has a persuasive value for the other Courts in the country.
This indispensable foundation for dispensation of justice has been evolved to
provide at least some degree of certainty upon which individuals can rely in the
conduct of their affairs, as well as a basis for orderly development of legal
rules and to avoid, to the maximum, uncertainty and confusion in the application
of law in the process of healthy development of social fabric. But it is not
that the whole judgment and all observations and findings therein are to be
taken as binding precedent by a subsequent Co-ordinate Bench. It is only the ‘ratio
decidendi’ of the judgment which constitutes a binding precedent.
The ‘obiter dicta’ of
a Judge has also no precedential value. It is only a considered enunciation of
law by the Judge on points arising or raised in the case directly, which has a
precedential value, and not the unnecessary statements or opinion, out of
context, made beyond the occasion, unnecessary for the purpose at hand or made
by way of passing remark.
Decisions rendered ‘per
incuriam’ also fall outside the category of binding precedent. Hence
decisions, contrary to the provisions of the Act or patently erroneous are not
to be treated as binding precedent. ‘Incuria’ literally means ‘carelessness’ and
‘per incuriam’ are those decisions rendered in ignorance of some clear statutory
provision or in ignorance of some law laid down by the Apex Court or a clear
decision of a Co-ordinate or Larger Bench of the same Court on the question of
law of universal
application.
But merely a different
opinion or a possible different interpretation of law cannot be a ground to hold
an earlier decision of a Co-ordinate Bench as rendered ‘per incuriam’ or ‘sub
silentio’ or not a binding precedent.
Thus, it is only a decision,
rendered contrary to law, statutory or Judge-made, or a binding precedent, or an
obligatory authority, and patently erroneous, is ‘per incuriam’. In the
circumstances, the Court found that there was no merit in the review
application.
5 Retracted confession : No reliance can be
placed on the retracted statement, unless the same was corroborated
substantially in material particulars by some independent evidence : FERA,
1973.
Search action was undertaken at the office
premises of the appellant on 25-10-1994. He was detained for next two
succeeding days where he allegedly made two statements before the authorities
under the Act. He is stated to have confessed that he was responsible for
remittance of the foreign exchange.
On 28-10-1994, he was produced before the Chief
Metropolitan Magistrate, Bombay (CMM). Before the CMM he filed an application
retracting his confession. Thereafter the respondent initiated proceeding
u/s.8(3) of the Act. The appellant contended that no reliance should be placed
on the retracted confession statement unless the same was corroborated
substantially in material particulars by some independent evidence.
The authority on the basis of the confession
imposed a consolidated penalty of Rs.10 lacs. The Appellate Tribunal dismissed
the appeal and held that the onus of proof was on the appellant that the
confession was obtained from him by threat, coercion or force. On further
appeal the High Court upheld that finding of the Tribunal.
On further appeal to the Supreme Court, the Court
observed that indisputably, a confession made by an accused would come within
the purview of S. 24 of the Indian Evidence Act, 1872. The FERA Act is a
special Act, which confers various powers upon the authorities prescribed
therein. Even the salutary principles of mens rea and actus reus
in a proceeding under the Act may not be held to be applicable. It was now a
well-settled principle that presumption of innocence as contained in Article
14(2) of the International Covenant on Civil and Political Rights is a human
right, although per se it may not be treated to be a fundamental right
within the meaning of Article 21 of the Constitution of India.
It was a trite law that evidences brought on
record by way of confession which stood retracted must be substantially
corroborated by other independent and cogent evidences, which would lend
adequate assurance to the Court that it may seek to rely thereupon. In some of
the cases retracted confession has been used as a piece of corroborative
evidence and not as the evidence on the basis whereof alone a judgment of
conviction and sentence has been recorded.
A person accused of commission of an offence is
not expected to prove to the hilt that the confession had been obtained from
him by any inducement, threat or promise by a person in authority. The burden
is on the prosecution to show that the confession is voluntary in nature and
not obtained as an outcome of threat, etc. if the same is to be relied upon
solely for the purpose of securing a conviction. With a view to arrive at a
finding as regards the voluntary nature of a statement or otherwise of a
confession which has since been retracted, the Court must bear in mind the
attending circumstances which would include the time of retraction, the nature
thereof, the manner in which such retraction has been made and other relevant
factors. Law does not say that the accused has to prove that retraction of
confession made by him was because of threat, coercion, etc., but the
requirement is that it may appear to the Court as such.
In the instant case, the Investigating Officers
did not examine themselves. The authorities under the Act as also the Tribunal
did not arrive at a finding upon application of their mind to the retraction
and rejected the same upon assigning cogent and valid reasons therefor.
Whereas mere retraction of a confession may not be sufficient to make the
confessional statement irrelevant for the purpose of a proceeding in a
criminal case or a quasi-criminal case, but there cannot be any doubt
whatsoever that the Court is obligated to take into consideration the pros and
cons of both the confession and retraction made by the accused. It is one
thing to say that a retracted confession is used as a corroborative piece of
evidence to record a finding of guilt, but it is another thing to say that
such a finding is arrived at only on the basis of such confession although
retracted at a later stage.
The Court further observed that the appellant was
arrested on 27-10-1994; he was produced before the learned Chief Metropolitan
Magistrate on 28-101994. He retracted his confession and categorically stated
the manner in which such confession was purported to have been obtained.
According to him, he had no connection with any alleged import transactions,
opening of bank accounts, or floating of company export control, bill of entry
and other documents or alleged remittances. He stated that confessions were
not only untrue, but also involuntary.
The allegation that he was detained in the Office of
Enforcement Department for two days and two nights had not been refuted. No
attempt was made to controvert the statements made by the appellant in his
application filed on 28-10-1994 before the learned Chief Metropolitan
Magistrate. Furthermore, the Tribunal as also the authorities misdirected
themselves in law insofar as they failed to pose unto themselves a correct
question. The Tribunal proceeded on the basis that issuance and services of a
show-cause notice subserves the requirements of law only because by reason
thereof an opportunity was afforded to the proceedee to submit its
explanation. The Tribunal ought to have based its decision on applying the
correct principles of law. The statement made by the appellant before
the learned Chief Metropolitan
Magistrate was not a bald statement. The inference that burden of proof that
he had made those statements under threat and coercion was solely on the
proceedee does not rest on any legal principle. The question of the
appellant’s failure to discharge the burden would arise only when the burden
was on him. If the burden was on the Revenue, it was for it to prove the said
fact. The Tribunal on its independent examination of the factual matrix placed before it did not arrive at any finding that the confession being free from any threat, inducement or force could not attract the provisions of S. 24 of the Indian Evidence Act.
In view of the above the appeal was allowed.
[Vinod Solanki v. UOI & Anrs., Civil Appeal No. 7407 of 2008, dated 18-12-2008, Supreme Court. (source: itatonline.org), 2009 (233) ELT 157 (SC)
1 Liability
of legal heirs — Partner — Loan borrowed by firm on mortgage — Partnership Act
1932 section 18 and section 22.
[Smt. Bramaramba v. T.
Madhawarao & Co. & Ors., AIR 2010 (NOC) 244 (Mad.)]
Loan was borrowed by firm on
mortgage. Promissory note was executed by partners in name and on behalf of
firm. Partners admitted borrowing and execution of promissory note.
Subsequently, partnership dissolved on account of death of one of partners. The
Court held that remaining partners were personally liable to discharge the debt.
The estate of deceased partner also answerable to suit debt apart from mortgaged
property. However, legal heirs of deceased partner were not personally liable
for suit debt, but were entitled to share of balance amount of sale proceeds of
mortgaged property in auction. Amount due under promissory note, not binding on
legal heirs.
4 Public action : Bank has discretion to sell
property below reserve price : Security Interest (Enforcement) Rules 2002,
Rule 9.
In the instant case, the Bank invited bids for
sale of the house and as per the Bank it had received highest bid of Rs.50
lakhs and reserved price of the house has been fixed at Rs.60 lakhs by the
Bank. Question arose as to whether the Bank can sell the house in a price less
than the reserve price ? The Court held that as per proviso of Rule 9(2) no
sale under this rule shall be confirmed if the amount offered by sale price is
less than the reserve price, however, the proviso to the aforesaid Rule
further provides that if the authorised officer fails to obtain a price higher
than reserve price, he may with the consent of the borrower and the creditor
effect the sale at such price.
Question arose whether authorised officer is
bound to sell the immovable property with the consent of the borrower and
secured creditor, if he fails to obtain higher price than reserve price or it
is the discretion of the authorised officer to obtain the consent of the
borrower and secured creditor or without consent he can effect the sale at
lower than the reserve price. The Court held that as per the aforesaid Rule
the Bank is obliged not to auction sale the property below the reserve price.
However, in the aforesaid Rule the word ‘may’ in the facts of the case cannot
be interpreted as a mandatory dictate to the Bank not to sell the property
below the reserve price. When the word ‘may’ has been used in statute or rule
it cannot always be interpreted that it is a mandatory provision and in view
of the provisions of the aforesaid Rule the word ‘may’ cannot be construed as
mandatory, because the Act has been enacted to facilitate recovery of loan by
financial institutions. It may be possible that in certain circumstances, as
in the instant case, financial institution is not in a position to fetch or
receive the reserve price, hence it has a discretion to sell the property
below the reserve price of the property.
[Smt. Godawari Shridhar v. Union Bank of India
& Anr., AIR 2009 Madhya Pradesh 13]
[Farhd K. Wadia v. UOI & Others, Civil
Appeal No. 7131 of 2008 {Arising out of SLP (Civil) No. 22939 of 2004), dated
5-12-2008 Supreme Court}
(source : itatonline.org) 2009 (1) scale
293]
2 Hindu Marriage : A marriage under Hindu
Marriage Act, 1955 can be entered into by two Hindus : Hindu Marriage Act,
1955.
The issue involved in the instant case is as
under: Whether a marriage entered into by a Hindu with a Christian is valid
under the provisions of the Hindu Marriage Act, 1955 ?
The appellant, who is a Roman Catholic Christian
allegedly married the respondent, who is a Hindu, on 24-10-1996, in a temple
only by exchange of ‘Thali’ and in the absence of any representative from
either side. Subsequently, the marriage was registered on 2-11-1996 u/s.8 of
the Hindu Marriage Act, 1955.
Soon thereafter, on 13-3-1997, the
respondent-wife filed a petition before the Family Court u/s.12(1)(c) of 1955
Act, for a decree of nullity of the marriage entered into between the parties
on 24-10-1996 on the grounds mentioned in the said petition.
The main ground for declaring the marriage to be
a nullity was mainly misrepresentation by the appellant regarding his social
status and that he was a Hindu by religion, although it transpired after the
marriage that the appellant and his family members all professed the Christian
faith. The Family Court dismissed the said petition against which an appeal
was preferred by the respondent before the High Court, which allowed the
appeal by its judgment and order dated 12-9-2002 upon holding that the
marriage between a Hindu and a Christian under the 1955 Act is void ab
initio and that the marriage was, therefore, a nullity.
The appellant filed a Special Leave Petition out
of which the present appeal arises. The argument advanced on behalf of the
appellant, that the Hindu Marriage Act, 1955 does not preclude a Hindu from
marrying a person of some other faith.
The Court observed that there is no dispute that
at the time of the purported marriage between the appellant and the respondent
the appellant was a Christian and continues to be so, whereas the respondent
was a Hindu and continues to be so. There is also no dispute that the marriage
was alleged to have been performed under the Hindu Marriage Act, 1955, and was
also registered u/s.8 thereof.
The provisions of S. 5 of the 1955 Act which
prescribes the conditions for a Hindu marriage are as follows :
“A marriage may be solemnised between any two
Hindus, if the following conditions are fulfilled, namely : . . . .”
The Preamble to the Hindu Marriage Act, 1955,
reads as follows : “An Act to amend and codify the law relating
to marriage among Hindus.”
The Court observed that the Preamble itself
indicates that the Act was enacted to codify the law relating to marriage
amongst Hindus. S. 2 of the Act which deals with application of the Act, and
has been reproduced hereinabove, reinforces the said proposition.
S. 5 of the Act thereafter also makes it clear
that a marriage may be solemnised between any two Hindus if the conditions
contained in the said Section were fulfilled. The usage of the expression
‘may’ in the opening line of the Section, does not make the provision of S. 5
optional. On the other hand, it in positive terms, indicates that a marriage
can be solemnised between two Hindus if the conditions indicated were
fulfilled. In other words, in the event the conditions remain unfulfilled, a
marriage between two Hindus could not be solemnised. The expression ‘may’ used
in the opening words of
S. 5 was not directory, as has been sought to be
argued, but mandatory and non-fulfilment thereof would not permit a marriage
under the Act between two Hindus. S. 7 of the 1955 Act is to be read along
with S. 5 in that a Hindu marriage, as understood u/s.5, could be solemnised
according to the ceremonies indicated therein. Accordingly the appeal was
dismissed.
[Gullipilli Sowria Raj v. Bandaru Pavani,
Civil Appeal No. 2446 of 2005, dated 4-12-2008 Supreme Court. (Source :
itatonline.org) 2008 (16) SCALE 109]
3 Noise pollution : Silence is one of the
human rights as noise is injurious to human health : Violation of Articles 14
and 21 of the Constitution of India.
The question involved in the appeal was as under
: Whether musical functions in an open theatre being Rang Bhavan should be
allowed to be carried on or not despite the fact that it is situated within
100 meters of an educational institution and a hospital ?
Rang Bhavan is an institution owned and run by
the State of Maharashtra. It is the only open theatre in the city of Mumbai.
It is let out on hire for the purpose of holding music and cultural programmes.
It charges a meagre amount for allowing private parties to hold functions. It
has a sitting capacity of 4000 persons. It is stated that the world’s greatest
artists, both Western and Indian, have performed therein. Dr. Yeshwant Trimbak
Oke & Ors. filed a public interest litigation bearing PIL No. 2053 of 2003 for
a direction to the State to curb noise pollution in general in the city of
Mumbai and particularly during the festive season of Navratri and Ganesh Utsav.
An order was passed by a Division Bench of the Bombay High Court, directing
that no loudspeaker permission be granted in respect of ‘Silence Zone’ as
defined and discussed in the Noise Pollution (Regulation & Control) Rules,
2000, as amended from time to time.
While the said order was operating, the appellant
made an application to book Rang Bhavan from 13th to 15th August, 2004 in
regard to performance of Western Cultural Music. The said application was
rejected by the State by an order dated 2-6-2004.
The Directorate of Cultural Affairs in a letter
dated 9-7-2004 addressed to the Secretary, Power Productions, also informed
that in accordance with the High Court’s order no. 2503, dated 25-9-2003,
Rangbhavan, Dhobi Talao, Mumbai, the open-air theatre comes under the silence
zone and hence the use of loudspeakers has been banned.
Contending that the said Rang Bhavan had been
lying closed for the past few years and the directions issued by the High
Court are not in consonance with the rules governing noise pollution framed by
the State of Maharashtra, a writ petition was filed by the appellant herein.
The purported public interest litigation was filed by the appellant herein to
seek an exception to the earlier order of the Bombay High Court.
The Court observed that the High Court in the
earlier public interest litigation, being writ petition No. 2053 of 2003,
admittedly passed an order of injunction. If the said order was required to be
modified or clarified and/or relaxation was to be prayed for and granted in
regard to Rang Bhavan, the appellant should have filed an application in the
said proceeding. An independent public interest litigation to obtain a relief
which would be contrary to and inconsistent with the order of injunction
passed by the Court was not maintainable. Inter alia, the doctrine of
comity or amity demands the same.
Silence Zone is an area comprising not less than
100 metres around hospitals, educational institutions, courts, religious
places or any other area which is declared as such by the competent authority.
Thus contention of the appellant that the State
Government has not declared the said zone was an irrelevant point. The High
Court, while passing its interim order dated 25-9-2003, did not state that
silence zone was required to be declared, but passed the order of restraint in
respect of silence zone, as ‘defined and discussed in the Rules’. The parties
thereto and particularly the State of Maharashtra had understood the said
order in that light.
Interference by the Court in respect of noise
pollution is premised on the basis that a citizen has certain rights being
‘necessity of silence’, ‘necessity of sleep’, ‘process during sleep’ and
‘rest’, which are biological necessities and essential for health. Silence is
considered to be golden. It is considered to be one of the human rights as
noise is injurious to human health which is required to be preserved at any
cost.
As there was no merit in this appeal the petition
was dismissed.
[Farhd K. Wadia v. UOI & Others, Civil
Appeal No. 7131 of 2008 {Arising out of SLP (Civil) No. 22939 of 2004), dated
5-12-2008 Supreme Court}
(source : itatonline.org) 2009 (1) scale
293]
1 Co-operative Housing Society cannot be said to
be public authority : Right to Information Act, S. 2(h).
It is the case of the society that in the month of
Feb. 1970 it was registered under the Karnataka Co-operative Societies Act,
1959. The society is governed by bye-laws approved by the respondent. It is
contended that the society has not received any financial assistance from the
State Govt. and therefore the society cannot be a public authority within the
scope of the Act. But the respondent No. 2 Registrar of Cooperative Societies
has issued a notification dated 22-9-2005 to the effect that all co-operative
societies in the State are public authorities. When certain members sought for
information, the other members of the society opposed divulging information
pertaining to them. Therefore, the society rejected their request to furnish the
information on both counts. When the appeal was preferred to the Chairman of the
society, he wrote a letter to respondent No. 2 pointing out the provisions of
the Act. The Respondent No. 2 by his reply dated 30-10-2006 intimated the
Chairman of the society stating that u/s.2(h)(d) of the Act all co-operative
societies are public authorities. The respondent No. 1/Karnataka Information
Commission, on the basis of the notification dated 22-9-2005, by order dated
1-9-2006, directed the Registrar of Co-op. Societies to seek information from
the society and furnish the same to the applicant. The petitioner society
therefore filed writ under Article 226 of the Constitution of India before the
Court.
The Court observed that in the instant case the
petitioner/housing society is neither owned nor funded nor controlled by the
State. It is not the case of the State that the notification dated 22-9-2005 has
been issued u/s.2(h)(d) of the RTI Act. Solely on the basis of supervision and
control by the Registrar of Societies; and the definition of ‘public servant’ in
the Karnataka Co-op. Societies Act and in the Karnataka Lokayukta Act, 1984 a
society cannot be termed as ‘public authority’. So as to include a society
within the definition of the term ‘public authority’, it should fulfil the
conditions stipulated in sub-clause (d) of clause (h) of S. 2 of the RTI Act.
Therefore the petition was allowed holding that the petitioner-society was not a
public authority under the provision of the RTI Act, 2005.
[Dattaprasad Co-op. Hsg. Society Ltd., Bangalore
v. Karnataka State Chief Information Commissioner & Anr., AIR 2009 Karnataka
1.]
4 Surety’s liability : where liability of
principal debtor is extinguished, the surety’s liability gets automatically
terminated : contract act s. 128.
In the instant case, the suit against the principal debtor
was dismissed for default and decision became final. Therefore, under law, there
was no liability surviving against debtor for realisation of amount due to the
creditor.
The Andhra Pradesh High Court held that once the liability of
principal debtor was extinguished, the sureties’ liability gets automatically
terminated. Therefore, without making the principal debtor liable for payment of
amount to the creditor, the sureties cannot be made liable for recovery of the
amount.
A surety is a person who comes forward to pay the amount in
the event of the borrower failing to pay the amount, unless it is held by a
competent Court through a decree that he is not liable to pay the amount due to
the creditor and when he denies the liability, it becomes difficult for the
creditor to realise the amount. In the event of a decree in favour of the
creditor against the principal borrower, the wings of the decree can also be
extended against the sureties as their liability is co-extensive with the
principal debtor. Once there is a decree, the creditor is at liberty to proceed
either against the principal borrower or sureties, provided that the remedy of
the surety is available for recovery of the amount against the principal debtor
after payment of the amount to the creditor.
[M/s. Kurnool Chit Funds (P) Ltd. v. P. Narasimha &
Ors., AIR 2008 AP 38.]
5 Unfair trade practice by car manufacturer :
Consumer Protection Act. S. 2(1)(r) and S. 2(1)(g).
The consumer purchased a Mercedez Benz, a luxurious car :
There was one manufacturing defect pointed out, which required repeated repairs
after its purchase. It was held that the consumer was entitled to get
replacement or refund of purchase price of car. Non-replacement of vehicle would
tantamount to unfair trade practice.
[M/s. Controls & Switchgear Company Ltd. v. M/s. Daimler-Chrysler India
Pvt. Ltd. & Anr., AIR 2008 (NOC) 385 (NCC)]
3 Precedent : Constitution of India, Article
141.
Every decision contains three basic postulates : (a) findings
of material facts, direct and inferential. An inferential finding of facts is
the inference which the judge draws from the direct, or perceptible facts; (b)
statements of the principles of law applicable to the legal problems disclosed
by the facts; and (c) judgment based on the combined effect of the above. A
decision is an authority for what it actually decides What is of the essence in
a decision is its ratio and not every observation found therein, nor what flows
logically from the various observations made in the judgment. The enunciation of
the reason or principle on which a question before a Court has been decided is
alone binding as a precedent. Observations of Courts are neither to be read as
Euclid’s theorems, nor as provisions of the statute and that too taken out of
their context.
[Oriental Insurance Co. Ltd. v. Smt. Rajkumari & Ors.,
AIR 2008 SC 403]
1 Adoption : Law does not recognise an
adoption by a Hindu of any person other than a Hindu: Hindu Adoption &
Maintenance Act, 1956, S. 6.
The petitioner Kumar Sursen, who was then a minor had filed
the petition for grant of caste certificate and residential certificate on basis
that he was the adopted son of Kamal Prasad Roy and was residing with him at
village Madarpur in the district of Vaishali. The district authorities had
dismissed the petition, on the ground that the petitioner was in fact a Muslim
boy named Sahadat and is the natural son of Majid Mian and Ayesha Khatoon. The
petitioner’s case was that he was adopted by Kamal Prasad Roy. The said Kamal
Prasad Roy does not dispute the above fact. He, accordingly, wanted this boy to
have this caste and his residential certificates.
The Patna High Court held that under the Hindu Adoption and
Maintenance Act, 1956, S. 6 thereof permits adoption by a Hindu of a Hindu child
alone. Law does not recognise an adoption by a Hindu of any person other than a
Hindu. If that be so, the adoption, as sought to be done in respect of the
petitioner by Kamal Prasad Roy, has no legal sanctity, though it may be morally
binding between the parties. If that be so, then unfortunately the boy cannot
get the caste certificate of his alleged adoptive parents. Similarly, he cannot
get a residential certificate and both cannot be granted in his name showing him
son of Kamal Prasad Roy.
Writ application was dismissed, as such giving liberty to the
petitioner or his alleged adoptive parents to approach for grant of requisite
certificate.
[ Kumar Sursen v. State of Bihar & Ors., AIR 2008
Patna 24]
2 HUF recovery of loan : Karta of HUF can
enter into contract for mortgage of undivided share of his minor son for legal
necessity.
The undivided share of the appellant in the joint Hindu
family was mortgaged by his father as karta for family business and for legal
necessity. At the time of availing of the loan, the appellant was a minor. The
respondent bank filed the original application against five borrowers for
recovery of Rs.67 lakhs. The Debts Recovery Tribunal held in favour of the bank.
Thereafter, the bank proceeded to recover the due amount by putting to auction
the mortgaged property. The appellant preferred objections before the Recovery
Officer. Which were rejected by the Recovery Officer.
On appeal, the Debt Recovery Appellate Tribunal dismissed the
appeal, holding that the debt had not been raised by the appellant’s father as a
karta for his personal benefit and had not been taken for immoral or illegal
purposes. The loan and credit facilities were availed of by the appellant’s
father as karta of the joint Hindu family very much for legal necessity that is
family business. The appellant could challenge the mortgage with regard to his
share only on establishing that the mortgage had been created without legal
necessity or that it was tainted with illegaility or immorality. The mortgage
was binding on the appellant.
The property belonging to a joint family is ordinarily
managed by the father or other senior member for the time being of the family.
The manager of a joint Hindu family is called the karta. So long as the members
of a family remain undivided, the senior member of the family is entitled to
manage the family property. The karta or manager has the power to contract debts
for family purpose and family business. A joint Hindu family may have no
business at all, and yet debts may be contracted by the manager for a joint
family purpose. Such debts are binding on other members. Besides the power to
contract debts for the family business, the manager has the power of making
contracts, giving receipts and compromising or discharging claims ordinarily
incidental to the business. Indeed without a general power of that kind, it
would be impossible to carry on the business. The power of the manager of a
joint Hindu family to alienate the joint family property is analogous to that of
a manager for an infant heir. The manger of a joint Hindu family has the power
to alienate for value, joint Hindu family property, so as to bind the interest
of both adults and minors in the property, provided that the alienation is made
for legal necessity for the benefit of the estate.
[ Rajat Pangaria v. State Bank of Bikaner and Jaipur &
Ors., (2008) 141 Comp Cas 323 (DRAT) (Delhi)]
26 Advocate – Enrolment – Disqualification of persons above
the age of 45 years from being enrolled as Advocates – Not proper : Advocates
Act, section 24(1)(e)
M.R. Kondal vs Bar Council of India & Ors
AIR 2009 HP 85
Rule 3 of the Enrolment Rules of 2006, framed by the Bar
Council of Himachal Pradesh, disqualifies persons above the age of 45 years from
being enrolled as advocates.
The rationale for the said rule was that those who retire
from various government, quasi-government and other institutions may use their
past contacts to canvass for cases on being enrolled as advocates. If this were
to occur, the dignity and repute of the profession would be jeopardised.
The petitioner, at the time of filing the petition, was aged
52 years. In the year 1994, he joined the LL.B course and successfully completed
the same in the year 1997. He also obtained the LL.M. degree in September 2000.
The petitioner is aggrieved by Rule 3 of the Bar Council of Himachal Pradesh,
Advocates Enrolment Rules, 2006.
According to the petitioner, the State Bar Council has no
authority to put a condition of the maximum age as prescribed under the
aforesaid rules. It is also alleged that the criteria so laid down had no nexus
with the object sought to be achieved.
The Hon’ble Court observed that there was no specific
provision in section 7 of the Act, which enumerates the functions of the Bar
Council of India, empowering it to fix the maximum age beyond which entry into
the profession would be barred. The functions of the Bar Council of India
enumerated in section 7 also do not envisage laying down a stipulation
disqualifying persons otherwise qualified from entering the legal profession,
merely because they have completed the age of 45 years.
No material had been placed on record that there was any
material available with the State Bar Council to show that state government or
quasi government servants indulge in undesirable activities after entering the
profession. Therefore, the rule was discriminatory since it only debars those
persons from entering the profession who have completed 45 years of age; and
there was nothing to show what the criteria was for fixing the age limit of 45
years.
The rules which lay down that a person who has completed the
age of 45 years shall not be entitled to be enrolled as an advocate was struck
down as being void and unconstitutional.
30 Release deed — Exemption from payment of
stamp duty — Stamp Act Schedule 1
Article 55.
On perusal of Article 55, Schedule 1 of the Indian Stamp Act,
1899 if any person renounced his interest, share or part, then he may be
exempted from payment of stamp duty if the release is made of ancestral property
in favour of brother or sister or son or daughter or father or mother or nephew
or niece. The nature of the property has to be ancestral.
The nature of the property sought to be transferred to the
petitioner cannot be considered ancestral in nature, because the property has
been transferred to the petitioner by Smt. Santoshi who is real sister of
petitioner’s father. In such a situation, the nature of the property cannot be
considered to be ancestral, because the property has come to Smt. Santoshi, from
her sons by virtue of release deed. It was thereafter that his aunt Smt.
Santoshi executed another release deed bearing No. 1909 in favour of the
petitioner. The meaning of expression ‘nephew’ used in Article 55 of Schedule I
of the Act cannot be extended to the petitioner who is alien to the property in
the hands of Smt. Santoshi. Accordingly, the petitioner has not been able to
prove that the nature of the property is ancestral and therefore ad valorem
stamp duty as per the Act was leviable.
[ Harender Singh v. State of Haryana & Ors., AIR
2008 P & H 217]
31 Recovery of interest : Debtor cannot be
penalised with interest on amount that remained unpaid due to accounting
errors : Contract Act S. 72.
The petitioner-company was sanctioned a loan of Rs. 54 lakhs
for setting modern roller flour mill in 1987. On 24-5-2005 from the Branch
Office at Motihari of the respondent corporation from which loan had been
originally disbursed, the petitioner received statements of account showing a
total outstanding of Rs.6,12,361.70. The petitioner on the very same day paid
the entire amount and thereafter requested for being granted a non-dues
certificate. After two months, the petitioner was informed that after
meticulously recalculating the dues of the petitioner, it is found that an
amount of Rs.1,54,966.95 is still due and if the petitioner pays the same amount
by 31-8-2005, non-dues certificate would be issued. Correspondence was then
exchanged with the petitioner protesting that as per accounts furnished, the
total outstanding shown therein was paid by the petitioner, then, on what
account such huge dues were now projected against him. From the head office of
the corporation a letter was issued stating that there was mistake in charging
interest in the loan account in the initial stage. The Court observed that more
than a decade and a half back some accounting errors were committed by the
Corporation of small amount which all put together on recasting the account for
the 20 years with accrued interest was Rs.1.50 lacs. On such wrong accounting
the petitioner was now held liable to pay Rs.1,55,489.95. In other words, due to
Corpn. accounting mistake of about Rs.29,000 made more than a decade and a half
back the petitioner must suffer and pay over Rs.1.50 lakhs as compensation to
the Corpn. for Corporation’s own mistake.
The Court observed that under what law can the petitioner is
made to suffer for a mistake committed not by him but by the Corporation itself.
If such an action is permitted, the result would be that by such a delayed
action the Corporation would gain at expense of the entrepreneur for its own
mistake. Had the Corporation made the demand, the petitioner would have paid and
avoided the heavy interest burden which is sought to be enforced against him
now. This action is wholly arbitrary, unreasonable and unjust enrichment on the
part of the Corporation and cannot be permitted.
The Court relied on the Apex Court decision in the case of
Kusheshwar Prasad Singh v. The State of Bihar, 2007 AIR SCW 1911.
. . . . . It is settled principle of law that a man cannot
be permitted to take undue and unfair advantage of his own wrong to gain
favorable interpretation of law. It is sound principle that he should prevent
a thing from being done and shall not avail himself of the non-performance he
has occasioned. To put it differently ‘a wrongdoer ought not’ be permitted to
make a profit out of his own wrong . . . . . .
[ Radha Flour Mills P. Ltd. & Anr v. Bihar State Financial Corpn. & Ors.,
AIR 2009 Patna 12]
29 Precedent : Failure of Revenue to appeal
in the case of one assessee; not open to it to question decision in the case of
another assessee.
Where the Appellate authority allowed the appeals filed by
the assessee ‘A’ and ‘B’ holding the transactions exempt from tax and the
Appellate Tribunal dismissed the appeals filed by the State relating to those
two assessees by its common order dated March 26, 2003, thereby confirming the
order of the Appellate authority and the State aggrieved by the common order
filed writ petitions.
The Court observed that admittedly in respect of assessee B
the Dy. Commercial Tax Officer had passed a final order implementing the order
of the Asst. Commissioner confirmed by the Tribunal and had also ordered refund
to the assessee. If an earlier order is not appealed against by the Revenue and
had attained finality, it is not open to the Revenue to accept the judgment on
the same question in the case of one assessee and question its correctness in
the case of other assessee. Discrimination between two sets of assessees in
respect of a common order is not permissible. Therefore the writ petitions were
liable to be dismissed.
[State of Tamil Nadu v. Vaikundam Rubber Co. Ltd. & Anr.,
(2008) 18 VST 93 (Mad.)]
28 Bank guarantee : Bank guarantee given for
performance of particular contract cannot be encashed for alleged breach of
another contract : Contract Act S. 126.
A contract agreement was arrived at between the petitioner
and the respondents for maintenance of Abu Road-Deesa Section National Highway.
As per the contract, during the period when the contract was in operation, the
petitioner had submitted two bank guarantees.
There was no dispute pertaining to the contract of
maintenance pursuant to which the aforesaid both the bank guarantees were
tendered by the petitioner. But there was dispute between the respondents and
the petitioner pursuant to another contract for calculation of toll and
maintenance of Samakhyali-Gandhidham National Highway No. 8-A. The respondents
authority found that there is huge loss caused by the petitioner in the said
contract by not crediting the actual toll, etc. and therefore, it had involved
the bank guarantee submitted pursuant to the said contract, namely, Samakhali
Gandhidham National Highway and it also invoked the bank guarantee which is
subject matter of the present petition pertaining to Abu Road-Deesa National
Highway No. 14. Under these circumstances, the petitioner had approached the
Court by preferring the present petition.
The Court observed that had the bank guarantee been given in
its absolute term, irrespective of any contract whatsoever, it might stand on
different footing, but in the present case, it is an admitted position that the
bank guarantee was given by way of performance of contract for maintenance of
Abu Road-Deesa National Highway and it was not irrespective of any contract
between the petitioner and the respondent No. 1 authority. Therefore, the
contention raised on behalf of the respondent No. 1 cannot be accepted.
The impugned action of respondent No. 1 for encashing the
bank guarantee submitted for maintenance of Abu Road-Deesa Section National
Highway is quashed and set aside.
[ Jivanlal Joitaram Patel v. National Highways Authority
of India & Ors., AIR 2008 Gujarat 181]
27 FSI-TDR : FSI/TDR is benefit arising from
the land, consequently must be held as immovable property : Flats (Regulation of
the Promotion of Construction, Sale, Management and Transfer) Act, 1963.
The agreement under consideration is an agreement for
entrusting the work of development to a party with added rights to sell the
constructed portion to flat purchasers, who would be forming a Co-operative
Housing Society to which society, the owner of the land, is obliged to convey
the constructed portion as also the land beneath construction on account of
statutory requirements.
The Court observed that an immovable property under the
General Clauses Act, 1897 u/s.3(26) has been defined as under :
” (26). ‘immovable property’ shall include land, benefits
to arise out of land, and things attached to the earth, or permanently
fastened to anything attached to the earth.” If, therefore, any benefit arises
out of the land, then it is immovable property. Considering S. 10 of the
Specific Relief Act, such a benefit can be specifically enforced unless the
respondents establish that compensation in money would be an adequate relief.
Can FSI/TDR be said to be a benefit arising from the land ?
In Sikandar & Ors. v. Bahadur & Ors., XXVII Indian Law Reporter, 462, a
Division Bench of the Allahabad High Court held that right to collect market
dues upon a given piece of land is a benefit arising out of land within the
meaning of S. 3 of the Indian Registration Act, 1877. A lease, therefore, of
such right for a period of more than one year must be made by registered
instrument. A Division Bench of the Oudh High Court in Ram Jiawan and Anr. v.
Hanuman Prasad and Ors., AIR 1940 Oudh 409 also held that bazar dues
constitute a benefit arising out of the land and therefore a lease of bazar dues
is a lease of immovable property. A similar view has
been taken by another Division Bench of the Allahabad High Court in Smt.
Dropadi Devi v. Ram Das and Ors., AIR 1974 Allahabad 473 on a consideration
of S. 3(26) of General Clauses Act. From these judgments what appears is that a
benefit arising from the land is immovable property. FSI/TDR being a benefit
arising from the land, consequently must be held to be immovable property and an
agreement for use of TDR consequently can be specifically enforced, unless it is
established that compensation in money would be an adequate relief.
[Chheda Housing Development Corpn., a Partnership firm
v. Bibijan Shaikh Farid & Ors., 2007 (3) MHLJ 402 (Bom.).]
Dhapibai vs. Tejubai AIR 2013 MP 149
The defendant No.1 and 2 Tejubai and Supdibai are the real sisters of plaintiff No.1 Dhapubai. The property under dispute is the agriculture lands of late Bhilya father of Plaintiff No. 1 and defendant. As per allegations made, plaintiff No. 1 being the youngest daughter, after her marriage with the plaintiff No. 2, both continued to reside and live with Bhilya. The couple looked after Bhilya and managed his affairs including cultivation over the land in dispute. It was alleged that Bhilya died intestate in the year 2001, therefore his interest would devolve exclusively upon the plaintiffs as per custom and usage and not upon other surviving members of the family. It was further alleged that defendants were trying to interfere in the possession over the land in dispute therefore, the suit for permanent injunction.
Defendants denied the claim of plaintiffs that they exclusively succeeded to the Bhilyas interest in the agricultural land in dispute as per custom or usage. They also denied existence of any such usage and custom. They claimed that upon the death of Bhilya, his daughters jointly succeeded and each and equal share. They also filed a counter claim claiming 1/4th share in the land in dispute.
The Trial Judge, on due consideration of evidence found no merit and substance in the case set up by the plaintiffs. On the other hand, the trial court found that defendants were able to establish their counter claim, accordingly while dismissing plaintiffs suit, a partition decree was passed in favour of respondents.
The lower appellate court continued the dismissal of the suit while affirming the decree of partition passed in favour of respondents. Hence, the second appeal.
Referring to section 332 of Mulla’s Hindu Law (21st Edition), it was submitted that a member suing for partition is bound to bring into hotchpot all family property in order that there may be complete and final partition between coparceners. In this connection, it was submitted by the plaintiff that since the defendants did not include the residential house of Bhilya in their counter claim therefore, it was liable to be dismissed and courts below erred in allowing the counter claim. The submission ignores the fact that a partition may be partial either in respect of property or in respect of the person making it. It is open to the members of joint family to make a division and severance of interest in respect of a part of the joint estate section 325 of Mullas Hindu Law. The appeal was dismissed.
1. Maintenance of Accounts
1.1 New section 128 of the Companies act, 2013 (New Act) provides for books of accounts to be maintained by the company. This section is similar to the existing section 209 of the Companies Act, 1956. The new section provides that every company shall prepare and keep at its registered office and at its branches such books of account and other relevant papers as may be prescribed. The company can maintain such books and records in the electronic mode. It is clarified in the section that the books of account should be kept on accrual basis and according to the double entry system. The section also provides that the company shall retain the books of accounts with the relevant vouchers and relevant other financial records for a period of 8 financial years. Recently, the government has issued some Draft rules framed under the New Act for public comments. Draft rules 9.1 and 9.2 deal with procedure for maintenance of accounts by Companies.
1.2 It may be noted that for the first time new section 2(41) defines the term “Financial Year” to mean the period ending on 31st March of every year. Therefore, every company will now be required to maintain accounts from 1st April to 31st March which is the accounting year to be adopted for Income tax purpose. There is only one exception to this rule in the case of a holding company or subsidiary company incorporated outside India which is required to maintain its accounts for a financial year which is different from April to March. In such a case, different financial year can be adopted by getting approval of the National Company Law Tribunal (Tribunal). Further, if any existing company is adopting different financial year it will have to fall in line with the new provision within a period of two years from the date on which the new Companies Act comes into force.
2. Financial Statements
2.1 New Section 129 provides for preparation of financial statements.
The term ‘Financial Statement’ is defined in the new section 2(40) to include balance sheet, profit and loss account/income and expenditure account, cash flow statement, statement of changes in equity and any explanatory note annexed to the above. Section 2(40) has come into force from 12-09-2013. New section 129 corresponds to existing section 210. It provides that the financial statements shall give a true and fair view of the state of affairs of the company and shall comply with the accounting standards notified under new section 133. It is also provided that the financial statements shall be prepared in the form provided in new schedule III.
2.2 It may be noted that in the new schedule III the provisions for preparation of balance sheet and statement of profit and loss have been given which are on the same lines as in the existing schedule VI. Further, in the new Schedule III detailed instructions have been given for preparation of consolidated financial statements as consolidation of accounts of subsidiary companies is now made mandatory in section 129.
2.3 It may be noted that for the first time a provision has been made in the new section 129(3) that if a company has one or more subsidiaries it will have to prepare a consolidated financial statement of the company and of all the subsidiaries in the form provided in the new schedule III. The company has also to attach along with its financial statement, a separate statement containing the salient features of the financials of the subsidiary companies in such form as may be prescribed by the rules. It is also provided that if the company has interest in any associate company or a joint venture the accounts of that associate company as well as joint venture shall be consolidated. For this purpose “associate company” has been defined in new section 2(6) to mean a company in which the reporting company has significant influence i.e. it has control of atleast 20% of the total share capital of the company or has control on the business decisions under an agreement. The Central Government has power to exempt any class of companies from complying with any of the requirements of this section and the rules made under the section.
2.4 New section 136 provides for right of members to get copies ofaudited financial statements, auditors’ report, Board Report etc. at least 21 days before the date of AGM. In the case of a listed company it will be sufficient if a statement containing the salient features of such documents in the prescribed form is sent to the members at least 21 days before the AGM. Further, new section 137 provides for filing of the financial statement etc. with ROC. These provisions are similar to existing sections 219 and 220.
2.5 Draft Rules 9.3 and 9.4 provide for procedure to be followed and the Forms for compliance with Section 129.
3. Reopening of Accounts
3.1 New sections 130 and 131 provide for the manner in which a company can reopen or recast its books of account or financial statements. This is a new provision made in the company legislation for the first time. At present, the Government has taken the view that the accounts once adopted by the members of the company at the AGM cannot be reopened or recast.
3.2 New section 130 provides that if it is found that (i) the accounts for a particular year were prepared in a fraudulent manner or (ii) the affairs of the company were mismanaged during the relevant period casting a doubt on the reliability of financial statements, an application will have to be made by the Central Government, the Income tax Authorities, the SEBI, any other statutory regulatory body or authority or any concerned party to a competent Court or Tribunal. On receipt of the order of the Court/Tribunal the company will have to reopen its accounts or recast its financial statements in conformity with the order. The accounts so revised or recast shall be considered as final.
3.3 New section 131 provides for voluntary revision of financial statements or Director’s Report. Under this section, if it appears to the directors that (i) financial statement or (ii) report of the Board of Directors for a particular financial year does not comply with the provisions of the new sections 129 or 134, they can revise the financial statement or director’s report in respect of any of the three preceding financial years. For this purpose the directors have make an application to the Tribunal in the prescribed manner and obtain its order. Before giving such an order the Tribunal has to give notice of hearing to the Central Government and the Income tax Authorities. It is also provided that such revised financial statement or report of directors shall not be prepared more than once in any financial years. Further, detailed reasons for such revision will have to be disclosed by the directors in their report to the members in the relevant financial year in which revision is made.
3.4 The Central Government has been authorised to make Rules about the procedure for such voluntary revision of financial statements and director’s report. These Rules will also provide for reporting requirements applicable to the auditors of the company. Draft rules 9.5 to 9.8 provide for the procedure to be followed by the Company for this purpose.
4. Accounting and Auditing Standards
4.1 New Sections 132, 133 and 143(10) provide for issue of Accounting and Auditing Standards. Existing Sections 210A and 211(3A) to (3C) deal with notification of Accounting Standards on the advice of National Advisory Committee on Accounting Standards (NACS). It may be noted that NACAS is now replaced by a new authority called National Financial Reporting Authority (NFRA) with very wide powers.
4.2 New Section 132 provides for constitution of NFRA, its functions and powers. Briefly stated these provisions are as under.
(i) The Central Government will constitute NFRA consisting of a chair person, who shall be a person of eminence and having expertise in accounting, auditing, finance or law and such other full-time or part-time members, not exceeding 15, as may be prescribed.
(ii) Terms and conditions and the manner of appointment of chairperson and members of NFRA and other related matters shall also be prescribed.
4.3 New Section 133 provides that the Central Government will prescribe the Standards of Accounting or any addendum to such standards as recommended by the Institute of Chartered Accountant of India (ICAI) in consultation with and after examination of recommendations made by NFRA. These Accounting Standards will be binding on the companies as well as their auditors. New section 143(10) provides that the Central Government will prescribe standards of Auditing or any addendum to such standards in a similar manner. It is also provided that until such auditing standards are notified by the Government, the existing Auditing Standards issued by ICAI will be binding on the auditors. It may be noted that new Section 133 has come into force from 12-09-2013. However, Section 132 providing for constitution of NFRA has not yet come into force. In such an event it is difficult to understand how powers u/s. 133 will be exercised by the government under this Section. Further, it is not clear as to what is the position of NACAs at present. Draft Rule 9.9 provides that the existing accounting standards made under the Companies Act, 1956, shall continue till the new standards are framed.
5. The functions of NFRA:
5.1 New Section 132 provides for functions of NFRA as under:-
(a) to recommend to the Central Government about formation of Accounting Standards and Auditing Standards for adoption by Companies and their auditors.
(b) to monitor and enforce the compliance with the accounting and auditing standards in such manner as is prescribed in the Rules.
(c) to oversee the quality of service of the profession associated with ensuring compliance with such standards.
(d) to suggest measures required for improvement in the quality of service by the professionals (i.e. chartered accountants, Cost accountants and company secretary) and such other related mat-ters as may be prescribed.
(e) to perform such other functions relating to the above matters as may be prescribed by the Rules.
5.2 The powers which NFRA can exercise are as under.
(a) Power to investigate, either on its own or on a reference made by the Central Government, in cases of such bodies corporate or persons, as may be prescribed, into the matters of performance or other misconduct committed by a Chartered Accountant or a Firm of Chartered Accountants. Once NFRA initiates this investigation, ICAI will have no authority to initiate or continue any proceedings in such matters.
(b) NFRA shall have the same powers as vested in a civil Court under Code of Civil Procedure, 1908. In other words it can issue summons, enforce attendance, inspect books and other records, examine witness etc.
(c) If any professional or other misconduct is proved, NFRA can impose penalty as under.
• In the case of an Individual CA. minimum penalty of Rs. 1 lakh which may extend to 5 times of the fees received by the Individual.
• In the case of a C.A. Firm, minimum penalty of Rs. 10 lakh which may extend to 10 times the fees received by the Firm.
• NFRA can debar any Chartered Accountant or a CA Firm from practice for a minimum period of six months or for such higher period not exceeding 10 years.
5.3 Any person/firm aggrieved by any order of NFRA can file appeal before the Appellate Authority. The Central Government has been empowered to appoint such Appellate Authority consisting of the chairperson and not more than two other members. The qualifications of those constituting the Appellate Authority and all other related matters will be prescribed by the Rules.
5.4 The above provisions in new section 132 will over ride any provisions contained in any other statute. This will mean that the council of ICAI will not be able to exercise its powers relating to disciplinary action against auditors of companies. Even powers to formulate auditing standards, ensure quality of audit etc. are now vested in NFRA. To this extent the autonomy conferred on ICAI under the C.A. Act, 1949, is partially taken away.
6. Rotation of Auditors
6.1 ICAI had successfully objected to the introduction of the system of Rotation of Auditors for the last six decades. Several commissions and Parliamentary Committees had agreed that rotation of auditors is not in the interest of the Accounting Profession and the corporate sector. In spite of this, provision for rotation of auditors has now been introduced by enactment of new section 139 in the New Act.
6.2 Appointment of Auditors:
The provisions of new section 139 dealing with appointment of auditors can be briefly stated as under.
(i) After incorporation of a company, the first auditors (Individual or Firm of CA) should be appointed by the Board of Directors within 30 days. If the Board does not make such appointment, an extraordinary general meeting of members will have to be called within 90 days for appointment of auditors. The first auditors shall hold office upto the conclusion of first AGM.
(ii) At the first AGM, the auditors will have to be appointed for a period of 5 years i.e. from conclusion of the AGM to the conclusion of the sixth AGM. This appointment will have to be ratified by the members every year at each AGM during this period of 5 years.
(iii) Before appointment, the auditors will have to give their consent in writing along with a certificate in accordance with the prescribed conditions. The auditor has also to give a certificate that the criteria for his appointment given in new section 141 is satisfied.
(iv) After such appointment, the company will have to file a notice with ROC within 15 days and also inform the auditors.
(v) Draft Rules 10.1 and 10.2 provide for the procedure for selection of Auditors and conditions of their appointment.
6.3 Procedure for Rotation of Auditors:
(i) The system of Rotation of Auditors has been introduced in the case of Auditors of listed companies and other class of companies (specified companies) as may be prescribed by rules. This is provided in new section 139(2) as under.
(a) If the auditor is an Individual, he cannot be auditor of such a company for more than 5 consecutive years.
(b) If a firm/LLP is auditor, it cannot be auditor of such a company for more than two terms of 5 consecutive years (i.e. 10 years)
(c) In the case of an Individual who has been auditor for one term of 5 years, he cannot be reappointed by the company for the next 5 years. In the case of a firm/LLP who has been auditors of such a company for 10 years cannot be reappointed by the company for the next 5 years. It may be noted that any firm/LLP which has one or more partners who are also partners in the outgoing audit firm/LLP cannot be appointed as auditors during this 5 year period.
(d) After the Companies Act, 2013, comes in force, every existing listed or specified company will have to comply with the above provisions relating to Rotation of Auditors within 3 years from such commencement. From the wording of second proviso to Section 139(2) it is not clear whether, for the purpose of Rotation, the period prior to the New Act coming into force should be counted for calculating the period of 10 years. Draft Rule 10.4(4)(i) states that for the purpose of Rotation the period for which the Auditor has been holding office as Auditor prior to the commencement of the New Act shall be taken into account in calculating the period of 5 or 10 consecutive years.
(e) Thus, if an Auditor (Individual) was Auditor of any specified Company for 5 consecutive years or a Firm has been Auditors of such a Company for 10 consecutive years prior to the New Act coming into force, such Auditors will be subject to the new provisions for Rotation. As stated in Para 9.2 below, the provisions relating to Rotation will also apply to Branch Auditors.
(f) The Central Government can make Rules to prescribe the manner in which companies shall rotate their auditors. It may be noted that Draft Rule 10.1 to 10.4 provide for procedure for Rotation of Auditors.
(g) It may be noted that Draft Rule 10.3 provides that theabove provisions for Appointment and Rotation of Auditors will apply, besides listed Companies, to all public and private companies, other than one-person Company or small Companies.
(ii) New section 139(3) provides that the members of any company can resolve at any AGM that the audit firm/LLP appointed by it shall rotate the audit partner and his team at such internals as specified in their resolution.
(iii) It may be noted that section 139 specifically provides that the term ‘Firm’ shall include a Limited Liability Partnership (LLP). Section 141 also states that a body corporate will not include a LLP. In other words, any company can appoint LLP wherein majority of the partners are practicing chartered accountants, as auditors of the company.
(iv) In the case of Government companies, the C & AG has been given power to appoint auditors within the specified time limit. Provisions have also been made for filling up casual vacancy in the office of the auditors in Government companies as well as private sector companies. There are also provisions to deal with contingencies where retiring auditors are not be reappointed. It is also provided that in the cases of private sector companies where Audit Committees are constituted, the appointment of auditors can only be made by the Board/
AGM after consideration of the recommendation of the audit committee. These procedures are on similar lines as provided in the existing Companies Act with minor modifications
6.3 Since the C.A. Act permits Chartered Accountants to form LLP for professional practice and the new Companies Act permits such LLP to render service as auditors of companies, it is necessary to suggest to the Government for amendment of section 47 of the Income tax Act. At present, section 47 (xiiib) provides for exemption from capital gains tax when a company is converted into LLP, subject to certain conditions. There is no similar exemption given on conversion of firm into LLP. Unless this exemption is given by amending section 47 of the Income tax Act, it will be difficult for existing C.A. firms to convert into LLP for rendering audit service. Let us hope that council of ICAI will make suitable representation to the Central Government for amendment of Income tax Act.
7. Removal of Auditors
7.1 New Section 140 provides for Removal, Resignation etc. of Auditors. The procedure given in this section is more or less similar to the existing procedure in section 225 with the following difference.
(i) Under new section 140 an auditor can be removed from his office before the expiry of his term only after obtaining the previous approval of the Central Government and after passing a Special Resolution by the Members. For this purpose the company will have to comply with the prescribed rules.
(ii) If an auditor resigns from his office, he is required to file, within 30 days, a statement in the prescribed form with the company and ROC.
In the case of a Government company, this form is also required to be filed with C& AG.
In this statement the auditor has give reasons and other facts relevant for his resignation. For failure to comply with this requirement, the auditor is punishable with a minimum fine of Rs. 50,000/- which may extend upto Rs. 5 lakh.
(iii) If the auditor is found to have, directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by the company or any of its officers, the Tribunal can, on its own or on an application by the company, Central Government or any concerned person, direct the company to change the auditors. In the case of such an application by the Central Govern-ment for change of Auditors, the Tribunal can, within 15 days, pass an order that the auditor shall not function as such and the Central Government will be able to appoint another auditor. The auditor who is removed by the Tribunal cannot be appointed as an auditor of that company for 5 years. Further, under the new section 447 the auditor who is guilty of fraud will be punishable with imprisonment for a minimum term of six months which may extent to 10 years and shall also be liable to pay a minimum fine of an amount involved in the fraud which may extend to 3 times the said amount. If the fraud involves public interest the minimum period of imprisonment will be 3 years.
7.2 Draft Rules 10.5 and 10.6 provide for procedure for removal and resignation of an Auditor.
8. Eligibility and Qualification of Auditors
8.1 New section 141 deals with eligibility, qualifications and disqualifications of Auditors. This section is similar to the existing section 226 with the following modifications.
(i) A firm of Chartered Accountants can be appointed as auditors of a company only if ma-jority of its partners are partners practicing in India.
(ii) As stated earlier, a LLP can be appointed as auditors of a company. However, in such a case only those partners of LLP who are chartered accountants in practice can be authorised to act and sign on behalf of the LLP.
(iii) It is provided that no Individual or Firm of chartered accountants can be appointed as auditors of a company if the Individual, his partner or partner of the firm or any relative of such persons hold any shares in the company, its holding or subsidiary or associate company. However, a relative of such persons can hold shares of the F.V of Rs. 1,000/- or such higher amount prescribed by the rules. Draft Rule 10.7(2) increases this limit from Rs. 1,000/- to Rs.1 Lakh. Similarly, the limit for indebtedness to the Company, its subsidiary etc. is also fixed
(iv) A person whose relative is a director or is in employment of the company as a director or key managerial personnel cannot be appointed as auditor.
(v) A person who is associated with any entity which is engaged in consulting and specialized services as specified in the new section 144 cannot be appointed as auditor.
8.2 Draft Rule 10.7 provides for circumstances under which an Auditor will be disqualified.
9. Powers and Duties of Auditors
9.1 New section 143 provides for powers and duties of Auditors. This section is similar to existing section 227. In the Auditor’s Report on the financial statements, apart from the existing reporting requirements, the auditor has to state (i) the observations or comments on the financial transactions or matters which have any adverse effect on the functioning of the company and (ii) whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls. The Central Government is also authorized to expand the requirements of reporting by the Auditor. Draft Rule 10.8 states that the Audit Report shall now state the views of the Auditors in respect of (a) whether the Company has disclosed the effect of any pending litigations on its financial position in its financial statement, (b) whether the company has made provision for foreseeable losses on long term contracts, including derivative contracts and (c) whether there has been delay in depositing money into the Investor Education and Protection Fund by the Company.
9.2 New section 143(8) provides for appointment of Branch Auditors.
This section is similar to the existing section 228. At present if the statutory auditor is not to conduct the audit of the branch members can appoint branch auditors at AGM or authorise the Board of Directors to make such appointment. New section provides that the Branch Auditors will have to be appointed by the members in AGM as provided in new section 139. From this provision it is evident that the Branch Auditors will have to be appointed for a consecutive period of 5 years. Similarly, it appears that the Branch Auditors will be subject to the system of Rotation of Auditors u/s. 139(2) in the audit of a listed company or a specified company as stated to above.
9.3 As stated earlier, the auditors will have to comply with the Auditing Standards while conducting Audit of any company as provided in new section 143(10).
9.4 It is also provided in section 143 that if an auditor, during the course of audit, has reason to believe that an offence involving fraud is being committed by the officers/employees against the company, the auditor will have to report to the Central Government in the prescribed manner. If the auditor fails to comply with this reporting requirement, without reasonable cause, he shall be punishable with minimum fine of Rs. 1 lakh which may extend to Rs. 25 lakh. Draft Rule 10.10 provides for procedure for reporting such frauds by the auditors. From this it is evident that under this Section only Matrial Fraud is to be reported. It is also clarified in Rule 10.10(2) that for this purpose materiality shall mean (a) Frauds that happening frequently or (b) Frauds where the amount involved or likely to be involved are not less than 5% of the net profit or 2% of turnover of the preceding financial year of the Company.
9.6 It may be noted that a Chartered Accountant having at least 10 years experience in Company matters can now be appointed as a Company Liquidator as provided in new Section 275. Under this Section, it is provided that when a Company is being wound up by the Tribunal, it can appoint a professional i.e. Chartered Accountant, Advocate, Company Secretary, Cost Accountant or such professional whose name is on the Panel maintained by the Central Government in the prescribed manner as a liquidator. Such liquidator has to perform duties of Liquidator as provided in the Act.
10. Auditor not to render non-audit services
10.1 New section 144 provides that Auditor of a company shall render only such other services to the company as may be approved by the Board of Directors or the Audit Committee. However, it is specifically provided that the auditor shall not render, directly or indirectly, other services such as (a) accounting and book keeping services, (b) internal audit, (c) design and implementation of any financial information system (d) actuarial services, (e) investment advisory services, (f) investment banking services, (g) rendering of outsourced financial services, (h) management services and (i) any other kind of services as may be prescribed.
10.2 It may be noted that this is a new provision and there is no restriction of this type in the existing Companies Act. Therefore, if any auditor is rendering any such non-audit service to the company before the new Act comes into force, he will have to comply with this provision of new section 144 before the end of the financial year after the new Act comes into force.
10.3 It is also provided in this section that the prohibited non-audit services cannot be rendered by the following associates of the auditor.
(i) If the auditor is an Individual :- The Individual himself, his relative any person connected or associated with him, or any entity in which the Individual has significant influence or control or whose name or trade mark/brand is used by the Individual.
(ii) If the auditor is a firm or LLP:- Such firm/LLP either itself or through its partner or through its parent, subsidiary or associate or through any entity in which the firm/LLP or its partner has significant influence or control or whose name, trade mark or brand is used by the firm/LLP or any of its partners.
10.4 From the above it appears that under this section the auditor can render non-audit service such as tax audit, direct or indirect tax advice, company law advice, tax or company law representation before appropriate authorities, FEMA matters and other related services.
11. Cost Auditors:
New Section 148 provides for appointment of Cost Auditors by Board of Directors of Companies engaged in the business of manufacture of such goods as may be notified by the Government. The procedure for appointment and reporting by the Cost Auditor is similar to the existing procedure. Draft Rule 10.11 provides for procedure for fixing remuneration of Cost Auditor.
12. Penalty Provisions
New section 147 provides for punishment for contra-vention of the provisions of new sections 139 to 146. These penalty provisions are as under.
(i) If a company contravenes any of the provisions of new sections 139 to 146 it shall be liable to pay minimum fine of Rs. 25,000/- which may extend to Rs. 5 lakh. Further, every officer who is in default shall be punishable with imprisonment upto one year and minimum fine of Rs. 10,000/- which may extend to Rs. one lac or with both.
(ii) If an auditor of a company contravenes any of the provisions of sections 139 and 143 to 145, the auditor shall be punishable with minimum fine of Rs. 25,000/- which may extend to Rs. 5 lakh. If it is found that the auditor has contravened those provisions knowingly or willfully with the intention to deceive the company, its share holders, creditors or tax authorities, he shall be punishable with imprisonment for a term upto one year and with a minimum fine of Rs. one lakh which may extend upto Rs. 25 lakh.
(iii) If any auditor is convicted of an offence as stated in (ii) above, he shall be liable to (a) refund the remuneration received by him to the company and (b) pay for damages to the company, statutory bodies/authorities or to any other persons for loss arising out of incorrect or misleading statements of particulars made in his audit report.
(iv) In the case of audit of a company which is conducted by an audit firm, if it is proved that any partner or partners of the audit firm have acted in a fraudulent manner or abetted or colluded in any fraud by the company, its
Directors or officers, the civil or criminal liability, as provided in this Act or any other law, for such act shall be joint and several of the firm and each of its partners.
(v) New section 148 provides for audit of cost records in specified companies. This section is more or less similar to existing section 233B with some modifications. It may be noted that the above penalty provisions contained in new section 147 are applicable to the company as well as the Cost Auditor in the same manner as stated above.
13. To Sum Up
13.1 The above provisions relating to accounts and audit contained in the Companies Act, 2013 will have far reaching impact on the companies and auditors. It appears that these provisions are being made with a view to curb the present day tendency on the part of some companies to manipulate accounts with a view to benefit those in management or with a view to reduce tax. Some of these provisions are very harsh and they are likely to affect the development of the corporate sector and the profession of Chartered Accountants.
13.2 The New Act will curtail the autonomy of the Institute of Chartered Accountants of India to issue Accounting Standards and Auditing Standards. These standards will now be notified by the Government in consultation with NFRA. This is a new national authority to be appointed by the Government with very wide powers. This National Authority will be able to take disciplinary action against erring auditors and award punishment to them. Therefore, the autonomy of ICAI to take disciplinary action against its members will be curtailed to this extent. It appears that the Central Government is now loosing the confidence reposed in the Council of ICAI for the last over 6 decades and started transferring this important function of regulating the C.A. profession to other Government controlled Agencies. It is surprising that the Council of ICAI has not taken general membership into confidence and no public protest has been made when such legislation was being made by the Parliament.
13.3 Considering the responsibilities being placed on the auditors it appears that small and medium size audit firms will find it difficult to continue in audit practice. No such audit firm will be able to undertake such responsibilities with threat of litigation in the event of unintended and genuine mistakes. The provisions relating to restrictions on number of years one can continue to remain auditor of a company and restriction on rendering other services will also impact the ability of such small and medium size firms to continue in audit practice. Let us hope that the provisions for removal of auditors, awarding punishment and other harsh provisions will be implemented by the Government and other authorities in a reasonable, sympathetic and fair manner.
Presently, shares can be allotted to a foreign investor under the Approval Route of the FDI Scheme against payments made by him (the foreign investor) towards pre-operative/pre-incorporation expenses (including payments of rent, etc.) only if the payment is routed through the bank account of the investee company.
This circular has modified the said condition and provides that equity shares can be allotted to a for-eign investor under the Approval Route of the FDI Scheme against payments made by him (the foreign investor) towards pre-operative/pre-incorporation expenses (including payments of rent, etc.) if the payment is routed through the bank account of the investee company or the payment is made from the bank account opened by the foreign investor as provided under FEMA Regulations. The amended paragraph is as under: –
Presently, gold can be imported by the nominated banks/agencies on a consignment basis. Ownership of the gold will rest with the supplier and the nominated banks/agencies only act as agents of the supplier. Remittances towards the cost of import have to be made as and when sales take place.
This circular restricts the import of gold on consignment basis, by providing that banks can import gold on consignment basis, only to meet the genuine needs of exporters of gold jewellery.
14. Relaxation of Additional Fees for some forms till 31-03-2013
The Ministry of Corporate Affairs has vide General Circular No. 7/2013, dated 20-03-2013 relaxed the additional fees payable on filing of various forms with the MCA till 31-03-2013 which was earlier relaxed till 28-02-2013 vide the general Circular no. 3/2013 dated 08-02-2013.
Death claim for Bank Accounts
Pursuant to the RBI’s Circular, all nationalised and private banks now have simplified processes in case of death claims for bank accounts of deceased. The salient features in this respect are as follows:
(a) Bank Accounts/Lockers with survivor/nominee clause
In the case of deposit accounts/lockers where the depositor had utilised the nomination facility or where the account was opened with the survivorship clause, the payment of the balance in the deposit account can be made to the survivors/nominee of a deceased deposit account holder provided:
(i) the bank verifies the identity of the survivors/nominee and the fact of death of the account holder, through appropriate documentary evidence;
(ii) there is no order from the competent court restraining the bank from making the payment from the account of the deceased; and
(iii) it has been made clear to the survivor(s)/ nominee that he would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him shall not affect the right or claim which any person may have against the survivor(s)/nominee to whom the payment is made.
(b) Bank Accounts/Lockers without the survivor/ nominee clause
In cases where the deceased depositor/locker holder had not made any nomination or for accounts other than those styled as ‘either or survivor’, and if the legal heirs of the deceased customer are identifiable and there is no dispute amongst the legal heirs, then banks generally settle the claims without insisting for obtaining Succession Certificate/Letter of Administration etc. These claims are generally settled after obtaining an Indemnity with or without Surety in favour of the bank. In case only one of the legal heirs wants to claim/receive the amount or contents of locker etc., then he must obtain a Power of Attorney in his favour from the other legal heirs.
(c) Premature Termination of term deposit accounts
In the case of term deposits, banks incorporate a clause in the account opening form itself to the effect that in the event of the death of the depositor, premature termination of term deposits would be allowed. Such premature withdrawal would not attract any penal charge.
(d) Treatment of flows in the name of the deceased depositor
With regard to the treatment of pipeline flows in the name of the deceased account holder, banks generally adopt either of the following two approaches:
(i) The bank could be authorised by the survivor(s)/nominee of a deceased account holder to open an account styled as ‘Estate of Mr.X, the Deceased’ where all the pipeline flows in the name of the deceased account holder could be allowed to be credited, provided no withdrawals are made.
OR
(ii) The bank could be authorised by the survivor(s)/nominee to return the pipeline flows to the remitter with the remark ‘Account holder deceased’ and to intimate the survivor(s)/nominee accordingly. The survivor(s)/nominee/legal heir(s) could then approach the remitter to effect payment through a negotiable instrument or through ECS transfer in the name of the appropriate beneficiary.
(e) Time limit for settlement of claims
Banks generally settle the claims in respect of deceased depositors and release payments to survivor(s)/nominee(s) within a period not exceeding 15 days from the date of receipt of the claim subject to the production of proof of death of the depositor and suitable identification of the claim(s), to the bank’s satisfaction.
PPF of the Deceased
A nomination can be made even in respect of a person’s balance standing in the Public Provident Fund or PPF. If such a nomination has been made, the nominee or nominees may make an application in Form G together with proof of death of the subscriber and on receipt of such application, all amounts standing to the credit of the subscriber after making adjustment, if any, in respect of interest on loans taken by the subscriber shall be repaid by the Accounts Office itself to the nominee or nominees.
Where there is no nomination in force at the time of death of the subscriber, the amount standing to the credit of the deceased after making adjustment, if any, in respect of interest on loans taken by the subscriber, is repaid by the legal heirs of the deceased on receipt of application in Form G in their behalf, from them.
A balance of upto Rs. 1 lakh may be paid to the legal heirs on production of (i) a letter of indemnity, (ii) an affidavit, (iii) a letter of disclaimer on affidavit, and (iv) a certificate of death of subscriber.
Jewellery/Bullion of the Deceased
The Executor should distribute the jewellery/bullion belonging to the deceased in accordance with his Will. While making such distribution, the beneficiaries should also be given copies of the bills of the jewellery/bullion so that they can keep a record of the cost of acquisition and period of holding since both of these relate back to that of the deceased.
Art and Antiques of the Deceased
The Executor should distribute the Art/Sculptures/ Antiques belonging to the deceased in accordance with his Will. One element to consider when inheriting a work of art or any antiques is the provenance, or the actual history of ownership. This lays down precisely who was the original owner of the work, i.e., the title history. A provenance is very valuable during a resale and fetches a higher price than a work without one. Internationally, sellers of antiques who can provide ownership proof of the items with ancestors can demand a higher price. Again the original purchase bill/proof would help.
Digital Assets of the Deceased
While most people prepare a Will for their assets, how many people prepare a Digital Will? A Digital Will bequeaths a person’s online assets, such as, email accounts, online photos, Facebook account, cloud data, passwords, etc. There are no specific laws in India for a Digital Will and even the Information Technology Act, 2000 does not deal with this situation.
Hence, what happens to a person’s digital assets and online records when he dies is largely controlled by the Terms of Service that ac-company the different websites or companies with which a person has accounts. The terms of some of the popular service providers are as follows:
• Gmail does not delete a deceased’s account and states that in “rare cases,” it may be able to provide the account content to an authorised representative of the deceased user. The applicant would have to prove his identity, a death certificate and proof of relationship.
• Hotmail sends a copy of any email messages that may be stored on a deceased’s account, along with any existing contact lists, and will ultimately close the account upon request. It will not provide the password to an account or transfer owner-ship of the account. In most cases, email account contents are deleted after nine months of inactivity, and the account itself is deleted after an additional three months; for a total of one year.
• Yahoo permanently deletes all content and terminates the account upon receipt of a copy of a death certificate. It will not provide access to user’s accounts or email. The Yahoo! account is non-transferable and any rights to the Yahoo! ID or contents within the account terminates upon your death.
• Facebook prepares a memorial of the deceased’s account to allow friends and family to write on his wall. The account may be closed upon a formal request from his next of kin or upon a legal request.
• LinkedIn removes a deceased’s account, after receiving a Death Certificate and the alternative email address registered in the deceased member’s account.
• Twitter allows family members to remove the deceased’s account and/or save a backup of his public tweets.
• PayPal allows the Executor of the Estate to close the account.
• iTunes provides that when a person buys music, movies and books, he is acquiring a non-transferable license for personal use. It does not provide for anything on the death of an account holder.
Foreign Assets of the Deceased
With the introduction of the Liberalised Remittance Scheme of the RBI, residents are now able to acquire foreign securities, immovable property, foreign assets, etc. The bequest/transmission of these foreign assets would be in accordance with the provisions of the applicable foreign law in this respect. The FEMA Regulations provide that a person resident in India may acquire foreign securities by way of inheritance from a person resident in or outside India. However, there is no provision under the FEMA Regulations as to whether foreign immovable property can be inherited by another person resident in India from a person who has acquired it under the LRS.
HUF of the Deceased
On the death of the deceased, his/her eldest child, whether a son or a daughter, would become the Karta of the deceased’s HUF. Necessary steps should be taken for inducting the new Karta as authorised signatory of all bank accounts, demat accounts, etc., of the HUF.
On the death of a Hindu, his/her interest in an HUF passes by any one of the following two modes:
(a) As per the Hindu Succession Act, a Hindu can make a testamentary disposition of his interest in an HUF. Thus, if he has included his HUF interest in his Will then its disposition would be in accordance with his Will.
(b) If no will is prepared in respect of the undivided share, then it passes on the legal heirs of the deceased and is governed by the succession rules laid down under the Hindus Succession Act.
Thus, if a father dies, leaving behind his mother, wife, son and daughter and there are three other members in his own HUF, then his interest will devolve by intestate succession upon his legal heirs, i.e., the mother, wife, son and daughter. Thus, the mother would also stand to get a share in her son’s HUF. Prior to 2005, it would have devolved only upon the HUF members and hence, their interest would have increased from ¼ each to 1/3 each. This is an important change brought about by the Hindu Succession Amendment Act of 2005.
Son liable for Father’s Debts?
Under the Hindu Law, a son was personally liable for the debts of his deceased father. This was known as the son’s pious obligation. It was considered that without clearing the debts, his father would not rest in peace. The Supreme Court in the case of Pannalal vs. Mt. Naraini, AIR 1952 SC 170, also upheld this theory but held that the liability of the son is limited only to his share in the joint family property or the property inherited by him from his father.
Section 6(4) of the Hindu Succession Act has been amended in 2005 to do away with the theory of pious obligation. Thus, now a Hindu son’s share in the joint family property or the property inherited by him from his father is not liable for recovery of debts. However, debts prior to 9th September, 2005 (the date of amendment of the Act) would yet be covered by the old law.
No Objection Certificate
In several cases of transmission, the entities may require the legal heirs of the deceased to furnish a No Objection Certificate in favour of the person receiving the asset on transmission. For instance, if a deceased leaves behind a wife and two children and the transmission of an asset is in favour of the wife, then an NOC may be required from the children. An NOC can be executed on a plain paper.
In some cases, an Indemnity is also required. An Indemnity protects the entity which allows the transmission from any legal claims/loss. An Indemnity is to be executed on a stamp paper of Rs. 200 in Maharashtra and requires to be notarised.
Taxation of the Deceased
In the year of death, there would be two assessments in respect of the deceased. U/s. 159 of the Income -tax Act, the Legal Representative of a de-ceased assessee would be liable to pay tax in the like manner and to the same extent as that of the deceased. Section 2(29) of the Act defines the term Legal Representative to mean a person who in law represents the estate of the deceased person. There could be more than one legal representatives but compliance may be practically done by any one legal representative.
The Legal Representative would be liable to pay tax on the income of the deceased received/accruing to him up to the date of his demise. In respect of income, such as interest which accrues on a yearly basis, the income would have to be apportioned between the period up to date of death and thereafter.
A separate procedure is prescribed for e-filing of Return of Income by legal representative. The procedure is available on the Income-tax Department’s Website. As per the procedure, the PAN of legal representative is required to be registered with the Income-tax Department. Based thereon, a legal representative will be able to file return of income by mentioning in verification part, the details and PAN of legal representative, while the form of the return of income may carry the PAN of the deceased. To file a return of income with digital signature, the legal representative is also required to register his digital signature.
In respect of the period commencing from the date of death until the period when the deceased’s Estate is fully executed, his Executors would be liable to tax u/s. 168 of the Act. U/s. 168(3), a separate assessment would be made on the Executor commencing from the date of death up to the date of complete distribution of the Estate to the beneficiaries. In addition to the Return filed by the Executor in his representative capacity u/s. 168, he would also file a Return in his own personal capacity. A PAN may be obtained in the name of the Estate of the deceased.
If there is only one Executor, then he is taxed as if he were an individual. However, if there is more than one Executor, then all of them are taxed as if they were an Association of Persons (AOP). Further, the residential status of the Executor would be that of the deceased during the previous year in which he died. Thus, if the deceased was a non-resident, then the Executor would also be a non-resident.
The assessment in the hands of the Executor shall be made for each completed previous year which begins from the date of the death of the deceased and continues till such time as a complete distribution is made to the beneficiaries according to their several interests. While computing the income of the Executor, any distribution which has already been effected to a specific legatee shall be excluded from the income of the Executor. The same would be taxed in the hands of the specific legatee to whom the distribution was made.
The Full Bench of the Madras High Court in the case of P. Manonmani, 245 ITR 48 (Mad), has held that these provisions apply only when a person dies after leaving a will, i.e., they do not apply to intestate deaths.
Taxation of the Beneficiaries
In respect of any asset received under a Will or by succession, inheritance or devolution, the cost of the asset to the beneficiary and the period of holding to the beneficiary would be the same as that to the deceased. Similarly, for claiming depreciation, the actual cost in case of an asset acquired by inheritance is the actual cost to the previous owner. Recent High Court decisions have held that the benefit of indexation is also available to the beneficiary from the date on which it would have
been available to the deceased – Arun Shungloo Trust vs. CIT, (2012) 205 Taxman 456 (Delhi); CIT vs. Manjula J.Shah (Mumbai), (2012) 204 Taxman 691 (Bom).
The provisions of section 56(2)(vii) of the Income-tax Act do not apply to gifts received without consideration if they are received under a will or by way of inheritance. Thus, even if a Will leaves everything to a person who is not a “defined relative” under section 56(2) of the Income-tax Act, say, a friend, then the recipient is not liable to tax on the gift so received by him by virtue of this express exemption.
FEMA and Transmission
(i) A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such asset was inherited from a person who was resident outside India.
(ii) A person resident outside India may hold, own, transfer or invest in Indian currency, Indian security or any immovable property situated in India if such asset was inherited from a person who was resident in India.
(iii) A foreign national of non-Indian origin who is not a Nepalese or a Bhutanese may have inherited assets in India from a person resident in India who acquired the assets (being immovable property, securities, cash, etc.) when he was an Indian resident. Such a Person of Indian Origin or a Foreign Citizen can remit an amount not exceeding $ 1 million per year if he produces documentary proof in support of the legacy, e.g., a will, and a tax clearance/no-objection certificate from the Income-tax Department. “Assets” for this purpose include, funds representing a deposit with a bank or a firm or a company, provident fund balance or superannuation benefits, amount of claim or maturity proceeds of insurance policies, sale proceeds of shares, securities, immovable properties or any other asset held in accordance with the FEMA Regulations.
(iv) A Non-Resident Indian or a Person of Indian Origin, who has received a legacy under a will, can remit from his Non-Resident Ordinary (NRO) Account an amount not exceeding $ 1 million per year if he produces documentary proof in support of the legacy, e.g., a will, and a tax clearance/no-objection certificate from the Income-tax Department. The meaning of the term “Assets” is the same as that under (iii) above.
(v) In case of a remittance exceeding that specified in (ii) and (iii), an application can be made to the Reserve Bank of India in Form LEG.
(vi) A Person of Indian Origin may acquire any immovable property in India by way of inheritance from a person resident in India or a person resident outside India who acquired the property in accordance with the prevailing foreign exchange law, i.e., FEMA or FERA.
Takeover Regulations
The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 apply in case of certain transfers in listed companies. If the prescribed threshold limits are breached, then the acquirer of the shares has to make a public offer, i.e., an offer to acquire shares from the public. However, the provisions relating to making of an open offer do not apply to an acquisition of shares of a listed company received by way of transmission, succession or inheritance. The Acquirer is required to file a Report with the stock exchanges where the shares are listed within four days of the acquisition.
Chartered Accountant’s Role
Normally, a CA in his capacity as an Auditor is not directly involved with succession/transmission issues. Nevertheless, a CA can provide a lot of value added services to his clients if he is aware of the law in this respect. He can be of great assistance to his clients in complying with various transmission formalities. It is an area where he can assist his client and avoid unnecessary problems.
1. To grant permission to listed companies to hedge the price risk in respect of any commodity (except gold, silver, platinum) in the international commodity exchanges/markets as specified under the delegated route.
2. To grant permission to unlisted companies to hedge price risk on import/export in respect of any commodity (except gold, silver, platinum) in the international commodity exchanges/markets subject to guidelines Annexed to this Circular.
5 Partition — Co-owner —
Possession of vendee — Transfer of Property Act, S. 44 & Partition Act, S. 4.
[Ram & Ors. v. Ram Kishan
& Ors., AIR 2010 Allahabad 125.]
The plaintiffs and
defendants were co-owners of house. The defendants sold their share in the house
in favour of defendant No. 1, namely, Shri Ram Kishan who took possession
forcibly. Therefore
the plaintiff filed the suit for cancellation of the sale and prayed for
mandatory injunction against the defendant No. 1.
The Allahabad High Court
observed that when the stranger to the family acquires an interest in an
immovable property or dwelling house of an undivided family, he has the right to
seek partition. S. 4 of the Partition Act gives a right to a member of the
family, who has not transferred his share, to purchase the transferee’s share,
when the transferee files a suit for partition.
These are two valuable
rights of the members of the undivided family. Particularly when the right to
joint possession is denied to a transferee in order to prevent a transferee who
is an outsider from forcing his way into a dwelling house in which the other
members of the transferor’s family had a right to live. Without there being any
physical formal partition of an undivided immovable property, a co-sharer cannot
put his vendee in possession. It was a settled law that the purchaser of a co-parcener’s
undivided interest in the joint family property was not entitled to the
possession of what he had purchased. He can only claim a right to sue for
partition of the property and seek allotment of that which on partition might be
found to fall to the share of the co-parcener whose share he had purchased. It
was therefore obvious that even if the sale deed whereby the undivided share has
been alienated was legally permitted to be executed, the transferee cannot force
his way into the dwelling house of the co-owners until and unless he files a
suit for partition and obtains an order from the Court or makes a settlement
with the
co-owners who have not transferred their shares.
3 Firm — Registration —
Reconstitution of firm — No separate registration necessary — S. 60 and S. 63 of
Partnership Act.
[Noble Kuries v.
Sebastian Antony & Ors., AIR 2010 Kerala 99.]
Whether a fresh registration
of the partnership firm is required consequent to its reconstitution to maintain
a suit in view of S. 69(2) of the Indian Partnership Act and whether
non-intimation of reconstitution of the partnership firm to the Registrar of
Firms would affect maintainability of the suit.
On account of some of the
partners retiring and another person coming in, the partnership firm was
reconstituted on 1-4-1986. S. 59 of the Act deals with registration of the
partnership. There is no provision in the Act which states that when there is
reconstitution of a firm which is already registered, a further registration is
required after such reconstitution. What is required is only intimation to the
Registrar of Firms about the reconstitution/change as provided u/s.60 to u/s.63
of the Act. A Division Bench of the Gujarat High Court in Bharat Sarvodaya
Mills v. Mohatta Bros., (AIR 1969 Gujarat 178) held that no separate
registration is necessary where there is reconstitution of a continuing firm. In
this case the firm had obtained registration from the Registrar of Firms. Hence
after reconstitution of that firm it was not necessary to have a fresh
registration of the reconstituted firm.
Then the question is what
are the consequences of not intimating the Registrar of Firms about
reconstitution even if it is assumed so, on the maintainability of the suits. S.
60 to S. 63 of the Act require any change in the constitution of a registered
partnership firm to be intimated to the Registrar of Firms. But neither the Act,
nor the Rules provide any time limit for that.
Thus, there could be no time
limit for intimation of the reconstitution or other change in a registered
partnership to the Registrar of Firms, though intimation has to be given within
a reasonable time.
Editor’s Note: The
Partnership Act 1932 as applicable in Maharashtra provides for time limit for
intimating changes in the constitution and other particulars of a registered
partnership firm to the Registrar of Firms.
4 Limitation —
Acknowledgement of debt — On each repayment of loan limitation get extended —
Limitation Act, S. 18, S. 19.
[Dena Bank, Durg v. Smt.
Chameli Bai and Ors., AIR 2010 Chhattisgarh 49]
The Bank filed a civil suit
for recovery of loan advance to the defendant for purchase of tractor and
trolley. The loan was repayable in half-yearly instalments in seven years with
interest The Bank pleaded that the defendant kept depositing various amounts and
thus on each repayment of loan, the limitation period got extended by three
years.
The Court held that the
period of limitation for suits relating to accounts for the balance due on a
mutual, open and current account, where there have been reciprocal demands
between the parties, is three years and the time from which period begins to run
is to be computed from the close of the year, in which the last item admitted or
proved is entered in the account; such year is to be computed as in the account
as per Article 1 of the schedule to the Limitation Act, 1963.
In the present case also,
the account between the parties was at all times an open and current one. From
the transactions reflecting from the statement of account, it was clear that it
was mutual during the relevant period. As per S. 4 of the Limitation Act, 1891,
the plaintiff-Bank has submitted statement of account duly certified by the Bank
officer and the same is a prima facie evidence of the existence of such
entries, and the same may be treated as sufficient evidence to hold that the
defendant No. 1 deposited the sums towards repayment of loan on various
occasions. Thus, by virtue of S. 19 read with aforesaid Article 1 of the
schedule to the Limitation Act, 1963, fresh extended period of limitation of
three years is to be computed from the close of the year in which the last item
is admitted or proved as entered in the account.
The Suit was not barred by
limitation.
2 Appeal by Department —
Measures to reduce litigation.
[Commr. of Central Excise
v. Techno Economic Services P. Ltd., (2010) 255 ELT 526 (Bom.)]
While dismissing an appeal
filed by the Revenue wherein the amount in dispute was Rs.1,21,219 the Court
noted that number of appeals are being filed before the Court; wherein the
customs duty and/or central excise duty involved was negligible. It was noticed
that most of the times the duty impact ranges between
`2 to 3 lakh; wherein,
normally, senior advocates appear on behalf of the Revenue assisted by two
junior advocates. In spite of engaging multiple advocates, adjournments were
sought. The matters were allowed to remain pending in the Court for a
substantially long period of time. With the result, they come up for hearing on
more than two or three occasions. Adjournments were always taken and granted by
the Court considering the substantial cause shown for the adjournment. All this
results in payment of heavy professional charges to the advocates appearing for
the Department. Sometimes the expenses incurred by the Revenue were
disproportionate to the stakes involved in the appeal and/or petition filed by
the Department.
In the aforesaid scenario,
the Court took the judicial notice of the fact that the Centre and the States
had acquired the ‘government is the largest litigant’ tag, accounting for 70% of
the 3 crore cases — over 2.1 crore pending in various Courts.
The Court, observed that the
Central Government had formulated a National Litigation Policy (NLP) to shed the
tag ‘Largest Litigant’. Thus, keeping in view the policy of the Central
Government, it invited attention of the Chairman of the Central Board of Excise
and Revenue (‘the Board’) to consider the necessity of taking policy decision
not to file cases; wherein the duty/tax impact was negligible. The similar
policy was already in vogue so far as the Income-tax Department was concerned.
The Central Board of Direct Taxes vide its Circular dated 27th March, 2000
followed by other Circulars dated 24th October, 2005 and 15th May, 2008 had
taken a policy decision not to file appeals or references wherein the tax effect
is less than the amount prescribed in the instructions issued from time to time,
so as to reduce litigation before the High Courts and the Supreme Court. The
said policy decision taken by the CBDT had reduced the volume of litigation,
with the result, their officers were in a position to concentrate on the cases
involving heavy stakes.
It has, therefore, become
necessary for the Board to impress upon the Departmental heads not to go for
appeals and litigation wherein tax or duty impact was not substantial, otherwise
it results in harassment to the assessees and creates unnecessary burden on the
infrastructure of the Revenue Department. The ‘let the Court decide’ attitude
needs to be given go-bye.
The Chairman of the Central
Board of Excise and Revenue shall consider the necessity of issuing a Circular,
on the lines of the Circulars issued by the CBDT, so as to reduce litigations
arising out of indirect tax legislations.
1 Appeal — Merger of order —
Once the Appellate Authority disposes a matter, the order passed by the
subordinate authority gets merged in such order.
[Box and Carton India P.
Ltd. v. Commissioner of C. Ex. Delhi, 2010 (255) ELT 423 (Trib. Del.)]
The applicant had filed a
rectification application before CESTAT alleging various mistakes apparent on
the record in the order and pleaded that the order needs to be rectified.
Against the said order of the CESTAT the applicant had also approached the
Supreme Court and the appeal was dismissed by the Court. The applicant in the
rectification proceedings submitted that the issue raised in the rectification
application was not raised in the appeal before the Supreme Court and therefore
the principle of merger cannot be applied.
The CESTAT held that it was
a settled doctrine of merger that once the Appellate Authority is seized with
the matter, and particularly in relation to the merits of the case, whatever
order is passed in such proceedings by the Appellate Authority, becomes a final
order and becomes an executable order. In other words, once the proceedings in
appeal are disposed off by an order by the Appellate Authority, the order passed
by the subordinate authority, gets merged in such order.
Once the party takes the
step to take the matter at appellate stage on conclusion of the proceedings at
original stage and the Appellate Court, considering the matter on merits,
disposes the same either by way of reversal, modification or confirmation, the
operative order would be that of the Appellate Authority. It would all depend
upon exercise of powers by the Appellate Authority. Once the Appellate Authority
finds no case for interference in the order passed by the lower authority and
dismisses the appeal, the order of the original authority would get merged in
the order of the Appellate Authority and, therefore, the order which would be
executable will be that of the Appellate Authority.
The Tribunal considering the
law laid down by the three-Judge Bench of the Apex Court in Kunhayammed v.
State of Kerala, (2000) 6 SCC 359 held, that an order passed by the Apex
Court in its appellate jurisdiction either by reversing, modifying or confirming
the order of the lower court or lower authority would result in merger of order
of the lower Court or the lower authority in the order of the Apex Court,
irrespective of the fact as to whether such order of the Apex Court is a
speaking order or a non-speaking order.
It was further held that
once the applicant had approached the Supreme Court against such order and
having tried to get it set aside, it was not permissible for the applicant
thereafter to approach the Tribunal under the guise of rectification of the
order and to seek de novo hearing of the appeal. What in essence the
applicant was seeking in the matter was not the correction of the order, but
reassessment of the matter on the ground that the Tribunal failed to take note
of the fact that the documents which the Commissioner was expecting the parts to
produce were already in possession thereof. Undoubtedly, this could have been
the ground for the appellants before the Apex Court in the appeal field by the
appellants.
In any case, it is settled
law that the party is not entitled to raise the points in piecemeal by way of
different proceedings in that regard. If the party does not raise a point at an
appropriate stage and the matter stands concluded by final order, then the party
would be debarred from raising such point thereafter by reopening the matter.
That is principle embedded in Explanation 4 of S. 11 of the CPC. Considering the
same, it is not permissible to allow the applicant to raise issue under the
guise of filing rectification of application.
The petitioner was the widow of Gopaldas Kanhyalal Gujarati. The late Gopaldas Kanhyalal Gujarati had participated in the Indian Independence Movement and was receiving Freedom Fighter’s Pension from the Government of Maharashtra. He had applied for Freedom Fighter’s Pension from the Central Government. The same was rejected. A fresh application was submitted alongwith required documents. In the meantime, the husband of the petitioner expired. After that, the petitioner pursued the matter and submitted all required documents. In spite of receiving of the application, the Central Government has neither granted pension nor communicated anything to the petitioner. Under these circumstances, the present petition had been filed.
The Hon’ble Court observed that on the issue there were conflicting decisions of Co-ordinate Benches of the Supreme Court. Under such circumstances it was open to the Court to consider the judgment which in its opinion is the better in point of law, irrespective of when the judgments were pronounced. The Supreme Court noted that the judgment in Surja & Ors vs. UOI, 1992 SC 777 was rendered on the peculiar facts of that case and then declared the position of law, that an applicant must have actually suffered a minimum imprisonment of six months less the remission period of one month. Therefore, it was not possible to take a view different than the view taken in the case of Surja (Supra) which was binding under Art. 141 of the Constitution.
[Gulabbai w/o. Gopaldas Gujrati vs. Union of India & ors. Writ Petition No. 1299 of 2008 Dated 9/7/2008 AIR (2009) (NOC) 763 (Bom) (2008) (6) AIR Bom R 857]
8. Condonation of delay : High Court has no power to condone the delay in filing the reference application under unamended Sec.35H(1) of Central Excise Act, 1944.
The question for consideration was whether the High Court has power to condone the delay in presentation of the reference application under unamended Section 35 H(1) of the Central Excise Act, 1944 beyond the prescribed period by applying Section 5 of the Limitation Act, 1963. Unamended Section 35G speaks about appeal to the High Court. Sub-Section 2(a) enables the aggrieved person to file an appeal to the High Court within 180 days from the date on which the order appealed against is received by the Commissioner of Central Excise or the other party. There is no provision to condone the delay in filing the appeal beyond the prescribed period of 180 days.
Unamended Section 35H speaks about reference application to the High Court. As per sub-section (1), the Commissioner of Central Excise or other party within a period of 180 days of the date upon which he is served with notice of an order under Section 35C direct the Tribunal to refer to the High Court any question of law arising from such order of the Tribunal. Here again as per sub-section (1), application for reference is to be made to the High Court within 180 days and there is no provision to extend the period of limitation for filing the application to the High Court beyond the said period and to condone the delay.
In this matter the Court was concerned with ‘reference application’ made to the High Court under Section 35H (1) of the Act before amendment of the Central Excise Act by Act 49/2005 (w.e.f. 28.12.2005) by which several provisions of the Act were omitted including Section 35H.
The Hon’ble Court observed that except providing a period of 180 days for filing reference application to the High Court, there is no other clause for condoning the delay if reference is made beyond the said prescribed period. In the case of appeal to the Commissioner, Section 35 provides 60 days time and in addition to the same, the Commissioner has power to condone the delay up to 30 days if sufficient cause is shown. Likewise, Section 35B provides 90 days time for filing appeal to the Appellate Tribunal and sub-section (5) therein enables the Appellate Tribunal to condone the delay irrespective of the number of days if sufficient cause is shown. Likewise, Section 35EE which provides 90 days time for filing revision by the Central Government and, proviso to the same enables the revisional authority to condone the delay for a further period of 90 days if sufficient cause is shown, whereas in the case of appeal to the High Court under Section 35G and reference to the High Court under Section 35H of the Act, total period of 180 days has been provided for availing the remedy of appeal and the reference. However, there is no further clause empowering the High Court to condone the delay after the period of 180 days. Chapter VIA of the Act provides appeals and revisions to various authorities. Though the Parliament has specifically provided an additional period of 30 days in the case of appeal to the Commissioner, it is silent about the number of days if there is sufficient cause in the case of an appeal to Appellate Tribunal. Also an additional period of 90 days in the case of revision by Central Government has been provided. However, in the case of an appeal to the High Court under Section 35G and reference application to the High Court under Section 35H, the Parliament has provided only 180 days and no further period for filing an appeal and making reference to the High Court is mentioned in the Act.
As pointed out earlier, the language used in Sections 35, 35B, 35EE, 35G and 35H makes the position clear that an appeal and reference to the High Court should be made within 180 days only, from the date of communication of the decision or order. In other words, the language used in other provisions makes the position clear that the Legislature intended the Appellate Authority to entertain the appeal by condoning the delay only up to 30 days after expiry of 60 days, which is the preliminary limitation period for preferring an appeal. In the absence of any clause condoning the delay by showing sufficient cause after the prescribed period, there is complete exclusion of Section 5 of the Limitation Act. The High Court was, therefore, justified in holding that there was no power to condone the delay after expiry of the prescribed period of 180 days. Even otherwise, for filing an appeal to the Commissioner, and to the Appellate Tribunal as well as revision to the Central Government, the Legislature has provided 60 days and 90 days, respectively, on the other hand, for filing an appeal and reference to the High Court larger period of 180 days has been provided with to enable the Commissioner and the other party to avail the same. In view of the above, the Court held that the Legislature provided sufficient time, namely, 180 days for filing reference to the High Court which is more than the period prescribed for an appeal and revision and the High Court has no power to condone delay.
[Commissioner of Customs and Central Excise vs. M/s. Hongo India (P) Ltd & Anr., Supreme Court dt. 27/3/2009 (Full Bench). (Source: itatonline.org)]
26 Recovery of tax : Dues from company cannot be recovered
from its directors who are partner in firm.
The petitioner is a partnership firm originally constituted
in the year 1984 and it is running a cinema theatre under a duly granted licence.
The partnership firm was registered under the Indian Partnership Act, 1932. The
petitioner firm is also an assessee on the file of the respondent under the
Tamil Nadu Entertainment Tax Act, 1939.
M/s. Sri Mappillai Vinayagar Spinning Mills Ltd. and M/s. Sri
Manicka Vinayagar Spinning Mills Ltd. are limited companies incorporated under
the Indian Companies Act, 1913 and some of the partners in the petitioner firm
are directors of the said limited companies.
According to the petitioner, the petitioner is not having any
arrears of entertainment tax. A notice of attachment in Form No. 5 had been
issued by the respondent u/s.27 of the Revenue Recovery Act and by the said
notice the respondent had attached the petitioner’s property for the sales tax
arrears of other two private limited companies and another partnership firm.
Being aggrieved by that, the petitioner filed the above writ petition.
The Court observed that the properties of the petitioner, a
firm, were attached by the Commercial Tax officer for non-payment of sales tax
arrears under the Tamil Nadu General Sales Tax Act, 1959 of two other companies
and another firm on the ground that the partners of the petitioner firm were
also admittedly the directors of the two companies and partners of the assessee
firm.
The Court held that the company being a legal entity by
itself could sue and be sued as a legal entity and any dues from the company had
to be recovered only from that company and not from its directors. Therefore,
the proceedings for attachment of the properties of the petitioner firm on the
ground that the partners of the petitioner firm were also directors of the two
private limited companies, could not be sustained.
[Sri Mappillai Vinayakar Cine Complex v. Commercial Tax Officer,
(2008) 146 Comp. Cas 110 (Mad.)]
One Mr. Chandra Bhushan Saran, father of appellant No. 1 and maternal grandfather of appellant no. 2 was allotted third floor residential premises of the building ‘Devonshire House’. Since he was appointed as a Director and Technical Advisor of one M/s. Automobile Products of India Ltd. (‘API Ltd.’). The suit premises was owned by Her Highness Vijaya Raje Scindia Maharani of Gwalior and was taken on lease by API Ltd. for residential needs of its employee.
Subsequent to Mr. C. B. Saran’s resignation he was appointed as the Managing Director of XLO Ltd., respondent No. 1 herein. Mr. C. B. Saran was entitled to rent-free accommodation and for the sake of convenience, the API Ltd. executed a licence agreement in respect of the suit premises in favour of respondent no. 1. Accordingly, Mr. C. B. Saran along with his family, which consisted of his wife, son and daughter, continued to occupy the said premises.
Mr. C. B. Saran expired in Germany and on his demise his son Mr. Sanjay Saran, by virtue of his employment with respondent No. 1, the suit premises was allotted in his favour.
It is pertinent to mention here that in the year 1976, API Ltd. filed a suit before the Small Causes Court against the respondent no. 1 and Mr. C. B. Saran disputing the tenancy right in relation to the suit property. After the demise of Mr. C. B. Saran his legal heirs were substituted in the said suit.
The respondent no. 1 instituted a proceeding under Section 630 of the Act against the present appellants. The Additional Chief Metropolitan Magistrate vide order dated 26.06.2007 found the appellants guilty under Section 630 of the Act. The appellants were directed to vacate the suit premises within 4 months from the date of the said order and in default to suffer simple imprisonment for 4 months.
The appellants filed a criminal appeal before the Sessions Judge which was dismissed. Against the said dismissal, the two appellants preferred a criminal revision application before the High Court of Bombay, which was also dismissed. It is against the said order that the appellants have approached the Apex Court.
The Hon’ble Court observed that the main purpose to make action an offence under Section 630 is to provide a speedy and summary procedure for retrieving the property of the company where it has been wrongly obtained by an employee or officer of the company or where the property has been lawfully obtained but unlawfully retained after termination of the employment of the employee or the officer. Sub-section (1) is in two parts. Clauses (a) and (b) of sub-section (1) create two different and separate offences. Clause (a) contemplates a situation wherein an officer or employee of the company wrongfully obtains possession of any property of the company during the course of his employment to which he is not entitled, whereas clause (b) contemplates a case where an officer or employee of the company having any property of the company in his possession, wrongfully withholds it or knowingly applies it to purposes other than those expressed or directed in the articles and authorised by the company. Under this provision, it may be that an officer or an employee may have lawfully obtained possession of any property during the course of his employment, still it is an offence if he wrongfully withholds it after termination of his employment. Clause (b) also makes it an offence, if any officer or employee of the company having any property of the company in his possession knowingly applies it to purposes other than those expressed or directed in the articles and authorised by the Act. In terms of sub-section (2), the Court is empowered to impose a fine on the officer or employee of the company if found in breach of the provision of Section 630 of the Companies Act and further to issue direction if the Court feels it just and appropriate for delivery of the possession of the property of the company.
The capacity, right to possession and the duration of occupation are all features which are integrally blended with the employment. Once the right of the employee or the officer to retain the possession of the property gets extinguished either on account of termination of services, retirement, resignation or death, they (persons in occupation) are under an obligation to return the property back to the company and on their failure to do so, they render themselves liable to be dealt with under Section 630 of the Act for retrieval of the possession of the property.
6. Copyright : A joint owner of a copyright, without the consent of the other joint owner cannot grant licence or interest in the copyright : Copyright Act, 1957.
The facts giving rise to the controversy between the parties are that the petitioner is the producer and first owner of copyright in the film ‘Victoria No. 203’. By an agreement dated 26th July 2007, the petitioner assigned to the respondent alongwith him joint ownership in the ratio of 50 : 50 of the rights in the negative of the film. There was some dispute between the parties as to whether copyright in the film or only in the negatives of the film are assigned. That would be decided by the Arbitral Tribunal. Clause No. 8(d) of the agreement provides that the respondents shall be entitled to enter into an agreement in respect of his rights (under the agreement) by making the petitioner the confirming party to the agreement. The agreement provides that all disputes and differences arising between the parties in connection with the agreement shall be resolved by mutual consent, failing which the disputes shall be referred to arbitration. Pending constitution of the Arbitral Tribunal and reference, the petitioner has claimed interim injunction.
The Hon’ble Court observed that the petitioner was the producer and original holder of the copyright in the film. Perusal of clause No.8 of the agreement prima facie showed that the petitioner had made the respondents joint owners of the copyright to the extent of 50%, the petitioner had further given the right to the respondents to exploit the said copyright by entering into an agreement with others, but subject to petitioner being made the confirming party to the agreement. According to the petitioner, the respondents have negotiated with a third party for exhibiting of the film abroad without the consent of the petitioner.
Placing reliance on the decision of the Supreme Court in M/s. Power Control Appliances vs. Sumeet Machines P. Ltd., (1994) Vol. 2 SCC 448, it was held that in respect of joint ownership of a copyright, the use of the copyright must be made jointly by the co- owners and individual use by any one of the co- owners is not permissible.
A joint owner of a copyright cannot, without the consent of the other joint owner, grant a licence or interest in the copyright. The respondents cannot exploit the copyright singly or individually. The exploitation of the copyright must be jointly made by the petitioner and respondents, as they are the joint owners. The respondents are not entitled to grant licence for exploitation of the film ‘Victoria No. 203’ without the concurrence of the petitioner. In view of above, the petitioner was entitled to an injunction pending the arbitration.
[Angath Arts P. Ltd. vs. Century Communications Ltd. & Anr. AIR 2009 Bom. 26.]
10 Tenancy : Tenant can be evicted if
subletting is done without the consent in writing of the landlord.
The appellant No. 1 was inducted as a tenant in the year 1956
by the erstwhile owners of the suit shop. He was all along in continuous
possession of the suit shop and was conducting the business from the same along
with his brother, under the name and style of M/s. Mitra Book Depot. The rent
receipts issued by the landlord were in the name of M/s. Mitra Book Depot as
tenant.
Subsequently, a business was started in a portion of the suit
shop in the name of M/s. Mitra Stores and M/s. Lucky Confectioners being
appellants 2 to 4. In the year 2000, the owners sold the suit shop to one Anil
Anand. However, the rent of the suit shop was continued to be paid to erstwhile
owners by the appellant. Mr. Anil Anand sold the suit shop to the respondent by
a registered deed of sale in year 2000. However, the appellant No. 1 went on
depositing the rent in the name of the original landlord. Finally, in February,
2002, the respondent filed an eviction petition before the Rent Controller,
Delhi u/s.14(1)(b) of the Act on the ground of subletting by the appellant No.
1. The Rent controller passed the order of eviction by holding, inter alia,
that the case of subletting was duly proved as from the evidence on record, both
oral and documentary, it was clear that an independent business was run by the
appellants and that they were in exclusive possession of a portion of the suit
shop.
The appellants filed a writ petition before the High Court of
Delhi and the High Court dismissed the same.
S. 14(1)(b) of the Act, reads as under :
“That the tenant has, on or after the 9th day of June,
1952, sublet, assigned or otherwise parted with the possession of the whole or
any part of the premises without obtaining the consent in writing of the
landlord.”
On further appeal the Supreme Court observed that if a tenant
had sublet or assigned or otherwise parted with the possession of the whole or
any part of the premises without obtaining the consent in writing of the
landlord, he would be liable to be evicted from the said premises as per S.
14(1). That is to say, the following ingredients must be satisfied before an
order of eviction can be passed on the ground of subletting :
(1) the tenant has sublet or assigned or parted with the
possession of the whole or any part of the premises;
(2) Such subletting or assigning or parting with the
possession has been done without obtaining the consent in writing of the
landlord.
In Kailasbhai Shukaram Tiwari v. Jostna Laxmidas Pujara
and Anr., Manu/SC/2529/2005, while dealing with a case of subletting under
the Bombay Rules, Hotel and Lodging House Rates Control Act, 1947 (57 of 1947),
the Apex Court observed that the question as to whether a person is a member of
the family of the tenant must be decided on the facts and circumstances of the
case. It observed in paragraph 14 as follows :
“Apart from the parents, spouse, brothers, sisters, sons
and daughters, if any other relative claims to be a member of the tenant’s
family, some more evidence is necessary to prove that they have always resided
together as members of one family over a period of time. The mere fact that a
relative has chosen to reside with the tenant for the sake of convenience,
will not make him a member of the family of the tenant in the context of rent
control legislation.”
In the facts of the case, the appellant No. 1 had parted with
the exclusive possession of a part of the suit premises in favour of the
appellant Nos. 2 to 4 without obtaining the consent in writing, either of the
erstwhile landlord or the purchaser respondent, nor the appellant could prove
that appellant nos. 2 to 4 being the family members were assisting him it the
business, hence the appeal was dismissed.
[Vaishakhi Ram & Ors. v. Sanjeev Kumar Bhatiani, Civil Appeal No. 1559
of 2008, dated 25-2-2008, Supreme Court of India.]
9 Stamp duty : Cousins not being members of
the family do not fall with definition of word ‘family’ under Stamp Act : S.
45(a).
The respondents herein are the sons of two brothers. They
entered into a deed of partition in respect of certain properties and presented
the same for registration. The respondents paid the fixed stamp duty as per
Article 45(a) of the Act. The District Registrar did not agree with the stamp
duty and held the said document as a pending document.
On appeal for release of documents, the Madras High Court
observed that the document presented for registration though titled as partition
deed was not actually a partition deed between two blood brothers. The
respondents were first cousins and the document was one falling under Article
45(b) of the Act. The word ‘family’ means as defined under Article 58 and reads
as under :
“Father, mother, husband, wife, son, daughter, grandchild.
In the case of any one whose personal law permits adoption, ‘father’ shall
include an adoptive father, ‘mother’ an adoptive mother, ‘son’ an adopted son
and ‘daughter’ an adopted daughter.”
Thus, it is seen that the word, ‘family’ is given a
restrictive meaning in its application to Article 58 and the same meaning is
imported to the word ‘family’ appearing in Article 45 of the Act. Consequently,
the respondents would be entitled to claim the benefit of concessional rate of
stamp duty under Article 45(a) only if both of them are members of a family,
within the meaning of the definition of the word, ‘family’ under Article 45(a).
Therefore, prima facie, the objection raised by the appellants i.e.,
District Registrar with regard to the nature of the document is well founded.
Under such circumstances, it was not possible to order the release of the
documents.
[ District Registrar, Tindivanam and Anr. v. V.
Ranganathan & Anr., AIR 2008 Mad 73.]
7 Deficiency in services by airline :
Consumer Protection Act. 2(1)(g).
The airline unilaterally cancelled the ticket without
intimating to the passenger prior to cancellation of tickets of onward journey.
Notice on ticket stipulated that passenger if breaks journey for more than 72
hours had to reconfirm the onward reservation. Telephones of the airline were
busy when passengers tried to reconfirm, nor emails of passenger were replied.
In these circumstances it was held that as the telephone
system was not functioning, the clause mentioned on ticket cannot be applied.
The airline was held deficient in its services.
[ Air India v. Prakash Singh & Anr., AIR 2008 (NOC)
666 (NCC)]
8 Maintenance : Mother can claim maintenance
against her son : S. 125 of Cr. P.C.
The respondent herein is the mother of the present applicant
Rafiuddin. The respondent was divorced in the year 1973. She had no source of
income and nobody was ready to maintain her. Therefore she claimed maintenance
from the present applicant i.e., son.
The Court relying on the decision in case of Mahendrakumar
Ramrao Gaikwad v. Golbhai Ramrao Gaikwad and Anr., 2000(2) Mh. L. J. 378 (Bom.)
held that the son cannot be absolved from his responsibility to maintain his
mother; even though the husband may be alive, son is one of those persons from
whom a woman can claim maintenance u/s. 125 of Cr. P.C.
The mother would be entitled to claim maintenance from the
son u/s.125 of Cr. P.C., irrespective of the fact that the husband is alive.
[ Rafiddin v. Smt. Salecha Khatoon, AIR 2008 NOC 776
(Bom.)]
6 Co-operative Housing Society : A member of
tenant co-partnership housing society is not a tenant of the society : Rent Act
1947, S. 5(11) and Maharashtra Co-operative Societies Act, 1961, S. 29.
The respondent No. 1 Belfer Co-op. Housing Society Ltd. was a
tenant co-partnership housing society which held both land and flats constructed
thereon and Dr. Gopal Mahadevo Dhadphale respondent No. 2 was admitted as member
of the society. The said respondent No. 2 inducted M/s. Anita Enterprises and
M/s. Anita Medical Systems P. Ltd. being appellants no. 1 and 2 in Room No. 1
and 2 of the said premises on monthly rent. Both the appellants were put in
possession of the aforesaid premises. Thereafter certain dispute arose between
respondent No. 2 and the appellants. The appellants filed two separate suits for
a declaration that they were tenants with regard to the aforesaid premises. The
suit was dismissed by Trial Court.
Meanwhile the society raised a dispute before the
Co-operative Court u/s.91 of the Maharashtra Co-op. Societies Act, 1960 for
evicting the appellants from the premises. The Co-op. Court decided the dispute
in favour of the society and passed eviction order against the appellant. The
Division Bench of the High Court upheld the orders of the Co-op Court.
S. 12 of the Maharashtra Co-op. Societies Act lays down that
the Registrar shall classify all societies into one or other of the classes of
societies defined in S. 2 and also into such subclasses thereof, as may be
prescribed. Rule 10 prescribes such classification of the societies and under
Rule 10(1)(5) three types of housing societies have been enumerated.
|
Class |
Sub-class |
Examples of societies falling in the class or subclass, |
| 1. | 2. | 3 |
| Housing society |
(a) Tenant ownership housing society |
Housing societies where land is held either on leasehold or freehold basis by societies and houses are owned or are to be owned by members. |
|
(b) Tenant Co-partnership housing society. |
Housing societies which hold both land and buildings either on leasehold or freehold basis and allot them to their members. |
|
|
(c) Other housing societies. |
House mortgage societies and House construction societies. |
In the case of tenant co-partnership housing society, it is
clear from the rules that the ownership of the land and building both remains
with the society and a member cannot be said to be co-owner, but in the case of
tenant ownership housing society, the ownership of the land remains with the
society, but ownership of the building/flat vests in the member. So far as
tenant within the meaning of S. 5(11) of the Rent Act is concerned, he has a
mere right to occupy. He is entitled to the protection of the statute so long as
grounds for eviction are not made out and can be evicted only by instituting a
suit in a Court enumerated u/s.28 of the Rent Act.
The concept of tenant co-partnership housing society was
considered by the Apex Court in the case of Sanwarmal Kejriwal v. Vishwa
Co-operative Housing Society Ltd., (1990) 2 SCC 288, wherein it was noticed
that the title to the property, i.e., the land and building/flat both,
vests in the society.
The status of a member in a tenant co-partnership housing society is very peculiar. The ownership of the land and building both vests in the society and the member has, for all practical purposes, right of occupation in perpetuity after the full value of the land and building and interest accrued thereon have been paid by him. Although dejure, he is not owner of the flat allotted to him, but, in fact, he enjoys almost all the rights which an owner enjoys, which includes right to transfer in case he fulfils the two pre-conditions, namely, he occupies the property for a period of one year and the transfer is made in favour of a person who is already a mem-ber or a person whose application for membership has been accepted by the society or whose appeal u/ s.23 of the Societies Act has been allowed by the Registrar or to a person who is deemed to be a member U/ss.(IA) of S. 23 of the Societies Act. In case any of these two conditions is not fulfilled, a member cannot be said to have any right of transfer. Thus, the law laid down by the Apex Court in the case of Sanwarmal (supra) is that a member has more than a mere right to occupy the flat, meaning thereby higher than tenant, which is not so in the case of a tenant within the meaning of S. 5(11) of the Rent Act. Therefore the status of a member in the case of tenant co-partnership housing society cannot be said to be that of a tenant within the meaning of S. 5(11) of the Rent Act, as such there was no relationship of landlord and tenant between the society and the member. Thus the appellants were not entitled to protection of the Rent Act. In view of the above, the appeals were dismissed.
[M/s. Anita Enterprises & Anr. v. Belfer Co-op. Hsg. Society Ltd. & Ors., AIR 2008 SC 746]
[The Registrar of Firms, Societies and Non-Trading
Corporations, West Bengal & Anr. v. Tarun Manna & Ors., AIR 2010 Calcutta
79]
The Registrar of Firms had declined to grant registration of
the firm which was desirous of carrying on business in foreign liquor as
wholesaler on the ground that the firm had not yet obtained any valid licence
from the concerned authority to start the business.
The Court observed that the partnership is the relation
between persons created by contract whereby the parties to such contract have
agreed to share the profits of a business with further condition that the
proposed business must be carried on by all or any of them acting for all.
Therefore the first condition of existence of a partnership is that there must
be an agreement by the partners to share the profits of a business. The other
condition is that such business must be agreed to be carried on by all or any of
them acting for all; in other words there must be existence of agency among the
partners of the proposed business as specifically recognized in S. 18 of the
Act.
Although a partnership firm can come into existence and
function without being registered at its own risk and at the risk of a third
party who deals with it, it is not the law that in order to have registration of
the firm the partners must be first exposed to risk of loss by dealing with the
third party without having any registration and then can only acquire the right
to apply for registration. There are various types of businesses which cannot be
even undertaken without first taking licence from appropriate authority.
Partnership is the relation among partners created by agreement and the
objection of S. 58 of the Act is to register such agreement by keeping note of
the particulars of the agreement arrived at by the parties for the benefit of
the partner as well as third parties who propose to deal with such firm. If
other formalities u/s.58 are satisfied the Registrar is bound to register the
firm.
[R. K. Jain v. Appellate Tribunal For Foreign Exchange,
2010 (252) ELT 366 (CIC)]
The applicant sought information from the Asst. Registrar of
the Appellate Tribunal For Foreign Exchange, namely :
“please provide inspection of all orders passed by ATFE
during the year 2008 and from 1-6-2009 to 15-8-2009.”
“Please provide list of cases in which orders are reserved
but not yet pronounced till 10-8-2009.”
The CPIO and the Appellate Authority declined to disclose the
information to the applicant on the ground that the applicant had not mentioned
the public interest for inspecting the records.
On further appeal the Central Information Commission
held that it is inconceivable why an applicant should be required to state
the public interest for receiving information which was so obvious as the orders
of a legally constituted authority. Such decisions are by their very nature in
the public domain and ought to be ordinarily accessible to any applicant.
The information relates to an essential function for which
this public authority was constituted, and there can be no reason why an
information about hearings of cases, their dates, reserving orders for
pronouncement, and pronouncement of the orders after these were reserved —
should be declined to a citizen. It was, in fact, expected of the public
authority that such essential information about its functioning should be
centrally tabulated and kept available for anyone seeking inspection.
It was held that the CPIO and the Appellate Authority had
been grossly errant in discharging their responsibilities under the RTI Act.
It was directed that the information be disclosed to the appellant through
inspection of the documents mentioned in the appellant’s RTI application.
[Mrs. B. Maragathamani & Ors. v. Member Secretary, Chennai
Metropolitan Development Authority & Ors., AIR 2010 Madras 61]
The petitioners 1 to 5 were holder of a valid power of
attorney.
The application for permission of construction of building
was rejected on the ground that the building was owned by several others holding
undivided shares of land and they have not given any registered power of
attorney in favour of the applicant.
The Court observed that S. 17 of the Registration Act, 1908
provides for compulsory registration of documents. S. 18 relates to the
documents of which registration is optional. S. 17 contemplates compulsory
registration of documents whenever some interest over immovable property or some
non-testamentary instruments transferring or assigning any decree or order of a
Court. None of the clauses contemplated under that Section requires a
registration of a power of attorney, which does not convey or confer any title
or interest whether vested or contingent.
As against S. 17, S. 18 gives an option to the executant of a
document to register the documents. The document in question is in respect of an
authorisation to some of the purchasers in an apartment seeking for
regularisation.
The authorisation does not indicate any transfer of title or
interest or any other matter covered u/s.17 and for that matter even u/s.18 of
the Registration Act. The power of attorney had been notarised by one Advocate
and Notary, Chennai. S. 85 of the Indian Evidence Act contemplates a presumption
to be drawn by the Court as to certain powers of attorney. By that Section the
Court shall presume that every document purporting to be a power of attorney and
to have been executed before and authenticated by a Notary Public was so
executed and authenticated. Certainly the power of attorney in question would be
considered to be a valid and legal document for the purpose of making an
application for regularisation and such application cannot be rejected solely on
the ground that it is not registered.
The Court held that the power of attorney does not create any
interest in immovable property. It is further held even on the question of
compulsory registration of the power of attorney, which is not covered u/s.17,
that only when the document creates an interest in immovable property, it is
compulsorily registrable.
Hence, the order rejecting the application for regularisation
solely on the ground that the power of attorney had not been registered was set
aside.
[Dani Ram (deceased by L.Rs) v. Jamuna Das
(deceased by L.Rs) AIR 2010 (NOC) 524 (All) 2010 (1) ALJ 706]
The plaintiff had claimed rights as co-sharer by way of
inheritance from one Mr. Girdhar who was one of the co-sharers. The sale deed
dated 20-10-1914 was reference in evidence, however it was not the basis of
plaint, neither was it relied upon by the plaintiff in pleading. On
admissibility of certified copy of the said sale deed, the Court held that S. 90
and S. 90-A of the Indian Evidence Act as applicable to the State of U.P.
provide that where a document which is more than 20 years old is produced from
proper custody, the Court may presume that the signature and every other part of
such document, which purports to be in the handwriting of any particular person,
is in that person’s handwriting and in case executed and attested, that it is
duly executed and attested by the persons by whom it is said to be so executed
and attested. Similarly, S. 90-A of the Act provides that where any registered
document or a duly certified copy thereof is produced from the proper custody,
the Court may presume that the original was executed by the person by whom it
purports to have been executed. In other words, a certified copy of a document
which is more than 20 years old and is produced in evidence from the proper
custody, the presumption would be that it bears the signature of the person and
that it is duly executed and attested by such a person. Therefore, in such
circumstances, it is not necessary to produce the original of such document and
to prove it. However, Ss.(2) of S. 90-A places a rider and provides that such a
presumption shall not be available where the document is the basis of the suit
or of defence or is relied upon in a plaint or written statement. On perusal of
the plaint it reveals that the plaintiff had claimed rights as co-sharer in the
offerings by way of inheritance from Girdhar who was admittedly one of the
co-sharers and whose rights devolved upon his daughter’s son Dulli, who happened
to be the father of the plaintiff. There was no mention in the plaint about the
sale deed dated 20-10-1914 or that the plaintiff is claiming rights on the basis
of the sale deed. A reference of the said sale deed had come only in evidence.
Therefore the sale deed was neither the basis of the plaint, nor had it been
relied upon by the plaintiff in the pleadings. Hence, Ss.2 of S. 90-A of the
Evidence Act would not be attracted, and as such the presumption drawn in favour
of the sale deed by the lower Appellate Court was legally correct. Even though
the original of the said sale deed was not produced and only a certified copy
thereof was brought on record coupled with the fact that its production from the
proper custody is not disputed, it was admissible in evidence u/s.90 and
u/s.90-A of the Act.
[Rajiv Dinesh Gadkari v. Smt. Nilangi Rajiv Gadkari,
AIR 2010 (NOC) 538 (Bom.), 2010 (1) AIR Bom R. 45]
The husband had asked for exemption from attending the Court
as he was residing in foreign country. As per provisions of S. 13 of the Family
Courts Act, 1984 no party to a suit or proceeding before a Family Court shall be
entitled, as of right, to be represented by a legal practitioner, though
normally the Court may give permission in the interest of justice for taking
assistance of legal expert. He cannot be permitted to give his evidence through
his power of attorney. It was held that in matrimonial matter, presence of
spouses before the Court was vital as there were certain aspects which are only
within the personal knowledge of the spouse. In fact, it was the duty of the
Family Court u/s.9 of the Act to make efforts for settlement. The power of
attorney holder cannot give evidence regarding the facts which were only within
the personal knowledge of either of the husband or wife.
Deficiency in service by Doctor — Consumer Protection Act
1986.
Smt. Harjit Kaur, the wife of complainant received
accidental burns while making tea on the stove. She sustained 50% burns
involving both upper limbs, part of trunk and most of both lower limbs. The
wife was taken to Daya Nand Medical College and Hospital, Ludhiana where she
responded to the treatment well. Subsequently she was shifted to PGI Hospital
Chandigarh where Senior Resident Dr. Varun Kulshrestha attended to her. The
condition of wife started improving at PGI.
She was transfused A+ blood which was her blood group.
Subsequently, the patient was transfused B+ blood group although her blood
group was A+. In the night the urine of the patient was reddish like blood and
the attendant nurse was informed accordingly. As to the bad luck of Smt.
Harjit Kaur, on the next day, again one bottle of B+ blood group was
transfused. Because of transfusion of mismatched blood, the condition of Smt.
Harjit Kaur became serious; her hemoglobin levels fell down. and urea level
went very high. Later on, it transpired that due to transfusion of mismatched
blood, the kidney and liver of the patient got deranged. The complainant made
a written complaint to the Head of the Department of Plastic Surgery for
mismatched transfusion of blood to the patient whereupon an inquiry was
conducted through senior doctor and wrong transfusion of the blood to the
patient was found. The condition of Smt. Harjit Kaur started deteriorating day
by day and she ultimately died. In the complaint before the State Commission,
the complainants alleged that the death of Smt. Harjit Kaur was caused due to
the negligence of Dr. Varun Kulshrestha and the medical staff at PGI.
The State Commission after hearing the parties and upon
consideration of the materials made available to it, came to the conclusion
that there was serious deficiency and negligence on the part of PGI and its
attending doctor(s)/staff in transfusion of wrong blood group to the patient
which resulted in death of Smt. Harjit Kaur. The State Commission in its order
held that PGI was liable to pay sum of rupees two lac to the complainant.
The National Commission upheld the above order. On further
appeal the Court observed that the term negligence is often used in the sense
of careless conduct. In Grill v. General Iron Screw Collier Co. (1866)
L.R. 1 C.P. 600 at 612, Wills J. referred to negligence as “. . . the absence
of such care as it was the duty of the defendant to use.”
The Court further observed that insofar as civil law is
concerned, the term negligence is used for the purpose of fastening the
defendant with liability of the amount of damages. To fasten liability in
criminal law, the degree of negligence has to be higher than that of
negligence enough to fasten liability for damages in civil law.
As for the distinction between negligence in civil law and
in criminal law, it has been held that there is a marked difference as to the
effect of evidence, namely, the proof, in civil and criminal proceedings. In
civil proceedings, a mere preponderance of probability is sufficient, and the
defendant is not necessarily entitled to the benefit of every reasonable
doubt; but in criminal proceedings, the persuasion of guilt must amount to
such a moral certainty as convinces the mind of the Court, as a reasonable
man, beyond all reasonable doubt.
With regard to the professional negligence, it is now well
settled that a professional may be held liable for negligence if he was not
possessed of the requisite skill which he professed to have possessed or, he
did not exercise, with reasonable competence in the given case the skill which
he did possess. It is equally well settled that the standard to be applied for
judging, whether the person charged has been negligent or not, would be that
of an ordinary person exercising skill in that profession. It is not necessary
for every professional to possess the highest level of expertise in that
branch which he practises.
The Supreme Court held that the available material placed
before the State Commission shows that at the time of her admission, Smt.
Harjit Kaur was taking medicine orally and passing urine. Her condition had
substantially improved at PGI and she had no signs of septicemia. It was only
after mismatched blood transfusion B+ on two consecutive days, that she became
anemic (her hemoglobin level was reduced to 5 per gram) and her kidney and
liver were deranged. Although she survived for about 40 days after mismatched
blood transfusion but from that it cannot be said that there was no causal
link between the mismatched transfusion of blood and her death. Wrong blood
transfusion is an error which no hospital/doctor exercising ordinary care
would have made. Such an error is not an error of professional judgment but in
the very nature of things a sure instance of medical negligence.
Precedent — Different view amongst Co-ordinate Benches of
Tribunal — Matter has to be referred to larger Bench.
A dispute arose before the Tribunal in the context of sales
tax liability towards development charges received by the appellant builders.
The Tribunal observed that it was not in agreement with the
view expressed by its earlier Co-ordinate Bench. Despite the existence of the
regulation 54(a)(i) of Karnataka Appellate Tribunal Regulations stipulating
that in the event of conflict of decisions, the matter is required to be
referred to the Chairman, that was not done in this matter. Thus the matter
referred to Tribunal to constitute a special bench in view of the conflicting
opinions of the co-ordinate benches of the Tribunal in terms of regulation
54(a)(i) of the Act.
[ Continental Builders & Developers v. State of
Karnataka, (2009) 21 VST 74 (SC)]
Co-owner sale — Release of share by co-owner to other
co-sharer did not amount to sale or conveyance — S. 2(10) Stamp Act 1899.
The collector passed an order u/s.47-A of the Indian Stamp
Act by which he had imposed stamp duty on the respondents by coming to the
conclusion but the release deed dated 7-6-2002 was not a release deed but was
a conveyance within the meaning of S. 2(10) and stamp duty was attracted on
it. The court held that Release deed made by two co-sharers to other
co-sharers who had existing right in the property and it was simply an
extension of their existing share and no stranger had been admitted to the
property. Therefore it did not amount to a transfer of the property at all and
the release deed would be covered by the Full Bench decision of this Court in
the case of Balwant Kaur v. State reported in AIR 1984 Allahabad 107.
The co-owners in this case had transferred their shares to
other co-sharers who had pre-existing right in the property. It did not amount
to any transfer, rather it only amounted to an extension of their existing
share. Since there was no transfer to any outsider, it would not amount to a
sale or conveyance within the meaning of S. 2(10) even if the explanation is
taken into account.[ State of UP v. Dharam Pal & Anr., AIR 2009 (NOC)
1372 (All.)]
Appearance of retired members of CESTAT — Prohibition of
practice by Ex-president, vice-presidents or members of CESTAT, before it held
to be reasonable restriction : Constitution of India Art. 14, 19(1)(g) and 21.
The issue before the High Court was in respect of the right
of a member/president/vice-president of the Customs Excise Service Tax
Appellate Tribunal (‘CESTAT’) to appear, act and/or plead on their demitting
office before the very same Tribunal. The Legislature had sought to debar all
such like persons, by insertion of Ss.(6) to S. 129 of the Customs Act, 1962.
The aid provision was introduced by S. 110 of the Finance Act 2007 w.e.f.
11-5-2007.
The petitioners being aggrieved, have challenged the said
provision, on grounds that S. 129(6) of the Customs Act is ultra vires
Articles, 14, 19(1)(g) and 21 of the Constitution of India. Secondly that, in
any event, S. 129(6) of the Act has no applicability to the petitioners in
view of the fact that at the time when they were appointed to CESTAT and also
at a point in time when they demitted the office, the said provision was not
on the statute book.
The High Court observed that there was a time when a son
would appear in the court presided over by his father and no questions were
asked. The validity of a statute cannot be judged on the basis of rights of an
individual when an individual’s rights are pitted against a greater public
weal. Indi-vidual rights have to give way to a greater public interest.
The charge of violation of Article 14 was levelled on the
ground that provision was discriminatory, inasmuch as members of other
Tribunals, such as, the Income-tax Appellate Tribunal and the Appellate
Tribunal for Foreign Exchange were not barred from appearing, acting or
pleading before Tribunals of which they have been members.
The Court held that the purported discrimination claimed by
the petitioners on account of the fact that members of Tribunals such as the
Income-tax Appellate Tribunal and the Appellate Tribunal for Foreign Exchange
were not visited with such disability, was untenable. The fact that a
beginning had been made by incorporating such like provisions in respect of
some tribunals, such as, the CESTAT, the Central Administrative Tribunal
constituted under the Administrative Tribunal Act, 1985 would only conclude
that the impugned provision was not discriminatory. In the opinion of the
Court the step was taken towards insertion of the impugned provision was
reformatory and not discriminatory, as contended by the petitioners. Before
inserting the impugned provision, inputs were taken from various sources,
including the sitting president who was none else than a retired judge of a
High Court. The recommendation must have been made by a high functionary such
as the President of CESTAT, with a keen sense of responsibility after taking
into account his experience gained both on the judicial and administrative
side in the working of CESTAT.
The predominant rationale for introduction of this
provision is to strengthen the cause of administra-tion of justice then the
restriction cannot be said to be unreasonable under Article 19(6) of the
Constitu-tion. The petitioners have acquired expertise in the field of law
pertaining to customs, excise and ser-vice tax. Therefore the impugned
provision does not completely prohibit the petitioners from practising their
profession. The prohibition is with respect to a forum. The petitioners’
expertise can and is sought to be applied in superior forums, such as the High
Courts and also the Supreme Court. It would help to develop and foster entry
of fresh blood and talent at the level of the tribunals and at the same time
make available much needed expertise in the superior forums. There is no
denying that there is pauctity of lawyers who are experts in fields such as,
customs, excise and service tax in superior courts. The amendment meets
various facets of public interests and hence cannot be dubbed as one which was
unreasonably restrictive or one which completely forecloses all opportunities
available to the petitioners to exercise their profession.
There was a single tribunal, that is CESTAT which
adjudicates upon matters which pertain to customs, excise and service tax. The
members, vice-president and president are the same persons who hear and
adjudicate upon the matter involving the aforementioned three streams of law.
That being the position, the prohibition contained in the impugned provision
gets attracted no sooner the person who has held the office of the
president/vice-president or a member of the Appellate Tribunal which is a
common tribunal, that is, the CESTAT, seeks to appear, act or plead before the
CESTAT. It makes no difference that corresponding amendments have not been
brought about in the Excise Act or the Finance Act, 1994, because the
prohibition is not attached to the stream of law which is practised before
CESTAT. The prohibition or the bar on appearance is vis-à-vis the forum
and the trigger for invoking the bar is that the person concerned should have
held the office of a member, vice-president or president of the said forum.
Further there was no reason to draw a distinction between
persons who have demitted office prior to the insertion of the impugned
provision, and those who would demit office thereafter. The writ petition was
accordingly dismissed.
[ P. C. Jain v. UOI, 2009 (236) ELT 737 (Del.)
itatonline.org]
20 Sale becomes absolute and title vests in
auction purchaser on issuance of sale certificate : Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 (SARFAESI Act).
As the borrowers have not complied with the notice of demand
issued under 13(2) of SARFAESI Act, the second respondent/bank directed the
borrowers to discharge the loan amounts with interest within 60 days. The
borrowers invoking S. 17 of the SARFAESI Act filed application before the Debts
Recovery Tribunal II, Chennai, challenging the said notices issued by the second
respondent/bank, but the same were dismissed.
In view of the default in discharging the loans by the
borrowers, the second respondent/bank, exercising its powers u/s.13(4) of the
SARFAESI Act issued notice informing the borrowers that constructive possession
of the secured assets were taken over by them and the same would be through for
sale after the expiry of 30 days from that date, by way of public auction. In
the absence of any headway by the borrowers in re-payment, the third respondent,
who is the authorised officer of the second respondent bank, brought the
property for public auction.
The SARFAESI Act is a Special Act which aims to accelerate
the growth of economy of our country, empowering the lenders, namely,
nationalised banks, private sector banks and other financial institutions to
realise their dues from the defaulted borrowers who are very lethargic in
repayment of the loans borrowed by them, by exercising their right of
expeditious attachment and foreclosure for the enforcement of security.
The High Court observed that Ss.(8) of S. 13 of the Act gives
an opportunity to the borrowers to redeem the property given in security to the
secured creditor by paying the dues on or before the date fixed for sale and if
the payment is made, the secured creditor shall not proceed with the sale or
transfer. But, in the case on hand, the borrowers did not come forward to settle
the dues on or before the date fixed for sale. The borrowers approached the
secured creditor, by way of three cheques after the sale was confirmed in favour
of the appellant, who was the highest bidder and therefore, the secured creditor
rightly returned those cheques stating that the sale was already over and sale
certificate alone was to be issued, which would be done shortly. Subsequently,
the sale certificate came to be issued by the third respondent authorised
officer as per sub-rule (7) of Rule 9 of the SARFAESI Rules.
The borrowers should have approached the secured creditor or
the authorised officer before the date fixed for sale and not after the sale as
provided U/ss.(8) of S. 13 of the SARFAESI Act. Only if the borrowers approach
the secured creditor or the authorised officer before the date fixed for sale or
transfer and tender or pay all the dues to the secured creditor, the Section
creates a bar on the secured creditor or authorised officer to proceed further
with the proposed sale or transfer. In this case, admittedly, the date fixed for
the sale was 19-12-2005. But, even according to the version of the borrowers,
they approached the secured creditor only on 2-1-2006. In such circumstances,
the contention of the borrowers is without any basis and contrary to the
provisions contained in Ss.(8) of S. 13 of the Act.
[ K. Chidambara Manickam v. Shakeena & Ors., AIR 2008 Madras 108]
Appeal : Territorial jurisdiction of Court — Where
significant part of cause of action arises : S. 20 of CPC.
The issue that arose for consideration was whether the
Delhi High Court ought to exercise jurisdiction in respect of the impugned
order passed by CESTAT, New Delhi.The respondent had raised preliminary objection pertaining
to lack of territorial jurisdiction of the High Court of Delhi. The appellant
operates from plot at Bareilly, U.P. The Commissioner of Central Excise,
Meerut-II issued show-cause notice; after adjudication the Commissioner
confirmed the demand and directed recovery of cenvat together with penalty. It
was that order which was appealed before CESTAT, New Delhi.The Court observed that the significant part of the cause
of action should have arisen within the territorial sway of the Court which is
chosen by the Petitioner for ventilation of his grievances. The Court relied
on the decision in the case of Kusum Ingots and Alloys Ltd. v. Union of
India, AIR 2004 SC 2321 which clarifies the law as under :
“When an order, however, is passed by a Court or Tribunal
or an executive authority whether under provisions of a statute or
otherwise, a part of cause of action arises at that place. Even in a given
case, when the original authority is constituted at one place and the
Appellate authority is constituted at another, a writ petition would be
maintainable in the High Court within whose jurisdiction it is situate
having regard to the fact that the order of the appellate authority is also
required to be set aside and as the order of original authority merges with
that of the appellate authority.”…….
“We must, however, remind ourselves that even if a small
part of cause of action arises within the territorial jurisdiction of the
High Court, the same by itself may not be considered to be a determinative
factor compelling the High Court to decide the matter on merit. In
appropriate cases, the Court may refuse to exercise its discretionary
jurisdiction by invoking the doctrine of forum convenience.”
In Stridewell Leathers (P) Ltd. v. Bhankerpur Simbhaoli
Beverages (P) Ltd., (1994) 1 SCC 34, the issue concerned was which High
Court would be the appropriate forum to adjudicate an appeal from the Company
Law Board, Principal Bench, New Delhi. The Supreme Court opined that — “the
expression “the High Court’ in S. 10-F of the Companies Act means the High
Court having jurisdiction in relation to the place at which the registered
office of the company concerned is situate as indicated by S. 2(11) read with
S. 10(1)(a) of the Act. Accordingly, the appeal against the order of the
Company Law Board would lie in the Madras High Court which has jurisdiction in
relation to the place at which the registered office of the company concerned
is situate and not the Delhi High Court merely because the order was made by
the Company Law Board at Delhi.
Similarly the Division Bench of the High Court of
Judicature at Bombay in Sun Pharmaceutical Inds. Ltd. v. Union of India,
2007 (218) ELT 495 (Bom.) held that even though the Settlement Commission was
physically located at Mumbai, since it was dealing with a case arising in
Tamil Nadu, it could be deemed to be located in that State and accordingly
amenable to the writ jurisdiction of the Madras High Court; the Bombay High
Court declined to exercise writ jurisdiction primarily because only a small
part of the cause of action had arisen within its jurisdiction.
The Court further observed that on a reading of Article
226(1) of the Constitution it will be palpably clear that without the next
following provision, that is, sub-clause (2) a High Court may not have been
empowered to issue a writ or order against a party which is not located within
the ordinary territorial limits of that High Court. The power to issue
writs against any person or Authority or government even beyond the
territorial jurisdiction of any High Court is no longer debatable. The rider
or prerequisite to the exercise of such power is that the cause of action must
meaningfully arise within the territories of that particular High Court. It
does not logically follow, however, that if a part of the cause of action
arises within the territories over which that High Court holds sway, it must
exercise that power rather than directing the petitioner to seek his remedy in
any other High Court which is better suited to exercise jurisdiction for the
reason that the predominant, substantial or significant part of the cause of
action arises in that Court. In other words any High Court is justified in
exercising powers under Article 226 either if the person, authority or govt.
is located within its territories or if the significant part of the cause of
action has arisen within its territories. The rationale of S. 20 of the Code
of Civil Procedure would, therefore, also apply to Article 226(2) of the
Constitution.
Thus the High Court should not exercise jurisdiction only
because the Tribunal whose order is in appeal before it, is located within its
territorial boundaries.
Merely because the order that is impugned has been
challenged by the CESTAT, New Delhi, the High Court at New Delhi ought not
exercise jurisdiction. The appeal was returned to be filed in the appropriate
court in accordance with law.
[Brindavan Beverages P. Ltd. v. Commissioner of C.
Ex., Meerut (2009) 237 ELT 658 (Del.)]
19 Gift of share in immovable property in a
co-operative society requires registration : Registration Act S. 17(1)(A)
The gift of share in immovable property in a co-operative
society or a gift of share in the society, which has the effect of transfer of
rights over the immovable property, is not exempt from being registered.
[ Brigadier Harjit Singh v. M/s. Rangmahal Theatre,
AIR 2008 (NOC) 1334 (Bom.)]
18. Nomination — Law
relating to nomination u/s.109A of Companies Act and S. 9.11 of Depositories
Act, 1996.
[Harsha Nitin Kokate v.
The Saraswat Co-op. Bank Ltd. & Ors., Notice of Motion No. 2351 of 2008 in
Suit No. 1972 of 2008, dated 20-4-2010, Bombay High Court.]The plaintiff, wife of the
late Shri Nitin Kokate claimed right and interest in the shares of her husband
held in Demat Account. Her husband had executed a nomination in the prescribed
form in favour of his nephew which was filed with the depository participant
and so registered. The nephew had also claimed right title and interest in the
shares pursuant to the nomination executed in his favour. The nomination had
been executed well prior to the death of the deceased and well after his
marriage with the plaintiff.The issue arose for
consideration as to the effect of such nomination. The Court observed that the
nomination form itself shows that the rights of transfer and/or the amount
payable in respect of the securities held by the late Nitin Kokate, vests in
the said nominee. The law relating to nomination is set out in S. 109A of the
Companies Act pursuant to the amendment which came into effect on 31st October
1998. It is common knowledge that prior to 1996, shares were not held in
dematerialised form. Consequent upon the dematting of the shares the share
certificates in physical form are not mandatorily required to be issued by the
limited companies listed on the Stock Exchanges. Shares can be transferred by
word of mouth or on the Internet from person to person. Upon such transfer the
membership rights of the holder of the shares change. Since the share is an
intangible movable property, it is bequeathable estate. The nomination in
respect of the shares is, therefore, important. S. 109A sets out the rights of
the holder of shares to nominate as well as the rights of the nominees.The Depositories Act 1996,
S. 9.11 thereof relates to transmission of securities in the case of
nomination. Upon such nomination the dematted securities automatically get
transferred in the name of the nominee upon the death of the holder of shares.
The nomination is required to be duly registered with the depository
participant (Bank) in accordance with the Business Rules. On death of the
holder of the shares the nominee would be entitled to elect to be registered
as a beneficiary owner by notifying the Bank along with the certified copy of
the death certificate. The Bank would be required to scrutinise the election
and nomination of the nominee registered with it. Such nomination carries
effect notwithstanding anything contained in a testamentary disposition or
nominations made under any other law dealing with the securities. The last of
the many nominations would be valid. Under the said Section the holders of the
shares would nominate any person in whom the securities would vest in the
event of his death.The nomination would have
the effect of vesting in the nominee complete title in the shares. He would be
entitled to elect to be registered as a beneficial owner of the shares or he
would have the right to transfer the shares. These are inter alia the rights
of every shareholder of listed companies. These rights show that the vesting
of the shares is upon the death of the shareholder, provided only that the
nomination is made as per the procedure set out by the Depository Participant.
The purpose and object of this Section is to simplify the procedure relating
to the transmission of shares which is otherwise an intangible movable
property.Under the Insurance Act,
the nomination entails payment by the insurance company to the nominee to
obtain a complete discharge. Once the amount under the policy is paid to the
nominee, the nominee would hold it in trust or the estate, because under the
Insurance Act there is no legislative provision that the nominee would obtain
any other right.It may be mentioned that
the position u/s.30 of the Maharashtra Cooperative Societies Act is similar
for nominees in respect of shares in a housing society. Hence in a cooperative
society also the shares of the member can be simplicitor transferred to the
nominee which transfer would effectually discharge the society as against any
other person making a demand. Such a transfer, therefore, cannot and does not
result in vesting of the flat in such nominee. Hence such nominee is merely a
trustee for the estate of the deceased. The society is not concerned with the
dispute amongst the heirs of the deceased.The provision pursuant to
the amendment of the Companies Act is quite the contrary. The nomination
u/s.109A of the Companies Act does not entail mere payment of the amount of
shares. It specifically vests the property in the shares in the nominee, in
the event of the death of the holder of the shares.It is observed that the
word ‘vest’ is a word of variable import even under Indian Statutes. Under the
Insolvency Act which provides that the property vests in the Receiver. Such
vesting is held to be temporary and only for the purpose of management of the
properties of the insolvent for payment of his debts after distributing his
assets. Consequently, the Receiver would have no interest of his own in the
property vested in him. The vesting under the Land Acquisition Act is shown to
be different. Under that Act the property would vest ‘absolutely in the
Government, free from all encumbrances’. Hence upon such vesting the property
acquired becomes the property of the Government without any conditions or
limitations either as to its title or possession. A reading of S. 109A of the
Companies Act and S. 9.11 of the Depositories Act makes it abundantly clear
that the intent of the nomination is to vest the property in the shares which
includes the ownership rights thereunder in the nominee upon nomination
validly made as per the procedure prescribed, as has been done in this case.
These Sections are completely different from S. 39 of the Insurance Act which
requires a nomination merely for the payment of the amount under the Life
Insurance Policy without confirming any ownership rights in the nominee or
u/s.30 of the Maharashtra Cooperative Societies Act which allows the society
to transfer the shares of the member which would be valid against any demand
made by anydemand made by any other person upon the society.Since the nomination is shown to be correctly made by her husband who was the holder of the suit shares, the plaintiff wife would have no right to get the shares of her deceased husband sold or to otherwise deal with the same.
19. Parking spaces —
Interpretation — Meaning ‘Flat’ — Separate self-contained part of building —
Promoter has no right to sell ‘Stilt parking spaces’.
[Nahalchand Laloochand
P. Ltd. v. Panchali Co-op. Housing Society Ltd., AIR 2010 SC 3607]The issue which arose for
consideration was in respect of encroachment on the parking spaces in the
stilt portion of the building by the promoter/developer of the building. The
promoter set up the case that under the agreement for sale it has sold flats
in its building and no other portion. The High Court had held that the stilt
parking spaces cannot be put on sale by the developer as he ceases to have any
title on the same and it becomes the property of society. The appeal arises
from the aforesaid order of the High Court which have effect on rights on
several developers.The Supreme Court observed
that the stilt car parking spaces is part of the common amenities and it
cannot be treated to be a separate premises/garage which could be sold.The definition of ‘flat’
occurring in S. 2(a-1) of MOFA includes an ‘apartment’. It must be a separate
unit conforming to the description capable of being used for one of these
purposes, namely, residence, office, showroom, shop, godown or for industrial
or business purposes. Alternative uses in S. 2(a-1) of MOFA do expand the
ordinary meaning of the term ‘flat’, but nevertheless such premises that form
part of building must be separate and self-contained.The words ‘and includes a
garage’ in definition of word flat in S. 2(a-1) are put in brackets. The
bracketed phrase is indicative of the legislative intention to include a
‘garage’ as appurtenant or attachment to a flat which satisfies the
ingredients of S. 2(a-1). The open parking space does not tantamount to a
‘garage’ within the meaning of S. 2(a-1). The word ‘garage’ may not have
uniform connotation, but definitely every space for parking motor vehicles is
not a garage. A roofless erection could not be described as garage. What is
contemplated by a ‘garage’ in S. 2(a-1) is a place having a roof and walls on
three sides. It does not include an unenclosed or uncovered parking space.
That being so,
open parking space cannot be sold as flat or along with flat.Stilted portion or stilt
area of building is not a garage under the Act. A stilt area is a space above
the ground and below the first/floor having columns that support the first
floor and the building. It may be usable as a parking space, but for the
purposes of the Act, such portion could not be treated as garage. The 1963 Act
(MOFA) does not define nor does it explain ‘common areas and facilities’
though said phrase is used at various places in that Act. This expression is
however defined in S. 3(f) of the 1970 Act (MAOA). Looking to the scheme and
object of MOFA, and there being no indication to the contrary, there is no
justification to exclude parking areas (open to the sky or stilted portion)
from the purview of ‘common areas and facilities’ under MOFA.It is true that under MOFA
it is for promoter to prescribe and define at the outset the ‘common areas’,
but it cannot be said that the parking area cannot be termed as part of
‘common areas’ if they are not so defined by promoter. The fact that as
open/stilt parking space is treated as part of ‘common areas’, every flat
purchaser will have to bear proportionate cost for the same although he may
not be interested in such parking space at all cannot be a consideration
relevant for the consideration of term ‘common areas and facilities’ in MOFA.
It is not necessary that all flat purchasers must actually use ‘common areas
and facilities’ in its entirety. By treating open/stilt parking space as
common area, the promoter is not put to any prejudice financially since he is
entitled to charge price for the common areas and facilities from each flat
purchaser in proportion to the carpet area of the flat.MOFA mandates the promoter
to describe ‘common areas and facilities’ in the advertisement as well as the
‘agreement’ with the flat purchaser and the promoter is also required to
indicate the price of the flat including the proportionate price of the
‘common areas and facilities’. If a promoter does not fully disclose the
common areas and facilities, he does so at his own peril. The ‘stilt parking
space’ is not covered by the term ‘garage’ much less a ‘flat’ and that it is
part of ‘common areas’. The only right that the promoter therefore has, is to
charge the cost thereof in proportion to the carpet area of the flat from each
flat purchaser. Such stilt parking space being neither ‘flat’ under S. 2(a-1)
nor ‘garage’ within the meaning of that provision is not saleable at all. The
promoter has no right to sell any portion of such building which is not ‘flat’
within the meaning of S. 2(a-1) and the entire land and building has to be
conveyed to the organisations; the only right remains with the promoter is to
sell unsold flat. Promoter has no right to sell ‘stilt parking spaces’ as
these are neither ‘flat’ nor appurtenant or attachment to a ‘flat’.
17. Binding precedents —
Tribunals are bound by the judgment of the High Court in absence of any contrary
judgment of the jurisdictional High Court.
[C.C.E. Mumbai-III v.
Valson Dyeing Bleaching & Printing Works, 2010 (259) ELT 33 (Bom.)]In the instance case the
adjudicating authority had determined the annual capacity of production (ACP)
and accordingly basic duty liability of the assessee was determined. The CIT(A)
upheld the said order. The assessee preferred the appeal to the Tribunal.The respondent during the
course of hearing had relied on judgment of the Madras High Court in the case
of Beauty Dyers v. Union of India, 2004 (166) ELT 27 (Mad.) with one more
judgment in the case of respondent assessee itself, reported in 2004 (163) ELT
28. In the case of Beauty Dyers (supra), Madras High Court had declared the
Notification No. 42/98, issued in exercise of powers u/s.3A of the Act, under
which ACP was determined, as constitutionally invalid. The said judgment of
the Madras High Court was followed by the Tribunal in the case of Raji Thangam
Textiles Ltd. v. C.C.E., Coimbatore, 2006 (205) ELT 631 (Tri.). The Tribunal
in the present matter had relied upon the aforesaid judgments and set aside
the impugned orders of the Appellate as well as that of the adjudicating
authorities. The aforesaid order had given rise to the present appeal.The question involved in
this case was whether or not the Tribunal was justified in relying upon the
judgment of the Madras High Court. The Court held that the judgment of the
Madras High Court in case of Beauty Dyers (supra) was very much binding on the
Tribunal. The Tribunal could not have brushed aside the said judgment of the
Madras High Court since there was no other judgment of the jurisdictional High
Court much less of any other High Court taking contrary view. The law on the
subject is absolutely clear, wherein various High Courts and the Apex Court
have ruled from time to time that the Tribunals are bound by the judgment of
the High Court in absence of any contrary judgment of the jurisdictional High
Court. Thus, the Tribunal was bound by the judgment of the Madras High Court.
Reliance was placed on the Division Bench judgment of the Court in the case of
CIT v. Smt. Godavaridevi Saraf, (1978) 113 ITR 589.
16. Appellate Tribunal order
— Non-consideration of facts.
[C.C.E. Coimbatore v.
Kwality Fun Foods & Restaurant P. Ltd., (2010) (259) ELT 641 (SC)]In the instance case the
CESTAT without adverting to the basis facts and without making any independent
analysis of the agreement between the parties relied on a decision and allowed
the appeal of the assessee.On appeal by the Revenue
the Supreme Court observed that though the Tribunal has referred to the
findings of the said judgment but without saying anything as to how those
findings are applicable to the facts of the present case. The issue whether
the parties are related person within the meaning of S. 4(4)(e) of the Central
Excise Act is to be considered with reference to facts in each case.The Tribunal had failed to
advert even to the basic facts and disposed of the appeals in a summary
manner. The impugned order of the Tribunal was set aside and remitted for
fresh consideration.
Arbitration — Resolution of dispute through arbitration
cannot be initiated by a debtor — Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 S. 11.
[Smt. Pushpalatha S. v. State Bank of Travancore & Anr.,
AIR 2009 Kerala 181]The petitioner availed a loan from the first respondent,
under the available financial assistance scheme of the second respondent,
Khadi and Village Industries Commission. The petitioner states that the second
respondent recommended her application and forwarded it to the first
respondent bank. However, the bank did not duly honour its commitments and
hence margin money and other amounts payable by the second respondent, the
Commission, was not appropriately released.On default in repayment, the bank initiated action under
the Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (in short, SARFAESI Act). A notice u/s. 13(2) was
issued. The petitioner replied stating that in view of the disputes between
the petitioner and the first respondent regarding the total amount outstanding
from her to the bank, the parties have to go for arbitration in terms of S. 11
of the SARFAESI Act read with the provisions of the Arbitration and
Conciliation Act, 1996.The petitioner’s challenge is to the bank’s decision that
it does not agree for arbitration in terms of S. 11 of the SARFAESI Act.The Court observed that a reading of S. 11 of the SARFAESI
Act shows that the disputes which could be resolved by recourse to that
provision are disputes relating to securitisation or reconstruction or
non-payment of any amount due including interest. Such a dispute could be
resolved only when that arises amongst any of the parties stated in that said
provision. They are the bank or the financial institution or the
securitisation company or the reconstruction company or a qualified
institutional buyer. Therefore any dispute between a secured creditor and a
debtor in relation to the security interest or secured debt does not fall for
arbitration under that provision. For that clear reason, S. 11 of the SARFAESI
Act cannot be initiated by a debtor. Hence the decision of the bank to that
extent is sustainable. Therefore, the petitioner’s plea based on S. 11 of the
SARFAESI Act was rejected.
Power of attorney — Sale of immovable property through
execution of sale agreement/general power of attorney/will instead of
execution and registration of regular deeds of conveyance deprecated as
illegal and irregular — Transfer of Property Act, S. 54.
[Suraj Lamp & Inds. (P) Ltd. Thru DIR v. State of
Haryana & Anr., AIR 2009 SC 3077]This case is a typical example of an irregular process
spreading across the country.The petitioner, a company incorporated under the Companies
Act, claims that one Ramnath and his family members sold two and half acres of
land in Gurgaon to them by means of an agreement of sale, General Power of
Attorney (for short ‘GPA’) and a ‘Will’ in the year 1991 for a consideration.
It was further alleged that the petitioner verbally agreed to sell a part of
the said property measuring one acre to one Dharamvir Yadav for Rs.60 lakhs in
December 1996. It was stated that the said Dharamvir Yadav, and his son Mohit
Yadav (an ex MLA and Minister), instead of proceeding with the transaction
with the petitioner, directly got in touch with Ramnath and his family members
and in 1997 got a GPA in favour of Dharamvir Yadav in regard to the entire two
and half acres executed and registered and illegally cancelled the earlier GPA
in favour of the petitioner. The petitioner claims that when its Director, S.
K. Chandak, confronted Dharamvir Yadav in the year 1999 in this behalf, the
said Yadav apologised and issued a cheque for Rs.10 lakhs towards part payment
and agreed to pay the balance of Rs.50 lakhs shortly, but that the said cheque
was dishonoured. It was further alleged that in the year 2001, the petitioner
lodged a criminal complaint against Ramnath and members of his family who
executed the sale agreement/GPA/will in favour of the petitioner and another
complaint against Dharambir Yadav and his son in the District Court, Gurgaon.
The petitioner claims that as no action was taken on its FIR by the
Investigation Officer, the petitioner filed an application under the Right to
Information Act, 2004 seeking the status. An appeal filed by the petitioner
was disposed of by the Chief Information Commissioner, merely directing that
the Police should re-investigate the FIR. The petitioner filed a writ petition
challenging the order of the Chief Information Commissioner and seeking
initiation of proceedings u/s.20 of the RTI Act and imposition of penalty. The
said writ petition was disposed of by the High Court by the impugned order
holding that S. 20 was directory and not mandatory.The Court observed that the issue was in respect of
avoidance of execution and registration of deeds of conveyance as the mode of
transfer of freehold immovable property by increasing tendency to adopt ‘Power
of Attorney Sales’, that is execution of sale agreement/ general power of
attorney/will (for short ‘SA-GPA-Will transactions’) instead of execution and
registration of regular deeds of conveyance, on receiving full consideration.The ‘Power of Attorney Sales’ as a method of ‘transfer’ was
evolved by lawyers and document writers in Delhi, to overcome certain
restrictions on transfer of flats by the Delhi Development Authority (for
short ‘DDA’). DDA had undertaken large-scale development by constructing of
flats. It is stated that when DDA allotted a flat to an allottee, any transfer
of the assignment by the allottee required the permission of DDA and such
permission was granted only on payment to DDA of the ‘unearned increase’, that
is the difference between the market value/sale price and the original cost of
allotment. To avoid the cumbersome procedure in obtaining permission and to
avoid payment of the huge part of the price to the DDA as unearned increase, a
hybrid system was evolved whereby the allottee/holder of the flat, on
receiving the agreed consideration would deliver the possession of the flat to
the purchaser and execute such power of attorney sales/will, etc. Such
transactions were obviously irregular and illegal being contrary to the rules
and terms of allotment. Further, in the absence of a registered deed of
conveyance, no right, title or interest in an immovable property could be
transferred to the purchaser.The Registration Act, 1908, was enacted with the intention
of providing orderliness, discipline and public notice in regard to
transactions relating to immovable property and protection from fraud and
forgery of documents of transfer. This is achieved by requiring compulsory
registration of certain types of documents and providing for consequences of
non-registration. S. 17 of the Registration Act clearly provides that any
document (other than testamentary instruments) which purports or operates to
create, declare, assign, limit or extinguish whether in present or in future
‘any right, title or interest’ whether vested or contingent of the value of
Rs.100 and upwards to or in immovable property. S. 49 of the said Act provides
that no document required by S. 17 to be registered shall, affect any
immovable property comprised therein or received as evidence of any
transaction affected such property, unless it has been registered.
Registration of a document gives notice to the world that such a document has
been executed. Registration provides safety and security to transactions
relating to immovable property, even if the document is lost or destroyed. It
gives publicity and public exposure to documents, thereby preventing forgeries
and frauds in regard to transactions and execution of documents.Whatever be the intention, the consequences are disturbing
and far-reaching, adversely affecting the economy, civil society and law and
order. Firstly, it enables large-scale evasion of income tax, wealth tax,
stamp duty and registration fees, thereby denying the benefit of such revenue
to the government and the public. Secondly, such transactions enable persons
with undisclosed wealth/income to invest their black money and also earn
profit/income, thereby encouraging circulation of black money and corruption.
Such power of attorney sales indirectly lead to growth of real estate mafia
and criminalisation of real estate transactions.
Power of attorney — The holder of power of attorney can
only conduct case — Cannot be allowed to depose on behalf of his principal on
matters which would be within his personal knowledge — Civil Procedure Code,
Order III Rule 1 & 2.
[ Usha Ranganathan v. N. K. V. Krishnan & Anr., AIR
2009 Madras 178]The respondents are defendants, they were represented by
one Mr. C. Ramesh, who was conducting their case on their behalf, as their
power of attorney. The respondents filed application stating that the Power of
Attorney Mr. C. Ramesh suddenly left them, which necessitated to cancel the
power of attorney given to him and on the same day they executed Power of
Attorney deed in favour of one Mr. D. Nagarajan and hence he may be recognised
as power of attorney holder for the defendants and be permitted to give
evidence and prosecute the above case on the behalf of defendants by
substituting his name in the place of Mr. C. Ramesh. The said petition was
resisted by filing the counter application by the respondent/plaintiff. The
learned District Munsif allowed the application.The petitioner contended that the prayer in the application
contains a request for examination of power of attorney in place of the
defendants, which is not recognised by law and the application ought to be
dismissed.The Court while dealing with Order III Rules 1 and 2 of CPC
explained the scope of the phrase ‘to act’ and held that the word ‘act’ would
not include adducing oral evidence on behalf of his principal for the acts
done by the principal and not by him and that he cannot depose for the
principal in respect of the matter which only the principal can have a
personal knowledge.Order III, Rules 1 and 2 CPC, empowers the holder of power
of attorney to ‘act’ on behalf of the principal. The word ‘acts’ employed in
Order III, Rules 1 and 2 CPC, confines only in respect of ‘acts’ done by the
power of attorney holder in exercise of power granted by the instrument. The
term ‘acts’ would not include deposing in place and instead of the principal.
In other words, if the power of attorney holder has rendered some ‘acts’ in
pursuance to power of attorney, he may depose for the principal in respect of
the matter of which only the principal can have a personal knowledge and in
respect of which the principal is entitled to be cross-examined.Thus the new power of attorney holder Mr. D. Nagarajan can
conduct the case on behalf of the respondents/defendants except giving oral
evidence on their behalf.
Property — Right of Guardian to sell the property of minor
— Permission of the Court u/s.8 of the Hindu Minority and Guardianship Act
read with the provisions of Guardian and Wards Act would not be necessary
where an interest in the joint family is sought to be disposed of.
[Prakash Ramkrishna Khadse, Vilas Ramkrishna Khadse and
Smt. Shakuntala wd/o Ramkrishna v. Manikrao Ramaji Sonwane and Ors., 2009
Vol. 111(9) Bom. L.R. 4137]The appellant defendants, owners of suit property, entered
into an agreement of sale with the respondent plaintiff. Allegedly, the
plaintiff failed to perform his part of contract by providing evidence as to
payment of requisite consideration under agreement of sale. Therefore, the
defendants refused to register the sale deed in favour of the plaintiff and
entered into sale with the defendants No. 4-5 and later on with the defendants
6-7. The plaintiff had filed suit for specific performance.One of the contentions raised by the appellant/defendants
was that there is no averment in the plaint that the contract was entered into
by the defendants 1 and 2 i.e., elder brother and mother for the
benefit of the minor defendant No. 3 or that it will so benefit the minor. He
submits that a guardian has no right to sell the property of minor without
obtaining permission of the District Judge and admittedly in this case the
permission was not obtained.The suit property is admittedly the ancestral property of
the defendants No. 1 to 3 i.e., vendors of the plaintiff. S. 6 of the
Hindu Minority and Guardianship Act says that in the absence of the father,
the mother shall be the guardian of the person and property of the minor,
excluding his undivided share in the joint family property. S. 8 speaks of
powers of natural guardian in respect of separate property of the minor. S. 8
has no application to cases where the minor has an interest in Hindu undivided
family.The Court observed that the permission of the Court u/s.8
of the Hindu Minority and Guardianship Act read with the provisions of the
Guardian and Wards Act would not be necessary where an interest in the joint
family is sought to be disposed of. In the instant case the elder brother who
was the Karta of the joint family and the mother have joined the execution of
the agreement.The question that arose for consideration was whether a
contract entered into by a guardian of a Hindu minor for sale or for purchase
of immoveable property was specifically enforceable against the minor.It was held that a minor has no legal competency to enter
into a contract or authorise another to do so on his behalf. A guardian,
therefore, steps in to supplement the minor’s defective capacity. The limit
and extent of the guardian’s capacity (authority) are conditioned by Hindu
law. They can only function within the doctrine of legal necessity or benefit.
The validity of the transaction is judged with reference to the scope of his
power to enter into a contract on behalf of the minor. Even the personal
liability arising out of the guardian’s contract is a liability of the minor’s
estate only. Since the guardian under the Hindu law has the legal competency
to enter into a contract on behalf of the minor for necessity or for the
benefit of the estate, the contract is valid from the time of its inception,
and since either party can enforce any contract, the test of enforceability is
satisfied.The Court therefore held that a contract to purchase
immoveable property by a competent guardian acting within his authority on
behalf of a minor is specifically enforceable by or against the minor. Thus a
guardian has power to enter into a contract on behalf of a minor and it could
be so enforced against the minor. It will always be for the minor to repudiate
or not to repudiate on attaining majority. The contract is therefore not void.
Enforcement of security interest — It is open to a secured
creditor to move against any secured asset and it is not essential that all
the secured properties should be put to sale simultaneously — Securitisation
and Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 : S. 13(2) and S. (4).
[M/s. Wasan Shoes Ltd. & Ors. v. Chairperson, Debts
Recovery Appellate Tribunal, Allahabad & Ors., AIR 2009 Allahabad 163]The respondent-bank filed a claim application in the year
2004 before the Debts Recovery Tribunal for recovery of Rs.14.97 crores plus
interest. During its pendency, a demand notice was issued u/s.13(2) of the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002. It was alleged in the said notice that the
petitioners were required to discharge their liabilities within sixty days
and, in the meanwhile, the petitioners were restrained from dealing with the
secured assets, in any manner, whatsoever. The secured assets were at Agra and
the other at Noida.The petitioners submitted their reply to the notice denying
any liability to pay, and contended that no amount was due or payable by them,
and that, the notice was liable to be withdrawn. A possession notice u/s.13(4)
of the Act was issued, intimating the petitioners that possession of plot at
Agra had been taken.The Debts Recovery Tribunal, disposed of the interim
application holding that the sale of the property at NOIDA could not be made
by the respondent-bank, inasmuch as the possession of this plot was not taken
u/s.13(4) of the Act, but permitted the respondent-bank to proceed with the
sale of the plots located at Agra. The petitioners, being aggrieved by the
said order, filed an appeal u/s.18 of the Act, which was dismissed.The petitioner contended that the notice u/s.13(2) of the
Act was with regard to the two properties located at Agra and NOIDA, and that,
possession u/s.13(4) of the Act was only confined to one property located at
Agra, and this procedure, adopted by the respondent-bank, was patently
illegal.The Court observed that there was no error in the issuance
of notice u/s.13(2) of the Act. It is open to a secured creditor to move
against any secured assets and it is not essential that all the secured
properties should be put to sale simultaneously. If by sale of one property
substantial recovery could be made, it is not necessary that all the
properties should be sold or possession be taken u/s.13(4) of the Act. Thus
the Court did not find any error in the procedure adopted. Insofar as Rule
8(2) of the Rules is concerned, the publication had been made in two
newspapers, and that substantial compliance had been made under Rule 8(2) of
the Rules. Therefore, the petition was dismissed.
20 Hindu Marriages Act : After decree of divorce is passed,
relation between husband and wife with respect to matrimonial premises becomes
that of licencesor and licensee : Easement Act S. 52.
The present petitioner filed suit against the respondent, who
is his divorced wife, on the ground that she is residing in a portion of the
same building in which he has been residing and her stay is continued even after
his marriage with her came to be dissolved by a decree granted by the Family
Court.
The Trial Court held that since no right has been conferred
upon the wife in the divorce decree to stay in the said premises, after
dissolution of her marriage with petitioner, the relationship between the
petitioner and the respondent became that of licensor and licensee and therefore
the husband claimed possession of it by filing the said ejectment suit.
The High Court observed that it is the settled principle of
law that once a decree of divorce is passed by the competent Court, dissolving
the marriage between the husband and wife, they cease to be husband and wife and
consequently they cease to have any right or obligation against each other,
which they had during the subsistence of their marriage. Such rights and
obligations include the right of the wife to reside with her husband and the
obligation on the part of the husband to live with her under the same roof; her
right to succeed to his properties. Therefore, after obtaining a decree of
divorce, though the husband would be liable to pay alimony towards maintenance
of his divorced wife till she remarries or till she dies, he would not be liable
to make arrangement for her stay by securing an accommodation when she has to
leave his residence by reason of dissolution of his marriage with her. At best,
his obligation would extend to enhance the alimony payable by him to her so as
to enable her to meet the additional expenses towards rent of the residential
premises wherein she has to reside after leaving his residence. This being so,
the respondent herein cannot claim against the petitioner any right to reside in
the said premises after dissolution of her marriage with him. The relationship
between the petitioner and the respondent with respect to the said premises has
been that of licensor and licensee, but not that of husband and wife, so that
the respondent could exercise her right to residence in the said premises. She
has no alternative but to quit the said premises, stay in any other premises
suitable to her and claim from the petitioner enhancement in the monthly
alimony.
[B. Krishnappa v. Smt. Chandrika G., AIR 2008
Karnataka 175]
21 Powers of Revenue authority : Revenue authority cannot
decide question relating to genuineness of document : Stamp Act, 1899, S. 38(2).
When a document is sent to Revenue authority or District
Collector, for the purpose of impounding, levying the stamp duty and penalty he
is expected to decide the same in accordance with provisions of the Stamp Act
and cannot travel beyond that by entering into controversy whether document sent
by the Civil Court is genuine or not. It is for the competent Civil Court to
decide the question in relation to genuineness or otherwise of document
concerned. The authority or jurisdiction of Revenue authority/District Collector
would be limited for the purpose of deciding the question of impounding i.e.,
levying the stamp duty and penalty.
[Mohd. Qamruddin & Ors. v. Masula Narsimhulu, AIR 2008 Andhra Pradesh
249]
19 Dishonour of cheque issued on behalf of a company :
Negotiable Instruments Act, 1881 S. 141 and S. 138.
The appellant filed a complaint u/s.138 read with S. 141 of
the Negotiable Instruments Act, 1881, against the accused Company on whose
behalf the bounced cheque was issued. The cheque in question was a post-dated
cheque. The cheque was signed by the respondent in April 1995, when he was
Director of the accused Company, but the cheque was post-dated as 28-1-1998.
However, before bouncing of the cheque in January 1998 or thereafter, the
respondent had already resigned from the accused Company on 25-5-1996, and had
also given intimation to all concerned including the appellant. Despite this
intimation the respondent was impleaded as co-accused, but no specific averment
was made in the complaint, as to in what capacity he was being impleaded.
The Trial Court accepted the respondent’s plea that he should
be deleted from the array of the accused persons for the reason that he had
already resigned from directorship when the cheque bounced. The High Court also
dismissed the appellant’s criminal revision petition.
The Apex Court held that S. 141 of the Act provides for a
constructive liability. A legal fiction has been created thereby. The statute
being a penal one should receive strict construction. It requires strict
compliance with the provision. Specific averments in the complaint petition so
as to satisfy requirements of S. 141 of the Act are imperative. Mere fact that
at one point of time some role had been played by the accused may not by itself
be sufficient to attract the constructive liability u/s.141 of the Act.
A person who had resigned within the knowledge of the
complainant in 1996 could not be a person in charge of the Company in 1998 when
the cheque was dishonoured. He had no say in the matter of seeing that the
cheque is honoured. He could not ask the Company to pay the amount. He as a
director or otherwise could not have been made responsible for payment of the
cheque on behalf of the Company or otherwise.
When post-dated cheques are issued and the same are accepted,
although it may be presumed that the money will be made available in the bank
when the same is presented for encashment, but for that purpose, the harsh
provision of constructive liability may not be available except when an
appropriate case in that behalf is made out.
S. 140 of the Act cannot be said to have any application
whatsoever in this case. Reason to believe on the part of a drawer that the
cheque would not be dishonoured cannot be a defence. But, then one must issue
the cheque with full knowledge as to when the same would be presented. It
appears to be a case where the appellant has taken undue advantage of the
post-dated cheques given on behalf of the Company. The statute does not envisage
misuse of a privilege conferred upon a part to the contract. Accordingly the
appeal was dismissed.
[ DCM Financial Services Ltd. v. J. N. Sareen and
Another, (2008) 8 Supreme Court Cases 1]
17 Accident claim : Compensation awarded under Motor Vehicle
Act is not a ‘debt’, nor a succession, therefore production of succession
certificate by heirs of deceased not necessary : Motor Vehicles Act, S. 168,
Succession Act, 1952, S. 214(1)
Original claimant Abdul Razak Gulam Rasul Bhurwala had
sustained grave injuries in a vehicular accident and therefore, he had moved the
M.A.C. Tribunal for compensation. Ultimately, the said original claimant
succeeded in the claim petition and the Tribunal awarded amount of Rs.3,48,020
with cost and interest. Consequently, the insurance company deposited amount of
Rs.7,72,741 with the Tribunal. However, before the original claimant Abdul Razak
Gulam Rasul Bhurawala could realise the amount, he died of natural death. When
the heirs of the deceased claimant applied for disbursement of the amount, they
were asked to produce succession certificate.
The High Court observed that the Apex Court in the case of
Smt. Rakhsana and Others v. Nazrunnisa (Smt.) and Anr., reported in 2000 AIR
SCW 4941, held that the succession certificate as envisaged under the Indian
Succession Act was only granted in respect of ‘debts’ or ‘securities’ to which
the deceased was entitled and the compensation awarded under the Motor Vehicles
Act was not a debt, nor a succession. Therefore, a certificate was not required
to be obtained in order to claim the compensation awarded under the Motor
Vehicles Act. However, it would be open for the Tribunal to make appropriate
disbursement if there are any disputes amongst the heirs qua quantum of
compensation payable to each of the heirs.
[ Aktharbibi Abdul Razak Gulam Rasul & Ors. v. United
India Insurance Co. Ltd., AIR 2008 Gujarat 146]
18 Condonation of delay of 4 years : Pendency of
representation filed before State Government against alleged order, sufficient
ground to condone delay : Constitution of India Article 226.
The petitioner had filed a writ petition before the High
Court against the decision of the State Government after 4 years from the date
of passing of such order. The High Court dismissed the petition on ground of
delay and laches.
The Supreme Court observed that the petitioner had filed a
representation/review of the decision of the State Government, and was expecting
that an order would be passed on the said representation. Therefore, the delay
in moving the writ petition was sufficiently explained by the petitioner and the
petition ought not to be dismissed on the ground of delay and laches. The High
Court was directed to decide the writ petition on merits in accordance with law.
[Ashok Kumar v. State of Bihar & Ors., AIR 2008
Supreme Court 2723]
25 Recovery : Loan taken by cooperative society cannot be
recovered from secretary of the society : Bihar Co-op. Societies Act, S. 52.
The petitioner Jay Mangal Singh was at the relevant time
secretary of the Ajanta Tel Utpadak Sahyog Samiti Ltd. duly registered under the
Bihar Co-op. Societies Act, 1935. The co-op had taken a loan from Central Co-op
Bank Ltd, Aurangabad. Having taken
the loan, it defaulted in repayment, the consequence, thereof, was that for
recovery of outstanding dues a certificate proceeding was initiated against the
said co-op. While doing so, petitioner was made a party to the certificate
proceeding and shown as a certificate debtor. This was done specifically
mentioning that the petitioner was the secretary of the said co-op. when the
loan was granted.
A co-operative is a body incorporate and an independent
juristic entity. That being so, it is distinct from not only its member but
members elected as office bearers. This distinction as between the co-operative
and its constituents is well established. That being so, the loan having been
taken by the co-operative, it cannot be recovered from petitioner who was
secretary of society. Especially, as petitioner was being proceeded against only
because he happened to be elected secretary of co-operative. He was not being
proceeded against on ground of having underwritten or guaranteed repayment of
loan. He had no personal liability in the matter, except, to the extent he may
be liable for any loan or advance taken and remaining unpaid from his
co-operative. That was not the case of the respondents. That being so, the
certificate proceedings as against the petitioner cannot be sustained and would
be wholly without jurisdiction.
[Jay Mangal Singh v. Bihar State Co-op. Bank Ltd.,
AIR 2008 Patna 192]
23 Precedent : Non-challenge of order by Revenue preclude
from challenging similar order passed in respect of another unit.
The respondent M/s. Surcoat Paints (P.) Ltd. is engaged in
the manufacture of paints and varnishes. A show-cause notice was issued for
short payment of duty to the tune of Rs.40,33,903.73 on the goods cleared by the
manufacturer. As per the show-cause notice the SSI benefit is not available to
the respondents on the ground that SSI registration certificate was not
correctly given to the respondent.
The assessee being aggrieved by the order, filed an appeal
before the Tribunal. The Tribunal reversed the order passed by the Commissioner
of Central Excise, Allahabad, primarily relying upon the earlier decision of the
Tribunal in CCE v. Agra Leather Goods P. Ltd., (2000 (39) RLT 674 (T).
This appeal has been filed by the Revenue against the
judgment and order passed by the Customs, Excise and Gold (Control) Appellate
Tribunal, New Delhi.
The Court held that since the Revenue has accepted the
decision given by the Tribunal in Agra Leather Goods case (supra), the
Revenue is precluded from challenging the similar order passed in respect of
another unit. Since the order passed in Agra Leather Goods case (supra)
has attained finality, the present appeal deserves to be dismissed on this
ground alone and accordingly dismissed the appeal.
[Commissioner of Central Excise, Allahabad v. Surcoat
Paints (P) Ltd., 2008 (232) ELT 4 (SC)]
22 Appeal : Condonation of delay : High
Court is empowered to condone delay in filing appeals u/s.35G of the Central
Excise Act, 1944.
In view of conflicting decisions of two Division Benches of
the Bombay High Court on the issue of whether this Court is empowered to condone
the delay in filing appeals u/s.35G of the Central Excise Act, 1944, which are
filed beyond the prescribed period of 180 days, a Full Bench of three judges was
constituted.
One Division Bench in the case of Commissioner of Customs
v. M/s. Sujog Fine Chemicals (India) Ltd., by a judgment and order dated
13th August 2008 held that in the light of S. 29(2) of the Limitation Act, 1963,
in any appeal filed u/s.130 of the Customs Act, 1962, this Court is empowered
u/s.5 of the Limitation Act, 1963 to condone the delay.
Whereas another Division Bench in a group of cases in
Commissioner of Central Excise v. M/s. Shruti Colorants Ltd., by a judgment
and order dated 29th August 2008 involving appeals u/s.35G of the Central Excise
Act, 1944 held that this Court is not empowered to condone the delay taking
recourse to S. 5 of the Limitation Act, 1963.
The Full Bench after analysing the aspect in depth, came to a
conclusion that in such appeals, the High Court is empowered to have recourse to
S. 5 of the Limitation Act.
Unfortunately the two judgments of the Supreme Court in the
case of Mukri Gopalan v. Chepplat Puthanpurayil Aboobacker, AIR 1995 SC
2272 and also of State of West Bengal & Ors v. Kartik Chandra Das, (1996)
5 SCC 342 were not brought to the notice of the Division Bench which decided the
Shruti Colorants Case. In fact the above two judgments of the Supreme Court deal
with the scope and purport of S. 29(2) of the Limitation Act exhaustively,
clearly holding that unless expressly excluded, Civil Courts are empowered to
have recourse to S. 5 of the Limitation Act to condone the delay.
Similarly the Full Bench judgment of the Bombay High Court in
the case of Commissioner of Income-tax v. Velingkar Brothers, (2007) 289
ITR 382 (Bom.) (FB) was not brought to the notice of the above Division Bench
which dealt with the case of Shruti Colorants. In fact in that case the
expression appeal ‘shall’ be filed within 120 days was interpreted to mean that
it did not take away the Court’s power to condone delay having recourse to S. 5
of the Limitation Act.
The Full Bench observed that the High Court being the
Superior Court, the power to condone the delay in filing the appeal must be read
to be existent, more so by virtue of S. 29(2) of the Limitation Act, unless
there is a clear indication of its exclusion by implication.
The Full Bench also held that the word ‘shall’ and the longer
period of limitation (120 days) were not indicators of such exclusion.
In Mukri Gopalan’s case, it was found that there was no
express exclusion anywhere in the Rent Act, taking out the applicability of S. 5
of the Limitation Act. In the present case also there is no express exclusion of
S. 5 of the Limitation Act in S. 35G of the Central Excise Act, and the same
cannot be lightly implied or inferred.
Thus the Full Bench held that S. 5 of the Limitation Act will
be applicable to appeals filed u/s.35G of the Central Excise Act, 1944.
[The Commissioner of Central Excise v. M/s. Shree Rubber
Plast Co. P. Ltd. Notice of Motion No. 1485 of 2008 in CEXAL No. 88 of
2008 Bombay High Court (Full Bench), dated 19-12-2008. Source : itatonline.org]
[Prafulchandra V. Patel & Ors. v. State Bank of India &
Ors., AIR 2010 Gujarat 46]
The respondent-bank had filed a petition against the
petitioners for recovery of amount of Rs.37 crores with accrued interest.
Simultaneously an application for interim injunction by the bank to restrain the
petitioners, to transfer of the property and the petitioners from leaving India
without prior permission. The Tribunal granted interim injunction in respect to
properties, however, it did not grant any injunction for restraining the
petitioners from leaving India. Later in another application the Tribunal
restrained the petitioner from leaving India without prior permission of the
Tribunal. The said order was challenged before the High Court on the limited
issue of restraining the petitioner from leaving India.
The Court held that the Debt Recovery Tribunal has no power
to control the physical movement of the defendant-borrowers in absolute, merely
because suit for recovery or the proceedings for recovery of amount, if filed,
in capacity as the mortgagee by the plaintiff bank.
The Tribunal under the RDB Act has power to command and
control the properties of the defendants, may be in its possession or in
possession of third party, and the powers are to be used for grant of injunction
for such purpose. It is only when the Tribunal satisfactorily finds that the
defendant is obstructing the Tribunal or its officers from having command and
control over properties of the defendant, in possession of the defendant or in
possession of third party, the powers may be exercised by the Tribunal to
control and restrict physical movement of the defendant, but not otherwise. But
the Tribunal has no power in absolute to prohibit the physical movement of the
defendants beyond its territorial jurisdiction or to prohibit the defendants
from leaving the country. Thus, the Tribunal has no power to direct impounding
of the passport.
[Mercedes Benz India Pvt. Ltd. v. UOI, 2010 (252) ELT
168 (Bom.)]
One Bench of the Tribunal decided an appeal in favour of the assessee. However, another Bench refused to follow that decision
even though the facts were the same, on the ground that the earlier decision did
not address the grievance of the Revenue and did not consider all the facts and
did not lay down a clear ratio. The assessee filed a writ petition complaining
of breach of propriety on the part of the Tribunal by not referring the issue to
a
Larger Bench.
The Bombay High Court observed that in a multi-Judge Court,
the Judges are bound by precedents and procedure. They could use their
discretion only when there is no declared principle to be found, no rule and no
authority. The judicial decorum and legal propriety demand that where a learned
single Judge or a Division Bench does not agree with the decision of a Bench of
co-ordinate jurisdiction, the matter should be referred to a Larger Bench. It is
a subversion of judicial process not to follow this procedure. In the system of
judicial review which is a part of the Constitutional scheme, it is held to be
the duty of the Judges of the Courts and Members of the Tribunals to make the
law more predictable. The question of law directly arising in the case should
not be dealt with apologetic approaches. The law must be made more effective as
a guide to behaviour. It must be determined with reasons which carry convictions
within the Courts, profession and public. Otherwise, the lawyers would be in a
predicament and would not know how to advise their clients. Subordinate Courts
would find themselves in an embarrassing position to choose between the
conflicting opinions. The general public would be in dilemma to obey or not to
obey such law and it, ultimately, falls into disrepute.
The Court further held that the view taken by the Tribunal
was not the correct approach. If the Tribunal wanted to differ to the earlier
view taken by the Tribunal in an identical set of facts, judicial discipline
required reference to the Larger Bench. One Co-ordinate Bench finding fault with another Co-ordinate Bench is not a healthy way of dealing with the matters.
Note : In UOI v. Paras Laminates Pvt. Ltd., (1990) 186 ITR
722 (SC) it was held that an order which did not follow a Co-ordinate Bench
decision was ‘per incuriam’ i.e., not a binding judicial precedent.
TORTS : Person losing his right hand due to
electrocution — Electricity Board liable to compensate.
Petitioner got electrocuted on account of a live wire which
snapped due to strong wind and fell on roof of petitioner’s house, which had
C1 sheet roofing. It was held that Electricity Board ought not to have carried
electrical wire over a dwelling house. A person undertaking activity involving
generation or transmission of electricity which is inherently dangerous to
human should take extra care and precaution to avoid harm. However, the
Electricity Board authorities have not shown that they have taken all
necessary care to avoid harm. The petitioner being sole bread-earner of his
family and has lost his right hand being amputed, is entitled to be
compensated for his sufferings and loss of earning and earning capacity.
Compensation of Rs.3,00,000 awarded including medical expenses.[Md. Sahajuddin vs. ASEB & Ors., AIR 2009 (NOC) 1072 (Gau.)].
[Shantilal Jain v. UOI, 2010 (252) ELT 326 (Bom.)]
In this case the impugned order was passed by the Customs,
Excise and Service Tax Appellate Tribunal practically after a period of six
months from the date of hearing. The Bombay High Court set aside the order
without examining merits or demerits thereof and the appeal was restored to the
file of the
Tribunal for de novo hearing and decision afresh. The Court relied on the case
of Dewang Rasiklal Vora v. Union of India, 2003 (158) ELT 30 (Bom.); wherein it
was held that the judgment passed after considerable gap of time from the date
of hearing was
liable to be set aside, observing that justice should not only be done, but must
manifestly appear to
be done.
The Court also showed displeasure on the conduct of the
advocates signing the minutes of the order on behalf of the Revenue, which was
found to be not as per consensus between the advocates. The Court observed that
it was the obligation on the part of the advocate for the Revenue to protect the
interest of the Revenue and to be more diligent.
See Shivsagar Veg Restaurant v. CIT, (2009) 317 ITR 433 (Bom.)
Translation of document : Filing of translated copy of
document in Court is not additional evidence — Only requirement is that
counsel should certify that translation is correct : Civil Procedure Code :
O.13, R.4, General Rules (Civil) 1986, Rule 37.
The plaintiff filed a suit for permanent injunction. In the
suit the plaintiff relied upon a registered sale deed dated 26.7.1926,
executed by one Bhanwaria and based his title in the property upon the said
sale deed. The said registered sale deed was in Urdu script and language.After filing of the appeal against the dismissal of suit by
the learned trial Court, the plaintiff-appellant submitted an application with
prayer that the plaintiff had during the trial filed a copy of the registered
sale deed which was written in Urdu script and with a view to facilitate the
Court to peruse and go through the contents of the said document, the
appellant is filing a correct translation of the same in Devanagari script
having translated the document from Urdu script to Devanagari script (in
Hindi).The appellant further submitted that so far as the
application was concerned, it was not one under O. 41, R. 27, C.P.C. of
leading any additional evidence but in fact the appellant was only submitting
the translated version of the document, the registered sale deed of the year
1926 which has already been filed before the learned trial Court and admitted
in evidence of the plaintiff and since the parties were not conversant with
Urdu language or the script, the appellant could not state before the Court as
to what were the contents of the said documents. When the suit was dismissed
by the learned Trial Court the appellant with a view to overcome the aforesaid
difficulty, produced before the Court the translated version which cannot be
said to be by means of an additional evidence strictly in accordance with the
provisions of O. 41, R. 27, C.P.C. It was evident from the document that the
counsel had certified and put an endorsement.The Hon’ble Court held that the provisions of O. 14, R.27,
C.P.C. were not strictly applicable as it was not a case where any additional
evidence was sought to be produced by the appellant which had not been filed
before the learned trial Court and was being sought to be filed for the first
time in the appeal. By the application, all that the petitioner sought to do
was to file a translated copy of sale deed which is in Urdu language by filing
a translation in Devanagari script in Hindi for being appreciated by the Court
and it is for this purpose that the application was filed by the plaintiff.The Rule 37 of the General Rules (Civil), 1986 requires (1)
that a correct translation of the document which is not written in Hindi or
English to be accompanied by a translation of the same into Hindi written in
Devanagari script; (2) that the translated document must bear a certificate of
the party’s counsel to the effect that it is a correct translation; and (3)
that if the party filing the same is not represented by a counsel, the Court
shall have the same certified by any person appointed by it at the cost of the
party seeking to produce the document.The document which had been filed before the Appellate
Court showed that it was signed by the advocate who had endorsed the same to
be the true translated copy from Urdu script into Devanagari script. It was
not the case that the aforesaid document was not a correct translation, but
the application had been rejected by the learned Appellate Court on the ground
that it does not bear endorsement and the name of the person who has
translated the said document.A look at Rule 37 of the General Rules (Civil), 1986, goes
to show that the requirement is that “the translation shall bear a certificate
of the party’s counsel to the effect that the translation is correct.” The
Rule does not require an endorsement by the counsel that he has translated the
document into Hindi but only requires a certificate ‘the translation is
correct’.In view of the matter, the learned Appellate Court which
did not advert to the provisions of Rule 37 of the General Rules (Civil),
1986, while passing the order committed an error of jurisdiction.[Prahlad Singh vs. Suraj Mal & Ors., AIR 2009
Rajasthan 53].
Public document : Certified copy of power of attorney which
is registered document on file of Sub-Registrar is a public
document : Evidence Act Sec. 74(2).
The suit had been instituted by the petitioner on the
factual premise that as per the power of attorney executed by the respondent
on 29.01.1993, he was permitted to develop the land belonging to the
respondent, having an extent of 1.50 acres and a certified copy of the said
power of attorney was produced along with the plaint. However, the suit was
contested by the respondent on the ground that only an extent of 50% of
property were given as per the said power of attorney and the petitioner with
the connivance of the officials of the Registration Department fraudulently
changed the extent as 1.50 acres instead of the original extent of 50%.
Subsequently, during the course of trial, the petitioner attempted to mark the
certified copy of the power of attorney as a document on his side. The same
was objected to by the respondent mainly on the ground that loss of original
has not been properly accounted in terms of Section 65 of the Indian Evidence
Act.The document produced by the petitioner was rejected by the
learned District Munsif on the ground that certified copy of power of attorney
cannot be admitted in evidence. The petitioner had contended before the Trial
Court that the original was lost and the same was also mentioned in the plaint
as well as in the proof affidavit and as such, he was entitled to lead
secondary evidence.The Hon’ble Court observed that the document produced by
the petitioner as document No.1 is found to be a certified copy of the power
of attorney registered as document No.13/1993 on the file of Sub-Registrar.
Admittedly, the document was a registered document and what was produced by
the petitioner was only a certified copy of the said document. Section 74 of
the Indian Evidence Act, 1872 indicates as to what are all the documents which
could be termed as public documents. As per Sub-Section 2 of Section 74,
public records kept (in any State) of private documents are public documents.
Section 76 mandates that every public officer having the custody of the public
document, which any person has a right to inspect, shall give that person on
demand a copy of it on payment of the legal fees therefor, together with a
certificate written at the foot of such copy that it is a true copy of such
document or part thereof, as the case may be, and such certificate shall be
dated and subscribed by such officer with his name and his official title, and
shall be sealed, whenever such officer is authorised by law to make use of
seal; and such copies so certified shall be called certified copies.As per Section 77, such certified copies may be produced in
proof of the contents of the public documents or parts of the public documents
of which they purport to be copies. Section 79 of the Indian Evidence Act
gives a statutory presumption with respect to the genuineness of certified
copies.Therefore, it was evident that the certified copy of the
power of attorney produced by the petitioner is a public document within the
meaning of Section 74(2) of the Indian Evidence Act and the same is admissible
in evidence as provided under Section 76 of the Act.The alleged alteration in the original deed was a matter
for evidence. It would be open to the respondent to summon the office copy of
the document sought to be marked and to take steps to send the same for expert
opinion. It is also possible for the respondent to take steps to prove her
contention that there were alterations made in the document subsequent to the
registration.[P. K. Pandian vs. Komala, AIR 2009 Madras 51].
10. Additional evidence : Permission to bring additional
document can be granted in exercise of discretion of Court to achieve ends of
justice.
The plaintiffs had challenged an order passed by the
learned Single Judge, dated 15th January, 2008 allowing the Chamber Summons
which is taken out by the defendants seeking liberty to lead evidence and to
place on record all documents referred to in the affidavit of documents which
was filed by the defendants. Grievance of the plaintiffs is that after they
had led their evidence, the defendants had specifically informed the Court
that they did not wish to lead any evidence. It is the contention of the
plaintiffs that after having taken a stand not to lead evidence, it was not
open for the defendants to subsequently file application seeking permission of
the Court to lead evidence.The power to permit the party to lead additional evidence
had been given to the Appellate Court under Order XLI Rule 27. It is settled
position in law that the purpose of procedural law is not to frustrate the
rights of the parties, but the law is primarily to achieve the ends of justice
and fully and finally decide the controversy between the parties.While interpreting the provisions of the Code, care should
be taken that substantial justice is not sacrificed for hypertechnical pleas
based on strict adherence to procedural provision. In this context, reference
be made to the Apex Court in the case of Ghanshyam Dass and Ors vs.
Dominion of India and Ors., reported in (1984) 3 SCC 46. Thus the Appeal
Court is entitled to allow the party to lead additional evidence.In view of provisions of Order VIII Rule 1 & Order XLI Rule
27, the learned Single Judge has exercised a discretion vested in him and has
permitted the defendants to bring on record any such documents. In the present
case, it has to be noted that affidavit of documents was filed by the
defendants. The documents could not be traced and, subsequently, the
defendants were in a position to procure the said documents and, after an
application for amendment which was filed by the plaintiff was allowed and
permission was granted to the parties to file additional written statement,
the application for production of documents was made and the learned Single
Judge was pleased to allow the said application. Therefore, the order passed
by the learned Single Judge was upheld.[Smt. Shantibai K. Vardhan & Ors. vs. Ms. Meera G. Patel
& Anr. AIR 2009 (NOC) 904 (Bom).]
Family arrangement : If Family arrange-ment is for
relinquishment of any immovable property it requires registra-tion — Registration
Act, Sec. 17.
In a suit for partition an alleged oral family arrangement
was relied in the written statement of the defendants. It was not known as to
when and on which date such oral arrangement took place and in whose presence.
There was no clinching evidence in that regard. The Hon’ble Court observed
that the law was clear on the point that family arrangement could be oral, but
if it was to be recorded it should be by way of memorandum so as to dispel
hazy notion about such oral arrangement and it should not be in evidence of
it. If it is in evidence of relinquishment of any immovable property it would
require registration within the meaning of Section 17 of the Registration Act.[D. V. Narayana Sah & Ors. vs. A. G. Nagammal & Ors.
AIR 2009 (NOC) 1061 (MAD.)].
15 Share broker and Stock Exchange render
‘services’ to the investors and investor would be ‘consumer’ : Consumer
Protection Act S. 2(1)(d) and S. (2)(1)(o).
The respondent share broker who was a member of the DSE
committed default in making payment or delivery of shares for which demand had
to be made by the complainant investor.
U/s.19 of Securities Contracts (Regulation) Act, 1956, no
person can organise or assist in organising or be a member of any stock exchange
other than a recognised stock exchange for the purpose of assisting in, entering
into or performing any contracts in securities. In view of aforesaid bar on
doing business as a share broker, a person has to become a member of a
recognised stock exchange. Without
becoming member of a stock exchange, share brokers are not permitted to have any
transaction in purchase and sale of shares. Therefore, the stock exchange is
apparently a service provider for purchase and sale of shares and not only does
the broker render ‘service’ in the purchase and sale of listed securities but
the stock exchange is also required to render service to the investors.
Further, the Delhi Stock exchange (DSE) is also a service
provider as stated in the memorandum and articles of Association because it
controls the mode, manner, time and place of performance of contract between the
broker member and the investors. DSE is required to establish and had
established Delhi Stock Exchange Customer Protection Fund. Every Member of the
DSE is required to become a member of the fund and contribute annually to the
Fund. If a member of DSE is declared as defaulter, the trustee of the fund step
into the shoes a defaulter member. This fund is established to protect and
safeguard interests of investors, particularly small investors from losses other
than that of speculative nature arising out of default of member brokers of the
stock exchange.
It was held that the complainant investor would be a consumer
who is affected by the services provided by the share broker and therefore he
would be eligible to be paid from the fund of the Stock Exchange.
[Senior Manager, Delhi Stock Exchange & etc. v. Ravindar Pal Singh & Anr.,
AIR 2008 (NOC) 962 (NCC); 2008 (1) ALJ 560]
13 Recovery of debts : Recovery of debts due
to Banks and Financial Institutions Act : S. 19(7).
The petitioner, his father and brother had jointly and
severally taken a loan from State Bank of India. On default the State Bank of
India initiated certificate proceedings against the three. At the time of
initiation of the proceeding itself the father and the brother had died. The
certificate was issued against all the three. The certificate officer later
dropped the proceedings and on appeal the collector remanded the matter back to
certificate officer to proceed against the petitioner.
On writ by the petitioner, it was held by the Court that the
certificate proceeding against the two dead person was void and unenforcecable.
But so far as the petitioner is concerned, the certificate issued was valid and
binding.
The loan was taken ‘jointly and severally’. The expression
‘jointly and severally’ implies their joint liability as well as individual for
entire loan amount. It was open for the creditor to proceed either against one
of the joint loanees or against all of them.
In view of the above the writ petition of the petitioner was
dismissed.
[Anand Mohan Singh v. State of Bihar & Ors., AIR
2008 Patna 53]
14 Void Agreement : Tenancy Rights cannot be
attached and auctioned — Consequent auction and sale certificate issued to
purchaser would be void. Contract Act S. 24 and S. 65.
The defendant No. 2 is a private limited company and because
of non payment of income tax, the recovery officer had issued a proclamation
which was published in govt. Gazette for sale of the property. The property
included the business alongwith the tenancy rights of the defendants over the
disputed premises.
The original plaintiffs bid was accepted in the auction and
the later on he deposited the amount with the income tax department. Nobody had
taken any objection nor had applied for setting aside the same within 30 days
from the date of auction. The defent No. 1 through income tax officer issued
sale certificate in favour of the original plaintiff. The suit premises was
actually property of LIC and defendant No. 2 was a tenant over the same.
The income tax authorities failed to put the plaintiff in
possession of the suit premises. Therefore, the original plaintiff filed suit
for possession of the suit premises alongwith movable articles. The trial court
held that the sale certificate in favour of the plaintiff was illegal, null,
void and unenforceable in law.
Before the Court the plaintiff alternatively contended that
if the sale was illegal the Union of India (Income tax Dept.) was liable to pay
compensation to him or atleast refund the amount alongwith interest.
S. 23 of the Indian Contract Act provides that the
consideration or object of an agreement is lawful, unless it is forbidden by
law; or is of such a nature that, if permitted, it would defeat the provisions
of any law. S. 24 provides that if the consideration is for an object which is
unlawful, the agreement is void.
Transfer of tenancy is not permitted under the law and,
therefore the object of the auction being the sale of tenancy rights was
unlawful and, therefore, auction as well as the sale certificate are void and
unenforceable.
S. 65 of the Indian Contract Act provides that when an
agreement is discovered to be void, or when a contract becomes void, any person,
who has received any advantage under such agreement or contract is bound to
restore it, or to make compensation for it to the person from whom he received
it. In view of this clear legal position, income tax authorities, who had
received the consideration amount from the plaintiff for the contract of sale,
which turned out to be void, was liable to restore and refund the said amount to
the plaintiff.
The defendant No. 1 Union of India was liable to refund that
amount to the plaintiff with interest at the rate of 18% per annum from the date
of suit till the realization of the amount to the plaintiff.
[Smt. Chandan Mulji Nishar & Ors. v. UOI & Ors., AIR
2008 (NOC) 396 (Bom.); 2007 (6) AIR Bom R 698]
12 Family arrangement or partition deed :
For the purpose of stamping & Registration the contents of document are to be
taken into consideration and not nomenclature — Transfer of Property Act; S. 5,
Stamp Act, S. 35.
The father and mother of the plaintiff owned properties
comprising of houses, shops and vacant sites and they died intestate leaving
behind the plaintiff and defendants as their legal heirs. The defendant
attempted to partition the properties with the help of local people and
panchayatdars which was not agreed to by the plaintiff. After prolonged
negotiation the defendants ultimately agreed for an amicable partition of
movable and immovable properties. When the plaintiff claimed for division of
ard
share the defendants resisted the same and the plaintiff filed the suit.
According to the defendant the agreement for partition was
reduced to writing before the panchayatdars and signed by the plaintiff and
defendants. The trial judge rejected the document produced by the defendants on
the ground that it was a partition deed and unless it is stamped and registered
the same cannot be admitted.
The Court held that to decide about the nature of a document
whether it requires to be stamped or to be registered, it is the contents of the
document, that are to be taken into consideration and not the nomenclature
alone.
The law is well settled that in cases where partition among
the joint owners had already taken place and the factum of the partition
effected earlier was put in writing on a later point of time and the properties
are enjoyed as per the said partition, the same can be termed as a family
arrangement and need not be treated as a partition deed and therefore, the
question of stamping and registering the same does not arise. On the other hand,
if an agreement itself creates a right for the first time as a document, then
one has to consider the contents of the agreement, instead of the nomenclature.
Merely because it is stated in the agreement that in respect of the gold, jewels
and silver utensils the same have already been divided among the family members
in the presence of panchayatdars, it does not mean that all other immovable
properties have also been divided already. A reading of the entire agreement
clearly showed that there was no recital to the effect that it was for recording
the earlier partition which had already taken place that the said agreement was
entered into. In that view of the matter, the said agreement cannot be marked as
a document, since it requires to be stamped and registered so as to be admitted
in evidence.
In this regard the Hon’ble Court relied on the Division Bench
decision in case of A.C. Lakshmipathy v. A. M. Chakrapani Reddiar & Ors.,
2001 (1) Law Weekly 257 wherein the legal position is summed up as under :
(a) “I. A family arrangement can be made orally.
(b) If made orally, there being no document, no question of
registration arises.
(c) If the family arrangement is reduced to writing and it
purports to create, declare, assign, limit or extinguish any right, title or
interest of any immovable property, it must be properly stamped and duly
registered as per the Indian Stamp Act and Indian Registration Act.
(d) If the family arrangement is stamped but not
registered, it can be looked into for collateral purposes.
(e) A family arrangement which is not stamped and not
registered cannot be looked into for any purpose in view of the specific bar
in S. 35 of the Indian Stamp Act.” and applying the above guidelines to the
facts of the case and contents of the document which is sought to be marked,
concluded that the agreement was purported to create, declare, assign, limit
and extinguish right, title and interest over the immovable properties and
therefore, the document was required to be properly stamped and duly
registered under the Indian Stamp Act and the Indian Registration Act.
Therefore, the document requires execution on proper stamp papers and
registration as per the Indian Registration Act.
[Vincent Lourdhenathan Dominique v. Josephine Syla
Dominique, AIR 2008 (NOC) 1173 (Mad.)]
11 Audio CD admissible in evidence :
Evidence Act 1875 S. 65B
In a matrimonial proceeding for dissolution of marriage the
husband had produced an audio CD wherein the wife had abused and theatered the
husband on a cell phone which was recorded on audio CD and produced in Court.
The trial court admitted the audio CD as evidence; against the said order the
wife filed the present revision petition.
The petitioner wife had contended that the audio CD was
fabricated and inadmissible as evidence because the cell phone which was primary
evidence was not produced.
The Court dismissed the petition on the ground that the trial
court allowed the audio CD to be admitted reserving the right of the petitioner
to cross examine the respondent husband of its contents. The court directed the
trial court to consider the objection raised by the petitioner regarding
admissibility of the audio CD and decide the same.
[G. Shyamala Ranjini v. M. S. Tamizhnathan, AIR 2008
(NOC) 476 (Mad).]
Electricity tariff : Advocates running office from
commercial place liable to be charged at Commercial basis : Electricity
(Supply) Act, 1948 : S. 49.
[ J.V.V.N. Ltd. & Ors. v. Smt. Parinitoo Jain & Anr.,
AIR 2009 Rajasthan 119]
The controversy involved is in regard to the electricity
tariff levied by the appellants on the offices of Advocates under category of
non domestic service.
The Single Judge relying on the judgement of Sajjan Raj
Surana v. JVVNL, AIR 2002 Raj 109 held that categorisation and inclusion
of profession of a lawyer as a commercial establishment or non domestic
services for the purpose of payment of electricity consumption at commercial
rate was illegal.
On further appeal it was held that the decision of Sajjan
Raj Surana (supra) had been overruled by Larger Bench and the Advocates
running their office from their residences cannot be charged the additional
tariff on the commercial basis. However, in case advocates are running their
office at independent commercial place, then the advocate cannot be exempted
from the same. A distinction has been made between the office in a residence
and office in a commercial place.
Choice of one reasonable course of treatment to other — Not
medical negligence : Consumer Protection : S. 2(1)(g).
[ Martin F. D’souza v. Mohd. Ishfaq, AIR 2009 SC
2049]
The respondent who was suffering from chronic renal failure
was referred by the Director, Health Services to the Nanavati Hospital, Mumbai
for the purpose of a kidney transplant.
On or about 24-4-1991, the respondent reached Nanavati
Hospital, Bombay and was under the treatment of the appellant Doctor.
Investigations were underway to find a suitable donor. The respondent wanted
to be operated by Dr. Sonawala alone who was out of India.
The respondent approached the appellant Doctor. At the
time, the respondent, who was suffering from high fever, did not want to be
admitted to the Hospital despite the advice of the appellant. Hence, a broad
spectrum antibiotic was prescribed to him. The appellant constantly requested
the complainant to get admitted to hospital but the respondent refused. On
29-5-1991 the respondent who had high fever of 104 F finally agreed to get
admitted to hospital due to his serious condition.
The blood culture report of the respondent was received,
which showed a serious infection of the blood stream. The respondent insisted
on immediate kidney transplant even though the appellant had advised him that
in view of his blood and urine infection no transplant could take place for
six weeks. The respondent was administered Amikacin injection. On 8-6-1991,
the respondent, despite the appellants advice, got himself discharged from
Nanavati Hospital. The respondent received haemodialysis at Nanavati Hospital
and allegedly did not complain of deafness during this period. On 25-6-1991,
the respondent, on his own accord, was admitted to Prince Aly Khan Hospital,
where he was also treated with antibiotics. The complainant allegedly did not
complain of deafness during this period and conversed with doctors normally,
as was evident from their evidence. The respondent returned to Delhi on
14-8-1991. After discharge. The respondent filed a complaint before the
National Consumer Disputes Redressal Commission, New Delhi, claiming
compensation of an amount of Rs.12,00,000 as his hearing had been affected.
The appellant filed his reply stating, inter alia, that there was no material
brought on record by the respondent to show any correlation between the drugs
prescribed and the state of his health.
The case of the respondent, in brief, was that the
ap-pellant was negligent in prescribing Amikacin to the
respondent of 500 mg twice a day for 14 days as such dosage was excessive and
caused hearing impairment. It is also the case of the respondent that the
infection he was suffering from was not of a nature as to warrant
administration of Amikacin to him.
The Commission allowed the complaint of the respondent and
awarded Rs.4 lakhs with interest @ 12% as well as Rs.3 lakhs as compensation
as well as Rs.5000 as costs.
On appeal the Supreme Court observed that law, like
medicine, is an inexact science. One cannot predict with certainty an outcome
of many cases. It depends on the particular facts and circumstances of the
case, and also the personal notions of the Judge concerned who is hearing the
case. However, the broad and general legal principles relating to medical
negligence need to be understood.
A medical practitioner is not liable to be held negligent
simply because things went wrong from mischance or misadventure or through an
error of judgment in choosing one reasonable course of treatment in preference
to another. He would be liable only where his conduct fell below that of the
standards of a reasonably competent practitioner in his field. It is not
enough to show that there is a body of competent professional opinion which
considers that the decision of the accused professional was a wrong decision,
provided there also exists a body of professional opinion, equally competent,
which supports the decision as reasonable in the circumstances.
The standard of care has to be judged in the light of
knowledge available at the time of the incident and not at the date of the
trial. Also, where the charge of negligence is of failure to use some
particular equipment, the charge would fail if the equipment was not generally
available at that point of time.
As regard the impairment of hearing of the respondent is
concerned it was observed that there is no known antibiotic drug which has no
side effect. Hence merely because there was impairment in the hearing of the
respondent that does not mean that the appellant was negligent.
The Court further observed that some times despite best
efforts the treatment of a doctor fails. For instance, sometimes despite the
best effort of a surgeon, the patient dies. That does not mean that doctor or
the surgeon must be held guilty of medical negligence, unless there was some
strong evidence to that effect. The appellant was held not guilty of medical
negligence.
Nomination by Member of Society empowers nominee to hold
property in trust for real owner : Maharashtra Co-op. Societies Act, S. 30.
[Ramdas Shivram Sattur v. Rameshchandra alias Ramchandra
Popatlal Shah & Ors., AIR 2009 (NOC) 2058 (Bom.)]
One Shri Shivram had purchased a plot of land in his own
name from co-op. hsg. Society. He nominated his wife Smt. Tarabai the original
defendant No. 1 as his nominee pursuant to S. 30 of the Mah. Co-op. Societies
Act, r/w. Rule 25 of the Rules framed thereunder.
They had 4 children namely Ramdas, Krishnadas, Vithaldas
and Sangita. After death of Shivram, Tarabai sold the property to Ramchandran
Popattlal Shah. The respondent No. 1 instituted suit against Tarabai for
specific performance and declaration. The society was also impleaded as party.
In the above litigation inter alia among other issue
one issue that came up for consideration was about the status of a nominee who
has been validly nominated as a member of Co-op. society u/s. 30 of
Maharashtra Co-op. Society Act.
The Court observed that by virtue of nomination of wife by
her deceased husband u/s.30 of the Maharashtra Co-op Societies Act, 1960, she
does not become absolute owner of the property, however, was only empowered to
hold the property in trust for the real owners that too for the purpose of
dealings with the society. Wife as such, had no power, authority and title to
alienate the property to the exclusion of the other legal heirs of her
deceased husband. Wife as such, was not competent to enter into an agreement
for sale of the suit plot as she along with her four children were class I
heirs of her deceased husband.
S. 30 of the Maharashtra Co-op. Societies Act does not
provide for a special rule of succession altering the rule of succession laid
down under the personal law.
Liability of a surety or a guarantor to repay loan of
principal debtor arises only when a default is made by the latter : State
Financial Corporation Act 1951 : S. 29(1) and S. 31.
[ West Bengal Industrial Development Corpn. Ltd. & Anr
v. Niccon Electronics Devices P. Ltd. & Ors., AIR 2009 Calcutta 193.]The appellant had given financial assistance of Rs. 55 lacs
to the respondent No. 1 a Pvt. Ltd. Company @ interest 14% p.a. for setting up
of a plant. The respondent 2 to 7 executed a deed of their personal guarantee.
On the failure on part of respondent No. 1 to pay dues a
notice u/s.29(1) read with S. 30 of the State Financial Corporations Act, 1951
was issued, asking the respondent No. 1 to liquidate the dues within a
stipulated period, but as the respondent No. 1 failed to liquidate its dues in
accordance with the said notice, the appellant took over all secured assets of
the respondent No. 1.
The assets were auctioned and after adjusting the sale
proceeds of the fixed assets of respondent No. 1 amounting to Rs.12,00,000 in
the loan account of respondent No. 1, the appellant sent demand notices dated
7th June, 2005, invoking guarantee of respondent Nos. 2 to 7. By the said
notices, the appellant called upon the said respondents to pay the sum.
The Single Judge by an order appointed Jt. Receivers to
sell the properties and assets of respondents 2 to 7. The respondent submitted
that the auction by financial corporation in terms of S. 29 of the Act must be
exercised only on a defaulting party. Only when there was a default on the
part of the principal debtor that the separate provision could be invoked
against a surety or a guarantor for repayment of loan.
The Court observed that S. 29 of the Act nowhere states
that the corporation can proceed against the surety even if some properties
are mortgaged or hypothecated by it. The right of the financial corporation in
terms of S. 29 of the Act must be exercised only on a defaulting party. There
cannot be any default as is envisaged in S. 29 by a surety or a guarantor. The
liabilities of a surety or the guarantor to repay the loan of the principal
debtor arise only when a default is made by the latter.
The demand was, therefore, specifically made and default
had admittedly not occurred on the part of the ‘industrial concern’, as on
date of the said notice, so as to enable the appellant to invoke the provision
of S. 31 of the Act for enforcing the liability of any surety.
In a mock trial, despite repeated questioning by the
prosecution attorney on his accepting slush money to compromise a case, a
witness maintained a stoic silence. When the judge asked him to reply to the
question, the witness replied that he thought the attorney was talking to the
judge.
Global phenomenon :
Corruption is as old as modern civilisation and has made
Bofors, 2G auctions, IPL and Commonwealth Games household names. Presently,
corruption has hogged the limelight in the country because of the sheer
magnitude of the amounts involved. It is anybody’s guess that the revenue
deficit of India would have reduced substantially had a major portion of the
money above been routed through normal channels and taxes paid on them. The
phenomenon is universal as evidenced by the statistic that over a third of the €
35.5 billion allocated by the European Union in 2009 for regional infrastructure
projects were affected by errors either unintentional or by fraud. In EU new
member state Romania, journalists have uncovered that two cross-border centres
funded with over € 840,000 are actually being used by regional authorities for
private parties and weddings. The role of auditors in tackling corruption has
been debated for long, but nothing concrete could be legislated due to the
specific nature of an auditors’ responsibility (commenting on the accuracy of
the financial statements) and the fact that the financial statements audited
would inevitably be post the corruption event. A Corruption Audit seems
necessary and inevitable.
Corruption Audit :
A Corruption Audit should be distinguished from a Forensic
Audit, which is a specialised branch of audit that principally covers fraud and
the findings of the audit are courtworthy. The common purpose of both the audits
is to ensure that the economic resources of the entity are not misused for the
personal benefit of either insiders or outsiders. The Institute of Internal
Auditors (IIA) has a publication on Corruption Audit. The publication lists 10
indicators of corruption- general administration, procurement, capital works,
human resource management, privatisation, ministries, government departments,
revenue collecting departments, the judiciary and education. Specific names can
be assigned to each of these indicators in India. In the criteria for Corruption
Auditing, the publication lists procurement of goods and services, consultancy
services and spaces on lease as significant areas. A Corruption Opportunity Test
(COT) is performed on the criteria and indicators to hone specific areas. Just
as in a normal Internal Audit, a detailed audit programme is prepared. A
Corruption Audit is executed with the assistance of a lot of surveys — client
surveys, public surveys and employee surveys being popular methods. The
International Organisation of Supreme Audit Institutions (INTOSAI) has been
active in building anti-corruption awareness, but the sheer scale of the problem
and the fact that they focus on Government Audits ensures that these measures
take time to fructify. The Corruption Audit Report would highlight specific
areas that are prone to corruption and would provide recommendations to prevent
recurrence. A Corruption Audit would be the responsibility of the Internal
Auditor who has the time and resources to scale up his audit to meet these
specific requirements. The audit would draw upon the existing policies of the
company such as whistle-blower policies, employee and contractor referral
procedures and past experience in dealing with outside agencies and specific
issues therein. The critical part of the audit would be to ensure that such
policies are drafted, implemented and made to work. The findings of the audit
could throw up specific names or departments that are parties to transactions.
To make such audits work, it would be imperative to question and initiate action
against confirmed cases of corruption and make the findings public.
Tackling Corruption :
The Comptroller and Auditor General of India in collaboration
with the Institute of Chartered Accountants of India could consider introducing
Corruption Audits in select entities and for specific projects. Like dope tests
on athletes, they should be surprise forays and should be conducted on all
participating entities. History has taught us that corruption-prone areas are
government tenders, large contracts, auctions and bidding processes. The results
of such an audit could be noteworthy.
A whistle-blower policy on corruption can be thought of as a
remedial measure. Corruption invariably involves two or more parties and is
contractual in nature. Being contractual, there could be individuals or persons
aware of the contract who could be rewarded for whistle-blowing the deal.
Chartered Accountants constitute a key part of the service
economy of India and could be privy to a lot of information on dubious
contracts. They would be under pressure to be a part of the contract or give
their assent to it. They should resist the temptation to succumb and lodge their
disagreement in writing. There could be uncomfortable and embarrassing moments
the first time, which if overcome, will yield tangible benefits over the long
term.
Eradicating an issue that gives the Indian economy a run for its money could
take time, effort and persistence. The key is to make a start.
Extract from the Address by the President, Pratibha Patil, to
the Parliament on 21st February 2011.
Hon’ble Members,
12. Our citizens deserve good governance; it is their
entitlement and our obligation. My government stands committed to improving the
quality of governance and enhancing transparency, probity and integrity in
public life. A Group of Ministers is considering all measures, including
legislative and administrative, to tackle corruption and improve transparency.
The Group will consider issues relating to the formulation of a public
procurement policy and enunciation of public procurement standards, review and
abolition of discretionary powers enjoyed by Ministers, introduction of an open
and competitive system of exploiting natural resources, fast-tracking of cases
against public servants charged with corruption, and amendments to the relevant
laws to facilitate quicker action against public servants. It will also consider
issues relating to the state funding of elections. The report of the Group of
Ministers is expected soon. A bill to give protection to whistleblowers has been
introduced in Parliament. My government has also decided to ratify the United
Nations Convention Against Corruption.
13. The subject of electoral reforms has been de-bated over the years. I am sure that all parties across the political spectrum support the need for bringing about such reforms. I am happy to share with the Hon’ble Members that my government has constituted a committee on electoral reforms to fast-track the process. The committee has held regional conferences with the concerned stakeholders. This will culminate in a national conference in April this year. It is expected that this process of consultation would lead to a consensus on an acceptable agenda of reforms.
14. My government attaches high priority to improving the delivery of justice and reducing delays in the disposal of cases. The details of the National Mission for Delivery of Justice and Legal Reforms are expected to be finalised soon. This should result in re-engineering of procedures, improving of human resources in this sector and leveraging of information technology. The Judicial Standards and Accountability Bill, already introduced in Parliament, is intended to enhance the accountability of the judiciary, thereby improving its image and efficiency.
Hon’ble Members,
15. The issue of black money has attracted a lot of attention in the recent past, especially that allegedly stashed away in foreign banks. The government fully shares the concern about the ill-effects of black money whether generated by evasion of taxes on income earned legitimately or through illegal activities. My government stands committed to tackling the menace frontally. It requires diligent, sustained effort by all law enforcement agencies, including those of state governments.
16. My government has taken many steps to strengthen the legal framework, build new institutions, and improve capacity to tackle this problem. A multidisciplinary study has been commissioned to study its ramifications for national security and recommend a suitable framework to tackle it. The government is also working closely with the international community, especially through the G-20, to expedite the process of identification and recovery of such money. India is now a member of the Financial Action Task Force in recognition of its anti-money laundering and anti-tax evasion measures. India has also gained membership of the Eurasian Group and the Task Force on Financial Integrity and Economic Development. My government has taken steps to facilitate exchange of information for tax purposes with such countries and entities where Indian citizens may have parked their money. The early results have been encouraging. These steps have led to additional collection of taxes of Rs. 34,601 crore and detection of additional income of Rs. 48,784 crore. My government will spare no effort in bringing back to India what belongs to it and to bring the guilty to book.
