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2023 (12) TMI 427
Validity of the ‘Group of Companies’ doctrine in the jurisprudence of Indian arbitration - whether there can be a reconciliation between the group of companies doctrine and well settled legal principles of corporate law and contract law? - doctrine of competence-competence.
As per Dr. Dhananjaya Y Chandrachud, CJI
HELD THAT:- The questions of law referred to this Constitution Bench answered as follows:
a. The definition of “parties” under Section 2(1)(h) read with Section 7 of the Arbitration Act includes both the signatory as well as non-signatory parties;
b. Conduct of the non-signatory parties could be an indicator of their consent to be bound by the arbitration agreement;
c. The requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding non-signatory parties;
d. Under the Arbitration Act, the concept of a “party” is distinct and different from the concept of “persons claiming through or under” a party to the arbitration agreement;
e. The underlying basis for the application of the group of companies doctrine rests on maintaining the corporate separateness of the group companies while determining the common intention of the parties to bind the nonsignatory party to the arbitration agreement;
f. The principle of alter ego or piercing the corporate veil cannot be the basis for the application of the group of companies doctrine;
g. The group of companies doctrine has an independent existence as a principle of law which stems from a harmonious reading of Section 2(1)(h) along with Section 7 of the Arbitration Act;
h. To apply the group of companies doctrine, the courts or tribunals, as the case may be, have to consider all the cumulative factors laid down in OIL AND NATURAL GAS CORPORATION LTD. VERSUS M/S DISCOVERY ENTERPRISES PVT. LTD. & ANR. [2022 (4) TMI 1350 - SUPREME COURT]. Resultantly, the principle of single economic unit cannot be the sole basis for invoking the group of companies doctrine;
i. The persons “claiming through or under” can only assert a right in a derivative capacity;
j. The approach of this Court in CHLORO CONTROLS (I) P. LTD. VERSUS SEVERN TRENT WATER PURIFICATION INC. & ORS. [2014 (1) TMI 830 - SUPREME COURT] to the extent that it traced the group of companies doctrine to the phrase “claiming through or under” is erroneous and against the well-established principles of contract law and corporate law;
k. The group of companies doctrine should be retained in the Indian arbitration jurisprudence considering its utility in determining the intention of the parties in the context of complex transactions involving multiple parties and multiple agreements;
l. At the referral stage, the referral court should leave it for the arbitral tribunal to decide whether the non-signatory is bound by the arbitration agreement; and
m. In the course of this judgment, any authoritative determination given by this Court pertaining to the group of companies doctrine should not be interpreted to exclude the application of other doctrines and principles for binding non-signatories to the arbitration agreement.
The Registry shall place the matters before the Regular Bench for disposal after obtaining the directions of the Chief Justice of India on the administrative side.
As per PAMIDIGHANTAM SRI NARASIMHA, J.
While concurring with the judgment of the learned Chief Justice, following conclusions arrived at:
I. An agreement to refer disputes to arbitration must be in a written form, as against an oral agreement, but need not be signed by the parties. Under Section 7(4)(b), a court or arbitral tribunal will determine whether a non-signatory is a party to an arbitration agreement by interpreting the express language employed by the parties in the record of agreement, coupled with surrounding circumstances of the formation, performance, and discharge of the contract. While interpreting and constructing the contract, courts or tribunals may adopt well-established principles, which aid and assist proper adjudication and determination. The Group of Companies doctrine is one such principle.
II. The Group of Companies doctrine, As delineated in para 40 of Discovery Enterprises is also premised on ascertaining the intention of the non-signatory to be party to an arbitration agreement. The doctrine requires the intention to be gathered from additional factors such as direct relationship with the signatory parties, commonality of subject-matter, composite nature of the transaction, and performance of the contract.
III. Since the purpose of inquiry by a court or arbitral tribunal under Section 7(4)(b) and the Group of Companies doctrine is the same, the doctrine can be subsumed within Section 7(4)(b) to enable a court or arbitral tribunal to determine the true intention and consent of the non-signatory parties to refer the matter to arbitration. The doctrine is subsumed within the statutory regime of Section 7(4)(b) for the purpose of certainty and systematic development of law.
IV. The expression “claiming through or under” in Sections 8 and 45 is intended to provide a derivative right; and it does not enable a non-signatory to become a party to the arbitration agreement. The decision in Chloro Control tracing the Group of Companies doctrine through the phrase “claiming through or under” in Sections 8 and 45 is erroneous. The expression ‘party’ in Section 2(1)(h) and Section 7 is distinct from “persons claiming through or under them”. This answers the remaining questions referred to the Constitution Bench.
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2023 (12) TMI 426
Allegation of Misconduct against the petitioner acting as Commissioner of Income Tax (Appeals) / CIT(A) - officials exercising quasi-judicial functions - exemption from disciplinary proceedings - exercise of power of judicial review akin to adjudicating an appeal arising out of an impugned decision - disciplinary proceedings are at the final stage - HELD THAT:- In ZUNJARRAO BHIKAJI NAGARKAR VERSUS UNION OF INDIA [1999 (8) TMI 142 - SUPREME COURT], the Supreme Court was concerned with a case wherein the appellant while working as a Collector of Central Excise, Nagpur was issued a memorandum with allegations that he favoured the assessee therein, by not imposing penalty on it under Rule 173Q of the Central Excise Rules 1944, when he passed the order in Original No. 20/95 on March 2, 1995, despite holding that the assessee had clandestinely manufactured and cleared the excisable goods wilfully and evaded the excise duty and had ordered confiscation of the goods.
After considering UNION OF INDIA AND OTHERS VERSUS KK. DHAWAN [1993 (1) TMI 255 - SUPREME COURT] and various other judgments, the Supreme Court was of the view that merely because the penalty imposable was not imposed, it cannot be said that by not levying penalty, the appellant has favoured the assessee or shown undue favour to him. It was also held that if every error of law were to constitute a charge of misconduct, it would impinge upon the independent functioning of quasi-judicial officer like the appellant therein. It further held that to maintain a charge-sheet against a quasi-judicial authority, something more has to be alleged than a mere mistake of law, e.g., in the nature of some extraneous consideration influencing the quasi judicial order. Since nothing of that sort was alleged against the appellant therein, the impugned chargesheet was rendered illegal / quashed.
The Supreme Court in the case of Zunjarrao Bhikaji Nagarkar has held that the negligence in case of quasi-judicial adjudication is not perceived as carelessness, inadvertence or omission, but as culpable negligence. In other words, if the view of the competent authority, is that the impugned order passed by an officer reveals culpable negligence while discharging quasi-judicial function, then such a conduct can be made subject matter of disciplinary proceedings. But, whether culpable negligence shall sustain, is a matter of evidence to be produced and considered by the disciplinary authority.
The UPSC advice has also come. The petitioner has been given a copy of the UPSC advice and Inquiry Report. She has also submitted her representation on the Inquiry Report. If that be so, the proceedings are at the final stage. Unfortunately, neither the copy of the report of the inquiry officer nor the UPSC advice and the representation made by the petitioner, have been placed on the record of this Court for the reasons best known. Surely, the petitioner in her representation may have taken the jurisdictional pleas as urged by Dr. Kothari in this petition on the Charge Memorandum - this Court instead of deciding the pleas itself, the disciplinary authority should first consider the same by keeping in view, the law laid down by the Supreme Court, this Court and other High Courts, along with criteria laid down by CVC vide its Circular dated October 24, 2016, without being influenced by any conclusion drawn by us in this judgment and pass a final order. If the disciplinary authority agrees with the pleas of Dr. Kothari/petitioner, then it shall close the proceedings. But if the disciplinary authority is of the view that the Charge Memorandum has been rightly issued, the disciplinary authority shall pass a reasoned order in the manner directed by us in that regard, so also on the Inquiry report.
By not interfering with the impugned judgment of the Tribunal, the writ petition is disposed off.
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2023 (12) TMI 364
Payment of insurance claim amount in favour of the nominee - Right of nominee as collector of sum or as absolute owner - Right of legal heirs - direction to disbursement of assured claim amount to the petitioner and her son, who are the legal heirs of the deceased S.Arul - whether the impugned communication of the second respondent requires the interference of this Court and this Court has to issue a consequential direction to the first and second respondents to pay the assured claim amount to the petitioner and her son?
HELD THAT:- A beneficiary nominee means a nominee who is entitled to receive the entire sum assured under the insurance policy absolutely. On the other hand, a collector nominee means a nominee other than a beneficiary nominee It is true that on a plain reading of Section 39(7) of the Act, this distinction has been done away with. However, the legislature was careful enough to identity who all will fall within the category of nominees who in law will be considered as a beneficiary nominee. While categorizing those persons, the legislature was careful enough to bring in the parents, spouse, children, spouse and children or any of them. If the legislature had thought it fit to make everyone as a beneficiary nominee, there was no need for the legislature to specifically prescribe those persons who will fall within the ambit of Section 39 (7) of the Insurance Act, 1938. The fact that such a conscious description of persons, who fall under Section 39(7) of the Act has been prescribed by the legislature, shows that the legislature only wanted those persons who are closely related to the deceased policy holder alone to be treated as beneficiary nominees. In the instant case, the third respondent is admittedly the brother of the deceased policy holder and the third respondent cannot be brought within the scope of Section 39(7) of the Act. If the third respondent cannot be brought within the scope of Section 39(7) of the Act, it would only mean that he will be treated as a collector nominee.
The concept of nomination is only to ensure that the Insurance Company does not get into the area of dispute and the Company washes of its hands by handing over the sum assured to the nominee. If the nominee falls within the scope of Section 39(7) of the Act, those persons described therein automatically takes it as a beneficiary nominee. If the person does not fall within the scope of Section 39(7) of the Act, he can only be treated as a collector nominee and he has to hold the money in trust subject to the claims made by the legal representatives who are entitled to a share in the sum assured. This position continues even after the amendment made to the Insurance Act in the year 2015. If every nominee is brought within the scope of Section 39(7) of the Act, this Court will be doing violence to the plain language used in the said provision and it will be certainly beyond the scope of the said provision.
This Court holds that the third respondent as a nominee can only collect the sum assured from the Insurance Company and hold it in trust and it will be subject to the claims made by the legal heirs of the deceased under the personal law governing them. This Court cannot find fault with the impugned communication issued by the second respondent dated 24.06.2021, in this regard.
Whether the petitioner and her son will have to once again go through the process of initiating recovery proceedings against the third respondent, if in case, the third respondent does not hand over the sum assured to them? - HELD THAT:- In the instant case, as between the petitioner and the third respondent, it is the petitioner and her son who are entitled to receive the sum assured as Class-I legal heirs. The Hindu Succession Act that governs the parties makes it very clear that the Class I legal heirs will be entitled to take the share absolutely to the exclusion of the other heirs. The third respondent, who is the brother of the deceased falls under the category Class-II legal heir and therefore, he is excluded from succeeding to the sum assured. Hence, in the absence of any dispute on the status of the parties, this Court in order to render substantial justice, directs the second respondent to hand over the entire sum assured to the petitioner.
This Writ Petition is disposed of.
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2023 (12) TMI 296
Recovery of dues - priority over the charges - whether the different departments of the State including Excise and Revenue will have priority over the secured creditors’ debt? - HELD THAT:- Apparently, the petitioner-Bank is the secured creditor and has created the first charge over the property in question as far as back in the year 2008 and thereafter in 2012 as against the charge created by the Excise Department in the year 2017 and, therefore, has the first right to realize its dues.
The issue in question is no longer res integra in view of the authoritative judgment of the Hon’ble Supreme Court in Punjab National Bank Vs. Union of India & Ors. [2022 (2) TMI 1171 - SUPREME COURT] where it was held that the provisions contained in the SARFAESI Act, 2002, even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, will have an overriding effect on the provisions of the Act of 1944.
The legal position has thereafter been reiterated in a recent judgment of this Court in Mankind Life Sciences Private Limited vs. The State of Himachal Pradesh & Anr., [2023 (10) TMI 867 - HIMACHAL PRADESH HIGH COURT], wherein it was held that Once the petitioner has only purchased the Industrial Plots-Immovable Properties, which had been leased out to the Original Lessee by department of industries and the petitioner has never purchased the past or ongoing business of the original lessee therefore, the petitioner-auction purchaser cannot be fastened with the liability of State taxes, which had accrued and were connected with and were solely attributable to the business of the original lessee only.
In view of the settled legal position, this Court is left with no other option, but to allow the instant petition by directing respondents No. 1 and 2 to remove the red entry qua the property in question made in the revenue record i.e. rapat No. 484 , dated 27.5.2017 forthwith - petition allowed.
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2023 (12) TMI 163
Dishonour of Cheque - Vicarious liability - petitioner is an Independent Non-Executive Director - petitioner within the ambit of Section 141 of the NI Act or not - HELD THAT:- Section 141 NI Act extends criminal liability in case of a company to every person who at the time of the offence, was in charge of and was responsible for the conduct of the business of the company. A company is a juristic person and every person who at the time of commission of offence is in charge and responsible for the conduct of the business of the company is liable for the offence stated to be committed by the company. The criminal liability arises when the offence was committed and not on the basis of merely holding a designation or office in a company. Section 141 of the NI Act mandates that a person is criminally liable when at the time of commission of offence was in charge and responsible for the conduct of the business of the company and person connected with the company may not fall within the ambit of section 141 of the NI Act.
The Supreme Court in Siby Thomas V M/s Somany Ceramics Ltd., [2023 (10) TMI 487 - SUPREME COURT] observed that it is the primary responsibility of the complainant to make specific averments in the complaint, so as to make the accused vicariously liable.
It is the primary responsibility of the complainant to make specific averments in the complaint so as to make the accused vicariously liable. If the basic averment is made in the complaint under section 138 of NI Act that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed then Magistrate can issue process against such Director. The complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient.
Section 141 of the NI Act provides for a constructive liability which is created by a legal fiction - The petitioner as per Form 32 was appointed as Additional Director on 29.06.2001 and resigned as Director with effect from 10.11.2012. Form 32 appears to be a declaration regarding appointment of a director etc. in the company or any change thereto as per section 303(2) of the Companies Act, 2013. It reflects that when the cheque in question was issued, the petitioner was a director in the accused no 1. The petitioner was not shown as Independent Non-Executive Director of the accused no. 1 in Form 32 as pleaded and alleged by the petitioner.
It is reflecting that the petitioner was not a party to the execution of Inter Corporate Deposit Agreement, Memorandum of Settlement dated 27.05.2003 and Consent Award dated 21.07.2003 and the cheque in question was not issued under his signature. However the petitioner was appointed as Additional Director and resigned as Director from the accused no. 1 and was one of the Director when the cheque in question was issued, the petitioner cannot be absolved from vicarious liability arising out of cheque in question by pleading that he was not a party to the execution of Inter Corporate Deposit Agreement, Memorandum of Settlement dated 27.05.2003 and Consent Award dated 21.07.2003 and the cheque in question was not issued under his signature. The arguments advanced by learned Senior Counsel on above legal and factual propositions are without any force.
There is no legal and factual infirmity in the order dated 11.10.2018 passed by the trial court and impugned order passed by the revisional court - Petition dismissed.
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2023 (12) TMI 162
Dishonour of Cheque - challenge to reversal and acquittal passed by the Additional Sessions Judge - discharge of a liability or debt or not - rebuttal of presumption - appellant failed to discharge his burden - HELD THAT:- Section 138 of the Negotiable Instruments Act, 1881, has provided for punishment regarding an offence of dishonour of cheque which was delivered in discharge in whole or in part of any debt or other liability and for the reasons of insufficiency etc. of the funds in the account of the drawer. The statutory presumption as enumerated under Section 139 of the said Act in favour of the holder of the cheque is that the holder has received the same in due discharge of the whole or part of any debt or other liability.
The Supreme Court in the case of Bir Singh Vs. Mukesh Kumar [2019 (2) TMI 547 - SUPREME COURT] has held that presumption is a rule of evidence and do not conflict with the presumption of innocence which requires the prosecution to prove it beyond reasonable doubt. It has been held in a catena of judgment of various constitutional Courts including the Apex Court that the presumption under Section 139 of the Act is ‘rebuttable presumption’ in nature, since the accused issuing the cheque is at liberty to prove to the contrary.
The presumption of law pursuant to the provisions under Section 139 of the Negotiable Instruments Act, 1881, would not release the prosecution from burden of proving the fact that the relevant point of time there existed a legally enforceable debt as against the accused persons, in this case also the Court has to ascertain if such a initial burden is discharged by the prosecution appropriately or not. Only then the Court should apply the presumption as above against the accused persons to expose them for rebuttal of the same.
Considering the nature of transaction as shown by the ‘exhibit 1’, I find that the decision of the first appellate Court that money if at all changed hands, was pursuant to the business undertaken by the present appellant and the cheque was handed over as a security in lieu of obtaining the amount. This is more so, when there is no doubt in view of ‘exhibit 1’ that the parties have agreed for paying interest over the amount, for over a considerable period of time - the prosecution in this case has not been successful in discharging its initial burden that the cheque was issued by the present respondents in discharge of their legally enforceable debt towards the appellant.
The initial burden of prove lied on the appellant himself to come up with the adequate material before the Court to show that on the particular date he had a legally enforceable debt recoverable from the respondents. As elaborately discussed above, the appellant had failed in discharging his such burden. The rest of the questions raised in this appeal would only be unnecessary for discussion any further.
This Court finds no irregularity or illegality in the impugned judgment of the first appellate Court - Appeal dismissed.
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2023 (12) TMI 108
Professional misconduct - Disciplinary proceedings against Chartered Accountant (CA) - Abatement of proceedings of death of the accused - Procedure to be followed by Director on a complaint - Correctness of closing the complaint of the Petitioner - direction to the Respondent No. 1 to re-open her complaint and conduct a disciplinary enquiry against the Respondent No. 2 - HELD THAT:- Rule 8 provides for the procedure to be followed by the Director on receiving a complaint. Under Rule 8(1)(b) of the Rules, Director of the Institute has to send a copy of the complaint to the firm calling upon the firm to disclose the name or names of the member or members concerned. In terms of the said Rules, on receiving the complaint of the Petitioner the Respondent No. 1/ICAI vide letter dated 17.08.2020 called upon Respondent No. 2 firm to disclose the name of the member answerable to the complaint and Respondent No. 2 by its letter dated 27.08.2020 informed Respondent No. 1/ICAI that the Audit in question was carried by CA Vijay Kumar Lalla who passed away on 18.11.2017. In terms of Rule 8(2) a member whose name is disclosed by the firm shall be responsible for answering the complaint. Name of CA Vijay Kumar Lalla was disclosed by the Respondent No. 2/Firm. CA Vijay Kumar Lalla was associated as a partner with the Respondent No. 2/Firm at the time of occurrence of the alleged misconduct. It is not the case of the Petitioner that no one has owned the responsibility for the allegations made against the firm and therefore, in absence of such responsibility the disciplinary proceedings can be initiated against Chartered Accountant firm.
In the present case, the Respondent No. 2/Firm has disclosed the name of CA Vijay Kumar Lalla, who conducted the Audit of Respondent No. 3/IIC. The complaint was filed by the Petitioner after three years of the report of Audit and by the time the said CA Vijay Kumar Lalla had passed away. It is well settled that disciplinary proceedings cannot continue after the death of the concerned person.
Thus, it cannot be said that the Respondent No. 2/Firm has whittled away from its responsibility and the Respondent No. 1/ICAI is at fault for closing the complaint of the Petitioner. Therefore, this Court is of the opinion that the decision of Respondent No. 1/ICAI in closing the complaint of the Petitioner does not require any interference by this Court - petition dismissed.
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2023 (12) TMI 107
Dishonour of Cheque - insufficient funds - whether the complainant has proved the case against the Accused for the offence under Section 138 of the Negotiable Instruments Act? - correctness of conviction of accused - HELD THAT:- A person, who signs a Cheque and makes it over to the Payee remains liable unless he adduces evidence to rebut the presumption that the Cheque had been issued for payment of a debt or in discharge of a liability. The presumption is that the existence of a legally enforceable debt is to be presumed in favour of the complainant and the accused has to adduce evidence to rebut the presumption under section 139 of Negotiable Instruments Act. But in the case on hand the complainant failed to prove the case, per contra the accused probabilished his defence through sufficient evidence thereby the said case laws will not be helpful to decide the case in favour of the complainant.
The trial Court in its judgment, has taken a view that the Accused has not denied the signature found in the complaint and the complainant proved her financial capacity to pay the amount by pledging her jewels and mortgaging the properties. But those mortgaged documents are unregistered documents and cannot be relied and those documents were also not marked. Further, the alleged pledging of jewels were not proved and only the complainant produced the redemption of jewels in the year 2010. But the alleged lending money was given in the year 2008. Further the trial Court failed to consider that P.W.2 himself admitted the employment under the first accused company and he only managed the accounts of the company and had transactions with the Bank and the Bank account was inoperative from 24.09.2005 onwards. Thereby the accused has probablized his defense.
The trial Court has erroneously convicted the Accused by holding that the complainant has proved her case - the judgment of the trial Court is not sustainable and the judgment of the Appellate Court is well reasoned.
There is no perverse or infirmity found on the judgment of the Appellate Court, thereby there is no warrant to interfere by this Court - Criminal appeal dismissed.
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2023 (12) TMI 74
Dishonour of Cheque - Legally enforceable debt or not - whether the officials could have acted in such a manner and asked the applicants to make good the payment without there being any adjudication in accordance with the provisions of the Excise Act and the Rules framed therein? - HELD THAT:- In order to attract the penal provisions for the bouncing of a cheque, it is essential that the dishonoured cheque should have been issued in discharge, wholly or in part, or any debt or other liability of the drawer to the payee. The explanation to Section 138 of the Negotiable Instruments Act defines the expression “debt or other liability” as a legally enforceable debt or other liability. Unless the two conditions set out in Section 138 of the Act are satisfied, no criminal liability can be fastened. This is also in accordance with the general scheme as laid down in Section 118(a) of the Negotiable Instruments Act. It also enforces the doctrine of consideration as laid down in Section 2(d) of the Indian Contract Act, 1872.
In the facts of the cases on hand where there is no legally enforceable debt is found and considering the above judgment which is passed in identical facts and the ratio laid down on the aspect that there should be legally enforceable debt existing on the date of issuance as well as presentation of cheques and accordingly considering the ratio laid down in the judgments of M/s Indus Airway Pvt. Ltd. [2014 (4) TMI 464 - SUPREME COURT], Sampelly Satyanarayana Rao [2016 (9) TMI 867 - SUPREME COURT] and Dashrathbhai Trikambhai Patel [2022 (10) TMI 424 - SUPREME COURT], all these applications are allowed.
Application disposed off.
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2023 (12) TMI 1
Cancellation of sale deed on dishonor of cheque - Dismissal of suit filed by the appellant/plaintiff - suit was filed for cancellation of the sale deed and to restrain the defendants from interfering the possession of the plaintiff - contradiction in sales amount as per two agreements - HELD THAT:- In the case of non payment of sale consideration, the issue came up for consideration before the Supreme Court in the matter of Dahiben Versus Arvindbhai Kalyanji Bhanusali (Gajra) [2020 (7) TMI 786 - SUPREME COURT] wherein the Supreme Court at paras 29.7 held that if the sale consideration has not been paid, it could not be a ground for cancellation of sale deed.
Following the judgment of Madhya Pradesh High Court in the matter of J.B.O. Association vs. State of M.P. [2002 (12) TMI 652 - MADHYA PRADESH HIGH COURT] wherein the High Court held that in case of conflict between two decisions of the Apex Court Benches comprising of equal number of judges, decision of earlier bench is binding unless explained by the latter bench of equal strength in which case the later decision is binding. Therefore, it was held that the decision of the earlier Division Bench unless distinguished by the decision of latter Division Bench, would be binding on the High Court and the subordinate courts.
Therefore, in the instant case if the plaint averments are accepted that the sale having been made, the only recourse left to the appellant was to file a suit for recovery and evidence would show that for dishonour of the cheque proceeding has already been drawn and the complaint was filed under Section 138 of the Negotiable Instrument Act. As such the agreement Ex.P/3 cannot be given over riding effect over registered document of sale whereby the property has been transferred to the defendant. Consequently, the document Ex.P/3 wherein the plaintiff relied that in case non payment the agreement deemed to be cancelled cannot be given a legal precedent.
There are no merit in the appeal, warranting interference in the impugned judgment and decree passed by the Court below, which is just and proper - appeal dismissed.
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2023 (11) TMI 1371
Monetary amount involved in the application - Rejection of petitioner’s application u/s 13(10) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) read with Rule 11 of the Security Interest (Enforcement) Rules, 2002 - rejected on the ground that the same was less than ₹ 10,00,000 and was therefore, not within the pecuniary jurisdiction of the learned Debts Recovery Tribunal III - whether the Debts Recovery Tribunal constituted under the RDB Act, exercises any original jurisdiction for the recovery of debts under the SARFAESI Act? - HELD THAT:- In terms of Section 179 of the IBC, the Debts Recovery Tribunal is also the Adjudicating Authority for individuals and firms. Thus, to clothe the Debts Recovery Tribunal with the jurisdiction to adjudicate insolvency of individuals and firms, Section 249 of the IBC amended certain provisions of the RDB Act as set out in the Fifth Schedule to the IBC. This included amendment to Sub-section (4) of Section 1 of the RDB Act by introducing the opening words “save as otherwise provided”. The import of the said words was to carve out an exception to the clause regarding the pecuniary jurisdiction of the Debts Recovery Tribunal. Thus, to the extent that the Debts Recovery Tribunal is expressly conferred jurisdiction, it would exercise the same notwithstanding, the pecuniary threshold specified under Sub-section (4) to Section 1 of the RDB Act.
Whether the pecuniary jurisdiction of a Debts Recovery Tribunal under the RDB Act would also apply for an application made under Section 13(10) of the SARFAESI Act? - HELD THAT:- There is no provision in the RDB Act or the SARFAESI Act, that specifies the Debts Recovery Tribunal, to which an application is required to be made under Section 13(10) of the SARFAESI Act. Section 17(1A) of the SARFAESI Act, specifies the Debts Recovery Tribunal to which an application under Section 17(1) of the SARFAESI Act may be made; however, there is no such similar provision for making an application under Section 13(10) of the SARFAESI Act.
RDB Act (then known as Recovery of Debts Due to Banks and Financial Institutions Act, 1993) was held to be unconstitutional by this Court in Delhi High Court Bar Association & Anr. v. Union of India, Secty. Department of Economic Affairs [1995 (3) TMI 506 - DELHI HIGH COURT] on various grounds including that the enactment did not enable a defendant to claim any set off or make any counter claim against a bank or a financial institution.
The remedy under Section 13(10) of SARFAESI Act cannot be considered as a remedy independent of the RDB Act. An application under Section 13(10) of the SARFAESI Act is required to be made in a manner as prescribed – in the form annexed as Appendix VI to the SIE Rules – and is required to be accompanied with the requisite fee as prescribed under the Debts Recovery Tribunal (Procedure) Rules 1993. However, for all intents and purposes, this application is an Original Application under Section 19(1) of the RDB Act and is required to adjudicated as such.
Conclusion - The Debts Recovery Tribunal exercises original jurisdiction under the Recovery of Debts and Bankruptcy Act, 1993, and appellate jurisdiction under the SARFAESI Act, with pecuniary limits applying only to the original jurisdiction.
Petition dismissed.
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2023 (11) TMI 1368
Dismissal of application filed by the appellant / defendant to set aside the ex parte decree - delay in service of summons - after coming to know about the ex parte decree, appellant preferred the application to set aside the ex parte decree - no delay in approaching the court - HELD THAT:- In the suit, the respondent / plaintiff has taken all efforts to serve summons on the appellant / defendant. It is settled law that if the notice is sent to the correct and last known address of the defendant, the same has to be deemed to be served, whether it is actually served or not.
In the present case, summons have been served to the correct and last known address of the appellant. It is not the case of the appellant that summons have been sent to a wrong address. Further, the appellant has not informed about their change of business place. In such circumstances, it can be inferred that summons have been duly served on the appellant, but they failed to contest the suit. Therefore, the application filed by the appellant in the year 2019 to set aside the ex parte decree dated 24.04.2009, after a decade, was rightly dismissed by the learned Judge, by the order impugned herein, which need not be interfered with, at the hands of this court.
Appeal dismissed.
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2023 (11) TMI 1357
Dishonour of cheque - funds insufficient - vicarious liability of petitioner, as an Independent Non-Executive Director - Section 141 of the NI Act - HELD THAT:- Section 138 of NI Act casts criminal liability on a person who issues a cheque towards discharge of a debt or liability as a whole or in part and the cheque is dishonoured by the bank on presentation. Section 138of NI Act creates criminal liability in case of dishonour of a cheque.
Section 141 of NI Act extends criminal liability in case of a company to every person who at the time of the offence, was in charge of and was responsible for the conduct of the business of the company. A company is a juristic person and every person who at the time of commission of offence is in charge and responsible for the conduct of the business of the company is liable for the offence stated to be committed by the company. The criminal liability arises when the offence was committed and not on the basis of merely holding a designation or office in a company. Section 141 of the NI Act mandates that a person is criminally liable when at the time of commission of offence was in charge and responsible for the conduct of the business of the company and person connected with the company may not fall within the ambit of section 141 of the NI Act.
The Supreme Court in SMS Pharmaceuticals Ltd. V Neeta Bhalla & another, [2005 (9) TMI 304 - SUPREME COURT] held that 'the liability arises on account of conduct , act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable.'
The Supreme Court in Siby Thomas V M/s Somany Ceramics Ltd. [2023 (10) TMI 487 - SUPREME COURT] referred decision in S.P. Mani and Mohan Dairy V Dr. Snehalatha Elangovan, [2022 (9) TMI 846 - SUPREME COURT] and observed that it is the primary responsibility of the complainant to make specific averments in the complaint, so as to make the accused vicariously liable.
It is accepted legal proposition in view of law laid down by the Supreme Court in above referred decision that it is the primary responsibility of the complainant to make specific averments in the complaint so as to make the accused vicariously liable. If the basic averment is made in the complaint under section 138 of NI Act that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed then Magistrate can issue process against such Director. The complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient.
Section 141 of the NI Act provides for a constructive liability which is created by a legal fiction. The section 141 of the NI Act being a penal should receive strict construction and compliance. It the accused played insignificant role in affairs of the company may not be sufficient to attract the constructive liability under Section 141 of the NI Act - Had the petitioner not responsible for affairs of the accused no 1, it can only be established and proved in accordance with law during the trial of the complaint under section 138 of NI Act. The petitioner cannot be absolved from his liability qua the cheque in question by pleading that he was independent non-executive director of the accused no 1. The nomenclature of the petitioner in certain documents submitted by the petitioner and required to be proved in accordance with law does not mean that the petitioner was a non-functional director of the accused no1.
It is also relevant to mention that the petitioner never challenged his summoning for offence punishable under section 138 of the NI Act and only challenged impugned order whereby the trial court judicially opined about existence of prima facie case against him.
Conclusion - The complaint contained sufficient averments to proceed against the petitioner under Section 138 read with Section 141 of the NI Act. The petitioner's designation as an Independent Non-Executive Director did not absolve him of liability, given the allegations in the complaint.
There is no legal and factual infirmity in the order passed by the trial court and impugned order passed by the revisional court - Petition dismissed.
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2023 (11) TMI 1352
Burning of paddy crop by the SHOs - implementation of financial and machinery support for farmers to prevent stubble burning - HELD THAT:- There are farmers operating at larger economic scales where they are able to gain even a profit out of this byproduct by use of these machines.
The Committee must look into the aspect of discouraging cultivation of rice especially on account of the water required for it and the wells running dry in Punjab. The long term impact could be disastrous. Thus, persons concerned must put their head together to see how to encourage the switch over to alternative crops.
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2023 (11) TMI 1351
Abolition of MSP forthwith on paddy - HELD THAT:- There are certain suggestions being made in the course of hearing and the concerned authorities will look to it. Among the suggestions which we can easily flag is that with technology available now information is forthcoming to be utilized to control the farm fire where the exact location of farm fire can be immediately detected. How to proceed with it and what measures are to be taken are administrative in character and the function of the Court is to make sure that the administrators perform the task assigned to them.
The Chairman, DPCC may not remain present in the court as the order has been complied with.
List on 21.11.2023.
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2023 (11) TMI 1350
Aggravating problem of pollution - HELD THAT:- The bottom line is that very sowing of paddy which is not a local crop and which is not consumed locally is the basis of the problem. As submitted it is not a regular crop. The switch over to alternative crops is necessary so that next year we don’t face this problem. The switch over can only occur when the MSP is not granted for paddy but is given to an alternative crop, something which the Central Government in any case is seeking to encourage by growing and utilization of the traditional crops.
Though the Delhi Government is seeking to impose restrictions on the basis of “Odd-Even”, she submits that this is really an unscientific method if on the basis of colour codded stickers, vehicles which have orange stickers can be banned instead. On this aspect also the State Government will report back.
Conclusion - There is critical need for proactive measures to address environmental challenges caused by crop burning and pollution, emphasizing the importance of immediate action and compliance with regulatory frameworks to safeguard public health and the environment.
The Delhi Government to also place the figures of Environment Compensation Charge, which has been collected and in what manner it has been utilized - List on 10.11.2023 along with IA No. 232078/2023.
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2023 (11) TMI 1346
Validity of adopted will - Nalini Kanth was the adopted son of Venkubayamma or not - vailidity of registered Will executed by Venkubayamma - entitlement to possession of the suit properties based on the adoption and the Will - HELD THAT:- Mere registration of Ex. A9 Adoption Deed did not absolve the person asserting such adoption from proving that fact by cogent evidence and the person contesting it from adducing evidence to the contrary. It is in this respect that various suspicious circumstances attached to the adoption ceremony of 18.04.1982 assume significance. It is an admitted fact that Venkubayamma was residing ordinarily at Srikakulam, which is at a distance (98 miles/150 kms) from Berhampur. While so, PW 2, himself, stated that she did not invite any of her relations from Srikakulam to attend the adoption ceremony at Berhampur. Normally, such occasions would not be kept secret or confidential as an adoption would usually be made with much pomp and celebration. The clandestine manner in which the alleged adoption is stated to have taken place raises a doubt but the same has not been adequately explained. Further, no evidence was adduced to prove that relations between Venkubayamma and Kaliprasad, her grandson, had fallen out. The document also does not record any reasons as to why Venkubayamma was not happy with Kaliprasad, whose marriage she had performed in February 1982, just a few months earlier.
Pasupuleti Anasuya (PW 1) who was to play a pivotal role as the guardian of the adopted child in the event of Venkubayamma's death, seems to have been absent at the adoption ceremony and no reason or explanation worth the name has been offered therefor. She, herself, admitted that she was not present when the actual 'giving and taking of the child in adoption' took place and that she is not seen in Exs. A2 to A4 photographs. Significantly, she never stated in clear terms that she was actually present at that time. Her brothers (PWs 2 and 3) also did not vouch for her presence at the adoption. If she was to play such an important role in the adopted child's life, her absence at the ceremony and in the photographs speaks volumes.
The actual 'giving and taking' of the child in adoption, being an essential requisite Under Section 11(vi) of the Act of 1956, we find that there is no convincing evidence of that 'act' also in the case on hand. Interestingly, there are no pictures of the actual 'giving and taking' of the child in adoption. In Exs. A2 and A3, the purohit (PW 7) is seen standing or sitting behind the others and the same cannot be taken to be during the ceremony of 'giving and taking', as he would have stood/sat in front of them, chanting mantras and incantations as per shastras - Strangely, though a professional photographer (PW 4) was stated to have been engaged for the purpose of taking pictures at the adoption ceremony, he took only three photographs and no more. This parsimony is not explained. Further, PW 1 producing and marking Ex. A8 receipt, supposedly issued by PW 4 to the temple, with no explanation as to how it came into her possession, also does not inspire confidence.
Ex. A9 Adoption Deed records the age of Venkubayamma as 70 years and states that she was desirous of taking a male child in adoption as she had no male issues. The document also records that the adoptive child would perform the annual shraddha ceremonies and offering of Pinda and water, as her natural son, to her ancestors. Nalini Kanth was aged less than a year when this adoption deed was executed whereas the adoptive mother, going by the document itself, was aged 70 years. Being of that age, it is strange that Venkubayamma would have expected this toddler to perform her obsequies after her death and such other ceremonies for her and her ancestors. Further, it is difficult to believe that a woman of such advanced years would willingly take on the responsibility of caring for an infant at that age.
Conclusion - The adoption of Nalini Kanth by Venkubayamma on 18.04.1982 is not proved in accordance with law despite the registration of Ex. A9 Adoption Deed dated 20.04.1982. The very adoption, itself, is not believable, given the multitude of suspicious circumstances surrounding it. Nalini Kanth cannot, therefore, be treated as her heir by adoption. Further, as Ex. A10 Will dated 03.05.1982 was also not proved in accordance with law, it does not create any right in his favour. In consequence, Nalini Kanth is not entitled to claim any right or share in Venkubayamma's properties. The findings of the High Court to that effect, albeit for reasons altogether different, therefore, do not warrant interference.
The judgment and decree of the High Court is confirmed - Appeal dismissed.
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2023 (11) TMI 1338
Purposive interpretation of Section 148 of the Negotiable Instruments Act - HELD THAT:- The justice would be subserved by permitting the appellant to advance his arguments on the application seeking waiver of pre-deposit which was dismissed by the Appellate Court and sustained by the High Court in JAMBOO BHANDARI VERSUS M.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. AND ORS. [2023 (9) TMI 560 - SUPREME COURT].
The impugned order passed by the High Court sustaining the order of the Sessions Court is/are set aside. The Sessions Court to re-consider the application filed by the appellant herein seeking waiver of the pre-deposit.
Appeal allowed.
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2023 (11) TMI 1314
Dismissal of appeal and the judgment and decree of the Trial Court decreeing the suit for possession and mesne profits - HELD THAT:- It is to be emphasized that irrespective of what was decided in the case of Suraj Lamps and Industries [2011 (10) TMI 8 - SUPREME COURT] the fact remains that no title could be transferred with respect to immovable properties on the basis of an unregistered Agreement to Sell or on the basis of an unregistered General Power of Attorney. The Registration Act, 1908 clearly provides that a document which requires compulsory registration under the Act, would not confer any right, much less a legally enforceable right to approach a Court of Law on its basis. Even if these documents i.e. the Agreement to Sell and the Power of Attorney were registered, still it could not be said that the Respondent would have acquired title over the property in question. At best, on the basis of the registered agreement to sell, he could have claimed relief of specific performance in appropriate proceedings. In this regard, reference may be made to Sections 17 and 49 of the Registration Act and Section 54 of the Transfer of Property Act, 1882.
Law is well settled that no right, title or interest in immovable property can be conferred without a registered document.
The embargo put on registration of documents would not override the statutory provision so as to confer title on the basis of unregistered documents with respect to immovable property. Once this is the settled position, the Respondent could not have maintained the suit for possession and mesne profits against the Appellant, who was admittedly in possession of the property in question whether as an owner or a licensee.
In case the Respondent wanted to evict the Appellant treating him to be a licensee, he could have maintained a suit on behalf of the true owner or the landlord under specific instructions of Power of Attorney as landlord claiming to have been receiving rent from the Appellant or as Attorney of the true owner to institute the suit on his behalf for eviction and possession. That being not the contents of the plaint, the reasoning given by the High Court in the impugned order cannot be agreed upon.
The impugned judgment deserves to be set aside and the suit deserves to be dismissed. Accordingly, the appeal is allowed - The impugned judgment is set aside and the suit is dismissed.
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2023 (11) TMI 1309
Dismissal of appeal - no representation on behalf of the appellants before the High Court - Order XLI Rule 17 of the CPC - HELD THAT:- The Explanation of Order XLI Rule 17 of the CPC categorically states that if the appellant does not appear when the appeal is called for hearing it can only be dismissed for non-prosecution and not on merits.
However, the impugned judgment is a dismissal of the appeal on merits which is contrary to the aforesaid provisions and particularly the Explanation thereto. On that short ground alone the appeal is allowed the impugned order is set aside.
Appeal is restored on the file of the High Court.
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