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Indian Laws - Case Laws
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2023 (12) TMI 945 - MADRAS HIGH COURT
Professional misconduct - power of High Court to revise an order passed by the Council under Section 22 A of the Chartered Accountants Act, 1949 - HELD THAT:- A reading of the case of RADHEY SHYAM & ANR & JAGDISH PRASAD VERSUS CHHABI NATH & ORS & IQBAL KAUR & ORS [2015 (7) TMI 376 - SUPREME COURT] would to a conclusion that all Courts and Tribunals which are functioning in the territorial jurisdiction of this Court are subordinate to it. The control and working of the Subordinate Court while exercising their statutory appellate or revisional authority are subject to the jurisdiction of the Court under Article 227 of the Constitution of India. Despite the curtailment of the power of this Court to revise an order pursuant to the amendment to Section 115 of Code of Civil Procedure under Act 46 of 1999, the power of this Court to exercise superintendence and control over courts and tribunals and exercise revisional jurisdiction continues to be recognised by virtue of Article 227 of Constitution of India. Being a Constitutional Court, the power is inherent, as it were.
An adjudication implies that there is a lis before the Court of Tribunal and the Tribunal decides the same after hearing both the parties. The mere fact that the parties are heard does not make a body - a Tribunal. Principles of natural justice have grown to such an extent that even without a body being a Tribunal, it has been called upon to comply with the principles of natural justice. The basis of this principle is attributed to the Act of the Almighty. God did not punish Adam, banishing him from Paradise, without hearing him. If principles of natural justice applies to Almighty, all the more it applies to his frail creatures. Therefore, the test is not whether the parties are heard and examined, but, whether there is a transfer of judicial power from the State to a body and that body is clothed with the power of adjudication of a lis.
In case on hand, a professional misconduct not being a lis, the Board of Discipline cannot be held to be a Tribunal within the meaning of Article 227 of the Constitution of India. Consequently, it is not amenable to my revisional jurisdiction. Therefore, the Civil Revision Petition is dismissed as not maintainable.
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2023 (12) TMI 897 - SUPREME COURT
Stamping of arbitration agreements - whether such arbitration agreements would be non-existent, unenforceable, or invalid if the underlying contract is not stamped?
As per Dr Dhananjaya Y Chandrachud, CJI
The consequences of the failure to stamp an instrument - HELD THAT:- The procedure contemplated by the Stamp Act facilitates the collection of revenue. It permits instruments to be impounded not only by persons in charge of a public office or those who are empowered by law to receive evidence but also by any person who is empowered to receive evidence by consent of parties. The statute then sets out the procedure to be followed upon impounding a document. This procedure ensures that stamp-duty is paid. After the payment of the appropriate amount under the appropriate description in Schedule I and the penalty (if any), the Stamp Act provides for the certification of such payment by an endorsement by the appropriate authority. Once an instrument has been endorsed, it may be admitted into evidence, registered, acted upon or authenticated as if it had been duly stamped.
The difference between inadmissibility and voidness - HELD THAT:- When an agreement is void, we are speaking of its enforceability in a court of law. When it is inadmissible, we are referring to whether the court may consider or rely upon it while adjudicating the case. This is the essence of the difference between voidness and admissibility.
Section 35 of the Stamp Act renders a document inadmissible and not void - HELD THAT:- The arbitration agreement must satisfy the requirements of the Contract Act. However, the authority empowered to adjudicate whether the requirements of the Contract Act are satisfied is the arbitral tribunal, under Section 16 of the Arbitration Act.
The purpose of the Stamp Act - HELD THAT:- The Stamp Act is a legislation which is enacted in the interest of the revenue. The statute must be interpreted with due regard to its purpose.
The Arbitration and Conciliation Act 1996 - HELD THAT:- The Arbitration Act was enacted to “consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to the conciliation and for matters connected therewith or incidental thereto.” In the process, the Arbitration Act repealed the 1940 Act, the Arbitration (Protocol and Convention) Act 1937, and the Foreign Awards (Recognition and Enforcement) Act 1961.
Arbitral autonomy - HELD THAT:- The principle of arbitral autonomy is an integral element of the ever-evolving domain of arbitration law. Arbitral autonomy means that the parties to an arbitration agreement can exercise their contractual freedom to bestow the arbitral tribunal with the authority to decide disputes that may arise between them. The basis of arbitral autonomy is to give effect to the true intention of parties to distance themselves from the “risk of domestic judicial parochialism.”
Principle of minimum judicial interference - HELD THAT:- Section 5 is of aid in interpreting the extent of judicial interference under Sections 8 and 11 of the Arbitration Act. Section 5 contains a general rule of judicial non-interference. Therefore, every provision of the Arbitration Act ought to be construed in view of Section 5 to give true effect to the legislative intention of minimal judicial intervention.
The Arbitration Act is a self-contained code - HELD THAT:- When a self-contained code sets out a procedure, the applicability of a general legal procedure would be impliedly excluded. Being a selfcontained and exhaustive code on arbitration law, the Arbitration Act carries the imperative that what is permissible under the law ought to be performed only in the manner indicated, and not otherwise. Accordingly, matters governed by the Arbitration Act such as the arbitration agreement, appointment of arbitrators and competence of the arbitral tribunal to rule on its jurisdiction have to be assessed in the manner specified under the law. The corollary is that it is not permissible to do what is not mentioned under the Arbitration Act. Therefore, provisions of other statutes cannot interfere with the working of the Arbitration Act, unless specified otherwise.
Principles of modern arbitration - HELD THAT:- Modern arbitration law does not completely restrict the role of national courts in the arbitration process, but gives priority to the arbitral tribunal to decide on disputes and issues pertaining to arbitration agreements as well as the substantive rights of the parties. The Arbitration Act reflects these aspects of modern arbitration law - It is the duty of this Court to interpret the Arbitration Act in a manner which gives life to the principles of modern arbitration in India.
The law on the arbitration agreement - HELD THAT:- An arbitration agreement is the foundation of arbitration as it records the consent of the parties to submit their disputes to arbitration - Section 2(b) of the Arbitration Act defines an “arbitration agreement” to mean an agreement referred to in Section 7. Section 7 defines an “arbitration agreement” to mean an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. It provides that an arbitration agreement could be in the form of an arbitration clause in a contract or in the form of a separate agreement. Further, Section 7 mandates that an arbitration agreement shall be in writing. According to Section 7(4), an arbitration agreement is in writing if it is contained in: (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. Section 7(5) provides that a reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
Separability of the arbitration agreement - HELD THAT:- The concept of separability or severability of an arbitration agreement from the underlying contract is a legal fiction which acknowledges the separate nature of an arbitration agreement. The separate nature of the arbitration agreement from the underlying contract is one of the cornerstones of arbitration law. As Redfern and Hunter explain, an arbitration agreement is juridically independent from the underlying contract in which it is contained -
To properly understand the contours of the separability presumption, it is necessary to understand its origin and development in the international context. Such an analysis is important because any ruling by this Court on the separability presumption ought to be with the aid of international best practices.
Correctness of the decision in N.N. GLOBAL MERCANTILE PVT. LTD. VERSUS INDO UNIQUE FLAME LTD. AND ORS. [2021 (1) TMI 1121 - SUPREME COURT] - The Constitution Bench acknowledged the separability presumption, but refused to apply it in the context of Sections 33 and 35 of the Stamp Act - The above position of law is contrary to the separability presumption which treats an arbitration agreement as separate from the underlying contract.
The doctrine of competence-competence - HELD THAT:- The doctrine of kompetenz-kompetenz (also known as competencecompetence), as originally developed in Germany, was traditionally understood to imply that arbitrators are empowered to make a final ruling on their own jurisdiction, with no subsequent judicial review of the decision by any court - The separability presumption insulates the arbitration agreement from the defects of the underlying contract, and thereby ensures the sustenance of the tribunal’s jurisdiction over the substantive rights and obligations of the parties under the underlying contract even after such a contract is put to an end. The doctrine of competence-competence allows the tribunal to decide on all substantive issues arising out of the underlying contract, including the existence and validity of the arbitration agreement.
In case the issue of stamping is raised before an arbitral tribunal, Sections 33 and 35 of the Stamp Act make it evident that a person having authority by “consent of parties” to receive evidence is empowered to impound and examine an instrument. A person having authority “by consent of parties” to receive evidence includes an arbitral tribunal which is constituted by consent of parties.
Negative competence-competence - HELD THAT:- The international arbitration law as well as domestic law prioritize the arbitral tribunal by permitting them to initially decide challenges to their authority instead of the courts. The policy consideration behind this approach is twofold: first, to recognize the mutual intention of the parties of choosing the arbitrator to resolve all their disputes about the substantive rights and obligations arising out of contract; and second, to prevent parties from initiating parallel proceedings before courts and delaying the arbitral process. This is the positive aspect of the doctrine of competence-competence - The negative aspect, in contrast, speaks to the national courts. It instructs the courts to limit their interference at the referral stage by deferring to the jurisdiction of the arbitral tribunal in issues pertaining to the existence and validity of an arbitration agreement. Thus, the negative aspect of the doctrine of competence-competence suggests that the courts should refrain from entertaining challenge to the jurisdiction of the arbitral tribunal before the arbitrators themselves have had an opportunity to do so.
Judicial interference under the Arbitration Act - HELD THAT:- When parties enter into an arbitration agreement, it is their mutual and unequivocal intention to submit their disputes to an arbitral tribunal. The arbitration law recognizes this aspect by granting autonomy to the parties to adopt a procedural mechanism for the appointment of arbitrators. Party autonomy has also been expressly recognized by international arbitration covenants as well as national arbitration legislations - Section 5 of the Arbitration Act disallows a judicial authority from intervening unless expressly provided under Part I. In the present proceedings, the exercise of the powers by the courts or judicial authorities as provided under Section 8 and 11 becomes particularly relevant consideration.
In the course of the decision, one of the questions before this Court in Vidya Drolia [2020 (12) TMI 1227 - SUPREME COURT] was the interpretation of the word “existence” as appearing in Section 11. It was held that existence and validity are intertwined. Further, it was observed that an arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Therefore, this Court read the mandate of valid arbitration agreement contained in Section 8 into the mandate of Section 11, that is, “existence of an arbitration agreement.”.
Vidya Drolia proceeds on the presumption that Section 11(6A) was effectively omitted from the statute books by the 2019 Amendment Act - We are of the opinion that the above premise of the Court in Vidya Drolia is erroneous because the omission of Section 11(6A) has not been notified and, therefore, the said provision continues to remain in full force. Since Section 11(6A) continues to remain in force, pending the notification of the Central Government, it is incumbent upon this Court to give true effect to the legislative intent.
Harmonious construction of the Arbitration Act, the Stamp Act, and the Contract Act - HELD THAT:- The object of the Arbitration Act is to inter alia ensure an efficacious process of arbitration and minimize the supervisory role of courts in the arbitral process. On the other hand, the object of the Stamp Act is to secure revenue for state. It is a cardinal principle of interpretation of statutes that provisions contained in two statutes must be, if possible, interpreted in a harmonious manner to give full effect to both the statutes.
The Arbitration Act will have primacy with respect to arbitration agreements - HELD THAT:- The Arbitration Act is a legislation enacted to inter alia consolidate the law relating to arbitration in India. It will have primacy over the Stamp Act and the Contract Act in relation to arbitration agreements for multiple reasons.
The Arbitration Act is a special law and the Indian Contract Act and the Stamp Act are general laws - HELD THAT:- It is not only the definition of ‘arbitration agreement’ but also the other provisions of the Arbitration Act and the purpose for which it was enacted that makes it a special law - The Statements of Objects and Reasons of the Arbitration Act records that the main objective of this law was to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation.
Section 5 of the Arbitration Act - HELD THAT:- Section 5 is effectively rendered otiose by the interpretation given to it in N N Global 2. The court failed to provide a reason for holding that Section 5 of the Arbitration Act does not have the effect of excluding the operation of Sections 33 and 35 of the Stamp Act in proceedings under Section 11 of the Arbitration Act. The non-obstante clause in Section 5 does precisely this. In addition to the effect of the non-obstante clause, the Arbitration Act is a special law. We must also be cognizant of the fact that one of objectives of the Arbitration Act was to minimise the supervisory role of courts in the arbitral process.
Parliament was aware of the Stamp Act when it enacted the Arbitration Act - HELD THAT:- Parliament was aware of the Stamp Act when it enacted the Arbitration Act. Yet, the latter does not specify stamping as a pre-condition to the existence of a valid arbitration agreement. Further, Section 11(6-A) of the Arbitration Act requires the court to confine itself to the examination of the existence of the arbitration agreement. This provision stands in contrast to Section 33(2) of the Stamp Act which also uses the word “examine.”
Harmonious construction of the three statutes under consideration - The effect of the competence-competence doctrine - HELD THAT:- In A. Ayyasamy v. A. Paramasivam, [2016 (10) TMI 1147 - SUPREME COURT] a two-judge Bench of this Court of which one of us, DY Chandrachud, J, was a part emphasized that arbitration must provide a “one-stop forum” for the resolution of disputes and held that (a) Courts must give effect to the commercial understanding of parties to arbitration agreements that arbitration is efficacious; and (b) This can be done by minimising judicial intervention.
The corollary of the doctrine of competence-competence is that courts may only examine whether an arbitration agreement exists on the basis of the prima facie standard of review. The nature of objections to the jurisdiction of an arbitral tribunal on the basis that stamp-duty has not been paid or is inadequate is such as cannot be decided on a prima facie basis. Objections of this kind will require a detailed consideration of evidence and submissions and a finding as to the law as well as the facts. Obligating the court to decide issues of stamping at the Section 8 or Section 11 stage will defeat the legislative intent underlying the Arbitration Act.
Once the arbitral tribunal has been appointed, it will act in accordance with law and proceed to impound the agreement under Section 33 of the Stamp Act if it sees fit to do so. It has the authority to receive evidence by consent of the parties, in terms of Section 35. The procedure under Section 35 may be followed thereafter. In this manner, the competence-competence doctrine is given life and arbitration proceedings can continue to remain a faster alternative to suits before the trial courts or other, similar actions.
The object of the Stamp Act is preserved - HELD THAT:- The impounding of an agreement which contains an arbitration clause at the stage of the appointment of an arbitrator under Section 11 (or Section 8 as the case may be) of the Arbitration Act will delay the commencement of arbitration. It is a well-known fact that courts are burdened with innumerable cases on their docket. This has the inevitable consequence of delaying the speed at which each case progresses. Arbitral tribunals, on the other hand, deal with a smaller volume of cases. They are able to dedicate extended periods of time to the adjudication of a single case before them. If an agreement is impounded by the arbitral tribunal in a particular case, it is far likelier that the process of payment of stamp-duty and a penalty (if any) and the other procedures under the Stamp Act are completed at a quicker pace than before courts.
SMS Tea Estates [2011 (7) TMI 1289 - SUPREME COURT] and Garware Wall Ropes [2019 (4) TMI 716 - SUPREME COURT] were wrongly decided - HELD THAT:- The non-obstante clause contained in Section 11(6A) pertains to those judicial precedents which delved into the discretion and power of referral courts to intervene and examine the existence and validity of an arbitration agreement at the Section 11 stage. This includes SMS Tea Estates considering the fact that it mandated the referral court to judicially intervene in the arbitration process by impounding the unstamped instrument containing the arbitration agreement. Therefore, we hold that Section 11(6A) also legislatively altered the basis of SMS Tea Estates (supra) to the extent that it dealt with judicial intervention at the Section 11 stage.
The discussion has held that non-stamping or insufficient stamping of an instrument does not render it invalid or nonexistent. Therefore, paragraphs 22 and 29 of Garware Wall Ropes, which held that an arbitration agreement contained in an unstamped or insufficiently stamped contract would be non-existent in law, does not set forth the correct position of law.
The Appointment of Arbitrators by the Chief Justice of India Scheme, 1996 - HELD THAT:- The referral court at Section 11 stage should not examine or impound an unstamped or insufficiently stamped instrument, but rather leave it for the determination by the arbitral tribunal. When a party produces an arbitration agreement or its certified copy, the referral court only has to examine whether an arbitration agreement exists in terms of Section 7 of the Arbitration Act. The referral court under Section 11 is not required to examine whether a certified copy of the agreement/ instrument/ contract discloses the fact of payment of stamp duty on the original. Accordingly, we hold that the holding of this Court in SMS Tea Estate as reiterated in N N Global 2, is no longer valid in law.
Vidya Drolia does not deal with the issue of stamping - HELD THAT:- The reasoning in Vidya Drolia does not lead to the conclusion that Garware Wall Ropes was rightly decided either on the aspect of examination and impounding of unstamped or insufficiently stamped instrument with respect to arbitration proceedings, or the validity of on arbitration agreement contained in an unstamped or insufficiently stamped underlying contract.
Thus, following conclusions have been reached out by CJI:-
a. Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable;
b. Non-stamping or inadequate stamping is a curable defect;
c. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists;
d. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal; and
e. The decision in NN Global 2 (supra) and SMS Tea Estates (supra) are overruled. Paragraphs 22 and 29 of Garware Wall Ropes (supra) are overruled to that extent.
The Registry is directed to take administrative directions from Hon’ble Chief Justice of India for placing the matters before an appropriate Bench.
As per SANJIV KHANNA, J.
For the reasons set out in detail by Hon’ble the Chief Justice and recorded herein, the conclusions drawn are agreed with.
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2023 (12) TMI 896 - BOMBAY HIGH COURT
Dishonour of Cheque - existence of debt/liability or not - rebuttal of presumption - it is argued that the cheques in question were stolen by the appellant and even signatures over the same are forged - HELD THAT:- In order to rebut the presumption, it was incumbent upon the accused to bring on record such facts and circumstances, upon consideration of which, the Court may either believe that consideration and debt did not exist or their non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that they did not exist. As already stated, nothing has been brought on record to rebut the presumption by the respondent No. 1. There is absolutely nothing in the evidence of respondent No. 1 to infer, even remotely, that neither the amount in question was lent by the appellant nor had she issued any cheques in discharge of the said debt. The reason for which respondent No. 1 is said to have borrowed the amount from the appellant viz. ailment of her husband (blood cancer) and the training of her daughter as an Air Hostess, she could have adduced some evidence in order to bolster the said aspect, which she did not. Respondent No. 1 also could have relied on the presumption of fact, for instance, those mentioned in section 114 of the Indian Evidence Act to rebut the presumptions under section 118 and 139 of the N.I. Act.
The statutory notice, complaint and evidence of the respective parties, if juxtaposed, would unerringly point out the fact that the respondent No. 1 did borrow an amount of Rs. 3,00,000/- from the appellant and issued cheques in question in discharge of a debt. Defences as raised by respondent No. 1 are unacceptable and unbelievable. Respondent No. 1 had failed to discharge the said onus.
A bare look at Section 269-SS of the Income Tax Act would reveal that the said bar is applicable to a person who accepts deposit by way of cash and not to a person who makes or offers any money to the payee and, therefore, even if the said bar is made applicable to the present case, the same shall apply to respondent No. 1 who had accepted the amount of Rs. 3,00,000/- from the appellant by way of cash for which punishment is contemplated under Section 271 of the Income Tax Act - It is thus clear that no person should accept any loan or deposit of a sum of Rs. 20,000/- or more otherwise than by an account payee cheque or account payee bank draft. The provision does not say that a person cannot advance more than Rs. 20,000/in cash to another person. Restriction on cash advances was, in fact, on the taker and not on the person who makes an advance. The penalty for taking such advance or deposit in contravention of provisions of Section 269-SS was to be suffered by the taker who accepts the advance.
The learned Magistrate had rendered the judgment in most cryptic and perfunctory manner, in the sense, neither the facts have been clearly stated nor the evidence has been properly discussed. The learned Magistrate has also misinterpreted and misread the legal position as envisaged not only under sections 138 and 139 of the N.I. Act but also the provisions of Section 269-SS of the Income Tax Act. The learned Magistrate has failed to appreciate vital admissions in the cross-examination of the appellant as well as D.W.2 – Moulik Shah in it’s correct perspective which have been elicited at the time of recording evidence - the findings arrived at by the Court below are patently illegal and perverse and, therefore, need to be set aside.
Appeal allowed.
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2023 (12) TMI 837 - DELHI HIGH COURT
Challenge to order directing the removal of the name of the Petitioner from the Register of Members maintained by the ICAI for a period of nine months - challenge to order passed by the Disciplinary Committee of the ICAI holding the Petitioner guilty of Professional Misconduct under the Chartered Accountants Act, 1949 - violation of principles of natural justice or not.
The only argument, raised before the Appellate Authority was that the punishment imposed on the Petitioner is disproportionate to the misconduct committed by him and more so because the entire money has been returned back to the Society.
HELD THAT:- Material on record indicates that proper notices have been given to the Petitioner and the procedure as laid down in the Conduct Rules has been followed. The prima facie opinion of the Disciplinary Directorate, along with all the relied on documents were forwarded to the Petitioner and the Petitioner has been given full opportunity to defend his case. There is nothing on record which discloses that the Petitioner had asked for cross examination of witnesses and, in the absence of any material, this Court is not inclined to accept the contention of the learned Counsel for the Petitioner that the correct procedure had not been followed - Though it has been stated in the present Writ Petition that the composition of the members of the Committee changed, the same was not objected to in the hearing. In fact, the material on record discloses that the Petitioner was explicitly asked if he had any objections and the Petitioner did not raise any objection to the change in the composition of the Committee.
It is well settled that while exercising jurisdiction under Article 226 of the Constitution of India, the Courts, while interfering with the decision of Disciplinary Committee, must only look into the decision-making process and not the decision as such. If the decision-making process is fair, then Writ Courts must not interfere with the findings of a Disciplinary Committee. In the instant case, the Petitioner has not been able to demonstrate as to how the procedure adopted by the Disciplinary Committee is not reasonable or fair or is violative of the principles of natural justice.
The Petitioner is guilty of a very serious misconduct that has the ability to shake the faith of persons in the profession of Chartered Accountancy and the larger Institute of Chartered Accounts. The Appellate Authority has been considerably lenient on the Petitioner by reducing the period of punishment from one year to nine months. This Court is of the opinion that no further reduction in the quantum of punishment is necessary.
Keeping in mind the seriousness of allegations against the Petitioner which have been proved in the proceedings, this Court is not inclined to interfere with the judgment passed by the Appellate Authority - Writ petition is dismissed.
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2023 (12) TMI 836 - HIMACHAL PRADESH HIGH COURT
Dishonour of Cheque - time limit for payment of fine or compensation awarded - power of High Court to extend the time under Section 482 of Cr.P.C. - HELD THAT:- Section 148 of the Negotiable Instruments Act provides that in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the Trial Court. This amount shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant.
The Hon’ble Supreme Court held in Suridner Singh Deshwal vs Virender Gandhi & another [2019 (5) TMI 1626 - SUPREME COURT], that Section 148 of the N.I.Act was introduced to avoid the delaying tactics of the drawers due to easy filing of an appeal and obtaining the stay of the proceedings. This was frustrating the very purpose of enactment of Section 138 of the Negotiable Instruments Act 1881; therefore, the Parliament decided to provide that 20% amount shall be deposited by the appellant.
In the present case, the words of the statutes are clear that the amounts shall be deposited within 60 days or within such further time not exceeding 30 days as may be directed by the Court on sufficient cause being shown. These words are capable of only one interpretation that an initial time of 60 days can be granted which can be extended by 30 days on sufficient cause being shown. There is no ambiguity in the words of the statute, hence, the plain words are to be given effect - In the present case, the mischief was delay by the drawer in the payment of the compensation by filing an appeal; hence the interpretation to avoid the delay has to be preferred. By considering the provision as mandatory the mischief would be avoided whereas by considering the provision as directory the mischief will be perpetuated and the purpose of enacting the provision would be defeated.
It was submitted that provision of Section 148 of the N.I. Act, 1881 binds the Appellate Court and not this Court. This Court has inherent power vested under Section 482 of Cr.P.C. to pass any order to do substantial justice. This submission cannot be accepted. Substantial justice has to be rendered to both the parties, namely, the complainant and the accused. The Court cannot do justice to the accused and injustice to the complainant. When the legislature has enacted a provision to ensure that the complainant should promptly get at least some of the amount, the Court cannot circumvent the intention of the legislature by holding that the time can be extended by the High Court.
Thus it is not permissible to exercise the power conferred under Section 482 of Cr.P.C. to defeat the provisions of the law and extend the time beyond the period of 90 days. Doing so will amount to encroachment in the field of the legislation, which is impermissible - the submission that the power can be exercised to extend the time beyond that prescribed by the legislature is not acceptable.
Therefore, the learned First Appellate Court had rightly held that it had no power to extend the time beyond 90 days and this Court does not have the power under Section 482 of Cr.P.C. to extend the time granted by the legislature under Section 148(2) of N.I.Act - Petition dismissed.
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2023 (12) TMI 741 - SUPREME COURT
Seeking declaration that the Conveyance Deed dated 17.12.2019 to be declared null and void - tri-partite agreement - whether the Trial Court and the High Court have rightly referred the matter to arbitration or the dispute is of such a nature that it is not liable to be referred to arbitration, as there was no arbitration clause in the Conveyance Deed dated 17.12.2019 or if there was, yet the matter in any case is such that it is not arbitrable?
HELD THAT:- In the present case, therefore there is absolutely no ambiguity that both the Tripartite Agreements dated 31.03.2007 and 25.07.2008 contain an arbitration clause, which forms the basis of all subsequent agreements including the agreements sought to be declared as validly terminated by the appellants and the conveyance deed sought to be declared as null and void. Both the trial court as well as the High Court have given a correct finding on facts as well as on law - there are no scope for interference in the matter.
Appeal dismissed.
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2023 (12) TMI 670 - KARNATAKA HIGH COURT
Dishonour of Cheque - validity of judgement of acquittal - examination of evidence of DW1 and DW2 which is in the form of affidavit - application filed under Section 391 of Cr.P.C - HELD THAT:- The appellate Court has accepted the defence set up by the accused and acquitted the accused. The evidence of DW1 and DW2 which is in the form of affidavit instead of examination-in-chief is not permissible under law, the same cannot be looked into. However, the appellate Court has not observed the same and passed the impugned judgment of acquittal which is not sustainable under law. On these grounds, it is just and proper to remand the case to the trial Court with a direction to provide an opportunity to the accused to adduce his evidence in accordance with law.
Application filed under Section 391 of Cr.P.C - HELD THAT:- In the affidavit of the complainant he has stated that the appellate Court has allowed the appeal filed by the respondent solely on the ground that the report of the handwriting expert is not proved in accordance with law. In order to prove that particular handwriting expert report, the complainant has not examined the handwriting expert. As a matter of abundant caution, without prejudice to the appeal filed by the appellant before this Court for the purpose of proving the report of handwriting expert, the complainant had filed this present application - The respondent has not filed any objection to this application.
Considering the facts and circumstances of the case since, this Court has opined that the trial Court has committed an error in receiving the defence evidence by way of affidavit, it is just and proper to provide an opportunity to the complainant to examine the handwriting expert as sought for in this application.
Appeal allowed.
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2023 (12) TMI 669 - KARNATAKA HIGH COURT
Dishonour of Cheque - insufficient funds - discharge of debt or not - apparent error or not, on the face of the record in the judgment of the Trial Court as well as the First Appellate Court in convicting the accused for the offence punishable under Section 138 of the Negotiable Instruments Act - HELD THAT:- In the instant case, the complainant has produced the cheque in question and it is marked as Ex.P1. The signature of the accused is also marked as Ex.P1(a). The bank endorsements are also marked as Exs.P2 and P3. On perusal of all these documents, it clearly establishes that the accused has not disputed the issuance of cheque and service of legal notice on him. As per the presumption available under the NI Act, the complainant has complied the legal requirements under Section 138 of the Act. Now, the burden shifts on the accused to disprove the case of the complainant.
On perusal of the evidence on record, the accused has taken up the contention that the cheque was issued to one Rajesh Bhat for different transaction and for security of the said transaction, he had issued the cheque, but the complainant by misusing the same, presented the said cheque for encashment in the year 2010 by filling the contents of Ex.P1-cheque and thereby he misused the cheque and therefore, the accused has taken such contention - In the instant case, the complainant has proved that on the relevant date, he lent loan to the accused and in consideration thereof, the accused issued cheque Ex.P1 in favour of the complainant. Further the accused has not placed any material before the Court to prove under what circumstances he issued cheque in favour of the complainant. Further, the accused has taken up a contention that he discharged the loan of one Rajesh Bhat and he never called upon the said Rajesh Bhat to return the cheque in question, if he has discharged the loan in complete, further he also failed to call upon the complainant to return the cheque in question, as it was not issued to him.
The burden lies on the accused to prove non- existence of consideration which would lead to the Court to disbelieve the non-existence of consideration either by direct evidence or by probable defence to show that the existence of consideration was improbable, doubtful or illegal, but the accused has not produced any kind of evidence to show that existence of consideration was improbable, doubtful or illegal. Therefore, Ex.P1-cheque was issued towards legally enforceable debt - When once issuance of cheque is proved, the presumption under Section 138 of N.I.Act would arise with regard to consideration. But the accused has not discharged the debt in question. Whether the accused has issued cheque for repayment of loan or as security or it was discharged prior to the current transaction, makes no difference under Section 138 of the N.I.Act. The legal consequence reamaining same without any distinction.
The judgment of the Trial Court as well as the First Appellate Court is in accordance with law. The Trial Court as well as the First Appellate Court have passed well reasoned orders. Hence no interference is called for and there is no error on the face of the record - Revision petition dismissed.
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2023 (12) TMI 668 - DELHI HIGH COURT
Dishonour of Cheque - technically defective legal demand notice - no cause of action arises against the drawers of cheques - sufficient opportunity to a person who issues the cheque - HELD THAT:- Once a cheque is issued by a person, it must be honoured and if it is not honoured, the person is given an opportunity to pay the cheque amount by issuance of a notice and if he still does not pay, he is bound to face the criminal trial and consequences. It is seen in many cases that the petitioners with malafide intention and to prolong the litigation raise false and frivolous pleas and in some cases, the petitioners do have genuine defence, but instead of following due procedure of law, as provided under the NI Act and the Cr.PC, and further, by misreading of the provisions, such parties consider that the only option available to them is to approach the High Court and on this, the High Court is made to step into the shoes of the Metropolitan Magistrate and examine their defence first and exonerate them. The High Court cannot usurp the powers of the Metropolitan Magistrate and entertain a plea of accused, as to why he should not be tried under Section 138 of the NI Act.
Sections 143 and 145 of the NI Act were enacted by the Parliament with the aim of expediting trial in such cases. The provisions of summary trial enable the respondent to lead defence evidence by way of affidavits and documents. Thus, an accused who considers that he has a tenable defence and the case against him was not maintainable, he can enter his plea on the very first day of his appearance and file an affidavit in his defence evidence and if he is so advised, he can also file an application for recalling any of the witnesses for cross-examination on the defence taken by him.
In view of the procedure prescribed under the Cr.PC, if the accused appears after service of summons, the learned Metropolitan Magistrate shall ask him to furnish bail bond to ensure his appearance during trial and ask him to take notice under Section 251 Cr.PC and enter his plea of defence and fix the case for defence evidence, unless an application is made by an accused under Section 145(2) of NI Act for recalling a witness for cross-examination on plea of defence. If there is an application u/s 145(2) of N.I. Act for recalling a witness of complainant, the court shall decide the same, otherwise, it shall proceed to take defence evidence on record and allow cross examination of defence witnesses by complainant - Upon analyzing the provisions of the NI Act, it is clear that Section 138 of the Act spells out the ingredients of the offence as well as the conditions required to be fulfilled before initiating the prosecution.
The parameters of the jurisdiction of the High Court, in exercising jurisdiction under Section 482 Cr.PC, are now almost well-settled. Although it has wide amplitude, but a great deal of caution is also required in its exercise. The requirement is, the application of well known legal principles involved in each and every matter. Adverting back to the facts of the present case, this Court does not find any material on record which can be stated to be of sterling and impeccable quality warranting invocation of the jurisdiction of this Court under Section 482 Cr.PC at this stage.
Thus, no ground for quashing of the proceedings/complaint/order of cognizance/order of summoning dated 16.03.2023 against the petitioners from the Complaint Case No. C.C. N1 ACT 6887/2022 is made out - petition dismissed.
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2023 (12) TMI 517 - DELHI HIGH COURT
Dishonour of Cheque - scope of section 138 of NI Act - vicarious liability on petitioner or not - whether the petitioner herein would come within the ambit of Section 138 of the Act and be impleaded as an accused in the complaint before the learned MM? - HELD THAT:- As per Section 138 of the Act, if the drawer of the cheque fails to make the payment on receipt of the legal notice, he is liable to be prosecuted under Section 138 of the Act.
In the present proceedings, admittedly, the impugned cheque has not been issued/ drawn by the petitioner and it has been issued by her brother from his bank account wherein the petitioner is not an account holder. As such, in view of the provisions of Section 138 of the Act, the petitioner, under the present circumstances, cannot be held liable for something not concerning her. Further, though the petitioner, along with her brother, is a Director, shareholder and authorised representative of an entity, namely, A.R. Restaurant India Pvt. Ltd., however, the respondent has not filed any complaint against the said entity. In view thereof, the petitioner has hardly any role to play qua the cheque involved in the present dispute. Thus, the petitioner ought not to have been made an accused in the complaint by the respondent. More so, whence no vicarious liability can be fastened upon the petitioner.
It is trite law that penal provisions should be construed strictly and the emphasis is on the words, “such person‟ which relates to the person, who has drawn the cheque in favour of the payee.
The complaint is quashed - petition allowed.
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2023 (12) TMI 470 - MADRAS HIGH COURT
Validity of settlement deed executed by the first defendant, his wife in favour of the second defendant, his son - Abatement of the suit for non substitution of the legal heir of the deceased / plaintiff - Order XXII Rule 3 read with Section 151 C.P.C to implead the petitioners therein as legal heirs of the deceased / plaintiff in the suit - sum and substance of the arguments of the learned counsel for the revision petitioners is that the daughters are seeking to implead themselves claiming under the Will of their father and therefore, the original cause of action in the suit cannot survive to the benefit of the daughters and therefore, they cannot be permitted to be impleaded in the suit.
HELD THAT:- Admittedly, though the respondents 1 and 2 are the daughters of the plaintiff, their applications to the Court is only to implead them in the capacity of their being legal representatives of the plaintiff. It may be a different aspect altogether that the defendants 1 and 2 are the legal heirs of the deceased plaintiff along with the respondents 1 and 2, being the daughters, who are also legal heirs of the deceased plaintiff. However, on a conjoint reading of Section 2 (11) and Order XXII Rule 3 C.P.C., it is clear that the persons claiming to be legal representatives of the deceased plaintiff are also entitled to make an application under Order XXII Rule 9 C.P.C. Here, the daughters are claiming only as legal representatives having become entitled to estate of their father. Therefore, it cannot be said that the respondents 1 and 2, are not entitled to maintain the application under Order XXII Rule 9 C.P.C.
Order XXII Rule 9(1) C.P.C makes it abundantly clear that when a suit is dismissed under Order XXII C.P.C., no fresh suit can be brought under the same cause of action. Here, admittedly, the plaintiff approached the Court to set aside the settlement deed executed by his wife in favour of their son on the strength of a Will that had not even taken effect. Admittedly the suit has been dismissed, whether on the ground of default or as abated. Therefore, challenge to the settlement deed automatically goes with the dismissal of the suit.
The core issue in the suit revolves around the factum of the execution of the settlement deed, based on a Will that never came to effect as the executant of the Will was very much alive. That being the position driving the defendants to another round of litigation will not subserve the cause of justice. Rules and procedures are always meant to be only to aid and be a handmaid of justice and not intended to destroy or defeat the cause of justice. Objecting to the application on technical/ hyper technical ground and driving the parties to multiply litigation will not in any way serve the interest of the parties themselves, leave alone justice. The Courts have always endeavoured to do substantial justice, ignoring technical objections raised by one of the parties to the litigation.
In Ambalika Padhi's case [1991 (12) TMI 293 - SUPREME COURT], the Hon'ble Supreme Court held that when the substituted and transposed plaintiffs were claiming under the original plaintiff and continuing the suit, it cannot be said that their cause of action is different from the cause of action of the original plaintiff, merely because, they are claiming to be legal representatives under settlement under Will. Therefore, the ratio laid down by the petitioners, it actually detrimental to the case of the revision petitioners.
There are no infirmity in the order of the trial Court - Both the Civil Revision Petitions fail and accordingly dismissed.
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2023 (12) TMI 430 - SUPREME COURT
Warehouse insured or not - cause of fire incident that occurred - introduction of additional reasoning to justify the repudiation - Alteration to insured premises and risk increase - Cause of fire and negligence - multiple reports - Value of a surveyor's report - Extent of liability when cause of fire indeterminable - Reimbursement of Customs Duty and unjust enrichment.
Appellants contended that the cause of the fire was negligence on the part of the insured.
Introduction of additional reasoning to justify the repudiation - HELD THAT:- In earlier cases like Galada Power and Telecommunication Ltd. vs. United India Insurance Co. Ltd. & Anr. [2016 (7) TMI 1603 - SUPREME COURT] and SAURASHTRA CHEMICALS LTD VERSUS NATIONAL INSURANCE CO LTD [2019 (12) TMI 1664 - SUPREME COURT], it was declared that new grounds for repudiation cannot be introduced during the hearing if they were not included in the repudiation letter - thus it is held that the insurer cannot introduce additional reasoning beyond those detailed in their letter, to justify the repudiation.
Location of fire if covered under the policy or not - HELD THAT:- Looking at the policy documents, the Leave & License Agreement and various communications received from the customs, police, fire & electricity departments, it is reasonable to conclude that the insured premises was the one that was identified and insured at Survey No. 9/3, by the insurance company. Needless to say, there is nothing to conclude that the area where the fire occurred on 14.03.2018 was not covered by the said insurance policy.
Alteration to insured premises and risk increase - HELD THAT:- Clause 3(a) indicates that the insurance policy would cease to be applicable or cover the insured premises in certain cases where there is an increased risk of loss or damage to the insured premises or goods within it. In this case, the insured had undertaken repairs on the rooftop to prevent water leakage to the warehouse. Such essential repair work on the rooftop by itself, cannot be reasonably construed to be an alteration that would increase the risk of loss or damage, as has been urged by the insurance company. In present assessment, the said repair work would not fall in the category of an alteration which would increase the risk insured for the warehouse premises. Therefore, no infirmity is seen with the view taken by the NCDRC on the same.
Cause of fire and negligence - multiple reports - HELD THAT:- The repudiation as noted is based on two reports (i) the forensic report of Screen Facts Service Pvt. Ltd. and of (ii) M/s Bhansali & Co. The first one notably was inconclusive. The other reports suggest short-circuit as the likely cause, not negligence. The significant time gap that exists between the welding work and the fire at 16:30 has no logical explanation. The basis of the repudiation accordingly appears to be un-reasonable and is not acceptable.
Value of a surveyor's report - HELD THAT:- The surveyor’s report, although comprehensive otherwise, is inconclusive on the aspect identifying the actual cause of fire. Given that the surveyor’s report only relies on the Forensic Examiner, i.e., M/s Screen Facts Services Pvt. Ltd.’s findings, it would be unsafe in this Court’s opinion to rely on the said report.
Extent of liability when cause of fire indeterminable - HELD THAT:- It was unequivocally declared that the precise cause of a fire, whether attributed to a short-circuit or any alternative factor, remains immaterial, provided the claimant is not the instigator of the fire. This case underscored the fundamental principle that an insurance company’s obligation to the insured is of much greater import. The NCDRC’s judicious application of this binding precedent appears to be well-merited.
Reimbursement of Customs Duty and unjust enrichment - HELD THAT:- The reports suggesting electrical short circuit as the trigger for the warehouse fire, is found to fit in with the attendant circumstances. As a corollary, the fire at the warehouse cannot be attributable to any negligent act of the insured. Moreover, the fire is found to have occurred within the insured warehouse and the appellant’s plea to the contrary, is not believable. Therefore, it is a case of wrongful repudiation by the appellants. No legal infirmity is thus seen with the impugned decision favouring the respondent’s insurance claim.
The appeal of the Insurance Company deserves to be dismissed. But even while dismissing the appeal, to avoid any confusion, the customs duty component of the claim should, in the given event, be discharged directly to the Customs Department. All other legal consequences will follow on upholding the claim of the insured against the appellants - the appeal stands dismissed favouring the insured.
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2023 (12) TMI 429 - PUNJAB & HARYANA HIGH COURT
Dishonour of Cheque - matter settled between the parties - compounding of offence under Section 138 N.I. Act - HELD THAT:- This Court in Vatsa Electronics Vs. Pala Ram & Anr. [2022 (4) TMI 353 - PUNJAB AND HARYANA HIGH COURT] has also held that once a settlement is being effected, then in terms of Section 147 of the Negotiable Instruments Act and Section 320 Cr.P.C., the accused ought to be acquitted as the offence stands compounded.
Since, the parties have voluntarily settled the disputes between themselves, it is a fit case for allowing them to compound the offence.
The order dated dated 19.09.2023 passed by the Additional Sessions Judge, Jalandhar, as well as the judgment of conviction and order of sentence dated 12.03.2018 passed by the Judicial Magistrate 1st Class, Jalandhar, are hereby set aside - revision petition is allowed.
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2023 (12) TMI 428 - CALCUTTA HIGH COURT
Dishonour of Cheque - conviction of accused - vicarious liability - company has not been made an accused nor was any notice served upon the company - petitioner has been made an accused as the Director of the company - HELD THAT:- Admittedly only the petitioner who was the director of the company has been made a party in the complaint case. The company M/s Bhavyaa Global Limited is not an accused in this case.
The Hon’ble Apex Court similarly in ANEETA HADA VERSUS GODFATHER TRAVELS & TOURS (P.) LTD. [2012 (5) TMI 83 - SUPREME COURT], has laid down that “in view of our aforesaid analysis, it is concluded that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself.”
In the present case ‘Notice’ under Section 138 of the Act of 1881 was never issued to the company - The company was not made a party to the proceedings under Section 138/141 of the Act of 1881 which itself makes the proceedings non-maintainable.
In the absence of the company being arraigned as an accused, a complaint against the petitioner is not maintainable - application allowed.
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2023 (12) TMI 427 - SUPREME COURT
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 - DELHI HIGH COURT
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 - MADRAS HIGH COURT
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 - HIMACHAL PRADESH HIGH COURT
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 - DELHI HIGH COURT
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 - CALCUTTA HIGH COURT
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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