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2016 (2) TMI 175 - GUJARAT HIGH COURT

2016 (2) TMI 175 - GUJARAT HIGH COURT - TMI - Constitutionality of Sardar Sarovar Narmada Nigam Limited (Conferment of Powers to Redeem Bonds) Act, 2008 - Held that:- The impugned Sardar Sarovar Narmada Nigam Limited (Conferment of Power to Redeem Bonds) Act, 2008 does not fall within the legislative head or legislative field either under Entry 43 in the State List being ‘Public Debt of the State’ or under Entry 20 in the Concurrent List being ‘Economic and Social Planning’, to the Seventh Sched .....

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gislations govern the matters and aspects sought to be dealt with and provided for by the impugned legislation. The State Legislature cannot claim and does not have the legislative competence to enact the impugned law. If the legislative head is to be traced for the impugned legislation, at the best, the same may be traced in Entry 7 in the Concurrent List for the reason that the impugned legislation and the provisions enacted therein deal with the special kind of contract which would be falling .....

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h and substance is a law in respect of any in connection with the Regulation of Securities and the governing mechanism therefor which are provided for by the aforesaid laws made by the Parliament.

The provisions of the impugned legislation are irreconcilable with the Central legislation occupying the field. The impugned law made by the State Legislature and the laws made by the Union Legislature aforesaid, having regard to their subject matter area, nature and effect cannot stand tog .....

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PPLICATION NO. 17672 of 2011 - Dated:- 15-1-2016 - MR. JAYANT PATEL, ACTING CHIEF JUSTICE AND MR. N.V.ANJARIA, JJ. SPECIAL CIVIL APPLICATION NO. 15719, 15720 of 2012, SPECIAL CIVIL APPLICATION NO. 3332, 3336, 3993, 3331, 3994, 8697, 7416, 7418, 16463 of 2014 FOR THE PETITONER : MR TUSHAR P HEMANI WITH MS VAIBHAVI PARIKH, ADVOCATE, MS MEGHA JANI, ADVOCATE, MS AMRITA AJMERA, MR MR BHATT, LD. SR. ADVOCATE WITH MRS.MAUNA BHATT, MR MAULIN RAVAL WITH MS SHIVYA DESAI, ADVOCATE, MR BHARAT T RAO, ADVOCAT .....

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SR. ADVOCATE WITH MR SANDEEP SINGHI WITH MR PARTH CONTRACTOR WITH MR PRANJAL BUCH, SINGHI & CO, ADVOCATE, MS DHARMISHTA RAVAL, ADVOCATE, MR SHRIJIT PILLAI FOR TRIVEDI & GUPTA JUDGMENT (PER : HONOURABLE MR.JUSTICE N.V.ANJARIA) In the present batch of group of petitions, what is at stake is the legislative competence, and therefore constitutional validity of the Sardar Sarovar Narmada Nigam Limited (Conferment of Power to Redeem Bonds) Act, 2008. 1.1 Passed by the Gujarat Legislature and .....

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n hereinafter, for convenient reference, is classified as per following sub-heads and the corresponding paragraphs thereto. Image No. 1 Basic Challenge and the Prayers 3. The challenge, as stated above, is addressed to the constitutionality of Sardar Sarovar Narmada Nigam Limited (Conferment of Powers to Redeem Bonds) Act, 2008 (hereinafter referred to as the impugned Act for the sake of brevity). Legislative competence of Legislature of State is called in question for enacting the said law on t .....

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rs. It is further prayed to command the respondents not to take any step or action in any manner so as to unilaterally alter the financial covenants and conditions mentioned in the Certificate of Bond. It may be mentioned that in petitions, what is prayed is only to declare the Act as unconstitutional; in other petitions, all of the above prayers are made. 3.1.1 In Special Civil Applications Nos.14433 of 2008, 15719 of 2012, 15720 of 2012, 2513 of 2009, 16463 of 2014, 7418 of 2014, 150 of 2009, .....

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il Application No.14433 of 2008 is a Scheduled Cooperative Bank having its registered office at Mumbai. The petitioner acquired 800 Bonds on 27th September, 2009 at the cost of ₹ 04,68,00,000/- from secondary market at the yield anticipated on the maturity date to be 8.025%. It is the say of the petitioner that the date is calculated on the basis of excess of maturity value over the current rate or security factored by remaining duration. It is the case of the petitioner that it purchased .....

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ce value of ₹ 01,11,000/-. Under the conditions mentioned in the Prospectus, the Bonds were redeemable at the option of the Bond-holder at the end of 7th, 11th and 15th years commencing from 1993, for ₹ 12,500/-, ₹ 25,000/- and ₹ 50,000/- at the end of respective dates. More than seven lakhs Deep Discount Bonds issued to the public as above and they were listed in 10 Stock Exchanges across the country. 3.2.3 On 29th March, 2008, the State of Gujarat promulgated a statute .....

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onds for premature redemption, they can do the same at determined rates and on specified dates. There was no Call Option , and it is the contention of the petitioners that respondent No.2-SSNNL could not have redeemed the Bonds premature prior to the date of maturity and expiry period. 3.2.5 In the impugned Act, condition No.3A was inserted on the financial covenants giving right to Sardar Sarovar Narmada Nigam Limited (SSNNL) to redeem the Bonds prior to the end of the original period contempla .....

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hion to all Bond-holders which stated that the Government of Gujarat has passed the impugned Act, that the Board of Directors of the Nigam had on 03rd November, 2008 in their meeting decided, in terms of the Act to redeem the Deep Discount Bonds earlier and the date for such redemption could be 10th January, 2009 with deemed value of ₹ 50,000/- per Bond. The notice stated to the Bond-holders that pursuant to provisions of Section 154 of the Companies Act, 1956 and the Listing Agreement wit .....

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etitioners of Special Civil Application No.8208 of 2009 are the private individuals. The petitioners acquired 1 Bond on 07th January, 1995. 3.3.1 The petitioner of Special Civil Application No.14491 of 2008 is Indian Oil Corporation Limited (Refineries Division) Employees Provident Funds which acquired 2950 Bonds at an average rate of ₹ 56,000/- from the secondary market as per its case. 3.3.2 The petitioner of Special Civil Application No.14492 of 2008 is Indian Oil Corporation Limited Em .....

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nt Corporation Limited, Staff Provident Fund Trust who acquired 594 Bonds in the year 2005 at the cost of ₹ 02,91,56,575/- from the secondary market. 3.3.5 The petitioner of Special Civil Application No.15437 of 2008 is Win-Medicare Limited Employees Provident Fund; it is a trust engaged for safeguarding interest of the members who are employees of the associate companies. This the petitioner acquired 916 Bonds between the year 2005 to 2007 at the cost of ₹ 04,93,00,950/- from the se .....

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l Civil Application No.238 of 2009 who acquired 200 Bonds in the year 2006 at the cost of ₹ 60,750/- from the secondary market and stated that it expected the yield at the end of the maturity period. 3.3.8 The petitioner of Special Civil Application No.150 of 2009-M/s.Sunmarg Securities Private Limited. Its case is that it held 105 Bonds and it is stated that on the maturity date, the petitioner was expecting to get ₹ 116.55 Lacs. 3.3.9 The petitioner of Special Civil Application No. .....

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plication No.17672 of 2011 is Shree Digvijay Cement Company Limited Employees Provident Fund. These petitioners having purchased the Bonds at the relevant time, are aggrieved by premature redemption sought to be effected under the impugned Act. 3.3.11 The petitioners of Special Civil Application No.15719 of 2012 are the private individuals and purchased 1 Bond comprising Certificate No.128719. 3.3.12 The petitioners of Special Civil Application No. 15720 of 2012 are also the private individuals. .....

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lue of ₹ 01,11,000/- as on 11th January, 2014. The said petitioner is also aggrieved by premature redemption. 3.3.14 Petitioner of Special Civil Application No.3336 of 2014 is Maharashtra State Road Transport Corporation s Contributory Provident Fund and others. It is its case that from 23rd June, 2005 onwards, the petitioner purchased 10,385 Deep Discount Bonds from secondary market in Mumbai at the cost price of ₹ 55,42,56,500/- at the premium of ₹ 51,68,70,500/- over the fac .....

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t engaged in safeguarding the interest of its members who are employees at Hotel Janpath. This petitioner purchased the Bonds between the year 2005 and 2007 and that there was no call option available to respondent No.2. The said petitioner is aggrieved by premature redemption of Bonds acted upon under the impugned Act. 3.3.16 The petitioners of Special Civil Application No.3331 of 2014 are (i) Sri. Mohan D. Kulkarni, (ii) Mysore Paper Mills Employees Group Gratuity Trust Fund, (iii) Sri. S. Kem .....

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4 of 2014 is SSNNL Investors Grievance Redressal Forum. This petitioner is also aggrieved having purchased the Bonds which are prematurely redeemed. 3.3.18 The petitioner of Special Civil Application No.8697 of 2014 is Allahabad Kshetriya Gramin Bank Provident Fund Trust managed as per the provisions of the Employees Provident Fund Act, 1952 having its office situated at Allahabad. It is the case of this petition that it wanted to maximize the returns for its members, therefore purchased on the .....

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54,750/- per Bond; On 03rd August, 2007, 25 Bonds came to be purchased by the petitioner at the rate of ₹ 55,100/- per Bond; a notice was received by the petitioner regarding premature redemption, pursuant to which the complaints were made to the Securities and Exchange Board of India as to the basis on which the redemption was arrived at. SSNNL sent a pay order of ₹ 1,06,00,000/- being the redemption amount to the petitioner. 3.3.19 The petitioner of Special Civil Application No.741 .....

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o.3. 3.3.21 The petitioner of Special Civil Application No.16463 of 2014 is a private individual who invested in 50 Bonds. 3.3.22 The petitioner of Special Civil Application No.15435 of 2008 is the Board of Trustees Hindustan Steel Limited Bhailai Steel Project Provident Fund. It is the case of the petitioner that with an intention to reap the benefit of interest in the yield at the end of maturity period of the Bonds, it purchased 5000 DDBs in three different lots in September-October 2005 from .....

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impugned Act, the petitioner would suffer huge loss in crores. The petitioner has given details of purchased lot and the investment. 3.3.24 The petitioners of Special Civil Application No.5471 of 2015 are private individuals. They purchased 01 Bond. 3.4 It appears that Writ Petition No.2812 of 2008 and Writ Petition No.2869 of 2008 were filed before the Hon ble Mumbai High Court, challenging the Act, 2008. Subsequently, transferred petitions before the Hon ble Supreme Court of India came to be .....

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2014, 7418 of 2014, 3332 of 2014 and 3336 of 2014 were filed before High Courts of other States. The Apex Court passed order dated 10th December, 2013 in Writ Petition (Civil) Nos.04-05 of 2009 and allied matters, and transferred different Writ Petitions to this Court. 3.4.1 The Apex Court passed following order. In these cases the petitioners have questioned the legislative competence of the State legislatures to enact the impugned 'Sardar Sarovar Narmada Nigam Limited' (Conferment of .....

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bay High Court and Karnataka High Court under Article 226 of the Constitution of India which were also transferred to this Court for hearing alongwith writ petitions filed under Article 32 of the Constitution of India. On hearing the parties, we find that the main question relates to legislative competence of the State legislature to enact to Act in question. Prima facie as it appears that no question relating to petitioner's right under Part III of the Constitution of India is involved, we .....

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e writ petitions and all other writ petitions (now listed as transfer case) to Gujarat High Court for decision on merit. Parties are given liberty to file additional affidavit/counter affidavit or amended petition taking additional grounds to challenge the validity of the law before the Gujarat High Court. The Gujarat High Court is expected to decide the writ petitions expeditiously. All the cases before this Court stand closed. 3.4.2 Accordingly the said matters came to be listed, converted int .....

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2513 of 2009, 3331 of 2014, 3332 of 2014, 3336 of 2014, 3993 of 2014 and 3994 of 2014 came to be listed before the Division Bench of this Court on 17th June, 2014 and the Division Bench issued Notice to the Advocate General making it returnable on 24th June, 2014. It may be further stated that out of the petitions of other High Courts transferred to this Court, though notice was issued to the petitioners concerned in those matters, in one such Special Civil Application No.3331 of 2014 despite se .....

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e extracted, copy of which forms part of the record of the petition. Terms of the present issue The Bonds now being offered are subject to the provisions of the Act, terms of this Prospectus, Application Form, Memorandum and Articles of the Company (hereinafter referred to as 'Memorandum' and 'Articles' respectively). In addition to such terms, the Bonds shall also be subject to such other terms and conditions to be incorporated in the Bond Trust Deed/Bond Certificates/Letters of .....

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event of such earlier withdrawal by the investor, the deemed face value of the Bond would be as under. In case of withdrawal Deemed Face Value At the end of 7 year Rs.12,500 At the end of 11 years Rs.25,000 At the end of 15 years Rs.50,000 3.5.1 The Bonds were non-convertible. Minimum number of Bond required to be applied was one and there was no maximum limit. The terms of payment were that the full issue price was ₹ 3600/- per Bond to be paid as indicated along with the application one .....

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th a written intimation mentioning his intention to withdraw, to the Company so as to reach them between three (3) and six (6) months prior to the date of withdrawal. In the event of Bondholder deciding to withdraw the Bond at any of the period mentioned above, the Bondholder shall first get the Bonds registered in his name. The Bonds will be redeemed or withdrawn only on the surrender of the Bond certificates by the registered Bondholders. 3.5.3 About transferability, the following covenants we .....

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ernment vide notification no.1294(E) dated 17.12.86 has directed that the provisions of sub-section (1) of Section 108 of the Act, in so far as it requires a proper instrument of transfer to be duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee shall not apply with respect to Bonds issued by a Government Company, provided that an intimation by the transferee specifying his name, address and occupation, if any, has been delivered to the Company along .....

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of India Limited was the Trustee of the Issue. The company executed Trust Deed on 31st December, 1994. It was stated that the Trustees confirm that they will protect the interest of the Bondholders in the event of default of the company in regard to timely payment of interest and repayment and principal and they will take necessary action including enforcement of security at the cost of the company. The major events of withdrawal which will necessitate repayment before maturity were indicated t .....

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of the Company exceed its assets. 3.5.5 It was stated in the Prospectus that applications were made before the Government of Maharashtra, Government of Gujarat, Government of Rajasthan as well as Government of Madhya Pradesh under the relevant provisions of the Public Trust Act applicable in the respective State for declaration to treat the Bond as public security. Rights of Bondholders were mentioned as under. 3.5.6 On the rights of holders of the Bonds, it was provided as under, Rights of Bon .....

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g in such consent or resolution shall be operate against the Company where such consent or resolution modifies or varies the terms and conditions governing the Bonds, if the same are prejudicial to the interest of the Company. (iii) The registered holder of the Bonds and/or in the case of joint holders, the one whose name stands first in the Register shall be entitled to vote in respect of such Bonds, either in person or by proxy at any meeting of the Bondholders and every such holder shall be e .....

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ers will be maintained in accordance with Section 152 of the Act, and all principal sums and the interest becoming due and payable will be paid to the registered holders only and in case of jointholders, to the person whose name appears first in the Register of Bondholders. (vi) The Bondholders will be entitled to their Bonds free from equalities and/or cross claims by the Company against the original or any intermediate holders thereof. (vii) The Bonds comprising the present issue shall rank pa .....

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te discretion; from time to time, to repurchase all or any of the Bonds, at any time prior to the specified date of redemption and may re-issue the same or may cancel them. Where the Company has redeemed or repurchased any of the Bonds, the Company shall have and shall be deemed always to have had the right to keep such Bonds alive for the purpose of re-issue and in exercising such right the Company shall have and shall be deemed always to have had the power to re-issue such Bonds either by re-i .....

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It appears that on 20th August, 1993, a Tripartite Agreement came to be entered amongst the State Government, SSNNL and the Trustees of the Issue in order to provide adequate comfort to the investors in relation to the Issue of the Bonds, whereunder it was agreed that the Government of Gujarat would provide funds to SSNNL. A copy of the same was produced and relied on in course of the hearing on behalf of the State Government. 3.6.1 The said Tripartite Agreement may be conveniently reproduced he .....

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d include its successors and assigns) of the ONE PART; (2) THE STATE GOVERNMENT OF GUJARAT, through the GOVERNOR OF THE STATE OF GUJARAT, hereinafter referred to as GOG (which expression shall unless it be repugnant to the subject or context or meaning thereof be deemed to mean and include its successors) of the SECOND PART; AND (3) THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED, a Company incorporated under the Indian Companies Act, 1913 having its Registered Office at 163, B .....

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purpose joint project of four States viz. Gujarat, Madhya Pradesh, Maharashtra and Rajasthan, interalia, involving the construction of 1210 metre long concrete gravity dam in Gujarat. The completed dam would rise 146.50 Mtr. Net above the river bed and 157.5 metres above the deepest excavation point. (2) The Narmada Project would on completion create a reservoir of 5800 million cubic metres extending to more than 214 kilometers upstream, covering 370 square kilometers and also envisages the cons .....

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the main dam, is designed as a conventional surface station with 5 Kaplan type units of 50 MW capacity. The total generating capacity would be 1450 MW. Water supply and distribution facilities would include the construction of a 460 Km long main canal leading to the Gujarat-Rajasthan border. The canal would be concrete lined and have a capacity of 1133 cumecs (40,000 cusecs) at the head and about 71 cumecs (2,500 cusecs) at the tail end. The main canal would be supported by branch canals and mi .....

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sides, as mentioned above, there would be additional power generation of 1450 MW from the aforesaid Power Houses. The Narmada Project would provide drinking water facilities to 8215 villages and 135 urban centres and would assist in the supply of potable water in a number of villages in North Gujarat and increases the agricultural production and domestic power generation in the order of ₹ 2,175 Crores per annum. (4) GOG through SSNNL has already invested a large sum running into several hu .....

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e available by multilateral agencies, SSNNL needs to bridge a part of the fund gap for the Narmada Project by raising resources through nonbudgetary sources. Accordingly, SSNNL have proposed to raise resources through public subscription of various debt instruments. (6) The Narmada Project implemented through a Company whose entire share capital is owned by GOG viz. SSNNL is being implemented as part of the development and commercial activities of GOG and as mentioned above with a view to make a .....

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a view to partially bridge the net gap of ₹ 2350 crores, from out of the non-budgetary sources. SSNNL proposes to issue- (a) Deep Discount Bonds of the face value of ₹ 1,11,000/- each issued at deep discounted price of ₹ 3,600/- each having stipulated maturity period And (b) 18% Non Convertible (Non Cumulative) Bonds of the face value of ₹ 5000/- each redeemable after the expiry of a specified period commencing from the date of allotment. The Deep Discount Bonds referred .....

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ther documentation. The brief particulars of the features of the instrument would be referred to in the Offer Document. It is expected that DD Bonds would be listed on several recognised Stock Exchanges and as such would be governed by the terms to be set out in the Offer Document. (9) The interest on the NC Bonds would be subject to tax including withholding tax. The NC Bonds are liable to be redeemed after the expiry of a specified period commencing from the date of allotment, at a premium of .....

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said Bonds to be issued by the SSNNL, approached and requested ICICI to act as Trustees for the benefit of the holders of the Bonds who would be allotted or would hold said Bonds issued by SSNNL, and to act as Trustees in respect of the Security. ICICI has agreed to act as such Trustees. (12) In order to provide adequate comfort to the investors proposing to subscribe to the said Bonds, about the ability of SSNNL to service the said Bonds, SSNNL has requested GOG to agree that, upon a request b .....

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ich such amounts of Additional Funding (in whatever form) may be called up by SSNNL from GOG, and, applied towards servicing of principal, interest, premium and other charges and expenses in relation to the said Bonds, and the Security to be created pursuant to the provisions hereof, and to enable the Trustees to take all steps as may be necessary for the protection of the interest of the Bondholders, as provided herein. (13) The parties being desirous of recording the terms and conditions of su .....

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onds or the said Bonds shall mean collectively the Deep Discount Bonds (DD Bonds) and the 18% Non-Convertible (non-Cumulative) Bonds (NC Bonds) of the aggregate value (issue proceeds) of ₹ 300 Crores proposed to be issued pursuant to a decision of the Board of Directors of SSNNL dated 18-1-1993 and in terms of the Offer Documents. (b) DD Bonds shall mean the Deep Discount Bonds (Series A ) of the face value of ₹ 1,11,000/- each proposed to be issued in terms of Board Resolution dated .....

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mean the Request or notice in writing in the form prescribed herein issued by SSNL or the Trustees requiring Additional Funding from GOG. (f) Additional Funding shall mean any one or more or any combination of various types of funding agreed to be provided by GOG to SSNNL, under the provisions of Clause 3 hereof, and where the context so requires, shall include the disbursements made by GOG under the provisions of Clause 3(d) hereof. (g) Bondholder(s) shall mean the holder/s of a Bond/s for the .....

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ereof which is intended to be secured/charged in favour of the Trustees as stated therein. (k) ICICI shall mean The Industrial Credit and Investment Corporation of India Limited having its registered office at 163 Backbay Reclamation, Bombay 400 020. (l) Outstanding from time to time shall mean in the aggregate, outstanding towards principal, interest premium and other charges and expenses whatsoever in relation to the said Bonds and/or the Security, as being due and payable to the Bondholder/s .....

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as the party paid up shares for the purpose of his Agreement. (o) Preview Date shall mean in relation to each Service Date, a date being 45 calender days prior to the service date, both days not being included. In case the Preview Date falls on a holiday, the prior working day shall be the Preview Date . (p) Request (whether or not used in its capitalised form but subject to the context) shall mean the Notice in the form prescribed herein for Additional Funding. (q) Schedule shall mean any Sched .....

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n amount(s) or any other sum whatsoever falls due for payment by SSNNL to the Bondholders. (t) SSNNL shall mean Sardar Sarovar Narmada Nigam Limited, a company having its registered office at Block No.12, 1st Floor, New Sachivalaya Complex, Gandhinagar, Gujarat. (u) Trustees shall mean the trustees for the Bondholders and shall in the first instance mean ICICI and in the even tof any change or substitution of Trustees shall mean such substituted Trustees. CONSIDERATION 2. In the circumstances re .....

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and, being the principal sponsoring party in relation to the Narmada Project, under implementation by SSNNL, has agreed to enter into and execute this Agreement and has permitted SSNNL under the Offer Documents proposed to be issued by SSNNL to make certain representations therein in relation to the provisions of this Agreement. PREVIEW PROCESS AND EVENT OF ELIGIBILITY TO CALL 3 (a) SSNNL has agreed to make payment to the Bondholders of all amounts of principal, interest, premium and all other c .....

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e called the Designated Account . The operations of the said Designated Account and all withdrawals from the said Designated Account shall be made only in consultation with the Trustees, and shall, exclusively be utilised for the purpose of servicing the said Bonds and/or the payments of the Outstandings in relation thereto. SSNNL may in consultation with the Trustees open more than one Designated Account as may be required, all of which shall be known as the Designated Account (s) . (c) On each .....

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NNL that it would be in a position to fully pay and/or discharge obligations on the relevant Service Date, the Trustees and/or SSNNL shall forthwith be entitled to declare that an Event of Eligibility to Call has occurred, and shall forthwith be entitled to communicate the same to the appropriate official of GOG, being the Additional Chief Secretary (FD) Government of Gujarat or failing him or in case of redesignation, to the Chief Secretary, Government of Gujarat. (d) (i) Upon the communication .....

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have the sole discretion to decide. GOG agrees that it shall unconditinoally make disbursement of the amount requested by the Trustees and/or SSNNL under the aforesaid Notice/intimation of the Event of Eligibility to call and that the pendency of the final decision in relation to mode and combination of Additional Funding shall not be a ground of withhold or delay disbursement. (ii) GOG agrees that the disbursements so made by GOG under the aforesaid clause (I) or the Additional Funding provide .....

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atleast 7 (seven) days prior to the Service Date. (iv) It is also agreed that GOG shall in relation to the extent of the Additional Funding requested by the Trustees and/or SSNNL be entitled to seek any clarification in respect of the mode of computation or any other details in that behalf but, the pendency of such request or clarification shall not be a basis for withholding any disbursement prior to the Service Date or in any manner delay or postpone the provision of such Additional Funding. I .....

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o in sub-clause (d) above shall be generally in accordance with the provisions of Annexure - I attached hereto and, shall be considered as having been properly communicated to the GOG if the notice or request is delivered to the Additional Chief Secretary, F.D., GOG, Gujarat or failing him or in case of redesignation, to the Chief Secretary, Government of Gujarat. (vi) It is expressly clarified that neither SSNNL nor the Trustees shall be required or obliged in any manner to inquire into or asce .....

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n validly delivered and that all internal compliances, approvals and procedures have been complied with an, in any event there is no material requirement outstanding for compliance in that behalf. (e) The Notice issued by the Trustees upon GOG shall be binding on GOG and the same shall to the extent applicable also be subject to the provisions of the Security and such other arrangements in favour of the Trustees under the provisions of clause 6 hereof. Upon the issuance of such notice for Additi .....

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ally authorised to do so. GOG agrees to comply with all such actions of the Trustees and shall duly punctually perform their obligations in that behalf. (f) SSNNL and GOG also agree to indemnify and keep indemnified the Trustees from and against any loss or damage caused to any party as a result of the Trustees exercising all such powers and authorities referred to above or otherwise for any reason whatsoever. (g) (i) On or before each Preview Date, SSNNL shall on the assumption that an Even of .....

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r the Trustees can forthwith proceed to issue the Notice upon GOG seeking Additional Funding without any delay, or having to comply with any fresh formalities or modalities in order to seek Additional Funding from Government of Gujarat prior to the Service Date. All such corporate resolutions, formalities and compliances shall be carried out and implemented to the satisfaction of the Trustees, on or before the Preview Date and any requirement in that behalf indicated by the Trustees shall be fin .....

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y Court or other appropriate authority to the extent that the exercise of any remedies by the Trustees against SSNNL and/or GOG shall be expeditiously undertaken, if necessary by the Trustees under such authority. 4. In the event of the Additional Funding being in the form of subscription to equity or payment of calls on the Partly Paid Shares, then, it is agreed by GOG, that SSNNL and the Trustees on behalf of SSNNL, subject to the provisions of law and of the Articles of Association of SSNNL, .....

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aid Shares of the same class with a view to make them fully paid, whilst on the other hand retaining them as Partly Paid Shares of the same class or to reduce the outstanding unpaid amount on such other Partly Paid Shares by crediting a portion of the Additional Funding to such other Partly Paid Shares, all to the end and intent that SSNNL and/or the Trustees shall have the discretion and authority to credit or direct the credit of the amount of the Additional Funding to the partly paid shares o .....

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vided by GOG in terms of its obligations as aforesaid, shall be made available to SSNNL or as the circumstances may require, to the Trustees acting as agents for SSNNL, subject to the provisions of the Security more particularly set out in Clause 7 hereof. In the event of GOG failing to provide such Additional Funding, then in addition to any remedies which the Trustees may be entitled to pursue against SSNNL, they shall additionally also be entitled to the specific performance of all such oblig .....

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does not pay the called up amount and to exercise the power of reissue thereof in favour of any party of its choice. APPROPRIATION (i) The amounts of Additional Funding received pursuant to payment or credits made by GOG in the Designated Account shall be applied for discharge of the obligations in relation to the relevant Service Date. The payment shall be applied in the first instance to payment of all costs, charges and expenses if any of recovery or realisation by the Trustees, in the second .....

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may interalia include: (a) a mortgage on the said immovable property being a bungalow situate on a sub-plot No.8 admeasuring 2503.002 square meters on plot NO.280, Town Planning Scheme No.14, Near Narmada Colony, Dafnala, Shahibaug, Ahmedabad in the State of Gujarat. (b) a first charge on the Additional Funding and in respect of the rights of and benefits accruing to SSNNL under the provisions of this Agreement. (iii) SSNNL and GOG agree that they shall also enter into and execute such further .....

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he said Bonds as may be applicable and shall not commit any breach or default thereof. (v) SSNNL shall issue to each Bondholder a Bond Certificate in the form and the salient features whereof are described in the Offer Documents indicated in the Trust Deed in respect of the Bonds allotted to him after obtaining the requisite Certificate of Registration of Charge from the Registrar of Companies, Gujarat, in respect of the mortgage and charge under the Debenture Trust Deed to be executed between S .....

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cording to the laws for the time being in force in the State in which its properties are situated and in the event of SSNNL failing to pay such stamp duties, other duties, cesses, taxes and penalties as aforesaid, which failure in the opinion of the Trustees is likely to prejudice the interest of the Bondholders, the Trustees will be at liberty (but shall not be bound) to pay the same or arrange for payment of the same for the purpose of protection and preservation of the Security or for enforce .....

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each thereof. (vii) Upon proof being given to the reasonable satisfaction of the Trustees that all the said Bonds for the time being issued have been paid off or satisfied and upon payment of all costs, charges and expenses incurred by the Trustees (including the remuneration of the Trustees and all interest therein) the Trustees shall, at the request and cost of SSNNL release or reassign to SSNNL or as SSNNL may direct, the Security or such part thereof as may therein subject to such security t .....

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pect of the Bonds have been fully paid and discharged. IN WITNESS WHEREOF the Company has caused its Common Seal to be affixed to this Agreement has caused this Agreement to be executed in triplicate and the other parties hereto have caused to be executed the same by their respective officials/Constituted Attorneys on the day, month and year first above written as hereinafter appearing. Related facts and events 3.7 Further the terms of the Prospectus inter alia provided that any change in the co .....

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ial Resolution was to be considered. The special Resolution then proposed , reproduced in its relevant part read as under, RESOLVED THAT pursuant to the provisions of the Prospectus dated 29th September, 1996 for issue of Secured Redeemable Non Tax Exempt Deep Discount Bonds in the nature of Promissory Notes (Deep Discount Bonds) and subject to such approval of Authority(ies), if any, as may be necessary consent of Deep Discount Bondholders be and is hereby accorded for modification/variation of .....

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iving two months notice, to all the registered holders of Deep Discount Bonds, prior to the date of the early redemption and from the date of the early redemption the Deep Discount Bonds shall stand fully discharged and the Company shall not be liable to pay any interest, damage, compensation, cost, charges on such Deep Discount Bonds even if the Deep Discount Bond certificate is not surrendered for receipt of redemption amount. 3.7.2 It appears that since certain representations were made to Se .....

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Company-SSNNL. A notice dated 03rd November, 2008 was issued to the Bond-holders mentioning therein inter alia that if the Deep Discount Bonds were not surrendered for redemption, interest would not be paid beyond 10th January, 2009. Text of Impugned Legislation 3.8 Before proceeding further, the entire text of impugned legislation being Gujarat Act No.12 of 2008 as published in the Government of Gujarat Gazette extraordinary, dated 29th March, 2008 which is divided into three Sections, is repro .....

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Narmada Nigam Limited being a Government Company within the meaning of section 617 of the Companies Act, 1956 (hereinafter referred to as the Company ) in respect of the Bonds or in the Trust Deed dated the 31st December, 1994 between the Company and the trustees, or in any other document relating to Deep Discount Bonds or in condition No.7 appearing under the heading financial covenants and conditions specified on the reverse side of the Bonds (hereinafter referred to as the said financial cove .....

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and in the terms of withdrawal appearing under condition No.9, each Bond having the face value of ₹ 1,11,000 issued at ₹ 3,600 shall be redeemed earlier on such date and with such deemed face value as the company may determine by payment of the amount so determined: Provided that the deemed face value shall be so determined as not to be less than such amount as may be arrived at by raising the deemed face value of ₹ 25,000 as on 11th January, 2005 at the rate of 18.92 per cent .....

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from the date of its allotment i.e. the 11th January, 1994 (irrespective of whether the Bond is in possession of a Bond holder or not.) 3. No civil court shall have jurisdiction to entertain any question arising out of any provision of this Act and of the Deep Discount Bonds (as amended by this Act) issued by the Company and no injunction shall be granted by any civil court in respect of any action taken or to be taken in pursuance of any financial covenant or condition of the Bonds. 3.8.1 The S .....

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a deemed face value of ₹ 12,500/- Rs, 25,000/-, ₹ 50,000/- and ₹ 1,11,000/- respectively. The financial covenants and conditions of the Bonds do not given option to the Nigam to redeem the Bonds comes to about nineteen per cent considering the present trend of declining rates of interest which has stabilized at 10.75 per cent and the enormous liability of the Nigam to make payment of ₹ 7,445.26 crores at the end of 20th year when the Bonds mature, it is considered necess .....

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the validity of the legislation are inter alia that (i) there is no entry either in the State List being List II or the Concurrent List being List III in the Seventh Schedule to the Constitution, under which the impugned law could have been enacted; (ii) even if the court is to hold that the subject matter of the legislation falls within any of the entries available either in List II or List III, to the State Legislature, the doctrine of repugnancy would operate; (iii) the impugned legislation .....

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alls under Entry 43 in List II under the title Public Debt of the State and further falls under Entry 20 in relation to Economic and Social Planning in List III. According to them, the subject matter of the legislation in question falls in pith and substance under the said two entries and therefore, state legislature could validity enact the law which is referable to said entries. According to the submission, the impugned law does not encroach upon the legislative field kept for the Parliament a .....

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wing main submissions, (i) The State did not have source of power to enact the legislation in question. No Entry either in List II or List III would confer the legislative competence for passing the impugned law. (ii) The Entry 43 in List II of Public Debt of State does not apply. The Public Debt is a special connotation and meaning. It has specific context to the Consolidated Fund. It has restrictive meaning. (iii) Every debt of State is not public debt. The impugned statute does not relate to .....

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impugned law. (vi) The impugned Act is repugnant and a clear encroachment in the legislative field earmarked for the Parliament only. (vii) On the scope and applicability of Article 246 and 254 of the Constitution, as well as to highlight the concept of repugnancy of State law vis-a-vis Central law, and the circumstances in which the repugnancy may arise, following decisions were pressed into service. (1) State of Madras Vs M/s.Gannon Dunkerley and Co. (Madras) Ltd. [AIR 1958 SC 560], (2) Sahara .....

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rise even otherwise than in respect of Entry in List III-the Concurrent List. Decision in State of Kerala Vs Mar Appran Kuri Company Limited [(2012) 7 SCC 106, para 39, 40 and 47] was relied on. (ix) The Indian Companies Act, 1956, the Securities Contract (Regulation) Act, 1956 and the Security and Exchange Board of India Act, 1992 are the central laws which cover the entire field and are complete code in themselves. The Issue of Deep Discount Bonds and the attendant rights and liabilities are g .....

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n circumstance came into existence subsequent to the contract; redemption in the interest rate was foreseeable; the amount payable eventually was crystallized before-hand at the time of contract; (b) Redemption was not to be made out of the earnings of the company, but there was a security provided and there was a tripartite agreement. (c) There was no question of security to the extent of 1.25 times having been got reduced in value; (d) No demand was made in the tripartite agreement till the st .....

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gned Act was a fraud on the powers. Further submissions 4.3 The other learned advocates for the different petitioners Mr.Maulin Raval, Mr.B.T. Rao Mr.Tushar Hemani, and Mr.Masoom Shah adopted the above submissions of learned senior counsel and made additional submissions summarized as under, (i) An Entry in any of the Lists in the Seventh Schedule to the Constitution should be construed in its legal meaning and not as per its popular meaning. Giving broad meaning to the Entry does not mean depri .....

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erent words and for interpreting. It is to be construed as one single phrase. (iv) The impugned Act is fraud on the legislative powers. (v) Provisions of nine central statutes are violated because of the impugned law-(a) Section 126 to 141 of the Contract Act made redundant, (b) Section 55 to 66, 68, 119, 637 and 641 of the Companies Act, 1956 are violated, (c) Provisions of the Income-Tax Act, (d) Provisions of the Negotiable Instrument Act, (e) Provisions of SEBI Act, (f) Provisions of Securit .....

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Issue of the Deep Discount Bond was governed by the regulatory provisions of SEBI Act. She relied on the Preamble and Section 11 of the Act. (b) SEBI is a regulatory body. Once the issue is floated, the regulatory mechanism of SEBI as per the statutory provisions would come into play. Section 30 of the SEBI Act was referred to. (c) Decision in Sahara India Real Estate Corpn. Ltd. Vs SEBI [(2013) 1 SCC 1, para 66] was relied on to contend that SEBI Act is selfcontained Code. 4.3.2 Before the Sup .....

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of the said total 01,70,462 DDBs were held by 01,29,841 investors in the State of Gujarat and the remaining 04,98,909 Bonds were held by 02,79,335 investors outside the State of Gujarat. 4.3.3 Learned advocates for the petitioners in addition to above submitted that when the Issue was floated throughout the country and the same was listed in different stock markets, the impugned legislation affected the rights of the Bond-holders who are outside the State and who purchased the Bonds outside the .....

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ity of the legislation on the aforesaid ground of it having an extra-territorial operation. The petitioners in the next submitted that the consequential relief prayed for of directing the SSNNL to pay the interest for the left out period and further to make good the financial loss suffered by the Bond-holders due to premature redemption should be allowed. This, it was submitted, was necessary more particularly when the Civil Suit was also barred as per the provision in the impugned legislation. .....

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ether the SSNNL continued to enjoy the principal amount. It was submitted that even if the amount at the time of premature redemption was accepted by a Bond holder, the facts remains that the principal amount with accrued interest came to be parted with by the SSNNL and the same was received and enjoyed by the recipient Bond holder. According to the submission of the respondent, it could not be said that the Bond holders were completely deprived of the interest which could be treated as damage o .....

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was made are all the questions to be considered on the basis of evidence and factual inquiry. It was therefore submitted that this court may not award the damages even if the court were to hold the impugned legislation to be unconstitutional or void. Decisions relied on behalf of petitioners 4.5 Out of the various decisions relied on by learned counsel for the petitioners, few may be referred to with reference to the proposition canvassed. (1) Decision in Kishan Parkah Sharma Vs Union of India [ .....

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re relied on to submit that even though respondent No.2 may be a State for the purpose of Article 12 of the Constitution, it nevertheless cannot be equated with State Government. (3) Decision in Jogendra Lal Saha Vs State of Bihar [AIR 1991 SC 1148] was pressed into service for the purpose of the following proposition contained therein. 7. The contract in question is in fact contrary to the scheme of this Act. It tries to take away the right of the contractor to be paid excess money earned on su .....

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ransactions instead of allowing its activities to run in a different direction. (4) Union of India Vs Shah Governdhan L. Kabra Teachers College [(2002) 8 SCC 228] was relied on to contend that the Entry cannot be interpreted by extending the meaning unreasonably. Punjab Distilling Industries Ltd. Vs The Commissioner of Income-tax Punjab [AIR 1965 SC 1862, para 11] as well as Association of Natural Gas Vs Union of India [(2004) 4 SCC 489, para 42] were relied on for similar proposition. (5) State .....

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or by implication forbidden by statute, the Court will not lend its assistance. (7) M/s.Helos and Matheson Information Technology Limited C/o. Corporate Law Chambers India Vs Securities and Exchange Board of India [Securities Appellate Tribunal, Mumbai Appeal No.69 of 2011 decided on 16th November, 2011] was relied on to submit that the Listing Agreement is statutory in nature. (8) Sundaram Finance Limited Vs State of Gujarat [Gujarat High Court judgment, Special Civil Application No.6223 of 20 .....

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SCC 358, Para 28 to 30] was pressed into service. (ii) The impugned legislation clearly falls under Entry 43 List II namely Public Debt of the State . This Entry read with Entry 20 List III namely Economic and Social Planning applies. The pith and substance of the legislation has to be seen. (iii) The public debt is borrowing by the State and its instrumentality. Furthermore, the facts of the legislation had a link with budgetary source. (iv) The impugned legislation properly derives its legisl .....

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State debt which was not segragable from the State liability, it became public debt of the State. (ix) It was not compulsory for SSNNL to redeem the Bonds and the provisions in the impugned enactment were in the nature of empowerment given to the Nigam. (vii) Liability of guarantor and principal debtor is co-extensive. The State undertook the liability of SSNNL by virtue of tripartite agreement. (viii) Decision in Bank of Bihar Vs Damodar Prasad [AIR 1969 SC 297, para 3 and 5], decision in Indus .....

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t, the debt of the SSNNL became the liability of the State Government which became guarantor under the agreement. Referring to provisions of Sections 128 and 140 of the Contract Act and the decision in the Bank of Bihar Vs Dr.Damodar Prasad [AIR 1969 SC 297] submitted that under Section 128 in the Indian Contract Act, save as provided in the contract, the liability of surety is co-extensive with that of principal debtor. The surety become liable to pay the entire amount and the liability was imm .....

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ent the Project speedily; that SSNNL is a wholly owned company of Government of Gujarat and a special purpose vehicle was created to meet with economic and social requirements of the State. In the affidavit, objects of SSNNL were highlighted vis-a-vis the Sardar Sarovar Project. It was further stated that till the end of March, 2008 Government of Gujarat had released ₹ 18,489.85 crores against ₹ 02,166.39 corres released by the other beneficiary States. It was stated that the Governm .....

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the said borrowing, Government of Gujarat had issued guarantees in public interest. His attempt was to also indicate thereby that it was a public debt of the State which was being discharged through means of the impugned law. Decisions relied on behalf the State Government 4.7 Following decisions were relied on by learned Advocate General in support of his above submissions, (1) G.N. Venkataswamy Vs Tamil Nadu Small Industries Development Corporation Ltd. [AIR 1981 Madras 318, paragraphs 1,2,10, .....

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blic Works and Transport Department, Andhra Pradesh Vs Adoni Ginning Factory [AIR 1959 Andhra Pradesh 538, paragraph 13] and it was submitted that existence of contracts made by government does not curtail legislative powers. In that case law was enacted for regulating prices by the state. (3) M/s. Raghubar Dayal Jai Parkash and 3. Vs The Union of India [AIR 1962 SC 263, paragraphs 1, 19 to 26] for same above proposition. (4) Damadilal Vs Parashram, [(1976) 4 SCC 855, paragraph 11] was pressed i .....

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ct of guarantee. (6) State of T.N. Vs G.N. Venkataswamy, [(1994) 5 SCC 314, paragraphs 16 to 19] and Mardia Chemicals Ltd. Vs Union of India, [(2004) 4 SCC 311, paragraphs 2,5,33,66, 67] were pressed into service to submit as to how economic legislation should be interpreted and the principles which may be applied for considering the challenge to its constitutionality. (7) Jayantilal Ravishankar Bhatt Vs State of Gujarat [1970 ILR 844 Guj., at page 850, 860 to 862] and Animal Welfare Board of In .....

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l Corporation [1985 (1) GLR 57, paragraphs 1 to 4, 11, 12, 14, 17, 26, 30, 31] and Orient Paper and Industries Ltd. Vs State of Orissa [1991 Supp (1) SCC 81, paragraphs 1,2, 9 to 14 , 22, 23] were referred to on the aspect of legislative competency and the parameters for determining the same. 4.7.2 A Division Bench decision of this court in Jayantilal Ravishankar Bhatt Vs State of Gujarat [1970 GLR 844] was relied on in which the constitutional validity of Gujarat Industrial Development Act was .....

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though incidentally it might trench on matters beyond its competence. The extent of the encroachment on matters beyond its competence may be an element in determining whether the legislation is colourable, that is, whether in the guise of making a law on the mater within its competence, the legislature is, in truth, making a law on a subject beyond its competence. But where that is not the position, the fact of encroachment does not affect the vires of the law even as regards the area of encroa .....

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supported the impugned legislation by making following submissions, (i) By referring various clauses in the prospectus it was submitted that there is an element of public debt and also a public interest dimension, (ii) He highlighted following aspects and figures were highlighted (a) 300 crores in aggregate out of which 256.90 crores was from Deep Discount Bond being the fund raised for the project. (b) ₹ 7445 crores was required to be repaid at the end of redemption period. Bonds are issu .....

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save itself from spending about ₹ 4,000 crores more and therefore passed the Statute taking up the liability of SSNNL which was its limb. It was in realm of social and economic planning, the counsel emphasized. (g) Reliance was placed on decision of the Supreme Court and in particular paragraph 22 thereof in Viklad Coal Merchant, Patiala, Vs Union of India [AIR 1984 SC 95]in support of the submission that the impugned legislation could be enacted for the purpose of social and economic plan .....

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for the investors. A withdrawal option was available. (vi) The objects and reasons of the impugned Act are quite relevant, it was submitted by learned counsel and he highlighted the same. (vii) Intention of the Legislature was not to legislate on the Bond but basically and for all purposes to reduce the public debt for managing and pursing economic and social planning. (ix) The budgetary allocation, the tripartite agreement, the nature of project, the assets generated, etc., are the strong aspec .....

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must be examined for judging the legislative competency of the impugned Act. (xii) On the reasonableness of the legislation, it was submitted that the petitioners did not have any fundamental right, nor constitutional right, nor statutory right available to urge as a ground to challenge the impugned Act. (xiii) The rights are in the arena of contract. About the redemption permitted under the impugned legislation, it was submitted that right to redeem is a standard right and there is nothing ill .....

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s not invalid. (xvi) The claim of larger sum at the end of the Five Years was an event yet to occur. (xvi) He relied on decision in Dharam Dutt Vs Union on India [(2004)1 SCC 712] about reasonableness in the context of Article 19 to judge the validity of the provision. (xvii) From decision in R.C. Tobacco (P) Ltd. Vs Union of India [(2005)7 SCC 725, para 21, 22 and 30] were relied on the aspect of retrospectively. (xviii) For contending that one man legislation can be a valid exercise of legisla .....

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the next question would be to consider whether the field or subject in respect of which the State Legislature has enacted the law, is occupied by any law made by the Parliament. He submitted that after these two aspects are cleared, the Court has to further see whether the law made by the State Legislature has entrenched the law made by the Union Legislature. Here more pertinent question would be the extent of entrenchment or encroachment. It would be the moot question whether the encroachment .....

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th the Central legislation. There is indeed no dispute to the aforesaid principle stated by learned senior counsel. The question to be addressed while considering the constitutionality of legislation enacted by the State Legislature when pitted against the law made by the Central Legislature, would be whether both the laws having regard to the legislative Entry to which they claim their competence and existence, can stand together duly reconciled. Decisions Relied on by Respondent No.2-SSNNL 4.9 .....

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; (iv) Rajiv Sarin Vs State of Uttarakhand [(2011) 8 SCC 708]; (v) Animal Welfare Board of India Vs A. Nagarja [(2014) 7 SCC 547]; (vi) State of Madhya Pradesh Vs Rakesh [(2012) 6 SCC 312]; (vii) Viklad Coal Merchant Patiala etc. Vs Union of India [AIR 1984 SC 95]; (viii) Builders Association of India Vs Union of India [AIR 1989 SC 1371]; (ix) Association of Leasing and Financial Service Companies Vs Union of India [(2011) 2 SCC 352]; (x)State of A.P. Vs MCDOWELL & Co, [(1996) 3 SCC 709]; (x .....

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icking up the holes. The court should also lean to upheld the legislation. In this regard, he relied on decision in Govt. of A.P. Vs P. Laxmi Devi [(2008) 4 SCC 720, paragraphs 39, 40 to 49, 55, 61, 64, 70, 73]. 5. In light of the above factual conspectus and the contentions canvassed on behalf of the parties, the following aspects emerge for examination, broadly stated. (a) The application and ambit thereof of Article 246 and Article 254 of the Constitution; (b) Whether the impugned legislation .....

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to the subject matter field occupied by the Central legislation; (e) For the purpose of (c) and (d) above, what is the scope and operational ambit of the laws enacted by the Union Legislature, namely (i) the Securities Interest (Regulation) Act, 1956; (ii) Securities and Exchange Board of India Act, 1992; (iii) the Indian Companies Act, 1956; (iv) the Negotiable Instruments Act, 1882 and (v) Indian Contract Act, 1872 for their concerning provisions compared to the impugned legislation; (f) The n .....

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ther to be read with the relevant Entries, that the controversy as to the constitutionality of the impugned law is to be considered. 6.1 Article 246 deals with the subject matter of laws made by Parliament and by the legislatures of State. The Article reads as under, 246. Subject-matter of laws made by Parliament and by the Legislatures of States (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List .....

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or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this constitution referred to as the "State List"). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included b [in a State] notwithstanding that such matter is a matter enumerated in the State List. 6.1.1 Article 254 is another provision to be read with Article 246. Article 254 speaks of inconsistency between laws made by .....

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de by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void. (2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that ma .....

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vests exclusive power in the Parliament to make laws in respect of any of the matters enumerated in List I in the VIIth Schedule. List I known as Union List sets out the different heads - the subject matter in respect of which the Parliament is conferred an exclusive power for making laws. List II in the VIIth Schedule which is the State List, enumerates the subjects on which the State has the power to make laws. List III - the Concurrent List envisages the subjects in respect of which the Parl .....

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State Legislature on the other, Article 254 operates in two facets. First is to provide the mechanism to resolve the conflict between the two laws when placed against one another in case of conflict. Secondly, a problem of determining whether a particular State Law is repugnant to the Central Act is addressed; in other words, it states as to when the repugnancy arises. 6.1.4 In Govt. of A.P. and Vs J. B. Educational Society [(2005) 3 SCC 212] 9. The Parliament has exclusive power to legislate wi .....

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h Parliament and the State legislature are supreme in their respective assigned fields. It is the duty of the Court to interpret the legislations made by the Parliament and the State legislature in such a manner as to avoid any conflict. However, if the conflict is unavoidable, and the two enactments are irreconcilable, then by the force of the non-onbstante clause in Clause (1) of Article 246, the Parliamentary legislation would prevail notwithstanding the exclusive power of the State legislatu .....

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5 About scope, applicability and working of Article 254, the Apex Court in Vijay Kumar Sharma Vs State of Karnataka [(1990) 2 SCC 562] explained as under which may be pertinently extracted. The Court has to examine in each case whether both the legislations or the relevant provisions therein occupy the same field with respect to one of the matters enumerated in the Concurrent List and whether there exists repugnance between the two laws. The emphasis laid by Art. 254 is "with respect to tha .....

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is reserved for consideration of the President and it has received his assent, and then it will prevail in that State notwithstanding its repugnancy or inconsistency with the Union law. This exception again is to be read subject to the proviso to cl. (2) thereof, which empowers the Parliament to make law afresh or repeal or amend, modify or vary. the repugnant State law and it became void even though it received President's assent. In short, cl. (1) lays down a general rule; cl. (2) is an ex .....

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uld co-exist and operate in the same territory. (Para 63) Relevant Entries 7. The legislative Entries which were referred to in the rival submissions on behalf of the parties claiming to be bearing a relation to the subject matter of the impugned legislation may be mentioned. 7.1 In the List I, namely, the Union List, Entry 44 is in respect of incorporation, regulation and winding up of corporations whether trading or not, with objects not confined to one State, but not including universities. 7 .....

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and Entry 43. 7.3.1 Entry 7 states the subject as Contracts including partnership, agency, contract of carriage and other special forms of contracts, but not including contracts relating to agricultural land. 7.3.2 Entry 20 is about Economic and social planning . 7.3.3 Entry 43 reads: Recovery in a State of claims in respect of taxes and other public demands, including arrears of land-revenue and sum recoverable as such arrears, arising outside that State. 7.4 Respondents case is that Entry 43 i .....

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informing the interpretation of the legislative Entries in the three Lists to the Seventh Schedule. It is the principle well understood that the legislative Entries earmark the respective fields for the two Legislatures. They are not the source of power to legislate; the fountain-source of power is Article 246 of the Constitution with other applicable Constitutional provisions. The functions which the three Lists in the Seventh Schedule and the Entries contained therein, discharge is to only dem .....

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ed subject to an overall limitation that the courts cannot extend the field of an Entry to such an extent as to result in inclusion of such matters as the framous of the Constitution never intended to be included within the scope of the Entry or so as to transgress into the field of another Entry placed in another List. (emphasis supplied) 8.2 Similar was the observation in Shah Goverdhan L. Kabra Teachers College (supra) that the rule of liberal construction of an Entry would not enable the Leg .....

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conflict between the different Entries it is the duty of the court to reconcile them…. For reconciliation, the doctrine of pith and substance has to be applied and brought into play, guided the Apex Court. 8.3 The decision of the Supreme Court in Gannon Dunkerley s case was referred to and relied on. From that decision and the development in law in relation thereto, it is possible to learn the interpretational. In that case, (AIR 1958 SC 560) the words sale of goods in Entry 48 in List II .....

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t a contract to sell materials used in the construction nor the property in those materials pass as movables and in that view, it was held, that the provision of Madras General Sales Tax (Amendment) Act, 1947 defining a sale to include a works contract was ultra vires and void. 8.3.1 Though the actual effect of Gannon Dunkerley s case ceased to operate because of the Parliament enacted the Constitution (46th Amendment) Act, 1982 by inserting Clause 29(A) in Article 366 of the Constitution to def .....

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al Commentary (4th Edition 2011, Volume 3) after discussing the Gannon Dunkerley s case on the above aspect and the post-decision developments viewed to opine that following observations in Gannon Dunkerley s case were the law accurately stated, To sum up from the expression sale of goods in Entry 48 is a nomen juris, its essential ingredient being an agreement to sell movables for a price and property passing therein pursuant to that agreement. In a building contract which is, as in the present .....

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s case and the subsequent development in law after the said judgment on the aspect of the Entry help understand what could be the interpretational contours and the canons which may be applied for the permissible extent of extending the meaning and import of an Entry. 8.3.4 What implies is that while construing the words in an Entry, the essence and the crux of the meaning have to be adhered to and the basic ingredients of the words in the Entry cannot be divorced from it while giving an extended .....

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relied on by the State, has to be given a legal and technical meaning and its concept cannot be extended so as to cover include the impugned legislation. 8.5 In a Madras High Court decision in G.N. Venkataswamy (supra) relied on behalf of the State, while holding Section 2A of Tamil Nadu Revenue Recovery Act as ultra vires the powers of the State Legislature, the Division Bench of the High Court observed to held that the State law for its subjectmatter provisions was not falling within the expr .....

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t is in that meaning the said expression has been used in the Constitution, it is not open to the State Legislature by a fiction to treat something which is not land revenue as land revenue and make a law with respect to the same. (Para 49) 8.5.1 The submission of learned Advocate General of Stat of Tamil Nadu was that the Act could fall under Entry 43 of List II was negatived and it was observed that the expression public debt has a meaning of its own as reflected in the Public Debt Act, 1944; .....

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ntively considered, there are certain Entries specifying the legislative field by describing such field with general words. The generality of the subject and the words would naturally book for it a wide meaning. It would be naturally possible to attach broadest possible meaning while interpreting the same. There are Entries which denote the commercial words. There are Entries which delineate the subject in the socio-economic arena. Entries also include the Entries on the subject of polity or dem .....

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be admissible for interpreting an Entry would vary with the Entry itself, the concept inheres, its context and its meaning per se. Where the subject-field in the Entry it technical or legal in nature or contains defining word or words, such cases would be the cases of caution. Such kind of Entries cannot be interpreted or construed for its meaning too wide in a manner as the other Entries general in nature may permit. 8.7 The summing-up principles for interpreting the legislative Entry would be .....

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f another Entry placed in another List. In other words, enlargement is permissible, but enlarged without taking away extract of it is the principle. In zealousness to save the legislative power of a legislature, the zone of meaning of an Entry cannot be flexed where it does not really reach. Legislative field and impugned law 9. The case of the respondents being that the impugned law is referable to Entry 43 in List I, that is, Public Debt of the State , contentions were canvassed in detail by l .....

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territory of India. On the basis of Article 293(3) was further relied on to submit that such borrowing would include the loan which has been made to the state by the government of India or in respect of which a guarantee has been given. The definition of debt in sub clause (8) of Article 366 was pressed into service. 9.2 It was submitted that the interpretation to Public Debt of the State is required to be given in the context of debt as a charge from the Consolidated Fund. In this regard, vari .....

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9.3 On behalf of the State Government, additional affidavit dated 05th October, 2015 was filed. Therein, it was stated that (i) the Bill relating to the impugned Act was passed by the State Legislature as a Money Bill on 26th March, 2008 as provided under Article 199 of the Constitution. (ii) Respondent No.2 company SSNNL is a public undertaking specified in Schedule-III to the Gujarat Legislative Assembly Rules, 1960. (iii) The company s accounts are examined under the provisions of Rule 200B .....

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ent in that year, was provided by the Supplementary Statement along with other expenditure and the same was tabled before the State Legislature. The said Supplementary Statement of Expenditure for the Year 2008-2009 is at A-II page 120. After debate in the assembly, Appropriation Bill came to be passed, and Assent to it was granted by His Excellency the Governor on 03rd March, 2009 giving rise to the Gujarat (Supplementary) Appropriation Act, 2009. Following was further stated and was relied on .....

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he guarantee extended by the State Government under Tripartite agreement dated 20.08.1993, was within the prescribed limit. Thus, the actions on the part of the respondent State in the present case, to stand as a guarantor in the matter of redemption of Deep Discount Bonds, as provided under the said Tripartite Agreement dated 20.08.1993 and to arrange for appropriation of monies from the Consolidated Fund of the State, to discharge its liability towards the Public Debt of the State in the matte .....

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igam relied on decision in R.K. Garg Vs Union of India [(1981) 4 SCC 675] wherein Special Bonds (Immunities and Exemptions) Act, 1987 was challenged and it was held that the legislation in particular in respect of economic matters, that may be crudities and inequities and even possibility of abuse but on that count alone, the law cannot be struck down as invalid. It was contended that the law relating to economic activities should be viewed with greater latitude than the laws touching civil righ .....

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erpretation of the concept of Public Debt of State canvassed as aforesaid was refuted by learned senior counsel and other learned advocates for the petitioners and it was submitted by relying on the provisions of Government of India Act, 1985, in particular Item V of List II, the Entry in the Federal Legislative List, by explaining the concept of Borrowing Power of State that the phrase Public Debt of State has a special meaning and the subject matter of the impugned legislation does not touch i .....

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d Substance of Impugned Legislation 10. The above discussion goes to underline that the dictum of giving broad or wide interpretation to an Entry does not mean that the field indicated in the Entry can be enlarged too wide to bring something really unshocked within that sphere. The Entry cannot be artificially widened so as to denude it of its essence and meaning. 10.1 The question of conflict between the two Lists will not arise in the cases where the impugned legislation, by applying the doctr .....

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ent, it would produce a reverse result and the State law would not be able to stand valid. 10.2 Under the doctrine of Pith and Substance, true character of legislation is ascertained. It is also emphasized that name given by the Legislature to the legislation is not material. In applying the doctrine of Pith and Substance, (i) the enactment as a whole, (ii) the main object and purpose of the enactment and (iii) the scope and effect of the provisions, are relevant considerations. The nature of th .....

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s vis-à-vis Entry 25 Gas and Gas Works in List II, under which the Gujarat Gas (Regulation of Transmission, Supply and Distribution) Act, 2001 was enacted by the State Legislature, the Court viewed the State legislation to be ultra vires. 10.3.1 It is the following reasoning which the Supreme Court supplied to the construction of Entry 53 in List I vis-a-vis Entry 25 in List II so as to construe the scope of the State List Entry vis-a-vis Union List Entry to finally held that State Legisl .....

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of the view that under Entry 25 List II of the Seventh Schedule, the State would be competent to pass a legislation only in respect of gas and gasworks and having regard to collocation of words gas and gasworks , this entry would mean any work of industry relating to manufactured gas which is often used for industrial, medical or other similar purposes. Entry 25 of List II, as suggested for the States, will have to be read as a whole. The expressions therein cannot be compartmentally interpreted .....

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ng of the term gasworks is well understood in the sense of the place where the gas is manufactured. So it is difficult to accept the proposition that gas in Entry 25 List II includes natural gas, which is fundamentally different from manufactured gas in gasworks. Therefore, Entry 25 of List II could only cover manufactured gas and does not cover natural gas within its ambit. This will negative the argument of States that only they have exclusive powers to make laws dealing with natural gas and l .....

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the interpretation of the words in Entry stand in support of the proposition which were canvassed by learned advocates for the petitioners that the Entry Public Debt of the State in List II is to be construed as one concept and one phrase and the same cannot be bifurcated for attaching convenient interpretation to the same. 10.4 The doctrine of pith and substance would apply in also judging as to whether the legislation falls within particular Entry. In Surahmanayan Chettiar Vs Muttu Swami Gound .....

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pass, whatever it be, such as to show that the pith and substance of the impugned Act is not moneylending but promissory notes or banking ? Once that question is determined the Act falls on one or the other side of the line and can be seen as valid or invalid according to its true content. 10.5 In Union of India Vs Shah Goverdhan L. Kabra Teachers College [(2002)8 SCC 228], it was stated, This rule, however, would not enable the legislature to make a law relating to a matter which has no rationa .....

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that the qualification in teacher education obtained from an unrecognized institution shall be invalid for the purpose of employment under the government. The Supreme Court held that on examining the statute as a whole and on scrutiny of object and scope, the provision dealt with the coordination and determination of standard for higher education falling within Entry 66 of List I in the Seventh Schedule of the Constitution. 10.5.2 It was explained, When a law is impugned as being ultra vires of .....

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stion of invasion into the territory of another legislation is to be determined not by degree but by substance. The doctrine of pith and substance has to be applied not only in cases of conflict between the powers of two legislatures but in any case where the question arises whether a legislation is covered by particular legislative power in exercise of which it is purported to be made. (Para 7) 10.6 The principle mentioned by the Supreme Court in A.K. Krishna Vs Madras State [AIR 1957 SC 297], .....

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a particular purpose, is not the consideration to disregard the true character of the law. The Supreme Court observed, Even if the object or purpose is within the legislative field of the Legislature, it cannot be achieved by legislating on a subject-matter outside its competence…. It is the subject matter of legislation which is to be seen in order to determine its pith and substance and not the motive which actuates the Legislature or the ultimate and desired to be attained . (emphasis .....

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sation of Reservation) Act, 2000 were dismissed by Five Judge Bench by majority of 4:1 and before the Supreme Court question was agitated for consideration inter alia on the issue whether the State of Andhra Pradesh had legislative competence under Entry 41 List II or Entry 25 of List III. By the said enactment, the Schedule Castes mentioned in the Presidential List prepared under Article 341 of the Constitution, came to be grouped as A,B,C and D, so divided and thereby the 15% reservation for b .....

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s if answering the contention of the side of the respondents that the object of the legislation is a governing criteria for judging its field and therefore legislative competence, the objects of the enactment cannot be the solitary yardstick, ....If the objects stated in the enactment were the sole criteria for judging the true nature of the enactment then the impugned enactment satisfies the requirement on application of the doctrine of pith and substance to establish the State's legislativ .....

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pplicable to the State and apportionment of reservation is only secondary and consequential. Whatever may be the object of this classification and apportionment of reservation, the State cannot claim to legislative power to make such law tracing its legislative competence to Entry 41 of List II or Entry 25 of List III. A beckoning principle is laid down in the reasoning of the Supreme Court that the law in question was not a law governing the field of education or the field of State Public Servi .....

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the law does not made indeed traces its subject matter field to the Entry 43 in List II and Entry 20 in List III and having regard to the nature of provisions and their pith and substance, the said Entries could not be said to be the native field for the subject of impugned legislation. 10.9 Reverting to the impugned legislation, its nomenclature and the actual provisions deal with the redemption of Bonds. The power is conferred on SSNNL by the State by enacting law to prematurely redeem the Dee .....

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vided for procedure for dealing with them, for redemption payment and the tenure were changed and replaced by the new one as per the provisions of the Act. 10.9.1 When the impugned legislation is looked upon as a whole, it is not possible to accept the submission that the said law falls within the Entry Public Debt of State in List II. The law for its legislative field cannot be said to be referable to Public Debt of State and the said Entry is not available for the State to derive power to legi .....

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the law in pith and substance it relates to economic and social planning. ….. Thus, the rule of pith and substance is applied to determine whether the impugned legislation is within that competence under Arts. 246(1) and 246(3) of the Constitution, and to resolve the conflict of jurisdiction. If the Act in its pith and substance falls in one List it must be deemed not to fall in another List, despite incidental encroachment and its validity should be determined accordingly. The pith and s .....

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of validity of an Act arises, it may be that the topic underlying the provisions of the Act may in one view of the matter fall within the power of the Centre, and on another view within the power of the States. When this happens, it is necessary to examine the pith and substance of the impugned legislation; and to see whether in its pith and substance it fails within one or the other of the Legislative Lists. As stated earlier the constitutionality of the Impugned Act is not determined by the d .....

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e from the contents of the provisions of the impugned legislation, it has to be ruled that the said law cannot claim the said legislative field for its competency. Public Debt of the State is not the legislative house for the impugned legislation a rendevzous, more particularly when its subject-matter is measured in pith and substance. 10.11 Article 246 uses the expression with respect to , which brings into play the doctrine of pith and substance in understanding the exertion of the legislative .....

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the State because in its essence and substance it is not with respect to the public debt of the State. 10.11.1 The impugned law cannot be traced to any Entry in the State List. The provision which it engrafts and the total effect it creates on the subject is about prematurely dealing with the securities. The various statutes competently enacted by the Central Legislature operate in relation to the subject dealt with. Therefore if the legislative field is to be traced for the impugned law, it ca .....

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, agency, contract of carriage and other special forms of contracts, but not including contracts relating to agricultural land . The impugned law may be viewed as creating special contract by nullifying the previous contract. Repugnancy and its Aspects 11. When repugnancy arises, the repugnant state law stands voided and rendered unconstitutional against the law made by the Parliament. The repugnancy is a constitutional concept with reference to the power of the legislature of the state and the .....

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ject. It may arise for the reason that the state law has encroached into the central law and created a situation of conflict and the co-existence of both the laws is not possible. 11.1 The repugnancy will arise in the situation where the subject matter area is occupied by the legislation validly enacted by the Parliament, and a state legislature seeks to exercise its legislative powers claiming legislative competence from an Entry or Entries from either of the Lists, in respect of matter or matt .....

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necessary corollary of, and the extension of, the salutary principle of federal legislative supremacy envisaged in our Constitution in the scheme of legislative powers. 11.2 On a reading of Article 254, it says that repugnancy arises where any provision of law made by a legislature of a State is repugnant to any provision of law made by the Parliament, implying thereby that repugnancy arises for the State law vis-à-vis the Central law even in respect of any provision of law . Therefore, .....

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law or adding or amending or varying or repealing by an enactment on the said matter and in case of conflict, such enactment will prevail over the State Legislation. Article 254 professes the doctrine of federal supremacy. 11.3 The above broadly highlighted aspects of repugnancy for a State law against the Central law may be comprehended with more clarity by delving into the decisions of the Apex Court. 11.4 In Deep Chand Vs State of U.P.[AIR 1959 SC 648], the Supreme Court explained the concept .....

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03, refers to three tests of inconsistency or repugnancy:- "(1) There may be inconsistency in the actual terms of the competing statutes; (2) Though there may be no direct conflict, a State law may be inoperative because the Commonwealth law, or the award of the Commonwealth Court is intended to be a complete exhaustive code; and (3) Even in the absence of intention, a conflict may arise when both State and Commonwealth seek to exercise their powers over the same subject matter." This .....

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tre should prevail over that of the State." 11.5 In M. Karunanidhi Vs Union of India [(1979) 3 SCC 431], the Supreme Court elaborated the principle thus, 1. Where the provisions of a Central Act and a State Act in the Concurrent List are fully inconsistent and are absolutely irreconcilable, the Central Act will prevail and the State Act will become void in view of the repugnancy. 2. Where however a law passed by the State comes into collision with a law passed by Parliament on an Entry in t .....

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n analysis of the provisions of the Act it appears that by and large the law falls within the four corners of the State List and entrenchment, if any, is purely incidental or inconsequential. 4. Where, however, a law made by the State Legislature on a subject covered by the Concurrent List is inconsistent with and repugnant to a previous law made by Parliament, then such a law can be protected by obtaining the assent of the President under Article 254(2) of the Constitution. The result of obtain .....

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s, the question of repugnancy between the Parliamentary legislation and the State legislation can arise in two ways. First, where the legislations, though enacted with respect to matters in their allotted sphere, overlap and conflict. Second, where the two legislations are with respect to matters in Concurrent List and there is a conflict. In both the situations, Parliamentary legislation will predominate, in the first, by virtue of the non-obstante clause in Article 246(1), in the second, by re .....

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List III and its repugnancy to the Motor Vehicles Act, 1988 enacted under Entry 35 of List III. Even though the Apex Court on the facts of that case and after comparing the provisions of the Karnataka Act, held that the said State law was not unconstitutional and was enacted within the legislative area demarcated in the Entry for the State, however in the judgment the Supreme Court after considering the several decisions elucidated the meaning and test of repugnancy. In that case, it was conten .....

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articular Entry, that is the legislative field available to it. In the case before the Supreme Court, the State Legislation, that is, Karnataka Contract Carriages Act had received the assent of the President. 11.7.1 In Vijay Kumar (supra), the Apex Court explained how the repugnancy would arise between the two legislations, Repugnancy between the two pieces of legislation, generally speaking, means that conflicting results are produced when both laws are applied to the same set of facts. Repugna .....

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54 of the Constitution would arise only when the Act or provision/ provisions in an Act made by the Parliament and by a State Legislature on the same matter must relate to the Concurrent List III of Seventh Schedule to the Constitution must occupy the same field and must be repugnant to each other; (b) In considering repugnance under Article 254 the question of legislative competence of a State Legislature does not arise since the Parliament and the Legislature of a State have undoubted power an .....

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eld by both the pieces of the legislation is material" and not the form. The words "that matter" connotes identity of "the matter" and not their proximity. The circumstances or motive to make the Act/ Provision or Provisions in both the pieces of legislation are irrelevant. (e) The repugnancy to be found is the repugnancy of Act/ Provision/ Provisions of the two laws ' and not the predominant object of the subject-matter of the two laws. (f) Repugnancy or inconsisten .....

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ovisions of the two pieces of law but by their very existence in the statutes; (iv) Occupying the same field; operational incompatibility; irreconcilability or actual collision in their operation in the same territory by the Act /provision or provisions of the Act made by the Parliament and their counter parts in a State law are some of the true tests; (v) Intention of the Parliament to occupy the same field, held by the State legislature may not be expressly stated but may be implied which may .....

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authorities to obey the law but if the State law denies the self same rights or privileges negates the obligation or freezes them and injuncts the authorities to invite or entertain an application and to grant the right/ privilege conferred by the Union law subject to the condition imposed therein the two provisions run on a collision course and repugnancy between the two pieces of law arises thereby; (viii) Parliament may also repeal the State law either expressly or by necessary implication bu .....

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ties/ punishments of different kind, degree or variation in procedure etc. The inconsistency must appear on the face of the impugned statutes / provision/ provisions therein; (ix) If both the pieces of provisions occupying the same field do not deal with the same matter but distinct, though cognate or allied character, there is no repeal by implication, (x) The Court should endeavour to give effect to both the pieces of legislation as the Parliament and the legislature of a State are empowered b .....

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validity though repugnant to the Central law but by subsequent law made by the Parliament or amendment/modification, variation or repeal by an act of Parliament renders, the State law void. The previous assent given by the President does not blow life into a void law. Scope and operation of Rule of Pith and Substance and predominant purpose vis a vis Concurrent List. (para 88) 11.8 A Calcutta High Court decision in O.P. Stewart Vs B.K. Roy Chaudhury [AIR 1939 Cal 628] lucidly explained the conc .....

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re may well be cases of repugnancy where both laws say don't but in different ways. For example, one law may say, No person shall sell liquor by retail, that is, in quantities of less than five gallons at a time and another law may say, No person shall sell liquor by retail, that is, in quantities of less than ten gallons at a time . Here, it is obviously possible to obey both laws, by obeying the more stringent of the two, namely the second one; yet it is equally obvious that the two laws a .....

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ive. Whether and to what extent in a given case, the dominant law evinces such an intention must necessarily depend on the language of the particular law . The Concept of Occupied Field 12. Though the test that two legislations-one by the Legislature of a State and the other enacted by Parliament when cannot stand together without disobeying one for obeying the other, is a sure test to apply to judge the state of repugnancy, yet another cannon, important and surer, emanates from the observations .....

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islature, namely, Parliament has evinced an intention to create a complete code. 12.2 In State of Orissa Vs Tulloch and Co. [AIR 1964 SC 1284], the Apex Court explained the doctrine of occupied field stating, But even if the matter was res integra, the argument cannot be accepted. Repugnancy arises when two enactments both within the competence of the two Legislatures collide and when the Constitution expressly or by necessary implication provides that the enactment of one Legislature has superi .....

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other legislature whether passed before or after would be overborne on the ground of repugnance. Where such is the position, the inconsistency is demonstrated not by a detailed comparison of provisions of the two statutes but by the mere existence of the two pieces of legislation. In the present case, having regard to the terms of s.18(1) it appears clear to us that the intention of Parliament was to cover the entire field and thus to leave no scope for the argument that until rules were framed .....

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levy a fee for development of mining areas in the State. After bringing these provisions into operation, State of Orissa demanded from Tulloch and Company on August 1, 1960 fees for the period July, 1957 to March, 1958. Tulloch and Company challenged the legality of the demand before the High Court under Article 226 of the Constitution. The writ petition was allowed on the ground that on the coming into force of the Mines and Minerals (Regulation and Development) Act of 1957, hereinafter called .....

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ents could validly coexist since they did not cover the same field. The argument was rejected by the Supreme Court. It was held that having regard to the terms of Section 18(1) the intention of Parliament was to cover the entire field. That, by reason of declaration by Parliament under the said Section the entire subject matter of conservation and development of minerals was taken over for being dealt with by Parliament thus depriving the State of the power hitherto possessed. 12.2.3 Relying on .....

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declaration covers the field or not. In Tulloch s case, the Constitution Bench of the Apex Court applied the test and ruled that the Central Act of 1957 intended to cover the entire field dealing with regulation and development of mines being under the control of the Central Government. 12.2.4 On the aspect of occupied field it was observed, "The principle deducible from the English cases, as from the Canadian cases seems therefore to be the same as that enunciated by Issacs, J. in the Aus .....

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two laws occupy the same field, whether the new or the later statute covers the entire subject matter of the old, whether legislature intended to lay down an exhaustive code in respect of the subject matter covered by the earlier law so as to replace it in its entirety and whether the earlier special statute can be construed as remaining in effect as a qualification of or exception to the later general law, since the new statute is enacted knowing fully well the existence the earlier law and ye .....

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, [1985 Supp SCC 476], the Supreme Court was concerned with Entry 52 of List I which authorized the Central Legislature to take over any industry it likes. It was found that by virtue of the Tobacco Board Act, 1975, the Parliament chose to occupy the entire field of tobacco industry which includes all kinds of tobacco and its by-products. After considering the provisions of the Central Act vis-à-vis the provisions in Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 which pr .....

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e Supreme Court in Animal Welfare Board of India Vs A. Naga Raja [(2014) 7 SCC 547] stated the principle in following words. Instances are many, where the State law may be inconsistent with the Central law, where there may be express inconsistency in actual terms of the two legislations so that one cannot be obeyed without disobeying the other. Further, if the Parliamentary legislation, if intended to be a complete and exhaustive code, then though there is no direct conflict, the State law may b .....

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Schedule VII that the Chit Funds Act, 1982 which was a law made by the Parliament under the said Entry intended to cover entire legislative field with regard to conduct of chit funds, etc. therefore the Kerala Chitties Act, 1975 became void and stood pro tanto repealed when the Chit Funds Act, 1982 was made. 12.6 In State of J&K Vs M.S. Farooqi [(1972) 1 SCC 872], the Apex Court stated, 24. We may also refer to the observations of Evatt, J., in Stock Motor Plough Ltd. v. Forsyth [(1932) 48 .....

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ject is either touched or trenched upon by State authority. 12.6.1 In the case before the Supreme Court, Entry 7 of List III which dealt with the subject of Contracts was considered. The Entry covers special contracts also. Since it is in Concurrent List both the Parliament and State Legislature are competent to enact the law with respect thereto. Explaining the doctrine of complete code, the Supreme Court observed, There is one more way in which this problem can be approached. Both the courts b .....

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ch institutions from taking advantage either of the absence of any law governing chit funds in a State or exploit the benefit of any lacuna or relaxation in any State law by extending their activities in such States . (Para 55) 12.6.2 On what may be the criteria to consider the existing Central law a complete code, it was stated, The background of the enactment of the Central Chit Funds Act, which refers to the Report of the Banking Commission has been exhaustively dealt with in the case of Shri .....

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ore comprehensive manner. Thus, on 19.08.1982, the Parliament in enacting the Central law has manifested its intention not only to override the existing State Laws, but to occupy the entire field relating to Chits, which is a special contract, coming under Entry 7 of List III. Consequently, the State Legislature was divested of its legislative power/ authority to enact Section 4(1a) vide Finance Act No. 7 of 2002 on 29.07.2002, save and except under Article 254(2) of the Constitution. Thus, Sect .....

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late in respect of such field. If the State law is in respect of the very field or subject matter which is fully occupied by the Central legislation and the operational ambit of such Central legislation evinces and intention of the Parliament to cover the area of the subject matter in its entirety, the State is prohibited to enter into the said legislative field. The emphasis in the occupied field concept is on the field occupied and other considerations pale into insignificance once the parliam .....

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es irreconcilable, and that it amounts to an impermissible inroad and interjection into the field occupied by the laws made by the Parliament on the subject-matter. 13.1 It is a major plank submission of petitioners that the impugned legislation stands in conflict with the Securities Contracts (Regulation) Act, 1956, in particular Section 21 and 21A of the Act were pressed into service which read as under. 20. Prohibition of options in securities.-(1) Notwithstanding anything contained in this A .....

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Securities and Exchange Board of India] is of opinion, having regard to the nature of the securities issued by any public company as defined in the Companies Act, 1956 (1 of 1956), or to the dealings in them, that it is necessary or expedient in the interest of the trade or in the public interest so to do, it may require the company, after giving it an opportunity of being heard in the matter, to comply with such requirements as may be prescribed with respect to the listing of its securities on .....

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er. 13.2 In a commentary on Constitution of India by Durga Das Basu, 8th Edition, 2011, the author refers to English decision in R Vs Justice of Middlesex [(1831) 2 B&Ad 891] mentions one of the circumstances as inconsistency operating as an implied repeal of the Act- If two statues give authority to two public bodies to exercise power which cannot consistently with the object of the Legislature co-exist, the earlier must necessarily be deemed to have been repealed by the later statute. 13.3 .....

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the SEBI Act closely interact in their provisions, operations and applicability. The requirements contained in both relating to the securities, etc., are inextricably inter-wooven. 14.1 The Securities Exchange Act came to be enacted with a purpose to prevent undesirable transactions in the security. The law intends to regulate the business of dealing in the securities by providing for matters connected therewith. The law in its incident also subserves to protect the interest of the investors by .....

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issible conditions and various kinds of prohibitions. 14.1.1 This Act provided for establishment of Board and intended to protect the interests of investors in securities. The Act seeks to promote development of and further to regulate the securities market and it regulates all matters connected therewith or incidental thereto. The statement of objects and reasons at the said central legislation inter alia mentioned that capital market has witness tremendous growth in recent times and there is a .....

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ntracts (Regulation) Act, 1956. Sub-section (2) of Section 2 says that words and expression used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 or the Depositories Act, 1996 shall have the meanings respectively assigned to them in that Act. The law contains various provisions for establishment of Board, its function, the regulatory mechanism; it further provides the mechanism for registration of stock brokers and contains prohibitory measures and provi .....

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) of sub-section (2) is relevant. Section 30(2)(c) says that the Board may make Regulations in respect of matters relating to issue of capital, transfer of securities and other matters incidental thereto and the manner in which such matters shall be disclosed by the companies under Section 11A. 14.1.4 Section 11A may also be referred which empowers the Board to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities for the purpose of pr .....

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ection 11A says that without prejudice to the provisions of Section 21 of the Securities Contracts (Regulation) Act, 1956, the Board may specify the requirements for listing and transfer of securities and other matters incidental thereto. 14.1.5 In exercise of powers conferred under Section 30, the Board has framed the Regulations called the Securities and the Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulations, 2009. They are statutory in nature and deal with the e .....

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incidental matters and aspects. The Regulations are regulatory as well as prohibitory in nature. 14.1.6 Regulation 24 of the aforesaid Regulations may be reproduced as it bears a striking relevance. 24. Alteration of rights of holders of specified securities.-No issuer shall alter the terms (including the terms of issue) of specified securities which may adversely affect the interests of the holders of that specified securities, except with the consent in writing of the holders of not less than .....

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laid down the legal provisions in the subject. 14.2 It would be clear from the above discussion that the operation of the two laws namely Securities Contracts (Regulation) Act and the SEBI Act is in the very subject-matter area dealt with by the impugned legislation. The impugned law suffers from the vice of irreconcilable operationality vis-a-vis the above parliamentary legislations. Similar would be the position when the impugned legislation is placed against the Companies Act. (iii) Indian C .....

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ion of prospectus (1) No prospectus shall be issued buy or on behalf of a company or in relation to an intended company unless, on or before the date of its publication, there has been delivered to the Registrar for registration a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, and having endorsed thereon or attached thereto- (a) any consent to the issue of the prospectus required by section 58 from .....

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that Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons therefor. (2) Every prospectus to which sub-section (1) applies shall, on the face of it,- (a) state that a copy has been delivered for registration as required by this section; and (b) specify any documents required by this section to be endorsed on or attached to the copy so delivered, or refer to statements included in the prospectus which specify those documents. (3) The Registrar sh .....

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d without a copy thereof being delivered under this section to the Registrar or without the copy so delivered having endorsed thereon or attached thereto the required consent or documents, the company, and every person who is knowingly a party to the issue of the prospectus, shall be punishable with fine which may extend to fifty thousand rupees. 61. Terms of contract mentioned in prospectus or statement in lieu of prospectus, not to be varied A company shall not, at any time, vary the terms of .....

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uch trust deed on payment of such sum as may be prescribed. (3) If a copy of the trust deed is not made available for inspection or is not given to any member or debenture holder, the company and every officer of the company who is in a default, shall be punishable, for each offence, with fine which may extend to five hundred rupees for every day during which the offence continues. 15.1.1 Section 62 of the said Act provides for payment of compensation to every person who subscribes for any share .....

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pursuance of a prospectus so issued, until the beginning of the fifth day after that on which the prospectus is first so issued or such later time, if any, as may be specified in the prospectus: 15.2 Decision of the Supreme Court in N.Parthasarathy Vs Controller of Capital Issues, [(1991) 3 SCC 153] was relied on by the petitioners in the context of the above provisions to contend against the validity of the impugned legislation. Thus, it is evident from a consideration of the above provisions .....

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anged or modified both as regards the reduction of the amount of debentures as well as the purposes for which the fund will be utilised contrary to what has been embodied in the prospectus and approved by the Controller of Capital Issues on the basis of the special resolution adopted at the general meeting of the shareholders of the company. Sub-section (6) of Section 3 of the Capital Issues (Control) Act, 1947 states that: 3.(6) The Central Government may by order at any time - (a) revoke the c .....

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of its provisions is about premature redemption of the Deep Discount Bonds. Upon a bare reading of the impugned Act extracted in whole above, it reveals to be providing for alteration and modification of the financial covenants and conditions which govern the issue of Deep Discount Bonds when they were floated by the Nigam. It substituted condition No.3 relating to the redemption of the Bonds by inserting condition No.3A as above. It was provided that notwithstanding anything contained in the or .....

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r - English as well as Vernacular language. Section 3 of the Act bared the jurisdiction of the civil court to entertain any question arising out of any provision of the Act. The filing of civil suit and seeking injunction in respect of any action taken in pursuance of any condition of Bond was disallowed. 16.1 Section 3A of the impugned legislation relating to redemption comes into direct conflict of Section 20 of the Securities Regulation Act. Section 2(h)(ii) of the Securities Contracts Act de .....

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tate Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public Debt Act, 1944. 16.2.1 When Government Security is included in the definition of Securities and the affairs and aspects relating to Government Security are governed by the Security Contracts (Regulation) Act, 1956, it produces a significant and far-bearing results not only considering that the impugned law is inconsistent and in conflict with the said Central la .....

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ote. They are sought to be prematurely redeemed in breach of conditions. In that way, it also entrench into the field of the provisions of the Negotiable Instruments Act. furthermore, it would be seen that Section 3A of the Act reduces the face value and gives power to the Nigam which is not only an excessive delegation but it is irrational because it leaves for the Nigam to take decision as to make saving and the extent of saving to be made for the State. Learned advocates for the petitioners w .....

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d trading of the securities. The Agreements which are executed in relation to the subject, are statutory agreements at times. The Prospectus is also viewed as a statutory document. The discordance, the conflict and irreconcilability between the impugned State legislation and the Central laws above may arise in many ways and on several fronts not permitting obedience of provisions of one law without committing breach of the other law. As the Central laws operate pervasive in relation to the subje .....

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d substance, is a law enacted in respect of the legislative field already occupied and operational of the abovesaid Central statutes. Once the field relating to the Bonds/Securities, and the regulatory aspect thereof and the dealing of such matters is occupied by the Parliament by enacting laws on the subject, the State could not be enacted the impugned legislation as it had no such legislative power. Applying the doctrine of occupied field, the impugned legislation is clearly repugnant to the C .....

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d for it, but while enacting such competent law, the same to some extent encroaches upon the law made by the Union Legislature and if such encroachment is incidental or negligible in its extent allowing both the provisions to stand together, the State law would not be repugnant. If the extent of encroachment or erosion effected by the State Legislature is of such nature that it gives rise to a clear conflict between two provisions, then the law made by the State Legislature cannot stand valid vi .....

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w made by the State Legislature vis-a-vis the law made by the Central Legislature, therefore its connotation may have other facets and folds which in terms of constitutionality require the State legislation to be voided against the Central legislation. 17.1 It is the nature and not the extent of encroachment, which is material to judge whether law made by the State Legislature and the law made by the Parliament can stand together and can be reconciled, which is the real test to judge whether the .....

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te Legislature operate in the field of the subject and they evinces intention of the Parliament to control and occupy the field. In that case, legislation made by the State cannot stand. State legislation would be divested from its legislative competency for entering into such occupied field and legislate for its own. This principle is something which displaces forever the right of the State Legislature to legislate in respect of a subject, for which the Central Legislature has already legislate .....

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rom the standpoint of any of the above yardsticks, the impugned legislation fails to stand the test of constitutionality. 19.1 A jurisdictional view is also held that the concept of ultra vires is more fundamental than repugnancy. Ultra vires is something referable to incompetency, whereas repugnancy refers to inconsistency. The impugned law has to be declared ultra vires the Constitution for want of legislative competence by the State Legislature. 20. Though the learned counsel for both the sid .....

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s cited. Conclusion 21. In view of all the aforesaid reasons and discussion, it has to be held that the impugned Sardar Sarovar Narmada Nigam Limited (Conferment of Power to Redeem Bonds) Act, 2008 does not fall within the legislative head or legislative field either under Entry 43 in the State List being Public Debt of the State or under Entry 20 in the Concurrent List being Economic and Social Planning , to the Seventh Schedule of the Constitution nor it traces legislative field even by readin .....

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by the impugned legislation. The State Legislature cannot claim and does not have the legislative competence to enact the impugned law. If the legislative head is to be traced for the impugned legislation, at the best, the same may be traced in Entry 7 in the Concurrent List for the reason that the impugned legislation and the provisions enacted therein deal with the special kind of contract which would be falling within the said Entry. But then even in this purview the State law fails to co-ex .....

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curities and the governing mechanism therefor which are provided for by the aforesaid laws made by the Parliament. The provisions of the impugned legislation are irreconcilable with the Central legislation occupying the field. The impugned law made by the State Legislature and the laws made by the Union Legislature aforesaid, having regard to their subject matter area, nature and effect cannot stand together. The impugned law cannot be obeyed without disobeying the Central legislations. Therefor .....

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, we cannot grant the consequential relief of paying the loss or damages as prayed for, because it would require leading of evidence and such prayer cannot be granted in writ jurisdiction. This is for the simple reason that the loss claimed to have been sustained, whether suffered or not and if suffered, the exact nature thereof cannot be considered unless the aspects of benefits realized or possible to be realized but for the premature redemption of the Bonds and due to early encashment effecte .....

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have to be gone into in the Suit in light of the factual details attendant to a particular individual case. However the bar provided under the impugned legislation under the Civil Court s jurisdiction and therefore institution of the Suit in relation to the Bonds, stands lifted as the Act is held unconstitutional. The Civil Court s jurisdiction would become available for going into in accordance with law including the law of limitation and other governing legal considerations, for an aggrieved .....

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rem would be entitled to file civil suit. The law of limitation has to be allowed its play which would bar the civil suit for all those Bond- holders who have either accepted the redemption amount with or without protest and who have not challenged the law in question and have not filed petitions before this Court. Even amongst the petitioners in the present batch of petitions, it is clarified that only those petitioners who are before this Court and who have accepted the redemption amount of t .....

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