Scaora e-Journal

Article

ARTICLE

“ADMINISTRATIVE DISCRETION –NEED, SCOPE AND ITS LIMITS”

Environment, Constitution & Cr.P.C

A BRIEF INSIGHT INTO PREVENTION OF MONEY LAUNDERING

In Relation to Insolvency and Bankruptcy Code 2016

END CAN NOT JUSTIFY THE MEANS

‘OBITER’ in R. VIJAYAN V. BABY’ ON COMPENSATION ELEVATED TO ‘RATIO’IN MAINNUDDIN ABDUL SATTAR SHAIKH

THE CITIZENSHIP CAULDRON - UNDERSTANDING THE ISSUE

VICTIMIZATION OF WOMEN IN CYBER CRIME AND INVESTIGATIVE CHALLENGES IN INDIA

WHY POOR PEOPLE STAY POOR

Description

 

                                                          ARTICLE

 

Protection of Women against sexual exploitation at the Religious places.

 

In the Indian modern country, it is fast emerging as a global power but for half of its population, the women across the country, struggle to live life with dignity continues. Women, irrespective of their class, caste, and educational status, are not safe. In modern society women have been the victims of exploitations for a long time in different fields in their life both physically, socially, mentally and economically. There are several causes of sexual as well as moral abuse which are very often highlighted by the media in Indian modern society, and a lot of those also remain unexplored. Although such violence against women, sexual harassment and exploitation to women is not of recent origin, its trace is found in the history of ancient India. It is realized that the long run supremacy of male over female in all respect in the patriarchal society in India is highly responsible for arresting the empowerment of women. Women are being sexually exploited everywhere, harassed at the workplace and being tortured in the family and the society too, in some or the other way.

 

This article which I am writing here for the SCAORA e-Journal is an opportunity given to me by the SCAORA( for which I am extremely thankful), to extend my views on a much larger scale among the we legal laureates about the state of women at some places which are still not being covered under the protection of women against the women act, 2013 and is thus in itself carries a lot of significance which also is in reference to the petition which is being already pending at the Hon’ble Supreme Court as a Writ Petition (Crl) and I being the petitioner in that PIL. It is basically one more effort in struggling for the rights of women, their protection against any form of sexual exploitation at the religious places which can be counted as the workplace too as many of the women are working there not only some being on the salary basis but many also working on a voluntary basis by their own will to serve that particular Ashram or Madarsa or any other religious or spiritual institution too. Media published it, reported it and even asked me the same regarding my views on it in one of the interview dated December 19, 2018, on Rediff.com under heading ‘Women feel very unsafe in many religious places’ of which I carry one view that its the high time now that these religious institutions like the Ashrams, Madarsas come under the protection some how for the women working there and also for the women devotees who come there stay there for some spiritual training and for the peace of mind and at the end of the day mostly become prey in the hands of the some spiritual religious gurus like the Aasaram Bapu or Ram Rahim or Narayan Sai along with some of the Maulvis too like that of the incident happened in Ghaziabad where a minor girl was raped and sexually exploited by the Maulvi in the Madarsa (all these and many other such hateful sexual exploitation incidents being mentioned in my petition), so thus coming there for the peace of mind at some religious or spiritual institution turn into there mental trauma for the rest of their life and this need to be addressed now by some strict rules to be framed like the

 

 

 

 

 

 

formation of an external committee in such cases and incidents, awareness among the women workers and devotees of that particular Ashram or Madarsa through the notices being placed everywhere in that particular area of that spiritual place (as in case of

Vishakha Guidelines regulations for every workplace) that where and how a women can seek assistance in such cases and incidents if happening with her, where and by what means can she approach there as going to police complaint is mostly no women prefer due to the hectic and cumbersome process that too against those mighty spiritual some of the gurus. Moreover, the women commission of a particular state in which that Ashram or Madarsa or any religious institution is located should make an effort for the periodic visits through its members so as to see the condition of the women workers and devotees staying in that particular Ashram Madarsa or any such other spiritual places. The other point to be taken in view is we see every now or then some or the other spiritual leader come from somewhere and get a land for his Ashram or Madarsa through any donation and starts thriving over there in his religious activities, when the people don’t even know about his past where he came from his past activities his record, if criminal or not any. This way the things get more complicated once their religious business activities run away with good speed. Thus a process of verification of such new upcoming Babas or Maulvis should be made by the local Thana of that particular place where such Ashram or Madarsa or any other such religious or spiritual institutions are located. These are some of the ways in which if we cannot fully stop the crime of sexual exploitation of the women at the religious places at least we can curtail them to a good extent.

 

Though the status of women in India, both historically and socially, has been one of the respect and reverence, the hard truth is that even today, they are struggling for their own identity, shouting for diffusion of their voices and fighting for their own esteem. Every day, they cross among the fears and fraught for individuality. Despite the constitutional guarantee of equality of sexes, rampant discrimination and exploitation of women in India continue. Every woman has a fundamental right to be safe protesting injustice, if a woman is able to protest herself with the right and education, then that protest in her life becomes miserable. It is high time now that women should get a respectable and dignified position in Indian society including the religious and spiritual places too. In modern society, changes have been taking place everywhere in almost every field but very minuscule in terms of to protect the honour of women anywhere. International Women Day is celebrated, a number of women organizations have been working for women freedom and empowerment. But all of those are external in nature as mentality is the product of society and culture. What we need now is to create awareness about the protection of women everywhere including religious and spiritual institutions too,

as they too form an integral part of every women’s life so as to end any form of

 

 

 

 

 

 

exploitation against women and girl by building the strong social, moral, and cultural values and make strong laws in every sphere of the field where its required for the protection of women.

                                                                                                        

                                                                                        Through

                                                                                        Maneesh Pathak

                                                                                        Advocate

                                                                                        Supreme Court of India

                                                                                        S.C.B.A Membership No.- P –773

 

                                                                                        Dated: 28.01.2019

 

 

Description

“ADMINISTRATIVE DISCRETION –NEED, SCOPE AND ITS LIMITS”

 

 

 

ADMINISTRATIVE DISCRETION

A person writing his will has such discretion to dispose of his property in any manner how arbitrary or fanciful it may be. But the term discretion when qualified by the word ‘Administrative’ has somewhat different overtones. Discretion in this sense means choosing from amongst the various available alternatives but with reference to the rules of reason and justice and not according to personal whims.

 

 

SCOPE OF ADMINISTRATION DISCRETION

How is the scope of discretion determined?

In India, The Supreme Court of India followed the majority decision in Liversidge  in  AK Gopalan v Madras to hold that detaining authority’s satisfaction that a person needed to be detained preventively was not open to judicial review.  The court salvaged personal liberty to some extent by holding that the grounds of detention must be specific and elaborate enough to enable the detenue to make a representation against his detention.

In another case, it was held that the statutory power to issues licence for holding the fair carried with it the power to fix the days for holding such fairs. The Supreme Court observed: it is well accepted that conferral of statutory power on those local authorities must be construed as impliedly authorising everything which could fairly and reasonably be regarded as incidental or consequential to the power itself.

 

 

DISCRETION CONFFERREM BY THE CONSTITUTION

Administrative discretion may be conferred by the Constitution itself. Normally, the exercise of such discretion by the President or Governors was supposed to be controlled through the political process. The President acts on the aid and advice of the council of ministers and the council of ministers is responsible to the House. The exercise power by the President or governors is, therefore, subject to the political process. Therefore, for long time, courts hesitated to bring them within the purview of judicial review. However, with the weakening of the political checks due to shift in power  from Parliament to the government, courts have brought the exercise of such constitutional discretion within the purview of judicial review. Where political checks are not adequate, issues of abuse of such discretion are raised in courts and legal checks have to operate. The provisions conferring such discretion on the President/ governors are:

  1. Ordinance - making power under arts 123 and 213;
  2. Power to grant pardon or remission of sentences to persons convicted of offences by courts of law under arts 72 and 161;
  3. Power of the President to declare Emergency under art 352 and
  4. The power of the President to impose president’s Rule on a state under art 356 of the Constitution.

 

 

 

JUDICIAL DEVELOPMENT AND ADMINISTRATIVE DIRECTION IN INDIA

Though court in India have develop a few effective parameters for the proper exercise of discretion,  the conspectus of judicial development or behaviour. Judicial control mechanism of administrative direction is exercised at two stages: 

  1. Control at the stage of delegation of discretion;
  2. Control at the stage of the exercise of discretion.

Control at the stage of delegation of discretion;

The court exercise control over delegation of discretionary power to the administration by adjudicating upon the constitutionality of the law under which such power are delegated with reference to the fundamental rights enunciated in Part III of the Indian Constitution. Therefore, if the law confers vague and wide discretionary power on any administrative authority, it may be declared ultra vires Article 14, Article 19 and other provisions of the constitution.

Administration discretion and Article 14-

State of W.B v. Anwar Ali Sarkar[1]  - in this case, in order to speed up the trial for certain offences, Section 5 (1) of the west Bengal special Court Act, 1950 conferred discretion on the State Government to refer any offence for trial by the special Court. Since the procedure before the special court was stringent in comparison with that for normal trail, the respondents asserted its unconstitutionality on the ground that it violates the equality clause in Article 14. The court held the law invalid on the ground that the use of vague expressions like ‘speedier trial’ confers a wide discretion on the government and can be a basis of unreasonable classification.

State of Punjab v. Khem Chand[2]-- in this case the truck of Sri Khan Chand was requisitioned by the District Magistrate, Rohtak for famine relief work. He challenged the constitutionality of the East Punjab Requisition of Movable Property Act, 1947, under which the action was taken, on the ground that it violates the provisions of Article 14 of the Constitution. The court, upholding the contention held that the Act confers wide discretionary power upon authorities by not laying down the guidance for requisitioning movable property. Even the words “public purpose” are not used. Therefore, arbitrariness and power to discriminate are writ large on the face of the Act and fall within the mischief which Article 14 seeks to prevent. It would be wrong to assume an element of judicial arrogance in the judicial behaviour striking down the statute.   

Administrative discretion and Article 19-

 Article 19 contains six freedoms [the freedoms to acquire, hold and dispose of property- A19 (f) -has been deleted by the constitution (Forty-fourth Amendment) Act]. These freedoms are not absolute and are subject to reasonable restrictions. The courts have always taken the view that the vesting of wide discretionary power in the administrative authorities to curtail these freedoms is unreasonable and hence unconstitutional.

  1. Control at the stage of the exercise of discretion i.e. administrative action

The courts in India have developed various formulations to control the exercise of administrative discretion, which can divide into two broad heads:

  1. That the authority has not exercise its discretion properly –‘abuse of discretion’.
  2. That the authority is deemed not to have exercise its discretion at all – ‘ non-application of mind’.
  1. Mala fides. – Mala fides or bad faith means dishonest intention or corrupt motive. Even though it may be difficult to determine whether or not the authority has exceeded its powers in a particular case because of the broad terms in which the statute in question may have conferred power on it, the administration action may, nevertheless, be declared bad if the motivation behind the action is not honest. In Jaichand v. State of West Bengal, the Supreme Court observed that mala fide exercise of power does not necessarily imply any moral turpitude as a matter of law. It only means that the statutory power is exercised for purposes foreign to those for which it is in law intended.
  2. Improper purpose. – If a statute confers power for one purpose, its use for a different purpose will not be regarded as a valid exercise of the powers and the same may be quashed. The cases of exercise of discretionary power from improper purposes have increased in modern times because conferment of broad discretionary power has become usual tendency. The orders based on improper purpose were quashed first in the cases concerning the exercise of powers of compulsory acquisition in India.
  3.  Irrelevant considerations. – A discretionary power must be exercised on relevant and not on irrelevant or extraneous considerations. It means that power must be exercised taking into account the considerations mentioned in the statute. If the statute mentions no such considerations, then the power is to be exercised on considerations relevant to the purpose for which it is conferred. In Ram Manohar Lohia v. Bihar[3] the petitioner was detained under the Defence of India Rules, 1962 to prevent him from acting in a manner prejudicial to the maintenance of “law and order”, whereas the rules permitted detention to prevent subversion of “public order”. The court struck down the order as, in its opinion, the two concepts were not the same, “law order” being wider than “public order”.
  4. Unreasonableness. – At times the statute may require the authority to act reasonably. The courts have also stated that the authority should consider the question fairly and reasonably before taking action. The term “unreasonable” means more than one thing. It may embody a host of grounds mentioned already, as that the authority has acted on irrelevant or extraneous consideration or for an improper purpose, or mala fide, etc.

GROUNDS FOR ATTACKING THE EXERCISE OF ADMINISTRATIVE DISCRETION

  1. It has been exercised beyond the scope of the power given by the law, i.e. it is ultra vires the law;
  2. It has been exercised by the authority other than the one in whom it was vested;
  3. It has been exercised without application of mind or on irrelevant considerations or without taking into account the relevant considerations;
  4. It has been exercised arbitrarily or unreasonably or disproportionately;
  5. When, there has been mala fide intent; or
  6. When, it has been resulted in belying the legitimate   expectations raised by previous administrative policy or practice.[4]

 



 

 

 

 

 

Description

Environment, Constitution & Cr.P.C

Vijay Panjwani, Environmental Lawyer, Ex-Member Executive Supreme Court Bar Association.

 

 

Section 2 Environment (Protection) Act, 1986:

 

  1. Environment includes water, air & land their inter-relationship and human beings, other living creatures, plants, micro-organism and property

 

  1. PM 2.5 ug/m3: Schedule-7, The Environment (Protection) Rules 1986 prescribed safe air to contain particulate matter not more than 60 ug/m3.
  2.  Solid Waste means: Solid or semi solid domestic waste,

                                  (1.4)  Composting means producing khad in a controlled process                  involving de-composition of organic matter.

(2)        Criminal Procedure Code Environment Procedure & Penalties:    Municipal Council Ratlam Vs. VardhiChand,AIR 1980 SC 1622,Krishna Iyer,J            The question is whether by affirmative action a court can compel a statutory body to carry  out its duty to the community, at great cost, by constructing sanitation facilities ? : Yes answered Krishna Iyer,J.

           (2.1) The Supreme Court held, Executive Magistrate on a written complaint under Section 133 CrPC by a group has the power to receive a written complaint on garbage odour. Inquire into the nuisance grievance complained of like unlawful obstruction with regard to any road or river or drain. Executive Magistrate can prevent or stop or remove any construction or collection of garbage at an unauthorized place. Section 135 CrPC order passed against any person makes him duty bound to perform within the time frame and in the manner directed. Section 136 CrPC prescribes punishment for failure to comply with the orders of the Executive Magistrate.

(2.2)      In the Ratlam case on receiving a written complaint the Magistrate ordered that a plan be submitted to remove the accumulated  garbage from the drain and road side within 6 months. The reconstruction of the drain cost a big sum of money. The municipal council filed an appeal before the Sessions Court on the ground that it does ot have enough funds. The Sessions Court set-aside the order of the Magistrate, the complainant filed a revision Petition which approved and upheld the order of the Magistrate. The municipal council then filed an SLP in the Supreme Court which upheld the orders of the High Court and the order passed U/s 133 CrPC by the Executive Magistrate.

Indian Penal Code IPC Environment violation penalties:

(3.1)      Section 277 IPC the Court of Judicial Magistrate has the power to punish any person for fouling water of any public spring or reservoir. The punishment may extend to three months or with fine up to Rupees 500.

(3.2)      Section 278 IPC: The Judicial Magistrate has the power to punish any person who vitiates the atmosphere in any place so as to make it noxious to the health of the people in general or the neighborhood. The punishment extends to fine up to Rupees 500.

(3.3)      Section 285 IPC: Any person acting negligently with any combustible matter which results in fire like firecracker  can be punished  for a term which may extend to six months.

(3.4)      Section 286 IPC: Any person handling explosive substance like-firecracker causes injury to any other person shall be punished for a term which may extend to six months.

(3.5)      Sections 268 IPC public nuisance to Section 291 are provisions relating to offences affecting public health, safety and convenience.

(3.6)   Procedure: Without going to the police station a complaint against the polluter can be filed under Section 156(3) read with Section 190 CrPC directly in court of judicial magistrate of competent   jurisdiction in which the offence of polluting air and water committed.

NATIONAL GREEN TRIBUNAL:

(4.1)      Section 14 National Green Tribunal Act, 2010 provides for an Original Application. Read Section 2(m) definitions. U/s 15 further relief can be prayed for compensation and restitution.

(4.2)      Section 22 National Green Tribunal Act provides for an appeal to the Supreme Court within 90 days on any one or more of the grounds specified  in Section 100 CPC that involves a substantial question of law.

(4.3)      The National Green Tribunal has the power  to order costs as may consider necessary any addition to  lost benefit due to any interim injunction.

(4.4)      The National Green Tribunal shall have the power of a civil court to execute its orders as a decree of a Civil Court.

 

(5.1)      Constitution of India: Some important Articles 21, 32, 37, 47, 48-A, 51-A (g), 142, Schedule 12, in addition to the preamble. Any person can approach the Hon’ble Supreme Court under Article 32. Or Article 136 against order of High Court. Or Section 22 NGT Act,2010. Or Making an oral prayer to Court to take cognizance of a news item published in a newspaper.

 (5.2)            Sustainable Development includes:

             (a)        Polluter pays principle.

            (b)        Precautionary principle.

(c)        Compensation to award damages and Exemplary Damages.

-END-  25-1-2019

 

Description

A BRIEF INSIGHT INTO PREVENTION OF MONEY LAUNDERING

1.         Global Economy today is a far cry from the Friedmanite dictum “business of business was business” and when business had a singular responsibility to their shareholders.  The International Monetary Fund has estimated that an aggregate amount of  2% to 5% of world’s Gross Domestic Product now comprises of Laundered Funds.*1  (World Bank Publication on Reference Guide to Anti – Money Laundering and Combating the Financing of Terrorism by Paul Allan Schott 2nd Edition).

2.         The literal meaning of ‘Laundering’ is washing or cleaning dirty clothes.  The term “Money Laundering” is used for cleaning “Dirty Money”.  The World Bank has defined Money Laundering as the process of disguising the proceeds of crime in an effort to conceal their illicit origins and legitimize their future use.  The objective is to conceal true ownership and origin of the proceeds, a desire to maintain control and a need to change the form of the proceeds.

3.         Broadly, there are three Internationally recognized steps to Money Laundering namely,

  1. Placement, which refers to physical disposal of bulk cash proceeds derived from illegal activity.
  2. Layering,  which refers to the separation of illicit proceeds from their source by creating complex layers of financial transactions, so as to conceal the audit trail.
  3. Integration,  refers to the re-induction of the Laundered Funds back in to the economy in such a way that they re-enter the financial system as normal business funds.

4.         The methods utilized for laundering are manifold & include Structuring, Bulk Cash Smuggling, Cash Intensive Businesses, Trade-based laundering, Shell companies and trusts, Round-tripping, Bank Capture, Gambling, Real Estate, Black Salaries, Fictional Loans, Hawala, False invoicing.

5.         In an increasingly interconnected world, the negative effects on financial stability, macro economic performance, draining resources from productive economic activities, are global and their impact on the financial integrity and stability of countries is widely recognized.*  (Proceeds of Crime, Prevention of Money Laundering Act, 2002, Law and Procedure by S. Kannan and V. Geetha 1st Edition 2017). 

            As such, concerted efforts are being made by governments to fight money laundering.  The main International Agreements addressing money laundering are the United Nations Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (the Vienna Convention), for implementation of which the Financial Task Force (FATF) was established, and the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime.  Predicate offences have expanded from Drug trafficking as per Vienna Convention and now include all serious crimes such as Terrorism, Extortion, corruption etc.

6.         The role of financial institutions in preventing and detecting money laundering has been defined by Basle Committee on Banking Supervision, the European Union, and the International Organisation of Securities Commissions.

7.         Anti Money Laundering in India

In India, the Prevention of Money Laundering Act, 2002(hereinafter referred to as the Act) was brought into force in 2005 to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto.  The Act also addressed the international obligations under the Political Declaration and Global Programme of Action adopted by the General Assembly of the United Nations to prevent money laundering.  The Act extends to the whole of India and came in to force w.e.f. 01.07.2005.

8(a)Section 3 defines “Money-Laundering” as follows:-

Offence of money-laundering.- Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.

Thus, u/s. 3 of PMLA, as mentioned above, the offence is said to be committed on fulfillment of any of the following three conditions:-

  1. acquiring, owning, possessing, using or transferring proceeds of crime; or
  2. knowingly entering into any transaction which is directly or indirectly related to proceeds of crime; or
  3. concealing or aiding in the concealment of the proceeds of crime.
  1. ‘Proceeds of Crime’ is defined u/s. 2(u) of the Act as follows:-

“Proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;

 

 

  1. Scheduled offences

Under PMLA, commission of any offence, as specified in the Part A and Part C of the Schedule of PMLA will attract the provisions of PMLA.  Some of the acts and offences, which may attract PMLA, are enumerated herein below:

  • Part A enlists offences under various acts such as: Indian Penal Code, 1860, Narcotics Drugs and Psychotropic Substances Act, 1985, Prevention of Corruption Act, 1988 SEBI, Customs Act, 1955, Foreigners act, Arms Act, Antiquities and Art Treasures Act, Copyright act, 1957, Trademark Act, 1999, Wildlife Protection Act, 1872, Information Technology Act, 200, amongst others.
  • Part B offences (offence under the Customs Act), provided the value of property involved is more than one crore rupees or more;
  • Part C deals with trans-border crimes, and reflects the commitment to tackle Money Laundering across International Boundaries.

 

To summarize, a person is liable to be booked under the PMLA if he is directly or indirectly connected with the proceeds of crime i.e. property derived as a result of criminal activity relating to scheduled offences only.  In other words, if any property is derived through criminal or unethical activity relating to an offence not listed in Part A, B or C of the schedule of offences, the provisions of PMLA shall not be applicable.  

9.         Certain anomalies in the Act have been highlighted in a landmark decision of the Hon’ble Supreme Court in the case of “Nikesh Tarachand Shah Vs Union of India (2018) 11 SCC 1. Section 45 (1) of the Act, was struck down as unconstitutional. Section 45 (1) imposes two stringent conditions for grant of bail  namely, (a) Public Prosecutor must be given an opportunity to oppose any application for release on bail; (b) The Court must be satisfied, where the Public Prosecutor opposes the application, that there are reasonable grounds for believing that the accused is not guilty of such an offence and that he is not likely to commit any offence while on bail.

The Supreme Court also ordered fresh trial in all cases in which bail was denied because of the above mentioned conditions.

10.       Section 45 relates to Section 44 of Prevention of Money Laundering Bill 1999.  In the Bill, the twin conditions for release on bail U/s 44 applied only in so far as the offences under the Act were concerned.  However, the scheme changed radically under the Act.  Now, both the offence of Money Laundering and the predicate offence were to be tried by the Special Court, and the bail is granted only if the twin conditions U/s 45 (1) are met, where the term of imprisonment is more than 3 years for the predicate offence.  The Court took notice of the fact that clause 44 of the Bill referred only to offences U/s 3 & 4 of the Bill, whereas Section 45 of the Act does not refer to offences U/s 3 & 4 of the Act at all.  Reference is made only to offences under Part A of the schedule, which are offences outside the 2002 Act. 

11.       The statutory scheme as originally enacted, with Section 45 in its present Avatar would lead to the same offenders in different cases having different results qua bail depending on whether Section 45 does or does not apply. 

12.       Amongst others, the Court took note of an interesting fact that every other Act, where these twin conditions are laid down, be it the Terrorist and Disruptive Activities (Prevention) Act, 1987 or the Narcotic Drugs and Psychotropic Substances Act, 1985, the reasonable grounds for believing that the accused is not guilty of an offence is in relation to an offence under the very Act in which such Section occurs.  [See Section 20(8) of TADA and Section 37 of the NDPS Act].  It is only in the 2002 Act that the twin conditions laid down do not relate to an offence under the 2002 Act at all, but only to a separate and distinct offence found under part A of the schedule.

13.       Undoubtedly PMLA 2002 was introduced to deal effectively with the menace of serious threat to financial system of India.  However, Section 45 is a drastic provision and was struck down being manifestly arbitrary, discriminatory and violative of Articles 14 and 21 of the Constitution of India.

14.       Money Laundering poses a serious threat not only to the financial systems of countries, but also to their integrity, sovereignty and the society. There are provisions in the Act for attachment and impounding of property/bank accounts/ill gotten money, and for punishment of persons who are involved with laundering of proceeds of crimes such as Narcotics, corruption, smuggling, arms and terrorism etc. The Act is a deterrent for the above crimes which are plaguing the society.  

 

Description

Subject:-Company Law

Supreme Court on Furnishing of a Certificate of a Financial Institution and Issuance of Demand Notices by Advocates under the Insolvency and Bankruptcy Code, 2016

Case Law Review:-Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd.[1] 

India introduced major reforms in commercial bankruptcy laws by enacting the Insolvency and Bankruptcy Code, 2016 (“Code”). The Code consolidates and amends laws relating to Reorganization and Insolvency Resolution of Corporate Persons, Partnership firms and Individuals and provides a unified single legislation extensively dealing with the insolvency regime in India.

The Hon’ble Supreme Court recently in a Landmark Judgement- Macquarie Bank Ltd. Vs. Shilpi Cable Technologies Limited dated 15th December 2017, has implemented the true legislative intent behind the Code and has enabled the Operational Creditors, especially the Foreign Operational Creditors, to initiate insolvency proceedings against their debtors without being restricted by the procedural requirements that are not mandatory in nature. The Division Bench comprising of Hon’ble Justice R F Nariman and Hon’ble Justice Navin Sinha held as under:-

  1. The filing of the Certificate of a Financial Institution under Section 9 (3) (c) of the Code is a procedural requirement and directory in nature; and
  2. The Demand Notices issued by the Advocates under Section 8 of the Code are valid and in order.

Brief Background and Facts:

To provide a brief background, Section 8 of the Code provides inter alia that an Operational Creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debt to the Corporate Debtor in such form and manner as may be prescribed. Section 9 (3) (c) of the Code envisages that along with an Application to initiate Insolvency proceedings under Section 9 of the Code against the Corporate Debtor, the Operational Creditor shall’ file a Certificate from the Financial Institution maintaining accounts of the Operational Creditor confirming that there is no payment of an unpaid operational debt by the Corporate Debtor. The Code states that this Certificate has to be issued by a Financial Institution as defined under Section 3 (14) of the Code which includes a Scheduled Bank, a financial institution as defined under Section 45-I of the Reserve Bank of India Act, 1934, a public financial institution as defined in Clause 72 of Section 2 of the Companies Act, 2013 and any such other institution as the Central Government may by notification specify as a financial Institution.

In the Instant case, Macquarie Bank after serving the Demand Notice under Section 8 of the Code through its Advocate, had filed Applications under Section 9 of the Code before the National Company Law Tribunal (“NCLT”) to initiate Insolvency Proceedings against Uttam Galva Metallics Limited and Shilpi Cable Technologies Limited. Macquarie Bank, being a foreign Bank and not having an account with any Financial Institution as defined above, filed its own Certificates under Section 9 (3) (c) of the Code, which reflected that no payment from the debtors had been received.

NCLT rejected the petition[2] holding that Section 9(3)(c) of the Code was not complied with, inasmuch as no certificate, as required by the said provision, accompanied the application filed under Section 9. It, therefore, held that there being non-compliance with the mandatory provision of Section 9(3)(c) of the Code, the application had to be dismissed at the threshold.

In subsequent appeals before the National Company Law Appellate Tribunal (“NCLAT”) filed by the parties, the NCLAT[3] held as under:

  1. That Macquarie Bank was not a Financial Institution within the meaning of the Code and thus the Certificate filed by it was not in terms of the requirement under Section 9 (3) (c) of the Code. The said requirement being mandatory in nature, an Application in absence of the Certificate was not maintainable by Macquarie Bank and as such deserved to be dismissed; and
  2. That the Demand Notice had been given by an advocate/lawyer and there was nothing on the record to suggest that the lawyer was authorised by the appellant/Macquarie Bank. Also there was nothing on the record to suggest that the said lawyer/advocate held any position with or in relation to the Appellant/Macquarie Bank. Therefore the notice issued by the advocate/lawyer on behalf of the Macquarie Bank could not be treated as notice under Section 8 of the Code.

Findings of the Supreme Court:

Re:-Requirement of Certificate as envisaged under Section 9(3)(c) of the Code

In the Civil Appeals against these orders of the NCLAT, the Supreme Court has settled the legal position and has held that the filing of Certificate under Section 9 (3) (c) of the Code is not a pre-requisite to trigger insolvency proceedings under the Code. The Court held that the filing of the Certificate under Section 9 (3) (c) of the Code is a procedural requirement and is directory in nature. The Court observed that Section 9(1) contains the conditions precedent for triggering the Code insofar as an operational creditor is concerned. The requisite elements necessary to trigger the Code are:

  1. occurrence of a default;
  2. delivery of a demand notice of an unpaid operational debt or invoice demanding payment of the amount involved; and
  3. the fact that the operational creditor has not received payment from the corporate debtor within a period of 10 days of receipt of the demand notice or copy of invoice demanding payment, or received a reply from the corporate debtor indicating the existence of a pre-existing dispute or repayment of the unpaid operational debt.

It is only when these conditions are met that an application may then be filed under Section 9(2) of the Code in the prescribed manner, accompanied with such fee as has been prescribed. Under Section 9(3), what is clear is that, along with the application, certain other information is also to be furnished.

The Court after interpreting clause (c) of Section 9(3) observed that it was quite clear that a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there was no payment of the unpaid operational debt by the corporate debtor was not a condition precedent to trigger the insolvency process under the Code. The expression “confirming” made it clear that it was only a piece of evidence, albeit a very important piece of evidence, which only “confirmed” that there was no payment of the unpaid operational debt.

The Court in relation to Section 3(14) of the Code, observed that a foreign supplier or assignee of such supplier may have a foreign banker who is not within Section 3(14) of the Code. The fact that such foreign supplier is an operational creditor is established from a reading of the definition of “person” contained in Section 3(23), as including persons resident outside India, together with the definition of “operational creditor” contained in Section 5(20), which in turn is defined as “a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred”.  The Court observed that the Code cannot be construed in a discriminatory fashion so as to include only those operational creditors who are residents outside India and happen to bank with financial institutions which may be included under Section 3(14) of the Code.        

Re: Issuance of Demand Notice under Section 8 of the Code by an Advocate
The Court noticed that Section 8 of the Code speaks of an operational creditor delivering a demand notice. The Court observed that if the legislature wished to restrict such demand notice being sent by the operational creditor himself, the expression used would perhaps have been “issued” and not “delivered”. Delivery, therefore, implied that such notice could be made by an authorised agent or an Advocate.

The Court also relied on Section 30 of the Advocates Act, 1961, which deals with the fundamental right under Article 19(1)(g) of the Constitution to practise one's profession. The Court observed that the use of the expression/word 'practise' in Section 30 of the Advocates Act was an expression of extremely wide import, and included within its ambit all preparatory steps leading to the filing of an application before a Tribunal, including issuance of a Demand Notice under Section 8 of the Code on behalf of the Operational Creditor. The Court therefore held that a notice sent on behalf of an operational creditor by a lawyer was valid and in order.

Conclusion:

This judgment, is thus, a huge respite especially for the foreign Operational Creditors who do not have an account with a Financial Institution within the meaning of the Code, as now they are not restricted by the said requirement to initiate insolvency proceedings under the Code. Also, this judgment comes as a great relief to lawyers who can now fully represent their Clients from the very inception and can issue Demand Notices on their behalf which was earlier not permitted.  



[1] - (2018) 2 SCC 674

[2]  Macquarie Bank Ltd. v. Uttam Galva Metallics Ltd., 2017 SCC OnLine NCLT 155 dated 1.06.2017

[3] Macquarie Bank Limited v. Uttam Galva Metallics Limited, 2017 SCC OnLine NCLAT 409 dated 17.07.2017

 

Description

END CAN NOT JUSTIFY THE MEANS

The PIL was invented to compel the lethargic and unresponsive Governments and public authorities to perform their duties mandated by the Constitution or law (s). The civil rights and fundamental rights given to the citizens may be subjected to restriction, but the procedure for imposing such restrictions is of utmost importance. Imposition of restrictions and prohibitions in a democratic society like India falls within the domain of legislatures subject to the Constitutional limitations and remedies provided under the Constitution. In every civil society, applying the theory of checks and balances, there is always an effective remedy against any prohibition or restrictions on the citizens’ rights. According to the settled legal position, any law imposing restrictions must not contravene any other provision of the Constitution.

India is a country with innumerable diversities i.e. regional, geographical, cultural, economical, social and so on. Therefore, even the Parliament has not been able to lay down a uniform law to regulate the belief, habits, life style, social behaviour, education etc.. It must be remembered that the Parliament has huge machinery and resources at its command with a mechanism to receive feedbacks, analyse them and process them. The Constitution has provided extraordinary powers to the higher judiciary but keeping in mind the intended use of such powers within judicial manageable parameters, the corresponding assignment of resources, enforcement machinery and manpower for the higher judiciary were not envisaged under the Constitution. The reason is clear that the Constitution maker never intended the higher judiciary to make policies or participate in the governance which is exclusively within the domain of democratic process. It is humanly impossible for the constitutional courts which are overburdened with huge backlog and explosion of dockets to have sufficient time to undertake thorough examination of evidence based studies, formulate public policies or to legislate. Further, any factual determination requires proof established by a judicially known process of examination and cross examination of facts which cannot be substituted by tendering of some affidavits only.

The Supreme Court has made good use of PILs in the matters against corruption, Govt. lethargy and inaction in the area of environment etc. and so on but recent spate of prohibitory directions against general public may not fit into the constitutional scheme. In a society governed by the Constitution and the Rule of law, no organ of the State including the superior Courts can claim to wield an undefined, unlimited, unbridled and absolute power which leaves the aggrieved persons virtually remediless.

The “larger public interest” is frequently tossed in the air to justify annihilation of fundamental rights of innumerable persons by the judicial orders without hearing all of them. But do we have any scientific measurement of the larger public interest actually subserved by such orders? Take the instance of air pollution in Delhi, various restriction and Prohibitions have been imposed by the court orders from time to time but what is the outcome? Without undertaking thorough science-based studies, few PIL petitioners are coming up with out of the box ideas resulting into new prohibitory orders against fellow citizens without affording them a meaningful individual opportunity of hearing. One of the salutary principles for dispensation of justice is “no person shall be condemned unheard”. The benefit of this principle is extended even to the terrorists /criminals. A transporter, vehicle owner, manufacturer, trader working according to the existing law or an encroacher cannot be treated worse than them.

The supremacy and majesty of the Courts are accepted by the people due to the sound fundamentals of judicial process based upon sound legal principles like “end itself cannot justify the means adopted to achieve the end” and the rule of “Audi alteram partem”etc. PIL is a judicial innovation, however, under the Constitutional framework, its limitations and boundaries must be clear. The use of PILs for activating the government machinery or for checking the abuse of power by the people in authority have positive connotations. A judicial order for the benefit of people in general without adversely affecting the fundamental right of common citizenry may fit into the Constitutional scheme. But whether Article 32or Article 226 was envisaged to enable a self-proclaimed righteous person to seek prohibition from Courts against innumerable fellow citizens? Unless the interpretation is stretched too far, these jurisdictions were not intended to be used by individuals against fellow citizens. The recent judgement of the Supreme Court imposing prohibition on the firecrackers may be hailed by majority but the fundamental question is whether justice can be delivered by majoritarian approach? Whether the fundamental rule that “nobody shall be condemned unheard” and the “end cannot justify the means adopted” must be thrown to the wind because the majority is feeling satisfied with a decision?Whether the higher judiciary can step into the legislative domain by imposing prohibition against general public and in turn creating new offences and a new class of offenders not envisaged under any legislation?How the production and sales of a commodity shall be regulated is a complex task assigned to the legislature. An aggrieved person doing a business has a fundamental right of remedy under Article 32 to approach the Supreme Court against the State’s excesses but an order passed by the Supreme Court in PIL against countless private persons virtually takes away their fundamental right guaranteed by Article 32 apart from their rights under Article 19.  A vehicle is a property which is a constitutional right under Article 300A. If a person is holding and maintaining his property without violating the extant laws, how can his constitutional right be curtailed? It is well known that a poorly maintained new vehicle may cause more pollution than a 15 years old well maintained vehicle. Further, the provision for grant of vehicle license for 15 years and collection of taxes for 15 years is still in vogue and not struck down. There is no direction to the State to refund the pro rata taxes of 5 years and provide compensation to the owners of the diesel vehicles. But the general public has been punished for the failure of the government machinery. The situation is reminiscent of the lines from a famous hindi movie song “Majhdhaar mein naiya doobe, to maajhi use bachaye; Maajhi jo naav dubaaye, use kaun bachaye.” The Court should instead think of confiscating the properties of those who are entrusted by the Constitution to provide clean air.  After all we are spending huge money on salaries and paraphernalia for them.

PIL is a potent weapon which needs to be used with utmost care and circumspection. Conservatively, in a matter involving substantial public interest which raises a pan India issue, the Supreme Court may step in within the constitutional parameters. But recently, the PIL jurisdiction is entering into the arena of issuing PROHIBITORY orders against the citizens in absence of any prescribed procedure fulfilling the requirements of Article 14, 21 and/or Article 19. Article 14 ensures that State cannot deny to any person equality before law or the equal protection of law. “Rule of law” and “reasonableness of procedure” are part of Article 14. The  sweeping  prohibitory orders against the citizens by the Courts are also required to pass the test of Article 14. Article 32 is a Fundamental right available to citizens which is taken away whenever a prohibitory order is passed by the Supreme Court against countless citizens in order to secure “larger public interest” because according to the Supreme Court a writ is not maintainable against an order passed by the Supreme Court.

There are serious problems in the country but there is also a mechanism defined by the Rule of law to address those problems. Those problems can be satisfactorily resolved by breaking the inertia in the system through court’s intervention (but judicial intervention to restrict and punish individuals for the failure of the timely action by the organs of the Government seems prima facie unjustifiable. The trend of prohibitions imposed by the judicial orders against countless private persons is neither constitutional nor ahealthy sign for a vibrant constitutional democracy)-----can this be avoided.???. The desire of handful self proclaimed righteous PIL petitioners becomes law through PILs without any participation of 1.3 billion citizens of the country in the process, who are no lesser human beings than PIL petitioners. Some persons may be academically brilliant, learned, knowledgeable, research oriented and good intentioned but is that enough to accept their opinions and views as good and binding for the nation by keeping aside the process provided under the Constitution. Even the laws made by the Parliament expressing the popular will of the people are not final and subject to scrutiny by the High Court and the Supreme Court but an order passed by the Supreme Court in PIL leaves many adversely affected party remediless----this can be avoided. No specifics narrated. Sweeping statement.

In a country like India governed by chaotic but constitutional democracy, the prerogative writ of the higher Courts through PILs should be rarely and cautiously used keeping in mind the principle that “the act of the court shall not prejudice anyone”. It is also necessary that a systematic and scientific study to measure the pros and cons of previous PILs be undertaken and public feedback is invited for a proper research. The approval from media and those people whose views are aired in the media may not be the correct barometer to gauze the pros-cons and constitutionality of every judicial activism. The concept of separation of power does not envisage or allow one organ to take over the task assigned to another Organ. The courts may coerce the State to perform its duties but the Constitution does not envisage taking over of governmental functions by the Courts. The basic foundation of judicial activism is mostly the good intentions but that can’t be a mantra to get rid of the constitutional difficulties posited.

In the history of mankind, even the Kings and monarchs would never have thought of the judicial powers which are being exercised by the Supreme Court through two cases namely M.C. Mehta and T.N. Godavarman. Through an innovative process of I.A.s, any issue may possibly be included in the perpetual proceedings of these two cases. Where is the source of such power with unknown limits?  A court case running in perpetuity is exceptionable. (to be deleted)

There is another flip side of judicial intervention, it unintentionally provides a cover to the government, an opportunity to shrug its responsibilities and to shun accountability of actions because the higher judiciary has taken upon itself certain governmental functions through committees and commissions. Unmeasured judicial intervention is likely to create administrative and executive complacency because once the court takes over an issue, the tendency of the bureaucratic machinery is to leave the entire issue for the Court to resolve. Despite the intervention of Supreme Court over decades, pollution in rivers Ganga and Yamuna have not shown any sign of improvement, air quality in various cities have not improved. Despite several experiments like judicial closure of industries, judicial prohibition on the use of diesel and petrol in public transport vehicles and many other prohibitions including ceiling and demolitions, do we have any measurable benefit? It can be argued that had those steps not been taken, perhaps the situation could have been worse but the answer is speculative. It would have been much better for the Courts to call upon the government to draw a long-term sustainable policy for improving the air quality and reducing pollution in Delhi. The knee-jerk ad hoc judicial orders have not yielded desired results.

It is true that a lot is desired and deserved by the people of India but we are a democracy governed by the Constitution and the fulfilment of desires and aspirations of the people are left to be achieved through democratic process and not by intermittent judicial legislation. The process of making legislation and legislative drafting is a complex and time-consuming process considering the size of population of our country. The judicial legislation or policy-making can never be a proper substitute for such exercise.

The astute logic and concrete reasons based upon irrefutable evidences are the hallmark of judicial decisions for which they are respected and celebrated. These hallmarks are often absent from the prohibitive orders passed by the Courts against general public. All of a sudden thousands of people who used crackers beyond the specified times have been labelled as criminals and in some cases FIRs have been lodged. Lakhs of vehicle owners have been punished although they did not contravene any law. This judicial adventurism must be judged in the light of consequences which may follow. The already overburdened police has an additional job at hand, some righteous neighbours have started accusing and despising those burning crackers as criminals, the paperwork of police has increased, when such cases will end up in the court, the number of pending cases will further increase. The end result of judicial experiment may be seen in the quality of air people breathing after Deepawali, the quality of air is not yet good. Government and government agencies are claiming that they took every step to enforce the order passed by the Supreme Court as if they were not required to do anything except following the Supreme Court’s order.(to be deleted)

The Courts instead of assuming the role of governmental agencies and the legislators may begin with fixing their responsibility and accountability. Instead of creation of new regime and laws, the adherence to the existing law must be insisted upon by the Court and in case of deliberate failure, accountability may be fixed.   

 

Description

OBITER’ in R. VIJAYAN V. BABY’ ON COMPENSATION   

ELEVATED TO ‘RATIO’IN MAINNUDDIN ABDUL SATTAR SHAIKH  

 

(C.S. Raghu Raman, Asst Prof, College of Law, KL University, Guntur Dt., AP)

 

 

Lords Justices R.V. Raveendran and R.M. Lodha in R. Vijayan[1] suggested as follows:

 

                            “As the provisions of Chapter XVII of the Act strongly lean towards grant of    reimbursement of the loss by way of compensation, the courts should, unless there are special circumstances, in all cases of conviction, uniformly exercise the power to levy fine up to twice the cheque amount (keeping in view the cheque amount and the simple interest thereon at 9% per annum as the reasonable quantum of loss) and direct payment of such amount as compensation. Direction to pay compensation by way of restitution in regard to the loss on account of dishonor of the cheque should be practical and realistic, which would mean not only the payment of the cheque amount but interest thereon at a reasonable rate. Uniformity and consistency in deciding similar cases by different courts, not only increase the credibility of cheque as a negotiable instrument, but also the credibility of courts of justice.”

 

The brief facts in Mainuddin Abdul,[2] are that in 1999, Mr. Mainuddin, the Appellant, Mr. paid Rs.74,200/ as advance to Mr. Vijay Salvi, Respondent-Accused[3] (Director of M/s. Salvi Infrastructure Pvt. Ltd. and  also Proprietor of Salvi Builders and Developers) on booking a flat proposed to be developed by M/s. Salvi Infrastructure Pvt. Ltd.

 

Prosecution was brought against Mr. Vijay D. Salvi[4] on dishonor of cheque No.075073 for Rs.74,200/- issued by him (towards refund on failure of the house construction project), not in his capacity as a Director of the above company or as Proprietor of M/s. Salvi Builders and Developers, but from his personal account maintained with his banker for the offence under Sec. 138 read with Sec. 141 of The Negotiable Instruments Act, 1881 (known as ‘The Act’).

As first issue, Respondent argued that ‘when the company was not shown as accused, no prosecution can be brought against him in his personal capacity in view of sec. 141 of the Act’ on the authority of Full Bench decision of SC in Aneeta Hada v. M/S Godfather Travels & Tours.[5]

 

Also rejecting this argument, Lord Justices Pinaki Chandra Ghose and Uday Umesh Lalit held that “though Respondent as an employee issued the cheque from his personal account for discharge of debt of the company” he was, ‘nevertheless, liable as drawer of the cheque’  by relying on P.J. Agro Tech Limited and Ors. V. Water Base Limited [6] wherein Lord Justices Altamas Kabir and Mukundakam Sharma held that “where the cheque was drawn by the employee of the appellant-company on his personal account, even if it be for discharging dues of the appellant-company and its Directors, he alone is liable and the Company and its Directors were absolved of liability since drawer alone is accountable under Sec. 138 of the Act”.

 

P.J. Agro Tech Limited explained the legal principle to be applied ‘to make the drawer but no one else liable’ as follows:

 

                     “An action in respect of a criminal or a quasi-criminal provision has to be strictly construed in keeping with the provisions alleged to have been violated. The proceedings in such matters are in personam and cannot be used to foist an offence on some other person, who under the statute was not liable for the commission of such offence.” (Emphasis Supplied)

 

Rejecting the second argument of Respondent that ‘there was no averment in the complaint [7] that Respondent was the person in charge of, and responsible for the affairs of the Company’, Lord Justices Pinaki Chandra Ghose and Uday Umesh Lalit held that “since Respondent. was the Managing Director of M/s. Salvi Infrastructure Pvt. Ltd. and sole proprietor of M/s. Salvi Builders and Developers, there is no need of specific averment on this point” by quoting the authority of National Small Industries Corporation Ltd. V. Harmeet Singh Paintal and Anr. [8]

 

It was held in Harmeet Singh Paintal that “if the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.”[9]

 

 

 

 

 

Therefore, Lord Justices Pinaki Chandra Ghose and Uday Umesh Lalit held that there was     “no necessity for the Appellant to prove that Respondent was in charge of the affairs of the company by virtue of the position he held. Thus, we hold that the respondent, Vijay D Salvi can be prosecuted for the offence under Section 138 of the NI Act”.[10]

 

Now coming to the most important aspect of payment of compensation to the complainant-appellant under Sec. 357 (1) of Code of Criminal Procedure 1973 (known as ‘the Code’) out of  amount of fine imposed on conviction of drawer or under Sec. 357 (3) of the Code separately, when fine was not imposed, as the case may be,  Lord Justices Pinaki Chandra Ghose and Uday Umesh Lalit, for the first time in India as per this author, “paid 9% simple interest per annum on Rs.1,48,400/- (twice the amount of the cheque),[11] by quoting the  observation of

 

The paragraph, quoted from R. Vijayan, not necessary to dispose of the appeal, as it is only suggestion given by Lords Justices R.V. Raveendran and R.M. Lodha on payment of interest on amount of compensation.

 

Their Lordships have held that “if compensation could be paid from out of the fine, there is no need to award separate compensation. Only where the sentence does not include fine but only imprisonment and the court finds that the person who has suffered any loss or injury by reason of the act of the accused person, requires to be compensated, it is permitted to award compensation under Sec. 357 (3) of the Code.”

 

The High Court decision effect that ‘it could only restore the fine of Rs.2000/- imposed by the Magistrate with the default sentence but ‘not the direction for payment of compensation of Rs.20000 (being the amount of the cheque) to Appellant’ under section 357(3) of the Code as “it could not co-exist with the imposition of fine” on declaring that “a reading of Sec. 357(3) would show that the question of award of compensation would arise where the court imposes a sentence of which fine does not form a part. It was also held that section 357(3) will not apply where a sentence of fine has been imposed” [12] was confirmed by Lords Justices R.V. Raveendran and R.M. Lodha

 

It is the humble opinion of the author that the direction given in R Vijayan, now ‘ratio’ in Mainuddin, on ‘payment of interest at 9 % per annum, shall be understood that the total amount of ‘compensation to be paid to complainant under Sec. 357 (1) of the Code’ shall never exceed twice the amount of cheque as it is maximum amount that can be imposed as ‘fine as punishment on conviction of accused for the offence.[13]

 

 

 

Having regard to the facts in Mainddun as an example, the position, in the humble opinion of the author, comes to as follows:

 

  1. Taking the amount of cheque of Rs. 74200 as principal, interest at 9%, say, for 6 months (from the date of dishonor to the date of final disposal of case or any other period depending on the facts of the case), comes to Rs. 77539 (74200+3339, less than twice the amount of cheque) that amount can be paid as ‘compensation’ to complainant under S. 357(1) of the Code. Still an amount of Rs. 70861 can go to Government as fine if the Court wants to impose the maximum amount of Rs. 148400 as fine.   

  

  1. Or amount of Rs. One lakh, or some other amount, together with interest, at discretion of Court, but not exceeding twice the amount of chque is imposed as fine, that amount can be paid as compensation, with balance, Rs. 48400 going to Government.

 

  1. The Court can pay the total amount of Rs. 148400 as compensation, as twice the amount of cheque, without any interest whatsoever, when Government gets nothing as fine.[14]   

 

  1. Payment of interest on Rs. 148400, even for six months, Rs. 155078 (148400 + 6678) as ‘compensation’ becomes impossible as it exceeds the maximum amount of fine that cannot be done in view of legislative provision. . 

 

The author humbly submits that propositions (1),  (2) and (3) can be permitted as they have legislative support.[15]

 

Permanent clarifications are required from SC to guide the lower Courts.

 

But the propositions (4) can never be followed as ‘there is no legislative provision’ for such course of action to pay interest on ‘fine’ though paid as ‘compensation’ but in reality it is ‘fine’.

 

But there appears to be no such ceiling on amount of compensation as per Sec. 357(3) of Code but in view of precedents of SC, the amount differs on the facts and circumstances of the cases and on financial capacity of convict to pay the amount. 

 

But the above propositions are also highly debatable and controversial proposition. Further clarifications must come from another larger bench of the SC.

 

 

As far as the research undertaken by the author, it is first occasion that SC has convicted and gave punishment to drawer under the Act.

                    “Considering the fact that the cheque amount is Rs.74,200/-, we direct the respondent Vijay D Salvi to pay a compensation of Rs.1,48,400/- (Rupees one lakh forty-eight thousand four hundred only) with simple interest thereon at 9% per annum, to the complainant-appellant. In default of payment of the said compensation, the respondent will have to undergo simple imprisonment for a period of six months.”

On careful reading of the above paragraph, it is clear that SC passed the order for payment of compensation to Appellant under Sec. 357(3) but not under Sec. 357(1) of the Code since ‘neither imprisonment nor fine’ was imposed on Respondent.   

The author wants to place before the readers that existing rules of Sec. 117 of the Act provide easy method for payment of compensation on dishonor of negotiable instrument can used on conviction of drawer of cheque for offence under S.138 f the Act.

 Sec. 117. Rules as to compensation.—The compensation payable in case of dishonour of a promissory note, bill of exchange or cheque, by any party liable to the holder or any indorsee, shall 1[***] be determined by the following rules:—

 

(a) the holder is entitled to the amount due upon the instrument together with the expenses properly incurred in presenting, noting and protesting it;

 

(b) when the person charged resides at a place different from that at which the instrument was payable, the holder is entitled to receive such sum at the current rate of exchange between the two places;

 

(c) an indorser who, being liable, has paid the amount due on the same is entitled to the amount so paid with interest at [eighteen per centum] per annum from the date of payment until tender or realisation thereof, together with all expenses caused by the dishonour and payment;

 

(d) when the person charged and such indorser reside at different places, the indorser is entitled to receive such sum at the current rate of exchange between the two places;

 

(e) the party entitled to compensation may draw a bill upon the party liable to compensate him, payable at sight or on demand, for the amount due to him, together with all expenses properly incurred by him. Such bill must be accompanied by the instrument dishonoured and the protest thereof (if any). If such bill is dishonoured, the party dishonouring the same is liable to make compensation thereof in the same manner as in the case of the original bill.

 

These simple rules will certainly ease the difficulties in matter of giving compensation to complainant from drawer-accused on conviction under Sec. 138 of the Act through an appropriate amendment to Chapter XVII of the Act thereby obviating the necessity of using the provisions of Sec. 357 of The Code of Criminal Procedure Code, 1973.

 

In concluding comments, these additional principles can be noted.

 

It can be pointed out that there is no necessity to refer to Harmeet Singh ‘on absence appropriate facts in the complaint on the position of MD of the Company etc.’ in the complaint since ‘that SC clearly found that ‘Appellant has issued cheque from his personal account but not from company’s account,’ though not authorized to do so by a resolution of the company’[16] for reasons best known to him, to fix him as drawer of the cheque for the offence under S.138 of the Act.

 

If he had in fact drawn the cheque on company’s account as authorized signatory occupying the position as Managing Director of the company, he is sure ‘to avoid prosecution when Company was not brought on as accused 1 in the complaint’ on the authority of Aneetha Hada.     

  

On these two issues, the SC was against him, obviously, on the facts presented.                

 

 

 

                                                  ---------------------------------------

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



[1] R. Vijayan V. Baby and Anr (2012) 1 SCC 260

[2] Mainuddin Abdul Sattar Shaikh v. Vijay D. Salvi  (decided 6th July 2015)

[3] In acknowledgment of payment respondent issued two receipts to the appellant for a sum of Rs.59,000/- and Rs.14,200/-respectively.

[4] Trial Court acquitted respondent on reason that ‘he alone was brought on as an accused in his personal capacity but without Company being made as accused’ and ‘it was not proved that respondent was personally liable to make the payment on behalf of the company’. and Bombay High Court did not find any necessity to interfere with the trail court order.

[5] 2012 CrLJ 2525 SC The full Bench clearly held that ‘without prosecution of company as main accused, there shall be no prosecution against directors and other officers of the company’ under sec. 141 of the Act.

[6] (2010)12 SCC 146

[7] Refer to S.M.S. Pharmaceuticals Ltd v. Neeta Bhalla (2005) 8 SCC 89 (FB) and RamRaj Singh v. State Of M.P. & Anr, decided on 15 April, 2009 (SC) (Full Bench), it was held that ‘there must be clear specific allegations in the complaint against the directors and others subject to exceptions as to ‘Managing Director Manager’ as it operates as deeming provision under Sec. 141 of the Act.

[8] (2010) 3 SCC 330

[9] At para 39 (v)

[10] The SC directed that Respondent shall be taken into custody forthwith to undergo the sentence, reversing High Court and Trial Court on allowing the appeal of Mr. Mainuddin Abdul.

[11]  ‘default sentence of simple imprisonment for a period of six months if compensation is not paid’

[12] State of Punjab 2002 (6) SCC 663 and Sivasuriyan v. Tangavelu 2004 (13) SCC 795

[13] Ref. sec. 138 of the Act on punishment prescribed.

[14] Some decisions can be found on this course of action. 

[15] While imposing ‘fine’ on conviction of accused, the lower court shall always keep in view Sec. 143 A (6) of the Act on adjustment of amount of interim compensation, if any,  paid to complainant and on acquittal pass an order of refund of the amount with interest to the accused.. 

[16] Similar facts were noted down by SC in P.J. Agro Tech Limited and Ors.

 

Description

THE CITIZENSHIP CAULDRON - UNDERSTANDING THE ISSUE

….Manish Goswami, Advocate, Supreme Court

Assam in particular and the entire North-East in general have off late witnessed large scale popular support against the Citizenship Bill’ 2016 which has since been passed by the Lok Sabha. It is awaiting the passage by the Rajya Sabha before becoming an Act of Parliament.

Let’s us first reflect on two significant events, which are mostly ignored, that preceded the introduction of the Bill in the Lok Sabha on 19/07/2016. Firstly The Passport (Entry into India) Amendment Rules, 2015 further amending the Passport (Entry into India) Rules, 1950 was notified on 07/09/2015. The effect of the Passport (Entry into India) Amendment Rules, 2015 is that the entry into India of the persons covered by the conditions laid down in the notification without valid travel documents or with valid documents and the validity or any of such documents having expired, stand regularized with effect from 07/09/2015 (the date of publication of the notification in the Official Gazette). In other words such persons will not be termed as “illegal migrant”. And secondly on the same day The Foreigners (Amendment) Order, 2015 further amending the Foreigners Order, 1948 was notified. The effect of the Foreigners (Amendment) Order, 2015 is that the stay in India of the persons covered by the conditions laid down in the Order who entered into India without valid travel documents or with valid documents but the validity of such documents having expired, stands regularized with effect from 07/09/2015 (the date of publication of the notification in the Official Gazette).

It may be noted that illegal migrants may be imprisoned or deported under the Foreigners Act, 1946 and the Passport (Entry into India) Act, 1920.  The 1946 and the 1920 Acts empower the central government to regulate the entry, exit and residence of foreigners within India. However the aforesaid two notifications protects such Bangladeshi, Pakistani and Afghanistan nationals fulfilling the conditions mentioned in those two instruments from prosecution under the Passport (Entry into India) Act, 1920 either without valid travel documents or with valid travel documents, the validity of which have expired, and also from deportation proceedings. In other words, persons belonging to six religious communities from three countries are no longer to be described as illegal migrants and are therefore eligible for fast-tracked citizenship.  The provisions in the notification and the Order Mentioned above are to apply automatically to all such persons who fulfill the following 3 conditions:

  1. The person should belong to minority communities in Bangladesh, Afghanistan and Pakistan, namely Hindus, Sikhs, Buddhists, Jains, Parsis and Christians.
  2. The person should have been compelled to seek shelter in India due to religious persecution or fear of religious persecution.
  3. The person should have entered into India on or before the 31st December, 2014.

 

(The reader may note that the constitutional validity of The Passport (Entry into India) Amendment Rules, 2015 and The Foreigners (Amendment) Order, 2015 has been assailed in the Hon’ble Supreme Court and the same is pending final adjudication.)

As a follow up to the aforesaid two orders the central government introduced The Citizenship (Amendment) Bill 2016, in the Lok Sabha on 19/07/2016. The Bill seeks to amend the Citizenship Act of1955, which prescribes the four main methods of acquiring citizenship of India: by birth, descent, registration and naturalisation. This bill seeks to enable Hindus, Sikhs, Buddhists, Jains, Parsis and Christians, who have fled to India on account of religious persecution from Pakistan, Afghanistan and Bangladesh without valid travel documents or those whose valid documents have expired in recent years, to acquire Indian citizenship through the process of naturalisation. It may be noted that the application of this Act will be pan-India and not just limited to Assam.

In the back-drop of the huge illegal immigration into Assam and also other parts of North-East, the popular opposition to the Bill is primarily based on the following legitimate apprehensions that the indigenous people of Assam in particular and the entire north-east in general harbour:

  1. It is a fundamental right of the indigenous people under Article 21 of the Constitution of India to protect their own homeland, territory, culture, honour and dignity from illegal alien occupation which is an inviolable right. It is also their fundamental right under Article 25 & 29 of the Constitution of India to conserve and preserve their distinct language, script and culture. In this context it will be most appropriate to fondly remember that the father of our Nation, Mahatma Gandhi, highlighted the importance of culture in the following words: "I do not want my house to be walled in on all sides and my windows to be stuffed. I want the culture of all the lands to be blown about my house as freely as possible. But I refuse to be blown off my feet by any."
  2. The proposed Act carry the potential threat of reducing the citizens of India, who are residents of Assam/North-East, into a minority in their own land, thereby denuding them of their cultural and political rights. The issue of protecting the State from any external aggression by illegal foreigners is by all reasonable reckoning a national issue in as much as the same is directly linked with the question of internal security of the country.
  3. The direct and inevitable effect of the proposed Act is that it will allow dilution of the Assam accord inked in 1985 which presently makes anyone entering from Bangladesh into Assam after the mid-night of 24th March’1971 an illegal immigrant.
  4. It also has the potential to derail and nullify the gains made by updating the National Registrar of Citizens in Assam. Many persons who could not otherwise establish their claims and were therefore excluded from draft NRC published recently can now take shelter under the proposed law and subsequently become legitimate Indian citizens at the cost of the indigenous people of Assam.
  5. It seeks to encourage illegal immigration into the territory of India and particularly Assam. Such a stand by a sovereign government at the cost of its bonafide citizens cannot be countenanced more so because the influx of illegal migrants into India in general and Assam in particular constitutes "external aggression" as defined under Article 355 of the Constitution of India. And the Union is bound to protect the State from such external aggressions.
  6. While religious persecution may in the given facts and circumstances could be a reasonable principle for differentiation, it cannot be articulated in a manner that dilutes the republican and secular foundations of citizenship in India, and goes against constitutional morality. The proposed law threatens the foundation of India’s plural polity, where every citizen, regardless of his religious identity, is equal to every other in his enjoyment of the rights the Constitution confers on him.

By the time this article is published we would know whether the Rajya Sabha has also passed the Citizenship Bill’ 2016. Whatever be the outcome, the people want peace and not confrontation, but not at the cost of their identity and wellbeing. Such confrontation would undermine a hard-won peace in Assam and in neighbouring states that has come after many years and after much sacrifice, bloodshed, trauma and negotiations.

This Citizenship Bill’ 2016 has created chaos across Assam and North-East. The rise of fresh anger against the Centre would not only be damaging, but also enable the rise of those very forces that had lost credibility and has been long dormant. It is time to read the warning signs and reach out to calm the waters. A meaningful dialogue between the government and the various stake holders is the key towards resolving this vexed issue peacefully and honourably.

 

Description

VICTIMIZATION OF WOMEN IN CYBER CRIME AND INVESTIGATIVE CHALLENGES IN INDIA

Information technology has become the axis of today’s global and technology developments. With the advancement of the internet, crimes using this tool too have widened. Cyber crimes pose a great threat to individuals, especially women, who form 90 percent of the victims..According to the Indian Computer Emergency Response Team, (CERT-In),from January to June in 2017, 27,482 cases of cybercrime were reported . As cybercriminals misuse the anonymity of cyberspace to commit more cybercrimes, women and children typically are vulnerable targets owing to lack of cyber awareness in the country.[i]

            Every second, one woman in India gets tricked to be a victim of cyber crimes and the online platform is now the new platform where a woman’s dignity, privacy and security is increasingly being challenged every moment. Cyber crimes incept generally through fake ids created on Facebook, Twitter and other social media platforms causing grave harm to women, as through these platforms, major blackmailing, threatening, bullying, or cheating via messenger messages and email are done by perpetrators. Ill-intentioned men perpetrate these cyber-crimes with malafide intention such as illegal gain, revenge, insult to the modesty of a woman, extortion, blackmailing, sexual exploitation, defamation, and to steal information.

            Cybercrime means any criminal or other offence that is facilitated by or involves the use of electronic communications or information systems, including any device or the Internet or both or more of them. The NCRB Crime in India Report 2015 in its Chapter-18: on Cyber Crimes states that 11,592 cyber crime cases were registered in 2015 (under IT Act, related sections of IPC, and offences under Special and Local Laws) and there was a 20.5%increase from 2014. Further 8,121 persons were arrested during 2015 which indicates increase by 41.2% in arrests from 2014. The Report indicates the motives of the crimes to be: 33.3% for greed/financial gain, 9.6% for fraud/illegal gain, 5.2% for insult to modesty of women (that 606 cases),5.1% for sexual exploitation (that is 588 cases), 3.3% for causing disrepute(that is 387 cases).

            My article is on the most blatant cybercrime that the women are facing in India and challenges in Investigative process.Few of them have been discussed below.

1)        Cyber stalking

Stalking means to “pursue stealthily” and cyber stalking is a behavior in which an individual, group of individuals or organization uses information and communications technology to harass one or more individuals. Cyber stalking is online threat and there is no direct relationship between the victim and cyber stalker .It is believed that Over 75% of the victims are female. The motives behind are sexual harassment, for obsession for love, for revenge and hate and for ego and power trips.This is necessary to increase punishment to deter the crime.U/S 354 D IPC stalking is a criminal offence punishable with imprisonment  upto 3 years and fine

            In the Vinupriya case, the victim was a 21-year-old student from Salem who had finished her BSc in chemistry. A person had posted morphed nude and semi-nude photographs of Vinupriya on Facebook. On June 23, 2016, when the first obscene photograph appeared, she informed her parents, who then lodged a complaint with the Cyber Crime Cell. The police, either lacking the investigative skills to trace the origin of the photograph or lacking interest, told Vinupriya’s father that they would nab the culprit in two weeks. On June 26, another obscene photograph was posted on Facebook, leaving Vinupriya traumatised. The investigating officer assumed that she must have sent those pictures to someone and now they were being posted, perhaps by a jilted lover. The questioning of Vinupriya was along those lines. It humiliated her and on June 27, she hanged herself.[ii]

 2)       Cyber Pornography

 This is another threat to the female netizens. This would include pornographic websites; pornographic magazines produced using computers Cyber Pornography is considered an exceptional case which has been covered by the IT Act 2000 to ascertain extent by Section 67 of the IT Act 2000.The punishment is upto five years and fine. Along with IT Act the perpetrator can be punished under various Sections of IPC ,Section 290 for committing public nuisance, section 292 for sale of obscene books etc, and section 292A for printing or publishing grossly indecent or scurrilous matter or matter intended to blackmail, section 293 for sale etc of obscene objects to young persons and then section 294 for doing or composing, writing etc of obscene songs and finally under section 509 for outraging the modesty of women..Cyber pornography is in simple words defined as the act of using cyberspace to create, display, distribute, import, or publish pornography or obscene materials. With the advent of cyberspace, traditional pornographic content has now been largely replaced by online/digital pornographic content.Child pornography is dealt under Section 13 of POCSO that  provides for imprisonment for a term of up to five years and in case of subsequent conviction, for a term up to seven years and a fine Section 15 provides for punishment for storage of child pornography for commercial purposes with up to three years of imprisonment or a fine. The Supreme Court recently imposed a cost of Rs 1 lakh on internet giants such as Google, Facebook, Yahoo, Microsoft and WhatsApp for online child pornography

In February 2018, the Indore cell of MP’s cyber police arrested a man from Dhar for being involved in a child auction pornography group.The police, acting on information from Inter pol, said the group is named Groupo De Leila (an auction group) operating from Portugal.[iii]

3)        Cyber bullying

Cyber bullying is intimidation, threat or harassment using an electronic form of contact by the use of computers, mobiles and the internet. It is punishable under Section 506 of the IPC. It provides for imprisonment for a term which may extend to two years, a fine or both. If the threat is to cause death or grievous hurt, it can lead to imprisonment for a term which may extend to seven years.In an Ipsos survey in 2014, India topped the list of 254 countries for cyber bullying.Blue whale challenge and other viral challenges such as cinnamon are the most brutal form of bullying.

 4)       Cyber sexual defamation

Defamation is another common crime against women in the net. This occurs when defamation takes place with the help of computers and the Internet. E.g. someone publishes defamatory matter about someone on a website or sends e-mails containing defamatory matters to others. With the invention of the internet the life of a common man has changed a lot. U/S/499 IPC imprisonment upto 2 years and fine is imposed in case of defamation

.

5)Harassment via email

Harassment includes blackmailing, threatening, bullying, and even cheating via email. E-harassments are similar to the letter harassment but creates problem quite often when posted from fake ids. Email spoofing is the forgery of an email header so that the message appears to have originated from someone or somewhere other than the actual source. Email spoofing is a tactic used in phishing and spam campaigns because people are more likely to open an email when they think it has been sent by a legitimate source. U/S 67 A punishment upto 5 years is imposed for harassment via e mail.

6)        Trolling:

 Trolls spreads conflict on the Internet, criminal starts quarreling or upsetting victim by posting inflammatory or off-topic messages in an online community (such as a newsgroup, forum, chat room, or blog) with the intention to provoke victims into an emotional, upsetting response). Trolls are professional abusers who, by creating and using fake ids on social media, create a cold war atmosphere in the cyber space and are not even easy to trace.

WHERE TO LODGE A COMPLAINT

 A person aggrieved of the offence of offence of cyber defamation can make a complaint to the Cyber Crime Investigation Cell. The Cyber Crime Investigation Cell is a branch of the Criminal Investigation Department(CID). Cyber Crime Investigation Cells have opened up in many cities like Delhi, Mumbai, Chandigarh, Hyderabad, Bangalore, Tamil-Nadu, Gurgaon, Pune, Madhya-Pradesh, Lucknow, etc. The Cyber Crime investigation Cells deal with offences related to the computer, computer network, compute resource, computer systems, computer devices and Internet. It also has power to look into other high-tech crimes. In addition, provisions have now been made for filing of 'E-FIR' in most of the states.

INVESTIGATIVE CHALLENGES RELATING TO CYBER CRIME AGAINST WOMEN  IN INDIA.

            Cybercrime in India faces biggest challenge at investigative stage. Police department are not well trained to investigate the matter.When  victim happens to be a woman it becomes even more tough for her to lodge an FIR. A woman is blamed for crime happening on her. She is treated as a criminal not a victim. Due to financial restrain she is unable to lodge an FIR and initiate even an investigation to punish the offenders. This is therefore necessary to have separate Women cyber cell in every Cyber Cell. A women police official should be appointed to head the department. Law enforcement officers and prosecutors shall conduct closed-door investigations and shall not allow the media to have access to any information regarding the victim identity.

KEY POINTS ON HOW TO PROTECT YOURSELF FROM GETTING VICTIMIZED TO CYBER CRIMES ARE AS UNDER:

1)        Passwords Should Not Be Given To Others

            Password should not be shared with trusted partners and friends . According to the Norton Cyber Crime Report, two in three people believe it’s riskier to share their email password with a friend than lend them their car.

2)        Personal Information Should Not Be Disclosed.

            Relationships have only two shades in a spectrum – very good or very bad. That is why use caution when you share intimate messages, pictures, information or anything that has the potential to come back and embarrass you in form of pornography.

3)        Avoid Meeting Online People Alone.

            Always let your friends and family know where you are going and who you are meeting. Make sure you meet the person in a crowded coffee shop or mall.

4)        Web Cam Should Be Used With Care.

            As a precaution disable camera permission and keep the lens of your camera closed or covered when not in use otherwise the recording may by mistake be uploaded on internet and circulated.

5)        Anti -Virus Should Be Installed

            Always install a reliable security system like Norton Security in all your devices to avoid virus attack in software.

6)        Agreement Terms Should Be Read.

            Know and understand the privacy policy and terms of service of any service you use. Some websites can own, sell, rent or resell your information to anyone they want.

7)        Free Downloading Sites

            Freebies come as games, offers, deals, etc. They may have  viruses, spyware and malicious software. These can get into your device and mine all your data.[iv]

 

            To reduce cyber crime against women cases  I strongly believe that women  should be independent in society.She should be well educated and empowered. It is because of protection and security a women seeks from a man that most of the crime is happening. This dominance in turns leads to crime in society .For past several crimes has evolved from Sati to dowry to acid throwing to stalking and other cyber crime on women. The crime evolved but victims till remained women. New laws and Bills definitely help in curbing the crime but question remains the same why only a woman remains a victim. It should be drilled to the mind of every woman that she has her own existence otherwise crime will never tend to end against women. Women should be made financially, socially and emotionally strong to deal with every situation in her life. I hope with strong support of women, society and law enforcement agencies crime against women will definitely end .To conclude with my article on women and crime I would say

            The divine are extremely happy where women are respected; where they are not, all actions (projects) are fruitless.

 

                      yatra naryastu pujyante ramante tatra devata?|

                        yatraitastu na pujyante sarvastatraphala? kriya? ||

 

 



[i] Cyber Crime Against Women E book –Karnika Seth

[ii] Cyber Stalking Fatal Attraction-Advocate Shruti Bist,India Legal (11/11/2018)

[iii] Handle Kids With Gloves-Shruti Bist ,India Legal (07/01/2019)

[iv] Cyber Crime Against Women-Dhruti Kapadia, 11/12/2018

 

Description

WHY POOR PEOPLE STAY POOR

 

  •                                                                                    Sandeep Narain,

                                                                                                Advocate On Record

                                                                                            Supreme Court Of India

 

          While reports of cheating of home buyers by Builders are in news almost every day, cheating and exploitation of yet another class i.e., the construction workers, by such Builders is rarely in news. In the midst of plethoric plenty in our country due to industrialisation and globalisation, the unorganised sector of workers and the labour class which plays a pivotal role in the construction industry and without whom the growth and development of this industry would not have been possible, still continues to lead a dismal life with a poor standard of living and no social security. The socio-economic difference between a Builder and the construction worker is as much as that of the peak of a mountain and the depth of an ocean. In spite of our Constitution seeking to secure to all its citizens – justice – social, economic and political and seeking to set up a Welfare State and a host of labour welfare legislations being in place, social and economic upliftment of the construction workers still remains a distant dream even after more than seven decades of independence. 

 

            The slow and poor implementation of two recent labour centric welfare legislations – (i) The Building and Other Construction (Regulation of Employment & Conditions of Service) Act, 1996 and (ii) The Building and Other Construction Workers’ Welfare Cess Act, 1996, makes a classic case study towards the continuance of disparity and deprivation of the unorganised sector of workers who usually work as daily wagers in the Building and Construction Industry. Though the benevolent provisions of the two Acts came into force on the 1st March, 1996 and the 3rd November, 1995 respectively, these Acts remained on paper for over a decade until the Supreme Court’s intervention in the matter of National Campaign Committee for Central Legislation on Construction Labour Vs.  Union of India & Ors.[i]

 

The aforesaid Acts were enacted by the Parliament keeping in view the fact that the workers involved in the Building and Construction industry belonged to one of the most vulnerable segments of the unorganised labour in India. Their work was of a temporary nature, the relationship between employer and the employee was equally temporary and intermittent, the working hours were unregulated and since the very basic amenities and welfare facilities provided to these workers were inadequate. The risk to the life and limb was also inherent in the nature of the activities of such workers which remained unprotected. This, coupled with the greed of Builders and Contractors, who exploited this unorganised sector which was a mute spectator to the employer’s tyranny, resulted in the enactment of the two Acts.

 

However, the Builders and Contractors lost no time in challenging the constitutional validity of the said Acts before the Delhi High Court. A Division Bench of the Delhi High Court in Builders Association Of India Vs. Union Of India[ii]  upheld the constitutional validity of the two Acts. The said Judgment was then carried in Appeal to the Supreme Court. The Supreme Court in its Judgment in Dewan Chand Builders & Contractors Vs. Union Of India[iii] , held that the impugned levy was in the nature of a “fee” and that there existed a reasonable nexus between the payer of the cess and the services that were to be rendered to that industry and that the Act was constitutionally valid and within the legislative competence of the Parliament.

 

Simultaneous disputes had also been raised by almost all Builders and Contractors by refusing to deposit such cess which was payable under the two legislations with effect from the year 1996, primarily on the ground that various State Governments had not constituted the “State Building & Other Construction Workers’ Welfare Boards” as stipulated under Section 18 of The Building and Other Construction (Regulation of Employment & Conditions of Service) Act, 1996, and that no such cess could be collected or would become payable until such Welfare Boards were constituted by the respective State Governments.    

 

Interestingly, two Judgments were rendered by a learned Single Judge of the Delhi High Court in Delhi Metro Rail Corporation Ltd. Vs. Simplex Infrastructures Ltd.[iv], and Delhi Metro Rail Corporation Ltd. Vs. Gammon Rizzani (JV) {O.M.P. No. 693/2010 decided on 23-11-2910}, inter alia holding that since the Delhi Government had notified the Delhi Building & Other Construction Workers (RE&CS) Rules, 2002, on the 10th January, 2002 and since the Delhi Building and Other Construction Workers Welfare Board had been constituted by issuance of a Notification on the 2nd September, 2002,  the Cess levied under The Building and Other Construction Workers’ Welfare Cess Act, 1996, would be payable by the Contractors from such dates. Consequently, awards by the Arbitral Tribunals which were considering contracts entered prior to the year 2002 and which contracts contained clauses to the effect that any tax leviable due to a “subsequent legislation” would not be payable by the Respondent Contractors in these cases, were upheld by a learned Single Judge of the Delhi High Court.

 

According to the author, the learned Single Judge of the Delhi High Court had fallen in grave error in appreciating the scope and applicability of the two Central Acts and the dates from which cess would become leviable in law.  The Judgments failed to appreciate that The Building and Other Construction Workers’ Welfare Cess Act, 1996, had come into force throughout the territory of India from the 3rd November, 1995 and the cess ought to be levied with effect from the said date under Section 3 of the Act. The issuance of Notifications bringing in the Delhi Rules and/or constitution of State Welfare Boards in the year 2002 by the Delhi Government could not be said to have curtailed or postponed the date of enforceability of the Cess Act – a Central Act, by any State Government.   Further it would also be evident from Section 22 of The Building and Other Construction (Regulation of Employment & Conditions of Service) Act, 1996 that the functions of the State Welfare Boards which were to be constituted by the State Governments, was to only make disbursals of the funds collected under the two Acts and since such Cess was to be collected by the designated Cess Collectors under the Cess Act and not by the State Welfare Boards, the date of constitution of such Boards by the State Governments would be immaterial for determining the date from which such cess could be levied or collected.

                       

A learned Single Judge of the Madras High Court had however in  MES Builders Association of India Vs. Union Of India & Ors[v],  held that the cess became payable from the date of enforcement of the Cess Act in November, 1995 and non constitution of  the State Welfare Board by the Tamil Nadu Government would not preclude the authorities to levy and collect cess under the Cess Act, 1996.   A Division Bench of the Delhi High Court had also eventually rectified the erroneous views of the learned Single Judge of the same Court in Delhi Metro Rail Corporation Ltd. Vs. Simplex Infrastructures Ltd., and Delhi Metro Rail Corporation Ltd. Vs. Gammon Rizzani (JV)[vi],  and had set aside the two Judgments that had been passed by a learned Single Judge of the same Court.  It needs to be noted that Special Leave Petitions against the said Division Bench Judgment of the Delhi High Court are pending before the Supreme Court and need to be decided at an early date. Since there is no interim Order or stay of the operation or implementation of the Judgment of the Division Bench of the Delhi  High Court, the said Judgment holds the field, at least as of now.

 

            However, the saga does not end here. Subsequently, yet another Division Bench of the Delhi High Court had in the case of NHAI Vs. Gammon Atlanta (JV)[vii], after taking note of the earlier Judgment of Delhi Metro Rail Corporation by a co-ordinate Division Bench of the same High Court (supra), placed reliance on the Judgment of the Supreme Court in Dewan Chand Builder’s case (supra) and held that the said Supreme Court Judgment had “held” that the Delhi enactments came into force in January, 2002 and thus the Orders of the Arbitral Tribunal upholding the payment by the Contractors w.e.f. 2002 and as a result of a legislation subsequent to the contract entered in 2008 could not be faulted with.

 

            Once again with utmost respect, it is stated that the aforesaid Judgment of the Division Bench of the Delhi High Court in NHAI Vs. Gammon Atlanta (JV) seems to be completely erroneous as the Supreme Court in Dewan Chand Builder’s case nowhere holds the applicability and date of enforcement of the Cess Act, 1996 to be from the dates of constitution of the State Welfare Boards or from the dates of framing of State Rules under the enactments.  According to the author, only a contention of one of the parties to this effect is recorded in paragraph 18 of the Supreme Court’s Judgment. A careful analysis of the Supreme Court’s Judgment in Dewan Chand Builder’s case and a perusal of paragraph 2 of the Supreme Court’s Judgment would reveal that a pure question of law regarding the constitutional validity of the two Acts arose in the said matter and was being decided by the Supreme Court. Paragraph 18 of the said Judgment, which has been relied upon by the second Division Bench in the NHAI Judgment, to be a “finding” of the Supreme Court, in fact, merely records a contention made in the Petitions before the Court which was to the effect that “the Cess Act and the Rules are operative in whole of NCT Delhi w.e.f. January, 2002”. This becomes further evident as the subsequent paragraphs 20 to 23 of the Supreme Court Judgment records the arguments and contentions of the Counsel appearing in the matter, while paragraph 24 spells out the issue for consideration by the Court. The reasoning and findings of the Supreme Court commence only from paragraph 25 onwards.   Thus, reliance on paragraph 18 of the said Judgment by the second Division Bench Judgment of the Delhi High Court in NHAI’s case is completely misplaced.

                       

However, as a result of a direct conflict between the two Judgments by co-equal Benches of the Delhi High Court, which cannot possibly be reconciled, the Builders and Contractors in all ongoing arbitrations, are taking refuge of the second Division Bench Judgment of the Delhi High Court in NHAI Vs. Gammon Atlanta (JV), to avoid and/or deny their liability to pay and deposit such cess from dates prior to the dates on which the State Governments had constituted their respective State Welfare Boards. Such reliance on the second Judgment is being placed on the ground that the said Judgment being later in point of time, as also, since it refers to the first Division Bench Judgment, it  cannot be said to be per incuriam and   would now be binding on all subordinate Courts and Tribunals. This is resulting in complete chaos and divergent views being taken by various Arbitral Tribunals most of which predominantly comprise of only technical members/experts as the other majority of disputes in such arbitrations relate to the technical aspects of the building and construction contracts.

 

According to the author, till such time that the Supreme Court clears the air on the issue, it could well be pointed out to the Arbitral Tribunals and Courts where such issues are pending that the first Judgment of the Division Bench in Delhi Metro Rail Corporation (supra) is the correct law and ought to be relied upon in view of the infirmity pointed out by the author in the second Judgment of NHAI. It is well settled law that if there is a direct conflict between two decisions of co-equal Benches (in this case between the Delhi Metro Judgment and the NHAI Judgment), the subordinate Courts and Tribunals must follow the Judgment which appears to them to state the law accurately.

 

In this context reliance can be placed on a Full Bench Judgment of the Punjab & Haryana High Court in the case of M/s. Indo-Swiss Time Ltd.  Vs. Umrao & Ors.[viii], wherein it has been held that mere incidence of time whether the Judgment of co-equal Benches  are earlier or later is a consideration which is hardly of any relevance. What is important is that the Judgment which is better in point of law and logic should hold the field. According to the author, this view appears to be in perfect consonance with what was also stated by the ancient sage Narada  “Dharmashastra Virodhe To Yuktiyukta Vidhe Smrita”  i.e.,  when the Dharmashastras or Law Codes of equal authority conflict with one another, the one appearing to be reasonable, or more reasonable, is to be preferred and followed. The distinguished jurist and author Late Mr. H.M. Seervai had also advocated a similar view in his Treatise - Constitutional Law of India, wherein it has been observed that "judgments of the Supreme Court, which cannot stand together, present a serious problem to the High Courts and Subordinate Courts" and that "in such circumstances the correct thing is to follow that judgment which appears to the Court to state the law accurately or more accurately than the other conflicting judgment". 

 

The author strongly feels that the Supreme Court should settle the issue arising due to the conflict of the High Court Judgments at an early date as until such time, the unorganised and poor labour class working with Builders and Contractors in construction activities, would continue to be deprived of their dues and thus, continue to remain poor despite of the two benevolent Central enactments. 



[i] (2018) 5 SCC 607

[ii] 2007 (139) DLT 578; 2007 SCC Online DEL 327

[iii] (2012) 1 SCC 101

[iv] 2010 SCC Online DEL 3027

[v] 2010 SCC Online MAD 2919

[vi] 2011(3) Arb. LR 307 (Delhi)

[vii] 2013 SCC Online DEL 3149

[viii] AIR 1981 P&H 45