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Indian Laws - Case Laws
Showing 501 to 520 of 26755 Records
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2024 (2) TMI 765
Dishonour of Cheque - vicarious liability of the director - Whether a Director who has resigned from such position and which fact stands recorded in the books as per the relevant rules and statutory provisions, can be held liable for certain negotiable instruments, failing realization? - HELD THAT:- The veracity of Form-32 has neither been disputed by the Respondent nor has the act of resignation simpliciter been questioned. As such, the basis on which liability is sought to be fastened upon the instant appellant(s) is rendered questionable.
The record reveals the resignations to have taken place on 9th December 2013 and 12th March 2014. Equally, it is found that the cheques regarding which the dispute has travelled up the courts to have been issued on 22nd March 2014. The latter is clearly, after the appellant(s) have severed their ties with the Respondent- Company and, therefore, can in no way be responsible for the conduct of business at the relevant time. Therefore, there are no hesitation in holding that they ought to be then entitled to be discharged from prosecution.
All criminal proceedings pertaining to the instant appellant(s) arising out of the complaints filed by the respondent herein are quashed - Appeal allowed.
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2024 (2) TMI 722
Dishonour of Cheque - insufficient funds - existence of debt and liability or not - alleged authorization letter has not been issued by the applicant no.2, who being a Managing Director is solely authorized to issue any such letter on behalf of the Company - summons passed without considering the evidence produced by the applicants - violation of principles of natural justice - HELD THAT:- After perusal of the materials available on record, prima facie it appears that the learned trial court has failed to appreciate the materials available on record and has committed manifest illegality while passing the impugned order while summoning the applicants as the same is passed without considering the evidence produced by the applicants, which is unsustainable in the eyes of law.
On perusal of the authorization letter dated 14.08.2020, it would reveal that the alleged authorization letter as claimed by the opposite party No.2 has been issued for the specific time period of 15 working days i.e. from 16.08.2020 till 30.08.2020 and there is no averment in the complaint made by the opposite party No.2 that the said letter has been extended further - It is admitted case of the complainant that the alleged authorization letter has not been issued by the applicant no.2, who being a Managing Director is solely authorized to issue any such letter on behalf of the Company, thus, there exists no debt or liability upon the applicants.
Section 138 is structured in two parts, the primary and the provisory. The contents of the proviso place conditions on the operation of the main provision, while it does not form a constituent of the crime itself, it modulates or regulates the crime in circumstances where,unless its provisions are complied with, the already committed crime remains impervious to prosecution - The cause of action for prosecution will arise only when the period stipulated in the proviso elapses without payment. Ingredients of the offence have got to be distinguished from the conditions precedent for valid initiation of prosecution. The stipulations in the proviso must also be proved certainly before the offender can be successfully prosecuted. But in the strict sense they are not ingredients of the deemed offence under the body of Section 138 of the N.I. Act, though the said stipulations must also be proved to ensure and claim conviction. It is in this sense that it is said that the proviso does not make or unmake the offence under Section 138 of the NI Act. That is already done by the body of the sections.
Hon'ble the Supreme Court of India in the case of Lalankumar Singh and Others vs. State of Maharashtra [2022 (10) TMI 1135 - SUPREME COURT] has specifically held in paragraph No.38 that the order of issuance of process is not an empty formality. The Magistrate is required to apply his mind as to whether sufficient ground for proceeding exists in the case or not.
The impugned summoning order passed under Section 138 N.I. Act, Police Station P.G.I., District Lucknow and the entire proceeding are against the spirit and directions issued by the Hon'ble Apex Court and are liable to be set aside - the matter is remanded back to the trial court - the instant application under Section 482 Cr.P.C. is allowed in respect of the instant applicants.
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2024 (2) TMI 721
Dishonour of cheque - insufficient funds - vicarious liability of partners - cheque in question was issued from the account of the partnership firm and signed by both partners - no legal notice was issued to the partnership firm - partnership firm was not impleaded - HELD THAT:- Admittedly, the cheque in question was not issued by the partners from their individual accounts. Rather, it was issued from the account of the partnership firm and signed by both the partners. Thus, the liability of the partners is vicarious and flow from Section 141 of the NI Act.
It is apt to observe that sub-section 1 of Section 141 NI Act stipulates that if an offence is committed by a company, then every person, who at the time of commission of offence, was in charge and was responsible to the company for the conduct of its business, as well as company itself, would be guilty of the offence. The first proviso, which is in the nature of exception, provides that in case such a person is able to prove that offence was committed without his knowledge or that he exercised due diligence to prevent the commission of offence, then such a person would not be liable for punishment. The onus to satisfy the said requirement is on the person alleging/stating the same. However, this does not take away the initial onus cast on the complainant to establish the requirements of sub-section 1 of Section 141.
The issue whether any person under Section 141(1) can be proceeded against in the absence of a company, came up before the Supreme Court in Aneeta Hada v. Godfather Travels & Tours (P.) Ltd. [2012 (5) TMI 83 - SUPREME COURT], wherein a three Judges Bench held that for maintaining prosecution under Section 141, arraigning of company as an accused is imperative. The other categories of offenders can only be brought in the drag-net by way of vicarious liability. The position with respect to a partnership firm is no different. Likewise in the case of the partnership firm, the liability of its partners is vicarious and thus impleading of the partnership firm is necessary.
In the present case, though the complainant sought to overcome the said issue by way of filing an amended memo of parties however, the same would not come to its rescue. When a cheque issued for discharge of any debt or other liability is returned unpaid, the drawer or holder of the cheque in due course is required to issue a demand notice for payment of the amount under the cheque within 30 days of the receipt of the information from the bank of its dishonour and if the drawer fails to make such payment within 15 days of the receipt of the said notice, then the offence under Section 138 NI arises. In the present case, no such demand notice was issued to the partnership firm and as such, the filing of the criminal complaint suffered from a material defect.
The criminal complaint under Section 138 of the NI Act was filed only against the partners, without impleading the partnership firm and as such this Court deems it fit to exercise its power under Section 482 Cr.P.C. to quash the complaint.
Petition allowed.
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2024 (2) TMI 719
Forfeiture of gratuity - employees have been terminated for an act which constitutes an offence involving moral turpitude - commitment during the course of their employment - requirement of determination by the management that the act for which the services of the employees have been terminated, constitutes an offence involving moral turpitude - HELD THAT:- It has been categorically held by the Hon’ble Supreme Court in Union Bank of India [2018 (8) TMI 934 - SUPREME COURT] that “it is not the conduct of a person involving moral turpitude that is required for forfeiture of gratuity but the conduct or the act should constitute the offence involving moral turpitude.” and that “To be an offence, the act should be made punishable under law. That is absolutely in the realm of criminal law.” What has been highlighted in the above decision after explaining the scope and purview of the phrase ‘offence’ and its meaning within the context of section 4(6)(b)(ii) of the Act, is that “it is not for the Bank to decide whether an offence has been committed. It is for the court.” This emphatic statement on point of law and interpretation by the Hon’ble Supreme Court is binding and fully applicable to the facts of this case - Even though in Union Bank of India, the management had not registered an FIR, the principle laid down therein is on the very interpretation of said provision of section 4(6)(b)(ii) of the Act and would hold ground.
This aspect has been reiterated in and applied by a Division Bench of this Court in Rajiv Saxena v. The Chief General Manager & Ors. [2018 (11) TMI 1952 - DELHI HIGH COURT], where gratuity was forfeited by the management pursuant to punishment of compulsory retirement by the disciplinary authority and a registration of a criminal case by the CBI. In fact, in that case a show cause notice specific on the issue of forfeiture of gratuity was issued as well. In the said petition preferred by the worker challenging forfeiture of gratuity, this Court held that the case therein had progressed merely till the stage of filing of charge sheet. Subsequently, it observed that, “The criminal court concerned will hereafter apply its mind to the contents of said charge sheet and pass an order on charge. The progress of the criminal case will depend on whether charges are framed against the Appellant; whether he is sent up for trial on those charges; whether he is convicted for the offences with which he is charged and whether such conviction attains finality.
Other courts have also followed Union Bank of India and held that forfeiture of the gratuity would require initiation of criminal proceedings that would have culminated in conviction for an offence.
Considering the principles laid down by the Hon’ble Supreme Court, as well as the consistent view taken by various courts including this Court, the submission of the petitioners has to be accepted - No purpose would be served in assessing the other submission relating to the change of the stand of the management from termination due to ‘misconduct’ to termination due to ‘loss of confidence’. In fact, the said alteration from ‘misconduct’ to ‘loss of confidence’ as the final reason for termination further dilutes the stand taken by the respondent-management.
The impugned decisions dated 11th October, 2018 passed by the Deputy Chief Labour Commissioner (Central) and the Appellate Authority under the Payment of Gratuity Act, 1972 are set aside - petition allowed.
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2024 (2) TMI 611
Dishonour of 5 Cheque - admissibility of joint trial - cheques were issued by the husband and wife for the same cause of action - insufficiency of funds - whether filing single complaint is maintainable, instead of filing 5 complaints, for 5 cheques? - HELD THAT:- The Hon'ble Supreme Court in the DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [2010 (5) TMI 380 - SUPREME COURT] has held "(B) Dishonour of cheque - Cheques issued in one transaction - Filing of multiple complaints - causes tremendous harassment and prejudice to drawer of the cheque". It has held the complainant should file an affidavit stating that he has not filed any other complaint for the same cause of action.
In another case by High Court of Andhra Pradesh, in case of Rajini Chandra Vs State of Andhra Pradesh [2010 (2) TMI 1324 - ANDHRA PRADESH HIGH COURT] has taken the similar view, that both the accused have committed same offence in the course of same transaction, as the transaction is arising out of land dealing for which advance was paid and after the settlement, the cheques were issued by both the accused towards discharging the liability which is of legally enforceable debt.
Therefore, a joint trial can be conducted.
Thus, when all the cheques were issued by the husband and wife for the same cause of action and cheques were dishonoured, a common notice was issued against the accused. Such being the case, instead of filing the multiple complaints, single complaint for dishonour of multiple cheques are maintainable. Therefore, the impugned order of dismissing of the complaint by trial court is liable to be set aside. Accordingly, answered the point raised above in favour of the complainant.
This Criminal petition is allowed.
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2024 (2) TMI 558
Seeking grant of anticipatory bail - allegation against the petitioner is that he in connivance with co-accused namely Arshdeep Singh and Ravinder Kumar, who were allegedly the thugs, he introduced the complainant to CA Arshdeep Singh and in return, he got a cut of Rs. 30,000/- which he had showed as a professional fee - HELD THAT:- It remains undisputed that the petitioner had received Rs. 30,000/-. This Court has refrained from commenting further because all accused are not parties before this Court in the present case, and any observation would cause severe prejudice against them.
Unfortunately, some professions in our country have become highly unethical, and the practitioners accept cuts for referring the work instead of referring the matters on a reciprocal basis or ethical or professional grounds. Although with a heavy heart, this Court cannot ignore the existence of such unethical practices, which are widely prevalent in many professions, including some of the unethical Chartered Accountants.
There would be no justification for the petitioner for pre-trial incarceration and custodial interrogation subject to the condition that the petitioner shall fully cooperate for recovery of Rs. 30,000/-. Petitioner is directed to cooperate in the investigation for recovery of Rs. 30,000/- within 15 days. On failure to do so, the concerned Superintendent of Police shall apply for cancellation of bail, and bail would be cancelled on this ground alone. It is further clarified that the above observations are only to decide the present bail petition and for no other purpose.
Petition allowed.
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2024 (2) TMI 493
Jurisdiction - Constitutional Validity of Rule 9(3)(b) of the Chartered Accountants’ (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 - ultra vires section 21 A (4) of the Chartered Accountants’ (Amendment) Act, 2006 or not - Whether Rule 9(3)(b) of the Rules, 2007 is inconsistent with and beyond the rule-making power of the Central Government? - professional misconduct - HELD THAT:- Experience of legislative drafting in India has shown that, generally, the delegation of power to formulate rules follows a standardized pattern within statutes. Typically, a section of the statute grants this authority in broad terms, using phrases like 'to carry out the provisions of this Act' or 'to carry out the purposes of this Act.' Subsequently, another sub-section details specific matters or areas for which the delegated power can be exercised, often employing language such as 'in particular and without prejudice to the generality of the foregoing power.' Judicial interpretation of such provisions underscores that the specific enumeration is illustrative and should not be construed as limiting the scope of the general power. This approach allows for flexibility in rulemaking, enabling the authorities to address unforeseen circumstances. A key principle emerges from this interpretation: even if specific topics are not explicitly listed in the statute, the formulation of rules can be justified if it falls within the general power conferred, provided it stays within the overall scope of the Act.
In State of Jammu and Kashmir v Lakhwinder Kumar and Ors., [2015 (7) TMI 218 - SUPREME COURT], this Court held that when a general power to make regulations is followed by a specific power to make regulations, the latter does not limit the former. This is the principle of 'generality vs enumeration': a residuary provision can always be given voice.
In the instant case, the ultra vires challenge has been mounted on the ground that the impugned Rule exceeds the power conferred by the parent Act. On looking at the parent Act, the rule-making power has been conferred under Section 29A, which is titled as ‘Power of the Central Government to make Rules’. While sub-clause (1) of Section 29A sets out the general power of delegation, sub-clause (2) provides for enumerated heads - Admittedly, Rule 9(3) goes beyond what is provided for under Section 21A(4) in terms of the options available to the Board of Discipline in case it disagrees with the opinion of the Director (Discipline). Other than the option of advising the director to further investigate, Rule 9(3) provides the additional option to the Board for proceeding to deal with the complaint by itself or referring it to the Disciplinary Committee, depending on whether the alleged misconduct falls under the First Schedule or the Second Schedule.
Object of the CA Act vis a vis Chapter on Misconduct - HELD THAT:- The Chartered Accountants Act, 1949, is a legislation that governs the regulation of the chartered accountancy profession in India. The chapter on "Misconduct" in the Chartered Accountants Act, 1949, plays a crucial role in maintaining the ethical standards of the profession in India. Its main objectives are to set ethical guidelines, prevent actions that may compromise public interests, ensure accountability among chartered accountants, and preserve the profession's reputation. This Chapter defines and prohibits professional misconduct, while aiming to uphold honesty, integrity, and professionalism in the practice of chartered accountancy. By addressing instances of misconduct, it establishes a framework for accountability, reinforcing the credibility of individual professionals and the reputation of the entire profession. To achieve these goals, the Act includes a disciplinary mechanism, ensuring a fair and transparent process for investigating and adjudicating alleged cases of misconduct.
There are no hesitation to conclude that the impugned rule is completely in sync with the object and purpose of framing the Chapter on ‘Misconduct’ under the Act. As has been rightly argued by the learned counsel for the Respondent, accepting the contention of the Appellant will create an anomalous situation. The Director (Discipline) who functions as a secretary to the Board of Discipline as per Section 21A (2) will be having greater powers than the Board itself. The ‘prima facie’ opinion of the Director will become nothing but a final opinion if the Board will have no option except to direct the Director (Discipline) to further investigate the matter - even if it accepted for the sake of argument, that Rule 9(3) cannot be saved under Section 29A(2)(c), as it directly relates to furthering the purposes of the Act in ensuring that a genuine complaint of professional misconduct against the member is not wrongly thrown out at the very threshold, it can be easily concluded that the impugned Rule falls within the scope of the general delegation of power under Section 29A(1).
Appeal dismissed.
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2024 (2) TMI 492
Dishonour of Cheque - insufficiency of funds - whether the prosecution initiated under Section 138 of N.I. Act by and on behalf of the company can be initiated through power of attorney? - Section 141 of N.I. Act - HELD THAT:- It is a settled principle that if the payee is a company the complaint has to be filed in the name of the company. Section 142 of the N.I. Act does not specify as to who should represent the company, if the company is the complainant. A company can be represented by an employee or even by a known employee, who is duly authorized and empowered to represent the company either by resolution or by a power of attorney.
Further, where the company is a complainant, who will represent the company, and how the company will be represented in 138 proceedings is not covered by the Code. Section 200 of the Code mandatory requires an examination of the complaint, and whether the complainant is an incorporeal body, it is only one of its employee or authorized representative can be examined on behalf of the company. With the result, the company becomes a dejure complainant and the person, who is representing the company whether it is employee or the authorized representative becomes de facto complainant, thus, in every complaint lodged by a company, which is a separate juristic personality, there is a complainant dejure and a complainant de facto.
This application has been pending since last 8 years and the trial could not proceed, it is in the interest of justice that the trial may be concluded expeditiously in accordance with law, preferably within a period of six months from the date of receipt of certified copy of this order without granting any unnecessary adjournments to either side.
The instant application filed by the directions of the company is devoid of merit, and is, accordingly, dismissed.
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2024 (2) TMI 491
Dishonour of cheque - Funds Insufficient - Cross-examination of complainant was carried out - accused was provided with due opportunity to examine the complainant or not - failure to appreciate the statement of the accused - failure to satisfy necessary ingredients of the offence complained of - principles of natural justice - HELD THAT:- This Court notes that the present petitioner had filed an application under Section 311 of Cr.P.C. for cross-examination of respondent no. 2 before the learned Trial Court on 07.01.2023 after a delay of more than three years and five months from the date of cross-examination of CW-1 i.e. on 26.07.2019. The present petitioner, in his application filed under Section 311 of Cr.P.C. before the learned Trial Court had stated that the complainant needs to be confronted with several documents in relation to his previous alleged relation with one Upender Gupta, without which the complainant's version would go unrebutted, and such questions could not be put to the complainant as there was communication gap between the accused and his counsel.
This Court notes that the learned Trial Court, while dismissing the application of present petitioner filed under Section 311 of Cr.P.C., had considered this ground and had observed that the complainant had been extensively cross-examined on 26.07.2019, and the accused had failed to show any sufficient cause to justify the delay of more than three years or any reason as to why the recall of CW-1 for further cross-examination was essential for just decision of the case.
Upon thorough examination of the evidence presented, including the cross-examination of the complainant Ghanshyam Dass, this Court notes that that the complainant Ghanshyam Dass was extensively questioned with regard to his association with his attorney and the individual named Upender Gupta. During his cross-examination on 26.07.2019, the complainant disclosed that he has known accused Rajesh Marwah for approximately 7-8 years through his attorney, Mr. Upender Gupta. Furthermore, it was revealed that the complainant has had a relationship with Mr. Upender Gupta for approximately 15-20 years, and had entrusted him with the authority to settle the matter at hand through a Special Power of Attorney (SPA) - It is also noted that the appellant opted not to call Upender Gupta as a witness to substantiate his defense during the proceedings before the learned Trial Court. It is also noted that in the current application, the appellant has not expressed a desire to summon Upender Gupta as additional evidence in the present appeal. Instead, the appellant seeks to conduct further cross-examination of the complainant-respondent as an additional evidence.
Thus, it is clear that the petitioner had extensively questioned the complainant in his cross-examination, and there is no ground to further examine the complainant. In these circumstances, this Court is of the opinion that the provisions of Section 391 of Cr.P.C. cannot be used to delay the proceedings or to cause inconvenience to the other party as that also amounts to miscarriage of justice by delaying the proceedings under Section 138 NI Act, and abuse of process of law, especially in cases where complainant has already been cross-examined in detail and no grounds are shown to recall the witness.
This Court does not find any merit in the present petition and the same stands dismissed.
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2024 (2) TMI 365
Dishonour of Cheque - post dated cheque - Vicarious Liability - Offences by companies u/s 141 of NI Act - failure to appreciate that the petitioners had resigned from the accused Company - cheque handed over to the respondent no. 2 and returned unpaid much later and after the resignation of the petitioners - HELD THAT:- While Sub-section (1) of Section 141 makes “every person” who, at the time the offence was committed, was in charge of and responsible for the day-to-day affairs and conduct of the business of the company, to be “deemed to be guilty of the offence”, unless he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such an offence, Sub-section (2) of Section 141 makes any director, manager, secretary, or other officer of the Company, with whose consent or connivance of or due to whose neglect the offence has been committed by the company to be deemed to be liable to be proceeded against and punished under Section 138 of the NI Act.
In the present case, it is the case of the respondent no. 2 that even the cheque, on the basis of which the complaints have been made, were given by the company and taken by the respondent no. 2 on the assurance of the petitioners herein that the said cheques would be duly honoured at the time of their presentation. These cheques are stated to be given post the date of the alleged resignation of the petitioners. It is also important to note that there were other Directors arrayed as accused in the complaint(s), however, against them such averment is not specifically made. The averments made in the paragraphs 5 and 7 are specifically made against the petitioners herein. In any case, whether this averment of the respondent no. 2 is correct or not, has to be tested during the trial.
There are no merit in the challenge made by the petitioners in the present petitions - petition dismissed.
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2024 (2) TMI 364
Declaring the account as "Fraud" - Violation of principles of natural justice (audi alteram partem) - Validity of decision of the respondent banks taken in the Joint Lenders Meeting dated 29.09.2020 declaring the account of M/s Syntex Industries Limited (Company) as fraud - opportunity to deal with the forensic audit report and/or the supplementary forensic audit report not provided - HELD THAT:- Rule of audi alteram partem has been read into clauses 8.9.4 and 8.9.5 of the Master Directions of 2016 on frauds. The Apex Court in State Bank of India and Others v. Rajesh Agarwal and Others [2023 (3) TMI 1205 - SUPREME COURT] has also directed that consistent with the principles of natural justice, the lender banks should provide an opportunity to a borrower by furnishing a copy of the audit reports and allow the borrower a reasonable opportunity to submit a representation before classifying the account as fraud coupled with passing of a reasoned order on the objections addressed by the borrower.
Undisputedly, in the present case, no such steps have been taken by the respondent lender banks and therefore, on this limited ground of violation of principles of natural justice, the decision of the respondent banks declaring the account of the company as fraud is hereby quashed and set aside. The matter is remitted and let the respondents concerned, after furnishing the copies of the forensic audit report and supplementary forensic audit report so also reasonable opportunity to the petitioners to submit the representation, complete the proceedings by passing order.
The petition stands partly allowed.
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2024 (2) TMI 291
Forfeiture of the earnest money deposit by the appellant bank - Applicability of underlying principle of Section(s) 73 & 74 respectively of the Indian Contract Act, 1872 - principles of unjust enrichment - quantum of forfeiture under the SARFAESI Rule is limited to the extent of debt owed or not - case of exceptionable circumstances or not.
Legislative History and Scheme of the SARFAESI Act - HELD THAT:- Section 13 of the SARFAESI Act contains the provisions relating to the enforcement of the security interest and the manner in which the same may be done by the secured creditor without the intervention of the court or ribunal in accordance with its provisions - This Court in M/S MADRAS PETROCHEM LTD. AND ANR. VERSUS BIFR & ORS. [2016 (2) TMI 132 - SUPREME COURT], recapitulated the object behind the enactment of the SARFAESI Act and in that context examined the purpose of Sections 13, 35 and 37 respectively of the SARFAESI Act and held that In conclusion, it is held that the interim order dated 17.1.2004 by the Delhi High Court would not have the effect of reviving the reference so as to thwart taking of any steps by the respondent creditors in this case under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. This is because the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 prevails over the Sick Industrial Companies (Special Provisions) Act, 1985 to the extent of inconsistency therewith. Section 15(1) proviso 3 covers all references pending before the BIFR, no matter whether such reference is at the inquiry stage, scheme stage, or winding up stage. The Orissa High Court is not correct in its conclusion on the interpretation of Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985.
Applicability of Section(s) 73 & 74 of the 1872 Act to Forfeiture under the SARFAESI Rules - HELD THAT:- It appears that the High Court whilst passing the impugned order was of the view that the legislature had provided for forfeiture under the SARFAESI Rules as a relief to the secured creditor for the breach of obligation by the auction purchaser. Thus, it was of the view that Section 73 of the 1872 Act will be applicable to forfeiture under Rule 9(5) of the SARFAESI Rules and any forfeiture will only be allowed to the extent of the loss or damage suffered by the secured creditor - This Court in C. Natarajan [2023 (4) TMI 1232 - SUPREME COURT] whilst dealing with a similar issue pertaining to the applicability of Section(s) 73 and 74 of the 1872 Act on forfeiture under Rule 9(5) of the SARFAESI Rules, answered the same in a negative.
Forfeiture under the SARFAESI Rules - HELD THAT:- In Madras Petrochem [2016 (2) TMI 132 - SUPREME COURT] this Court made a pertinent observation that Sections 35 and 37 respectively of the SARFAESI Act form a unique scheme of overriding provisions, however the scope and ambit of Section 37 is restricted only to the securities law.
The SARFAESI Act is a special legislation with an overriding effect on the general law, and only those legislations which are either specifically mentioned in Section 37 or deal with securitization will apply in addition to the SARFAESI Act. Being so, the underlying principle envisaged under Section(s) 73 & 74 of the 1872 Act which is a general law will have no application, when it comes to the SARFAESI Act more particularly the forfeiture of earnest-money deposit which has been statutorily provided under Rule 9(5) of the SARFAESI Rules as a consequence of the auction purchaser’s failure to deposit the balance amount.
Concept of Earnest-Money & Law on Forfeiture of Earnest-Money Deposit - HELD THAT:- A 5-Judge Bench of this Court in its decision in Fateh Chand v. Balkishan Dass [1963 (1) TMI 46 - SUPREME COURT], held that a forfeiture clause in an ordinary contract would fall within the meaning of the words “any other stipulation by way of penalty” of Section 74 of the 1872 Act, and thus only a reasonable amount can be forfeited.
This Court in Satish Batra [2012 (10) TMI 595 - SUPREME COURT] after taking note of the decisions in Delhi Development Authority v. Grihshapana Cooperative Group Housing Society Ltd. [1995 (2) TMI 457 - SUPREME COURT], V. Lakshmanan v. B.R. Mangalagiri & Ors. [1994 (12) TMI 322 - SUPREME COURT] and HUDA v. Kewal Krishnan Goel [1996 (5) TMI 439 - SUPREME COURT] concluded that only that deposit which has been given as an earnest-money for the due performance of the obligation is liable to be forfeited in the event of a breach.
The difference between an earnest or deposit and an advance part payment of price is now well established in law. Earnest is something given by the Promisee to the Promisor to mark the conclusiveness of the contract. This is quite apart from the price. It may also avail as a part payment if the contract goes through. But even so it would not lose its character as earnest, if in fact and in truth it was intended as mere evidence of the bargain. An advance is a part to be adjusted at the time of the final payment. If the Promisee defaults to carry out the contract, he loses the earnest but may recover the part payment leaving untouched the Promisor’s right to recover damages. Earnest need not be money but may be some gift or token given. It denotes a thing of value usually a coin of the realm given by the Promisor to indicate that the bargain is concluded between them and as tangible proof that he means business.
The question whether the amount is a deposit (earnest) or a part payment cannot be determined by the presence or absence of a forfeiture clause. Whether the sum in question is a deposit to ensure due performance of the contract or not is not dependent on the phraseology adopted by the parties or by the presence or otherwise of a forfeiture clause. The proportion the amount bears to the total sale price, the need to take a deposit intended to act in terrorem, the nature of the contract and other circumstances which cannot be exhaustively listed have to be taken into account in ascertaining the true nature of the amount. In essence the question is one of proper interpretation of the terms of a contract.
The forfeiture under Rule 9(5) of the SARFAESI Rules is also taking place pursuant to the terms & conditions of a public auction, it is not needed to dwell any further on the decision of Kailash Nath [2015 (1) TMI 1377 - SUPREME COURT] and leave it at that. Suffice to say, in view of the above discussion, Section(s) 73 and 74 of the 1872 Act will have no application whatsoever, when it comes to forfeiture of the earnest-money deposit under Rule 9 sub-rule (5) of the SARFAESI Rules.
Law on the principle of ‘Reading-Down’ a provision - HELD THAT:- The principle of "reading down" a provision refers to a legal interpretation approach where a court, while examining the validity of a statute, attempts to give a narrowed or restricted meaning to a particular provision in order to uphold its constitutionality. This principle is rooted in the idea that courts should make every effort to preserve the validity of legislation and should only declare a law invalid as a last resort - When a court encounters a provision that, if interpreted according to its plain and literal meaning, might lead to constitutional or legal issues, the court may opt to read down the provision. Reading down involves construing the language of the provision in a manner that limits its scope or application, making it consistent with constitutional or legal principles.
In B.R. Enterprises v. State of U.P. & Ors. [1999 (5) TMI 498 - SUPREME COURT], this Court observed that the principles such as “Reading Down” emerge from the concern of the courts towards salvaging a legislation to ensure that its intended objectives are achieved.
Thus, the principle of ‘Reading Down” a provision emanates from a very well settled canon of law, that is, the courts while examining the validity of a particular statute should always endeavour towards upholding its validity, and striking down a legislation should always be the last resort. “Reading Down” a provision is one of the many methods, the court may turn to when it finds that a particular provision if for its plain meaning cannot be saved from invalidation and so by restricting or reading it down, the court makes it workable so as to salvage and save the provision from invalidation. Rule of “Reading Down” is only for the limited purpose of making a provision workable and its objective achievable - The High Court in its Impugned Order resorted to reading down Rule 9(5) of the SARFAESI Rules not because its plain meaning would result in the provision being rendered invalid or unworkable or the statute’s objective being defeated, but because it would result in the same harsh consequence of forfeiture of the entire earnest-money deposit irrespective of the extent of default in payment of balance amount.
Thus, the High Court committed an egregious error by proceeding to read down Rule 9(5) of the SARFAESI Rules in the absence of the said provision being otherwise invalid or unworkable in terms of its plain and ordinary meaning without appreciating the purpose and object of the said provision.
Whether, the forfeiture of the entire earnest-money deposit amounts to Unjust Enrichment? - HELD THAT:- The concept of ‘Unjust Enrichment’ is a by-product of the doctrine of equity and it is an equally well settled cannon of law that equity always follows the law. In other words, equity cannot supplant the law, equity has to follow the law if the law is clear and unambiguous - The consequence of forfeiture of 25% of the deposit under Rule 9(5) of the SARFAESI Rules is a legal consequence that has been statutorily provided in the event of default in payment of the balance amount. The consequence envisaged under Rule 9(5) follows irrespective of whether a subsequent sale takes place at a higher price or not, and this forfeiture is not subject to any recovery already made or to the extent of the debt owed. In such cases, no extent of equity can either substitute or dilute the statutory consequence of forfeiture of 25% of deposit under Rule 9(5) of the SARFAESI Rules.
This Court in National Spot Exchange Ltd. v. Anil Kohli, Resolution Professional for Dunar Foods Ltd. [2021 (9) TMI 1156 - SUPREME COURT] after referring to a catena of its other judgments, had held that where the law is clear the consequence thereof must follow. The High Court has no option but to implement the law.
Thus, the High Court erred in law by holding that forfeiture of the entire deposit under Rule 9 sub-rule (5) of the SARFAESI Rules by the appellant bank after having already recovered its dues from the subsequent sale amounts to unjust enrichment.
Whether Any Exceptional Circumstances exist to set aside the forfeiture of the earnest money deposit? - HELD THAT:- This Court in its decision in ALISHA KHAN VERSUS INDIAN BANK (ALLAHABAD BANK) & ORS [2021 (12) TMI 1483 - SUPREME COURT] had directed the refund of the earnest-money deposit after forfeiture to the successful auction purchaser who was unable to pay the balance amount on account of the Pandemic.
In C. Natarajan [2023 (4) TMI 1232 - SUPREME COURT], this Court while affirming the decision of Alisha Khan (supra) observed that after the earnest-money deposit is forfeited, the courts should ordinarily refrain from interfering unless the existence of very rare and exceptional circumstances are shown.
In the case at hand, it is the respondent’s case that he was unable to make the balance payment owing to the advent of the demonetisation. The same led to a delay in raising the necessary finance. It has been pleaded by the respondent that the appellant bank failed to provide certain documents to him in time as a result of which he was not able to secure a term loan - However, the aforesaid by no stretch can be said to be an exceptional circumstance warranting judicial interference. We say so because demonetization had occurred much before the e-auction was conducted by the appellant bank. As regards the requisition of documents, the sale was confirmed on 07.12.2016, and the respondent first requested for the documents only on 20.12.2016, and the said documents were provided to him by the appellant within a month’s time i.e., on 21.01.2017. It may also not be out of place to mention that the respondent was granted an extension of 90-days’ time period to make the balance payment, and was specifically reminded that no further extension would be granted, in-spite of this the respondent failed to make the balance payment.
Thus, the High Court committed an egregious error in passing the impugned judgment and order. There are no other option but to set aside the impugned judgment and order passed by the High Court.
The appeals filed by the bank succeed and are hereby allowed.
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2024 (2) TMI 246
Seeking direction for an in-depth, thorough and time bound investigation by a SIT into various serious illegalities, violations and siphoning of funds committed by the promoters of Indiabulls Housing Finance Limited (IBHFL), its subsidiaries and their promoters - siphoning of funds by the IBHFL and other Indiabull group of companies - HELD THAT:- Applying the dictum of the Hon’ble Supreme Court in Vishal Tiwari Vs. Union of India [2024 (1) TMI 188 - SUPREME COURT] to the case in hand, this Court is of the opinion that the allegations levelled by the petitioner are not substantiated as these are not supported by any evidence. The balance sheets or other material placed on record is already available on the website of these companies and is thus already in public domain. Not only a large portion of alleged loans were repaid by the respondent- companies but also the loans were advanced against mortgages and securities furnished by the borrowers. Moreover, due to alleged complaints, the Government functionaries have already set in motion and necessary inspections have been carried out by NHB. The Ministry of Corporate Affairs is also in the process of further investigation.
In the considered opinion of this Court, due to articles published in magazine and newspaper, the tweets made by member of the petitioner-firm or a Member of Parliament, the share holders of accused-companies were jolted and they were made to suffer huge losses. It is settled position of law that the jurisdiction of investigation lies within the realm of investigating agency and a Court has no authority to interfere in the investigation until and unless there is grave miscarriage of justice or misuse of process of law. The investigation has to be transferred to CBI or SIT or any other agency only in exceptional cases and not as a matter of routine. There is no dispute to the position that necessary investigation in the present case has already been carried out by NHB and also the Ministry of Corporate Affairs is in the process of further investigation.
Finding no merit in the present petition, it is accordingly dismissed.
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2024 (2) TMI 245
Change in the interest rate during the period of loan against guidelines of the Reserve Bank of India - illegally charging thousands of rupees as yearly charges - no opportunity of submitting objection was granted to the petitioner - violation of principles of natural justice - HELD THAT:- It was incumbent on the bank not to charge usurious interest, including processing and other charges. An appropriate ceiling should also be fixed on interest including processing and other charges that are levied on such loans and the same should be suitably publicized. In this case, though it is clear that variable rate of interest has been charged by the bank, but the same has not been accepted by the petitioner/customer. Further, the bank on its own had charged annual maintenance charges which was not even agreed upon by the petitioner - The respondent no.5-bank failed to provide and adopt a transparent method of charging of the interest. It has been pointed out that the respondent-bank did resort to an arbitrary methodology. As per the guidelines given by the RBI, any change in that rate cannot be applied to the customers without notice to him and without his consent.
Surprisingly, RBI had been issuing guidelines but has done nothing for the implementation of the same. They have just been a mute spectator allowing the banks to charge arbitrarily a very high rate of interest - Even if the benefit of doubt is given to the bank that they are free to charge the interest rate but it is duty of the RBI to see that the customers are not inconvenienced by huge rate of interest charged by the banks.
The order dated 17.6.2020 clearly mentioned that no objection by the complainant was received by the Banking Ombudsman but later, under the RTI sought by the petitioner, the Banking Ombudsman admitted that no opportunity for submitting the objection was granted to the petitioner. Even the impugned order of closure of petitioner’s complaint by the Banking Ombudsman is a non speaking order and only a formatted order, which has been passed mechanically, without application of mind.
The impugned order dated 17.6.2020 passed by the Banking Ombudsman (respondent no.4) is set aside and the matter is relegated back to the Banking Ombudsman to decide the same, after giving due opportunity of hearing to the parties by passing a speaking order - petition allowed by way of remand.
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2024 (2) TMI 244
Inquiry before issuance of process - whether the amendment in Section 202, sub-clause (1) of the Code of Criminal Procedure, contemplating an inquiry before issuance of process by the Magistrate, where the accused is residing outside the jurisdiction of the Court, is discretionary or mandatory? - HELD THAT:- Summoning of an accused in a criminal case, is a serious matter and it certainly cannot be a perfunctory exercise. The amendment introduced in the Code therefore, contemplates that a Magistrate shall examine the nature of allegations in the complaint and take into account the evidence, both oral and documentary, to find out if it is sufficient for the complainant to succeed in establishing the charge against the accused, and justify the issuance of process against him. It is nonetheless the duty of the Magistrate to prima facie find out, if the case is made out by the complainant against the accused before the process is issued, so as to avoid any frivolous or vexatious claims being taken forward by the Magistrate.
Vindication of majesty of justice and maintenance of law and order in the Society, being the primary object of criminal justice, would not bring within its sweep, a personal vengeance.
The reference is answered accordingly.
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2024 (2) TMI 191
Dishonour of Cheque - Funds insufficient - Offences by companies - vicarious liability - roles and responsibilities of directors and non-directors of a company - HELD THAT:- Apart from mentioning the petitioners in CRR 196 of 2016 as ‘non-directors’ and in CRR 197 of 2016 as ‘directors’, the complainant has also described as to how the said accused persons by their oral representation depicted the property to be so lucrative that it led to the misunderstanding of the complainant about the potency of the property as well as the bone fide of the accused persons.
The argument advanced on behalf of the petitioners in CRR 196 of 2016 and CRR 197 of 2016 cannot be accepted. Instead, a case has been made out sufficiently regarding their alleged involvement. Policy decisions being made by the petitioners for the accused company, their active involvement in executing those and accruing benefits therefrom, are apparent. Likewise, it is also apparent that at the relevant point of time, excepting the present petitioners, there were no other ‘directors’ or ‘nondirectors’, in the said company and also that the concerned cheques were issued by them. Considering the attending facts and circumstances as discussed above and the object and purpose of the statute itself as delineated above, this Court hardly finds any impropriety in the orders passed by the Metropolitan Magistrate regarding taking cognizance of offence under section 138 and 141 of the Negotiable Instruments Act.
Service of the notice / summons to the company - Held that:- From the reading of provisions under Section 65 and under Section 305 of the Cr.P.C, it appears firstly that affixing duplicate of summons at a conspicuous place of the company would satisfy requirement of good service thereof to a company. It shows also that no coercive action has, however, been provided by the statute in case of absence of a representative of an accused company, even after due service of summons to it. In case he appears, according to section 305(3) of the CrPC, statutory requirements of things to be done, read, stated or explained in presence of the accused, would be construed to be required to be so done in presence of the said representative. It has further been provided that the requirement of law of examination of the accused company would be construed to be as the requirement of examination of the said representative. However, in his absence, the statute has provided that provisions under section 305(3) of the CrPC, would not apply.
Company as a juridical person cannot be physical apprehended. - The natural consequence would be that an order of issuance of warrant of arrest may not be an executable order under law against the company, which is a juridical person. However, company as an accused person cannot be seized of the liability to face the trial and punished, if found guilty, in case the Court finds the summons to have been duly served upon it. An appropriate punishment as prescribed under the law would be applicable in its case.
This Court finds it proper to interfere into the impugned order dated December 11, 2015, of the Magistrate, to the extent as necessary. So far as the issuance of warrant of arrest and order of attachment against the company namely M/s. AKJ Mineral Ltd, i.e, petitioner in CRR 278 of 2016 is concerned, the same is found to have been passed in disobedience and derogation of the statutory provisions and thus is violative of the same. For this reason the same cannot be maintained and should be set aside. For the Magistrate a decision pursuant to an enquiry regarding due service of summons to the accused company, would suffice, to let it proceed with the trial of the case - so far as the accused company is concerned. The impugned order dated December 11, 2015, is modified to that extent.
The case is allowed in part.
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2024 (2) TMI 68
Direction to formulate guidelines/scheme for grant of sanctions/approval/clearances for speedy and effective implementation of time-sensitive medical research, to secure the right to health under Article 21 of the Constitution of India, 1950 - direction directing the Respondent No. 1 to take necessary steps to give effect to clause 2.3.3 of the National Health Policy, 2017 for facilitating growth of Private Medical Research Institutions, and promotion of life-saving medical technologies for attainment of Public Health Goals - direction to formulate a framework for revival and rehabilitation of Medical Research Institutions which are in, incipient stress to secure ‘public interest’ under Section 21 of the Banking Regulation Act, 1949 - direction to Respondent No. 6 to constitute a Committee to examine the irregularities in the conduct of the Corporate Insolvency Resolution Proceedings pertaining to Frontier Lifeline Private Limited initiated pursuant to the order of the Ld. National Company Law Tribunal, Chennai Bench.
HELD THAT:- The Special Leave Petition, which suffered from a delay of 1615 days, was dismissed when it came up before the Court today - The narration will clearly indicate that what is now preferred as a petition, which was purportedly filed in the public interest, is, in fact, relatable to the petitioner’s specific grievance in regard to proceedings of insolvency against FLPL.
Petition not entertained purportedly in the public interest - petition dismissed.
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2024 (2) TMI 67
Maintainability of petition - 1st respondent company is a State under Article 12 of the Constitution of India or not - HELD THAT:- An anxious consideration given to the judgments of the Apex Court and the various High Courts on the question of how the issue whether an authority is an instrumentality of the State under Article 12 of the Constitution of India is to be determined.
It is noticed that in the case of entities in different states which are similar in nature to the 1st respondent herein, cases have arisen before the respective High Courts on the question whether such bodies are instrumentality of the State within the meaning of Article 12.
In the case of Asok Kumar Singh and others v. Bihar Industrial and Technical Consultancy Organisation Limited and others, the Patna High Court held that the BITCO is an instrumentality of the State, while the Bombay High Court in R.V Dnyansagar v. Maharashtra Industrial and Technical Consultancy Organisation Limited [2003 (2) TMI 353 - HIGH COURT OF BOMBAY] has held that the Maharashtra equivalent of the 1st respondent is not an instrumentality of the State.
Though the State Government has only 3% share in the 1st respondent, it has a decisive representation in the Board by sending two directors out of twelve. Further, the policy decisions of the 1st respondent are controlled by the SIDBI which nominates 1/3rd of the Directors including the Chairman and the Managing Director. It is clear from a reading of the Articles of Association and the documents produced in the writ petition and in this writ appeal that the State and Central Governments themselves specifically consider the 1st respondent as a Central Government company. It is also discernible that the accounts of the 1st respondent are audited by the Comptroller and Auditor General of India treating it as a deemed Government company. It is recognised as an accredited Government agency for the purpose of public works in the State.
The finding that the respondent company is not a State under Article 12 of the Constitution of India and that the writ petition is not maintainable is not correct position in law - the respondent company is an instrumentality of the Union of India under Article 12 of the Constitution of India and is, therefore, amenable to writ jurisdiction.
The writ petition shall be placed before the learned single Judge for consideration on merits.
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2024 (2) TMI 4
Dishonour of Cheque - insufficient funds and account dormant - rebuttable presumption - seeking a direction to obtain the opinion of the handwriting expert after comparing the admitted signature of the accused appellant and the signature as appearing on the disputed cheque - HELD THAT:- The law is well-settled by a catena of judgments rendered by this Court that power to record additional evidence under Section 391 CrPC should only be exercised when the party making such request was prevented from presenting the evidence in the trial despite due diligence being exercised or that the facts giving rise to such prayer came to light at a later stage during pendency of the appeal and that nonrecording of such evidence may lead to failure of justice.
Certified copy of a document issued by a Bank is itself admissible under the Bankers’ Books Evidence Act, 1891 without any formal proof thereof. Hence, in an appropriate case, the certified copy of the specimen signature maintained by the Bank can be procured with a request to the Court to compare the same with the signature appearing on the cheque by exercising powers under Section 73 of the Indian Evidence Act, 1872 - if at all, the appellant was desirous of proving that the signatures as appearing on the cheque issued from his account were not genuine, then he could have procured a certified copy of his specimen signatures from the Bank and a request could have been made to summon the concerned Bank official in defence for giving evidence regarding the genuineness or otherwise of the signature on the cheque.
The presumptions under the NI Act albeit rebuttable operate in favour of the complainant. Hence, it is for the accused to rebut such presumptions by leading appropriate defence evidence and the Court cannot be expected to assist the accused to collect evidence on his behalf.
So far as the allegation of the accused appellant that he did not receive the notice under Section 138 of the NI Act is concerned, it would be for the appellate Court while deciding the appeal to examine such issue based on the evidence available on record and thus, there was no requirement for the appellate Court to have exercised power under Section 391 CrPC for summoning the official from the Post Office and had rightly rejected the application under Section 391 CrPC.
There are no infirmity in the impugned orders warranting interference - appeal dismissed.
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2024 (2) TMI 3
Maintainability of Revision Petition before the High Court when the petitioner has alternate remedies as per the - an ex-parte decree was passed against the respondent - Trial court refused to condone the delay - High Court, in a revision petition, contending that Trial Court was not right in dismissing the application seeking condonation of delay of 5767 days in filing the petition to set aside the ex-parte decree dated 15.02.1999.
HELD THAT:- As against the ex-parte decree, a defendant has three remedies available to him. First, is by way of filing an application under Order IX Rule 13 CPC seeking for setting aside ex-parte decree; the second, is by way of filing an appeal against the ex-parte decree under Section 96(2) of the CPC and the third, is by way of review before the same court against the ex-parte decree.
The filing of an application under Order IX Rule 13 CPC as well as the filing of appeal under Section 96(2) of the CPC against the ex-parte decree are concurrent remedies available to a defendant. However, once the appeal preferred by the defendant against the ex-parte decree is dismissed, except when it is withdrawn, the remedy under Order IX Rule 13 CPC cannot be pursued. Conversely, if an application filed under Order IX Rule 13 CPC is rejected, an appeal as against the ex-parte decree can be preferred and continued under Section 96(2) of the CPC. Thus, an appeal against an ex-parte decree even after the dismissal of an application under Order IX Rule 13 CPC is maintainable.
When an application or petition filed under Order IX Rule 13 CPC is dismissed, the defendant can avail a remedy by preferring an appeal in terms of Order XLIII Rule 1 CPC. Thus, Civil Revision Petition under Section 115 of the CPC would not arise when an application/petition under Order IX Rule 13 CPC is dismissed. Thus, when an alternative and effective appellate remedy is available to a defendant, against an ex-parte decree, it would not be appropriate for the defendant to resort to filing of revision under Section 115 of the CPC challenging the order refusing to set aside the order of setting the defendant ex-parte. In view of the appellate remedy under Order XLIII Rule 1(d) CPC being available, revision under Section 115 of the CPC filed in the instant case was not maintainable.
When there is an express provision available under the CPC or any statute under which an appeal is maintainable, by-passing the same, a Revision Petition cannot be filed. It is needless to observe that in the absence of an appellate remedy, a revision may be maintainable.
The impugned order set aside on the ground that the said order was passed in a Civil Revision Petition which was not at all maintainable under Section 115 of the CPC. However, liberty is reserved to the first respondent herein to file an appeal under Order XLIII Rule 1(d) CPC, if so advised, on or before 31.12.2023 - appeal allowed.
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