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• 2007 (1) TMI 656
  
  **Summary:**In the case before the Bombay High Court, presided over by Justices Dr. S. Radhakrishnan and J.P. Devadhar, the appellants challenged the orders of the Commissioner of Customs dated March 25, 2005, and the CESTAT dated January 19, 2006. The appellants argued that these orders failed to consider whether they had complied with all conditions necessary for exemption under Exemption Notification No. 64/88 dated March 1, 1988. The court noted that the records presented prima facie evidence of compliance, which appeared to have been overlooked by the Commissioner of Customs.The High Court set aside the previous orders on this limited ground and remanded the matter back to the Commissioner of Customs. The Commissioner is instructed to reassess whether the appellants have met all the conditions for exemption as per Notification No. 64/88, strictly based on the merits and in accordance with the law, considering the material provided. Both appeals were allowed without any order as to costs, and related Notices of Motion were disposed of accordingly.

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• 2007 (1) TMI 655
  

  1. ISSUES PRESENTED and CONSIDERED

  The core legal questions considered in this judgment are:

  • Whether the petitioner was properly summoned and made aware of the charges against him under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
  • Whether the petitioner, as the signatory of the dishonored cheques, falls within the ambit of Section 141(2) of the Negotiable Instruments Act.
  • Whether the procedural irregularities in the trial led to a miscarriage of justice.
  • Whether the sentence imposed, particularly the compensation amount, was appropriate and justified.

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue 1: Proper Summoning and Awareness of Charges

  • Relevant Legal Framework and Precedents: The court examined the requirements for summoning an accused under the Code of Criminal Procedure, particularly Section 251, and the necessity for the accused to be aware of the charges against them.
  • Court's Interpretation and Reasoning: The court found that the petitioner was effectively treated as an accused throughout the proceedings, as evidenced by the notice under Section 251 and his Section 313 statement.
  • Key Evidence and Findings: The notice under Section 251 was addressed to the company and the petitioner as its Chairman and Director, indicating his responsibility for the day-to-day business.
  • Application of Law to Facts: The court concluded that despite procedural irregularities, the petitioner was aware of the charges and had a fair opportunity to defend himself.
  • Treatment of Competing Arguments: The petitioner argued he was not properly summoned, but the court found that he was aware of the proceedings and charges.
  • Conclusions: The court held that the petitioner was adequately informed of the charges, and no miscarriage of justice occurred due to procedural issues.

  Issue 2: Liability Under Section 141(2)

  • Relevant Legal Framework and Precedents: Section 141(2) of the Negotiable Instruments Act and the Supreme Court's decision in SMS Pharmaceuticals Ltd. were pivotal in determining liability for signatories of dishonored cheques.
  • Court's Interpretation and Reasoning: The court noted that as the signatory of the cheques, the petitioner was responsible for the incriminating act, falling within the ambit of Section 141(2).
  • Key Evidence and Findings: The petitioner admitted to signing the cheques, which were dishonored, fulfilling the criteria for liability under Section 141(2).
  • Application of Law to Facts: The court applied the legal principles from SMS Pharmaceuticals Ltd. to affirm the petitioner's liability.
  • Treatment of Competing Arguments: The petitioner argued against personal liability, but the court found his role as signatory sufficient for liability.
  • Conclusions: The court upheld the petitioner's conviction under Section 138 read with Section 141(2) of the Act.

  Issue 3: Procedural Irregularities and Miscarriage of Justice

  • Relevant Legal Framework and Precedents: Sections 464 and 465 of the Code of Criminal Procedure address the impact of procedural errors on the validity of proceedings.
  • Court's Interpretation and Reasoning: The court emphasized that procedural errors do not invalidate a trial unless they result in a failure of justice.
  • Key Evidence and Findings: The court found that the petitioner had a fair trial and was aware of the charges, despite procedural irregularities.
  • Application of Law to Facts: The court determined that no failure of justice occurred, as the petitioner had ample opportunity to defend himself.
  • Treatment of Competing Arguments: The petitioner claimed procedural errors led to injustice, but the court disagreed, citing substantial compliance with legal requirements.
  • Conclusions: The court concluded that procedural irregularities did not lead to a miscarriage of justice.

  Issue 4: Appropriateness of Sentence and Compensation

  • Relevant Legal Framework and Precedents: Section 357(3) of the Code of Criminal Procedure allows for compensation to be awarded to victims.
  • Court's Interpretation and Reasoning: The court found that the compensation amount was not adequately justified and remanded the issue for reconsideration.
  • Key Evidence and Findings: The compensation of Rs. 4 crores was not supported by a detailed examination of the petitioner's ability to pay or the complainant's loss.
  • Application of Law to Facts: The court reduced the petitioner's imprisonment term and remanded the compensation issue for further consideration.
  • Treatment of Competing Arguments: The petitioner argued for leniency due to health issues and financial capacity, which the court partially accepted.
  • Conclusions: The court reduced the imprisonment term and remanded the compensation issue for further evaluation.

  3. SIGNIFICANT HOLDINGS

  • Verbatim Quotes of Crucial Legal Reasoning: "The signatory of the cheque which is dishonoured is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141."
  • Core Principles Established: Procedural irregularities do not invalidate proceedings unless they result in a failure of justice; signatories of dishonored cheques are liable under Section 141(2).
  • Final Determinations on Each Issue: The petitioner's conviction was upheld, the imprisonment term was reduced, and the compensation issue was remanded for reconsideration.

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• 2007 (1) TMI 654
  
  The Gujarat High Court dismissed the appeal regarding refund claim of accumulated balance deemed credit under compounded levy scheme. The Tribunal found that the goods imported were used in manufacturing goods for export, allowing the refund claim. The High Court upheld the Tribunal's decision, stating no substantial question of law arose. The appeal was dismissed at the admission stage.

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• 2007 (1) TMI 653
  
  Issues:
  Challenge to Adjudication Order imposing penalty for contravention of FER Act, 1973 without RBI permission; Misidentification of appellant; Alleged lack of application of mind by adjudicating authority; Admissibility of statements recorded in English and Urdu; Availability of relied on documents; Burden of proof on appellant.
  
  Analysis:
  
  The Appellate Tribunal for Foreign Exchange heard an appeal challenging an Adjudication Order imposing a penalty for contravention of the FER Act, 1973. The appellant was penalized for making unauthorized payments to Afghan nationals without RBI permission. The Tribunal granted full dispensation of pre-deposit due to the appeal's old age and proceeded to hear the case on merits. The appellant argued misidentification, lack of application of mind by the adjudicating authority, and the unavailability of relied on documents. The Enforcement Directorate filed written submissions, and the Tribunal took them on record.
  
  The Enforcement Directorate contended that the penalty was justified due to a long-standing practice of payments to Afghan nationals in Old Delhi. They argued that the appellant was correctly identified and prosecution was valid. The Tribunal noted that some statements were recorded in Urdu and relied on by the Enforcement Directorate.
  
  The appellant's counsel argued misidentification and lack of implication in the statements recorded in English. They contended that the statements were inadmissible as they were not made before police officers. The Tribunal discussed the admissibility of statements made before Enforcement Directorate officials and the burden of proof on the appellant.
  
  The Tribunal rejected the appellant's arguments, stating that misidentification was a mere mistake in description and not of substance. They emphasized that the appellant failed to demonstrate errors in the adjudication order or the legality of the penalty. The Tribunal upheld the Adjudication Order, dismissing the appeal and instructing the appellant to deposit the penalty within a week.
  
  In conclusion, the Tribunal found no merit in the appeal and maintained the Adjudication Order. The decision was based on the evidence presented and the lack of substantiated arguments by the appellant. The burden of proof was on the appellant, who failed to demonstrate any errors in the order.

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• 2007 (1) TMI 652
  
  Issues involved:
  The issues involved in this judgment include the jurisdiction of the court to entertain objections to an arbitration award, the appropriate forum for filing and challenging awards, and the expeditious disposal of pending matters before the court.
  
  Jurisdiction of Court to Entertain Objections:
  The Respondent applicant, Krishna Travel Agency, filed applications seeking directions regarding objections to an award before the District Judge, Dehradun. The dispute arose between the applicant and Garhwal Mandal Vikas Nigam Ltd., leading to the appointment of an arbitrator by the Supreme Court. The applicant argued that since the arbitrator was appointed by the Supreme Court, only the Supreme Court had jurisdiction to entertain the objections. However, the Respondent applicant contended that the Principal Civil Court of Original Jurisdiction, as defined in the Arbitration and Conciliation Act, should handle such objections. The court referred to previous judgments and held that the appropriate forum for filing and challenging awards remains the Principal Civil Court of Original Jurisdiction, irrespective of the appointing authority.
  
  Appropriate Forum for Filing and Challenging Awards:
  The court emphasized that if an arbitrator is appointed by the Supreme Court or a High Court, the objections to the award must be filed before the Principal Civil Court of Original Jurisdiction as defined in the Act. It was clarified that the intention of the legislature was not for the appointing court to handle objections, ensuring parties' rights to appeal under the Act. The court reaffirmed the view that the Principal Civil Court of Original Jurisdiction remains the appropriate forum for such matters, rejecting the plea for the Supreme Court to entertain objections to the arbitrator's award.
  
  Expeditious Disposal of Pending Matters:
  Acknowledging the age of the pending matter before the District Judge, Dehradun, the court directed the District Judge to expedite the disposal of the application within six months from the date of the court's order. This direction aimed to ensure the timely resolution of the long-standing dispute, emphasizing the importance of efficient judicial proceedings.
  
  In conclusion, the Supreme Court clarified the jurisdictional aspect of entertaining objections to arbitration awards, reiterating the role of the Principal Civil Court of Original Jurisdiction in handling such matters. Additionally, the court emphasized the need for expeditious disposal of pending cases to facilitate timely resolution of disputes.

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• 2007 (1) TMI 651
  
  Issues involved:
  The issues involved in the judgment are related to land acquisition without following proper procedures, arbitrary possession of land by a development authority, dispute over compensation, and entitlement to interest on delayed payment.
  
  Land Acquisition Procedure:
  The appellants, as landowners, filed a suit against the Agra Development Authority for taking possession of their land without following the Land Acquisition Act procedures. The trial court issued an injunction to maintain the status quo, and the authority undertook to pay compensation within two months, but failed to do so. The authority later issued a cheque for compensation, which the appellants refused, leading to the money being deposited in court.
  
  Interest on Delayed Payment:
  The High Court initially denied the appellants' claim for interest on delayed payment, stating that the authority had offered the compensation within the stipulated period. However, the Supreme Court disagreed, noting that the authority had not deposited the money within the agreed timeframe. The Court found that the appellants were deprived of the beneficial use of their money and awarded them simple interest at 18% per annum from the date of possession until actual payment.
  
  Judgment and Directions:
  The Supreme Court set aside the High Court's order and directed the Agra Development Authority to pay simple interest on the compensation amount. The appellants were allowed to withdraw the deposited sum without providing security. The authority was instructed to pay the interest by a specified date, emphasizing strict compliance. The appeal was disposed of with no costs imposed.

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• 2007 (1) TMI 650
  
  Issues Involved:
  1. Quashing of process issued under Section 500 read with Section 34 of IPC.
  2. Responsibility of the Managing Editor for day-to-day reporting.
  3. Applicability of Section 7 of the Press and Registration of Books Act, 1867.
  4. Applicability of the Fourth Exception to Section 499 of IPC.
  
  Issue-wise Detailed Analysis:
  
  1. Quashing of Process Issued Under Section 500 Read with Section 34 of IPC:
  The applicant, the Chairman and Managing Editor of the Indian Express Group, sought to quash the process issued by the Judicial Magistrate, First Class, Pune, in Criminal Case No. 1912 of 1997. The process was issued under Section 500 read with Section 34 of IPC for a defamatory news item published in the Pune Edition of "Loksatta" on 20/5/1997. The applicant argued that he was not responsible for day-to-day reporting, which was the responsibility of the Resident Editor and the Editor at the corporate level. The applicant relied on Section 7 of the Press and Registration of Books Act, 1867, which presumes the Editor or Resident Editor responsible for publication. The court noted that the applicant's involvement in day-to-day reporting was not established, and the presumption under Section 7 did not apply to him.
  
  2. Responsibility of the Managing Editor for Day-to-Day Reporting:
  The applicant contended that he, as the Managing Editor, was not responsible for the day-to-day reporting in the local editions of "Loksatta." He argued that the Resident Editor and the Editor at the corporate level were responsible for the content published in the newspaper. The court agreed with this contention, noting that the applicant did not have knowledge of the reports published in the local editions and could not be held responsible for the defamatory content. The court referred to the case of K.M. Mathew v. State of Kerala (Mathew-I), which established that the person named as Editor or Resident Editor is presumed responsible for the publication.
  
  3. Applicability of Section 7 of the Press and Registration of Books Act, 1867:
  Section 7 of the Act presumes that the person whose name is printed as Editor is responsible for the publication. The applicant argued that this presumption should apply to the Resident Editor or Editor, not the Managing Editor. The court referred to the case of K.M. Mathew v. K.A. Abraham (Mathew-II), which clarified that the presumption under Section 7 is rebuttable and can be challenged by leading evidence. However, in this case, the court found no positive averments against the Managing Editor and noted that the accused nos.2 to 4 (Printer, Publisher, and Resident Editor) had accepted their responsibility for the publication on oath.
  
  4. Applicability of the Fourth Exception to Section 499 of IPC:
  The Fourth Exception to Section 499 of IPC states that it is not defamation to publish a substantially true report of court proceedings. The applicant argued that the news item in question was a substantially true version of a suit filed by Ms. Yogeeta Bankar, which included the complainant as a defendant. The court examined the news item and found that the first three paragraphs did not make a case of defamation, while the remaining paragraphs, particularly paragraphs 5 and 6, were alleged to be defamatory. The court noted that the reporting was substantially true and fell within the Fourth Exception to Section 499 of IPC, thus not constituting defamation.
  
  Conclusion:
  The court concluded that the applicant, as the Managing Editor, was not responsible for the day-to-day reporting in the local editions and could not be held liable for the defamatory content published in the Pune Edition of "Loksatta." The presumption under Section 7 of the Press and Registration of Books Act, 1867, did not apply to him, and the Fourth Exception to Section 499 of IPC protected the publication as it was a substantially true report of court proceedings. Consequently, the application to quash the process issued against the applicant was allowed, and the rule was made absolute in terms of prayer clause (a) for the applicant only. The observations made in the judgment were stated to have no bearing on the pending petitions.

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• 2007 (1) TMI 649
  
  Issues:
  The issues involved in this case are the challenge to the legality and vires of paras VIII and XV of Clause 28 of the arbitration agreement, and the requirement to deposit 10% of the claim amount before entering into arbitration.
  
  Challenge to Paras VIII and XV of Clause 28:
  The petitioners sought to declare paras VIII and XV of the arbitration agreement as illegal and ultra vires, along with quashing a letter requiring a 10% deposit before arbitration. The petitioner, a government-owned company, was engaged in a construction project in Punjab. Disputes arose due to alleged breaches by the respondents, leading to termination of the contract and a claim of Rs. 721.34 lakhs. The Arbitrator-cum-Superintending Engineer requested a 10% deposit as per the agreement, which the petitioner challenged as confiscatory and violative of Article 14 of the Constitution and Section 28 of the Contract Act, 1872.
  
  Validity of Impugned Clauses:
  The Court considered the argument that the clauses were confiscatory and took away the right of arbitration. Reference was made to the concept of unconscionable clauses in contracts, especially in cases of unequal bargaining power. The Court cited precedents and legislative provisions to analyze the reasonableness and fairness of the clauses. It was concluded that the clauses did not exhibit unequal bargaining power and were not unconscionable, unfair, or irrational, thus upholding their validity.
  
  Decision and Dismissal of the Petition:
  The Court dismissed the petition, stating that the impugned clauses requiring a 10% deposit served the purpose of preventing frivolous claims. It was noted that the clauses had mutuality and were not found to be unfair or unconscionable. The argument regarding maintainability of the writ petition against a state agency was addressed, emphasizing that the jurisdiction under Article 226 could be invoked but was not warranted in this case due to the clauses being deemed reasonable. Consequently, the petition was dismissed based on the lack of unfairness or unconscionability in the impugned clauses.

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• 2007 (1) TMI 648
  
  Issues involved:
  The judgment involves a challenge to a summoning order issued under Section 347/461 of the Delhi Municipal Corporation Act regarding the alleged violation of property use from residential to commercial.
  
  Summary:
  
  Issue 1: Alleged violation of property use
  The Metropolitan Magistrate issued a summoning order based on a complaint by the MCD, alleging that the petitioners changed the property's use from residential to commercial without authorization. The petitioner argued that the order was stereotyped and lacked application of mind by the Court, citing precedents like D.A. Mehta v. The Regional Director, ESI Corporation and Flex Foods Ltd. v. Registrar of Companies. The Court emphasized the importance of judicial orders reflecting the application of mind and criticized the use of cyclostyled orders for penal consequences. Consequently, the impugned order was quashed, and the matter was remitted for appropriate orders after due consideration of the evidence.
  
  This judgment highlights the necessity for judicial orders to demonstrate a thoughtful consideration of the facts presented, especially in cases with penal implications. The Court's decision to quash the order and remit the matter for proper consideration underscores the significance of procedural diligence in legal proceedings.

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• 2007 (1) TMI 647
  
  Issues involved:
  The issues involved in the judgment are the correct classification of fuel and oil in a vessel's engine room and the Tribunal's decision regarding the same.
  
  Issue A: Classification of fuel and oil in a vessel's engine room
  The appellant questioned whether the Tribunal was correct in not considering the oil in a vessel's engine room as part of the vessel for classification purposes. The appellant cited previous decisions and a Circular of the CBEC to support their argument. The Tribunal based its decision on the location of the fuel and oil, stating that only fuel and oil contained in the vessel's machinery and engines can be classified as part of the vessel. Since there was no dispute that the fuel and lubricating oil were in the vessel's machinery and engine, the lower authorities correctly classified the goods. The Tribunal and Commissioner(Appeals) rejected the appellant's claim, leading to the dismissal of the appeal at the admission stage.
  
  Issue B: Factual finding regarding the location of oil in the vessel
  The appellant also challenged the Tribunal's finding that the oil was not in the engine room of the imported vessel without any basis. The Tribunal considered the opinion of the World Customs Organisation and the Circular of the CBEC in determining the classification based on the location of the fuel and oil. As the lower authorities found that the fuel was neither in the engine nor in the machinery, the appeal was dismissed at the admission stage.

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• 2007 (1) TMI 646
  
  Issues Involved:
  1. Conviction based on circumstantial evidence.
  2. Validity and voluntariness of the confessional statement.
  3. Corroboration of the confessional statement.
  4. Appropriateness of the death penalty.
  
  Detailed Analysis:
  
  1. Conviction Based on Circumstantial Evidence:
  The appellants were convicted for the rape and murder of a minor girl based on circumstantial evidence. The key circumstances included:
  - Appellant No. 1 was the night chawkidar and had exclusive access to the waiting room where the family stayed.
  - Both appellants were seen conversing under suspicious circumstances.
  - Appellant No. 1's reluctance to open the door when the girl was found missing.
  - Seizure of a black-colored half pant belonging to Appellant No. 1 and a brown-colored jangia with white stains belonging to Appellant No. 2.
  - Injuries on Appellant No. 2's face, indicating resistance from the victim.
  
  2. Validity and Voluntariness of the Confessional Statement:
  The confession of Appellant No. 1 was recorded by the Judicial Magistrate and detailed the commission of the crime. The confession was held to be voluntary and truthful, as Appellant No. 1 did not retract it during the trial and even admitted to it during his examination under Section 313 of the Code of Criminal Procedure.
  
  3. Corroboration of the Confessional Statement:
  The confession was corroborated by several pieces of evidence:
  - The presence of both appellants at the scene.
  - Appellant No. 2's suspicious behavior and injuries.
  - Seizure of stained undergarments.
  - Testimonies of multiple witnesses, including employees of the travel agency and the parents of the deceased.
  The court emphasized that a confession can form the basis of conviction if it is voluntary and corroborated by independent evidence.
  
  4. Appropriateness of the Death Penalty:
  The court considered whether the death penalty was appropriate, given that the conviction was based on circumstantial evidence. The court noted that while the crime was heinous, the appellants showed remorse, particularly Appellant No. 1, who confessed and repented. The court referred to precedents suggesting that death penalty should be reserved for the "rarest of rare" cases and concluded that life imprisonment was a more appropriate sentence in this case.
  
  Conclusion:
  The Supreme Court upheld the conviction of both appellants but modified the sentence from death penalty to life imprisonment, considering the nature of the evidence and the appellants' remorse. The court emphasized the importance of corroborated confessions and the cautious application of the death penalty.

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• 2007 (1) TMI 645
  
  Issues Involved:
  1. Liability of the petitioner to pay excise duty on liquor destroyed in a fire accident.
  2. Interpretation of the charging section under the Karnataka Excise Act, 1965, and related rules.
  3. Validity of the demand notice issued by the respondent.
  
  Detailed Analysis:
  
  1. Liability of the petitioner to pay excise duty on liquor destroyed in a fire accident:
  
  The petitioner, a firm manufacturing Indian made liquor under a license, faced a dispute regarding the liability to pay excise duty on liquor destroyed in a fire accident. The respondents argued that the manufacturing process was complete, and the duty was applicable even though the liquor was destroyed before being issued. The petitioner contended that no excise duty was payable as the charge was not complete until the goods were issued.
  
  2. Interpretation of the charging section under the Karnataka Excise Act, 1965, and related rules:
  
  Sections 22 and 23 of the Karnataka Excise Act, 1965, were pivotal in this case. Section 22 prescribes the levy of excise duty on excisable articles manufactured or produced in the State. Section 23 outlines the ways of levying such duties, including on the quantity of excisable articles produced, manufactured, or issued from a distillery. Rule 2 of the Karnataka Excise (Excise Duties & Fees) Rules, 1968, specifies that excise duty shall be levied on excisable articles issued from any distillery, warehouse, or place of storage.
  
  The petitioner argued that the charge was incomplete as the liquor was not issued from the distillery, and thus, no liability for excise duty arose. This was supported by the interpretation of the charging section and the rules, indicating that the charge is effectuated only at the issue point.
  
  3. Validity of the demand notice issued by the respondent:
  
  The respondents issued a demand notice for Rs. 24,53,580/-, asserting that the petitioner was liable for the duty as the liquor was manufactured and the duty rate was prescribed. The petitioner challenged this, arguing that the demand was not enforceable as the charge was incomplete without the issuance of the liquor.
  
  The court examined the statutory provisions and concluded that the charging section under Section 22 of the Act was incomplete without the aid of Rule 2, which links the levy to the issuance of the excisable articles. The court held that the charge is complete only when the manufactured article is issued from the distillery or warehouse. Since the liquor was destroyed before issuance, the charge was not effectuated, and thus, the demand notice was quashed.
  
  Conclusion:
  
  The court allowed the writ petition, quashing the demand notice and directing the respondents to refund any amount already recovered from the petitioner unless it could be adjusted against any other outstanding liability. The court emphasized that the charging section should be strictly construed, and the levy could not be sustained as the charge was not complete without the issuance of the liquor.

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• 2007 (1) TMI 644
  
  Issues Involved:
  1. Whether the High Court of Kerala can quash a complaint filed u/s 138 of the Negotiable Instruments Act before the Judicial First Class Magistrate's Court-I, Coimbatore.
  2. Whether a writ of prohibition can be issued against the Coimbatore Court from proceeding with the case.
  3. Jurisdictional conflict regarding the maintainability of a writ petition under Article 226 of the Constitution of India.
  
  Summary:
  
  Issue 1: Quashing of Complaint u/s 138 of the Negotiable Instruments Act

  The petitioner, a retired partner of an unregistered firm, sought to quash a complaint filed u/s 138 read with Section 141 of the Negotiable Instruments Act, alleging that cheques issued by the firm were dishonored. The petitioner argued that she retired from the partnership effective 1-4-2001, and thus, was not responsible for the cheques issued in December 2003. The petitioner relied on various documents, including the reconstituted partnership deed and income tax returns, to support her claim. The High Court, however, dismissed the writ petition, stating that the complaint and the Magistrate's cognizance occurred outside its jurisdiction.

  Issue 2: Issuance of Writ of Prohibition

  The petitioner also sought a writ of prohibition to restrain the Coimbatore Court from proceeding against her. The High Court observed that the actions of the Judicial First Class Magistrate's Court-I, Coimbatore, in taking cognizance and issuing process, occurred entirely outside its jurisdiction. Therefore, the High Court of Kerala could not grant the relief sought.

  Issue 3: Jurisdictional Conflict under Article 226

  The case was referred to a larger Bench due to conflicting decisions in Krishnakumar Menon v. Neoteric Informatique (P) Ltd. and U.B.C. v. Govarthanam. The Court examined whether a writ petition under Article 226 could be maintained to quash a complaint pending in another state if part of the cause of action arose in Kerala. The Court concluded that the decision in U.B.C. v. Govarthanam, which held that a writ petition under Article 226 is not maintainable, laid down the correct legal position. The Court distinguished the Supreme Court's decision in Navinchandra N. Majithia v. State of Maharashtra, noting it pertained to quashing an FIR and police investigation, not a private complaint under the Negotiable Instruments Act.

  Conclusion:

  The High Court of Kerala dismissed the writ petitions, holding that it lacked jurisdiction to interfere with proceedings before a Criminal Court outside its territorial limits. The petitioners were advised to seek appropriate reliefs from the Coimbatore Court or the Madras High Court.

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• 2007 (1) TMI 643
  
  Issues Involved:
  1. Locus standi of the Employees Union to object to the Scheme of Amalgamation.
  2. Consideration of service conditions of employees in the Scheme of Amalgamation.
  3. Allegation that the Scheme is prejudicial to the interests of the employees of the Transferor Company.
  4. Allegation that the Scheme is against public policy.
  5. Allegation of defects in the affidavit filed in Company Petition.
  
  Issue-wise Detailed Analysis:
  
  1. Locus Standi of the Employees Union:
  The Employees Union argued that they have the right to object to the Scheme of Amalgamation under Section 394(1)(v) of the Companies Act, 1956. They cited various judgments to support their claim, including the case of Hindustan Lever Employees Union vs. Hindustan Lever Ltd. The court acknowledged that employees have locus standi to object if the scheme is prejudicial to their interests. The court referred to the judgments of the Delhi High Court and Bombay High Court, which support the employees' right to object. Consequently, the court held that the employees of the amalgamating company have the locus standi to object to the Scheme of Amalgamation if it is found to be prejudicial to their interests.
  
  2. Consideration of Service Conditions of Employees:
  The Employees Union contended that the Scheme of Amalgamation did not adequately address the service conditions, pay parity, seniority, and other benefits of the employees of the Transferor Company. They argued that there is a significant disparity between the wages of employees of the Transferor Company and the Transferee Company. The court noted that Clause 12 of the Scheme provides that all employees of the Transferor Company will become employees of the Transferee Company without any break in service and on terms and conditions not less favorable than those subsisting with the Transferor Company. The court referred to the Hindustan Lever Employees Union vs. Hindustan Lever Ltd. decision, which held that as long as employees do not suffer any change to their detriment, the scheme cannot be refused. The court concluded that the Scheme protects the employees' interests and overruled the objections regarding service conditions.
  
  3. Allegation that the Scheme is Prejudicial to Employees:
  The Employees Union argued that the Scheme is prejudicial to the employees of the Transferor Company as it does not ensure pay parity and other benefits. They claimed that the Scheme allows for discrimination between the employees of the two companies. The court held that the Scheme ensures continuity of service and terms and conditions not less favorable than those existing. The court referred to the Gujarat Nylon Company Ltd. case, which held that issues of pay disparity can be addressed under labor laws and do not fall within the purview of Sections 391-394 of the Companies Act. The court concluded that the objections regarding prejudice to employees are not sustainable and overruled them.
  
  4. Allegation that the Scheme is Against Public Policy:
  The Employees Union contended that the Scheme is against public policy as it involves the merger of two profit-making companies. The court referred to the Hindustan Lever Employees Union vs. Hindustan Lever Ltd. decision, which laid down parameters for granting sanction under Sections 391 and 394 of the Companies Act. The court noted that the Scheme has been approved by the requisite majority of shareholders and creditors and that the Central Government and Official Liquidator had no objections. The court concluded that the Scheme is not against public policy and overruled the objection.
  
  5. Allegation of Defects in the Affidavit:
  The Employees Union argued that the affidavit filed in the Company Petition was defective and not in accordance with Rule 21 of the Company Court Rules. The court referred to the Associated Journals Limited vs. Mysore Paper Mills Ltd. decision, which held that substantial compliance with the affidavit requirements is sufficient. The court found that the affidavit was in substantial compliance and overruled the objection.
  
  Conclusion:
  The court concluded that the Scheme of Amalgamation is not prejudicial to the interests of the employees of the Transferor Company, is not against public policy, and complies with the requisite statutory procedures. The objections raised by the Employees Union were overruled, and the Scheme of Amalgamation was sanctioned. The court allowed Company Petition No. 147 of 2006 and Company Petition No. 148 of 2006, and dismissed Company Applications No. 572 of 2006 and 573 of 2006. The costs to be paid to the learned Additional Central Government Standing Counsel were quantified at Rs. 3500 per petition.

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• 2007 (1) TMI 642
  
  Issues Involved:
  
  1. Violation of Regulations 7 and 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
  2. Acting in concert among entities.
  3. Non-disclosure of shareholding.
  4. Acquisition of shares as collateral security.
  5. Imposition of penalties.
  
  Summary:
  
  1. Violation of Regulations 7 and 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997:
  The appellants were penalized for acquiring shares of Shonkh Technologies International Ltd. in excess of the threshold limits prescribed by Regulations 7 and 10 without making the necessary disclosures or public announcements. The adjudicating officer imposed monetary penalties on the appellants for these violations.
  
  2. Acting in concert among entities:
  The adjudicating officer concluded that Classic Credit Ltd., Panther Investrade Limited, Panther Fincap & Management Services Ltd., and other entities were acting in concert, controlled by Ketan Parekh. This was based on the fact that these entities had common directors, proximate addresses, and common shareholders. The appellants' argument that these factors were not conclusive of acting in concert was rejected.
  
  3. Non-disclosure of shareholding:
  The appellants failed to disclose their shareholding to the target company as required by Regulation 7. The acquisitions made by Classic, PIL, and PFMS on July 18, 2000, through preferential allotment, were not exempt from Regulation 7. The adjudicating officer found that the appellants violated Regulation 7 by not disclosing their shareholding.
  
  4. Acquisition of shares as collateral security:
  The appellants argued that the shares transferred to their demat account were held as collateral security and in trust for arranging finance for third parties. This argument was rejected because the shares were credited in the appellants' demat account, making them the beneficial owners as per Section 2(1)(a) of the Depositories Act, 1996. The appellants did not create a pledge or hypothecation as required by Section 12(3) of the Depositories Act, nor did they make a declaration under Section 187C of the Companies Act, 1956.
  
  5. Imposition of penalties:
  The adjudicating officer imposed penalties of Rs. 5 lacs for violating Regulation 10 and Rs. 1,50,000 for violating Regulation 7 on each entity. The appellants' contention that only one collective penalty should be imposed was rejected. Each entity committed multiple breaches by not complying with the Regulations on different occasions, justifying separate penalties for each violation.
  
  Conclusion:
  The appeals were dismissed, and the appellants were directed to comply with the adjudicating officer's order and deposit the penalty amount within 45 days. No costs were awarded.

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• 2007 (1) TMI 641
  

  Computation of Surcharge u/s 5-A of the Orissa Sales Tax Act, 1947 ("the OST Act") - modality contravenes the provisions of the Orissa Entry Tax Act ("the OET Act) and Orissa Entry Tax Rules ("the OET Rules") - HELD THAT:- It is well settled that the objective of framing rules is to fill up the gaps in a statutory enactment so as to make the statutory provisions operative. Rules also clarify the provisions of an Act under which the same are framed. (A) Subordinate legislation has been fictionally called the delegation of power to fill up the details.

  In Khambhalia Municipality v. State of Gujarat [1967 (2) TMI 111 - SUPREME COURT], it was pointed out that the legislature may, after laying down the legislative policy, confer discretion on an administrative agency as to the execution of the policy and leave it to the agency to work out the details within the framework of the policy. Sub-rule (1) of Rule 18 of the O.E.T. Rules, in consonance with the heading of Section 4 of O.E.T. Act lays down that a motor vehicle importer's "tax liability under the Sales Tax Act shall be reduced to the extent" of Entry Tax paid. The illustration appended to Sub-rule (1) of Rule 18 of the O.E.T. Rules specifically indicates that Sales Tax payable by a dealer is Sales Tax due less the amount of Entry Tax paid. The inconsistency or ambiguity, if any, between the language of Section 4 of the O.E.T. Act and Sub-rule (1) of Rule 18 of the O.E.T. Rules gets removed by the language in c, which provided that, "the Sales Tax payable on the sale of goods shall be reduced to the extent of Entry Tax paid in the manner illustrated under Sub-rule (1)."

  Thus, it is clear that the O.E.T. Act and O.E.T. Rules provide for set off of Entry Tax paid from the amount of Sales Tax payable by a dealer. In such view of the matter, the controversy in the present applications is confined to the question as to what constitutes "Sales Tax payable" under the O.S.T. Act.

  Therefore, on a plain reading of the provisions under the O.S.T. Act and the O.E.T. Act, set off has to be made by way of reduction of the Sales Tax payable to the extent of Entry Tax paid. There is no scope for the Revenue to urge that surcharge paid u/s 5-A of the O.S.T. Act has also to be taken into account in computing the dealer's tax liability under the O.S.T. Act. Such a conclusion is apparent from the provision of Section 5-A of the O.S.T. Act as it stood during the periods of assessments under the reference in the present applications.

  Thus, from a harmonious reading of the relevant provisions of the O.S.T. Act, O.E.T. Act and O.E.T. Rules, it is evident that "tax payable", as contemplated u/s 5-A of the O.S.T. Act, means tax payable after set off of Entry Tax from the Sales Tax assessed on a dealer. The modality adopted by the taxing authorities in computing surcharge on the gross tax assessed instead of tax payable after reduction to the extent of Entry Tax paid is not in accordance with the provisions under the O.S.T. Act, O.E.T. Act and O.E.T. Rules. The letter of clarification issued by the Government is misconceived and has no legal sanctity.

  In the result, therefore, the writ petitions are allowed; the impugned letter and the extra tax demand made on the Petitioners on the basis of such letter of clarification are quashed.

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• 2007 (1) TMI 640
  
  Issues involved: The issues involved in this judgment are the eligibility of the applicant to avail benefits under a treaty, determination of permanent establishment in India, and taxability of business income in India.
  
  Eligibility to Avail Treaty Benefits:
  The applicant sought relief to direct the Assessing Officer to examine if the income is subject to tax in the USA and extend treaty benefits. The Authority ruled that the applicant was not a resident of the USA under the Double Taxation Avoidance Agreement, thus unable to avail treaty benefits. The presence of a permanent establishment in India was not determined due to the applicant's non-resident status.
  
  Taxability of Business Income:
  The applicant provided material showing most beneficiaries were subject to tax in the USA. The Commissioner noted a certificate of tax liability was for Australia, not India. The applicant argued the varying tax status of beneficiaries should be considered annually by the assessing authority. However, the Authority clarified that the ruling is binding unless there is a change in law or facts, and additional evidence cannot be admitted for review.
  
  Maintainability of Petition:
  The applicant invoked Rules 5 and 19 of the Authority for Advance Rulings (Procedure) Rules, seeking a clarification. The Authority explained that Rule 5 must be exercised before ruling pronouncement, and Rule 19 allows amendment before the ruling is given effect by the Assessing Officer. As the petition was filed post-ruling, it was deemed not maintainable under these rules.
  
  Conclusion:
  The petition was dismissed as not maintainable, emphasizing the binding nature of advance rulings unless there is a change in law or facts. The Authority clarified that additional evidence cannot be admitted post-ruling, and any discrepancies should be addressed through the appropriate legal channels.

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• 2007 (1) TMI 639
  

  Bench Judgement - cessation of membership of either House of Parliament - Powers of expulsion of a sitting member - Interpretation of Article 105 of Constitution of India - Whether in exercise of the powers, privileges and immunities as contained in Article 105, are the Houses of Parliament competent to expel their respective Members from membership of the House. If such a power exists, is it subject to judicial review and if so, the scope of such judicial review - distinction between British Parliament and the Indian Parliament - Doctrine Of Proportionality - Judicial Review - Members of Parliament (MPs) indulged in unethical and corrupt practices of taking monetary consideration in relation to their functions as MPs.

  Y.K. Sabharwal, C.J. - HELD THAT:- It is pertinent to note that before stating that nobody would be spared, the Speaker had exhorted the members of the House to rise to the occasion and to see to it that such an event does not occur ever in future and commended that "if anybody is guilty, he should be punished". It is clear that when he stated that no body would be spared he was not immediately passing a judgment that the petitioners were guilty. He was only giving vent to his feeling on the subject of the proper course of action in the event of inquiry confirming the facts that had been projected in the telecast. The finding of guilt would come later. The fact that he had constituted an Inquiry Committee with members drawn also from parties in opposition rather goes to show that the resolve at that stage was to find the truth.

  The petitioners' case is that the procedures adopted by the Committees of the two Houses were neither reasonable nor fair. Further, they contend that the entire inquiry was improper and illegal inasmuch as rules of natural justice were flouted. In this context, the grievances of the petitioners are manifold. They would state that proper opportunity was not given to them to defend themselves; they were denied the opportunity of defending themselves through legal counsel or to give opportunity to explain; the request for supply of the material, in particular the un-edited versions of videography for testing the veracity of such evidence was turned down and doctored or morphed video-clippings were admitted into evidence, the entire procedure being unduly hurried. As already noted the scope of judicial review in these matters is restricted and limited. Regarding non-grant of reasonable opportunity, we reiterate what was recently held in Jagjit Singh v. State of Haryana and Ors.[2006 (12) TMI 514 - SUPREME COURT] that the principles of natural justice are not immutable but are flexible; they cannot be cast in a rigid mould and put in a straitjacket and the compliance thereof has to be considered in the facts and circumstances of each case.

  We out rightly reject the argument of denial of reasonable opportunity and also that proceedings were concluded in a hurry. It has become almost fashionable to raise the banner of "Justice delayed is justice denied" in case of protracted proceedings and to argue "Justice hurried is justice buried" if the results are quick. We cannot draw inferences from the amount of time taken by the Committees that inquired the matters as no specific time is or can be prescribed. Further such matters are required to be dealt with utmost expedition subject to grant of reasonable opportunity, which was granted to the petitioners.

  As has been pointed out by the learned Counsel on behalf of the Union of India, basing his submissions on the main report of the Inquiry Committee of Lok Sabha, the request for supply of full-footage of video recordings and audio tapes or extension of time or representation through counsel for such purposes did not find favour with the Inquiry Committee mainly because the Committee had offered to the concerned Members of Lok Sabha an opportunity to view the relevant video-footage that was available with the Committee and point out the discrepancies therein, if any, to the it. But, as is mentioned in the report copy of which has been made available by the Union of India to us, the petitioners themselves chose to turn down the said offer. The situation was almost similar to the one in Jagjit Singh's case [2006 (12) TMI 514 - SUPREME COURT].

  We agree with the submissions of the learned Counsel for Union of India that the Inquiry Committee in the face of the refusal on the part of the concerned members was fully justified in not giving any credence to the objections that the video-clippings were doctored or morphed. The Committee in these circumstances could not be expected but to proceed to draw conclusions on the basis of the available material.

  The reports of the Inquiry Committee of Lok Sabha and the Committee on Ethics of Rajya Sabha indicate that both of the said Committees had called for explanations from each of the Members in question and had given due consideration to the same. The submissions of the learned Counsel for Union of India that the proceedings of the respective Committees were open to one and all, including these petitioners who actually participated in the proceedings could not be refuted. Therefore, it is not permissible to the petitioners to contend that evidence had been taken behind their back. The reports further show that the Committees had taken care not to proceed on the edited versions of the video recordings. Each of them insisted and procured the raw video-footage of the different sting operations and drew conclusions after viewing the same.

  As pointed out by the learned Counsel for Union of India, the evidence contained in the video recordings indicating demand or acceptance of money was further corroborated in two cases by the admissions made by the two Members of Rajya Sabha. Dr. Chhattrapal Singh Lodha had sought to attribute the receipt of money to a different transaction connected with some organization he was heading. But this explanation was not believed by the Committee on Ethics that unanimously found his complicity in unethical behavior on account of acceptance of money for tabling questions in Rajya Sabha. Dr. Swami Sakshiji Maharaj, on the other hand, went to the extent of expressing his regrets and displaying a feeling of shame for his conduct even before the Committee on Ethics.

  It is the contention of the petitioners that the evidence relied upon by the two Houses of Parliament does not inspire confidence and could not constitute a case of breach of privilege. Their argument is that the decision of expulsion is vitiated since it violated all sense of proportionality, fairness, legality, equality, justice or good conscience, and it being bad in law also because, as a consequence, the petitioners have suffered irreparable loss inasmuch as their image and prestige had been lowered in the eyes of the electorate.

  We are of the considered view that the impugned resolutions of Lok Sabha and Rajya Sabha cannot be questioned before us on the plea of proportionality. We are not sitting in appeal over the decision of the Legislative chambers with regard to the extent of punishment that deserved to be meted out in cases of this nature. That is a matter which must be left to the prerogative and sole discretion of the legislative body. All the more so because it is the latter which is the best Judge in exercise of its jurisdiction the object of which is self-protection. So long as the orders of expulsion are not illegal or unconstitutional, we are not concerned with the consequences for the petitioners on account of these expulsions.

  In these proceedings, this Court cannot not allow the truthfulness or correctness of the material to be questioned or permit the petitioners to go into the adequacy of the material or substitute its own opinion for that of the Legislature. Assuming some material on which the action is taken is found to be irrelevant, this Court shall not interfere so long as there is some relevant material sustaining the action. We find this material was available in the form of raw footage of video recordings, the nature of contents whereof are reflected in the Inquiry reports and on which subject the petitioners have not raised any issue of fact.

  On perusal of the Inquiry reports, we find that there is no violation of any of the fundamental rights in general and Articles 14, 20 or 21 in particular. Proper opportunity to explain and defend having been given to each of the petitioners, the procedure adopted by the two Houses of Parliament cannot be held to be suffering from any illegality, irrationality, unconstitutionality, violation of rules of natural justice or perversity. It cannot be held that the petitioners were not given a fair deal.

  Before concluding, we place on record our appreciation for able assistance rendered by learned Counsel for the parties in the matter.

  Thus, we find no substance in the pleas of the petitioners. Resultantly, all the Petitions and Transferred Cases questioning the validity of the decisions of expulsion of the petitioners from the respective Houses of Parliament, being devoid of merits are dismissed.

  C.K. Thakker, J. - The basic and fundamental question raised by the petitioners in all these petitions is the power of Parliament to expel a member. Other incidental and ancillary questions center round the main question as to authority of a House of Legislature of expulsion from membership. If the sole object or paramount consideration of granting powers, privileges and immunities to the members of Legislature is to enable them to ensure that they perform their functions, exercise their rights and discharge their duties effectively, efficiently and without interference of outside agency or authority, it is difficult to digest that in case of abuse or misuse of such privilege by any member, no action can be taken by the Legislature, the parent body.

  Doctrine Of Proportionality - Once it is conceded that an action of suspension of a member can be taken (and it was expressly conceded), I fail to understand why in principle, an action of expulsion is impossible or illegal. In a given case, such action may or may not be lawful or called for, but in theory, it is not possible to hold that while the former is permissible, the latter is not. If it is made referable to representation of the constituency, then as observed in Raj Narain, withdrawal of a member from the House even for a brief period is a serious matter both for the member and his constituency. Important debates and votes may take place during his absence even if the period be brief and he may not be able to present his view-point or that of the group or that of the constituency he represented. It is, however, in the nature of disciplinary or punitive action for a specific parliamentary offence, namely, disorderly behavior.

  I have already held that the decisions taken, orders made, findings recorded or conclusions arrived at by Parliament/State Legislature are subject to judicial review, albeit on limited grounds and parameters. If, therefore, there is gross abuse of power by Parliament/ State Legislature, this Court will not hesitate in discharging its duty by quashing the order or setting aside unreasonable action.

  I am in whole-hearted agreement with the above observations. On my part, I may state that I am an optimist who has trust and faith in both these august units, namely, Legislature and Judiciary. By and large, constitutional functionaries in this country have admirably performed their functions, exercised their powers and discharged their duties effectively, efficiently and sincerely and there is no reason to doubt that in coming years also they would continue to act in a responsible manner expected of them. I am equally confident that not only all the constituents of the State will keep themselves within the domain of their authority and will not encroach, trespass or overstep the province of other organs but will also act in preserving, protecting and upholding the faith, confidence and trust reposed in them by the Founding Fathers of the Constitution and by the people of this great country by mutual regard, respect and dignity for each other. On the whole, the situation is satisfactory and I see no reason to be disappointed for future.

  With the above observations and pious hope, I dismiss the Writ Petition as also all transferred cases, however, without any order as to costs.

  R.V. Raveendran, J. - Distinction between British Parliament and the Indian Parliament - Constitution of India differs significantly from Constitutions of other countries. It was made in the background of historical, social and economic problems of this country. Our Constitution-makers forged solutions and incorporated them. They made exhaustive provisions relating to Executive, Legislature, and Judiciary with checks and balances. While making specific and detailed provisions regarding Parliament, the Constitution also earmarked the areas where further provisions could be made by the Parliament by law. On the other hand, the Constitution of England is unwritten and flexible. The distribution and regulation of exercise of governmental power has not been reduced to writing. Further British Parliament was, at one time, also the highest court of justice and because of it, regarded as a superior court of record, with all its attendant trappings. United States has a short and rigid Constitution, expounded considerably by courts. Indian Constitution is exhaustive and sufficiently expounded by the Constitution makers themselves. In fact, with 395 Articles and 12 Schedules, it is the longest among world's Constitutions.

  The Constitution-makers have made detailed and specific provisions regarding the manner in which a person becomes a Member of Parliament (elected/nominated), the duration for which he continues as a member and the manner in which he ceases to be a member and his seat becomes vacant. Therefore neither the question of election or nomination, nor tenure, nor cessation/termination of membership of the House covered by the express provisions in the Constitution, can fall under 'other powers, privileges and immunities' of the House mentioned in Article 105(3).

  Conclusion - We have also noticed above that the Constitution makes express provisions for election/appointment and removal/cessation of service of the Executive (President and Vice-President), Judiciary (Judges of the Supreme Court and High Court) and all other constitutional functionaries (Attorney General, Auditor and Comptroller General, Chief Election Commissioner etc.). It is therefore inconceivable that the Constitution-makers would have omitted to provide for 'expulsion' as one of the methods of cessation of membership or consequential vacancy, if it intended to entrust such power to the Parliament.

  In view of the express provisions in the Constitution, as to when a person gets disqualified to be a member of either House of Parliament (and thereby ceases to be a member) and when a consequential vacancy arises, it is impermissible to read a new category of cessation of membership by way of expulsion and consequential vacancy, by resorting to the incidental powers, privileges and immunities referred to in Article 105.

  Clause (3) of Article 105 opens with the words 'in other respects'. The provision for 'powers, privileges and immunities' in Clause (3) occurs after referring to the main privilege of freedom of speech in Parliament, in Clause (1) of Article 105, and the main immunity against court proceedings in Clause (2) of Article 105. Therefore, Clause (3) is intended to provide for 'non-main' or 'incidental' or miscellaneous powers, privileges and immunities which are numerous to mention. Two things are clear from Clause (3). It is not intended to provide for the matters relating to nomination/election, term of office, qualifications, disqualification/cessation, for which express provisions are already made in Articles 80, 81, 83, 84, 101 and 102. Nor is it intended to provide for important privilege of freedom of speech or important immunity from court proceedings referred to in Clause (1) and (2) of Article 105.

  I am, therefore, of the considered view that there is no power of expulsion in the Parliament, either inherent or traceable to Article 105(3). Expulsion by the House will be possible only if Article 102 or Article 101 is suitably amended or if a law is made under Article 102(1)(e) enabling the House to expel a member found unworthy or unfit of continuing as a member. The first question is thus answered in the affirmative. Therefore the second question does not survive for consideration.

  Thus, I hold that the action of the two Houses of Parliament, expelling the petitioners is violative of Articles 101 to 103 of the Constitution and therefore invalid. Petitioners, therefore, continue to be Members of Parliament (subject to any action for cessation of their membership). Petitions and transferred cases disposed of accordingly.

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• 2007 (1) TMI 638
  
  Issues involved: Interpretation of penalty provision u/s 272A(2)(g) of the Income-tax Act, 1961 for late issuance of TDS certificate.
  
  The High Court considered an appeal filed by the revenue against an order of the Income-tax Appellate Tribunal related to the assessment year 1998-99. The issue at hand was the imposition of a penalty on the assessee for late issuance of TDS certificate, as the assessee had deducted tax at source but issued the certificate late. The revenue sought to levy the penalty u/s 272A(2)(g) of the Income-tax Act, 1961.
  
  The Tribunal based its decision on a Supreme Court case, Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, where it was highlighted that the imposition of a penalty for failure to fulfill a statutory obligation is akin to a quasi-criminal proceeding. The Supreme Court emphasized that a penalty should not be imposed merely because it is lawful to do so. It should be imposed when there is deliberate defiance of law, contumacious conduct, or conscious disregard of obligation. The authority must exercise its discretion judiciously, especially in cases of technical or venial breaches.
  
  The High Court noted that the revenue was seeking to impose a penalty solely because it had the power to do so, without considering the circumstances and exercising discretion as required by the Supreme Court's guidance. The Court opined that in cases of minor technical defaults, there is no substantial reason to levy a penalty. Consequently, the Court found no substantial question of law for consideration and dismissed the appeal.
  
  In conclusion, the High Court upheld the decision of the Tribunal and dismissed the appeal, emphasizing the importance of exercising discretion judiciously while imposing penalties for statutory violations.

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• 2007 (1) TMI 637
  
  Court: Supreme Court
  Citation: 2007 (1) TMI 637 - SC
  Judges: Mr. Tarun Chatterjee and Mr. V.S. Sirpurkar
  Decision: Appeal dismissed, no costs.

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