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Monthly Legal Bulletin September 2020
LABOUR LAWS
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Consult before amending the Karnataka Industrial Employment (Standing Orders) Rules: Karnataka High Court
The Karnataka High Court directed the State Government to file a statement regarding the consultation done before amending the Karnataka Industrial Employment (Standing Orders) Rules. Hearing a PIL questioning the constitutional validity of the amendments, a division bench of Chief Justice Abhay Shreeniwas Oka and Justice Ashok S Kinagi issued a notice to the Labour Department. The petition was filed by the Karnataka Industrial and Other Establishments Employees Federation. The petitioner’s counsel argued that employers had already taken coercive action based on the notification, taking advantage of the Covid-19 situation. The bench said the stay cannot be granted without giving an opportunity to the state government to submit its response. [Karnataka High Court in Public Interest Litigation dated 18.08. 2020.]
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Payment now at 50% of average wages payable for maximum 90 days unemployment instead of 25% earlier from 24.3.2020 to 31.12.2020: Ministry of Labour & Employment
ESIC is implementing the Atal Bimit Vyakti Kalyna Yojna under which unemployment benefit is paid to the workers covered under ESI Scheme. The ESI Corporation has decided to extend the scheme for one more year up to 30th June 2021. It has been decided to relax the existing conditions and the amount of relief for workers who have lost employment during the Covid-19 pandemic period. The enhanced relief under the relaxed conditions will be payable during the period of 24.03.2020 to 31st December 2020. Thereafter the scheme will be available with original eligibility condition during the period 01.01.2021 to 30.06.2021. Review of these conditions will be done after 31.12.2020 depending upon the need and demand for such relaxed condition.
The eligibility criteria for availing the relief has also been relaxed, as under:
a. The payment of relief has been enhanced to 50% of average of wages from earlier 25% of average wages payable up to maximum 90 days of unemployment.
b. Instead of the relief becoming payable 90 days after unemployment, it shall become due for payment after 30 days.
c. The Insured Person can submit the claim directly to ESIC Branch Office instead of the claim being forwarded by the last employer and the payment shall be made directly in the bank account of Insured Person.
d. The Insured Person should have been insurable employment for a minimum period of 2 years before his/her unemployment and should have contributed for not less than 78 days in the contribution period immediately preceding to unemployment and minimum 78 days in one of the remaining 3 contribution periods in 02 years prior to unemployment. [Source: Ministry of Labour & Employment, by PIB Delhi, 21.08. 2020]
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EPFO ensures hassle free service delivery through UMANG during COVID-19 pandemic: Ministry of Labour & Employment
The Unified Mobile Application for New-age Governance (UMANG) has been a big hit among Employees' Provident Fund Organisation (EPFO) subscribers enabling them to utilize services during COVID-19 pandemic from the comfort of their homes in hassle free manner. Presently a PF member can access 16 different services of EPFO on their mobile phone using UMANG App. For availing these services an active UAN (Universal Account Number) and a mobile number registered with the EPFO is required. EPFO’s member-centric services on UMANG App got a big thumbs-up from its subscribers during the COVID-19 pandemic period. On UMANG app a member can raise claim, track claim and know the status of claim raised. During the COVID-19 pandemic period from April to July 2020, a total of 11.27 lakhs claims were filed online through UMANG App. This was a whooping 180% increase compared to pre-Covid 19 period from December 2019 to March 2020, where only 3.97 lakhs claims were submitted through the app. UMANG has enabled members overcome the mobility restriction induced by COVID-19 pandemic in accessing EPFO’s services and thereby reduced the need to physically visit the offices of EPFO.
The most popular service availed by members through UMANG App is View Member Passbook. To ensure safe and secure delivery of its services at the door steps on its 66 lakh pensioners, EPFO brought the facility of View Pensioner Passbook as well as updating of Jeevan Pramaan Patra on UMANG app. With Smartphone penetration rising in India, EPFO has been able to extend access of its services to its members through mobile governance, thereby bridging the digital divide. This has enabled EPFO to overcome the challenge posed by COVID-19 restriction in providing social security services to its stakeholders, especially when they needed it the most. [ Source: Ministry of Labour & Employment, by PIB Delhi, dated 10.08.2020]
COMPANY LAWS
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Dispute must pre-exist before the receipt of the demand notice for admitting an application under Section 9 of IBC: National Company Law Tribunal, New Delhi
Challenge in present Appeal is to the Order passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi, by which Order, the Adjudicating Authority has admitted the Section 9 Application filed by Worldwide Metals Pvt. Ltd., the Operational Creditor. Aggrieved by the said Order, the shareholder of the Corporate Debtor J.P. Engineers Pvt. Ltd., preferred present Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC).
The facts in brief are that, the Corporate Debtor was a regular buyer of Aluminium Ingots and Wire Rods and had a running account with the Operational Creditor. Appellant claims that, the Principle Operational Debt claimed by the Operational Creditor pertains to purchase of Aluminium Ingots and Wire Rods. While admitting the Application under Section 9, the Adjudicating Authority observed that, the dispute raised by the Corporate Debtor is illusionary and moonshine, which is up-stretched with an intention to erase its liability and defeat the claim made by the Operational Creditor.
It is relevant to examine the ratio laid down by the Hon'ble Supreme Court in "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited-" wherein the Supreme Court held that, the 'existence of the dispute' must be pre-existing - i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. The adjudicating authority must follow the mandate of Section 9 of IBC, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act."
The existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the 'operational debt' is exceeding Rs. 1 lakh and the application shows that, the aforesaid debt is due and payable and has not been paid, in such case, in absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid 'operational debt', the application under Section 9 cannot be rejected and is required to be admitted.
In the reply to the legal notice, the Corporate Debtor has specifically stated that, as on 31st March, 2018 all amounts have been reconciled between both the Parties, but remain silent about any subsequent transactions. Even in the reply to the demand notice, there is no specific pleading with respect to any dispute regarding quality, quantity, price of the goods and services per se. It is significant to mention that, in the statement of 'Confirmation of Accounts', relied upon by the Appellant, is dated 1st April, 2019 and is for the period subsequent to 31st March, 2018. This document date is subsequent to the issuance of the demand notice and there are no tenable grounds to explain the reasons for the Operational Creditor to have signed this document, specially keeping in view that the 'Confirmation of Accounts' shows 'Nil' balance.
There is no documentary evidence filed by the Appellant to substantiate their plea that, all accounts have been reconciled and signed by both the Parties except for filing confirmatory letters which portray so many discrepancies and therefore, inspire no confidence. Both the defences raised by the Appellant's Counsel are mutually exclusive and cannot co-exist as a debt cannot be disputed and discharged at the same time. The Appellant did not raise any plausible contention requiring further investigation and the argument raised is not substantiated by any evidence. Hence, the 'dispute' does not truly exist in fact and is spurious and the principle laid by the Hon'ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited is squarely applicable to the facts of present case. Therefore, there is no illegality or infirmity in the Order passed by the Adjudicating Authority. Appeal dismissed. [Adish Jain Vs. Sumit Bansal and Ors. National Company Law Appellate Tribunal, New Delhi dated 10.08.2020 MANU/NL/0293/2020]
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Amendment made in ‘extract of annual return’ by the Companies (Amendment) Act, 2017 enforced: Ministry Of Corporate Affairs
MCA has finally notified the long-awaited amendment in section 92 relating to extract of annual return. Now, if a company has its own website, the annual return can be uploaded on the website and its extract will not be required to be attached with the Board’s report in Form No. MGT.9, in case the web link of such annual return has been disclosed in the Board’s report. Where accompany has no website, it will continue to attach the extract of annual return with the Board’s report in Form No. MGT.9. It is important to note that while the enabling provisions under Section 92 to provide for extract of MGT-9 has been omitted but the Rules continue to provide for the same. [Reported in Company Law Pulse dated 29.08.2020]
INTERNATIONAL NEWS
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Enrica Lexie Case - Will Not Close Case Against Italian Marines Without Hearing Victims' Families: Supreme Court
The Supreme Court refused to close the pending cases against two Italian Marines, without hearing the families of the victims. The Court asked the Centre to implead the victims in the case and said that they should be paid adequate compensation.
"We want you to pay not reasonable but "adequate" compensation. You will bring the cheque here and submit it before this Court. Mr. Mehta, join the victims' families as parties here", CJI SA Bobde told Solicitor General Tushar Mehta. The Union of India had filed an Application, seeking the closure of all the pending cases against two Italian Marines who had been accused of killing two fishermen from Kerala by mistaking their fishing boat for a pirate boat and opening fire at it. The application was filed in the light of the award passed by the Permanent Court of Arbitration last month in the dispute between India and Italy over the firing incident which took place near the shores of Kerala in February 2012. On July 2, 2020 the Permanent Court of Arbitration rendered its judgement, unanimously holding that India is entitled to claim compensation from Italy. It also held by a 3:2 majority that the Marines are entitled to immunity in relation to the acts that they committed during the incident and that India is precluded from exercising its jurisdiction over the Marines.
In light of the above, the Union of India filed the Application for the closure of the case. The CJI asked the SG: "You are saying that the case be taken over by their country. This does not take care of the fixed compensation. There are some legal difficulties involved here. Neither does this take care of the trial." The CJI further asked the SG how he could approach the Supreme Court without applying for withdrawal of prosecution of the criminal charge before the Special Court where the victims' families were also appearing. "You have not even sought withdrawal here. If you had done so, victims' families could have opposed that here."
The Court observed that it will not pass an Order without the victims' families being heard. The marines were now under the public prosecution of Rome. Accordingly, the SG has been directed to implead the families within a week. [Reported in LiveLaw August 7, 2020]
INCOME TAX LAWS
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Transparent Taxation: PMO
In order to reform tax system, Prime Minister launches platform for ‘Transparent Taxation - Honoring the Honest’. The platform has major reforms like Faceless Assessment, Faceless Appeal and Taxpayers Charter. With the launch of the Tax Charter, taxpayer is assured of fair, courteous and rational behaviour. Faceless appeal will be available across the country from 25th September, 2020.
The CBDT has carried out several major tax reforms in direct taxes in the recent years. The focus of the tax reforms has been on reduction in tax rates and on simplification of direct tax laws. Several initiatives have been taken by the CBDT for bringing in efficiency and transparency in the functioning of the IT Department. This includes bringing more transparency in official communication through the newly introduced Document Identification Number (DIN) wherein every communication of the Department would carry a computer generated unique document identification number. Similarly, to increase the ease of compliance for taxpayers, IT Department has moved forward with pre-filling of income tax returns to make compliance more convenient for individual taxpayers. Compliance norms for start-ups have also been simplified.
Further, with a view to provide for resolution of pending tax disputes, the IT Department also brought out the Direct Tax “Vivad se Vishwas Act, 2020” under which declarations for settling disputes are being filed currently. The focus of the tax reforms has been on reduction in tax rates and on simplification of direct tax laws. The launch of the platform for “Transparent Taxation – Honoring the Honest “by the Prime Minister will further carry forward the journey of direct tax reforms. [ Source: PIB dated 13.08.2020]
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If Assessee has reasonable cause for non-filing of Income Tax Return, penalty is unsustainable: Income Tax Appellate Tribunal
Present two appeals arise out of the orders passed by CIT(A), confirming penalty imposed under Section 271F of the Income-tax Act, 1961 ( IT Act) in relation to the assessment year 2011-12. The facts in the case of Arjun Dada Kharate are that he, along with other related persons, sold certain land/immovable property. The Assessee filed his return declaring total income. Since the return was beyond the time stipulated under Section 139(1) of IT Act, Assessee was served with a notice under Section 148 of IT Act. Assessment order was passed under Section 143(3) read with Section 147 of IT Act assessing total income at Rs.42,24,116. The Assessing Officer (AO) imposed penalty of Rs.5,000 under Section 271F of IT Act on the ground that, the Assessee failed to file his return of income within the time prescribed under Section 139(1) of IT Act. The Assessee made certain written submissions before the learned CIT(A) seeking deletion of penalty, which did not find favour with the learned first appellate authority, who affirmed the penalty.
It is seen from the impugned order that, the Assessee stated reasons before the learned CIT(A) for not furnishing the return under Section139(1) of the IT Act. The reasons referred to the Assessee being an agriculturist and illiterate; facing financial and family problems; under the impression that gain arising from sale of any agricultural land not chargeable to tax.
In the facts and circumstances of present case, it becomes apparent that, there was reasonable cause on the part of the Assessee in not filing return under Section 139(1) of IT Act, against which the penalty has been imposed and confirmed under Section 271F of the IT Act. Section 273B of the IT Act provides that, no penalty shall be imposed, under Section 271F of the IT Act where the Assessee establishes a reasonable cause for failure referred to in said section. In the given facts, there was a reasonable cause with the Assessee. This being the position, the case gets covered under Section 273B of the IT Act. As such, the penalty is ordered to be deleted. [Arjun Dada Kharate, Vs. DCIT, Circle-1, Nashik, Income Tax Appellate Tribunal, dated 10 Aug 2020, MANU/IP/0127/2020]
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Loss arose to Assessee on sale of another assets cannot set off from capital gain of previous assets : Income Tax Appellate Tribunal
The facts in brief are that, the Assessee is an individual and filed his return of total income declaring income of Rs. 74,69,570. During the year under consideration, the Assessee sold a commercial property being a showroom for a total consideration of Rs. 1,40,00,000. The indexed cost of acquisition was Rs. 36,74,643. The expenditure in connection with transfer of property was Rs. 24,165 and thus, the long term capital gain from sale of property was Rs. 1,03,01,192. The amount of sale consideration so received was transferred to capital gain account and such amount was used for purchases of flat.
The Assessee claimed deduction of Rs. 1,03,01,192 under Section 54F of the Income Tax Act, 1961 ( IT Act). During the year, the Assessee has suffered long term capital loss of Rs. 14,76,730 on sale of shares which the Assessee claimed carried forward as long term capital loss for the current year. The Assessing Officer (AO) firstly set off the long term capital loss suffered from shares from the long term capital gain from sale of commercial property and after intra-head adjustment, the AO computed net long term capital gain at Rs. 88,24,461 and from this amount, he allowed deduction under Section 54F of IT Act and disallowed the carry forward the long term capital loss of Rs. 14,76,729 for the current year on sale of shares. By the impugned order, the learned Commissioner of Income Tax (Appeal) (CIT(A)) confirmed the action of the AO against which the assessee is in further appeal.
The main issue in present appeal is whether it is lawful to first compute capital gain after doing intra head adjustments and whether the deductions under Section54F of IT Act should be allowed from the net income computed after intra head adjustments. The scheme of Sections 45 to 55A of IT Act, provide for the computation of capital gains, and the effect has to be given first to the provision of capital gains as given under the scheme and then apply the provisions of Section 70 of IT Act. Section 70 of IT Act would come into play only when the capital gains have been computed in accordance with the provisions contained in Sections 45 to 55A of IT Act. Thus, if, after work out of deduction under Section 54F of IT Act, if the capital gain arose on sale of certain assets is not chargeable to capital gain than the loss arose to Assessee on sales of another assets cannot set off from gain of such assets. It is not necessary that one should first apply Section 70(3) of IT Act and thereafter only, the Assessee could invest the capital gain arising from the long term capital asset.
Present Tribunal set aside the orders of lower authorities and direct the AO to compute the capital gain from sale of commercial property by not doing intra-head adjustment for the loss suffered from sale of shares and allow to carry forward the long term capital loss of Rs. 14,76,729 for the current year on sale of shares. The appeal of the Assessee is allowed. [Shri Naresh Jain Vs. The ACIT Circle-3 Jaipur - (Income Tax Appellate Tribunal) (11 Aug 2020) MANU/IJ/0140/2020]
INDIRECT TAX LAWS
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Shortage of funds due to pandemic – Whether GST dues can be paid in installments?
In cases where the taxpayer is unable to pay its tax dues under GST, Section 80 of the CGST Act provides an option to such taxpayer to either extend the time limit for making payment of any amount due under the act or to make payment of the said amount in monthly instalments (not exceeding 24 instalments). However, the said option is not available in case of the amount due as per the liability self-assessed in any return. In order to claim such an option, the taxpayer is required to make an application to the Commissioner in the prescribed form (DRC-20) on the common portal, who may, for reasons to be recorded in writing, allow such extension of time limit or payment of amount due in instalments.
Where the taxpayer is unable to file its GST returns due to paucity of funds, the amount of tax due for such period cannot be considered as a "liability self-assessed in any return" so as to be excluded from the ambit of Section 80 as no liability has been self-assessed in any return. Accordingly, in such case, an application u/s 80 can be filed by the taxpayer. However, such an application cannot be filed on the GST Common Portal at present as the application in Form DRC-20 can be filed only in those cases for which a demand has been raised by the Department and a Demand ID has been issued.
The Hon'ble Kerala High Court in the case of Pazhayidom Food Ventures (P.) Ltd. v. Superintendent Commercial Taxes [2020] 118 taxmann.com 139 has recently allowed payment of pending tax liability for the period November 2018 to March 2019 in monthly instalments where the petitioner whose business had come to total standstill due to COVID-19, approached the Hon'ble High Court seeking instalments and established its bonfide intention of discharging the pending tax dues by March 2021. Reference is made to the decision of the Hon'ble Gujarat High Court in Octagon Communications Pvt. Ltd. v. Union of India [2019] 105 taxmann.com 262/73 GST 858. [(2020) 118 taxmann.com 564 (Article)]
BANKING LAWS
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Amendment to the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017: Insolvency and Bankruptcy Board of India (IBBI)
The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2020 on 05.08.2020. The Insolvency and Bankruptcy Code, 2016 enables a corporate person to initiate voluntary liquidation process if it has no debt or it will be able to pay its debts fully from the proceeds of the assets. The corporate person appoints an insolvency professional to conduct the voluntary liquidation process by a resolution of members or partners, or contributories, as the case may be. However, there can be situations which may require appointment of another resolution professional as the liquidator. The amendment made to the Regulations provides that the corporate person may replace the liquidator by appointing another insolvency professional as liquidator by a resolution of members or partners, or contributories, as the case may be. The amended regulations are effective from 05.08.2020. [Ministry of Corporate Affairs, by PIB Delhi dated 07.08.2020]
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NABARD launched Structured Finance and Partial Guarantee Programme:
National Bank for Agriculture and Rural Development (NABARD) has unveiled a Structured Finance and Partial Guarantee Programme to Non-Banking Finance Companies (NBFCs) and Microfinance Institutions (MFIs). It is a dedicated debt and credit guarantee product. The programme aims to ensure the undisturbed flow of credit in COVID-19-affected rural areas. To launch the programme, NABARD has signed agreements with Vivriti Capital and Ujjivan Small Finance Bank.
Under the Structured Finance and Partial Guarantee Programme, NABARD will provide partial guarantee on pooled loans extended to small and mid-sized Microfinance Institutions (MFIs).
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It will help facilitate Rs.2,500 crore funding in the initial phase and is expected to be scaled up in the future.
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The program will cover over 1 million households across 28 states and 650 districts.
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It is expected that the partially guaranteed loan facility will catalyze financing to millions of households, agricultural, and business markets to sustain in the post-COVID-19 situation.
With NABARD as a guarantor and a convincing product construct in place, the programme has attracted many banks and small finance banks to participate. [NABARD, Reported on August 26, 2020]
PROPERTY LAWS
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A daughter of a coparcener shall by birth become a coparcener in her own right in the same manner as the son: Supreme Court
In a landmark decision the Supreme Court affirmed the retroactive nature of Section 6 and upheld the right of a daughter to be entitled to an equal share as a son in an ancestral property, irrespective of when she was born. The Court stated that though they can be claimed, with effect from 9.9.2005, they confer benefits based on the antecedent event and the operation of the Amendment is based upon the coparcenary status that arose earlier, by birth. The Court further emphasized on conferral of right by birth and not by inheritance and therefore, “it is irrelevant that a coparcener whose daughter is conferred with the rights is alive or not”.
This decision has finally put to rest the issues surrounding the applicability and effect of Section 6, in that it categorically reaffirms that a daughter of a coparcener shall by birth become a coparcener in her own right in the same manner as the son. The retroactive effect of the Amendment would confer coparcenary rights on daughters living on its commencement date, irrespective of whether they were born prior to it and regardless of whether their father had died before the Amendment. The decision would open the doors to fresh litigation, to daughters who could not previously approach the courts and claim their coparcenary rights. This landmark ruling provides parity of rights among male and female coparceners of a joint Hindu family by granting women, though belatedly, their rightful share in ancestral property and embracing the constitutionally envisaged goal of gender justice. [Vineeta Sharma v. Rakesh Sharma, Civil Appeal No. Diary no.32601 OF 2018 dated on 11. 08.2020]
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Monitoring Committee appointed vide 2006 order does not have the power to seal residential premises on the private land: Supreme Court
The Apex Court while dealing with the authority of the “Monitoring Committee to seal the residential premises on the private land” particularly when they are not being used for the “commercial purpose”, the 3-judge bench of Arun Mishra, BR Gavai and Krishna Murari, JJ has held that the Monitoring Committee is not authorized to take action concerning the residential premises situated on the private land. If there is unauthorized construction or in case of deviation, the requisite provisions are under the Delhi Municipal Corporation Act, 1957 (DMC Act), such as sections 343, 345, 347(A), 347(B). In the order reported in (2004) 6 SCC 588 in this case, this Court considered the question of regularization of illegal industrial activities in the context of a violation of Master Plan and industrial activities in residential non-conforming areas of Delhi. Requisite directions were issued for closure or relocation of industrial units nonconfirming with the ecological balance considering the right of a hygienic, clean and safe environment. The Monitoring Committee was appointed and empowered in 2006 by this Court to take action within the powers conferred vide judgment in M.C. Mehta v. Union of India, (2006) 3 SCC 399. The Monitoring Committee was authorized to take care of the unauthorized colonies, and the Special Task Force was directed to remove the encroachments from the public roads and public streets.
Considering the various orders passed by it from time to time, before the constitution of the Monitoring Committee, The Court found that it, at no point in time, has empowered the Monitoring Committee to take action with respect to residential premises not used for commercial purpose. “No doubt about it that matter of encroachment is a matter of concern, but the Monitoring Committee can act within the four corners of powers conferred upon it and purpose for which the court appointed the Monitoring Committee. It cannot exceed its powers and take any action beyond its authorization by the court.”
Considering the order dated 7.9.2018 where the Court had specifically noted in the aforesaid paragraph that the Monitoring Committee is doing the best to remove the encroachments/ unauthorized constructions or misuse of the property, The Court said that but that the same relates to the encroachments on the public land and unauthorized colonies, and at no point of time this Court has authorized the Monitoring Committee to take action concerning residential premises which were standing on the private land and were not being misused. The aforesaid observations are not with respect to the Committee’s authorization but have to be read in the context of the purpose for which the Monitoring Committee had been appointed. “The power of the Monitoring Committee could not be said to be widened by the aforesaid observations made in the order. This Court specifically dealt with in several orders the questions relating to power and the purpose for which the Monitoring Committee had been appointed.”
When asked to give it’s considered opinion specifically as to whether at any point in time in the past, it sealed any residential premises, which were not misused for commercial purposes, the Monitoring Committee kept silent on this aspect and did not cite even a single such instance. It further noticed that the power of sealing of property carries civil consequences. A person can be deprived of the property by following a procedure in accordance with law. The Monitoring Committee is not authorized to take action concerning the residential premises situated on the private land. If there is unauthorized construction or in case of deviation, the requisite provisions are under the DMC Act, such as sections 343, 345, 347(A), 347(B). The mode of action and adjudication under the Act is provided including appellate provisions and that of the Tribunal.
“It would not be appropriate to the Monitoring Committee to usurp statutory powers and act beyond authority conferred upon it by the Court. The Monitoring Committee could not have sealed the residential premises, which were not misused for the commercial purpose, nor could it have directed the demolition of those residential properties.”
It noticed that when the Monitoring Committee is not empowered to take action, the incumbents could not have been deprived of the due process of protection in accordance with law. As against the action of the Monitoring Committee, no appeal lies elsewhere. Even High Court is not authorized to entertain any matter and scrutinize its action, such is the drastic step taken by this Court by way of an exceptional measure in public interest, and it is confined to the misuse of residential property for commercial purpose and encroachments and unauthorized construction on the public land, roads. “Article 300A of the Constitution provides that nobody can be deprived of the property and right of residence otherwise in the manner prescribed by law. When the statute prescribes a mode, the property’s deprivation cannot be done in other modes since this Court did not authorize the Committee to take action in the matter. An action could have been taken in no other manner except in accordance with the procedure prescribed by law.” [MC Mehta v. Union of India, 2020 SCC OnLine SC 648, decided on 14.08.2020]
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Right to Property Is a Constitutional as Well As Human Right: Supreme Court
The right to property is still a constitutional right and a human right, reiterated the Supreme Court while allowing an appeal filed by Hari Krishna Mandir Trust in the matter of a land dispute with the Pune Municipal Corporation. The bench comprising Justices Indu Malhotra and Indira Banerjee observed that the right to property includes any proprietary/ hereditary interest in the right of management of a religion endowment, as well as anything acquired by inheritance.
The trust, in this case, had filed an application in which it requested the State Government to correct the wrong entry (as internal road to the Trust) in the name of Pune Municipal Corporation. The Urban Development Department, Government of Maharashtra rejected the proposal and held that the Pune Municipal Corporation is the owner in respect of the land. The High Court dismissed the writ petition challenging the said order passed by the Government and held that the land in question had vested under Section 88 of the Regional and Town Planning Act. Thus the Trust approached the Apex Court.
Allowing the Trust's Appeal, the Apex Court bench observed that the High Court misconstrued Section 88 of the Regional and Town Planning Act, by reading the same in isolation from the other provisions of the Regional and Town Planning Act, particularly Sections 65, 66, 125 and 126 thereof. In the light of admissions, on the part of the respondent authorities that the private road measuring 414 sq. was private property never acquired by the Pune Municipal Corporation or the State Government, the respondents had a public duty under Section 91 to appropriately modify the scheme and to show the private road as property of its legitimate owners, as per the property records in existence, and or in the award of the Arbitrator, the Court said.
The bench also observed that in the absence of any proceedings for acquisition or for purchase, no land belonging to the Trust could have vested in the State. In this regard, the bench, referring to Article 300A of the Constitution, said: The right to property may not be a fundamental right any longer, but it is still a constitutional right under Article 300A and a human right as observed by this Court in Vimlaben Ajitbhai Patel v. Vatslaben Ashokbhai Patel and Others. In view of the mandate of Article 300A of the Constitution of India, no person is to be deprived of his property save by the authority of law. The appellant trust cannot be deprived of its property save in accordance with law.
The court further observed that the Article 300A embodies the doctrine of eminent domain which comprises two parts, (i) possession of property in the public interest; and (ii) payment of reasonable compensation. It further observed: "The State possesses the power to take or control the property of the owner for the benefit of public. When, however, a State so acts it is obliged to compensate the injury by making just compensation. The right to property includes any proprietary interest hereditary interest in the right of management of a religion endowment, as well as anything acquired by inheritance. However, laudable be the purpose, the Executive cannot deprive a person of his property without specific legal authority, which can be established in a court of law."
The court further added that though the right to claim compensation or the obligation of the State to pay compensation to a person who is deprived of his property is not expressly provided in Article 300A of the Constitution, it is inbuilt in the Article. It said: "The State seeking to acquire private property for public purpose cannot say that no compensation shall be paid. The Regional and Town Planning Act also does not contemplate deprivation of a land holder of his land, without compensation. Statutory authorities are bound to pay adequate compensation."
The High Court exercising their jurisdiction under Article 226 of the Constitution of India, not only have the power to issue a Writ of Mandamus or in the nature of Mandamus, but are duty bound to exercise such power, where the Government or a public authority has failed to exercise or has wrongly exercised discretion conferred upon it by a Statute, or a rule, or a policy decision of the Government or has exercised such discretion malafide, or on irrelevant consideration. In all such cases, the High Court must issue a Writ of Mandamus and give directions to compel performance in an appropriate and lawful manner of the discretion conferred upon the Government or a public authority, the bench said while setting aside the High Court judgment.
While allowing the appeal, the Court also directed to delete the name of the Pune Municipal Corporation as owner of the private road in the records pertaining to the Scheme and carry out such other consequential alterations.' [Hari Krishna Mandir Trust vs. State of Maharashtra, Civil Appeal No.6156 of 2013 DOJ 07.08.2020]
PERSONAL LAWS
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Husband and Wife Equal Partners In A Marriage, Wife Best Suited To Be The Guardian Of A Husband In A Comatose Or Vegetative State: Bombay High Court
The Bombay High Court held that in a marriage, husband and wife are equal partners and the wife is best suited to be the guardian of her husband who is lying in a vegetative state. Court directed all concerned authorities to accept her status as a guardian after she cited mounting medical expenses to gain access to her husband's finances but the bank refused. Division bench of Justice Ujjal Bhuyan and Justice Milind Jadhav were hearing a writ petition filed by one Rajni Sharma, whose husband Hariom Sharma is in a state of comatose, a vegetative state, with no signs or prospect of revival. Hariom Sharma suffered cardiac arrest while jogging in November 2018 and has been in the said state ever since. Besides the husband, the petitioner has two sons, one of whom is a minor and a dependent mother-in-law to look after. With mounting medical bills and other household expenses and having hardly any income of her own, petitioner in a state of helplessness moved the High Court.
Hariom Sharma is a businessman having multiple businesses. He is the Director of several companies like M/s. Solus Software and Systems LLP, M/s. Solus Security Systems Private Limited and M/s. PSIM Community LLP. That apart, he is a partner in the firm M/s. Ampa Enterprises. On November 15,2018, Hariom Sharma suffered a cardiac arrest and he was immediately admitted in Kokilaben Dhirubhai Ambani Hospital and Medical Research Institute. He was treated in the said hospital for a period of almost three months. Despite extensive treatment including surgeries by a panel of doctors, there was very little improvement though his health condition stabilized, he remained in a vegetative state. He was discharged from the hospital on February 6, 2019 although he continued to remain in a paralytic vegetative state. As per medical advice, he was required to take all necessary care under trained paramedic personnel 24x7 along with physiotherapy and speech therapy.
Despite all the care and monitoring, Hariom Sharma continues to remain in a vegetative state till date. According to the petitioner, the medical expense incurred in looking after her husband is quite substantial. She had to create a well-equipped air conditioned nursing room having amenities like a recliner bed, air mattress and life-saving support system, etc. Besides, a full time nurse and part time physio and speech therapists have been appointed to continue with the treatment of her husband. Moreover, in addition to her husband, the petitioner also has to look after her mother-in-law who is having her own age related ailments; besides looking after her children who are all dependents. That apart, there are other household expenses for herself and for the family combined. Thus, when the petitioner approached the concerned banks to allow her to put her signature in place of her husband, the request was turned down and petitioner was advised to approach the competent court to get herself appointed as her husband's guardian. Whereas, both Union and the State while not contesting the factual narrative of the petitioner, have questioned maintainability of the writ petition contending that the relief sought for is basically a private relief; invoking public law remedy may not be justified.
After hearing submissions of all parties, Court referred to Supreme Court's decision in Aruna Ramchandra Shanbaug Vs. Union of India and observed- "When we say that a person is in coma or in a comatose condition or in a vegetative state, it cannot be construed that such a person is a physically challenged person or a mentally challenged person as is understood under the relevant statutes. Nor such a person can be construed to be a minor for the purpose of appointment of guardian. As such, it is quite evident that the relevant statutes relating to appointment of guardian would not be applicable to persons lying in a comatose condition or in a vegetative state. Infact, there is consensus at the Bar that at present there is no legislation in India relating to appointment of guardians to patients lying in comatose or vegetative state."
Moreover, the bench noted that, "According to Hindu vedic philosophy, marriage is a sanskar or a sacrament. What is essentially contemplated is a union of two souls. The eternal being is composed of two halves i.e., the man and the woman. Both the halves are equal and one-half is incomplete without the other. As long as the wife survives, one half of the husband survives. In such circumstances, there can be no manner of doubt that conceptually the wife can be said to be best-suited to be the guardian of her husband who is under a state of incapacity or disability on account of being in a comatose condition or vegetative state."
Finally, to ensure that guardianship is being used for the benefit of the person who is in a vegetative state, Court directed the Member Secretary of Maharashtra State Legal Services Authority to monitor functioning of the petitioner as guardian of Hariom Sharma every three months and submit report to the Maharashtra State Legal Services Authority which shall be compiled for a period of two years. [Rajni Hariom Sharma v. Union of India, WP(ST) No. 3883 of 2020, decided on 27-08-2020]
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In a “shared household” daughter-in-law can be evicted without seeking decree of eviction against son with whom she had moved on the suit property after the marriage of the son of the plaintiff with the appellant.: Allahabad High Court
Vivek Kumar Birla, J., while addressing a matter with regard to “shared household”, held that, “daughter-in-law can be evicted without seeking decree of eviction against son with whom she had moved on the suit property after the marriage of the son of the plaintiff with the appellant.” Appellant was married to the plaintiff’s son — Vijay Gandhi. In the year 2013, Vijay Gandhi deserted the appellant and filed a divorce petition under Section 13 of the Hindu Marriage Act.
Further, it has been noted that an FIR was lodged against the appellant by the plaintiff. Plaintiff is the owner of the property wherein he permitted his son and the defendant to live on the first floor of his house. Defendant started harassing the plaintiff who is old and handicapped along with his wife. In view of the above incident, the plaintiff asked his son to vacate the house with the defendant, who later came back and refused to vacate the house. Hence suit for eviction was filed against the defendant. Substantial question in the present appeal was - (I) Whether as per definition of shared household provided under Section 2(s) of the Protection of Women from Domestic Violence Act, 2005 appellant daughter-in-law can be evicted without seeking a decree of eviction against son with whom she had admittedly moved on the first floor of the suit property after the marriage of the son of the plaintiff with appellant? Supreme Court in its decision, S.R. Batra v. Tarun Batra, (2007) 3 SCC 169, while considering the aspect of “shared household” held that where the plaintiff is the exclusive owner, it cannot be called a “shared household”. The wife’s claim for alternative accommodation against the plaintiff was rejected and was held that it can be claimed only against the husband and not against the in-laws or other relatives.
S.R. Batra v. Tarun Batra, (2007) 3 SCC 169: a shared household would only mean the house belonging to or taken on rent by the husband, or the house which belongs to the joint family of which the husband is a member. Hence, in the Court’s opinion, no substantial question of law arose or can be raised in the present second appeal.
Further, the Court added that, it is not in dispute that the husband was not residing in the suit property and left the house. It is also not being questioned that if parents permit his son to live in their house he would be a licensee. If his wife is also living with him, she would also be a licensee. Where the son has left and is not residing in the suit property, no relief is being or is claimed against him. Since he is not living in the suit property, question of filing a separate suit or which may attract any common question of law or fact would also not arise.
Lastly, answering the substantial question of law in the negative, bench once again cited the Supreme Court decision in S.R. Batra with regard to the shared household and the argument for counsel for the respondent (wife) that definition of the shared household includes a house where the person aggrieved lives or at any stage had lived in a domestic relationship was specifically considered and rejected.
Court added that a reading of the said judgment, subject to correction, prima facie, reflects that husband was not a party to the suit and it was held that the claim for alternative accommodation can only be made against the husband and not against the in-laws or other relatives. Therefore, in view of the definition of the shared house, as provided under Section 2 (s) of the Act, 2005 daughter-in-law can be evicted without seeking a decree of eviction against the son with whom she had admittedly moved in the suit property after the marriage of the son of the plaintiff. In view of the above observations, petition was dismissed. [Sujata Gandhi v. S.B. Gandhi, 2020 SCC OnLine All 763, decided on 12-06-2020]
ARBITRATION LAWS
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The invocation of arbitration without complying with pre-arbitration mediation clause was not fatal when there was no scope for an amicable settlement between the parties: Bombay High Court
The Bombay High Court while determining a petition for appointment of a sole arbitrator under Section 11(6) of the Arbitration Act, discussed upon the mandatory nature of pre-arbitration clauses and examined if an arbitration clause, which provides a discretion to the disputing parties to invoke arbitration, would qualify as an arbitration clause.
Whilst the court acknowledged the mandatory nature of a pre-arbitration mediation clause enumerated in the contract between the parties, it also placed reliance on the judgment rendered by the Supreme Court in the case of Visa International Limited v. Continental Resorts (USA) Limited, (2009) 2 SCC 55, wherein it was held that, if from the correspondence between the parties, it becomes clear that both parties do not intend to come to any kind of settlement, then a pre-condition for amicable discussion for resolution which is mandatory/binding on the parties, will not hinder furtherance of the dispute resolution process. The court, thus, on consideration of the facts and circumstances of the instant case held that since, there was no scope for an amicable settlement between the parties, the invocation of arbitration without complying with pre-arbitration mediation clause was not fatal.
Further, the court, while examining if the clause was a valid arbitration clause held that, in the instant case there was no pre-existing agreement between the parties which stated that they "should" or they "will" refer their disputes to arbitration. The court, interpreted the terms "shall" and "may" used in the said clause and held that, the parties clearly made it optional for them to refer their disputes to arbitration by using the word "may" in the second part of the clause in contrast to the first part, wherein the word "shall" has been used in order to indicate the mandatory agreement between the parties to refer the disputes for amicable settlement to the designated personnel of each party first and it is only after failing in the same, the parties "may" refer the dispute to arbitration. The court thus, held that the said clause was not an arbitration clause. [Quick Heal Technologies Limited v. NCS Computech Private Limited and Ors., Arbitration Petition No.43 of 2018 (Bombay High Court). Decided on June 5, 2020.]
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Even the court cannot ratify an award ex post facto by extending the period in an Arbitration petition: Madras High Court
A question arose for consideration before the court with regard to the validity of an arbitral award which was passed a year after the period fixed by the court had lapsed.
The court after undertaking a comparative analysis of Section 28(1) under the erstwhile Arbitration Act, 1940 and the Section 29A of the Arbitration Act, held that unlike the provision of Section 28(1) of the Arbitration Act, 1940 which gave wide powers to the court to enlarge the time for making an award even after the expiry of the time for making the award or even after the award has been made; the Arbitration Act has curtailed these powers and restricted the extension only within the provisions of Section 29A(3) and 29A(4). Thus, as per the court a similar power has not been incorporated under Section 29A of the Arbitration Act unlike Section 28(1) of the Arbitration Act, 1940. Hence, the Madras High Court held that it is only the court that can extend the period for making of the award after the expiry of the 1 (one) year period under Section 29A(1) or the extended period under Section 29A(3). Thus, the Madras High Court held that, even the court cannot ratify an award ex post facto by extending the period in a petition filed under Section 34 of the Arbitration Act by an aggrieved party. Further, the court also enumerated that the language of Section 29A(4) of the Arbitration Act clearly stipulates that if the award is not made within the stipulated period or the extended period then the mandate of the arbitrator stands terminated unless extended by court. [Suryadev Alloys and Power Private Limited v. Shri Govindraja Textiles Private Limited, O.P. Nos. 955 of 2019 and 15 of 2020 (Madras High Court). Decided on May 8, 2020.]
LITIGATION LAWS
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Action instituted under section 31 of the Specific Relief Act, 1963 not an action in rem: Supreme Court
Supreme Court while refusing to hold an action instituted under section 31 of the Specific Relief Act, 1963 as an action in rem, the 3-judge bench of RF Nariman, Navin Sinha and Indira Banerjee, JJ has held that the proceeding under section 31 is with reference to specific persons and not with reference to all who may be concerned with the property underlying the instrument “the cancellation of the instrument under section 31 is as between the parties to the action and their privies and not against all persons generally, as the instrument that is cancelled is to be delivered to the plaintiff in the cancellation suit. A judgment delivered under section 31 does not bind all persons claiming an interest in the property inconsistent with the judgment, even though pronounced in their absence.”
Explaining the meaning of the expression “any person against whom a written instrument is void or voidable…” under Section 31(1), the Court said that the expression “any person” does not include a third party, but is restricted to a party to the written instrument or any person who can bind such party. Importantly, relief under section 39 of the Specific Relief Act, 1877 would be granted only in respect of an instrument likely to affect the title of the plaintiff, and not of an instrument executed by a stranger to that title. The expression “any person” in this section includes a person seeking derivative title from his seller.
“The principle behind the section is to protect a party or a person having a derivative title to property from such party from a prospective misuse of an instrument against him.” Further, when a written instrument is adjudged void or voidable, the Court may then order it to be delivered up to the plaintiff and cancelled. Hence, the action under section 31(1) is strictly an action inter parties or by persons who obtained derivative title from the parties, and is thus in personam.
An action that is started under section 31(1) cannot be said to be in personam when an unregistered instrument is cancelled and in rem when a registered instrument is cancelled. The suit that is filed for cancellation cannot be in personam only for unregistered instruments by virtue of the fact that the decree for cancellation does not involve its being sent to the registration office – a ministerial action which is subsequent to the decree being passed. “Thus, the factum of registration of what is otherwise a private document inter parties does not clothe the document with any higher legal status by virtue of its registration.”
It further explained that when it comes to cancellation of a deed by an executant to the document, such person can approach the Court under section 31, but when it comes to cancellation of a deed by a non-executant, the non-executant must approach the Court under section 34 of the Specific Relief Act, 1963. Cancellation of the very same deed, therefore, by a non-executant would be an action in personam since a suit has to be filed under section 34. However, cancellation of the same deed by an executant of the deed, being under section 31, would somehow convert the suit into a suit being in rem. All these anomalies only highlight the impossibility of holding that an action instituted under section 31 of the Specific Relief Act, 1963 is an action in rem. [Deccan Paper Mills Co. Ltd. v. Regency Mahavir Properties, 2020 SCC OnLine SC 655, decided on 19.08.2020]
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Audio Video Recording Of Witness Statements and Installation Of CCTV In Police Stations: Supreme Court
The Supreme Court has directed the Centre to file its affidavit before 7th September 2020 on the issues of implementation of audio-video recording of witness statements recorded by a Police officer under Section 161 CrPC and installation of CCTV in Police Stations. While considering an SLP filed by one Paramvir Singh Saini last month, the bench headed by Justice RF Nariman, had said that it is important to "follow up" on the directions issued in Shafhi Mohammad v. State of Himachal Pradesh' (2018) 5 SCC 311, with respect to introduction of "videography in investigation".
"We request Shri K. K. Venugopal, learned Attorney General of India, not only to appear on behalf of the Union of India but also to assist us in this case" said the bench yesterday while directing the Centre to file affidavit in this issue. The case is posted on 16th September, 2020. [Paramvir Singh Saini v. Baljit Singh . Case No.: SLP (Crl) DN 13346/2020 reported in LiveLaw on 06.08.2020]
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Validity of Fitness, Permits, Licenses, Registration or other documents of Motor Vehicles extended till December, 2020: Ministry of Road Transport & Highways
Ministry of Road Transport and Highways has decided to extend the validity of Fitness, Permits, Licenses, Registration or other documents under Motor Vehicles Act, 1988 and Central Motor Vehicle Rules, 1989 till the 31st of December 2020. The Ministry had earlier issued advisories on 30th March and 9th June this year regarding extension of validity of the documents related to Motor Vehicles Act, 1988 and Central Motor Vehicle Rules, 1989.
It was advised that the validity of Fitness, Permit (all types), License, Registration, or any other concerned document(s) may be treated to be valid till the 30th of September 2020.Taking into consideration the situation still continuing due to conditions for prevention of the spread of COVID-19 across the country, it has further advised that the validity of all of the above-referred documents whose extension of validity could or not likely be granted due to lock-down and which had expired since 1st of Feb, 2020 or would expire by 31st Dec 2020, the same may be treated to be valid till 31st of December 2020. Enforcement authorities have been advised to treat such documents valid till the 31st of December 2020. This step of the Ministry of Road Transport and Highways is likely to help out the citizens in availing transport-related services. [Ministry of Road Transport & Highways PIB, Press Release dated 24.08.2020].
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