No Bail For Offence Under S.447 Companies Act 2013 Without Fulfilling Twin Conditions

 No Bail For Offence Under S.447 Companies Act 2013 Without Fulfilling Twin Conditions

The Supreme Court held that bail, including anticipatory bail, cannot be granted for an offence under Section 447 (punishment for fraud) of the Companies Act 2013 unless twin conditions are satisfied.

Section 212(6) (investigation into affairs of Company by Serious Fraud Investigation Office) of the Companies Act states that the offences covered under Section 447 are cognisable in nature and no person can be released on bail unless he satisfies the twin conditions, that are: (1)that a Public Prosecutor should be given an opportunity to oppose the application for such release; (2)where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds for believing that the person is not guilty and is unlikely to commit any offence while on bail.

The Supreme Court while cancelling their bail, noted that the High Court, in its impugned judgments, failed to note the conduct of the accused persons who refused to cooperate with the authorities.

In these cases, there is a brazen attempt made on the part of the respondents-accused to stall the criminal proceedings initiated against them, in respect of the serious economic offences allegedly committed by them, by not respecting the summons/warrants issued by the Special Court from time to time and thereby causing obstruction in the administration of justice.

Case Details: SERIOUS FRAUD INVESTIGATION OFFICE v. ADITYA SARDA|

Accused Who's Absconding Or Obstructing Warrant Executions Not Entitled To Anticipatory Bail

 The Supreme Court held that an accused person, who is creating hindrances in the execution of warrants or is absconding from trial proceedings, is not entitled to the privilege of anticipatory bail.

"When after the investigation, a chargesheet is submitted in the court, or in a complaint case, summons or warrant is issued to the accused, he is bound to submit himself to the authority of law. If he is creating hindrances in the execution of warrants or is concealing himself and does not submit to the authority of law, he must not be granted the privilege of anticipatory bail, particularly when the Court taking cognizance has found him prima facie involved in serious economic offences or heinous offences,"

Accused Who's Absconding Or Obstructing Warrant Executions Not Entitled To Anticipatory Bail

The Supreme Court held that an accused person, who is creating hindrances in the execution of warrants or is absconding from trial proceedings, is not entitled to the privilege of anticipatory bail.

"When after the investigation, a chargesheet is submitted in the court, or in a complaint case, summons or warrant is issued to the accused, he is bound to submit himself to the authority of law. If he is creating hindrances in the execution of warrants or is concealing himself and does not submit to the authority of law, he must not be granted the privilege of anticipatory bail, particularly when the Court taking cognizance has found him prima facie involved in serious economic offences or heinous offences,"

The Supreme Court, while cancelling their bail, noted that the Respondents have avoided the execution of non-bailable warrants even after their anticipatory bail applications were rejected latest in 2022. It was only in 2023 that they were granted bail by the High Court. It held that in cases where a warrant of arrest is issued or proclamation proceedings are initiated, the extraordinary power to grant bail cannot be invoked.

In view of this observation, the Court set aside the High Court's order and directed the Respondents to surrender within 1 week.

Granting anticipatory bail is certainly not the rule. The respondent accused, who have continuously avoided to follow the due process of law, by avoiding attendance in the Court, by concealing themselves and thereby attempting to derail the proceedings, would not be entitled to the anticipatory bail. If the Rule of Law is to prevail in the society, every person would have to abide by the law, respect the law and follow the due process of law.

A bench of Justices Bela M. Trivedi and PB Varale, which pronounced the judgment, further noted:

The law aids only the abiding and certainly not its resistants. When after the investigation, a chargesheet is submitted in the court, or in a complaint case, summons or warrant is issued to the accused, he is bound to submit himself to the authority of law. If he is creating hindrances in the execution of warrants or is concealing himself and does not submit to the authority of law, he must not be granted the privilege of anticipatory bail, particularly when the Court taking cognizance has found him prima facie involved in serious economic offences or heinous offences.

The Court noted that the High Court passed orders utterly disregarding the mandatory conditions of Section 212(6) of the Companies Act, which lays down twin conditions on bail and the conduct of the Respondents. It also noted that in none of the orders passed by the High Court, it bother to look at the orders passed by the Special Court, such as issuing non-bailable warrants and proclamation proceedings etc for securing the presence of the Respondents.

It cannot be gainsaid that the judicial time of every court, even of Magistrate's Court is as precious and valuable as that of the High Courts and the Supreme Court. The accused are duty-bound to cooperate with the trial courts in proceeding further with the cases and bound to remain present in the Court as and when required by the Court. Not allowing the Courts to proceed further with the cases by avoiding execution of summons or warrants, disobeying the orders of the Court, and trying to delay the proceedings by hook or crook, would certainly amount to interfering with and causing obstruction in the administration of justice.

In this case, allegations of economic offences were made against the Respondents, Companies of Adarsh Group, and the Ministry of Corporate Affairs directed the Serious Fraud Investigation Office (SFIO) to investigate them for the various offences under the Companies Act, 1956 and 2013.

Upon investigation, it was found that funds to the tune of Rs.1700 crores were given by the Adarsh Credit Cooperative Society Limited (ACCSL), a Multi-State Credit Cooperative Society, as illegal loans to its own controlled 70 Adarsh Group of Companies (CUIs) and certain other companies belonging to the other groups of persons.

It was found contrary to settled the position that a company could not be a member of a multistate credit cooperative society and therefore loans could not have been given to such companies by the ACCSL. These loads were obtained on the basis of forged financial documents.

Case Details: SERIOUS FRAUD INVESTIGATION OFFICE vs ADITYA SARDA

Supreme Court Lays Down Guidelines For Interpretation Of Deeds & Contracts

 The Supreme Court observed that when the language of a deed is clear and unambiguous, there is no justification for judicial intervention to interpret it differently. It added that applying the literal rule of construction, the words must be given their plain and natural meaning, as they are presumed to convey the true intent of the parties.

“the court must look at the words used in the contract unless they are such that one may suspect that they do not covey the intention correctly. If the words are clear, there is very little the court can do about it. In constructing a deed, looking at the surrounding circumstances and subject matter is legitimate only if the words used are doubtful.”, the court observed upon placing reliance on the case of Provash Chandra Dalui and another v. Biswanath Banerjee and another, (1989) Suppl 1 SCC 487.

Holding thus, the bench comprising Justices Pankaj Mithal and SVN Bhatti laid down the guiding tools for the construction of contracts and deeds, which are:

1. The contract is first constructed in its plain, ordinary and literal meaning. This is also known as the literal rule of construction.

2. If there is an absurdity created by literally reading the contract, a shift from literal rule may be allowed. This construction is generally called the golden rule of construction.

3. Lastly, the contract may be purposively constructed in light of its object and context to determine the purpose of the contract. This approach must be used cautiously.

Further, relying on Sections 91 and 92 of the Indian Evidence Act, 1872, the Court reiterated that when an agreement is reduced to writing, oral evidence cannot be introduced to contradict its terms unless the case falls under specific exceptions such as fraud or mistake mentioned under proviso to Section 92 of the Evidence Act.

“Unless and until the case falls under one or the other exceptions enabling receipt of oral evidence on a written document, the court is precluded from entertaining oral evidence. The document or deed interpreted in a particular case is not relied upon, but the subject deed is construed on well-established principles. The law recognises both ownership and possession of an owner of a property. A lease recognises the outcome of a rightful separation of ownership and possession between lessor and lessee. Section 108 of The Transfer of Property Act, 1882 deals with the rights of the lessor and lessee. Under the said section, one of the conditions is that the lessor is bound by lessee's request to put lessee in possession of the property.”, the court observed.

“In the case on hand, admittedly, defendant no. 1 is in possession of the property from defendant no. 2. Whereas the Agreement of Conducting business does not deal with the possession so enjoyed by defendant no. 1 in favour of the plaintiff. The absence of such a crucial clause in the agreement dated 16.08.1967 is a vital circumstance in construing the subject matter of 18 the said agreement. This is an added circumstance to hold that what has been entrusted is to run the business in the plaint schedule but not occupying the plaint schedule under leave and licence. In the case on hand, the terms of the agreement dated 16.08.1967 are clear that the entrustment to the plaintiff is the ownership of the hotel business of the first defendant and not the tenancy right of the first defendant in favour of the plaintiff.”, the court added.

Thus, the Court held that the 'conducting agreement' was not a leave and license agreement but an agreement for operating a hotel.

ANNAYA KOCHA SHETTY (DEAD) THROUGH LRS VERSUS LAXMIBAI NARAYAN SATOSE SINCE DECEASED THROUGH LRS & OTHERS

Supreme Court Rejects UCO Bank's Plea That Employee Dismissed For Misconduct Wasn't Entitled To Pension Despite 10 Yrs Service

 Supreme Court Rejects UCO Bank's Plea That Employee Dismissed For Misconduct Wasn't Entitled To Pension Despite 10 Yrs Service

The Supreme Court rejected UCO Bank's plea that a bank employee who has completed over ten years of service was not entitled to superannuation benefits when he was dismissed on grounds of misconduct.

The bench comprising Justices Abhay S. Oka and Ujjal Bhuyan upheld the Punjab & Haryana High Court's decision directing the Appellant-UCO Bank to grant pensionary benefits to the Respondent-employee removed from service for misconduct after completing 10 plus years in the service.

The Case

In 1998, the Respondent was charged with assaulting a bank officer and was dismissed following an inquiry in 1999. In 2000, the appellate authority modified the penalty to removal with terminal benefits, a decision that went unchallenged by the Appellant-Bank and attained finality.

In 2004, the Labour Court reduced the penalty to stoppage of increments and ordered reinstatement with 75% back wages. However, in 2009, the High Court set aside the Labour Court's award, reinstating the removal with terminal benefits.

Subsequently, in 2010, the Respondent opted for a pension under the Bipartite Settlement. The High Court later directed the bank to grant pension benefits, relying on the Supreme Court's ruling in Bank of Baroda v. S.K. Kool, (2014) 2 SCC 715.

In SK Kool's judgment, the Court held that if the bank employee has completed the minimum pensionable years of service (10+ years), he would be entitled to the pensionary benefits even if dismissed on account of misconduct.

Answering in negative, the judgment authored by Justice Bhuyan relying on the case of S.K. Kool, harmonized both the provisions and observed that Regulation 22 cannot override the Bipartite Settlement, which has statutory force under the Industrial Disputes Act.

The Court rejected the Appellant's argument regarding the non-application of the SK Kool's judgment in the present case. The Appellant argued that in SK Kool's judgment applies only where the employee opted for pension before removal.

“the decision in S.K. Kool (supra) was rendered in a different factual context. The employee in the said case had opted for pension before the penalty of removal from service was imposed on him. In the present case, respondent never opted for pension. Therefore, S.K. Kool (supra) is clearly distinguishable in so far facts and circumstances of the present case is concerned.”, the court observed

“Both the learned Single Judge and the Division Bench had followed the aforesaid decision of this Court. Learned Single Judge noted that respondent had submitted his option for pension on 05.10.2010. Learned Single Judge also held that objection of the appellant to the claim of pension by the respondent was without any basis in as much as the appellate authority had specifically held that respondent would be entitled to receive terminal benefits for the period of service he had rendered. This order of the appellate authority has attained finality. Therefore, it was held that respondent was entitled to receive pension in view of the order passed by the appellate authority. This view of the learned Single Judge has been endorsed by the Division Bench in the impugned judgment. The decision in S.K. Kool (supra) is binding on us. Therefore, we do not find any compelling reason to interfere with the concurrent findings of the learned Single Judge and the Division Bench while exercising our jurisdiction under Article 136 of the Constitution of India.”, the court observed.

In terms of the aforesaid, the Court dismissed the appeal.

Case Title: UCO BANK & ANR. VERSUS VIJAY KUMAR HANDA

Even As We Near 80 Yrs Of Independence, Not Enough Public Jobs Generated For Eligible Candidates

 

Even As We Near 80 Yrs Of Independence, Not Enough Public Jobs Generated For Eligible Candidates

The Supreme Court recently highlighted the scarcity of government jobs and the hardships faced by deserving candidates unable to secure employment due to limited opportunities.

“Even as we near 80 (eighty) years of independence, generating enough jobs in the public sector to absorb those eager to enter public service remains an elusive goal. While there is no dearth of eligible candidates in the country waiting in the queue, the quest for public employment is thwarted by a lack of sufficient employment opportunities.”,

“The respondent no.7 was seeking relief from the High Court relying on the offending proviso. In a case where the party aggrieved seeks enforcement of a provision of a rule, which is seemingly unconstitutional, would he raise the plea of its unconstitutionality? It would be imprudent for him to do so and hence, the answer cannot but be in the negative. While considering the plea of the respondent no.7, the Division Bench found the offending proviso to be so obtrusively unconstitutional that notwithstanding absence of a specific challenge thereto, it proceeded to declare the same as void. Although the Division Bench had no occasion to refer to the decisions that we have referred to above, nothing much turns on it. The Division Bench must be presumed to be aware of the law on the subject that appointment cannot be claimed as a hereditary right and, thus, without even a challenge being laid to the offending proviso thought of striking it down. We do not see any illegality in such an approach.”,

“We are minded and do hold that, a writ court, when it finds its conscience to be pricked in a rare and very exceptional case by the patent unconstitutionality of a subordinate legislation connected with the issue it is seized of, may, upon grant of full opportunity to the State to defend the subordinate legislation and after hearing it, grant a declaration as to unconstitutionality and/or invalidity of such legislation. After all, as the sentinel on the qui vive, it is not only the duty of the writ courts in the country to enforce Fundamental Rights of individuals, who approach them, but it is equally the duty of the writ courts to guard against breach of Fundamental Rights of others by the three organs of the State. This power is a plenary power resident in all the Constitutional Courts. Should, in a given case, it be found that there has been an egregious violation of a Fundamental Right as a result of operation of a subordinate legislation and the issue is concluded by a binding decision of this Court, we consider it the duty of the writ courts to deliver justice by declaring the subordinate legislation void to safeguard rights of others who might not still have been affected thereby. We reiterate, it can only be done rarely and in cases which stand out from the ordinary.”,

IBC | Difference Between 'Avoidance Transactions' & 'Fraudulent Or Wrongful Trading'

 IBC | Difference Between 'Avoidance Transactions' & 'Fraudulent Or Wrongful Trading'

The Supreme Court, in its recent decision in Piramal Capital and Housing Finance Ltd v. 63 Moons Technology explained the key difference between how the Insolvency and Bankruptcy Code 2016 deals with avoidance transactions and transactions relating to fraudulent or wrongful trading.

Notably, under the IBC 2016, 'avoidance transactions' are specific transactions conducted by a corporate debtor prior to insolvency proceedings that are deemed detrimental to the interests of creditors. These include (1) Preferential transactions, (2) Undervalued transactions, (3) Extortionate Credit transactions; (4) Fraudulent transactions.

 

The bench of Justice Bela Trivedi and Justice SC Sharma noted that there was a fundamental distinction between Avoidance Applications under Chapter III and the Applications in respect of Fraudulent Trading or Wrongful Trading under Chapter VI.

Firstly, the ambit of avoidance applications comes under the duties of the resolution professional (RP)  .The RP can file an application for avoidance of transactions in accordance with Chapter III as part of his/her larger duty to 'preserve and protect the assets of the corporate debtor, including the continued business operations'.

Under S.26 of the IBC, filling of an Avoidance Application under Clause (j) of sub section (2) of Section 25 by the RP will not affect the insolvency proceedings.

Secondly, the aspect of 'Fraudulent trading or wrongful trading' within the corporate debtor entity has been separately dealt with under S. 66 under Chapter 4.

As per S.66(1) the Adjudicating Authority can order individuals who knowingly engaged in fraudulent business activities during the CIRP or Liquidation process to contribute to the assets of the Corporate Debtor (CD), based on an application from the Resolution Professional.

 PIRAMAL CAPITAL AND HOUSING FINANCE LIMITED (FORMERLY KNOWN AS DEWAN HOUSING FINANCE CORPORATION LIMITED) v. 63 MOONS TECHNOLOGIES LIMITED & OTHERS |

Wife Can Be Affected By Defamation Of Husband; Apart From Individual Reputations, Spouses Share Common Family Reputation

 Wife Can Be Affected By Defamation Of Husband; Apart From Individual Reputations, Spouses Share Common Family Reputation

In a civil matter, the Supreme Court recently observed orally that while a husband and wife have individual reputations, there is also something called "family reputation" and a wife is likely to be affected by anything that tends to lower her husband's reputation.

A bench of Justices Surya Kant and N Kotiswar Singh was dealing with an appeal filed by Spunklane Media Private Limited(which owns the news portal 'The News Minute) against an order of the Karnataka High Court. It involved an issue as to whether a wife, by way of subsequent impleadment of her husband (as co-plaintiff), can acquire better title in a suit to restrain media houses from publishing about a case against the husband.

The Court did not interfere with the High Court's order which affirmed the Trial Court's decision allowing the wife to join as a party in her husband's suit against the news portal.

Disposing of the appeal, Justice Kant said,

"A woman, a man...two persons...individually can suffer in terms of reputation. But definitely, [if] they are living together as husband and wife, and if they are a family, when you attack one, definitely, that attack impairs the psychology, the emotions and the social reputation of other family members. And most importantly, the wife will suffer because of husband. Husband will suffer because of wife...This was one of your arguments before the High Court...It would be a very dangerous proposition that living under the same roof, husband has a separate reputation, wife has a separate reputation...they may have separate [reputation] also, but they have a common, integral and integrated reputation also that's known as family reputation, a couple's reputation, a husband-wife's reputation."

SPUNKLANE MEDIA PRIVATE LIMITED Versus NIVEDITA SINGH AND ORS., 

'No Religion Permits Such Brutal Tree Felling, Pay Compensation From Festival Offerings'

 'No Religion Permits Such Brutal Tree Felling, Pay Compensation From Festival Offerings'

The Supreme Court on Friday (April 4) pulled up the temple committee of the Thiru Keralapuram Sreekrishnaswamy Temple, located in Peroor Village, Kerala, over three cutting of three Wild Jack Trees, each having a diameter of about 1.5 to 2 meters, on the temple premises.

A bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan was dealing with an interlocutory application in a property dispute regarding the temple.

According to a report submitted by the District Collector of Kottayam, the trees were cut at the instance of the temple's Administrative Committee.

During the hearing, Justice Oka remarked, “No religion permits felling of trees in such a brutal manner.”

Justice Oka asked the counsel for the temple committee, “How much compensation per tree will you pay to the forest department and how many trees will you plant?”

In response, the counsel submitted that the tree-cutting was done by the previous committee and informed the Court that the present committee had already planted 100 trees after the Court's earlier status quo order. He further submitted that the committee was ready to plant 100 more trees.

The Court asked the temple committee to specify in an affidavit how many trees it had planted and to indicate the compensation amount it was willing to pay for the trees that were cut.

When the counsel for the temple committee submitted that it was a very small and poor temple and that the people did not have money, particularly because the yearly festival was happening, the Court said that the offerings collected from devotees during the festival could be directed towards compensating the forest department.

Justice Oka said, “In this festival people will be offering something to the god, right? So whatever is offered at this festival can go to the forest department. As simple as that. Give an undertaking saying normally how much amount is received by way of the offerings during the festival. That amount you will pay to the forest department by way of compensation. That will solve the problem. Somebody must plant trees and somebody must pay compensation, and somebody must take responsibility.”

Excess Payments To Employee Can't Be Recovered When There Was No Fraud Or Misrepresentation

 Excess Payments To Employee Can't Be Recovered When There Was No Fraud Or Misrepresentation

The Supreme Court has reiterated that excess payment made to an employee cannot be recovered if such payment was not on account of any fraud or misrepresentation on the part of the employee. Also, excess payment to the employee due to any wrong application of the rule or incorrect calculation on the part of the employer is not recoverable.

A bench comprising Justice PS Narasimha and Justice Prashant Kumar Mishra was deciding the appeals filed by persons, who were working as Stenographers and Personal Assistants in the Orissa District Judiciary, against the recoveries of excess payments. Amounts in the range of Rs.20,000 to 40,000 were sought to be recovered from the appellants. The recoveries were ordered nearly three years after their retirement and six years after the payment

"This Court has consistently taken the view that if the excess amount was not paid on account of any misrepresentation or fraud on the part of the employee or if such excess payment was made by the employer by applying a wrong principle for calculating the pay/allowance or on the basis of a particular interpretation of rule/order, which is subsequently found to be erroneous, such excess payments of emoluments or allowances are not recoverable. It is held that such relief against the recovery is not because of any right of the employee but in equity, exercising judicial discretion to provide relief to the employee from the hardship that will be caused if the recovery is ordered."

In Thomas Daniel, the Court had held that recoveries would be impermissible in following situations :

(i) Recovery from the employees belonging to Class III and Class IV service (or Group C and Group D service).

(ii) Recovery from the retired employees, or the employees who are due to retire within one year, of the order of recovery.

(iii) Recovery from the employees, when the excess payment has been made for a period in excess of five years, before the order of recovery is issued.

(iv) Recovery in cases where an employee has wrongfully been required to discharge duties of a higher post, and has been paid accordingly, even though he should have rightfully been required to work against an inferior post.

(v) In any other case, where the court arrives at the conclusion, that recovery if made from the employee, would be iniquitous or harsh or arbitrary to such an extent, as would far outweigh the equitable balance of the employer's right to recover.

Here, the Court noted that there was no fraud or misrepresentation on the part of the petitioners in obtaining the excess payment. Also, no opportunity of hearing was afforded to them before ordering the recoveries.

"The appellants having superannuated on a ministerial post of Stenographer were admittedly not holding any gazetted post as such applying the principle enunciated by this Court in the above quoted judgment, the recovery is found unsustainable," the Court observed while allowing their appeals.

Case : Jogeswar Sahoo and others vs The District Judge Cuttack and others

**Specific Performance Suit Not Maintainable For Cancelled Sale Agreement Without Seeking Declaration Against Cancellation **

 The Supreme Court held that a suit for the specific performance of an agreement to sell, filed after its cancellation, is not maintainable unless it includes a prayer for declaratory relief (under Section 34 Specific Relief Act) challenging the validity of the cancellation.

The Court reasoned that declaratory relief challenging the validity of the cancellation was essential when seeking specific performance of the agreement to sell, as the suit could not be sustained without a valid and subsisting agreement.

“this Court is of the opinion that absent a prayer for declaratory relief that termination/cancellation of the agreement is bad in law, a suit for specific performance is not maintainable.”,

“This Court further finds that the seller had admittedly issued a letter dated 7th February 2008 cancelling the Agreement to Sell dated 25th January 2008, prior to the filing of the subject suit on 5th May 2008. Even though the demand drafts enclosed with the letter dated 07th February, 2008 were subsequently encashed in July, 2008 (After Suit's institution), yet this Court is of the view that it was incumbent upon the Respondent No.1-buyer to seek a declaratory relief that the said cancellation is bad in law and not binding on parties for the reason that existence of a valid agreement is sine qua non for the grant of relief of specific performance.”, the court observed.

Reference was drawn to the case of I.S. Sikandar (Dead) By LRs. v. K. Subramani and Others, (2013) 15 SCC 27, where it was held that in the absence of a prayer for declaratory relief that the termination of the agreement is bad in law, the suit for specific performance of that agreement is not maintainable.

“Since in the present case, the seller had issued a letter dated 07th February, 2008 cancelling the agreement to sell prior to the institution of the suit, the same constitutes a jurisdictional fact as till the said cancellation is set aside, the respondent is not entitled to the relief of specific performance.”, the court observed.

Since the trial court in this case didn't consider the issue of the maintainability of the suit, the Court referring to the recent case of R. Kandasamy (Since Dead) & Ors. v. T.R.K. Sarawathy & Anr. said that it would not trim away the powers of the Appellate Courts/High Court to examine whether the jurisdictional fact did exist for grant of relief as claimed, provided no new facts were required to be pleaded and no new evidence led.

In terms of the aforesaid, the Court allowed the appeal holding that the Court below had erred in decreeing the suit for specific performance of agreement to sell despite non-existence of the agreement to sell.

Case Title: SANGITA SINHA VERSUS BHAWANA BHARDWAJ AND ORS.