VOL II                                                      ISSUE NO. 21                                       October 10, 2017          

In This Issue

India: Effective Enforcement of the Insolvency and Bankruptcy Code, 2016

The objective of the Insolvency and Bankruptcy Code, 2016 is multi-faceted. Not only does it seek to promote entrepreneurship, by making availability of credit more transparent, but it also balances the interests of all stakeholders by consolidating and amending the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals, in a time bound manner and for maximization of the value assets of such persons and other related matters.

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India: Disqualification of Shell Companies & Their Directors

Faced by the challenges posed by black money, the Government of India is aiming to ensure its eradication. Amongst various measures taken thereunder, the Government has now focused its line of operation to the crackdown of shell companies. Shell companies being the companies with no operational business become common medium to carry out unlawful negotiations including tax evasion. The Government has taken strict measures to prohibit the use of such companies to channelize black money.

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India: Unique Identifier for Companies

Unique Identifier of Companies or Legal Entity Identifier, as brought forth by G20 is the alphanumeric code that distinguishes the legal entities engaged in financial affairs. It serves to redress the inability of the financial institutions to be clearly identified and fully tracked. In pursuance to the G20 compliance, United Kingdom has also adopted the unique identifier mechanism for legal entities. Just as the Aadhaar number issued in India has bestowed a distinctive identification to each individual, the Unique Identifier for companies would determine the integrity of a company independent from that of others.

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India: Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017

The Government of Maharashtra has issued Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 vide notification dated September 07, 2017. The Amendment Act extends to the whole of the State of Maharashtra, and shall come into force on a date to be specified by the State of Maharashtra in the Official Gazette and from such date, the Amendment Act will repeal the Maharashtra Shops & Establishments Act, 1948

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India: Voluntary Reporting of Estimated Current Income & Advance Tax Liability

The Central Board of Direct Taxes has proposed to create a mechanism for self-reporting of estimates of current income, tax payments and advance tax liability by certain taxpayers (companies and tax audit cases) on voluntary compliance basis. The proposed reporting mechanism is sought to be created by way of inserting a new Rule 39A and Form No. 28AA in the Income-tax Rules, 1962.

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India: Preference to Local Cyber-Security Products

The Ministry of Electronics and Information Technology has recently introduced a draft notification with the objective of providing preference to domestically manufactured or produced cyber security products by all procuring entities. This step has been taken in furtherance of the Public Procurement (Preference to Make in India) Order, 2017 issued by the Department of Industrial Policy and Promotion (DIPP) to encourage manufacturing and production of goods and services in India with a view to enhancing income and employment.

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India: Supreme Court Elucidate 10 Points for Quashing Of F.I.R under Section 482 of CRPC

A full bench comprising of Hon’ble Mr. Chief Justice Dipak Misra, Hon’ble Mr. Justice AM Khanwilkar and Hon’ble Mr. Justice DY Chandrachud has laid down broad principles from various precedents in relation to Section 482 of the Code of Criminal Procedure (CrPC) for quashing of First Information Reports (FIRs) in the judgment passed in an appeal against a decision of the Gujarat High Court.

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India: Supreme Court Rules that HUF Properties are Presumed Joint Property, Unless Proved to be Self-Acquired

In a recently decided case entitled Adiveppa & Ors. Vs. Bhimappa & Anr. being Civil Appeal No. 11220 of 2017, the bench comprising of Hon’ble Mr. Justice R. K. Agrawal and Hon’ble Mr. Justice Abhay Manohar Sapre of the Supreme Court of India, vide its order dated September 06, 2017, has held that all assets pertaining to Hindu Undivided Family (HUF) are to be treated as joint property of the HUF, unless the contrary is proved as self-acquisition of property through valid documents.

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S.S. Rana & Co shares Diwali festivities with the ‘third gender’

S. S. Rana & Co. was indeed honored to have an opportunity to share auspicious Diwali festivities with the third gender. Honored, we say, because it is indeed inspiring to see one particular community that forms such a significant part of the Indian demographics struggle since the past 2-3 centuries without being deterred or fearing societal atrocities only so their birth rights get recognized. Honored we say, because in response to the atrocities the society subjected them to, all they wanted was friendship and harmonious existence.

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India: Effective Enforcement of the Insolvency and Bankruptcy Code, 2016

 

 

 

Source: Civilsdaily.com

 

The objective of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ’Code’) is multi-faceted. Not only does it seek to promote entrepreneurship, by making availability of credit more transparent, but it also balances the interests of all stakeholders by consolidating and amending the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals, in a time bound manner and for maximization of the value assets of such persons and other related matters.

 

The former framework of insolvency and bankruptcy provisions were inadequate, ineffective and resulted in undue delays in resolution, which is why the present Code was brought into effect. One of the primary objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the intention of speeding up the insolvency process.

 

In the recent judgement of M/s Innoventive Industries Vs. ICICI Bank & Anr (Civil Appeal Nos. 8337-8338 of 2017) passed by the Hon’ble Supreme Court of India, the functionality and operation of the Code has been discussed elaborately.

 

Brief facts

 

In furtherance to the service of debts, a corporate debt restricting was proposed by Innoventive Industries which was admitted and thus a Master Restructuring Agreement (MRA) was entered into between the parties by which funds were to be infused by the creditors and certain obligations were to be met by the debtors.

 

An application was filed by ICICI at National Company Law Tribunal (NCLT) alleging that Innoventive Industries was a defaulter within the meaning of the Code, and prayed for insolvency resolution process to be set in motion. Innoventive Industries replied to the same by filing an interim application claiming that no debts were legally due vide the notifications issued under the Maharashtra Relief Undertakings (Special Provisions Act), 1958 (hereinafter referred to as the ‘Maharashtra Act’) and accordingly its liabilities were temporarily suspended for a period of one year in the first instance and for another period of one year subsequently. Innoventive Industries further pleaded via second application that owing to non-release of funds under MRA, it was unable to pay back its debts.

 

Appeal arose to the Supreme Court when the National Companies Law Tribunal (NCLT) and National Companies Appellate Law Tribunal (NCLAT) dismissed the aforesaid application of Innoventive Industries.

 

Decision

 

The Hon’ble Supreme Court upheld the decision of NCLT and NCLAT that the obligation of the corporate debtor was unconditional and did not depend upon infusing of funds by the creditors under MRA.

 

Further the Court categorically stated that the appeal by Innoventive Industries was not maintainable as the erstwhile directors were no longer in the management once an insolvency professional was appointed to manage the company.

Ratio

 

The Court gave comprehensive reasoning for its decision which was based on the following points:

  • The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins.

  • A comparative analysis was made between the insolvency proceedings initiated by the financial creditors and those by operational creditors. As per the provisions of the Code, under Section 7 in the case of insolvency proceedings initiated by a financial creditor, the Adjudicating Authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. Whereas under the provisions of Section 8 of the Code, the operational creditor is required to first deliver a demand notice of the unpaid debt to the operational debtor in case of occurrence of default.

  • It is of no consequence that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. When the same is proved to the satisfaction of the adjudicating authority it may reject an application and not otherwise.

  • The Adjudicating Authority while deliberating upon the provisions of Section 7 is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor and this process must be done within 14 days of receipt of the application.

  • Once the application is admitted, erstwhile management of the corporate debtor is vested in an interim resolution professional under the Code appointed to manage the operations of the corporate debtor as a going concern under the provisions of Section 17. The Code makes an attempt by divesting the erstwhile management of its powers and vesting it in a professional agency, to continue the business of the corporate body as a going concern until a resolution plan is drawn up, in which event the management is handed over under the plan so that the corporate body is able to pay back its debts and get back on its feet. The said process is to be done within a period of 6 months with a maximum extension of another 90 days else the liquidation process would commence as per the provisions of Section 12.

  • Under the provisions of Constitutional Law, relating to repugnancy between the Central and State Laws, the Central enactment prevails and operates over the State Law (Article 254 of the Constitution). By giving effect to the State law (Maharashtra Act), the scheme under the Parliamentary statute (the Code) would directly be hindered and/or obstructed to thereby causing clash in the taking over of the management and the imposition of moratorium. Also, the timeframe of 1-15 years as per the State Law (Maharashtra Act) would defeat the very purpose of speedy resolution according to the Central Law (Code) which restricts the time for the Company to be brought to commercial fold or face liquidation.

  • The Court confirmed the decision of NCLT and NCLAT in not accepting the second application by Innoventive Industries for the reasons that the period of 14 days within which the application is to be decided was long over by the time the second application was made before the Tribunal. Also, the application appeared to be an after-thought for the reason that the corporate debtor was fully aware of the fact of failure of MRA which could have been brought by the first application itself.

Opinion

 

The aforesaid judgement has dealt with the aims and objectives of the Insolvency and Bankruptcy Code 2016 in exhaustive details. It has not only clarified the purpose of the Code, but, had also focused on its efficacious implementation. Instilling confidence in the creditors, it is a comprehensive, systemic and speedy reform which paves way for development and progress. It has reposed the faith in the judicious approach of the legislature inculcating protection against unscrupulous debtors escaping and delaying the repayment of debts incurred by using the legislative framework thereby preventing taking advantage of one’s own wrong.

 

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India: Disqualification of Shell Companies & Their Directors

 

 

Source : www.thehindubusinessline.com

 

Faced by the challenges posed by black money, the Government of India is aiming to ensure its eradication. Amongst various measures taken thereunder, the Government has now focused its line of operation to the crackdown of shell companies. Shell companies being the companies with no operational business become common medium to carry out unlawful negotiations including tax evasion. The Government has taken strict measures to prohibit the use of such companies to channelize black money.

 

Fight against Black Money in Corporates

 

By passing the Companies Amendment Bill, 2017, limitations have been imposed on the layering of the subsidiary companies to forbid probable diversion and laundering of funds. Further the Government, struck off the names of over 200,000 companies on account of prolonged inactivity under the provisions of Section 248 of the Companies Act, 2013. All the banks were advised to put restrictions on bank accounts of struck-off companies.

 

In another recent action, the Government identified more than 100,000 Directors for disqualification under Section 164 of the Companies Act, 2013. Under the provisions of the said Section, a director in a company that has not filed financial statements or annual returns for three years in a row will not be eligible for reappointment as a director in that or any other company for five years.

 

The Government publically listed the names of directors disqualified for associating with companies that did not file their financial statements or annual returns for three financial years. The Professionals, Chartered Accountants/ Company Secretaries/ Cost Accountants associated with such defaulting firms and involved in illegal activities have been identified in certain cases and the action by Professional Institutes such as the Institute of Chartered Accountants of India, the Institute of Company Secretaries of India and the Institute of Cost Accountants of India is also being monitored.

Aggrieved by the decision of the Government in the process of disqualification of the Directors, such directors have approached the Government seeking redressal against the order disqualifying them and that they were not associated with the struck-off companies.

 

Conclusion

 

During framing of the policies by the Government, all pros and cons should be identified. While considering the aspect of constraining the use of shell companies as an instrument for illegal transaction, it should be considered that not all shell companies are created for such purpose. The varied activities of shell companies include holding intellectual property or accumulation of shares.

 

Under the aforesaid scheme of the Government for striking off shell companies and the disqualification of their directors has narrowed down the criteria of directors’ disqualification under the Companies Act, 2013 limiting it only to the non-functionality of the companies and ignoring the wrongdoing which may be attributable to such directors.

 

The removal of Directors from disqualified company under the provisions of the Companies Act, 2013, does not specifically state the removal of such directors from all such positions held in other companies.

 

It would thus be beneficial to make careful analysis with regards to the purpose of the shell companies before they are struck off from the list of companies registered and their directors disqualified thereby being prevented from holding directorship in any other company.

 

 

 

 

 

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India: Unique Identifier for Companies

 

Source : www.g20.org


Unique Identifier of Companies or Legal Entity Identifier, as brought forth by G20 is the alphanumeric code that distinguishes the legal entities engaged in financial affairs. It serves to redress the inability of the financial institutions to be clearly identified and fully tracked. In pursuance to the G20 compliance, United Kingdom has also adopted the unique identifier mechanism for legal entities. Just as the Aadhaar number issued in India has bestowed a distinctive identification to each individual, the Unique Identifier for companies would determine the integrity of a company independent from that of others.

 

A number of challenges arise as consequences of uncertainty with regards to the ownership of the Companies. Due to the absence of stringent measures requiring compulsory disclosure of beneficial ownership till now, the formation of shell companies became an easy escape route to avoid meeting with the legal compliances. Having no active operational aspect, these companies began serving as a media to promulgate diversion of funds via Benami transactions as have been witnessed in the recent past.

In the pursuit of delimiting the companies with non-operational business, the Government has placed a cap to the number of subsidiary companies. The restriction has been imposed on the layering of the subsidiary companies to prevent probable diversion and laundering of funds.

 

It is essential that during formulation and framing of the policies for governance, all aspects are to be covered. While laying consideration on the fact that shell companies may be used as an instrument for illegal deeds, it cannot be denied that not all shell companies have been incorporated to carry out unlawful negotiations. Some shell companies may be involved in accumulation of shares or may be used to hold licensed intellectual property. The generalized notion of barring the layering of subsidiaries would hinder the genuine, lawful transactions essential to be carried out by the parent company in their usual course of business.

 

A pragmatic approach towards this, is the adoption of the unique identifier for companies which has been proposed by G20. This would facilitate transparency in tracking the ultimate ownership thereby identifying the ultimate beneficiaries of the financial system being run through subsidiaries. Through the unique identifier the information of the real owners would fall in public domain thereby helping the investors to have complete knowledge before entering into any engagement with a company. By appropriate regulations and guidelines, it should ensure mandatory disclosures to enable clear identification of the beneficiaries so that the miscreants do not misuse the shell companies using chain of subsidiary companies. The present system lacks efficient mechanisms to establish proper disclosures of the ownership so that the true owners could be tracked even through the catena of subsidiaries.

 

Thus, the embracement of the unique identifier for companies serves a more suitable and adequate solution to prevent abuse through subsidiary companies rather than curbing them which may create a deadlock for bona-fide business.

 

 

 

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India: Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017

 

Source : www.maharashtra.gov.in

 

 

The Government of Maharashtra has issued Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 (hereinafter referred to as the “Amendment Act”) vide notification dated September 07, 2017. The Amendment Act extends to the whole of the State of Maharashtra, and shall come into force on a date to be specified by the State of Maharashtra in the Official Gazette and from such date, the Amendment Act will repeal the Maharashtra Shops & Establishments Act, 1948 (hereinafter referred to as the “Act”)

 

Applicability:

 

The provisions of the Amendment Act shall apply to the establishments which employ ten or more workers, in contrast to the Act which applied to all establishments, irrespective of number of employees employed.

 

However, establishments which employ less than 10 workers shall give intimation to Facilitator appointed under the Amendment Act by submitting online application, within a period of sixty days from the date of the commencement of this Act or the date on which establishment commences its business.

 

Appointment of Facilitators

 

The Amendment Act provides for appointment of Facilitator. The functions of the Facilitator include without limitation to making examination of premises and of any prescribed registers, records and notices, examination of person who is found in any premises of the establishment and whom, the Facilitator has reasonable cause to believe, is a worker of the establishment, search, seize or take copies of register, record of wages or notices and exercise such other powers, as may be prescribed

 

Registration:

 

Registration under the Amendment Act has been made online. Employers have to submit an online application within 60 days from commencement of the Amendment Act or commencement of business. The term of registration certificate granted under the Act shall be for a period as requested by the applicant. However, such term shall not exceed 10 years. The Amendment Act has introduced a new provision which provides that registration under the Amendment Act may be cancelled if registration is obtained through misrepresentation or suppression of material facts or by submitting false or forged documents or false declaration or by fraud.

 

Number of hours:

  • The state government may fix, by notification in the Official Gazette, opening and closing of different classes of establishments and for different premises, shopping complex or mall or for different area or areas and for different period.

  • No adult worker shall be required or allowed to work in any establishment for more than 9 hours in any day and 48 hours in any week.

  • No adult worker shall be asked to work continuously for more than five hours unless he has been given a break of not less than half an hour. However, the working hours or weekly holiday may be relaxed in case of work of urgent nature with the previous permission of the Facilitator.

  • The spread-over of a worker in an establishment shall not exceed 10 ½ hours in any day. If a worker is entrusted with urgent work, the spread over shall not exceed 12 hours.

Protection of women:

  •  A new provision has been introduced in the Amendment Act which states that there shall be no discrimination against any woman worker in the matter of recruitment, training, transfers or promotion or wages.

  • Woman worker shall not work in any establishment except between the hours of 7 a.m. and 9-30 p.m. However, a woman worker with her consent, shall be allowed to work during 9-30 p.m. and 7-00 a.m. in any establishment in which adequate protection of their dignity, honour and safety, protection from sexual harassment and their transportation from the establishment to the doorstep of their residence as may be prescribed are provided by the employer.

  • The State Government may, by notification in the Official Gazette, in the public interest, prohibit or regulate the employment of women workers after 9-30 p.m. and before 7-00 a.m. in such shops, establishments, hotels, restaurants, residential hotels, permit rooms, bars, spa-massage parlours, lodges or any business or any trade or occupation in such area or areas as it may deem fit.

Leaves:

 

The Amendment Act now entitles every worker to casual leave of 8 days in a year. The workers can accumulate earned leave up to a maximum of 45 days. Also, every worker who has worked for a period of 240 days or more in a calendar year shall be allowed paid leave for a number of days calculated at the rate of one day for every twenty days of work performed during the previous year. A worker shall also be entitled to 8 paid festival holidays in a calendar year, namely, 26th January, 1st May, 15th August and 2nd October and four such other festival holidays as may be agreed to between the employer and the workers as per the nature of business, before the commencement of the year.

 

Welfare Provisions:

 

The Amendment Act has provided for welfare provisions of workers wherein employers have to take measures relating to the health and safety of the workers including cleanliness, lighting, ventilation and prevention of fire. Also, employers have to ensure provision of adequate supervision of the workers employed in the establishment. Some of the welfare provisions introduced are:

  • Provision of first-aid facilities in the place of work.

  • Provision and maintenance at suitable points conveniently situated for all persons employed in the establishment, a sufficient supply of wholesome drinking water.

  • Provision of sufficient latrine and urinal for men and women

  • In every establishment wherein 50 or more workers are employed, there shall be provided and maintained a suitable room or rooms as crèche for the use of children of such workers.

  •  To maintain a canteen for the use of its workers for establishments with not less than 100 workers

 

 

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India: Voluntary Reporting of Estimated Current Income & Advance Tax Liability

 

 

Source : www.incometaxindia.gov.in

 

The Central Board of Direct Taxes (hereinafter referred to as the ‘CBDT’) has proposed to create a mechanism for self-reporting of estimates of current income, tax payments and advance tax liability by certain taxpayers (companies and tax audit cases) on voluntary compliance basis. The proposed reporting mechanism is sought to be created by way of inserting a new Rule 39A and Form No. 28AA in the Income-tax Rules, 1962.

 

A taxpayer who is liable to discharge part of its tax liability by way of advance tax has to bear additional burden of interest for default of advance tax, in case total advance tax paid for the year falls short of the assessed tax by ten percent or more. This interest is levied as per the provisions of Section 234B of the Income-tax Act, 1961. Such taxpayers are further liable to pay interest for deferment of advance tax, in case any quarterly instalment of advance tax paid falls short of the prescribed percentage of total advance tax paid. This interest is levied in accordance with the provisions of section 234C of the Act.

 

CBDT stated that it is of utmost importance for such taxpayers to arrive at a reasonably accurate estimate of their current income and advance tax liability, so that the additional burden on account of interest for default/deferment of advance tax can be avoided.

 

Under the present mechanism, taxpayers have to only pay advance tax to the CBDT on income tax payable for the whole financial year in four instalments — June 15, September 15, December 15 and March 15 but they are not required to provide estimates of income to the I-T department. As per the draft provisions, a taxpayer being a company and a person (other than a company), to whom the provisions of section 44AB are applicable shall furnish an intimation of estimated income and payment of taxes as on 30th September of the previous year, on or before 15th November of the previous year.

Opinion

 

According to CBDT, a continuous flow of tax revenues throughout the year is critical for the Government so as to meet various budgetary allocations such as welfare schemes, infrastructure development, defence expenditure etc. A reliable and advance estimate of tax revenues for the year would also provide much needed perspective for planning and prioritizing the Government expenditure.

 

Although, the Government by this approach tends to create tax transparency by creating a systematic framework, the implementation of the said proposal will add on to the already present compliances resulting in over-burdening the taxpayers requiring them to present a detailed estimate of taxable income.

 

Additionally, the scheme requires the taxpayer to provide the details of turnover, profits, etc. It is worthwhile to mention that determination of the net profit for the year is difficult to ascertain based on the uncertain factors.

 

The proposed scheme also requires the reasons to be specified by the taxpayer if the estimated advance-tax payment for the previous year is less than the advance tax paid during the preceding previous year. It seems unreasonable to inquire explanation to various hurdles being faced by the taxpayer attributable to the economic slowdown the country is undergoing presently.

 

It is advisable to adopt for stricter mechanisms against the tax evaders rather than increasing the liabilities of the honest taxpayer.

 

 

 

 

 

 

 

 

 

 

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India: Preference to Local Cyber-Security Products

 

Source : meity.gov.in

 

The Ministry of Electronics and Information Technology has recently introduced a draft notification with the objective of providing preference to domestically manufactured or produced cyber security products by all procuring entities. This step has been taken in furtherance of the Public Procurement (Preference to Make in India) Order, 2017 issued by the Department of Industrial Policy and Promotion (DIPP) to encourage manufacturing and production of goods and services in India with a view to enhancing income and employment.

 

The Ministry through this proposal aims to boost domestic cyber-security technology development by giving preference to good quality domestic products in government procurement. It covers all cyber-security products, meaning hereby any product or appliance or software manufactured or produced for the purpose of maintain confidentiality, availability and integrity of information by protecting computing devices, infrastructure, programs, data from attack, damage or unauthorized access.

The technology and its increasing accessibility in the interconnected world has revolutionized the lives of people in multiple spheres by facilitating everyday transactions virtually. Efforts are made to ascertain the safety of these media to reinforce genuine and legal use. With the changing paraphernalia, the criminal intent has also become technically and financially more advanced. This has resulted in growing concern for the requirement of cyber-security products which protect against the cyber-attacks by unscrupulous cyber-attackers preventing the fulfillment of their mala-fide intentions. These products cater varied requirements depending upon the user and include web security, antivirus, data protection, prevention of data loss, network security to name a few.

 

Owing to their great importance, the demand for cyber-security products is increasing which are met by number of suppliers on a world-vide level attributable to the economic integration provided by globalization. With regards to products in the cyber security area, foreign firms are generally relied upon. It is of paramount importance to ensure that the security concerning the confidential information is not flouted to from the end of the cyber-security providers via backdoor access which allow gaining access and control of a system by remote administration through tampering of the system’s code. One of the remedies that come to the rescue to such a situation is the use of domestically made cyber-security products.

 

The pragmatic approach of the Government in bringing forth the policy of public procurement of domestically manufactured cyber-security products serves as a multifaceted solution. The products so manufactured would not only prevent backdoor access and data theft by foreign entities but would also ensure compliance to the Indian standards, ethics and guidelines. It would also strengthen the aim of “Make in India” thereby promoting the manufacture of cyber-security products in India.

 

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India: Supreme Court Elucidate 10 Points for Quashing of F.I.R under Section 482 of CRPC

 

Source : supremecourtofindia.nic.in

 

[Parbatbhai Aahir & Ors. Vs. State of Gujarat & Anr. (Criminal Appeal No. 1723 of 2017)]

 

A full bench comprising of Hon’ble Mr. Chief Justice Dipak Misra, Hon’ble Mr. Justice AM Khanwilkar and Hon’ble Mr. Justice DY Chandrachud has laid down broad principles from various precedents in relation to Section 482 of the Code of Criminal Procedure (CrPC) for quashing of First Information Reports (FIRs) in the judgment passed in an appeal against a decision of the Gujarat High Court.

 

The Gujarat High Court vide its judgment dated November 25, 2016, had dismissed an application under Section 482 of CrPC filed by the Appellants seeking quashing of FIR registered against them on June 18, 2016 with the City ‘C’ Division Police Station, District Jamnagar, Gujarat for offences punishable under Sections 384, 467, 468, 471, 120-B and 506(2) of the Indian Penal Code.

 

Before, the High Court, the plea for quashing the FIR was advanced on the ground that the Appellants had amicably settled the dispute with the Complainant, who had also filed an Affidavit to that effect. On behalf of the prosecution, application for quashing was opposed on two grounds:

  1. The Appellants were absconding and warrants had been issued against them under Section 70 of the Code of Criminal Procedure, 1973.

  2. The Appellants had criminal antecedants.

The High Court observed that it had been given “a fair idea” about the modus operandi adopted by the Appellants for grabbing the land, in the course of which they had opened bogus bank accounts. The High Court held that the case involves extortion, forgery and conspiracy and all the Appellants have acted as a team. Hence, in the view of the High Court, it was not in the interest of society at large to accept the settlement and quash the FIR. The High Court held that the charges are of a serious nature and the activities of the appellants render them a potential threat to society. On this ground, the prayer to quash the First Information Report was rejected by the High Court.

 

The Hon’ble Supreme Court after discussing various precedents on the subject summarized the following broad principles in relation to Section 482 for quashing FIRs.

  1. Section 482 preserves the inherent powers of the High Court to prevent an abuse of the process of any court or to secure the ends of justice. The provision does not confer new powers. It only recognises and preserves powers which inhere in the High Court;

  2. The invocation of the jurisdiction of the High Court to quash a First Information Report or a criminal proceeding on the ground that a settlement has been arrived at between the offender and the victim is not the same as the invocation of jurisdiction for the purpose of compounding an offence. While compounding an offence, the power of the court is governed by the provisions of Section 320 of the Code of Criminal Procedure, 1973. The power to quash under Section 482 is attracted even if the offence is non-compoundable.

  1. In forming an opinion whether a criminal proceeding or complaint should be quashed in exercise of its jurisdiction under Section 482, the High Court must evaluate whether the ends of justice would justify the exercise of the inherent power;

  2. While the inherent power of the High Court has a wide ambit and plenitude it has to be exercised;

    • to secure the ends of justice or

    • to prevent an abuse of the process of any court;

  3. The decision as to whether a complaint or First Information Report should be quashed on the ground that the offender and victim have settled the dispute, revolves ultimately on the facts and circumstances of each case and no exhaustive elaboration of principles can be formulated;

  4. In the exercise of the power under Section 482 and while dealing with a plea that the dispute has been settled, the High Court must have due regard to the nature and gravity of the offence. Heinous and serious offences involving mental depravity or offences such as murder, rape and dacoity cannot appropriately be quashed though the victim or the family of the victim have settled the dispute. Such offences are, truly speaking, not private in nature but have a serious impact upon society. The decision to continue with the trial in such cases is founded on the overriding element of public interest in punishing persons for serious offences;

  5. As distinguished from serious offences, there may be criminal cases which have an overwhelming or predominant element of a civil dispute. They stand on a distinct footing in so far as the exercise of the inherent power to quash is concerned;

  6. Criminal cases involving offences which arise from commercial, financial, mercantile, partnership or similar transactions with an essentially civil flavour may in appropriate situations fall for quashing where parties have settled the dispute;

  7. In such a case, the High Court may quash the criminal proceeding if in view of the compromise between the disputants, the possibility of a conviction is remote and the continuation of a criminal proceeding would cause oppression and prejudice; and

  8. There is yet an exception to the principle set out in propositions (viii) and (ix) above. Economic offences involving the financial and economic well-being of the state have implications which lie beyond the domain of a mere dispute between private disputants. The High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanour. The consequences of the act complained of upon the financial or economic system will weigh in the balance.

The Apex Court dismissed the appeal holding that the High Court was justified in declining to entertain the Application for quashing FIR in the exercise of its inherent jurisdiction.

 

Conclusion

 

In view of the above expositions, it has been clearly held by the Apex Court that the High Court while exercising its power under Section 482 and dealing with a plea that the dispute has been settled, the Court must have due regard to the nature and gravity of the Offence. Further, it has been observed heinous and serious offences involving mental depravity or offences such as murder, rape and dacoity cannot appropriately be quashed though the victim or the family of the victim have settled the dispute. Such offences are, truly speaking, not private in nature but have a serious impact upon society.

 

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India: Supreme Court Rules That HUF Properties are Presumed Joint Property, Unless Proved to be Self-Acquired

 

Source : supremecourtofindia.nic.in

 

In a recently decided case entitled Adiveppa & Ors. Vs. Bhimappa & Anr. being Civil Appeal No. 11220 of 2017, the bench comprising of Hon’ble Mr. Justice R. K. Agrawal and Hon’ble Mr. Justice Abhay Manohar Sapre of the Supreme Court of India, vide its order dated September 06, 2017, has held that all assets pertaining to Hindu Undivided Family (HUF) are to be treated as joint property of the HUF, unless the contrary is proved as self-acquisition of property through valid documents.

 

Facts In Brief

 

The dispute was between the members of one family, i.e., uncle, aunt and nephews, pertaining to ownership and partition of agricultural lands.

 

For ease of understanding, the family tree of the parties is as under:

 

GENEALOGICAL TREE

 

Adiveppa (Died about 3-35 year back)
Yamanavva (Died about 10 year back)
Adiveppa
Yamanavva (wife)
Hanamappa Bhimappa Gundavva
(Son - Died 6 year ago) (Son - Defendant No. 1) (Daughter - Defendant No. 2)
Mangalavva
(Wife - Plaintiff No. 3)
Adiveppa
(Son - Plaintiff No. 1)
Yamanappa
(Son - Plaintiff No. 2)

 

 

Adiveppa was the head of the family. He married Yamanavva. Out of the wedlock, they had two sons and one daughter, namely, Hanamappa, Bhimappa and Gundavva respectively. Hanamappa had two sons, namely, Adiveppa and Yamanappa. Adiveppa, who was the head of the family, owned several acres of agricultural land. He died intestate.

 

After the death of Adiveppa and Hanamappa, dispute started between the two sons of Hanamappa i.e. Adiveppa (son – Plaintiff No. 1) and Yamanappa (son – Plaintiff No. 2) and their uncle, Bhimappa and aunt, Gundavva, regarding ownership and extent of the shares held by each of them in the agricultural lands.

 

Appellants’/ Plaintiffs’ contentions

  • Adiveppa and Yamanappa (Appellants/ Plaintiffs herein) filed a suit being O. S. No. 85 of 2001 against Bhimappa and Gundavva (Respondents/ Defendants herein) and sought declaration and partition in relation to the suit properties described in Schedules ‘B’, ‘C’, and ‘D’. The declaration was sought in relation to the suit properties in schedules ‘B’ and ‘C’ that these properties be declared as Plaintiffs’ self-acquired properties.

  • It was alleged that the properties specified in Schedule ‘D’ were ancestral and hence, the Plaintiffs have 4/9th share in them as members of the family.

  • It was alleged that since so far, partition has not taken place by metes and bound amongst the family members, hence the suit also sought for partition.

Respondents’/ Defendants’ contentions

  • The Respondents/ Defendants denied the Plaintiffs’ claim and averred inter alia that the entire suit properties comprising in Schedules ‘B’, ‘C’ and ‘D’ were ancestral properties.

  • That during the lifetime of Hanamappa, father of the Plaintiffs, oral partition had taken place amongst the family members on October 28, 1993 in relation to the entire suit properties, pursuant to which all family members were placed in possession of their respective shares. The partition was acted upon by all the family members including the Plaintiffs’ father (Hanamappa) without any objection from any member. Hence, the Plaintiffs’ claim was misconceived.

Judgement of the Trial Court

 

After framing the issues and tendering of evidence by the parties, vide judgment/ decree dated July 15, 2006, the Trial Court dismissed the suit on the ground that the Plaintiffs failed to prove the suit properties specified in Schedules ‘B’ and ‘C’ to be their self-acquired properties. So far as the properties specified in Schedule ‘D’ are concerned, though they were ancestral but were partitioned long back pursuant to which, the Plaintiffs through their father, Hanamappa, got their respective shares along with the other members.

 

Appeal before the High Court of Karnataka

 

Aggrieved by the above order, the Plaintiffs filed first appeal before the High Court of Karnataka, whereby the High Court, vide its judgement/ order dated August 22, 2011, dismissed the appeal and affirmed the judgment/ decree of the Trial Court.

 

Decision of the Hon’ble Supreme Court

  • The present appeal is by way of special leave before the Apex Court by the Plaintiffs.

  • Upholding the decisions of the courts below, the Hon’ble Supreme Court of India vide its judgement/ order dated September 06, 2017, held that the Plaintiffs in this case could not prove with any documentary evidence that the suit properties described in Schedules ‘B’ and ‘C’ were their self-acquired properties and that the partition did not take place in respect of Schedule ‘D’ properties and it continued to remain ancestral in the hands of family members. On the other hand, the Defendants could prove that the partition took place and was acted upon.

  • The Plaintiffs also failed to adduce any other kind of documentary evidence to prove their self-acquisition of the Schedule ‘B’ and ‘C’ properties, nor could they prove the source of its acquisition.

  • It is a settled principle of Hindu law that there lies a legal presumption that every Hindu family is joint in food, worship and estate and in the absence of any proof of division, such legal presumption continues to operate in the family. The Hon’ble Court opined that a legal presumption that the suit properties comprised in Schedules ‘B’ and ‘C’ are part and parcel of the ancestral one (Schedule ‘D’) could easily be drawn for want of any evidence of such properties being self-acquired properties of the Plaintiffs.

  • The counsel for the Appellants/ Plaintiffs had submitted that the Trial Court had recorded some findings against the Respondents/ Defendants in relation to their rights in the suit properties, and the same having been upheld by the High Court, the Appellants are entitled to get the benefit thereof, the Apex Court observed that if the Appellants/ Plaintiffs failed to prove their main case set up in the plaint and thereby failed to discharge the burden, any alternative submission of theirs, which also has no substance, cannot be accepted.

In view of the above, the Supreme Court dismissed the appeal of the Appellants/ Plaintiffs and held that all assets pertaining to a Hindu Undivided Family (HUF) are to be treated as joint property of the HUF, unless the contrary is proved such as self-acquisition of property, through valid documents.

 

 

 

 

 

 

 

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S.S. Rana & Co. shares Diwali festivities with the ‘third gender’

 

India, since time immemorial, has been one country in the world, that has always ‘celebrated’ diversity instead of ‘classifying’ it. The Mahabharata, Ramayana and even the Mughal Empire recognized and respected the transgenders as an integral part of the Society. But with the world taking a turn towards modernity, their social fortunes changed into obscurity. With the colonial government passing the Criminal Tribes Act, 1871 classifying all eunuchs as criminal, they were ostracized from all forms of social life and mostly survived in close knit communities of their own.

 

S. S. Rana & Co. was indeed honored to have an opportunity to share auspicious Diwali festivities with the third gender. Honored, we say, because it is indeed inspiring to see one particular community that forms such a significant part of the Indian demographics struggle since the past 2-3 centuries without being deterred or fearing societal atrocities only so their birth rights get recognized. Honored we say, because in response to the atrocities the society subjected them to, all they wanted was friendship and harmonious existence.

 

The theory of natural rights states that there are certain natural rights which are bestowed upon an individual merely by virtue of their birth. No state agency or governing body has the power to take away or impose these rights upon the individual. The right to be recognized for the gender a person is born with, is as fundamental as recognizing the individual itself, considering how gender is a vital and significant part of the individual’s existence.

 

We at S. S. Rana & Co. believe that through the recent rebels responsive recognition of the third gender, no extra right or special status was granted to them. The attitude of acceptance, is not accepting a new gender into the society, but realizing an old, long standing mistake and making efforts towards correcting it. The attitude of acceptance towards them was institutionalized when the Supreme Court of India, in the case of National Legal Services Authority v. Union of India, WP (Civil) No 604 of 2013, declared transgendered people to be officially called the ‘third gender’, giving them a right to self-identification of their gender. This move was seen as a big step towards gender equality in India, the effects of which can be felt on social media, as today we have a transgender police inspector, a transgender mayor, a transgender college principle and even a transgender music band; something that would have been unthinkable even a decade ago.

 

In light of this acceptance, ‘no gender’ toilets, government jobs for the third gender, third gender marriages, beauty pageants, sports events are being promoted all over the country.

 

At S. S. Rana & Co., keeping in line with our traditions, and all-inclusive policy shared the festivities of Diwali with a few members of the third gender.

 

 

 

 

 

 

 

 

 

 

 

 

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