Insolvency and Bankruptcy Code, 2016 prevails over SARFAESI Act, 2002: NCLAT

National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial), dismissed an appeal filed by the Financial Creditor, holding it to be sans merit.

The appeal was filed by the appellant Bank (Financial Creditor) against the order passed by the National Company Law Tribunal, Chennai whereby and whereunder the application preferred by the Operational Creditor under Section 9 of Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor was admitted, order of moratorium was passed and name of the Interim Resolution Professional was called for. It was submitted that the Bank had taken possession of certain lands of the Corporate Debtor, and therefore, the Corporate Debtor colluded with the Operational Creditor to file the application under Section 9.

The National Company Law Appellate Tribunal rejected the submission of the Bank in absence of evidence. Moreover, NCLT could not have decided the issue of collusion which could only be decided by a Court of competent jurisdiction. The contentions regarding insufficiency in service of Demand Notice to the Corporate Debtor were also rejected as the Corporate Debtor itself did not raise any such objection. It was observed that as per the Supreme Court decision in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, if the application under Section 9 is complete and there is no existence of dispute and there is a debt and default, then the Adjudicating Authority (NCLT) is bound to admit the application. The Appellate Tribunal also noted that the appellant Bank had already taken steps under Securitisation and Reconstruction of Financial Assets and Enforcement of Interest Act, 2002. It was held, however, that such action could not continue as I&B Code prevails over SARFAESI Act. In the result, the appeal filed by the Bank was dismissed. [Canara Bank v. Sri Chandramoulishvar Spg. Mills (P) Ltd.,2018 SCC OnLine NCLAT 389, order dated 03-08-2018]

The Negotiable Instruments (Amendment) Act, 2018 

The Negotiable Instruments (Amendment) Act, 2018 was notified on 02-08-2018.

The following amendments have been made —

  • Section 143 — now introduces a new proviso 143A, giving power to a Court to try an offence under S. 138 to order the drawer of cheque to pay interim compensation to the complainant in summary trials/summons case where he pleads not guilty to the accusations in the complaint. Furthermore, the interim compensation shall not exceed 20 % of amount of the cheque and shall be payable within 60 days from date of the order.
  • Recovery of fine shall be same as under Section 421 of the Code of Criminal Procedure, 1973.
  • In cases of acquittal, the Court is now empowered to direct the complainant to repay to the appellant the amount so released, at interest rates as prescribed by RBI.
  • Section 148 — now empowers the appellate court, for appeals against conviction under S. 138, to direct the appellant to deposit a minimum 20 % of the fine/compensation awarded, in addition to interim compensation paid under S. 143A.

Cabinet approves DNA Technology (Use and Application) Regulation Bill, 2018

The Union Cabinet has approved The DNA Technology (Use and Application) Regulation Bill, 2018.

Details of the Bill:.

The primary intended purpose for enactment of “The DNA Technology (Use and Application) Regulation Bill” is for expanding the application of DNA-based forensic technologies to support and strengthen the justice delivery system of the country.
The utility of DNA based technologies for solving crimes, and to identify missing persons, is well-recognized across the world.
By providing for the mandatory accreditation and regulation of DNA laboratories, the Bill seeks to ensure that with the proposed expanded use of this technology in the country, there is also the assurance that the DNA test results are reliable and the data remain protected from misuse or abuse in terms of the privacy rights of our citizens.
Speedier justice delivery.
Increased conviction rate.
Bill’s provisions will enable the cross-matching between persons who have been reported missing on the one hand and unidentified dead bodies found in various parts of the country on the other, and also for establishing the identity of victims in mass disasters.
Background: Forensic DNA profiling is of proven value in solving cases involving offences that are categorized as affecting the human body (such as murder, rape, human trafficking, or grievous hurt), and those against property (including theft, burglary, and dacoity). The aggregate incidence of such crimes in the country, as per the statistics of the National Crime Records Bureau (NCRB) for 2016, is in excess of 3 lakhs per year. Of these, only a very small proportion is being subjected to DNA testing at present. It is expected that the expanded use of this technology in these categories of cases would result not only in speedier justice delivery but also in increased conviction rates, which at present is only around 30% (NCRB Statistics for 2016).

Cabinet

LG, Delhi is bound by “Aid and Advice” of the Council of Ministers of the Delhi Government: SC

“Lieutenant Governor and the Council of Ministers must attempt to settle any point of difference by way of discussion and dialogue.”

Supreme Court: The 5-Judge Constitutional Bench delivered a 535-page long Judgment in the much-hyped case requiring adjudication on the Constitutional matter of ‘statehood’ to NCT of Delhi. There was coalescence in views of the Hon’ble Judges, who in their separate opinions held that the real power for the administration of the Capital lies with the democratically elected Government of NCT of Delhi.

The appellant was before the Supreme Court, challenging the decision passed by the Delhi High Court dated 04-08-2016. The High Court had negatived appellant’s claim that status of the voters of NCT of Delhi, after 69th Constitutional Amendment, has moved from notional to real. The present reference to the Supreme Court invited the interpretation of Article 239AA of the Constitution that provides special status to the Capital. The appellant-Government of NCT of Delhi was represented by a battery of lawyers including Senior Advocates P. Chidambaram, Gopal Subramanium, Rajiv Dhawan, Indira Jaising and Shekhar Naphade. They contended that insertion of Article 239AA was intended to eradicate the hierarchical structure which functionally placed the LG in a superior position to that of the Council of Ministers. Maninder Singh, learned Additional Solicitor General of India, advanced arguments on behalf of the Respondent-Union of India and the LG. He argued that though Article 239AA envisages constitution of Legislative Assembly for the Capital, yet the President remained its Executive Head who exercised powers through LG.

A summary of conclusions as reached by the Hon’ble Judges in their separate opinions is mentioned hereinafter:

Dipak Misra, CJI for himself and A.K. Sikri and A.M. Khanwilkar, JJ.

Our Constitution contemplates a meaningful orchestration of federalism and democracy.
Union and State Government must embrace a collaborative federal architecture.
In light of NDMC v. State of Punjab, (1997) 7 SCC 339, it was clear that NCT of Delhi could not be accorded the status of ‘State’ under the present Constitutional scheme.
An interpretative dissection of Article 239AA reveals that both the Union and the State Government exercise power of making laws according to the Union, State, and Concurrent lists.
The words “aid and advice” employed in Article 239AA(4) mean that LG is bound by aid and advice of the Council of Ministers unless he exercises his power under the proviso.
Exercise of power under the proviso for reference of the matter to the President has to be done in exceptional cases only.
Decisions of Council of Ministers must be communicated to LG but that does not mean that his concurrence is required.
Dr D.Y. Chandrachud, J.

Article 239AA represent a clear mandate of the Constitution to provide institutional governance founded on participatory, representative and responsive government.
If the expression ‘any matter’ mentioned in proviso to Article 239AA were to be read as ‘every matter’, it would lead to the President assuming administration of every aspect of the affairs of the Union Territory, thereby resulting in the negation of constitutional structure adopted for governance of the Capital.
The LG acts on the “aid and advice” of Council of Ministers; this recognizes that real decision making authority in a democratic form of government vests in the Executive.
Ashok Bhushan, J.

Executive power is coextensive with the legislative power. The policy of legislation can be given effect to only by executive machinery.
Legislative Assembly of NCT of Delhi represents views of elected representatives; their decisions have to be respected except where LG decides to make a reference to the President.
From persons holding high office, it is expected that they shall conduct themselves in the faithful discharge of their duties so as to ensure the smooth running of administration so that rights of all can be protected.
This matter traveled to the present Bench when a 2-judge bench comprising of A.K. Sikri and R.K. Agrawal, JJ. referred the matter to a Constitution Bench as substantial questions of law were involved. The reference was answered in the above terms and was further directed to be placed before appropriate regular Bench. [Government (NCT of Delhi) v. Union of India, Civil Appeal No. 2357 of 2017, decided on 04-07-2018]

BITCOIN Virtual Currency -Supreme Court issues directions to High Courts

The Supreme Court has asked high courts across the country not to entertain any petition relating to the circular issued by the Reserve Bank of India on “Prohibition on dealing in Virtual Currencies’. A bench headed by the Chief Justice of India Dipak Misra issued this order while staying further proceedings pending before Delhi and Calcutta high courts.

The court was hearing a writ petition filed by Siddharth Dalmia and transfer petitions seeking transfer of cases pending before Delhi and Calcutta high courts. The bench directed the registry to register transfer petitions and to issue notice and tag them with the writ petition.

The court has posted the matter for further hearing on 20th July 2018. RBI Circular The Reserve Bank of India had issued a circular cautioning users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated with dealing with such virtual currencies.

The circular, issued on 6th April 2018, reads: “In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/sale of VCs. Regulated entities which already provide such services shall exit the relationship within three months from the date of this circular”

 

Arrest under SC & ST Act, 1989 must be made with prior approval of SSP concerned, and only after recording reasons of arrest in writing

Madhya Pradesh High Court: While disposing off the present appeal wherein the appellant was charged under Section 3(2)(va) and 3(1)(d) of Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989, the Bench of J.P. Gupta, J., reiterated the recent Supreme Court decision in Subhash Kashinath Mahajan v. State of Maharashtra, 2018 SCC OnLine SC 323, holding that a police officer, who intends to arrest a person, who is not a government servant and is accused of the offence punishable under the 1989 Act, such arrest should be made with prior approval of the S.S.P concerned, only after recording the reasons of arrest in writing.

As per the facts, the appellant was the owner of the bus on which the complainant was working as a Driver. It was alleged that when the complainant demanded arrears of salary, he was abused publicly by referring to his caste. The complainant belongs to the Scheduled Tribe community. The appellant’s counsel Harshwardhan Singh Rajput refuted the allegations and prayed before the Court to issue directions in sync with the guidelines laid down in the aforementioned Supreme Court judgment.

On perusal of the facts, the Court observed that there is no evidence to show that the FIR against the appellant was filed with malafide intentions, therefore the appellant is not entitled to get anticipatory bail. The Court however also noted that the nature of the offence is not very severe and prima facie, the appellant’s arrest is not warranted for the purpose of investigation and his presence may be secured during trial by directing him to appear before the Magistrate/Court concerned in case of filing of the charge-sheet. Furthermore the Court stated that an accused, who is not entitled to get the benefit of anticipatory bail, cannot be denied the protection available under the law with regard to unjustified and unwarranted arrest, as before arresting an accused, it is the duty of the police officer to examine and record the reasons of arrest in writing subject to scrutiny of the Magistrate/Court.

[Ajeet Jain v. State of Madhya Pradesh, CRA No. 1757 of 2018, decided on 04.04.2018]

Maximum period of 90 days to file a written statement as prescribed under CPC is to be extended only in exceptional cases

Hyderabad High Court: A revision petition filed against the order of the Principal Junior Civil Judge whereby he rejected the I.A filed by the petitioner herein, was allowed by M.S. Ramchandra Rao, J.

Brief facts of the case were that the respondent (original plaintiff) filed a writ against the petitioner (original defendant). The defendant filed a counter claim to the suit. The plaintiff filed a written statement to the counter claim after a gap of nine years without leave of the court. The defendant filed an I.A before the Civil Judge which was dismissed. Present revision was filed against the said order of dismissal of I.A by the Civil Judge.

The Court referred to Order VIII Rule I of CPC and held that it provides that a written statement to a suit as also to a counter claim shall be filed within 30 days, extendable up to a maximum of 90 days. Relying on decisions of the Supreme Court, the Court held that such maximum period as prescribed in the CPC could be extended by the Court in exceptional cases only after recording the reasons in writing. However, in the present case, the Court held that the Civil Judge dismissed the I.A filed by the defendant without considering the fact that no reasons were recorded by the Court before admitting the written statement filed by the plaintiff beyond the maximum period of 90 days. Thus, the present revision was allowed and the impugned order was set aside. The written statement field by the plaintiff in response to the counter claim filed by the defendant was struck down.

[Y. Venkata Ramana v. Yellaboyani Venkatamma, 2018 SCC OnLine Hyd 53; dated 23.04.2018]

Prosecution can be directed under Section 340 CrPC, if wife misuses women-centric law

Gujarat High Court: The Single Bench of Sonia Gokani, J. has held that when a wife misuses women-centric laws by declaring completely incorrect facts, the trial court can direct her prosecution, at the time of considering the case, under Section 340 of the Code of Criminal Procedure, 1973.

In the instant case, the petitioner wife had made an application under Section 125 of CrPC seeking maintenance for herself and her son. She had submitted an affidavit, wherein she had declared herself a housewife having no source of income. Later, her husband moved an application to the trial Court contending that his wife was earning Rs. 40,000 per month and had produced false evidence on oath. The trial court, accordingly, directed the initiation of prosecution against the wife under Section 195 read with Section 340 of CrPC for committing offences under Sections 191, 192 and 193 of the Penal Code. The High Court noted that the action can be taken under Section 340 of CrPC when it is expedient in the interests of justice, and the impact on the administration of justice by misuse of women-centric laws would make it expedient for the trial Court to direct the prosecution. The Court further added that the trial court had elaborately discussed the law and applied the said law to the facts to hold that the petitioner has not stated the correct facts on oath. Therefore, the Court refused to interfere with the order. [Sejalben Tejasbhai Chovatiya v. State of Gujarat, 2016 SCC OnLine Guj 6333, decided on October 20, 2016]

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Negotiable Instruments Act: Cabinet approves amendment to provide interim compensation

The move would help in augmenting the trade and commerce, notably the MSME sector, and further order to elevate the credibility of the cheque as a financial statement.

The amendment seeks to provide for interim compensation to the payee of a cheque, both at the trial stage and at the appellate stage, and further allows a court to order interim compensation to the payee of a cheque, a part of the amount at the trial stage itself.

And furthermore, if the drawer is acquitted, the court may direct the payee to repay the amount paid as interim compensation with interest. Similarly, the appellate courts will be enabled to order the appellant to deposit a part of the compensation awarded by the trial court at the time of filing an appeal.

The move follows from the representations from the public and the trading community regarding the injustice caused to payees as a result of pendency of cheque dishonour cases.

STATEMENT OF OBJECTS AND REASONS

1. The Negotiable Instruments Act, 1881 (the Act) was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. The said Act has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of dishonour of cheques. However, the Central Government has been receiving several representations from the public including trading community relating to pendency of cheque dishonour cases. This is because of delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings. As a result of this, injustice is caused to the payee of a dishonoured cheque who has to spend considerable time and resources in court proceedings to realise the value of the cheque. Such delays compromise the sanctity of cheque transactions.

2. It is proposed to amend the said Act with a view to address the issue of undue delay in final resolution of cheque dishonour cases so as to provide relief to payees of dishonoured cheques and to discourage frivolous and unnecessary litigation which would save time and money. The proposed amendments will strengthen the credibility of cheques and help trade and commerce in general by allowing lending institutions, including banks, to continue to extend financing to the productive sectors of the economy.

3. It is, therefore, proposed to introduce the Negotiable Instruments (Amendment) Bill, 2017 to provide, inter alia, for the following, namely:—

(i) to insert a new Section 143A in the said Act to provide that the Court trying an offence under Section 138 may order the drawer of the cheque to pay interim compensation to the complainant, in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and in any other case, upon framing of charge. The interim compensation so payable shall be such sum not exceeding twenty per cent. of the amount of the cheque; and
(ii) to insert a new Section 148 in the said Act so as to provide that in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent. of the fine or compensation awarded by the trial court.

4. The Bill seeks to achieve the above objectives.

Cabinet

 

Tenants have a right to approach DRT under S. 17(4-A) of SARFAESI Act

Karnataka High Court: A Single Judge Bench comprising of Vineet Kothari, J., decided a writ petition filed under Articles 226 and 227 of the Constitution, wherein a stay was granted on the possession notice issued by the respondent Bank to the petitioner, directing the petitioners to approach the Debt Recovery Tribunal in proper proceedings.

The petitioners were tenants of Respondent 1 who was a debtor of Respondent 2 State Bank of India. Respondent 1 defaulted in re-payment of the loan and respondent 2-SBI issued notice to Respondent 1 to repay the loan within sixty days. Also, respondent 2 SBI issued notices to the petitioners-tenants, to evict the building within seven days which was a Secured Asset and would be taken over in the condition of non-payment of the loan, under the provisions of SARFAESI Act, 2002. Aggrieved by the said notices, the petitioners field the instant petition.

The Court perused the record and placing reliance on its earlier decisions held that the tenants too have a right to approach Debt Recovery Tribunal under Section 17(4-A) of SARFAESI Act. Holding that since the petitioners had an alternate and efficacious remedy available to them under the said Act, the Court declined to consider the petitions on merit. The petitioners were given liberty and directions to approach the DRT under proper proceedings within one month. Further, SBI was directed not to take any action for eviction of the petitioners for a period of four weeks.

The petitions were accordingly disposed of. [Aravindamma v. K.S. Jayalakshmammanni, WPs Nos. 10172-174 of 2018 (GM-RES), order dated 5.3.2018]