Administrator, Author at Socio Legal Corp

Under Clause 4 of Schedule III of the SEBI Stock Broker Regulations, fees paid by directors do not qualify for an exemption: Supreme Court

Issue – The Director, and not the Whole Time Director, transferred the corporate entity’s stock exchange registration and paid the registration fees, the Supreme Court upheld SEBI’s decision to deny a corporate entity an exemption from payment of fees under Clause 4 of Schedule III of the SEBI Regulations 1992.

Facts of the case – The SEBI dismissed the allegation of the Appellant Company while maintaining that Mr. Mantri was merely a Director and not a full-time Director in the Company for the three years following the transfer of his membership. There could be no exception since the requirements outlined in Schedule III Clause 4 were not met. Against the Appellate Tribunal’s decision, the Appellant Company filed an appeal with the Supreme Court.

Arguments – It has been emphasised that each stock market where the stock broker conducts business requires a separate Registration Certificate from SEBI.

When Mr. Mantri moved his CSE membership to the appellant company, it was noted that he was a Director and not a Whole-Time Director of the company.

Reasoning – The definition of “a certificate” in Section 12(1) of the Act, when combined with the scheme of Rules, 1992, and Regulations, 1992, inevitably leads to the requirement that the stock broker not only obtain a certificate of registration from SEBI for each stock exchange where he operates, but also pay an ad valorem fee in accordance with Part III of the Regulations, 1992, Regulation 10 of which is annexed, in reference to each certificate of registration from SEBI in each of the stock exchanges.

Judgement – The Bench was convinced that no exemption could be granted since the Appellant Company had not met the requirements outlined in Clause 4 of Schedule III of the Regulations, 1992. The appeal was turned down.

Provisions used in the case – National Stock Exchange, Clause 4 of Schedule III of the Regulations, 1992, Section 12(1) of the Act.

Case title – GPSK Capital Private Limited (Formerly Known as Mantri Finance Limited) v The Securities and Exchange Board Of India.

Written by – Nikita Shankar

State Administrative Tribunal Can Be Abolished By The Union Government: Odisha Administrative Tribunal’s abolition is upheld by the Supreme Court

Issue – The Central Government’s 2019 announcement to abolish the Odisha Administrative Tribunal was upheld by the Supreme Court.

Facts of the case – The Orissa High Court’s ruling upholding the OAT’s abolishment was challenged in a petition brought by the Odisha Administrative Tribunal Bar Association, which the bench dismissed.

Reasoning – Since Article 323A of the Indian Constitution only grants the Union Government the authority to create administrative tribunals at its discretion in response to a request from a State Government, it does not prevent it from dissolving a State Administrative Tribunal.

Arguments – The authority to create an Administrative Tribunal includes the authority to dissolve the Tribunal as well. The Constitution’s Article 14 was not broken by the announcement that disbanded the OAT on August 2, 2019. The class of people who were impacted by the decision to abolish the OAT are not entitled to a hearing, hence the standards of natural justice are also not infringed. The choice was made using administrative authority, not quasi-judicial authority.

Judgement – The Rojer Mathew decision’s directive to perform a judicial effect assessment has been given by the Court to the Ministry of Law and Justice. On September 21, 2022, the bench had postponed making a decision in the matter.

Provisions used in the case – Article 323A and Article 14 of the Constitution.

Case title – Orissa Administrative Tribunal Bar Association v. UoI And Ors.

Written by – Nikita Shankar

Supreme Court Accepts Petition Contesting Frequently Shuttered Internet in Different States

Issue – The Supreme Court decided to take up a case brought by the Software Freedom Law Centre in India protesting nationwide Internet shutdowns in certain states.

Facts of the case – The petitioner’s attorney initially argued that the problem of internet outages was a national issue in India. He used the example of the internet being shut down because of a Rajasthani exam. It should be recalled that the Supreme Court previously declined to hear a case challenging Rajasthan’s internet blackouts on the grounds that the petitioner might file a case with the Rajasthan High Court under Article 226.

Arguments –These specific states, the ones we have accused – West Bengal, Rajasthan, Gujarat, and Arunachal Pradesh – frequently shut down the internet when it comes to test cheating. Our visit to the Supreme Court is intended to allow for the issuance of pan-Indian directives. The Union further submitted a counter affidavit.

Reasoning – The Supreme Court urged the parties to appear before the High Court in prior petitions as well since there, the judges would be able to speak with the parties and learn the rationale behind the Internet shutdown. Not everyone in the country is experiencing it at once. In fact, we’ve had approaches. In a similar vein, you can also take your case to the High Court, which will hear it.

Judgement – After three weeks, on a day not designated for miscellaneous business, the bench ultimately decided to keep the matter since it involved a pan-Indian problem.

Provisions used in the case – Article 226 of the Indian Constitution

Case title – Software Freedom Law Centre, India v. State of Arunachal Pradesh And Ors.

Written by – Nikita Shankar

Diversion of gas to other stations, not enough ground to seek compensation: SC dismisses appeal

Supreme court recently dismissed an appeal while assailing the judgement given by the appellate tribunal for electricity and held that the electricity board would not indemnify if there was no provision regarding compensation of full fixed charges and actual variable charges in the power purchase agreement (PPA) in respect of the short supply of energy.

Initially, the Tamil Nadu electricity regulatory commission disposed of the petition by order dated 30^th December 2011, rejecting the claim of the appellant relating to unpaid fixed chargesof Rs.18.06 under Combined Cycle Operation as well as the claim of underpaid variable charges of Rs. 12.77 crores under Combined Cycle Operation for the period between 1st July 2006 to 15th June 2009. This decision was challenged by the appellant in the appellate tribunal for electricity which dismissed the appeal under impugned judgement. The appellant approached supreme court through an appeal under section 125 of the Act.

Mr Parag P. Tripathi, learned senior counsel for the appellant submits, “it was incumbent upon the Tribunal to have considered that the short supply of gas was due to the diversion of gas to other generating stations and on this account, the 4 Tamil Nadu Electricity Board (hereinafter being referred to as the “Board”) could not have made the appellant suffer by citing the terms of the PPA.” there was sufficient evidence on record regarding the communication between Gas Authority of India Limited(GAIL) and the Board in reference to the diversion of gas to other generating stations and this has seriously impaired the functionality and efficiency of the appellant company.”, it further mentioned

The court noted that the PPA was not approved under section 86(1)(b) of the electricity act, 2003. There was no clause in PPA which provided for full fixed costs. It clearly mentioned that the fuel supply risk would be shared between the producer and supplier and the board would not be responsible to indemnify.

“The submission made by learned counsel for the appellant that because of the diversion of gas to the other generating stations of the Board, at least on this account, the Board could not have made the appellant to suffer by citing the terms of PPA, on the first blush appears to be attractive but has no legs to stand for the reason that in the absence of there being any provision for compensation for capacity charges and variable charges due to the 12 fact that the plant was not able to maintain the normative availability/PLF on account of shortage of fuel in terms of the Central Government’s Tariff Regulations, 2004, at least the respondent Board cannot be said to be at fault and that was the reason prevailed upon the Commission to arrive at the conclusion that the appellant was not entitled to payment of fuel fixed charges and actual variable charges in respect of supply of energy between 1^st July, 2006 and 15th June, 2009 during the period when partial parameters were rejected because of shortage of supply in view of the provision in PPA or tariff regulations.” The court stated in its order while dismissing the appeal.

[Penna Electricity Limited (Now M/s Pioneer Power Limited) v. The Tamil Nadu Electricity Board & Ors.]

Written by: Shagun Behal

Rehabilitation Scheme Under SICA Binds All Creditors; Dues Can’t Be Recovered Post Revival Of Sick Company: Supreme Court

What:

Rehabilitation Plan Under SICA Binds All Creditors; Debts Cannot Be Recovered After Resurrection Of Sick Company

Facts:

The Supreme Court has ruled that all creditors, including unsecured creditors, must abide by the rehabilitation plan outlined in Section 18 of the SICA, 1985.

In ruling on an appeal filed in the case of Modi Rubber Limited v. Continental Carbon India Ltd., the bench of Justice M.R. Shah and Justice Sudhanshu Dhulia overturned a decision by a High Court that allowed creditors to reject their reduced debts and then demanded the full amount, along with interest, after the rehabilitation plan is put into place and the failing business is revived. The Court decided that collecting debts after a sick firm is revived would once more put it in a sick state.

Under the Sick Industrial Companies Act of 1985 (SICA), a Modi Rubbers Ltd. (“Company/Respondent”) rehabilitation plan was authorised on April 8, 2008. It was suggested that scaled-down amounts owed by the Company’s creditors under the Plan be paid to them.

As an unsecured creditor of the company, Continental Carbon India Ltd. (“Unsecured Creditor/Appellant”) was not pleased with the reduction in its debt and filed a writ case with the High Court.

The High Court ruled that when the BIFR approved a plan under SICA, the unsecured creditors had the choice to reject the lowering of the due amount. By doing this, the unsecured creditors can postpone payment until the rehabilitation plan is successful and then later, once the failing firm has recovered, they can be paid back with interest.

According to the Court, the primary goal of BIFR under SICA is to revive a sick firm and keep it from going bankrupt. For the same reason, there is no obstacle to developing a rehabilitation strategy to bring the firm back from the brink of bankruptcy. Moreover, Sections 22 and 22A of SICA ensure that the Plan of Rehabilitation is not jeopardized by a legal procedure or an unjustified disposition of the ill company’s assets.

The Court has rejected the argument that forcing unsecured creditors to accept a reduced value for their debts would be a violation of Article 300A of the Indian Constitution. It was discovered that the rehabilitation programme was established in accordance with Section 18 of the SICA, which has a binding impact on all creditors.

The Bench overturned the High Court’s decision, ruling that the rehabilitation programme under Section 18 of the SICA binds all creditors and that unsecured creditors must accept the reduced value of their dues under the rehabilitation scheme.

Written By – Shivank Duseja

Foreign Lawyers should be permitted to practice in India; in national interest: BCI

The bar council had recently allowed foreign nationals to be permitted to practice in India, which would be based on the principle of reciprocity. Regarding the same, there were a lot of misapprehensions and misinformation which were being circulated, so it was decided by the bar council of India to address the same through the mode of a press release.

It was stated by the bar council that the rules as per which the foreign lawyers are being permitted to practice in India are being done in a very restricted manner and there would be no threat to the practice of the Indian lawyers.

The press releases have clarified that the rules are framed as per the judgment of the supreme court which is the BCI v. A.K Balaji. In this case, the supreme court stated that the central government has the liberty to formulate rules regarding the matter above mentioned.

It has been assured by the Bar Council of India, that it will always be committed to working for the safeguards and security of the lawyers in the country, therefore the lawyers in the country should not feel insecure and welcome the rules which would be working in pursuance of the national interests.

These lawyers will not have the liberty to appear in a court of law, but they can advise the clients on the issues of foreign law and even take up work pertaining to corporate transactions. As per BCI, such a move can increase the flow of foreign direct investment in the country further paving the way to make India a hub of international commercial arbitration.

Written by:- Shianjany Pradhan

Supreme Court : Should a Judgement Be Reconsidered As It Adopted a Previously Overruled Precedent?

Issue – The fact that a Division Bench of the Supreme Court reached a judgement on a legal issue and that decision was later overturned or amended by a higher court in another case does not justify the reconsideration of that decision.

Facts of the case – In Pune Municipal Corporation v. Harakchand Misirimal Solanki, a saving provision in the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act of 2013 was constructed. Pune Municipal Corporation and all other judgements that had relied on it were overturned by a Constitution Bench in Indore Development Authority v. Manoharlal.

The review petitioners have stated that the Indore Development Authority specifically overturned the Pune Municipal Corporation and all other decisions that came after it. They want that the ruling be overturned and that the SLPs and civil appeals be reinstated. The petitions for review were unmaintainable, according to the replies.

Arguments – Each civil matter is subject to review on the reasons set out in Order XLVII Rule 1 CPC, according to Order XLVII of the Supreme Court Rules, 2013, Rule 1.

It is not a valid reason to reconsider a judgement just because a superior Court later overturned it in another instance.

Reasoning – In this instance, the review petitioner has asked for a review on the justification of “any other adequate cause”. The phrase, nevertheless, is not specified in CPC. The judge made this observation after citing three decisions and said that “other adequate cause” had to be comparable to the other two grounds listed in the clause.

Judgement – A judgement would be binding on the parties even if it were later shown to be incorrect and overturned.

Provisions used in the case – Section 24 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement, 2013, Section 24(2), Rule 1 of Order XLVII of the Supreme Court Rules, 2013.

Case title – Govt. of NCT of Delhi Through the Secretary, Land and Building Department And Anr. v. M/s. K.L. Rathi Steels Limited And Ors.

Written By – Nikita Shankar

An arbitrator can always award pendente lite interest unless there is bar under contract: SC set aside the high court’s order

Recently, the supreme court set aside the impugned judgement and order passed by the high court of Delhi and held that the arbitrator/ arbitral tribunal can award pendente lite interest unless there is a specific bar under the contract.

an Agreement was entered into between IRCON and the respondent – M/s. National Buildings Construction Corporation Limited (hereinafter referred to as “NBCC”), whereby the respondent was awarded the work of construction of a Railway Station cum Commercial Complex at Vashi, Navi Mumbai at the cost of Rs.3042.91 lakh, to be constructed within a period of 30 months from 05.04.1990. NBCC failed to complete the work in time. NBCC referred the dispute to arbitration. The Arbitral Tribunal passed an Award in 2011, rejecting NBCC’s claim for a refund of two security deposits i.e. Claim No. 33 and 34. the Arbitral Tribunal held that though termination with reference to Clause 60.1 was bad in law, but justified the termination with reference to Clause 17.4 of the Contract. the Tribunal also considered the counterclaim of IRCON and awarded 18% p.a. pendente lite interest on special advance given by IRCON to NBCC.

the NBCC approached the High Court by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Arbitration Act”). the learned Single Judge of the High Court set aside the rejection by the learned Arbitral Tribunal of Claim Nos.33 and 34 of NBCC to the extent it concerned the return of security deposit amounts i.e. Rs.5,57,486/+ Rs.60,85,840/by observing and concluding that once the Arbitral Tribunal found that the termination with regard to Clause 60.1 was not justified. The Single Judge further set aside the award of pendente lite interest on special advance, on the ground that the Agreement did not contain any clause for such interest.
the impugned judgment and order passed by the Division Bench of the High Court, IRCON has preferred the present appeal.

Shri R.S. Hegde, learned counsel appearing on behalf of the appellant submitted that “on appreciation of evidence and the material on record as the learned Tribunal has observed and held that the IRCON was justified in rescinding the contract due to abandonment of work by NBCC and when the said finding attained the finality, the IRCON was justified in forfeiting the security deposits. It is submitted that as such the High Court has taken too technical view.”

Mr Minocha appearing on behalf of the respondent supported the order passed by the high court and contended that “even the learned Arbitral Tribunal also observed and held that the IRCON was not justified in rescinding the contract under Clause 60.1. It is submitted that however, thereafter the Arbitral Tribunal justified the termination of the contract under Clause 17.4, which as rightly held by the learned Single Judge / Division Bench was not permissible.”

The bench of Justice M.R. Shah and Justice M.M. Sundresh passed the order which said “The impugned judgment and order passed by the learned Single Judge as well as the Division Bench of the High Court quashing and setting aside the award passed by the Arbitral Tribunal rejecting Claim Nos. 33 and 34 are hereby quashed and set aside and the award passed by the Arbitral Tribunal rejecting claim Nos. 33 and 34 are hereby restored.”

Written By – Shagun Behal

Shiv Sena Case: SC to Uddhav Thackeray’s Side, the Government Must Have the House’s Confidence in It

A Constitutional Bench comprising of CJI DY Chandrachud, J. Hima Kohli, J. MR Shah, J. Krishna Murari, and J. PS Narasimha heard the case and reserved its judgment in the batch of cases relating to a rift between the Shiv Sena party members. The case was argued by Senior advocate Kapil Sibal, Senior advocate AM Singhvi, and Senior advocate Devadatt Kamat.

Arguments

Kapil Sibal argued that there is no place for factions when the governor has to appoint a CM. it may have been allowed if Shivsena itself had merged with BJP. This unconstitutional act by the faction is allowing them to topple the government and is against the scheme of the tenth schedule.

In reply J. PS Narasimha said that this argument can sometimes be dangerous as almost every regional party is run by one family and doesn’t allow interference of anybody else. To this, Sibal in his defense compared the existing Indian law to UK’s rule.

CJI Chandrachud also provided some hypothetical situations to make matter more clear. Sibal then developed a few justifications for his claim in order to build a case in his favor. He said if rebels had lost faith in the alliance, they should have resigned as legislators and sought the mandate of the people in re-elections.

To this CJI Chandrachud said that Government must enjoy the faith of the house. If the house has faith in Government, it can legislate. Sibal replied, “Narsimha Rao government ruled although they were in minority. The matter here is not related to minority , but the point is that they don’t want to lose membership and ecause of faction government, we are being mocked.”

Advocate Manu Singhvi who was also appearing for Uddhav side gave arguments I support of Sibal. He talked about the four probable options a party has in case part member rebels. CJI Chandrachud interjected him.

Senior Advocate Kamat concluded by stating that the word “political party” was not an ambiguous idea. While there may be sections claiming to represent the political party, the Governor, according to him, could not recognize them. Moreover, he claimed that a legislative majority was not necessarily indicative of a majority, either ipso facto or ipso jure.

The Governor’s decision to call for a floor test based on Shinde Group’s mutiny had been questioned by the Court the day before.

Written by: Srijan Raj

Supreme Court: Doctors cannot be penalised for storing minimal quantities of medications under the Drugs and Cosmetics Act

Issue – The Supreme Court ruled that a doctor’s act of keeping minor amounts of medications would not constitute an offence of illegal stocking of medications under Section 18(c) of the Medicines and Cosmetics Act of 1940.

Facts of the case – A specific amount of medications, lotions, ointments, and other items were discovered during the Drugs Inspector’s inspection of the appellant’s premises, which she uses to conduct her medical practice from.

The inspector filed a request for a sanction for prosecution with the office of the Director of Drugs Control, Tamil Nadu, alleging that she had medicines on hand for sale and sold them without a valid drug licence, which is prohibited under section 27(b)(ii) of the aforementioned Act.

She appealed the Madras High Court’s decision, but after having her Section 482 CrPC plea rejected, she decided to file the current SLP with the Supreme Court.

Arguments – The small quantity of medications confiscated from the appellant may readily be located in a patient’s home or doctor’s office.

Drugs confiscated from the appellant’s premises were admittedly of “standard quality,” and the appellant had supplied many receipts from pharmaceutical stores to support her claims. This demonstrated that the appellant was not running a store to sell fake medications over the counter.

Reasoning – The Supreme Court pointed out that the Madras High Court overlooked the fact that the appellant was a licenced physician and that dermatology was her area of specialisation. It is possible that she was dispensing these medications to her patients for emergency uses, and as a result, she was covered by the Act itself.

Judgement – The appeal was upheld, the Madras High Court’s ruling was reversed, and the criminal case against X Metropolitan Magistrate in Egmore, Chennai was dismissed.

Provisions used in the case – Schedule (K) 7 appended to the Drugs and Cosmetics Rules, 1945, Section 18(c), section 27(b)(ii) of the Drugs and Cosmetics Act, 1940, Section 482 CrPC

Case title – S. Athilakshmi vs. The State Rep. By The Drugs Inspector

Written by – Nikita Shankar