Whether Section 143-A Of The Negotiable Instruments Act, 1881 Has Retrospective Application Or Not ?

Preface: 

The party who commits default in payment can be sued by a payee in the civil court by filing suit for recovery of money. However, the special provision of Section 138 under the Negotiable Instruments Act, 1881 (hereinafter referred to as the NIA) was inserted with effect from 01.04.1989 vide the Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. The object of the NIA is to enhance the acceptability of the cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts.

That by virtue of the Amendment Act No. 20 of 2018 in the NIA, the legislature introduced Section 143-A and Section 148providing for "Power to direct interim compensation" and "Power of Appellate Court to order payment pending appeal against conviction" respectively.

Key Aspects- Section 143-A of the NIA:

i.                 Section 143-A of the NIA deals with order of payment of interim compensation; the upper limit is maximum 20% of the cheque amount.

ii.                The order as regards payment of interim compensation is made directly in favour of the complainant.

iii.               If the order of payment is made, the accused is to pay interim compensation within a period of 60 days from the date of the order and for special reason, further 30 days can be given, hence, within a total of 90 days from the date of the order.

iv.               Stage at which application under Section 143-A of the NIA can be filed: (a) In summary trials or summons case, where the accused pleads not guilty to the accusation made in the complaint, and, (b)In any other case,upon framing of charge.

v.                Sub-section (3) of Section 143-A of the NIA states that the interim compensation shall be paid within 60 days from the date of the order passed under Sub-section (1) of Section 143-A of the NIA. However, Sub-section (1) of Section 143-A of the NIA states that the court may order the drawer to pay interim compensation. So, it leaves discretion with the trial court to pass such order of interim compensation and if such interim compensation is directed to be paid, then the ceiling limit under Sub-section (2) of Section 143-A of the NIA is 20% of the cheque amount.

vi.               Sub-section (4) of Section 143-A of the NIA states about recovery of money with interest from the complainant in case of acquittal of the accused within a period of 60 days or maximum 90 days from the date of order of acquittal of the accused.

vii.             Sub-section (5) of Section 143-A of the NIA states that interim compensation payable by the accused can be recovered by the complainant as if it were a fine under Section 421 of the Criminal Procedure Code, 1973.

Key Aspects- Section 148 of the NIA:

i.                 Section 148 of the NIA states that in an appeal by the drawer/accused against conviction under Section 138 of the NIA, the Appellate Court may order the appellant/drawer to deposit such sum which shall be a minimum of 20% of the fine or compensation awarded by the trial court.

ii.                 The Appellate Court may direct the release of the amount which is deposited by the appellant/drawerin the Appellate Court to the complainant/respondent, at any time during the pendency of the appeal.

iii.               If the order of payment is made, the appellant/drawer is to deposit such sum (minimum of 20% of the fine or compensation awarded by the trial court) within a period of 60 days from the date of the order and for special reason, further 30 days can be given, hence, within 90 days from the date of the order.

iv.               The order directing the deposit of money in the Appellate Court can be passed at any time during the pendency of the appeal.

v.                As per the proviso to Section 148 of the NIA, if the appellant/drawer is acquitted, the Appellate Court shall direct the complainant/respondent to repay to the appellant/drawer the amount so released, with interest (at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year) within 60 days from the date of the order, or within such further period not exceeding 30 days as may be directed by the Appellate Court on sufficient cause being shown by the complainant/respondent.

Comparing Section 143-A and Section 148 of the NIA:

In the matter of: Ajay Vinodchandra Shah V/s State of Maharashtra, Criminal Writ Petition No. 258 of 2019, High Court of Bombay, Date of Decision: 14.03.2019, Coram: MridulaBhatkar, J., in Para 13 and Para 14 it was held as follows:

"13. On comparison of the language used in sections 143A and 148, one finds a difference. U/s 143A, the accused is yet to face a trial. Under sub-section (2) thereof, the interim compensation under sub-section (1) shall not exceed twenty percent of the amount of cheque. However, under section 148, it is stated that the Court may order the appellant to deposit such sum which shall be a minimum of twenty percent of the fine. These clauses in these two sections reflect the intention of the Legislature that a person at the stage of trial is always considered innocent till he is found guilty and, therefore, the ceiling of 20% compensation is mentioned. However, in the appeal, when the first Court holds the accused guilty and thus, once he is convicted, then, the appellate Court is given the power to pass order directing the accused to deposit the amount which shall be a minimum of 20% of the fine or compensation awarded by the trial Court. It is further stated in section 148 that the amount payable under this sub-section (sic) shall be in addition to any interim compensation paid by the appellant under section 143A. 14. The Legislature has also taken care of the accused if at all he is not held guilty and acquitted either at the trial or in the appeal. The sub-section (4) of section 143A and the proviso to section 148 state about the repayment of the amount by the complainant to the accused. In the event of acquittal, the said amount also to be paid within 60 days from the date of the order…"

Section 143-A of the NIA operates retrospectively?

In the matter of: Punjab Tin Supply Co. V/s Central Government, (1984) 1 SCC 206, it was observed that, all laws which affect substantive rights generally operate prospectively and there is a presumption against their retrospectivity if they affect vested rights and obligations unless the legislative intent is clear and compulsive; such retrospective effect may be given where there are express words giving retrospective effect or where the language used necessarily implies that such retrospective operation is intended. Hence, the question whether a statutory provision has retrospective effect or not depends primarily on the language in which it is couched. If the language is clear and unambiguous, effect will have to be given to the provision in question in accordance with its tenor; however, if the language is not clear then the court has to decide whether in the light of the surrounding circumstances retrospective effect should be given to the statutory provision or not.

According to Section 5 of the General Clauses Act, 1897, any Act of Parliament comes into operation on the day on which it receives the assent of the President. Unless it is expressed to become operational on any other date and unless a contrary intention is expressed, the Act of Parliament comes into effect qua all cases on the day of its commencement.

View Taken by the Hon'ble High Court of Bombay: In the matter of Ajay Vinodchandra Shah (Supra), the Hon'ble High Court of Bombay observed that (Para 12 of the report):

"… It is incorrect to accept that it is to be made not (sic)applicable to the cases which are filed only after 01.09.2018 and not applicable to the cases pending earlier in the trial as well as appellate Court. Huge number of cases under section 138 of the Act are pending in the Courts. In these cases, if the plea is recorded or charge is not framed, then the trial Court can invoke its powers under Section 143-A after 1.9.2018 and can impose interim compensation which shall not exceed 20% of the amount of cheque. Same is the case in appeals. If the appeals are pending, the Court can pass interim orders under section 148…"

Thus, according to the view taken by the Hon'ble High Court of Bombay, Section 143-A and Section 148 of the NIA do not operate prospectively.

View Taken by the Hon'ble High Court of Punjab & Haryana:

In the matter of: Ginni Garments & Anr V/s Sethi Garments, CRR No. 9872-2018 (O&M), High Court of Punjab & Haryana, Date of Decision: 04.04.2019, Coram: Rajbir Sehrawat, J., it was held that:

i.                 Whether Section 143-A and Section 148 of the NIA have prospective or retrospective operation depends upon the determination whether these provisions are substantive in nature or are merely procedural. If these provisions are substantive in nature then these provisions cannot be applied retrospectively to the pending cases, however, if these provisions are procedural in nature then they have to be applied to all the cases, including the ones pending before the court on the date, the amendment was enforced.

ii.                A bare perusal of Section 143-A of the NIA shows that Section 143-A of the NIA has given power to the trial court to order the drawer of the cheque to pay interim compensation (maximum of 20% of the cheque amount) to the complainant, where the accused has not pleaded guilty of the accusation made against him. Moreover, as per Section 143-A of the NIA if interim compensation is not paid within 60 days (or maximum of 90 days) from the order of the court granting interim compensation, then the interim compensation can be recovered by the complainant from the drawer/accused under Section 421 of the Criminal Procedure Code, 1973, as if it were a 'fine' imposed upon the drawer/accused.Section 143-A of the NIA casts a substantive obligation upon the drawer/accused.

iii.               Section 143-A of the NIA is not a procedural provision as it intends to create a 'stand-alone liability' for the drawer/accused towards the complainant which has to be discharged by the drawer/accused when the matter is still pending for adjudication before the trial court.

iv.               Although the provision of Section 143-A of the NIA cannot be applied to the pending trials, however, the situation regarding Section 148 of the NIA is drastically different. Section 148 of the NIA does not, in any way, affects the substantive right of the accused, to defend himself or to prosecute his appeal. Section 148 of the NIA categorically provides that in case the appellant/drawer is acquitted by the Appellate Court, then, the amount awarded by the Appellate Court as interim compensation shall be returned to him, by the complainant along with interest.

v.                 When the case reaches before the Appellate Court, the appellant/drawer has already acquired a status of 'convict', who has already been found guilty of his conduct and sentenced by the trial court. In case the trial court imposes a fine then making the appellant/drawer pay that amount does not affect his substantive right, rather it is a matter of procedure only. Moreover, in case the trial court imposes a fine, which can be up to twice the amount of the cheque and which can be treated as compensation to be paid to the complainant, in that situation, liability of the appellant/drawer has already been determined by the trial court and the liability to pay the amount to the complainant already exists at the time when the appellant/drawer comes before the Appellate Court.

vi.               Section 148 of the NIA is to govern all the appeals pending on the date on which it was enforced and/or appeals filed thereafter.

View Taken by the Hon'ble High Court of Allahabad:

In the matter of: Vivek Kumar Negi V/s State of U.P. &Anr., Application under Section 482 of the Cr.P.C. No. 11055 of 2019, High Court of Allahabad, Date of Decision: 11.04.2019, Coram: Arvind Kumar Mishra, J., the question that came for adjudication before the Hon'ble Court was this:

"… whether the amendment brought and incorporated under Section 143 (A) (1) of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'the Act') is applicable retrospectively nor (sic) not?"

Answering the question framed above, the Hon'ble Court observed as follows:

"… In so far as amendment is concerned, the amendment is of procedural nature and not of substantive nature. Moreover, in matters of applicability of the amendment [under Section 143 (A)] proceedings launched in the matters pending prior to the incorporation of the amendment there is no express bar in the Act. It being so, the amendment will be applicable even to the proceeding pending prior to the date of incorporation of the amendment as Section 143 (A) in the matters involving provisions of the Negotiable Instruments Act, 1881…"

Thus, according to the view taken by the Hon'ble High Court of Allahabad, Section 143-A of the NIA is to operate retrospectively.

View Taken by the Hon'ble High Court of Karnataka:

In the matter of: Sri V. Narasimha Murthy V/s Sri Santhosh,

 I.A. No. 3 of 2018 in Criminal Revision Petition No. 425 of 2018, High Court of Karnataka, Date of Decision: 18.02.2019,

Coram: B.A. Patil, J.,

it was held that:

i.                 According to Section 148 of the NIA, the Appellate Court may order the accused to deposit a minimum of 20% of the fine amount or the compensation awarded by the trial court and if the said amount is deposited within 60 days from the date of such order, the Appellate Court may direct the release of the amount so deposited by the accused in favour of the complainant during the pendency of the appeal. The proviso to Section 148 of the NIA states that while releasing the amount so deposited, the complainant has to be directed to repay the said amount in the event of acquittal of the accused with interest at bank rate which was prevailing during the said period.

ii.                It is a cardinal principle of construction that every statute is prima facie prospective in nature, unless it is expressly or by necessary implication made to have retrospective operation.

iii.               Section 148 of the NIA has been enacted to protect the interest of the complainant and to provide relief to the complainant. Further, Section 148 of the NIA has been enacted to discourage filing of frivolous appeals. Thus, Section 148 of the NIA has to be given wider interpretation and not a restricted/pedantic interpretation.

iv.               Section 148 of the NIA has to be given retrospective effect.Section 148 of the NIA is to govern all the appeals pending on the date on which it was enforced and/or appeals filed thereafter.

Afternote:

In the matter of: G.J. Raja V/s Tejraj Surana,

Petition for Special Leave to Appeal (Crl.) No. 3342/2019, the Hon'ble Supreme Court of India, formulated the following question of law for adjudication:

"… whether Section 143-A introduced by the Amendment Act No. 20 of 2018 in the Negotiable Instruments Act, 1881 has retrospective application or not?"

The aforenoted matter is still pending adjudication before the Hon'ble Supreme Court of India with the next date of hearing being: 01.07.2019.

Source: https://www.livelaw.in/columns/whether-section-143-a-in-the-negotiable-instruments-act-14507

Bar Council of Delhi directs Deloitte, EY, KPMG and PwC not to offer legal services

In a double-whammy of sorts for the Big Four audit-cum-consultancy firms – Deloitte, EY, KPMG and PwC – the Bar Council of Delhi on Friday directed the four firms to refrain from providing legal services to clients till further notice.

The move comes after a complaint was filed by the Society of Indian Law Firms (SILF), representing around 100 Indian law firms. SILF said in its complaint that the Big Four were actually accounting firms, but are engaged in "doing law practice". SILF had filed a similar complaint to the Bar Council in 2015 alleging that the Big Four were resorting to "unauthorised practice of law" in violation of the Advocates Act.

The Bar Council order asked the four firms to provide a list of advocates on their rolls. The order copy said that while Deloitte and KPMG had filed their response to the complaint, PwC and EY had asked for more time to submit their response. The Council has deferred the matter for further hearing to July 12. It has asked the four firms to refrain from the practice until further orders.

The development comes at a time when the Big Four firms are under the scanner for audit-related practices. The recent meltdown at ILFS group has put the spotlight on statutory auditors.

Many in the chartered accountant fraternity were of the view that there were grey areas over jurisdiction of non-litigation related legal services. In their earlier response in 2015, one of the Big Four firms had said that they were not "engaged in the practice of law". A source in one of the Big Four firms reiterated the same stand that they do not represent any legal firm. "We do not practice in any area that only advocates are supposed to practice," he added.

There has been growing angst in the legal fraternity that multinational audit-cum-consultancy firms have over the years hired lawyers in large numbers to offer legal advice to clients. “It is a turf battle between lawyers and chartered accountants,” noted a senior advocate and chartered accountant. There are many lawyers – registered with the Bar Council – who offer tax advice to clients.

Meanwhile, the Institute of Chartered Accountants refused to get drawn into this fight and did not offer any official comment to Bar Council’s order.



Source: https://www.business-standard.com/article/companies/bar-council-of-delhi-directs-big-four-not-to-offer-legal-services-119050301212_1.htm

Amrapali Group Committed First Degree Crime by Cheating Home Buyers: Supreme Court

Amrapali Group has committed a "first-degree crime" by cheating thousands of home buyers and no matter how powerful the people behind this mess they will be booked and prosecuted, the Supreme Court said Tuesday.

"Fate is written on the wall" for the group and its directors, the top court said while declining to hear their claims of no wrongdoing.

The embattled real estate firm "cheated everybody including home buyers, banks and authorities and indulged in cartelization to prevent the Debt Recovery Tribunal from auctioning its unencumbered properties", it said. "The limit of your fraud touched the sky."

A bench of Justices Arun Mishra and U U Lalit said it cannot believe the justification given by Amrapali for alleged diversion of funds of over Rs 3,500 crore, looking at its dubious conduct.

"You have committed a first-degree crime by cheating thousands of home buyers. We should have cancelled the licences of statutory auditors of Amrapali for indulging in fraudulent practise long back and sent them to jail.

"We are saying in open court that there are powerful people behind this mess but no matter how powerful they are, we will book them and prosecute them. We are not going to spare anybody," the bench said.

The hard-hitting remarks of the bench came after advocates appearing for the group, said there was no wrongdoing done on their part and there was no diversion of Rs 3,500 crore as claimed by the court-appointed forensic auditors.

Luthra said forensic auditors have erred on various aspects in their report like they had claimed that not a single penny was invested by directors of Amrapali but in reality, Rs 60 to Rs 70 crore was put in by them.

"We have to believe the forensic auditors and their report looking at your dubious conduct. We believe them. You (Amrapali) have yourself admitted in your earlier affidavit that Rs 2,990 crore of home buyers money was diverted and now you are claiming that there was no diversion. You have made a peon as your director and he purchases shares worth crores of rupees for Amrapali. Is this not correct," the bench said.

Luthra said the group acted in a bona fide manner and in the interest of home buyers but the problems started after the company ran into litigation.

Amrapali Group claimed that they had received Rs 11,057 crore from the home buyers and they have constructed five projects in Indirapuram of Delhi-NCR and gave their possession to home buyers.

"Your (Amrapali Group and its directors) fate is written on the wall. We are not inclined to hear your bona fide claims looking at your dubious conduct," the bench said.

At the outset, the bench also pulled up Bank of Baroda and other lenders, who have given hefty loans to Amrapali Group for failing to monitor and control the diversion and usage of funds by the realty firms.

The day-long hearing remained inconclusive and would continue tomorrow.

Two forensic auditors -- Pawan Agrawal and Ravi Bhatia -- in their fresh report said yesterday that Amrapali has diverted over Rs 3,500 crore of home buyers money to different projects.

The top court had allowed the I-T department and the EOW to access the report of forensic auditors in their probe but restrained them from summoning them.

Forensic auditors in their fresh supplementary report pointed out that promoters of Amrapali did not invest a single penny in real estate firm and home buyers money was used for the construction of high rise buildings.

Supreme Court sets aside Centre's decision to merge FTIL and NSEL

The Supreme Court on Tuesday set aside the Centre's decision to merge National Spot Exchange Ltd (NSEL) with Financial Technologies India Ltd (FTIL), which is now known as 63 Moon Technologies Ltd.

A bench comprising justices R F Nariman and Vineet Saran delivered the judgement on a batch of petitions filed by 63 Moon Technologies Ltd challenging the Bombay High Court's December 2017 verdict upholding the Centre's decision to merge NSEL with FTIL.

In February 2016, the Centre had passed a final amalgamation order in terms of the provision of the Companies Act merging FTIL and NSEL. As per the order, all the assets and liabilities of NSEL would become assets and liabilities of FTIL.

The government's order was challenged in the high court which dismissed the petition in December 2017.

In its judgement, the apex court held that the Centre's February 2016 order was "ultra vires" to section 396 of the Companies Act and was also violative of Article 14 (equality before law) of the Constitution.

"In conclusion, though other wide-ranging arguments were made with respect to the validity of the Central Government amalgamation order, we have not addressed the same as we have held that the order dated February 12, 2016, is ultra vires Section 396 of the Companies Act, and violative of Article 14 of the Constitution of India for the reasons stated by us hereinabove," the bench said.

"The appeals are accordingly allowed, and the impugned judgment of the Bombay High Court is set aside," the apex court said.

The bench held that the merger of NSEL and FTIL did not satisfy the criteria of "public interest".

"Thus, it is clear that no reasonable body of persons properly instructed in law could possibly hold, on the facts of this case, that compulsory amalgamation between FTIL and NSEL would be in public interest," the bench noted.

After the apex court's verdict, Jignesh Shah, chairman emeritus and mentor of 63 Moons Technologies Ltd, said in a press statement, "We have always had full faith in the Indian judiciary and our courts. Finally, truth has prevailed."

NSEL had shut down in 2013 after a major payment default and it was ordered not to enter into any fresh contracts by Forward Markets Commission (FMC), which has since been integrated into the Securities and Exchange Board of India (SEBI).

On July 31, 2013, NSEL, then 99.99 per cent subsidiary of FTIL, had defaulted in nearly Rs 5,600 crore payments to its around 13,000 investors.

After the crisis, the Ministry of Corporate Affairs (MCA) had decided to issue a final order for the merger of NSEL with FTIL under section 396 of the Companies Act, 1956.

In February 2016, the MCA had passed a final order directing the merger of scam-hit NSEL with FTIL.

https://www.businesstoday.in/top-story/supreme-court-sets-aside-centre-decision-to-merge-ftil-and-nsel/story/342130.htm

WHETHER ARBITRATION AWARD DIRECTING TRANSMISSION OF SHARES CAN BE ENFORCED THROUGH NCLT?

Cheran Properties Ltd. vs Kasturi and Sons Ltd. & Ors. 
Civil Appeal 10025/2017 decided on 24.04.2018 

The court held that since the award postulates a transmission of share to the Claimant, the directions contained in the award can be enforced only by moving the tribunal for rectification in the manner contemplated by law.

WHETHER FLAT BUYERS CAN INITIATE INSOLVENCY PROCEEDINGS AGAINST BUILDERS UNDER THE IBC?

Nikhi l Mehta & Sons (HUF) & Ors. v. M/s AMR Infrastructures Ltd. (NCLT Delhi), 
C.P NO. (ISB)-03(PB)/2017, decided on 23.01.2017

In this case the NCLAT has ruled that a purchaser of real estate, under an 'Assured-return' plan, would be considered as a 'Financial Creditor' for the purposes of IBC and is, therefore, entitled to initiate corporate insolvency process against the builder, in case of non-payment of such 'Assured/Committed return' and non-delivery of unit. NCLAT further went on to rule that the 'debt' in this case was disbursed against the consideration for the 'time value of money' which is the primary ingredient that is required to be satisfied in order for an arrangement to qualify as 'Financial Debt' and for the lender to qualify as a 'Financial Creditor', under the scheme of IBC.

Supreme Court orders mediation to settle Ayodhya land dispute, appoints 3-member panel

The Supreme Court's Constitution Bench on Friday referred the Ram Janmabhoomi-Babri Masjid land dispute case for a court-appointed and monitored mediation to find a 'permanent solution'.

Justice Khalifullah (Retd) will be heading the mediation proceedings while the other two members will be - Sri Sri Ravi Shankar and senior advocate Shriram Panchu.

The top court also said that the mediation proceedings should be held on-camera. "Court monitored mediation proceedings will be confidential," Chief Justice Ranjan Gogoi said.

It will begin within a week and is meant to be completed in eight weeks. The first status report on mediation is supposed to be given within four weeks.

 In its order, the Supreme Court said, ''Mediators can co-opt more on the panel if necessary. Uttar Pradesh government will provide mediators all the facilities in Faizabad. Mediators can seek further legal assistance as and when required.''

Reacting to SC order, Swami Chakrapani, president of All Hindu Mahasabha, said, "We accept the Supreme Court order. We are happy with it. We are glad that Sri Sri Ravishankar is part of the mediation panel. I am sure that everything will go well."

Varun Kumar Sinha, advocate for Hindu Mahasabha, said, "Our past experience with mediation has not been good. I hope the apex court has taken this into consideration."

A five-judge Constitution Bench headed by CJI Gogoi had on Wednesday reserved the order after hearing various contesting parties.

Hindu bodies except Nirmohi Akhara have opposed the suggestion of the Supreme Court to refer the issue for mediation, while Muslim bodies have supported it.

The Constitution Bench, also comprising Justices SA Bobde, DY Chandrachud, Ashok Bhushan and SA Nazeer, concluded the hearing by asking stakeholders to give the names of possible mediators. 

Hindu bodies like Nirmohi Akhara suggested the names of Justices (retd) Kurian Joseph, AK Patnaik and GS Singhvi as mediators, while the Hindu Mahasabha faction of Swami Chakrapani proposed the names of former CJIs Justices JS Khehar and Dipak Misra, and Justice (retd) AK Patnaik to the bench.

Supreme Court also restrained media from reporting proceedings of mediation in Ayodhya case. It has directed in-camera proceedings of mediation in Ayodhya case. 

Fourteen appeals have been filed in the apex court against the 2010 Allahabad High Court judgment, delivered in four civil suits, that the 2.77-acre land in Ayodhya be partitioned equally among the three parties - the Sunni Waqf Board, the Nirmohi Akhara and Ram Lalla. 

https://zeenews.india.com/india/sc-orders-court-monitored-mediation-to-resolve-ram-janmabhoomi-babri-masjid-land-dispute-case-2186007.html

Aadhar status: Post 2 months of Supreme Court 5 Judges bench Judgment

It has been around two months since a five-judge bench of the Supreme Court determined the fate of the Aadhaar project. The majority judgement did not receive much enthusiasm as it only limited Aadhaar’s use, rather than strike it down entirely. The two aspects that emerged from the judgement were that first, Aadhaar can be made mandatory only for subsidies, benefits or services, and Aadhaar authentication cannot be carried out by private entities.

Aadhaar’s Continued Existence

One of the biggest criticisms of the Aadhaar judgement is that not much notice was taken of the negative consequences of upholding section 7 of the Aadhaar Act. This provision allows Aadhaar to be used for availing subsidies, benefits and services, which citizens are entitled to. The reasoning provided is that it will cut-out ghost beneficiaries and fraud which will result in savings.

However, the petitioners had repeatedly argued against this provision since the technology is not free from issues and hence false negatives can result in exclusion from entitlements. In September 2017, 11-year-old Santoshi Kumari died of hunger in Jharkhand. The reason was due to her family not linking their ration card with Aadhaar, they did not receive the foodgrains they were entitled to. On November 11, 2018, Kaleshwar Soren died of starvation. Once again, the culprit was non-possession of Aadhaar card. He had managed to survive on his neighbours’ charity after his ration card was cancelled in 2016.

The Economic Times reported today that Aadhaar enrolments, as well as authentications, had fallen drastically. However, this does not reveal much information about Aadhaar’s continued use. First, the drop in enrolment could be explained as many people in the country have already been coerced into getting an Aadhaar card before the Supreme Court decided on the matter. On the other side, the drop in authentication requests can also be one explanation as the use of Aadhaar for authentication has been made optional, hence rather than having to play with biometrics, people may prefer to submit or use other documents.

Following the Supreme Court’s judgement, the Unique Identification Authority of India (UIDAI) has issued two press releases in connection to it. The first press release welcomed the Supreme Court’s decision to uphold Aadhaar’s constitutional validity, the other concerned the electronic-Know Your Customer (e-KYC) norms. In the second press release, the UIDAI along with the Department of Telecommunications (DoT) stated that SIM cards linked with Aadhaar would not be deleted, as some rumours suggested. The release also mentioned that one could de-link one’s Aadhaar card by submitting a request for de-linking accompanied by an alternative identity document for fulfilling the e-KYC requirements.

However, Aadhaar continues to be of value to banks and telecommunications operators since no opt-out procedure has been devised till date. In a letter to the National Payments Corporation of India (NPCI) on November 19, the State Bank of India (SBI), in the light of the Aadhaar judgement, had decided to suspend the Aadhaar enabled Payment System (AePS). However, the UIDAI – the agency overseeing Aadhaar and its implementation – on November 30, informed the banks through a circular to the Reserve Bank of India (RBI), that since it is not possible to distinguish between authentication requests for the purposes listed under section 7, suspending the AePS would have an adverse impact. This circular would certainly be music to the ears of those operating the AePS, Bhim App as well as Aadhaar Pay, not to mention the numerous other corporate beneficiaries of Aadhaar.

Protecting the Financial Technology Companies

Barely a day after the Supreme Court had delivered its decision, the Union Finance Minister, Arun Jaitley, and the Union Minister for Electronics and Information Technology as well as Law and Justice, Ravishankar Prasad, said that the Supreme Court’s reading down of section 57 related only to contracts. In this regard, the Ministers are correct. But this is the letter, not the spirit of the Supreme Court’s decision.

Section 57 states that: “Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.”

Due to the blank cheque nature of this provision wherein Aadhaar can be used for ‘any purpose’ and by ‘the State or any body corporate or person’, the Supreme Court held:

“We read down this provision to mean that such a purpose has to be backed by law. Further, whenever any such “law” is made, it would be subject to judicial scrutiny. (b) Such purpose is not limited pursuant to any law alone but can be done pursuant to ‘any contract to this effect’ as well. This is clearly impermissible as a contractual provision is not backed by a law and, therefore, first requirement of proportionality test is not met. (c) Apart from authorising the State, even ‘any body corporate or person’ is authorised to avail authentication services which can be on the basis of purported agreement between an individual and such body corporate or person. Even if we presume that legislature did not intend so, the impact of the aforesaid features would be to enable commercial exploitation of an individual biometric and demographic information by the private entities. Thus, this part of the provision which enables body corporate and individuals also to seek authentication, that too on the basis of a contract between the individual and such body corporate or person, would impinge upon the right to privacy of such individuals. This part of the section, thus, is declared unconstitutional.”

However, there appears to be a loophole in this part of the Supreme Court’s decision, i.e. that the use of Aadhar has to be backed by a law. Under clause 3 of Article 13 of the Constitution, law is defined as including; “any Ordinance, order, bye law, rule, regulation, notification, custom or usages having in the territory of India the force of law”. Therefore, a departmental notification requiring the use of Aadhaar for any purpose would still not fall foul of the Supreme Court’s decision on section 57. The only saving grace is that the law is subject to judicial review, hence any formal iteration making Aadhaar mandatory can be challenged before the Courts. However, this depends on whether the general public is vigilant enough.

The actions of the UIDAI, as well as statements from the government regarding section 57, appear to be geared towards ensuring the continued existence of fintech companies. While the ongoing Assembly elections along with the rhetoric around the Ram Mandir and the Citizenship Bill grab people’s attention, the Monsoon Session of Parliament could see the passage of a Bill to enable Aadhaar’s use for digital payments. It is not necessary to state who the true beneficiaries of such a law would be.

departmental as well as criminal proceedings against government servants to be conducted simultaneously

The departmental and criminal proceedings against the erring Government servants will now be conducted simultaneously and necessary instructions in this regard have been passed to all the Administrative Secretaries for prompt and strict compliance.
The Supreme Court in its judgement in case titled “State of Rajasthan Versus BK Meena and Others” dated September 27, 1996 had made it clear that the approach and the objective in the criminal proceedings and the disciplinary proceedings are altogether distinct and different.
Moreover, the Apex Court in its judgment delivered in a case titled “State Bank of India and Others Versus Neelam Nag” on September 16, 2016 had mentioned that there is no legal bar to the holding of the disciplinary proceedings and the criminal trial simultaneously.
However, despite these explicit judgments of the highest court of the country, there was lack of clarity in Jammu and Kashmir regarding initiation of departmental proceedings in cases where criminal proceedings have either been sanctioned or the proceedings in the criminal case have been stayed by a higher forum. Due to this, the authorities were preferring to await conclusion of the criminal proceedings before initiating departmental proceedings.
Recently, on the directions of the Chief Secretary BVR Subrahmanyam, the plethora of judgments of the Apex Court were minutely examined by a group of senior officers in consultation with the Department of Law, Justice and Parliamentary Affairs and finally the issue regarding conduct of departmental enquiry in general cases and in particular where prosecution stands sanctioned has been settled.
“The matter has been commented upon by the Apex Court in plethora of judicial pronouncements and the Apex Court has held that there is no legal bar in simultaneous conduct of departmental proceedings along with the criminal proceedings”, the Commissioner Secretary to Government, General Administration Department Hilal Ahmad said in a circular issued today.
“It is a settled legal position that the criminal proceedings and the departmental proceedings can be held simultaneously except in the cases where the court has specifically restrained the Government from undertaking departmental proceedings”, the circular said.
Accordingly, the General Administration Department has directed all the departments to initiate departmental proceedings in all such criminal cases where the criminal proceedings have been initiated and the alleged criminal act amounts to misconduct and attracts the provisions of Jammu and Kashmir Civil Services (Classification, Control and Appeal) Rules, 1956.
“The departments should accordingly take recourse and strictly adhere to the Rules of 1956 wherever departmental enquiry in such cases has to be initiated”, the circular said.
It is pertinent to mention here that in its judgment in the case titled “State of Rajasthan Versus BK Meena and Others”, the Apex Court had held: “In the disciplinary proceedings, the question is whether the respondent is guilty of such conduct as would merit his removal from service or a lesser punishment whereas in the criminal proceedings the question is whether offences registered against him under the Prevention of Corruption Act are established and if established what sentence should be imposed upon him”.
“The standard of proof, the mode of enquiry and the rules governing the enquiry and trial in both the cases are entirely distinct and different. Staying of disciplinary proceedings pending criminal proceedings should not be matter of course but a considered decision. Even if stayed at one stage, the decision may require reconsideration with the criminal case gets unduly delayed”, the judgment further reads.
Similarly, the Supreme Court judgment in the case titled “State Bank of India and Others Versus Neelam Nag” read: “Suffice it to say that while there is no legal bar to the holding of the disciplinary proceedings and the criminal trial simultaneously, stay of the disciplinary proceedings may be advisable course in cases where the criminal charge against the employee is grave and continuance of the disciplinary proceedings is likely to prejudice their defence before the criminal court”.
“Gravity of the charge is, however, not by itself enough to determine the question unless the charge involves complicated question of the law. The court examining the question must also keep in mind that criminal trials get prolonged indefinitely especially where the number of accused arraigned for trial is large. The court, therefore, has to draw a balance between the need for a fair trial to the accused on the one hand and the competing demand for an expeditious conclusion of the ongoing disciplinary proceedings on the other. Moreover, an early conclusion of the disciplinary proceeding has itself been seen to be in the interest of the employees”.

NCLAT: NCLT Cannot Decide Legality Of A Foreign Decree

The NCLAT has once again held that the NCLT, for the purpose of initiating insolvency, has no jurisdiction to decide whether a foreign decree is legal or illegal.

The judgment is in response to an appeal filed against the Principal Bench order which got into the merits of a foreign decree, in the case of Usha Holdings LLC vs. Francorp Advisors. The Principal Bench found that the foreign decree did not satisfy the requirements of Section13 and 44A of the Civil Procedure Code, and hence the debt was not enforceable.

The NCLAT, however, disagreed and held that NCLT has no authority to decide the legality of a foreign decree. While doing so, it relied on the NCLAT judgment in the case of Binani, and recorded that,

“we hold that the Adjudicating Authority not being a Court or ‘Tribunal’ and ‘Insolvency Resolution Process’ not being a litigation, it has no jurisdiction to decide whether a foreign decree is legal or illegal.”

The reliance on the Binani judgment may be misplaced. The text of the judgment (or at least the portion quoted) does not make any reference to or is in any way related to the power of the NCLT with respect to enforcement of foreign decrees.

However, a previous judgment of the NCLAT provides better reasoning as to why NCLT is not the competent court to decide on validity of a decree, in insolvency proceedings. In the case of V.R. Hemantraj vs. Stanbic Bank Ghana Ltd, the NCLAT found that an application under Section 7, 9 or 10 is not a recovery proceeding, or proceeding for determination of claim on merit.

It further held that the NCLT is not required to write a detailed decision as to which are the evidence relied upon for its satisfaction. The NCLT is only required to be satisfied that there is a ‘debt’ and default has occurred.

Both judgments make reference to the term ‘Adjudicating Authority’  and not ‘NCLT’, because the NCLT has the powers of a Civil Court under provisions of the Companies Act, but the Adjudicating Authority under the IBC does not.

Supreme Court historic Judgments of 2018

1.            Sabarimala open to women after 27 years

Considered one of the holiest Hindu temples in the country, Sabarimala is located at the Periyar Tiger Reserve in Kerala. For the last 27 years, the temple has not been open to menstruating women (between the ages of 10 and 50). On September 28, the Supreme Court lifted this ban imposed by the Kerala High Court. The five-judge bench led by former Chief Justice Dipak Misra said,

“The dualism that persists in religion by glorifying and venerating women as goddesses on one hand and by imposing rigorous sanctions on the other hand in matters of devotion has to be abandoned. Such a dualistic approach and an entrenched mindset results in indignity to women and the degradation of their status.”

2.            Husband no longer wife’s master; adultery not a crime

Just a day before the Sabarimala verdict, the apex court struck down the colonial-era law of adultery. Section 497 of the Indian Penal Code stated that a woman could be punished for adultery, as could a man who has consensual sexual intercourse with another man's wife without his consent.

The apex court declared the law unconstitutional as it treated the husband as the master of his wife.

Chief Justice Dipak Misra read, "Any provision of law affecting individual dignity and equality of women invites the wrath of the constitution. Legal sovereignty of one sex over other sex is wrong."

3.            Link your Aadhaar? No more.

On September 26, a five-judge bench of the Supreme Court scrapped Section 77 of the Aadhaar Act. After 31 petitions challenged the validity of Aadhaar and said that it violated a citizen’s privacy, the court declared that while Aadhaar was constitutional it was, however, unconstitutional to make it mandatory for availing government services.

The verdict barred several private entities from asking customers to verify themselves using Aadhaar to avail their services.

4.            See court proceedings live

On September 26, a bench led by CJI Dipak Misra stated, “sunlight is the best disinfectant”, and said that all future proceedings of national and constitutional importance will be streamed live.

But, to ensure protection and privacy, it also added that cases related to matrimonial and where a child is involved like Protection of Children from Sexual Offences cases will be excluded.

5.            No more 377 - Same-sex love is not a crime

CJI Dipak Misra also led the bench that scrapped Section 377. The bench stated it to be ‘irrational, indefensible and manifestly arbitrary'.

The historic ruling stated,

“The natural identity of an individual should be treated to be essential to his being. What nature gives is natural. That is called nature within. Thus, that part of the personality of a person must be respected and not despised or looked down upon.”

6.            ‘Love Jihad’

In 2016, Hindu woman Hadiya Jahan converted to Islam and married Shafin Jahan, sparking a controversy when her father claimed that her daughter was brainwashed by extremist groups.

The issue escalated to Kerala High Court on January 19, 2016, that declared the marriage to be “only a sham”, and “a charade to force the hands of the court”. Hadiya’s custody was given to her father as the HC stated that she was incapable of taking her own decisions. But, things changed this year.

On March 8 this year, the case was heard by the Supreme Court and the final judgment came in Hadiya’s favour as the bench concluded that it was her choice to choose to live with whoever she wishes to.

7.            The fundamental right to die

On March 9, a five-judge bench led by CJI Dipak Mishra held the right to life includes the right to die with dignity. The apex court decided passive euthanasia should be allowed for withdrawal of life support for terminally ill patients or patients in a permanent vegetative state.

In doing so, the court ensured that an individual’s right to die with dignity is more important than the state’s interest in ‘preserving the sanctity of life’.