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Bombay HC dismisses petition which seeks for arbitration when the conciliation proceeding was abruptly terminated.

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TITLE : Bafna udyog v Micro and Small enterprises, Facilitation council

CORAM : Hon’ble Justice Neela Gokhale

DATE :  16th  January 2024

CITATION : Arbitration Petition No.201 of 2023

FACTS

The petitioner seeks appointment of a retired judge to conduct the arbitration proceedings. The petitioner also requests the court to direct the respondent to produce all records required for the proceedings. The petitioner is registered under MSMED Act, 2006. The respondent owes Rs. 92,41,072 to the petitioner with future interest as per the act.

The dispute among the parties remained unsolved. The petitioner contends that the respondent acknowledged the debt he owes. The petitioner filed a conciliation proceeding which upon getting failed has approached for arbitration under Section 11(6) of the arbitration act. The respondents did not show up during the proceedings even after issuing notice.

LAWS INVOLVED

Section 11(6) states that an arbitrator would be appointed by the arbitral forum if none of the parties take initiative to appoint an arbitrator or fails to seek for an arbitrator.

ISSUES

Whether the petitioner was right in asking for an arbitration proceeding?

JUDGEMENT

The court observed that the arbitration proceeding would be invalid as per the MSMED Act. There is an alternative remedy available in law to first observe failure of conciliation proceeding and then approach for arbitration. In the present matter, the conciliation proceeding was terminated which is against Section 18(3) of the MSMED Act which states that only after failure of conciliation proceeding, an arbitration recourse can be proceeded with.

The petiton was dismissed on the grounds of maintainability.

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Written by- Sanjana Ravichandran

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“Landmark Judgment: Madhya Pradesh High Court Upholds Applicability of Limitation Act in SARFAESI Cases”

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Case Title:Aniruddh Singh v. Authorized Officer, ICICI Bank Ltd.

Case No: M.P. No.5324 OF 2023

Decided on:3rd January, 2024

CORAM: Hon’ble Sheel Nagu, J. & Vivek Jain, J.

 

Facts of the Case

The final order dated 02.09.2023 passed by the Debt Recovery Tribunal (DRT), Jabalpur, in S.A. No. 806/2022 under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) is being challenged in this petition filed under Article 227 of the Indian Constitution. The DRT cited a 45-day statute of limitations and rejected the application as time-barred. The petitioner maintains that petitions under Section 17(1) of the SARFAESI Act are subject to the requirements of the Limitation Act, notably Section 5, and claims that the DRT incorrectly relied on a Supreme Court case (Bank of Baroda vs. M/s Parasaadilal Tursiram Sheetgrah Pvt. Ltd.). The petitioner had asked for forgiveness for the application’s 46-day filing delay. The court points out that the question of whether the Limitation Act applies to Section 17(1) petitions was not addressed in the Supreme Court’s Bank of Baroda ruling. Examining Sections 17 of the SARFAESI Act and 29 of the Limitation Act, the court emphasises that the SARFAESI Act does not specifically forbid the Limitation Act from operating. It decides that applications filed after the 45-day period are subject to Section 5 of the Limitation Act. The DRT’s order is set aside by the court, who also directs the DRT to take the petitioner’s request for a delay forgiveness into account. No remarks about the merits of the delay claim are made, and the interim order will remain in effect until the Tribunal rules on the delay application. There are no expenses given.

Legal Provisions

The petition challenges the Debt Recovery Tribunal (DRT), Jabalpur’s final order dated 02.09.2023, which dismissed S.A. No. 806/2022 under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). It does this by invoking Article 227 of the Indian Constitution. The application of the Limitation Act, namely Section 5, to the filing of petitions under SARFAESI Act Section 17(1) is at the centre of the dispute. In its application, the petitioner asked for forgiveness for the 46-day delay in filing. The DRT decided that Section 5 of the Limitation Act is not relevant to such applications, citing a ruling from the Supreme Court. However, the particular problem was not addressed in the Supreme Court’s Bank of Baroda ruling. The petitioner argues that while the SARFAESI Act does not specifically exclude Section 5 of the Limitation Act, Section 29(2) of the Act retains its application unless expressly prohibited by special legislation. In agreement, the Court grants the petition, vacates the DRT ruling, and instructs the DRT to take the application for a delay forgiveness into consideration.

Issues

The (SARFAESI Act 2002) and the application of the Limitation Act, 1963 are the two main legal issues at stake in this case. The main concern is whether petitions made under Section 17(1) of the SARFAESI Act—which deals with contesting actions taken by secured creditors—can benefit from provisions, in particular Section 5 of the Limitation Act. Relying on the basis that the SARFAESI Act does not specifically preclude the use of the Limitation Act, the petitioner challenges the Debt Recovery Tribunal’s (DRT) denial of their case on the grounds that it is time-barred. The court overrides the DRT’s ruling and instructs the tribunal to take into account the request for a delay forgiveness, emphasising that the special law’s silence on the subject suggests the availability of the Limitation Act’s provisions.

Courts analysis and decision

The Debt Recovery Tribunal (DRT) final order dismissing the petitioner’s application under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) as time-barred was challenged in a petition filed under Article 227 of the Indian Constitution. The DRT concluded that petitions under Section 17 are not subject to the provisions of Section 5 of the Limitation Act, which deals with the condonation of delay, based on a prior ruling in Bank of Baroda v. M/s Parasaadilal Tursiram Sheetgrah Pvt. Ltd. However, the Supreme Court stated that the question was not addressed in the Bank of Baroda case and found that Section 5 of the Limitation Act is relevant to petitions under Section 17 of the SARFAESI Act. The DRT’s ruling was overturned by the court, which also instructed it to take the petitioner’s request for a delay forgiveness into account. Without making any remarks about the viability of the delay claim, the interim order was to stay in effect until the Tribunal made a ruling. There were no expenses given.

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 Written by- Aastha Ganesh Tiwari

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“Land Acquisition Dispute: Allahabad High Court Upholds Petitioner’s Right Under Act of 2013”

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Case Title: Chandrabhan Yadav v. State of UP &2 Ors.

Case No: WRIT – C No. – 18397 of 2018

Decided on: 10th January, 2024

CORAM: Hon’ble Manoj Kumar Gupta, Acting Chief Justice, and Hon’ble Kshitij Shailendra,J.

 

Facts of the Case

The petitioner contests the Sant Kabir Nagar Collector/District Magistrate’s order dated July 8, 2018, which denied their request to submit a disagreement over the increase in land acquisition compensation to the Authority in accordance with Section 64 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013. The petitioner’s land was purchased in accordance with the Land Acquisition Act of 1894; possession was obtained on June 6, 2012, and an award was made on December 26, 2014. In a prior writ case, the petitioner challenged the award, claiming it was in violation of the Act of 2013. The petitioner argues that the Act of 2013 is relevant in spite of the Collector’s denial, pointing to Section 24(1)(a). In favour of the petitioner, the court decides, citing an earlier writ judgement, directing the Collector to submit the issue to the Authority for compensation augmentation within three weeks.

Legal Provisions

The Land Acquisition Act of 1894 and the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act of 2013 are the two main legislative statutes at issue in this case. The land that the petitioner had obtained under the Act of 1894 was in doubt until the Collector’s award on December 26, 2014, was made. In contesting the award, the petitioner argued that the Act of 2013’s guiding principles were not adhered to. Section 24(1)(a) of the Act of 2013, which specifies that all Act of 2013 provisions pertaining to the assessment of compensation will apply in the absence of an award granted under Section 11 of the Act of 1894, is at the centre of the important legal dispute. In its ruling, the court notes Section 64, which allows the petitioner to request reference under the Act of 2013, and highlights the application of Section 24(1)(a) even if possession was obtained under the previous Act. In the end, the court overturns the contested decision and gives the Collector three weeks to submit the disagreement to the Authority for an increase in compensation.

Issues

The Land Acquisition Act of 1894 and its interaction with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act of 2013 are the major legal concerns in the matter at hand. The petitioner contests the Collector’s decision to deny their request to send the compensation issue to the Authority in accordance with Section 64 of the Act of 2013. The main point of dispute is whether the Act of 2013’s provisions apply in this case, as the land was obtained under the Act of 1894, possession was obtained in 2012, and an award was made in 2014. The petitioner contends that the Act of 2013’s Section 24(1)(a) requires its applicability in situations in which no award under the Act of 1894 has been made prior to January 1, 2014. The court further examines whether the Collector’s denial under the old Act was lawful, and it highlights the petitioner’s entitlement to request a referral under Section 64 of the Act of 2013, which was previously upheld in a writ case. Citing the application of the Act of 2013 and the finality of the prior court ruling, the court eventually quashes the impugned order and directs the Collector to send the matter to the Authority.

Courts analysis and decision

Under Section 64 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 (Act of 2013), the petitioner in this case challenges the Collector’s order denying their application to submit a compensation issue to the Authority. Citing Section 24(1)(a) of the Act of 2013, the petitioner contends that even if possession was obtained in accordance with the Land Acquisition Act, 1894, the Act of 2013 nonetheless applies. The petitioner has been granted permission by the court, which emphasises that the Act of 2013 applies because the award was given after January 1, 2014. The petitioner’s entitlement to request a referral under Section 64 of the Act of 2013 is confirmed by the court, which rejects the Collector’s reliance on possession under the prior Act. Emphasising the finality of the prior court ruling allowing the petitioner to seek reference, the court quashes the impugned order and directs the Collector to refer the case to the Authority. The ruling emphasises that the petitioner’s entitlement to request a referral under the Act of 2013 is unaffected by the State’s payment of compensation under the previous Act.

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 Written by- Aastha Ganesh Tiwari

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Bombay High Court Upholds Justice in State of Maharashtra v. Ms. G.P. Mulekar – A Pivotal Ruling against Abduction and Trafficking”

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TITLE: THE STATE OF MAHARASHTRA V. MS. G.P. MULEKAR, A.P.P, FOR APPELLANT-STATE. MR. RAJESH B. PARAB,

CITATION: CRIMINAL APPEAL NO.65 OF 2015

DECIDED ON: 15 JANUARY 2024

CORAM: PRITHVIRAJ K. CHAVAN, J

 

Facts of the case

This case centers on the intricate details surrounding the prosecution of the respondent-accused. The charges primarily stem from the alleged abduction and attempted trafficking of a vulnerable 14-year-old girl who, under false pretenses, found herself ensnared in a red-light area in Nashik. The prosecution meticulously presented a wealth of evidence, drawing from the victim’s own harrowing experience, testimonies from witnesses who had been privy to the unfolding events, and statements from diligent police officials actively involved in the investigation. The victim, tragically lured into this distressing situation, played a crucial role in providing firsthand accounts of the events that unfolded during her ordeal. Additionally, the prosecution called upon a brothel operator, shedding light on the sinister machinations at play, as well as a social worker who contributed valuable insights into the broader implications of the case. These multifaceted evidentiary layers not only underscore the gravity of the charges but also establish a comprehensive foundation upon which the legal proceedings unfolded. In essence, the factual panorama presented in this case paints a distressing picture of the victim’s involuntary involvement in a web of criminal activities, intricately woven by the accused, which became the focal point of the subsequent legal scrutiny.

Legal Provisions:

The charges were brought under relevant sections of the Indian Penal Code (IPC) addressing abduction and under The Immoral Traffic (Prevention) Act, 1956, concerning attempted trafficking. The legal framework aimed to address crimes against minors and combat the immoral trafficking of individuals.

Issues Involved:

The primary issue before the court was the determination of the respondent-accused’s culpability in the charges of abduction and attempted trafficking. The trial court initially acquitted the accused, citing the absence of crucial witnesses and doubts surrounding the victim’s testimony.

Court’s Observation and Analysis

The trial court, in its initial judgment, acquitted the respondent-accused based on the absence of key witnesses and doubts regarding the victim’s testimony. However, the appellate judge disagreed, labeling the trial court’s decision as erroneous and unjust. The appellate analysis emphasized the severity of the offenses, the necessity for deterrence, and the escalating cases related to human trafficking. The appellate judge, overturning the trial court’s acquittal, convicted the respondent-accused on charges of abduction and attempted trafficking. Stressing the gravity of the offenses, the judge imposed a stringent sentence, including rigorous imprisonment and fines. The fine amount was designated for the victim as compensation in accordance with the law. The judge, highlighting the broader implications, directed the registry to certify the judgment and remit the record to the Sessions Court, Nashik, thereby concluding the appeal. In summation, the judgment reflects the court’s commitment to addressing human trafficking, ensuring justice for the victim, and establishing a precedent for severe punishment as a deterrent against such criminal activities. The legal analysis underscores the meticulous consideration of evidence and legal provisions, resulting in a decisive conviction and sentencing.

 

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Written by- Komal Goswami

 

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“Delhi High Court Affirms Prudent Taxation: Landmark Ruling on Mutual Fund Gains and Deemed Dividends”

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TITLE: PR. COMMISSIONER OF INCOME TAX- 18 V.  M/S WIG INVESTMENT

CITATION: ITA 169/2020

DECIDED ON: 15 JANUARY 2024

CORAM: JUSTICE RAJIV SHAKDHER, JUSTICE GIRISH KATHPALIA

Facts of the case:

The appeal involves the Assessment Year (AY) 2006-07, where the appellant, PR. COMMISSIONER OF INCOME TAX-18, challenges the order dated 16.10.2018 of the Income Tax Appellate Tribunal (the Tribunal). In the first round of litigation, the respondent, M/S WIG INVESTMENT, approached the Tribunal against the order dated 12.03.2011 passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income-tax Act, 1961 (the Act). The CIT, in the first round, set aside the assessment order dated 08.12.2008, asserting that the gain on redemption of mutual funds should be treated as business income and the capital contribution received by the respondent should be taxed as deemed dividend. The Tribunal in the first round allowed the appeal of the respondent, modifying the CIT’s order and directing the Assessing Officer (AO) to reframe the assessment order without being bound by the CIT’s findings. A fresh assessment order was framed on 21.12.2011, adding the gain on redemption of mutual funds and the capital contribution as per the CIT’s directions. The respondent appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who partly allowed the appeal concerning AY 2006-07 and AY 2009-10. The CIT(A) found that the gain on mutual funds should be treated as capital gains, not business income, and the capital contribution made by the companies should not be treated as deemed dividend. Cross-appeals were filed concerning AY 2006-07, and the Tribunal adjudicated on the issues raised by both the appellant and the respondent. The Tribunal, in the impugned order, upheld the CIT(A)’s decision, maintaining that the gain on mutual funds should be treated as capital gains and rejecting the deemed dividend treatment for the capital contribution.

Legal Provisions:

Section 143(3) of the Income-tax Act, 1961 – Pertains to assessment after scrutiny. Section 263 of the Act – Empowers CIT to revise an order if it is erroneous and prejudicial to the interests of revenue. Section 2(22) (e) of the Act – Defines deemed dividend in certain cases. Section 150(1) of the Act – Pertains to recovery of tax in a case of income deemed to be the income of another person.

Issues Involved:

Whether the gain on redemption of mutual funds should be classified as business income or capital gains. Whether the capital contribution received by the respondent should be taxed as deemed dividend under Section 2(22)(e) of the Act. Whether the Tribunal erred in sustaining the CIT(A)’s order.

Court’s Observation and Analysis:

The High Court of Delhi, in ITA 169/2020, upheld the order of the Income Tax Appellate Tribunal (ITAT) dated 16.10.2018, concerning Assessment Year 2006-07. The appellant, the Principal Commissioner of Income Tax, contested the ITAT’s decision, challenging the treatment of gains from mutual funds as capital gains and disputing the addition of a capital contribution by two companies as deemed dividend. The court affirmed the ITAT’s findings that the transactions involving mutual funds were investment-oriented rather than trading activities. The court stressed the importance of ascertaining the assessee’s intent based on factors such as transaction frequency, holding period, and disclosure methods. Regarding the capital contribution issue, the court concurred with the ITAT that such contributions from partner companies did not constitute loans or advances, preventing them from being treated as deemed dividends. The judgment emphasized adherence to factual findings by lower authorities and highlighted the need to establish perversity in such findings for judicial intervention. The court’s analysis relied on legal principles and precedents to affirm the ITAT’s conclusions.

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Written by- Komal Goswami

 

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