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“Insolvency Board’s Legal Battle: Supreme Court Affirms Sessions Judge’s Summons Against Respondents”

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Case Title – Insolvency and Bankruptcy Board of India Vs. Satyanarayan Bankatlal Malu & Ors.

Case Number – Criminal Appeal No. 3851 of 2023

Dated on – 14th February, 2022

Quorum – Justice B.R. Gavai

FACTS OF THE CASE

In The Case of Insolvency and Bankruptcy Board of India Vs. Satyanarayan Bankatlal Malu & Ors., M/s. SBM Paper Mills Private Limited instituted a petition on the 4th of September,2017 under Section 10 of the Code of Initiation of the Corporate Insolvency Resolution Process (CIRP). The National Company Law Tribunal (NCLT), accepted the petition and instructed the moratorium to commence as outlined in Section 14 of the Code. Additionally, it mandated specific statutory actions to be carried out consequently. Mr. Amit Poddar was appointed as the Interim Resolution Professional (RP) to carry out the functions as outlined in the provisions of the code. Meanwhile, the respondent in the present case, Mr. Satyanarayan Malu of the M/s. SBM Paper Mills Private Limited filed an application before the NCLT under Section 12A of the code for the purpose of withdrawal of the petition under Section 10 of the code. Following a One Time Settlement (OTS) made with Allahabad Bank, the sole Financial Creditor, the resolution professional also applied regarding the approval of the Resolution Plan. The NCLT on the 20th of December, 2018, approved the petition filed by the respondent, noting the withdrawal of the petition by the sole Financial Creditor on the 27th of November, 2018. However, due to the failure of the Respondent to comply with the terms and conditions of the OTS, the NCLT issued a show-cause notice against them on the 11th of March, 2019. Subsequently, on the 20th of August, 2019, while taking into consideration the application filed by the sole Financial Creditor, seeking prosecution of the Respondents, the NCLT deemed it appropriate to propose their prosecution.  Subsequently, on the 22nd of September, 2020, the Appellant-Board filed a complaint against the Respondent before the Sessions Judge, alleging their failure to comply with the terms of the OTS and their omission to fie a Miscellaneous Application under Section 12 of the Code through the RP. The Sessions Judge, in response, through an order dated 17th of March, 2021, directed the issuance of legal process against the respondents and summoned them for the next hearing.

The respondents filed a Writ Petition before the High Court of Judicature at Bombay, in response to this development, seeking to annul the order dated 17th of March, 2021, issued by the Sessions Judge on Jurisdictional Grounds. The High Court, through its impugned judgment and order dated 14th of February, 2022 granted the Writ Petition filed by the respondents. Consequently, this appeal was instituted in the Supreme Court of India.

CONTENTIONS OF THE APPELLANTS

  1. The appellant, through their counsel, contented that the learned single judge of the High Court has erred in quashing the proceedings and that the High Court has erred in holding the view of the Companies (Amendment) Act of 2017 that the offences committed under the Companies Act can be tried by the Special Court consisting of Sessions Judge or Additional Sessions Judge.
  2. The appellant, through their counsel, contented that the reasoning given by the learned Single Judge or Additional Sessions Judge is totally ignorance of the provisions of Sub-section (1) of the Section 236 of the Code.
  3. The appellant, through their counsel, contented that since the code has come into effect on 18th May, 2016, the provisions of Section 453, as existed in the Chapter XXVIII of the Companies Act,2013, then would only be applicable and that the code has been held to be a complete code in itself in a sequence of judgments of this court.
  4. The appellant, through their counsel, contented that if a statute is a complete code in itself, then normally a reference to the provisions of the prior statute referred in a subsequent statute would only have a restrictive operation and that in such a case, it would be a “legislation by incorporation” and not a “legislation by reference”.
  5. The appellant, through their counsel, contented that the findings of the learned Single Judge of the High Court in purview of the Companies (Amendment) Act, 2017, the special Court consisting of Sessions Judge or Additional Sessions Judge do not have the jurisdiction to entertain the complaint and that only the Special court of the Metropolitan Magistrate or the Judicial Magistrate First Class have the jurisdiction to entertain the case and that it should have returned the complaint for presentation of the same before the competent court having jurisdiction.

CONTENTIONS OF THE RESPONDENT

  1. The respondents, through their counsel, contented that the point regarding the “legislation by incorporation” was never argued before the Learned Single Judge of the High Court and therefore the contentions raised by the prosecution as invalid as it is raised for the first time in this court.
  2. The respondents, through their counsel, contented that the Learned Single Judge of the High Court has not considered the merits of the said case and in the event this court holds that the Learned Single Judge was not justified to quash the proceedings, the matter be remitted to the learned Single Judge of the High Court for deciding it afresh on merits.

LEGAL PROVISIONS

  1. Section 435 of Companies Act, 2013 prescribes the establishment of special court. It states that the central government may, for the purpose of providing speedy trial of offences under this act, by notification, establish, or designate as many special courts as necessary.
  2. Section 236(1) of the Insolvency and Bankruptcy Code states that the offences punishable under the code are required to be tried by the Special Court established under Chapter XXVIII of the Companies Act,2013

ISSUES

  1. The main issues of the present case revolve around whether the application for withdrawal filed by Mr. Satyanarayan Malu under Section 12 of the IBC was valid and was according to the provisions of the code?
  2. Whether the plan of resolution approved by the NCLT got executed in compliance with the requirements of the IBC and whether the failure to comply with the terms and conditions of the OTS affects the validity of the resolution plan?
  3. Whether the proposal of prosecution against the respondent by the NCLT for their failure to comply with the terms of the OTS and for omitting to file a Miscellaneous Application under Section 12 of the IBC through the Resolution Professional justifiable?
  4. Whether the issued order by the Sessions Judge, directing the issuance of legal process against the respondents and summoning them for the next hearing, was within the jurisdiction of the Sessions Judge considering the nature of the proceedings of the IBC?
  5. Whether the decision of the High Court to nullify the order issued by the Sessions Judge on jurisdictional grounds was legally sound and aligned with the principles of law.
  6. Whether the appeal instituted in the Supreme Court challenging the decision of the High Court has merit and whether the Supreme Court has the jurisdiction to review and overturn the decision of the High Court.

COURT ANALYSIS AND JUDGMENT

The court in the case of Insolvency and Bankruptcy Board of India Vs. Satyanarayan Bankatlal Malu & Ors., the court observed that the contentions put forward by the complainant ascertain that the present case involves the “legislation by incorporation” instead of “legislation by reference.” In identical cases, the effect of including the original Section 435 of the Companies Act into the Section 236(1) of the IBC has been intact since the enactment of the IB Code. Therefore, any subsequent amendments done to the Section 435 of the Companies Act does not affect the Section 236(1) of the IBC. Thus, the court upheld the summons issued by the Sessions Judge even though there were amendments done to the Section 435 of the Companies Act, accrediting Judicial Magistrates to issue summons for offences committed under the IBC.

Thus, the issuance of the process by the Sessions Judge to the accused was upheld by the Supreme Court stating that the offences that come under the ambit of the IBC,2016 shall be tried by Special Courts under the Section 435 of the Companies Act,2013 and that the Sessions Judge shall hold the power of issuance of process against the accused. The decision of the High Court was reversed and Justice Gavai interpreted that the Section 236(1) of the IBC,2016 holding the power to try offences punishable under the IBC vests in the hands of the Special Courts by the “legislation of incorporation”.

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Judgement Reviewed by – Sruti Sikha Maharana

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“Supreme Court Crushes Compensation Demand Over ‘Jabra Fan’ Song Exclusion by Yash Raj Films”

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Case Title – Yash Raj Films Private Limited Vs. Afreen Fatima Zaidi & Anr.

Case Number – Civil Appeal No. 4422/2024

Dated on – 18th February, 2020

Quorum – Justice Pamidighantam Sri Narasimha

FACTS OF THE CASE

In The Case of Yash Raj Films Private Limited Vs. Afreen Fatima Zaidi & Anr., a school teacher by profession, Afreen Fatima Zaidi, along with her children went to watch a Bollywood Movie titled “FAN” featuring the renowned actor “Shah Rukh Khan” after being tempted to the promotional video of the movie showcasing the song “Jabra Fan”. However, after watching the whole movie in the theatre, she realised that the song was not included in the movie which led to her feeling of deception and disappointment. Augmenting to her grievances, she also stated that her children abstained from eating that night because they had to go to the theatre to watch the movie, especially because of the song, which direly led to the spike in the acidity level of her children, resulting in the necessitation of hospitalisation. While seeking redressal for her grievances, initially Afreen filed a consumer complaint with the District Consumer Forum seeking for compensation and a direction from the court to include the said song in the movie while displaying it in the theatres henceforth. However, the petition filed by her was dismissed by the District Consumer Forum. Aggrieved by the decision of the District Consumer Forum, Afreen escalated the matter and filed a petition before the State Consumer Forum under the requisite sections of the Consumer Protection Act, 2019. The State Consumer Forum ruled in favour of Zaidi and ordered the Yash Raj Films Private Limited to pay her a compensation of Rupees 10,000 as well as the charges for litigation of Rupees 5000 additionally. Aggrieved by the decision of the State Consumer Forum, the Yash Raj Films Private Limited instituted an appeal against the decision of the State Consumer Forum before the National Consumer Forum in February,2020.

CONTENTIONS OF THE APPELLANTS

  1. The appellants, through their counsel, in the present case contented that the distributor and the producer of the movie “FAN” cannot be held liable for the discontent experienced by the complainant due to the absence of the song “Jabra Fan” in the movie. The decision to whether include a particular song in the movie or exclude the same solely depends upon the creativity and artistic choice made by the filmmakers and is beyond the control of the production company.
  2. The appellants, through their counsel, in the present case contented that the complaint made by Zaidi does not fall under the ambit of the Consumer Protection Act,2019 as it does not relate to the deficiency in goods and services provided by the Yash raj Films Private Limited and that the discontentment faced by her is her personal preferences and does not concern the Yash raj Films Private Limited.
  3. The appellant, through their counsel, in the present case contented that the promotional video along with the song “Jabra Fan” was solely for the purpose of generation of excitement and interest in the film but did not comprise a contractual obligation to include the song in its extensiveness in the final movie released on theatres.

CONTENTIONS OF THE RESPONDENT

  1. The respondent, through their counsel, in the present case contented that as the customer who is paying for watching the movie in the theatres, they have a licit expectation based on the promotional video that the song “Jabra Fan” would be a part of the movie and that the song not being included in the movie amounts to a breach of consumer rights and constitutes unfair trade practices.
  2. The respondent, through their counsel, in the present case contented that they suffered emotional anguish and inconvenience resulting in the disappointment caused by the exclusion of the song in the movie and that the children experienced health issues as well as hospitalisation due to not eating for long period for the purpose of watching the movie.
  3. The respondent, through their counsel, in the present case contented that the appellants bear the responsibility for the content of the movie as well as the display of the exact videos in the theatre that were initially displayed in the promotional video and that the company had a due obligation to ensure that the movie displayed on the expectations crafted by its advertising campaigns including the inclusion of the advertised song “Jabra Fan.”

LEGAL PROVISIONS

  1. Section 2(1)(d) of the Consumer Protection Act,2019 prescribes the definition of the term “complainant”
  2. Section 2(1)(g) of the Consumer Protection Act,2019 prescribes the definition of the term “consumer”
  3. Section 2(1)(o) of the Consumer Protection Act,2019 prescribes the definition of the term “goods”
  4. Section 2(1)(r) of the Consumer Protection Act,2019 prescribes the definition of the term “service”
  5. Section 17 of the Consumer Protection Act,2019 prescribes the “Jurisdiction of the District Commission”
  6. Section 21 of the Consumer Protection Act,2019 deals with the term “appeals”
  7. Section 34 of the Consumer Protection Act,2019 concerns the “Cognizance of the Offences”
  8. Section 2A of the Indian Contracts Act,1872 is related to the “Communication, acceptance and revocation of Proposals”
  9. Section 73 of the Indian Contracts Act,1872 concerns the “Compensation for loss or damage caused by the breach of Contract”
  10. Section 18 of the Indian Contracts Act,1872 deals with the “Effect of refusal of party to perform promise wholly”

ISSUES

  1. The main issues in the present case revolves around whether a person filing a complaint can be considered a consumer within the ambit of Section 2(1)(d) of the Consumer Protection Act,2019?
  2. Another issue in the present case revolves around whether the removal of the song “Jabra Fan” from the movie “Fan” by the appellant being complained against is within the ambit of unfair trade practices under Section 2(1)(r) of the Consumer Protection Act,2019?

COURT ANALYSIS AND JUDGMENT

The court in the case of Yash Raj Films Private Limited Vs. Afreen Fatima Zaidi & Anr., the court observed that since Afreen paid for the expense of the movie ticket, and that the revenue generated by the sale of the tickets was distributed amongst the distributor, producer, and exhibitor after the deduction of the taxes, the complainant is to be recognized as a consumer within the ambit of Consumer Protection Act,2019. The court believed that a promotional trailer is unilateral and is only meant to encourage the viewers to purchase the tickets which is an independent transaction and contract from the promotional trailer. A promotional trailer is not an offer nor can create a contractual relationship and since it is not an offer, there is no possibility of becoming a promise. The service is only to enable the complainant to watch the movie in the theatre upon paying the requisite consideration in the form of purchase of the movie ticket. This transaction is not connected to the promotional trailer and hence cannot be considered a deficiency in the service.

The court believed that the ingredient of the term “Unfair Trade Practices” under the Section 2(1)(r)(1) of the Consumer Protection Act,2019 are not made out in the present case. The promotional Trailer does not fall under any of the instances of the “Unfair Trade Practices” in the promotion of the goods and services nor does it make any false claims to mislead the viewers. Further, the burden is on the complainant to produce the convincing evidence that proves the unfair trade practices but nothing of such has been provided on record in the present case to show the same. Therefore, no case of the unfair trade practice is made out in the present case. The court firmly believed that the services involving the art and creativity involves freedom and discretion of the presentation, nuances, and variations of such art. Hence, the court taking into consideration the reasonings and analysis has set aside the findings of the impugned order that there is a deficiency of the services and unfair trade practices. The court allowed the appeal in the present case and stated that any pending applications regarding the said matter shall be disposed off.

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Judgement Reviewed by – Sruti Sikha Maharana

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“The Supreme “Court reverses a High Court decision in a murder case where the victim’s motive was rooted in financial envy.” 

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Case Title: Kirpal Singh v. State of Punjab 

Case No.: CRIMINAL APPEAL NO(S). 1052 OF 2009 

Dated On: April 18, 2024 

Quorum: Justice B R Gavai and Justice Sandeep Mehta 

 

FACTS OF THE CASE: 

The initial witness, Sharan Kaur, was the spouse of the deceased Balwinder Singh (dead). Her family used to live in the house behind the grocery and halwai stores that her husband had near the bus stop in Khudda.  

On the intervening night of November 12–13, 1997, Sharan Kaur slept in a room on the ground floor with the rest of the family, while Balwinder Singh (dead) slept in the house’s chaubara, which lacked a shutter. At at 2:30 in the morning, Sharan Kaur is said to have heard a knock on the door of the room where she was resting.  

She opened the door since she believed her husband to be the one who had knocked. She observed the accused appellant, Kirpal Singh, standing there brandishing a chura-style knife in the courtyard’s lighting. Sharan Kaur suffered an injury to her abdomen at the hands of the appellant. Kirpal Singh, the appellant, was being followed by another attacker who grabbed her arm.  

Her boys Goldy and Sonu awoke when she set off an alarm and said, “killed killed.” None of the three individuals were able to identify the second attacker. By opening the main gate between the two stores, both attackers were able to escape. As Sharan Kaur went upstairs to check on her husband, she discovered him lying on the cot with terrible injuries and blood seeping from his head and mouth. On the ground below, blood accumulated. There was nothing he could say.  

Balwinder Singh passed away en route to the Civil Hospital in Tanda with Sharan Kaur in tow. Sharan Kaur received first aid; after that, both she and the deceased Balwinder Singh’s body were returned.  

The prosecution claims that jealousy between the appellant and his associate over the booming business being done at Balwinder Singh’s (deceased) halwai shop—which was doing much better than the halwai shop run by the accused appellant—was the driving force behind the incident.  

Through a common judgement and order dated 28.02.2008, which is contested in this appeal filed at the accused appellant’s request, the learned Division Bench of the High Court of Punjab and Haryana went on to dismiss both the appeals, one by the State and the other by the accused-appellant, as well as the revision filed by the complainant.Krishna Singh  

 

 

CONTENTIONS OF THE APPELLANT: 

According to the prosecution, the reason for the incident was that the accused appellant and his associate were harbouring jealousy towards Balwinder Singh’s (deceased) booming halwai business, which was performing significantly better than the accused appellant’s halwai shop.  

The accused appellant fiercely argued that the conclusions listed in the contested judgement are irrational and contradictory, and as such, they should be overturned. 

He made the following relevant arguments in his request for the accused appellant to be exonerated:  

Daljit Singh @ Goldy , the deceased’s son, and Sharan Kaur , the first informant and the deceased’s wife, provide wildly inconsistent, inconsistent, and unpersuasive testimony. Further, the prosecution witnesses have attempted throughout the proceedings to embellish the narrative provided in the FIR; as a result, their testimony ought to be disregarded.  

They, further alleged that both the trial court and the high court concluded that the co-accused, Kulwinder Singh, was not guilty of the charges made against him and that the witnesses, Shan Kaur and Daljit Singh @ Goldy, were not entirely credible. As a result, Culwinder Singh was declared not guilty. Consequently, Kirpal Singh, the accused-appellant, likewise merits the same handling.  

Closure reports were filed by the police in the relevant Court after the defence witnesses unequivocally declared that, following a comprehensive investigation, the accusations made by the first informant, Shawn Kaur, were confirmed to be untrue.  

According to the testimony of Daljit Singh @ Goldy, the dead Balwinder Singh’s son, and the initial informant, Sharan Kaur, the case is accepted. However, the four servants who were seen having sex with the deceased Balwinder Singh in the house’s chaubara were not questioned or put on trial. Similarly, the prosecution did not question Gurmit Singh, the deceased’s other son and the first informant, it is a suitable instance that justifies or allows for the drawing of an adverse inference against the prosecution for the reasons that are best known to them. 

 

CONTENTIONS OF THE RESPONDENT: 

The State’s skilled counsel fiercely and passionately refuted the arguments put out by the appellant’s counsel. He acknowledged that the prosecution’s version of events regarding accused Kulwinder Singh’s involvement did not sit well with the trial court or the High Court, but he maintained that this did not constitute a good enough excuse to throw out the prosecution’s entire case, including the accused appellant who was mentioned in the FIR and the testimony of the key prosecution witness.  

He fiercely argued that minor inconsistencies in the prosecution witnesses’ testimony provide reassurance that they are real witnesses and not made-up witnesses. His argument was that the Indian criminal justice system did not follow the idea of “falsus in uno, falsus in omnibus,” and as a result, only when one of the two accused parties named by the prosecution. 

He further argued that both the trial court and the high court had found the accused appellant guilty of the charges after separating the grain from the chaff and reappreciating the evidence. As a result, the court should be reluctant to intervene in these concurrent findings of facts made by the trial court and the high court. Lean legal counsel representing the State argued on these grounds that the appeal should be dismissed because it is without merit.  

 

LEGAL PROVISION: 

Section 302 of the Indian Penal Code- The appellant was convicted under this section, which deals with the offense of murder. It prescribes punishment for intentionally causing the death of another person.   

Section 307 of the Indian Penal Code- Whoever commits any act with such intent or knowledge, and under such circumstances, that if he caused death by that act, he would be guilty of murder, shall be punished with imprisonment of either description for a term of up to ten years, as well as a fine; and if such act causes harm to any person, the offender shall be punished with either life imprisonment or the punishment mentioned above.  

 

COURT’S ANALYSIS AND JUDGMENT: 

The court held that using the ladder that the prosecution had erected on the house wall, they attempted to prove that the accused had used it to climb into the chaubara and struck the deceased Balwinder Singh with a spade, causing serious injuries. According to Sharan Kaur’s testimony (PW.5), the accused was jealous of her husband’s successful halwai business, which was causing her own business to struggle. This jealousy was the purpose behind the incident.  

The court further observed that Sharan Kaur makes a similarly nebulous statement on this subject. Nothing in the accused’s deposition can persuade the court that the accused would go to the extreme of erecting a ladder against the wall of the home where the deceased Balwinder Singh used to live with his family and then climb up and murder him—that too in front of his family members—just because of this alleged jealousy.  

It was also held that the identity of the second accused, Kulwinder Singh, is not listed as one of the attackers in either the FIR (Exhibit-PG/2) or the application (Exhibit-DA), which was signed by the first informant, Sharan Kaur, and sent to the Chief Minister of Punjab. There is no denying the intimate ties between the first informant and the deceased’s family and the acquitted accused Kulwinder Singh and appellant Kirpal Singh.  

As per the court, given that the first informant stated during her chief interrogation that her son had brought a van to transport her and her husband to the Civil Hospital in Tanda, where the medical officers concluded that her husband had passed away and that she had undergone a medical examination, there is much reason to seriously doubt the veracity of her deposition. Nevertheless, they did not accept this assessment and brought the patient to Bhogpur, where the medical professionals once more confirmed that her spouse had passed away.  

The court observed that the prosecution’s motive story was implausible so as to be taken at face value. After doing a comprehensive investigation, two investigating officers discovered that the original informant, Shawn Kaur, had made up the entire case. Considering that the first informant attempted to implicate Kulwinder Singh through many petitions filed while the investigation was still continuing and even in her testimony during the trial, her actions are not deserving of trust.  

The court, by extending the benefit of the doubt, held the appellant is deserving of being found not guilty. As a consequence, the trial court’s and the high court’s rulings from July 26, 2003, and hereby annulled and set aside, as of February 28, 2008, accordingly. The accused is found not guilty of the allegations. During the course of this appeal, the appellant’s sentence was instructed by this Court to be suspended on August 12, 2011, and he is currently free on bail. The bail bonds are released, and he is not required to surrender.  

 

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Judgment reviewed by Riddhi S Bhora.  

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“In a case involving trade and commerce, the Supreme Court dismissed the State’s appeal and held that the State of Arunachal Pradesh has been relieved to have escaped an unnecessary criminal prosecution.”

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Case Name: The State of Arunachal Pradesh v. Kamal Agarwal 

Case No.: SLP(Crl.) Nos.8663-8665 of 2023 

Dated On: April 18, 2024  

Quorum: Justice Vikram Nath and Justice K. V. Viswanathan 

 

FACTS OF THE CASE: 

The First Information Report is the source of the two appeals listed above. The above case was dealt along with another case, Chandra Mohan Baday v. The State of Arunachal Pradesh (SLP(Crl.) No. 7301 OF 2022). Three petitions for special leave have been filed by the state of Arunachal Pradesh. 

A plea for the quashing of the FIR was filed with the Gauhati High Court by three of the accused, Chandra Mohan Badaya and Respondent Nos. 3 and 4, Shashi and Rajesh Natani. One crore rupees was transferred in 2016 by M/s Shiv Bhandar, the proprietorship in question, to the accounts of Chandra Mohan Badaya, two of his proprietorships, and Rajesh Natani in four equal transactions of twenty-five lakhs apiece.  

In contrast to the complainant, who claims that the payments were made for the acquisition of a building located between plots Nos. A-47 to A-55, Sikar House, near Chandpole, Jaipur, Rajasthan, the appellant Chandra Mohan Badaya claims that the amount was transmitted as a loan. 

It is crucial to note that there is no formal contract pertaining to the reason for the money transfer, be it a loan or a down payment for the previously mentioned building or piece of land. It is important to remember that there is no official contract regarding the purpose of the money transfer—whether it is a loan or a down payment for the building or property that was previously indicated. The said amount was later repaid in 2016/17. 

 According to Chandra Badaya, he executed two sale deeds for two properties located in Chaksu, Jaipur, in the names of the complainant proprietor’s wife, Smt. Shalini Agarwal, and sister-in-law, Smt. Jaya Agarwal, as well as Shri Anil Agarwal, the holder of the power of attorney. Even though both sale deeds had a total sale consideration of Rs. 1.08 crores, the petitioner only received a total of Rs. 54 lakhs, or Rs. 27 lakhs each. 

The Chief Judicial Magistrate took cognizance and filed a case based on the aforementioned chargesheet. Following that, two sets of petitions were submitted to the Rajasthan High Court and the Gauhati High Court, two separate high courts.  

 

CONTENTIONS OF THE APPELLANT: 

The appellants contended that Rajesh Natani and Chandra Mohan Badaya contacted the complainant company and asked to be considered for an exchange of land or building in Rajasthan for a sum of Rs. one crore. 

As full payment for the sale of the aforementioned land/building, the aforementioned sum was deposited in four instalments on July 19, 2016, July 20, 2016, July 22, 2016, and July 25 in the accounts of Shri Ram Enterprises, A.R. Properties and Colonisers, Shashi Natani w/o Rajesh Natani, and Chandra Mohan Badaya.  

When the accusers saw the structure or plot of land, they refused to give it to the complaint. Since the accused had caused pain, mental anguish, and financial loss, it was evident that they had cheated. Further, the accused refused to turn over the land/building when the complaint was inspected. Because of this, it was evident that the accused had cheated, causing pain, suffering, and financial loss.  

 

CONTENTIONS OF THE RESPONDENTS: 

The State of Arunachal Pradesh appealed the Rajasthan High Court’s ruling in Special Leave Petition Nos. 8663–8665 of 2023, which it filed with the Supreme Court. Interestingly, the complainant did not challenge the Rajasthan High Court’s decision to quash the proceedings. 

The accused individuals have amassed substantial wealth through illicit means; but rather than keeping their word, they have threatened the complainant with dire repercussions. Upon identifying no other course of action, the formal complaint was filed in order to take suitable measures against the individuals involved.  

The address provided in the First Information Report (FIR) for the complainant, Mr. Anil Agrawal, is the address of the company M/s Shiv Bhandar in Pasighat, East Siang District, Arunachal Pradesh. However, the residential address of Anil Agarwal was not mentioned. 

It was also contended that Jaipur, Rajasthan is also home to the property for which it is said that a payment of Rs. 1 crore was made. The FIR makes no mention of the transaction involving the bank data.  

Arunachal Pradesh is the state in where the complainant is allegedly located, however other than that, no additional information related to the alleged offence is stated to be in or within the state; still, a FIR was filed there. It is obvious that the accused parties’ refusal to carry out the sale deed for which they had accepted the Rs. 1 crore sale consideration was the primary motivation behind filing the FIR.  

 

LEGAL PROVISIONS: 

  • Section 34 of the Indian Penal Code: Acts done by several persons in furtherance of common intention. When multiple people commit a crime together to accomplish their shared goal, each of them bears the same liability as if they had committed the crime alone. 
  • Section 120B of the Indian Penal Code: Punishment of criminal conspiracy. In the absence of a specific provision in this Code regarding the punishment of criminal conspiracies, any individual involved in a criminal conspiracy that involves the commission of an offence punishable by death, life imprisonment, or rigorous imprisonment for a term of two years or more will face the same punishments as if they had assisted in the commission of the offence.  
  • Section 420 of the Indian Peanl Code: Cheating and dishonestly inducing delivery of property. Anyone who deceives someone by cheating and then dishonestly persuades that person to give up property to someone else, create, alter, or destroy all or a portion of a valuable security, or sign or seal anything that could be turned into a valuable security, faces up to seven years in prison of any kind in addition to a fine.  

 

COURT’S ANALYSIS AND JUDGMENT:  

The court was of the view that the issue was exclusively of a civil nature. It was a situation where money was advanced without a formal document being signed to specify its purpose or significance. It is unclear from records whether this money was advanced for a loan or as an advance payment for the transfer of property, which was land or a building located in Jaipur.  

Based on the complainant’s assertion that it was for the transfer of property for the land/building specified above would be the subject of evidence presented and proven in a court of law, not by the police conducting an investigation and making a determination. The complainant’s claim in the FIR is not that the land or plot they claimed was going to be transferred to them either didn’t exist or had been sold to another party; rather, it is that the accused parties engaged in some form of deception.  

The court held that a capable Civil Court could hear arguments on all these points. It is not possible to call it cheating. Even though Chandra Mohan Badaya, the appellant, has attempted to clarify that he has already transferred Rs. 37 lakhs to the complainant via bank transfer and has also completed two transfer deeds in favour of Anil Agrawal’s wife and sister-in-law, the holder of the power of attorney, valued at a total of more than Rs. 1.45 crores.  

The court observed that the Rajasthan High Court correctly concluded, after taking into account all relevant circumstances, that any offense—though none is shown to exist—would fall under the territorial jurisdiction of Rajasthan and not Arunachal Pradesh. 

The court pronounced that after eliminating a needless criminal case that was filed and tried in Arunachal Pradesh, the State of Arunachal Pradesh should have been pleased.  

When the complainant in a case involving a civil or business dispute does not come forward to defend its FIR, which has been quashed by the said State, it is equally incumbent upon the said State to explain why it has contacted this Court.  

As a result, the court reversed the Gauhati High Court’s ruling, granted Chandra Mohan Badaya’s appeal, and halted all legal actions related to FIR No. 227 of 2017. The court also rejected the three appeals that the State of Arunachal Pradesh had submitted.  

 

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.” 

 

Judgment reviewed by Riddhi S Bhora. 

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“Supreme Court Invalidates Auction Sale Due to Absence of Mandatory 30-Days Notice to Borrower”

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Case title: Govind Kumar Sharma & Anr. v. Bank of Baroda & Ors.

Case no.: Civil Appeal No. of 2024 (Arising out of S.L.P.(C) No.24155 of 2018)

Dated on: 18th April 2024

Quorum: Justice Vikram Nath and Justice Satish Chandra Sharma

FACTS OF THE CASE

The case revolves around an auction sale conducted by Bank of Baroda (Respondent no. 1) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The appellants, Govind Kumar Sharma & Anr., were the highest bidders in the auction and obtained a sale certificate for the property in question. They were initially tenants but became owners after the auction sale was confirmed.

However, the borrowers (Respondent nos. 3 and 4) filed an application under Section 17 of the SARFAESI Act, seeking to set aside the sale due to non-compliance with statutory procedures, particularly regarding notice requirements. The Debt Recovery Tribunal (DRT) set aside the sale, directing the bank to refund the auction money with interest, and the same decision was upheld by the Debt Recovery Appellate Tribunal (DRAT) and the Allahabad High Court.

CONTENTIONS OF THE APPELLANT

The Appellants contented that sale is liable to be quashed for the non-compliance of Rule 8(6) and 8(7) of the Security Interest (Enforcement) Rules, 2002. The auction purchaser set up his case that he has spent huge money on improvement of property in question.

They sought compensation not only for the auction money but also for the investments made.

CONTENTIONS OF THE RESPONDENTS

The Bank admitted non-compliance with statutory procedures but argued that appellants shouldn’t be compensated for improvements made. Borrowers claimed to have paid outstanding dues and sought a No Dues Certificate.

LEGAL PROVISIONS

Section 17 of the SARFAESI Act, Application against measures to recover secured debts.

Rule 8(6) and 8(7) of Security Interest (Enforcement) Rules, 2002, which required a mandatory notice of 30 days to the borrower, had neither been issued nor served upon the borrower.

ISSUE –

  • Whether the auction sale should be set aside due to non-compliance with statutory procedures.
  • The status of the appellants as tenants or owners after setting aside the sale.
  • Compensation for the appellants for property improvements.

COURT’S ANALYSIS AND JUDGEMENT

  1. The Court affirmed the setting aside of the auction sale due to the Bank’s admission of non-compliance with statutory notice requirements.
  2. The appellants’ status reverted to tenants after the sale was set aside, with no obligation to hand over physical possession to the Bank.
  3. The Court directed the Bank to refund the auction money with compound interest of 12% per annum to the appellants.
  4. Borrowers were to receive a No Dues Certificate upon settlement of accounts with the Bank.

The Supreme Court’s judgment in Govind Kumar Sharma & Anr. v. Bank of Baroda & Ors. provides clarity on the consequences of non-compliance with statutory procedures in auction sales under the SARFAESI Act. It underscores the importance of adhering to legal requirements and ensures fair treatment of parties involved in such transactions.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Judgement Reviewed by – Chiraag K A

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