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Supreme Court Upheld the Decision of Punjab & Haryana High Court on Registration of Sale Deed.

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Case Name: Kanwar Raj Sing (D)TH.LRS vs. Gejo (D)TH.LRS
Case Number: CIVIL APPEAL NO. 9098 OF 2013
Dated: January 02, 2024
Quorum: Honourable Justice ABHAY S. OKA

FACTS OF THE CASE

The respondents are the legal representatives of the Plaintiff Gejo. There are total 8 defendants Plaintiff claimed a declaration of ownership over the land measuring 71 kanals 8 marlas (“suit property”) based on the sale deed executed on 6th June 1975 and registered on 23rd July 1975. According to the case of the original plaintiff – Smt. Gejo, before registration of the sale deed, an interpolation was made in the sale deed by the first defendant by adding that only 1/3rd share measuring 23 kanals and 8 marlas was being sold. The suit was contested by the first defendant, contending that what was sold was the area of 23 kanals and 8 marlas, which was his 1/3rd share in the suit property.

The Trial Court decreed the suit and held that what was sold to the original plaintiff was the entire land measuring 71 kanals 8 marlas. The first and eighth defendants preferred an appeal before the District Court. On 23rd August 1984, the Additional District Judge allowed the said appeal and held that the correction made in the sale deed was bona fide and was not fraudulently made. The plaintiff preferred a second appeal before the High Court. The plaintiff died during the pendency of the second appeal. High court passed a order in favour of plaintiff and then the unsuccessful defendant moved an appeal to the Hon’ble Supreme Court against the order of high court.

LEGAL PROVISIONS

  • Section 47 of The Registration Act, 1908

Time from which registered document operates —A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.”

  • Section 54 of the Transfer of Property Act, 1984

“Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Sale how made. —Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.

  • Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.
  • Contract for sale—A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property.”

Issues raised:

  1. Whether the sale deed as originally executed will operate?
  2. The corrections unilaterally made by the first defendant after the execution of the sale deed without the knowledge and consent of the purchaser will have to be ignored?

Submissions:

Learned counsel appearing for the appellants submitted that as the price of the property subject matter of the sale deed was only Rs. 30,000/-, it is impossible that a vast area of 71 kanals 8 marlas was sold under the sale deed. Learned counsel submitted that the sale took effect from the date on which the sale deed was registered and not from the date on which it was executed. He submitted that what is conveyed by the sale deed is what is mentioned in the registered sale deed. He submitted that even the agreement for sale executed before the execution of the sale deed refers to the sale of 1/3rd share of the first defendant and not the entire property. He submitted that the entry of the name of the original plaintiff in the revenue records as the owner of the whole area would not confer any title as what is relevant is the description of the property in the registered sale deed.

Court Analysis and Judgment:

The Hon’ble court referred section 47 of Registration Act,1908 and also took precedence from Ram Saran Lall v. Domini Kuer and analyzed that Section 47 applies to a document only after it has been registered, and it has nothing to do with the completion of the sale when the instrument is one of sale. It was also held that once a document is registered, it will operate from an earlier date, as provided in Section 47 of the Registration Act.

After referring section 54 of Transfer of Property Act,1984 the Court has observed Every sale deed in respect of property worth more than Rs. 100/- is compulsorily registerable under Section 54 of the Transfer of Property Act. Thus, a sale deed executed by the vendor becomes an instrument of sale only after it is registered.

After considering the facts of this case the Hon’ble Supreme Court observed The first defendant admittedly made the said interpolation after it was executed but before it was registered. In terms of Section 47 of the Registration Act, a registered sale deed where entire consideration is paid would operate from the date of its execution. Thus, the sale deed as originally executed will operate. The corrections unilaterally made by the first defendant after the execution of the sale deed without the knowledge and consent of the purchaser will have to be ignored. Only if such changes would have been made with the consent of the original plaintiff, the same could relate back to the date of the execution. It is not even the first defendant’s case that the subsequent correction or interpolation was made before its registration with the consent of the original plaintiff.

Therefore, the Hon’ble Supreme Court upheld the decision of High Court and dismissed the appeal.

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JUDEMENT REVIEWED BY: ABHISHEK SINGH

Click here to view full judgement: Kanwar Raj Sing (D)TH.LRS vs. Gejo (D)TH.LRS

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Supreme Court Dismissed the SLP on the Ground of Territorial Jurisdiction

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Case Name: ARCADIA SHIPPING LTD. V.  TATA STEEL LIMITED AND OTHERS
Case Number: SPECIAL LEAVE PETITION (CIVIL) NO.8488 OF 2024
Dated: April 16, 2024
Quorum: Honorable Justice Sanjiv Khanna and Justice Dipankar Datta

FACTS OF THE CASE

The facts of the case and pleadings arises in the plaint, Suit No. 458/2000:

Bhushan Steel & Strips Ltd is the original plaintiff in a dispute with Tata Steel Limited, TYO Trading Enterprises, Commercial Bank of Ethiopia, Arcadia Shipping Limited, and M.G. Trading Worldwide Pvt. Ltd. as the defendants. Bhushan Steel, a manufacturer of galvanised steel corrugated sheets, was instructed by TYO Trading to place supply orders for the material. The material was dispatched by Bhushan Steel and loaded by shippers Arcadia from Mumbai, India, to Djibouti, Ethiopia.

Bhushan Steel prepaid freight charges to Arcadia, who was directed to deliver the goods to the Bank of Ethiopia. The Bank of Ethiopia refused to encash the Letter of Credit due to discrepancies. Bhushan Steel informed Arcadia that both shipments had been released to TYO Trading, as they had presented a Bill of Lading endorsed by the Bank of Ethiopia. However, the payment was not received by Bhushan Steel, and the material could not be shipped back to Bhushan Steel.

The defendants took a contradictory stand, with TYO Trading stating they paid for the goods, while Arcadia claimed the material was released upon presentation of the Bill of Lading. PNB returned the original documents, including the Bill of Ladings, to Bhushan Steel, stating they had received them without any encashment of the Letter of Credit by the Bank of Ethiopia.

ISSUSES

  1. Whether the defendants are jointly liable for the loss suffered by Bhushan steel of $2,73,510 in the deal of galvanized steel corrugated sheets ?
  2. Whether the Delhi High Court have the territorial jurisdiction to entertain this suit ?

LEGAL PROVISIONS

  1. CONSTITUTION OF INDIA 
  • ARTICLE 136: Special Leave Petition

(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.

(2) Nothing in clause (1) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces.

  1. CODE OF CIVIL PROCEDURE 
  • Section 20(C): It accords dominus litis to the plaintiff to institute a suit within the local limits of whose jurisdiction the cause of action, wholly or in part, arises. Every suit is based upon the cause of action, and the circumstances of the cause of action, even in part, will confer territorial jurisdiction on the court.
  • ORDER 1 RULE 3: Who may be joined as defendants?

All persons may be joined in one suit as defendants where—

(a) any right to relief in respect of, or arising out of, the same act or transaction or series of acts or transactions is alleged to exist against such persons, whether jointly, severally or in the alternative; and

(b) if separate suits were brought against such persons, any common question of law or fact would arise.

  • ORDER 1 RULE 7: When plaintiff in doubt from whom redress is to be sought.

Where the plaintiff is in doubt as to the person from whom he is entitled to obtain redress, he may join two or more defendants in order that the question as to which of the defendants is liable and to what extent may be determined as between all parties.

 Contentions of plaintiff

The plaintiff is entitled to $2,76,510 in a bill of lading dispute between Tata Steel Limited and TYO Trading Enterprises. The plaintiff is entitled to the payment if the goods were released by the Bank of Ethiopia after obtaining a duly endorsed bill of lading from TYO Trading Enterprises. If the goods were released without obtaining the endorsement, the defendants are jointly and severally liable to the plaintiff for making payment. TYO Trading Enterprises cannot escape its liability under any circumstances, as the irrevocable Letter of Credit would not have been issued in favor of the plaintiff. The plaintiff would not have supplied the goods, and the Bank of Ethiopia’s liability arises if they delivered the goods without obtaining endorsement from TYO Trading Enterprises. The cause of action arose when the plaintiff was assigned an order by M.G. Trading Worldwide Pvt Ltd, and the defendants were jointly and severally liable. The High Court at Delhi possesses territorial jurisdiction to decide the suit.

Defendant ‘s contention

This Court lacks territorial jurisdiction to entertain and decide the present suit. Apparently, no cause of action arose against Arcadia within the jurisdiction of the Court to grant the relief prayed by the plaintiff. It is not a controversy that the goods in question were shipped / loaded at Mumbai; the freight charges were paid there. The goods were to be delivered at Djibouti Port, Ethiopia Apparently, no cause of action whatsoever qua Arcadia arose at Delhi to attract the territorial jurisdiction of this Court. This Court has no jurisdiction to entertain and the judgment records that Arcadia had not disclosed who was the ‘Principal’, who was an undisclosed foreign party. Arcadia had not produced document to show if the freight charges were received on behalf of the ‘Principal’ etc.

COURTS ANALYSIS AND Judgment

In the judgment or order dated December 20, 2017, the Single Judge of the High Court at Delhi recorded the following findings:

The goods were released by Arcadia unauthorizedly and have not been accounted for by them. Accordingly, Arcadia is liable to Bhushan Steel for the loss suffered. Arcadia should pay Bhushan Steel the value of the goods without any interest. Despite these findings, the Single Judge directed the return of the complaint on the question of territorial jurisdiction.

A Division Bench of the High Court at Delhi, vide judgment/order 09.01.2024, allowed an appeal against the judgement/order passed by the Single Judge dated December 20, 2017, in an appeal preferred by Tata Steel Limited.

The present appeal has been preferred by the appellant, Arcadia, against the judgment/order of the Division Bench of the High Court at Delhi, dated January 8, 2024.

Arcadia claims two transactions occurred: the sale of goods and a shipment of goods from Mumbai to Djibouti. They claim their involvement was restricted to the second transaction, as supply orders were placed in Delhi. However, the court finds Arcadia’s contentions unfounded as the transactions are intertwined and cannot be compartmentalized into silos. The shipment of goods was linked to the sale of goods by Bhushan Steel through the Bill of Lading. The release of goods by Arcadia hinged on the presentation of the Bill of Lading by TYO Trading at the point of receipt. The Bank of Ethiopia issued the Letter of Credit, and Bhushan Steel remained the owner of the goods. The actions of Arcadia and the transactions were interconnected, and a part of the cause of action had arisen in Delhi.

It would be opportune to refer to the provisions of the CPC.

Section 20(c) of the Code accords dominus litis to the plaintiff to institute a suit within local limits of whose jurisdiction the cause of action, wholly or in part, arises. Every suit is based upon the cause of action, and the circumstances of the cause of action, even in part, will confer territorial jurisdiction on the court. The expression ‘cause of action’ can be given either a restrictive or wide meaning. However, it is judicially read to mean every fact that the plaintiff should prove to support their right to the judgment.

Order I Rule 3 of the Code states that the plaintiff may join as a defendant in one suit all persons against whom the plaintiff claims the right to relief in respect of, or arising out of, the same act, transaction or series of transactions. The claim, viz. the defendants can be joint, several or alternative. Thus, it is permissible to file one civil suit, even when separate suits can be brought against such persons, when common questions of law and fact arise.

Order I Rule 7 of the Code permits a plaintiff who is in doubt as to the person from whom they are entitled to obtain redress to join two or more defendants in order that the question of which of the defendants is liable and to what extent can be decided in one suit.

The supply order was placed in Delhi, and the payment was to be released in Delhi. The cause of action arose in part at Delhi, under Section 20(c) of the Code. Bhushan Steel could enjoin all defendants, including Arcadia, in a single suit under Order I Rules 3 and 7 of the Code. The relief claimed by Bhushan Steel lies against all defendants, albeit to different extents, and was ‘in respect of and arises out of a series of transactions’. The Division Bench of the High Court was right in setting aside the Single Judge’s finding on territorial jurisdiction.

The Single Judge held that no liability could be fastened to TYO Trading and Bank of Ethiopia, but liability could be fastened to Arcadia. In the context of the dispute, the remedy was to file a civil suit against the defendants, which was maintainable in Delhi, a part of the cause of action having arisen in Delhi. Therefore, the Single Judge erred in upholding Arcadia’s contention regarding the lack of territorial jurisdiction of the Delhi High Court and absence of any cause of action arising against them in Delhi, based on their businesses being located in Mumbai. For the aforesaid reasons, the present civil appeal is dismissed. Pending application(s), if any, shall be disposed of.

“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.”

JUDEMENT REVIEWED BY: ABHISHEK SINGH

Click here to view the full judgement: ARCADIA SHIPPING LTD. V. TATA STEEL LIMITED AND OTHERS

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Reconciling the jurisdiction: Harmonizing Insolvency proceedings and Anti-Money laundering efforts in India’s legal landscape  

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ABSTRACT

The intersection of the Insolvency and Bankruptcy Code (IBC) and the Prevention of Money Laundering Act (PMLA) represents a significant legal conundrum in India. Both legislative frameworks serve distinct but crucial purposes—IBC aims to resolve insolvency and bankruptcy cases in a time-bound manner to promote economic stability, while PMLA targets the prevention and control of money laundering. However, their overlapping jurisdiction has led to numerous legal conflicts and interpretative challenges. The intersection of the Insolvency and Bankruptcy Code (IBC) and the Prevention of Money Laundering Act (PMLA) in India has led to significant jurisdictional conflicts, posing challenges for stakeholders and the legal system. The IBC, enacted to streamline and expedite insolvency resolution, often clashes with the PMLA’s mandate to combat money laundering and financial crimes. This conundrum arises when assets under insolvency proceedings are simultaneously subjected to PMLA’s attachment orders, creating a legal and procedural deadlock. The Supreme Court and various tribunals have been pivotal in interpreting these conflicts, yet a clear precedence remains elusive. This paper examines the legal frameworks of both statutes, analysing key case laws and judicial pronouncements that highlight the jurisdictional overlap and its implications. It also explores the potential for harmonization through legislative amendments or judicial guidelines to ensure coherent application without undermining either law’s objectives. By scrutinizing the operational challenges and proposing strategic solutions, this analysis aims to contribute to a more integrated approach, balancing the objectives of insolvency resolution and anti-money laundering efforts in India.

Keywords: Insolvency and Bankruptcy Code (IBC), Prevention of Money Laundering Act (PMLA), Jurisdiction conflict, Legal conundrum, Corporate insolvency resolution, Financial regulations, Legal framework, Cross-jurisdictional issues, Debt recovery, Insolvency proceedings, Enforcement Directorate (ED), Adjudicating authority Asset attachment, Creditors’ rights, Legal ambiguity, Judicial interpretation, Economic offences, Financial distress,  Bankruptcy laws in India, Corporate debt restructuring, Insolvency professionals, Legal precedents, Conflict resolution, Financial crimes, Insolvency jurisprudence.

Introduction

The Insolvency and Bankruptcy Code (IBC) and the Prevention of Money Laundering Act (PMLA) represent two critical legislative frameworks in India aimed at addressing insolvency and financial crimes, respectively. On the other hand, the PMLA was enacted in the year 2002 to prevent money laundering and confiscate the proceeds of crime. It provides for the attachment of property and freezing of assets of a person being investigated for an offence under the Act. In practice, law enforcement agencies have used the provisions of the PMLA to attach the assets of corporate debtors who are also being investigated for money laundering offences. However, the overlap between these two statutes has given rise to significant legal and practical challenges, resulting in what is commonly referred to as the IBC-PMLA conundrum. The IBC, enacted in 2016, seeks to consolidate and amend laws relating to the reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner to maximize the value of assets and promote entrepreneurship. On the other hand, the PMLA, established in 2002, aims to prevent money laundering and provide for the confiscation of property derived from, or involved in, money laundering. The crux of the conflict lies in the contrasting objectives and procedures of these two laws: while the IBC focuses on the revival of distressed businesses and equitable distribution of assets, the PMLA is geared towards penalizing financial misconduct and seizing assets involved in illicit activities. This clash of jurisdictions poses a dilemma for stakeholders, particularly insolvency professionals and enforcement agencies, as they navigate the legal landscape to prioritize asset distribution and penal measures. The ambiguity regarding which law takes precedence complicates insolvency proceedings when assets under consideration are tainted with allegations of money laundering. Consequently, the resolution of this conundrum is crucial for ensuring legal clarity, protecting stakeholder interests, and maintaining the integrity of India’s financial and legal systems. Further, the addition of Section 32A to the IBC, has given this issue a new dimension.

The new provision aims to encourage resolution applicants to take over distressed companies without fear of being prosecuted for offences committed by the previous management. However, it is unclear how Section 32A would affect the attachment of property under the PMLA during the moratorium period. Recently, the Hon’ble Apex Court has taken cognizance of the matter in the case of Ashok Kumar Sarawagi v. Enforcement Directorate 2023. Till the Apex court pronounces its decision, we will examine the legal position on the issue and analyse the relevant provisions of the IBC and the PMLA, as well as the decisions of courts and tribunals in this piece. We will also evaluate the practical implications of the issue on the insolvency resolution process and the interests of creditors, as well as the impact of the issue on the larger policy objectives of the IBC and the PMLA.

The Objectives and Frameworks

Insolvency and Bankruptcy Code (IBC):

Enacted in 2016, the IBC consolidates laws relating to insolvency and bankruptcy, creating a unified legal framework for resolving insolvency in a time-bound manner. Its primary objective is to maximize the value of the debtor’s assets, promote entrepreneurship, and balance the interests of all stakeholders. Prevention of Money Laundering Act (PMLA): The PMLA, enacted in 2002, aims to combat money laundering and provide for confiscation of property derived from or involved in money laundering. The Enforcement Directorate (ED) is the primary agency responsible for investigating offenses under the PMLA. The primary clash between IBC and PMLA arises from their differing priorities. The IBC focuses on the rehabilitation of the debtor and equitable distribution of assets, while the PMLA emphasizes the confiscation of tainted assets and punishing the offenders involved in money laundering activities. This fundamental difference creates several specific points of conflict Asset Freezing and Attachment Under the PMLA, the ED has the authority to attach properties involved in money laundering. These attachments often include assets of companies undergoing insolvency proceedings under the IBC. The attachment of assets impedes the resolution process envisaged under the IBC, leading to delays and complexities in asset distribution. Moratorium Under IBC: Section 14 of the IBC imposes a moratorium, which halts all legal proceedings against the debtor’s assets during the insolvency resolution process. However, the ED’s actions under PMLA often disregard this moratorium, leading to legal battles over jurisdictional supremacy.

Jurisdictional Overlap:

Insolvency proceedings under IBC are supervised by the National Company Law Tribunal (NCLT), while offenses under PMLA are adjudicated by the Adjudicating Authority constituted under the PMLA. This duality of jurisdictions often leads to conflicting orders, further complicating the resolution process. IBC seeks to resolve insolvency and maximize asset value for creditors through a structured resolution process PMLA empowers the Enforcement Directorate (ED) to attach and confiscate properties involved in money laundering activities, which may overlap with the assets under insolvency proceedings. IBC: Enacted in 2016, the Insolvency and Bankruptcy Code aims to consolidate and amend laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner for maximization of value of assets. PMLA: The Prevention of Money Laundering Act, 2002, aims to prevent money laundering and to provide for confiscation of property derived from or involved in money laundering and for matters connected therewith or incidental thereto.

Enforcement Directorate (ED): The ED is responsible for investigating offences related to money laundering and enforcing the PMLA. Adjudicating Authority: An authority appointed under the PMLA adjudicates matters related to attachment and confiscation of properties involved in money laundering. Appellate Tribunal: An Appellate Tribunal hears appeals against orders of the Adjudicating Authority. High Court: Appeals against the orders of the Appellate Tribunal can be made to the jurisdictional High Court. While the IBC and PMLA serve different purposes, their jurisdictions can overlap in certain situations, particularly where financial crimes and insolvency intersect: Attachment of Assets: During insolvency proceedings under the IBC, if assets are found to be involved in money laundering, the ED may attach these assets under the PMLA. This can complicate the insolvency resolution process. Coordination between Authorities: There may be a need for coordination between the NCLT, which handles insolvency resolution, and the ED, which handles money laundering cases. In some cases, courts have had to intervene to resolve conflicts between the attachment of assets by the ED and the resolution processes under the IBC.

Legislative Amendments:

Amending both IBC and PMLA to clearly define the extent and limits of their respective jurisdictions can help reduce conflicts. Clarifying the interplay between the moratorium under IBC and the attachment powers under PMLA is essential. Establishing a coordination mechanism between the ED and the Insolvency Professionals (IPs) can ensure smoother resolution processes. Joint efforts can help balance the objectives of both laws without compromising on their core mandates.

Jurisdiction and Authorities:

National Company Law Tribunal (NCLT): The NCLT is the adjudicating authority for companies and limited liability partnerships (LLPs) under the IBC.

Debt Recovery Tribunal (DRT): For individuals and partnership firms, the DRT is the adjudicating authority.

National Company Law Appellate Tribunal (NCLAT): Appeals against NCLT orders can be filed with the NCLAT.

Supreme Court of India: Appeals against (NCLAT) orders can be filed with the Supreme Court of India.

Judicial Interpretation:

The Supreme Court can play a pivotal role by laying down comprehensive guidelines to address the overlapping areas between IBC and PMLA. Clear judicial precedents can provide lower courts and tribunals with the necessary framework to handle such conflicts.

Supreme Court of India:

Lalit Kumar Jain vs. Union of India (2021): The Supreme Court upheld the supremacy of the IBC over other conflicting laws in matters related to insolvency resolution. The Court emphasized that once a moratorium is declared under Section 14 of IBC, it prohibits the initiation or continuation of any legal action or proceeding against the corporate debtor, including under PMLA.

Embassy Property Developments Pvt. Ltd. vs. State of Karnataka (2019): The Supreme Court clarified that statutory authorities cannot act in a manner that defeats the resolution process under IBC. The Court ruled that the adjudicating authority under the IBC has the power to decide the legality of actions taken by other statutory authorities, including the ED under PMLA.

National Company Law Appellate Tribunal (NCLAT)

Varrsana Ispat Ltd. vs. Deputy Director, Directorate of Enforcement (2019): NCLAT held that the attachment of properties by the ED under PMLA cannot continue once a moratorium under IBC is in place. The judgment reinforced that the IBC aims to preserve the corporate debtor as a going concern and hence any attachment by the ED would hamper the resolution process.

Bank of India vs. Deputy Director, Directorate of Enforcement (2020): NCLAT reaffirmed its stance that properties attached under PMLA cannot be excluded from the moratorium imposed under IBC. The tribunal noted that the resolution professional has the right to take control of all assets, including those attached under PMLA, to ensure effective resolution.

Conclusion

The clash of jurisdiction between the IBC and PMLA is an evolving challenge in the Indian legal landscape. While both laws serve critical functions, their intersection necessitates a nuanced approach to avoid protracted legal battles and ensure both economic stability and the integrity of financial systems. Through legislative clarity, coordinated enforcement, and judicial guidance, a balanced resolution to the IBC-PMLA conundrum can be achieved, fostering a more robust legal framework for handling insolvency and financial crimes in India. The conflict between IBC and PMLA represents a classic case of jurisdictional overlap, reflecting the challenges in harmonizing economic and criminal laws. Judicial interpretations have so far leaned towards ensuring that insolvency resolution under IBC is not derailed by actions under PMLA, thus maintaining the primary objective of asset maximization and creditor protection. Going forward, a balanced approach that respects the intents of both laws, possibly through legislative amendments and inter-agency cooperation, is crucial for a cohesive legal framework. The interplay between the Insolvency and Bankruptcy Code (IBC) and the Prevention of Money Laundering Act (PMLA) presents a complex legal conundrum in India, primarily revolving around the conflict of jurisdiction and priorities between insolvency proceedings and anti-money laundering measures. The IBC, enacted in 2016, aims to consolidate and amend laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner to maximize the value of assets. Its primary goal is to ensure the revival and continuation of the debtor company by protecting it from its creditors and providing an equitable distribution of assets. Conversely, the PMLA, 2002, seeks to combat money laundering and provide for confiscation of property derived from or involved in money laundering. The PMLA empowers authorities to attach and confiscate properties involved in money laundering, regardless of any proceedings under other laws.

 The friction arises when assets of a company undergoing insolvency under the IBC are simultaneously attached or confiscated under the PMLA. Courts have had to navigate the delicate balance between the creditors’ rights under the IBC and the state’s interest in curbing money laundering under the PMLA. The National Company Law Tribunal (NCLT) and the Enforcement Directorate (ED) often find themselves at loggerheads, leading to uncertainty and delays in insolvency resolution. Recent judicial interpretations suggest that the IBC should prevail over the PMLA in cases of conflict. The rationale is that the primary objective of the IBC is the revival of the debtor and maximizing asset value, which could be undermined if assets are indiscriminately confiscated under the PMLA. However, this precedence does not negate the importance of the PMLA but rather emphasizes the need for a harmonious interpretation where both statutes can operate without encroaching upon each other’s domains. The resolution of the IBC-PMLA conundrum requires a nuanced approach that respects the objectives of both laws. Harmonious interpretation, guided by judicial oversight, is essential to ensure that insolvency proceedings are not unduly hampered by anti-money laundering actions, and vice versa, thus fostering a balanced legal framework that supports both economic revival and financial integrity.

“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.”

Written By: HARIRAGHAVA JP

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Judicial Review Under Article 227: Deletion of Framed Issues and Recall of Witness for Cross-Examination: Delhi High Court

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Judicial Review Under Article 227: Deletion of Framed Issues and Recall of Witness for Cross-Examination: Delhi High Court

Case title: Ritu Kumar vs Tarun Chander Malik & ANR
Case no.: CM(M) 1926 OF 2023, CM APPL. 60265 OF 2023
Dated on: 14TH May 2024
Quorum: Hon’ble Ms. Justice Shalinder Kaur.

FACTS OF THE CASE
This petition filed under Article 227 of the Constitution of India impugns the order dated 05.09.2023 passed by the court of the Additional District Judge-01, Patiala House Courts, New Delhi in CS No.442/2014 in the suit titled as ―Tarun Chander Malik vs Ritu Kumar‖. The petitioner is the defendant no.1, the respondent no.1 is the plaintiff & respondent no. 2 is the defendant no. 2 before the learned ADJ in the aforementioned suit. The petitioner is aggrieved that vide the impugned order dated 05.09.2023, the learned ADJ has suo moto deleted issues no.4, 5 & 7 which were originally framed by the learned trial court vide order dated 14.05.2015. The petitioner is further aggrieved as his application dated 31.05.2023 under Section 151 of the Code of Civil Procedure, 1908 (hereinafter ―CPC), to recall the plaintiff/respondent no.1 for cross examination qua the new documents produced on the direction of the court by the respondent no. 1, was disallowed. One may start the recital of the facts with the suit for possession filed by respondent no. 1 for recovery of possession of suit property admeasuring 7246 sq. ft. at 68, Janpath, New Delhi – 110001 (hereinafter referred as ‗suit property‘), which is in the possession of the petitioner. Respondent no. 1 averred that petitioner is the biological eldersister of the respondent no. 1 and respondent no. 2 is the husband of petitioner who is a proforma party. Respondent no. 1 at the age of about 1.5 years was given in adoption to late Sh. Tara Chand Malik and his wife Smt. Bhagwanti, after the adoption ceremony and on execution of duly registered deed of adoption dated 04.02.1968. Late Sh. Tara Chand Malik was the paternal uncle of late Sh. Ram Nath Malik, father of respondent no. 1 and petitioner, who owned the suit property and bequeathed it in favour of respondent no. 1 vide Will dated 16.08.1968 qua which probate certificate dated 02/28.08.1969 was granted. Sh. T.C. Malik was issueless.
Petitioner and the respondent no.1 moved applications under Section 151 of the CPC and both the applications were listed for arguments on 05.09.2023. The learned ADJ, with regard to the application of the petitioner under Section 151 of the CPC, seeking to recall respondent no.1 for further cross examination, dismissed the same Further, the application moved by the respondent no.1 under Section 151 of the CPC for closing defendants evidence was disposed off by the learned ADJ, while granting 3 effective opportunities, subject to payment of costs imposed earlier.The petitioner contested the civil suit and filed the written statement. The biological relationship between respondent no. 1 and petitioner was not disputed, however, the petitioner refuted that respondent no. 1 was given in adoption to late Sh. Tara Chand Malik. It is the case of the petitioner that one room in the suit property is in possession of the petitioner being the owner, in accordance with the oral family settlement arrived in the year 1993.

CONTENTIONS OF THE APPELLANT
The learned counsel for Petitioner submitted that the learned ADJ passed the impugned order, deleting the previously framed issues which were framed under identical facts and circumstances of the case without following the prescribed procedure under Order XIV Rule 5 of the CPC. The deletion of these issues, primarily based on irrational findings have led to the rejection of the petitioner‘s application under Section 151 of the CPC. Moreso, because of impugned order, the petitioner has been rendered practically defenceless by deletion of the pivotal issues forming the backbone of the dispute involving determination of rights of the parties. The Learned Counsel contended that the matter of adoption serves as the corner stone of respondent no.1‘s suit, and the dispute between the parties cannot be resolved unless the court adjudicates on the adoption issue. The petitioner has asserted that the denial of the opportunity to present evidence regarding the issues is resulting in significant prejudice to the petitioner‘s interests and is impeding the equitable adjudication of the matter between the parties. The Learned Counsel further argued that it is an established legal principle that probate is granted without delving into the specific contents of the Will. The Probate Court lacks jurisdiction to decide matters pertaining to the ownership of the properties in question or to determine whether said properties, as bequeathed in the Will, were ancestral assets or personal acquisitions of the testator. Additionally, the Counsel asserted that a conveyance deed holds no relevance in establishing the validity of an adoption or determining ownership rights. Moreso, while passing the order allowing the application of petitioner under Order XI Rule 14 CPC, the learned Trial Court observed that Will of Smt. Bhagwati is necessary to decide the issue of adoption.

CONTENTIONS OF THE RESPONDENTS
The respondent submitted that the Endlaw raised the plea that the impugned order is justified and cannot be faulted with as the learned ADJ has exercised its jurisdiction within the framework of law by suo moto deleting the issues. The moment it came to the notice of the learned ADJ that certain issues were superfluous and would waste the precious time of the court by letting parties to lead evidence, it suo moto deleted the said issues. The learned counsel submitted that it is not disputed that the court can Suo moto delete or add issues. The Learned Counsel for the respondents further placed reliance on “K.K Velusamy vs. N Palanisamy” (2011) 11 SCC 275, where the precise nature and scope of Section 151 of the CPC was dealt with and clarified. the argument of the petitioner that PW1 is to be confronted with the additional documents. It is submitted that the petitioner had raised a limited plea to production of documents which has been allowed by the learned Trial Court but these documents could not be put to PW1 as the respondents never had a chance to rebut the documents and if a further cross examination of PW1 is permitted, it would prejudice the claims of the respondents.

Issues
1. Whether the suit property is self-acquired property of the deceased Sh. Tara Chand Malik or HUF property?
2. Whether the plaintiff was adopted son of late Sh. Tara Chand Malik and his wife Smt. Bhagwanti Devi?
3. Whether the suit is bad for misjoinder of necessary parties?

LEGAL PROVISIONS
Section 151 CPC: It gives inherent powers to the court to do justice.
Order XIV Rule 5 of the CPC: The Court at any time before passing a decree, frame an additional issues on such terms as it deems fit as may be necessary for determining the matters in controversy between the parties.
Article 227 of Indian Constitution: Every High Court shall have superintendence over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction
Order XI Rule 14 CPC: It allows the court to order the production of documents if they relate to any matter in question in the suit.

COURT’S ANALYSIS AND JUDGEMENT
The present petition, the petitioner has invoked the jurisdiction of this Court under Article 227 of the Constitution of India which delineates a crucial aspect of judicial oversight over subordinate courts and tribunals, as interpreted through various legal precedents. The Article confers upon the High Court‘s the power of superintendence to ensure that the subordinate bodies operate within the confines of their authority. This power is not meant for mere error correction but rather to rectify grave violations of law or fundamental principles of justice. Courts exercising supervisory jurisdiction under Article 227 must refrain from functioning as appellate bodies. The High Court’s intervention is warranted only in instances of serious dereliction of duty or when a finding is so blatantly erroneous that it results in a miscarriage of justice. The scope of this jurisdiction prohibits the High Court from delving into factual assessments or re-evaluating evidence unless there is a clear departure from legal principles or a blatant abuse of power. The essence of Article 227 lies not in reviewing the correctness of orders but in ensuring that the exercise of jurisdiction by subordinate courts aligns with legal norms, thus upholding the integrity of the judicial process. The “framing of issues” refers to the process where the presiding judge in a civil trial formulates specific points or questions based on the pleadings and documents submitted by the parties involved. The judge’s role is to meticulously review the allegations, defences, and relevant evidence presented by each party before determining the precise issues that need to be addressed and resolved during the trial. The expectation placed on court during this stage is that it exercises due diligence and careful consideration in analysing the pleadings and documents. By doing so, it ensures that the issues framed accurately reflect the disputed aspects of the case and encompass all pertinent legal and factual matters requiring adjudication. This thorough examination helps in promoting fairness, clarity, and efficiency in the trial process. In essence, the framing of issues serves as a roadmap for the trial, guiding the parties and the court in focusing their arguments, presenting evidence, and ultimately reaching a just resolution. It is a pivotal procedural step aimed at facilitating a structured and meaningful adjudication of the dispute before the court. Order XIV Rule 5 of the CPC delineates power of the court to amend and strike out issues. A plain reading of the provision makes it clear that a court can at any point of time before passing a decree, amend issues and permits the court to strike out any issue. The issues can be re casted as the court deems fit and as may be necessary for determining the controversy between the parties. The grievance of the petitioner is that the learned Trial Court had already exercised its jurisdiction on 14.05.2015, when the issues came to be framed by it. Neither side had raised any objection to the issues which were framed and the evidence has been led by the respondents on the said issues. It was submitted that the learned Trial Court erred in deleting the issues without any basis which is impermissible in law. The other document is a probate order dated 02.08.1969, as the Will already stands probated, the consequences of the probate of Will would be considered by court at an appropriate stage for which further evidence of the parties is not required. Hence, there is no infirmity in the order passed by learned Trial Court while dismissing the application of petitioner under Section 151 CPC to re-summon respondent no. 1 for further cross-examination. Having considered the above, the impugned order to the extent of issues nos. 4 & 5 having been deleted by the learned Trial Court is set aside. The judgments relied upon by the parties are decided on their own facts and are distinguishable from the facts of the present case. The petition along with pending application is disposed of.

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Judgement Reviewed by – HARIRAGHAVA JP

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Supreme Court Directs Bombay High Court to Scrutinize Legality of Advocates’ Filed ‘Minutes of Order’

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Case title: Ajay Ishwar Ghute and Ors V. Meher K. Patel and Ors

Case no: Civil appeal No. 4786 of 2024

Dated on: 30th April, 2024

Quorum: Justice Abhay S. Oka and Justice Ujjal Bhuyan

Facts of the case: 
An Arbitration Petition was filed under the Arbitration and Conciliation Act, 1996 before single judge of Bombay High court wherein consent terms were filed in the arbitration petition preferred by the first respondent. In terms of the consent terms the learned single judge recorded that the process of handing over the possession of the suit property by the respondents to the first respondents as commenced. The disputes were related to lands of Parsi Dairy Farm. The seventh respondent filed an interim application after two years of filing the consent terms by stating that High court had directed the Police to give police protection to the parties for completing the process of handing over possession. A compound wall was to be constructed in terms of the consent terms, which according, to the seventh respondent could not be done as local persons obstructed the work. The learned single judge of the Bombay High court disposed the interim application by directing Police/Tahasildar/ Collector/ Gram Panchayat office and all other Government authorities to offer assistance to construct a wall to safeguard the suit property. The persons who had obstructed the construction of the wall were not part to the arbitration proceedings/ interim application. An application was filed to Deputy Superintendent of Land Records by first respondent and five others for measuring the land who vide later dated 20.11.2021 informed the first respondent that several persons have objected, in writing, in carrying out the survey. Hence, holding an enquiry was necessary. First and second respondent filed a writ petition under Article 226 of the constitution for non-compliance with the orders of the Arbitration Petition regarding survey and construction of compound wall. The persons who raised objections were not impleaded in the Writ Petition. The Division Bench on 09.03.2022 ordered the Superintendent of Police to be present. The Superintendent of Police filed an affidavit stating that local tribals have gathered an impression that they were attempted to be illegally dispossessed and they insisted that the lands be demarcated before constructing the compound wall. The District Superintendent of Land Records vide an affidavit stated that there are certain persons to whom the petitioners and others have sold small portions of land and if a compound wall is constructed the third parties are likely to get landlocked. The Division bench without noticing the contentions of the above Government officers, instead of directing impleadment of the affected parties passed an order in terms of ‘Minutes of order’ dated 16.03.2022, for issuing a direction to survey authorities to carry out demarcation of the boundary and to direct the police to provide protection for constructing the compound wall.

Contentions of the appellant: 
Of the thirty review petitioners Nos. 7-18 were shown as interveners in the “Minutes of order” though they had not engaged any advocate. The said interveners never met the advocate who is shown to have signed ‘Minutes of order’ on their behalf. The appellants had rights in respect of several properties which were likely to be adversely affected by the construction of the compound wall. The principles of Natural justice were not followed before permitting the construction of the compound wall. The impugned order based on ‘Minutes of order’ is completely illegal and vitiated by the non-joinder of the necessary parties.

Contentions of the respondent: 
The compound wall had been built in such a manner that no person was landlocked or in any manner inconvenienced. The owners of the adjacent lands continue to enjoy unhindered and unfettered access to their respective land.

Legal provisions:

Article 226- Writ Jurisdiction of High Court.

Issue:

Whether the High court was justified in passing a order while exercising Writ Jurisdiction under Article 226 of the constitution of India permitting the first and second respondent to construct a compound wall under police protection in terms of “Minutes of Order”?

Court’s analysis and judgement: 
The court summarised conclusions regarding the concept of Minutes of order as follows: 
a) The practice of filing ‘Minutes of order’ prevails in Bombay High court the object of which is to assist the court. 
b) An order passed in terms of ‘Minutes of order’ is not a consent order. It is an order in invitum. 
c) The Courts to apply its mind as to whether parties likely to be affected by an order in terms ‘Minutes of order’ have been impleaded to the proceedings and whether such order is lawful? If the court finds that all parties are not impleaded the court to defer passing of the order till all the necessary parties are impleaded. 
d) If the court is of the view that an order made in terms of ‘Minutes of order’ will not be lawful court should decline to pass order in terms of ‘Minutes of order’.  
Findings on the facts of the case- 
It was the duty of the Court to call 1st and 2nd respondent to implead persons who were likely to be affected by the construction of the compound wall. The Division Bench of the High court failed to make an enquiry as to whether the third parties will be affected by the construction of the compound wall. Hence, order dated 16.03.2022 in terms of ‘Minutes of order’ is entirely illegal and must be set aside. The writ Petition to be remanded to the High court. After remand, High court must decide who are the necessary parties to the petition in case of failure of 1st and 2nd respondents to implead the necessary parties the High court is within its power to dismiss the Writ Petition and pass an order of restoration of status quo ante by directing demolition of the compound wall.

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Judgement reviewed by- Parvathy P.V.

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