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Interim relief cannot be seeked for an International Arbitration Case: SC

Case title: Ilwohnibrand Co. Ltd. V. Mahakali Food Pvt.Ltd and Ors.

Case no: Arbitration case No.of 2023

Dated on: 3rd April, 2024

Quorum: Hon’ble Justice Sushrut Arvind Dharmadikhari  and Hon’ble Shri Justice Devnarayan Mishra

Facts of the Case:

The petitioner had business relationship with the respondent no.1 to 3. A sale contract was entered into between the petitioner and the respondents on 18.09.2019 for supply of 2014 MT ‘ Full-Fat Soya Grits’. However, respondents committed a breach of contract wherein there was neither the quantity supplied according to the contract nor the quality. Even for the sub-standard material supplied by the respondent, the authorities conducted raid and sealed the premises of the petitioner. Petitioner notified the respondent about the breach. Respondent though admitted the supply of substandard quality under the contract and promised to compensate the petitioner but no such compensation was ever paid. Another contract was entered into between the petitioner and the respondent wherein respondent insisted for enhanced rate and issued proforma invoice and payment was duly made by the petitioner. However, respondent again committed breach of contract by not supplying the material as per the timeline mandated in the contract and in fact only supplied goods worth $1,42,500 despite receiving advance payment of $375,000 and thereafter respondent did not make any supply and stopped answering the calls. Again, with malicious intent, respondents communicated that it shall pay the balance amount to the petitioner, but no heed has been paid. Efforts to resolve the dispute failed since the respondent did not want to and stopped making communication with the petitioner. Since, the contract between parties provides for resolution of dispute by way of arbitration to be conducted in India, the petitioner filed petition under the Section 9 (1)(i) of the Conciliation Act of 1996 before the Commercial Court which was dismissed for want of jurisdiction with liberty to the petitioner to approach appropriate forum. Hence, the present petition had been filed. Shri Aniket Naik, appointed as Amicus Curiae submitted that petitioner has already approached the Commercial Court under Section 9 of the Act of 1996 seeking interim protection. However, learned Commercial Court dismissed the application filed by the petitioner holding the same as not maintainable for want of jurisdiction as the matter pertains to international commercial arbitration and not domestic arbitration.

Contentions of the Appellant:

Learned counsel for the petitioner submitted that evidence of breach committed by the respondent are available and, therefore, an order of interim protection securing the amount involved in the arbitration is required to be passed since despite sending several reminders, respondent kept making false promises, but neither exported the balance shipment nor compensate for the delivery of sub-standard quality of products thereby putting the petitioner to suffer irreparable loss. In terms of section 2(e) and (f) of the act of 1996, the petition can by heard by this court being the jurisdictional court and the present arbitration being an international commercial arbitration. In an identical situation the apex court , in S.D. Containers V. Mold Tek Packaging Ltd., had remanded the case to the court to be tried under its original civil jurisdiction where the court held that while invoking its powers under clause (9) of the letter patent read with rule 1(8) of chapter IV of the rules of the exercise its extra ordinary civil jurisdiction. Hence, the petition which is made under Section9 of the Act 1996 is exclusively triable by this court, therefore, the present petition to be deleted from the category of  the arbitration case and be listed under  the relevant category before appropriate single bench.

Contentions of the Amicus Curiae:

Petitioner has already approached the commercial court under Section 9 of the Act of 1996 seeking interim protection. But the court dismissed saying that the same is not maintainable as it pertains to international arbitration. Thereafter,

Petitioner has preferred the present application under section 9 (2)(1)(f) of the act of 1996 which is not maintainable in the view the fact that as per the Chapter 2 Rule 3 of Rules, 2008 an application under section 11 of the act of 1996 shall be registered as arbitration case which deals with the appointment of the arbitrator.  Court to sub-rule 8 Rule 10 Chapter 2, of the High Court rules 2008 which says that these cases can be considered as a  Miscellaneous Civil Case and also to be registered as a Miscellaneous Civil Case if they do not fall under the ambit of the first seven clauses which is not interlocutory to any proceedings. It is submitted that petitioner can very well file Miscellaneous Civil Case in terms of sub-rule 8 of Rule 10 of Chapter 2 of Rules of 2008, which can be entertained and appropriate orders can be passed.

Legal Provisions:

Section 9 of the Arbitration and Conciliation Act-  Seeking interim reliefs before, or during the arbitral proceedings, or at any time after the passing of the award but before it is enforced.

Section 11 of the Arbitration and Conciliation Act- Appointment of the arbitrator.

Sub-rule 8 of Rule 10 of Chapter 2 of the High Court of Madhya Pradesh rules of 2008- Filing miscellaneous civil cases.

Issues:

Whether the petitioner is entitled to seek interim measure of protection and securing the amount involved in the arbitration   under section 9 of Arbitration act 1996 and section 10 of the commercial courts act,2015?

Courts Judgement and Analysis:-

The present petition itself is not maintainable on twin grounds:

(i) Firstly , the petitioner resorting to the liberty granted by the Commercial Court has filed present petition under Section 9 r/W Section 2(1)(f) of the Act of 1996 seeking interim protection before this Court which cannot be entertained by this Court.

(ii) Secondly, as rightly pointed out by Amicus Curiae, in terms of Chapter 2 Rule 3 of the Rules of 2008, an application Section 11 of the Act of 1996 shall be registered as an arbitration case which deals with appointment of Arbitrator which is not the case herein.

In the considered opinion of this Court, looking to the nature of case and the relief as sought for by the petitioner, the same does not fall within the category of an Arbitration Case. Rather the same ought to have been filed as a Miscellaneous Civil case falling within the ambit and scope of any other application of civil nature, not falling under any of the specified categories in terms of sub-rule 8 of Rule 10 of Chapter 2 of Rules of 2008. In view of the above   discussion, its hereby rejected. Accordingly, the present petition is hereby dismissed with liberty to the petitioner to file miscellaneous civil case in terms of sub-rule 8 of Rules of 2008.

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Judgement Reviewed By- Parvathy P.V.

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

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.

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Judgement Reviewed by – Chiraag K A

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“Supreme Court Validates Lower Court’s Acquittal in Karnataka State Case.”

Case Title – Parteek Bansal Vs State of Rajasthan and Ors.

Case Number – Special Leave Petition (Crl.) No. 2520/2017

Dated on – 6th March,2017

Quorum – Justice Vikram Nath

FACTS OF THE CASE

In The Case of Parteek Bansal Vs State of Rajasthan and Ors., the Appellant and the Respondent No. 3 initially met each other online in June 2014. The father of the Respondent No. 3, who is the Respondent No.2 in the present case, visited the appellant in Udaipur, the appellant who is a Chartered Accountant based in Hisar, was approached by the Respondent No.2 regarding a wedding proposal for his daughter, the Respondent No. 2 in the present case, who was at the time working as the Deputy Superintendent of Police in Udaipur, Rajasthan. The engagement of the Respondent No. 3 and the appellant took place in Udaipur on 18th February,2015 followed by a wedding on the 21st of March,2015. However, on 10th October, 2015, the Respondent No. 2 filed a complaint against the appellant at the Hisar Police Station under Section 498A of the Indian Penal Code, 1860. A similar complaint was also filed by the Respondent No. 2 at the Udaipur Police Station on the 15th of October,2015, five days later of the complaint, leading to the registration of FIR NO. 156 on the 1st of November,2015. Initially, the first FIR registered in Hisar implicated several family members of the appellant, but after conducting further investigation, only the appellant was proceeded with the charge under Section 498A of the Indian Penal Code, 1860. Thereafter, the trail commenced against the appellant in the court of the Judicial Magistrate First Class, Hisar. Concurrently, the appellant filed a petition under Section 482 of the Code of Criminal Procedure,1973 before the High Court of Rajasthan and sought to quash the second FIR registered in Udaipur. However, the High Court of Rajasthan dismissed the petition on the 6th of March, 2017 citing the precedence of the complaint in Udaipur and lack of awareness by the Rajasthan Police regarding the earlier complaint in Hisar. Being aggrieved by the decision of the High Court of Rajasthan, the appellant appealed the case before the Supreme Court of India, which further stayed for investigation in the Udaipur FIR until further orders. Adhering to the decision of the High Court of Rajasthan, the trial in Hisar concluded and the Trial Court acquitted the appellant on the 2nd of August, 2017. The judgment and the acquittal order revealed that the prosecution called upon several witnesses, including the Investigating Officer and other members of the police force. However, they were unable to bring forward the complainant and the victim to testify during the proceedings of the court, resulting in the conclusion of the evidence of the prosecution and proceedings with the statement recording of the appellant under Section 313 of the Code of Criminal Procedure, 1973 before ultimately acquitting the appellant.

CONTENTIONS OF THE APPELLANT

  1. The appellant, through their counsel, in the said case pointed out two complaints, the acquittal judgments and the ostensible errors in the impugned orders and that these errors lead to the series of events, with the complaint at Udaipur was former than that at Hisar and secondly, the Rajasthan Police having no knowledge of the proceedings being conducted at Hisar.
  2. The appellant, through their counsel, in the said case contented that the complainants were well-aware of the multiplicity of the complaints registered in Hisar as well as the Udaipur Police Station but they did not take any requisite step to withdraw their complaint stating that it was wrongly registered in Hisar or that it may be transferred to Udaipur for the purpose of investigation.
  3. The appellant, through their counsel, in the said case contented that the impugned proceeding were nothing but an abuse of the process of law and that the only motive of the complainant was to harass the appellant and make him face the prolonged trial of the courts.

CONTENTIONS OF THE RESPONDENT

  1. The respondent, through their counsel, in the said case contented that the court at Hisar had no territorial jurisdiction to conduct the trial of the present case as the offense was committed in Udaipur. Therefore, the acquittal judgment delivered by the Hisar Court was void.
  2. The respondent, through their counsel, in the said case contented that the complaint should have been looked into and investigated by the Rajasthan Police. However, because of the interim order issued by the court, the investigation had been stalled. Therefore, the petition should be dismissed.

LEGAL PROVISIONS

  1. Section 498A of the Indian Penal Code, 1860 prescribes the punishment for Husband or Relative of Husband of a woman subjecting her to cruelty
  2. Section 482 of the Indian Penal Code, 1860 prescribes the punishment for using a false property mark
  3. Section 313 of the Code of Criminal Procedure, 1973 prescribes the power to examine the accused.

ISSUES

  1. The main issue in the present case revolves around whether the filing of two FIRs for the same incident is valid?
  2. Whether the decision of the High Court to dismiss the petition was appropriate, considering the circumstance and timing of filing of the FIRs in both the jurisdictions?
  3. Whether the trial adhered to the principles of a fair and just trial and due process?
  4. Whether the acquittal was justified on the basis of the inability of the prosecution to present important witnesses?

 COURT ANALYSIS AND JUDGMENT

The court in the case of Parteek Bansal Vs State of Rajasthan and Ors., observed that the Respondent No. 2 and 3 were misusing their official powers by lodging complaints one after another. The court, further, observed that the deportment of the Respondent No. 2 and 3 of not presenting themselves before the Trial Court in Hisar nor withdrawing their complaint, signifies their sole intention to harass the appellant.  The court observed that even before this court, the respondent no. 2 and 3 vigorously opposed the quashing of the FIR in Udaipur. It was alleged in the FIR filed in Hisar that the Respondent No. 2 and 3 demanded a sum of Rupees 50,00,000 and an Innova Car while visiting the appellant. Thus, the court was of the opinion that the argument that no offense was committed in Hisar but only in Udaipur was incorrect. The court stated that the misuse of the state machinery for ulterior intentions and harassment of any individual warrants castigation. Therefore, the court imposed costs on Respondent No. 2 to compensate the appellant. The court in the present case, allowed appeal and quashed the order of the High Court as well as the proceedings registered as FIR No. 156/2015 dated 1st November,2015 at the Women Police Station, Udaipur are also quashed. The court ordered the Respondent No. 2 to pay costs of Rupees 5,00,000/- (Rupees Five Lacs Only), which was ordered to be deposited mandatorily with the Registrar of the Court within four weeks. The court stated that upon deposit of the total amount specified, % shall be paid to the appellant and another % shall be transferred to the Supreme Court Legal Service Committee.

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Judgement Reviewed by – Sruti Sikha Maharana

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“Imposing a penalty greater than the one in force at the time of the commission of the offence has no application”: Supreme Court

Case title: Pernod Ricard India (P) Ltd. v. The State of Madhya Pradesh & Ors.

Case no.: Civil Appeal Nos. 5062-5099 of 2024 Arising out of SLP (C) Nos. 26571-26608 of 2017

Dated on: 19th April 2024

Quorum: Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar

FACTS OF THE CASE

The appellant is a sub-licensee under the M.P. Excise Act, 1915 for manufacture, import and sale of Foreign Liquor, regulated under the Madhya Pradesh Foreign Liquor Rules, 1996. Sub-licensees importing Foreign Liquor are granted transit permits in which the origin, quality, quantity and point of delivery of the imported liquor are recorded. At the point of destination, the consignment is verified for quality and quantity, and a certificate under Rule 13 is granted. Rule 16 prescribes the permissible limits of loss of liquor in transit due to leakage, evaporation, wastage etc. The purpose and object of this Rule is to prevent illegal diversion of liquor for unlawful sale and also to prevent evasion of excise duty. If the permissible limits of loss of liquor are exceeded, the 1996 Rules prescribe imposition of penalty. Rule 19 providing for penalty that could be imposed during the relevant license period of 2009-2010 was about four times the maximum duty payable on foreign liquor. Facts reveal that no action was initiated during the license year of 2009-2010. On 29.03.2011, Rule 19 was substituted by an amendment.

Despite this amendment, a demand notice dated 22.11.2011 was issued, directing payment of penalty for violations that occurred during the license year of 2009-2010, under the old, more stringent rule. The appellant contested this, arguing that the substituted rule should apply as it was in force when the demand notice was issued.

CONTENTIONS OF THE APPELLANT

Mr. Pratap Venugopal, Ld. Senior Advocate, appearing on behalf of the appellant argued that the effect of substitution is to repeal the existing provision from the statute book in its entirety and to enforce the newly substituted provision. He would further submit that even for incidents which took place when the old Rule was in force, it is the substituted Rule that would be applicable, and therefore, the demand notice dated 22.11.2011 seeking payment of penalties under old Rule is illegal.

In Koteswar Vittal Kamath v. K. Rangappa Baliga & Co., this Court brought out the distinction between supersession of a rule and substitution of a rule, and held that the process of substitution consists of two steps – first, the old rule is repealed, and next, a new rule is brought into existence in its place.

In Zile Singh v. State of Haryana, Court referred to the legislative practice of an amendment by substitution and held that substitution would have the effect of amending the operation of law during the period in which it was in force.

CONTENTIONS OF THE RESPONDENTS

The state authorities argued that the penalty should be imposed according to the rule in force during the license year in question, i.e., the old rule that existed when the violation occurred.

Mr. Saurabh Mishra, learned A.A.G. for the State, came up with an attractive argument that the State of M.P. can continue to apply the repealed Rule for the transaction of 2009-2010 by virtue of specific provisions under the Madhya Pradesh General Clauses Act, 1957.

He brought to our notice Section 10 of the Act which is as follows – Effect of Repeal. Where any Madhya Pradesh Act repeals any enactment then, unless a different intention appears, the repeal shall not – (c) affect any right, privilege, obligation or liability, acquired, accrued or incurred under any enactment so repealed;

LEGAL PROVISIONS

The M.P. Excise Act, 1915, Rule 16. Permissible limits of losses – An allowance shall be made for the actual loss of spirit by leakage, evaporation etc., and of bottled foreign liquor by breakage caused by loading, unloading, handling etc. in transit, at the rate mentioned hereinafter. The total quantity of bottled foreign liquor transported or exported shall be the basis for computation of permissible losses.

The M.P. Excise Act, 1915, Rule 19 providing for Penalty that could be imposed during the relevant license period of 2009-2010 was about four times the maximum duty payable on foreign liquor.

licensee shall be liable to pay penalty at a rate exceeding three times but not exceeding four times the maximum duty payable on foreign liquor at that time.

Rule 19 was substituted by an amendment. The relevant portion of substituted provision is as follows: Licensee shall be liable to pay penalty at a rate not exceeding the duty payable on foreign liquor at that time.

ISSUE

  • Applicability of the relevant rule for imposition of penalty: Whether it is the rule that existed when the violation occurred during the license period of 2009-10 or the rule that was substituted in 2011 when proceedings for penalty were initiated.
  • Whether the substituted rule can be given retrospective effect.
  • Interpretation of statutory provisions regarding repeal and substitution.

COURT’S ANALYSIS AND JUDGEMENT

The Supreme Court accepted the appellant’s contention that the substituted rule should apply to pending proceedings. It determined that the purpose of the amendment was to achieve a proper balance between the offense and penalty. Therefore, the Court directed that the substituted rule alone would apply to pending proceedings.

The Court rejected the arguments of both the single judge and the Division Bench of the High Court. It clarified that the substituted penalty only mitigated the severity of the law by reducing the penalty, and therefore, the bar of imposing a penalty greater than the one in force at the time of the offense did not apply. The Court emphasized the importance of a plain and simple understanding of laws and their processes, in line with their purpose and objectives.

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Judgement Reviewed by – Chiraag K A

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“Supreme Court Revokes Bail: Incarceration Duration Not Sole Basis When Accused Involved in Further Offenses”

Case title: Jadunath Singh v. Arvind Kumar & Anr.

Case no.: Criminal Appeal Nos. of 2024 (Arising out of SLP(CRL.) Nos. 7961-7963 of 2023)

Dated on: 19th April 2024

Quorum: Justice Vikram Nath and Justice Sanjay Kumar

FACTS OF THE CASE

  • The case revolves around an incident on February 11, 2011, in Village Bhogaon, where the appellant, Jadunath Singh, filed a written report stating that the accused, Arvind Kumar, had illegally occupied a plot.
  • On the same day, armed with firearms, the accused, along with others, opened fire on Jadunath Singh and his companions, resulting in the death of two individuals and injury to another.
  • The accused were charged under various sections of the Indian Penal Code (IPC) including Sections 147, 148, 302/149, and 120B.
  • In another case, on January 31, 2013, Rishi Kumar and Chandra Kumar, while in custody, requested Constable Ajay Kumar to accompany them for a nature break. However, they ambushed Ajay Kumar, fatally shooting him as they left the court premises. Subsequently, they dumped his body outside a residence. This led to the registration of FIR Case Crime No. 60 of 2013 under Section 302 IPC, with eight individuals, including Rishi Kumar and Chandra Kumar, implicated in a conspiracy to murder Ajay Kumar. Both accused fled but were apprehended by the Special Task Force (STF) in Maharashtra, where they also engaged in gunfire with the police, prompting the filing of a separate FIR Case Crime No. 54 of 2013.

CONTENTIONS OF THE APPELLANT

On behalf of the appellant, it was argued that the accused were dangerous criminals, having committed multiple murders including that of a police constable, and their release would endanger the appellant and his family.

CONTENTIONS OF THE RESPONDENTS

The respondents sought bail primarily based on their prolonged incarceration of more than 10 years and the fact that two co-accused had been granted bail earlier.

LEGAL PROVISIONS

Sections 147 of IPC, whoever is guilty of rioting, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.

Sections 148 of IPC, whoever is guilty of rioting, being armed with a deadly weapon or with anything which, used as a weapon of offence, is likely to cause death, shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.

Sections 149 of IPC, every member of unlawful assembly guilty of offence committed in prosecution of common object.

Sections 120B of IPC, punishment of criminal conspiracy.

Sections 302 of IPC, whoever commits murder shall be punished with death or [imprisonment for life], and shall also be liable to fine.

ISSUE

  • Whether the respondents, despite their lengthy incarceration, should be granted bail considering their involvement in multiple serious offenses, including murder.
  • Whether the High Court adequately considered all relevant factors before granting bail.

COURT’S ANALYSIS AND JUDGEMENT

The Supreme Court noted that the High Court had granted bail primarily based on the duration of incarceration and the bail granted to two co-accused. However, crucial facts regarding the respondents’ involvement in the murder of a police constable and their subsequent resistance to arrest were not presented before the High Court.

The Court emphasized that the respondents’ conduct in a separate case warranted denial of bail despite their prolonged incarceration in the present case. While Arvind Kumar was not implicated in the murder case of the police constable, bail for the other two respondents was revoked.

The appeals against Chandra Kumar and Rishi Kumar were allowed, and the impugned order granting them bail was set aside. They were given two weeks to surrender, failing which coercive measures would be taken.

This judgment underscores the importance of considering all relevant facts and circumstances before granting bail, particularly in cases involving serious offenses and individuals with a history of criminal conduct.

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Judgement Reviewed by – Chiraag K A

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