10 Commercial Law Principles One Should Know: Lex Unified


Principle I: “Agreement to Sell: Essential Ingredients”

  1. In the matter of: Braham Singh V/s Sumitra & Ors, 2011 (125) DRJ 570, it was observed that:

…Some of the essential ingredients of an Agreement to Sell an immovable property are: (i) identity of the vendor and purchaser, (ii) complete description of the property subject matter of the agreement, (iii) amount of consideration to be paid by the purchaser to the seller, (iv) time within which the agreement is to be performed, and, (v) earnest money if any paid to the vendor; if one of these essential ingredients are missing, the agreement between the parties would not amount to concluded contract.

  • A true contract requires the agreement of the parties, freely made with full knowledge and without any feeling of restraint and the parties must be ad idem on the essential terms of the contract and in case it is an Agreement to Sell of immovable property, the law requires that it must certainly identify the property agreed to be sold and the price fixed as consideration paid or agreed to be paid. (See: Mirahul Enterprises V/s Vijaya Srivastava, AIR 2003 Del 15)
  • In the matter of: Aggarwal Hotels (P) Ltd. V/s Focus Properties (P) Ltd., 63 (1996) DLT 52, it was observed that, it is trite that the ingredients necessary to make out a legal, valid and enforceable agreement to sell include: (i) the date of the agreement, (ii) the particulars of the consideration, (iii) certainty as to party, that is, the seller and the purchaser, (iv) certainty as to property which was the subject matter of the agreement, (v) certainty as to other terms relating to probable cost of conveyance to be borne by each of the parties, and, (vi) time within which the conveyance of the property was to be effected. In the event of any of the above constituents missing, it has to be held that there is no valid contract at all.
  • In the matter of: T. Muralidhar V/s PVR Murthy [RFA (OS) No.115/2014, High Court of Delhi, Coram: Gita Mittal & Sunil Gaur, JJ., Date of Decision: 07.11.2014], it was held that, “…It is well settled that specific performance would not be granted if the agreement itself suffers from deficiency which makes it invalid or unenforceable… Certainly the court cannot presume terms of agreement and direct enforcement thereof…”. Thus, if an agreement to sell is bereft of essential ingredients then specific performance qua it cannot lie.

Principle II: “Lifting the Corporate Veil”

  1. In the matter of: DDA V/s Skipper Construction Co. (P) Ltd., (1996) 4 SCC 622, it was held that:
  2. The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegalities and/or for defrauding creditors/suppliers, the court can ignore the corporate character and look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned.
  3. The concept of ‘piercing the corporate veil’ in the United States is much more developed than in the United Kingdom. In the United States, lifting up of the corporate veil takes place when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime. If a company is incorporated to commit illegalities such as for evasion of taxes and/or defrauding creditors, the court can lift the corporate veil and regard the corporation as an association of persons.
  4. When the conception of corporate entity is employed to defraud creditors, to evade an existing obligation, to circumvent a statute, to achieve or perpetuate monopoly, or to protect knavery or crime, the court can draw aside the web of entity to regard the body corporate (company) as an association of live, up-and-doing men and women shareholders, so that it can do justice between real persons.
  5. The court can lift the corporate veil where the device of incorporation is used for some illegal or improper purpose, for example, if vendor of a land seeks to avoid the action for specific performance by transferring the land in breach of contract to a company which the vendor had formed only for that purpose, the court can treat the company as mere ‘sham’ and can further order for specific performance against both the vendor and the company.
  6. It is impossible to evolve a rational, consistent and inflexible principle which can be invoked in determining the question as to whether the veil of the corporation should be lifted or not.
  7. In the matter of: Balwant Rai Saluja & Anr V/s Air India Limited & Ors, (2014) 9 SCC 407, it was held that:
  8. The corporate veil can be pierced only if there is some impropriety; the impropriety in question must be linked to the use of the company structure to avoid or conceal liability.
  9. To justify piercing of the corporate veil, there must be both control of the company vested in the wrongdoer and impropriety, that is use or misuse of the company by the wrongdoer. A company may be a ‘façade’ even though it was not originally incorporated with any deceptive intent, provided that it is being used for the purpose of deception at the time of the relevant transactions. The court can, as a matter of practice and principle, pierce the corporate veil only so far as it is necessary in order to provide a remedy for the particular wrong which those controlling the company had done.
  10. In the matter of: Telefonaktiebolaget LM Ericsson (PUBL) V/s Micromax Informatics Ltd & Ors, [CCP No. 71/2015 in CS (OS) No. 442/2013, High Court of Delhi, Coram: Najmi Waziri, J., Date of Decision: 02.12.2015], it was held that, “…the corporate veil can be pierced and the parent company can be held liable for the conduct of its subsidiary, only if it is known that the corporate form is misused to accomplish certain wrongful purposes, and further that the parent company is a direct participant in the wrong-doing complained of…

If ‘Company X’ files a suit against ‘Company Y’ alleging patent infringement and prays the Hon’ble Court that till the time the suit is pending for adjudication before it, ‘Company Y’ be made liable to pay ‘Company X’ royalty at the rate the Hon’ble Court deems fit, and, the Hon’ble Court grants the interlocutory relief to ‘Company X’ as regards the payment of royalty, but then, in the meantime ‘Company Z’ gets incorporated and the directors and manufacturing operations of ‘Company Z’ are the same as that of ‘Company Y’. ‘Company Z’ is wholly owned subsidiary of ‘Company Y’ and it indulges itself in the use of patents as regards which suit was filed by ‘Company X’ against ‘Company Y’ without making interim payments to ‘Company X’. Here, ‘Company Z’ can be seen as a device employed by ‘Company Y’ to surpass the order of the Hon’ble Court as regards interim payments of royalty that were to be made by ‘Company Y’ to ‘Company X’, hence, the controlling authority of ‘Company Y’ and ‘Company Z’ that is the common directors of both the companies are amenable to contempt proceedings  for breach of the order of the Hon’ble Court, and this is in fact a perfect case whereby the doctrine of lifting up of the corporate veil can be employed by the Court to catch hold of the real perpetrators. 

  • In the matter of: Life Insurance Corporation of India V/s Escorts Ltd & Ors, (1986) 1 SCC 264, while discussing the doctrine of lifting up of the corporate veil, the Hon’ble Constitution Bench of the Hon’ble Supreme Court of India, observed that:

…Generally, and broadly speaking, we may say that the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc. ….”  

Principle III: “Under Insurance & Averaging Out”

  1. ‘Under insurance’ basically means that the insured has taken out an insurance policy in which he has valued the insured items for a sum which is less than the actual value of the insured items. In India, this is normally done to pay a lesser premium. This practice of ‘under insurance’ is in fact harmful to the policy holder and not to the insurance company because even if the entire insured property is lost, the policy holder only gets the maximum sum for which the property has been insured and not a paisa more than the sum insured.
  2. Under Insurance: In case a person takes out the householder policy covering fire insurance and gives the value of the structure of his house and goods stored therein at Rs. 50,00,000/- even though the actual value of the same is Rs. 100,00,000/-, then even if the entire house and goods stored therein are completely lost in fire, the insured cannot get an amount above Rs. 50,00,000/- even though the value of the house and goods stored therein may be more.  
  3. If all the insured goods are lost then there is no problem. The insured is entitled to the amount for which the goods were insured even if that be less than the actual value of the goods. Thus, in case a person gets a painting insured for Rs. 1,00,000/- though the value of the same is Rs. 10,00,000/-, if the painting is lost the insured is entitled to Rs. 1,00,000/- only. If all the insured goods falling under one head are stolen or lost then the insurance company cannot apply the principle of ‘averaging out’ because though the loss may be of Rs. 10,00,000/-, the claimant will get only Rs. 1,00,000/- as per the value assessed and insurance premium paid by the insured.
  4. Averaging Out: The insurance company (insurer) can apply the principle of averaging out when all the goods are not destroyed. Supposing the entire house was insured for Rs. 50,00,000/-, but on valuation it is found that the value of the structure and the goods was Rs. 100,00,000/- and if the policy holder claims that he has suffered loss of Rs. 40,00,000/- then he will be entitled to only Rs. 20,00,000/- (that is, 50% of the loss suffered) by applying the principle of averaging out. What this means is that if the value of the goods is more than the sum for which they are insured then it is presumed that the policy holder has not taken out insurance policy for the un-insured value of the goods. The claim is therefore allowed by applying the principle of averaging out, that is, the insured is paid an amount proportionate to the extent of insurance as compared to the actual value of the goods insured.
  5. Example: Supposing, the insured owns two paintings of Rs. 5,00,000/- each but pays premium for insurance cover of Rs. 1,00,000/- for both the paintings. If one painting is lost, even though the value of the painting may be Rs. 5,00,000/- he will not get Rs. 1,00,000/- but will get only Rs. 50,000/- as proportionate amount. Therefore, when a group of items is insured under one heading and only some of the items and not all items are lost/stolen then the principle of ‘under insurance’ will apply. Nonetheless, if all or most of the items of value covered under the policy are stolen, then the insurance company (insurer) is bound to pay the value of the goods insured.

[See: I.C. Sharma V/s Oriental Insurance Co. Ltd., Civil Appeal No. 3167/2017 (Supreme Court of India), Date of Decision: 10.01.2018, Coram: Madan B. Lokur & Deepak Gupta, JJ.]

  • Averaging Out = (Loss Suffered/ Actual Value of Goods) x (Insured Amount)

Principle IV: “Contra Proferentum

  1. The common law rule of construction “verba chartarum fortius accipiuntur contra proferentem” means that ambiguity in the wording of a commercial contract (contract of insurance) is to be resolved against the party who prepared it.
  2. It is well-settled law that there is no difference between a contract of insurance and any other contract, and that it should be construed strictly without adding or deleting anything from the terms thereof. [See: M/s. Industrial Promotion & Investment Corporation of Orissa Ltd. V/s New India Assurance Co. Ltd. & Anr, Civil Appeal No. 1130/2007 (Supreme Court of India), Date of Decision: 22.08.2016, Coram: Anil R. Dave & L. Nageswara Rao, JJ.]
  3. In the matter of: General Assurance Society Ltd. V/s Chandmull Jain & Anr., (1966) 3 SCR 500, it was held that:
  4. There is no difference between a contract of insurance and any other contract except that in a contract of insurance there is requirement of uberima fides, that is, good faith on the part of the insured and the contract is likely to be construed contra proferentes, that is, against the insurance company in case of ambiguity or doubt.
  5. The duty of the court is to interpret the words in which the contract is expressed by the parties and it is not for the court to make a new contract, however reasonable.
  6. In the matter of: United India Insurance Co. Ltd. V/s Orient Treasures (P) Ltd., (2016) 3 SCC 49 it was held that:
  7. A standard policy of insurance is different from other contracts and in a claim under a standard policy the rule of contra proferentem is to be applied.
  8. If there is no ambiguity in the insurance policy then the rule of contra proferentem is not applicable.

Principle V: “Arbitration or Adjudication by the Court”

If a contract entered into between the parties provides that in case of dispute, the parties to the contract will try to resolve their disputes through mutual negotiations and amicable settlement, failing which, the aggrieved party will be free to take the legal recourse of “arbitration or court adjudication”, then, if the aggrieved party takes the legal recourse of arbitration instead of court adjudication then it cannot be termed as void or illegal on the reasoning that there was no proper arbitration clause in the contract and in absence of a proper arbitration clause (which forms an arbitration agreement) ventilation of grievance by the aggrieved party through the arbitration mechanism is not only improper but is rather non est.

In the matter of: M/s. Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. V/s M/s. Jade Elevator Components, Arbitration Petition (Civil) No. 22 of 2018 (Supreme Court of India), Date of Decision: 14.09.2018, it was held that:

  1. Whenever the ‘dispute settlement clause’ in a contract gives an option to the parties to the contract to get their disputes resolved through ‘arbitration’ or ‘court adjudication’ then it is open for the aggrieved party to either go for ‘arbitration’ or ‘court adjudication’ for resolution of its grievances, and,
  2. It cannot be said that the ‘dispute settlement clause’ is not in the nature of an arbitration agreement and thus, the remedy of arbitration for resolution of disputes is not available with the aggrieved party, and,
  3. The aggrieved party is always at liberty to exercise any of the options available to it by virtue of the ‘dispute settlement clause’, that is, to either go for alternate dispute settlement mechanism (arbitration) or court adjudication of dispute.
  4. Para 11 of the judgment, M/s. Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. (Supra) states as under:

…In the case at hand, as we find, Clause 15 refers to arbitration or court. Thus, there is an option and the petitioner has invoked the arbitration clause and, therefore, we have no hesitation, in the obtaining factual matrix of the case, for appointment of an arbitrator…

Principle VI: “Claim for Damages”

In the matter of: M/s. Construction & Design Services V/s Delhi Development Authority, Civil Appeal Nos. 1440-1441/2015 (Supreme Court of India), Date of Decision: 04.02.2015, Coram: T.S. Thakur & A.K. Goel, JJ., the questions that arose for adjudication before the Hon’ble Supreme Court of India were:

  1. When and to what extent can the stipulated liquidated damages for breach of a contract be held to be in the nature of penalty in absence of evidence of actual loss and to what extent the stipulation be taken to be the measure of compensation for the loss suffered even in absence of specific evidence?
  2. Whether burden of proving that the amount stipulated as damages for breach of contract was penalty is on the person committing breach?

Answering the questions formulated above, the Hon’ble Supreme Court of India, held as follows:

  1. The jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; and compensation has to be reasonable.
  2. Under Section 73 of the Indian Contract Act, 1872, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it.
  3. Section 73 of the Indian Contract Act, 1872 is to be read with Section 74 of the Indian Contract Act, 1872 which deals with penalty stipulated in the contract. Section 74 of the Indian Contract Act, 1872 provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of breach is entitled, whether or not actual loss is proved to have been caused, thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named.
  4. Section 73 of the Indian Contract Act, 1872 categorically states that, compensation is not to be given to the aggrieved party for any remote and/or indirect loss (or damage) sustained by it, by reason of breach of contract.
  5. Section 74 of the Indian Contract Act, 1872 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Thus, the emphasis is on “reasonable compensation”. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for breach is ‘genuine pre-estimate of loss’ which parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him. Burden is on the other party to lead evidence for proving that no loss is likely to have occurred by such breach of contract.
  6. If there is delay in completing the construction of road or bridge within the stipulated time by the contractor, then it would be difficult to prove how much loss is suffered by the society or State owing to such delay in the completion of the work. In such cases it could certainly be presumed that delay in executing the work resulted in loss for which the employer was entitled to reasonable compensation. Although evidence of precise amount of loss may not be possible but in absence of any evidence by the party committing breach that no loss was suffered by the party complaining of breach, the court has to proceed on ‘guess work’ as to the quantum of compensation to be allowed in given circumstances.

Further in the matter of: ONGC Ltd. V/s Saw Pipes Ltd., (2003) 5 SCC 705, it was observed that:

…41. Therefore, when parties have expressly agreed that recovery from the contractor for breach of the contract is pre-estimated genuine liquidated damages and is not by way of penalty duly agreed by the parties, there was no justifiable reason for the Arbitral Tribunal to arrive at a conclusion that still the purchaser should prove loss suffered by it because of delay in supply of goods.

42. Further, in arbitration proceedings, the Arbitral Tribunal is required to decide the dispute in accordance with the terms of the contract. The agreement between the parties specifically provides that without prejudice to any other right or remedy if the contractor fails to deliver the stores within the stipulated time, the appellant will be entitled to recover from the contractor, as agreed, liquidated damages equivalent to 1% of the contract price of the whole unit per week for such delay. Such recovery of liquidated damages could be at the most up to 10% of the contract price of whole unit of stores…

That the principle of law that emerges from the precedent cited above can be summarised as under:

(1) Terms of contract are required to be taken into consideration before arriving at the conclusion whether or not the party claiming damages is entitled to the same;

(2) If the terms are clear and unambiguous stipulating the liquidated damages in case of breach of contract (and such estimate of damages/compensation is reasonable and is not by way of penalty), the party who has committed the breach is required to pay such compensation to the aggrieved party and this is what is provided in Section 73 of the Contract Act, 1872;

(3) Section 74 of the Contract Act, 1872 is to be read along with Section 73 of the Contract Act, 1872 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of a contract; and,

(4) In some contracts, it would be impossible for the court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, the court can award the same if it is ‘genuine pre-estimate’ by the parties as the measure of reasonable compensation.

Principle VII: “Ownership in property can be gifted without transfer of possession of property

  1. Gift means to transfer certain existing moveable/immovable property voluntarily and without consideration by one person called the donor to another called the donee and accepted by or on behalf of the donee. (See: Naramadaben Maganlal Thakker V/s Pranivandas Maganlal Thakker & Ors, (1997) 2 SCC 255)
  2. So far as an immovable property is concerned, execution of a registered gift deed followed by acceptance of the gift and delivery of the property together make the gift complete. Once a property is gifted, the donor is divested of his title and the donee becomes absolute owner of the property.
  3. A conditional gift with no recital of acceptance and no evidence in proof of acceptance, where possession remains with the donor as long as he is alive, does not become complete during the lifetime of the donor. When a gift is incomplete and title remains with the donor the deed of gift might be cancelled.
  4. In the matter of: Reninkuntla Rajamma V/s K. Sarwanamma, (2014) 9 SCC 445, it was held that:
  5. There is no provision in law that ownership in property cannot be gifted without transfer of possession of such property.
  6. A gift is transfer of property without consideration. A conditional gift only becomes complete on compliance of the conditions in the deed.
  7. A conjoint reading of Sections 122 (“Gift” defined) and 123 (Transfer how effected) of the Transfer of Property Act, 1882 makes it abundantly clear that “transfer of possession” of the property covered by the registered instrument of the gift duly signed by the donor and attested as required is not a sine qua non for making of a valid gift.
  8. Section 123 of the Transfer of Property Act, 1882 is in two parts. The first part deals with gifts of immovable property while the second part deals with gifts of movable property. The difference in the two provisions lies in the fact that in so far as the transfer of movable property by way of gift is concerned the same can be by a registered instrument or by delivery. Such transfer in the case of immovable property no doubt requires a registered instrument but the provision does not make delivery of possession of the immovable property gifted as an additional requirement for the gift to be valid and effective. If the intention of the legislature was to make delivery of possession of the property gifted also as a condition precedent for a valid gift, the provision could and indeed would have specifically said so. There is indeed no provision in law that ownership in property cannot be gifted without transfer of possession of such property. Absence of any such requirement can only lead to the conclusion that delivery of possession is not an essential pre-requisite for the making of a valid gift in the case of immovable property.
  9. Gift of immovable property reserving life interest in property for donor is valid.
  10. If property is gifted by retaining possession and right to receive rents of property by donor during donor’s lifetime then such a gift of immovable property cannot be termed as invalid.
  11. In the matter of: S. Sarojini Amma V/s Velayudhan Pillai Sreekumar, Civil Appeal No. 10785/2018 (Supreme Court of India), Date of Decision: 26.10.2018, Coram: Arun Mishra & Indira Banerjee, JJ., it was held that:

…19. In the instant case, admittedly, the deed of transfer was executed for consideration and was in any case conditional subject to the condition that the donee would look after the petitioner and her husband and subject to the condition that the gift would take effect after the death of the donor. We are thus constrained to hold that there was no completed gift of the property in question by the appellant to the respondent and the appellant was within her right in cancelling the deed…

  • In the matter of: Commissioner of Gift Tax V/s Aloka Lata, (1991) 190 ITR 556, the Division Bench of the High Court of Calcutta observed that:
  • It cannot be said that the transaction was complete and a gift in the eyes of law came to be made by the donor to the donee, prior to the registration of the document by which the gift was made;
  • Under Section 47 of the Registration Act, 1908, a registered document operates from the date of its execution and not from the date of its registration;
  • That registration of a document relates back to the date of its execution between the parties thereto, but as regards third parties, it is effective from the date of its registration;
  • That where an instrument, which purports to transfer title to property is required to be registered, the title does not pass until registration has been done; no new title is created by registration, and registration in fact only affirms a title which has been created by the deed; and,
  • That a gift of immovable property cannot be completed, without a registered instrument. 

Principle VIII: “Specific Performance of an Agreement to Gift

The question as regards specific performance of an agreement to gift came up for consideration in the matter of: Hiralal Chimanlal V/s Gavrishankar Ambashankar, AIR 1928 Bom 250 (DB) (and S.P. Muthusamy V/s V. Thayammal, MANU/TN/1101/2002) and it was categorically held that no specific performance of an agreement to gift can be claimed. On the basis of an unregistered gift deed, no title can be claimed (See: Nasir V/s Govt. of NCT of Delhi, MANU/DE/3170/2015).

Principle IX: “Section 23 read with Section 25 of the Registration Act, 1908: Registration is to be done within ‘Eight Months’ from the date of execution of a document required to be registered

Though Section 23 of the Registration Act, 1908 provides the period of four (4) months from the date of execution, for presentation of a document for registration but Section 25 of the Registration Act, 1908 permits the Registrar of Documents to condone delay. Section 25 of the Registration Act, 1908 permits the document to be presented for registration beyond four (4) months from the date of execution prescribed in Section 23 of the Registration Act, 1908, only within maximum further period of four (4) months, that is, within eight (8) months from the date of execution of the document.

In the matter of: Aspire Investments (P) Ltd. V/s Nexgen Edusolutions (P) Ltd, 220 (2015) DLT 316, it was held that, under Section 25 of the Registration Act, 1908, maximum eight (8) months period is available for registration from the date of execution of a document and failure to have the same registered tantamount to an abandonment of the contract and waiver of rights.

Further, in the matter of: Subhash Chander Ahuja V/s Ashok Kumar Ahuja, 116 (2005) DLT 125, it was held that, the Registration Act, 1908 prescribes that a document must be presented for registration within four (4) months of its execution and thereafter it may be done within a further period of four (4) months but with special leave of the Registrar of Documents under the Registration Act, 1908. Lastly, in the matter of: Raj Kumar Dey V/s Tarapada Dey, (1987) 4 SCC 398, it was observed that, the cumulative effect of Sections 23 and 25 of the Registration Act, 1908 when read together is that, total period of eight (8) months is available for registration from the date of execution of the document which is required to be registered.

Principle X: “Composite Document: ‘Will’ as well as Gift

In the matter of: Mathai Samuel V/s Eapen Eapen, (2012) 13 SCC 80, it was held that a composite document which has characteristics of a Will as well as gift, it may be necessary to have that document registered, otherwise that part of the document which has the effect of a gift cannot be given effect to. (See: Prem Prakash Gupta V/s Sanjay Aggarwal, CS (OS) 272/2017, High Court of Delhi, Date of Decision: 09.01.2018, Coram: Rajiv Sahai Endlaw, J.)      

Law of Defamation, Newspaper Publication & Journalistic Improprieties

Preface:

Defamation means to take away or destroy the good fame or reputation; to speak evil of; to charge falsely or to asperse. According to Winfield, ‘defamation’ is the publication of statement which tends to lower a person in the estimation of right-thinking members of society generally or which tends to make them shun or avoid that person. It is “libel” if the statement be in permanent form and “slander” if it consists in significant words spoken or gestures. In the matter of: Parmiter V/s Coupland, 1840 (6) MLW 105, it was observed that, defamation means a publication, without justification or lawful excuse, which is calculated to injure the reputation of another, by exposing him to hatred, contempt, or ridicule. Further, in the matter of: Myroft V/s Sleight, 1921 (37) TLR 646, it was observed that, a defamatory statement is a statement concerning any person which exposes him to hatred, ridicule or contempt or which causes him to be shunned or avoided or which has tendency to injure him in his office, profession or trade. In India, by virtue of report in the matter of: Manisha Koirala V/s Shashi Lal Nair & Ors, 2003 (2) BCR 136, following test was laid down in order to determine whether or not a particular statement is defamatory:

  1. A statement concerning any person which exposes him to hatred, ridicule, or contempt, or which causes him to be shunned or avoided, or which has tendency to injure him in his office, profession or trade is defamatory;
  2. A false statement about a man to his discredit is defamatory; and,
  3. Words which tend to lower the plaintiff in the estimation of right-thinking members of society generally, are defamatory.

Essential ingredients of the tort of defamation:

  1. Malice (The words must have been published maliciously);
  2. They must be defamatory;
  3. The words must have reference to the plaintiff; and,
  4. They must be published.

Decision in the matter of: Subramanian Swamy V/s Union of India, Ministry & Ors, (2016) 7 SCC 221:

In the matter of: Subramanian Swamy (Supra) it was observed that-

  1. A defamatory statement is one which has tendency to injure the reputation of the person to whom it refers; which tends to lower him in the estimation of right-thinking members of society generally and in particular to cause him to be regarded with feelings of hatred, contempt, ridicule, fear, dislike, or disesteem. The statement is judged by the standard of an ordinary, right-thinking member of society. (See: Bata India Ltd. V/s A.M. Turaz & Ors, 2013 (53) PTC 536, and, Pandey Surindra Nath Sinha V/s Bageshwari, AIR 1961 Pat 164)
  2. According to the Halsbury’s Laws of England, Fourth Edition, Volume 28:

…A defamatory statement is a statement which tends to lower a person in the estimation of ‘right thinking’ members of the society generally or to cause him to be shunned or avoided or to expose him to hatred, contempt or ridicule, or to convey an imputation on him disparaging or injurious to him in his office, profession, calling, trade or business…

  • A defamatory statement is nothing but a false statement about a man to his discredit. (See: Scott V/s Sampson, 1882 QBD 491)
  • The wrong of defamation consists in the publication of a false and defamatory statement concerning another person without lawful justification. The wrong has always been regarded as one in which the court should have the advantage of the personal presence of the parties if justice is to be done. Thus, not only does an action of defamation not survive for or against the estate of a deceased person, but a statement about a deceased person is not actionable at the suit of his relative.
  • Sections 499 to 502 of the Indian Penal Code, 1860 are constitutionally valid. Reputations cannot be allowed to be sullied on the anvils of free speech and right to free speech is not an absolute right.

Newspaper Publication:

A newspaper is in no different position from an individual and it cannot give currency to a defamatory statement and escape upon the ground that, it showed that it did not believe that which it had published; this may have some bearing on the question of damages but not upon the question of liability. The responsibility in either case is the same. The degree of care and attention is in no way less in the case of newspaper publications other than that required from ordinary men. There can be no doubt that fair comments upon any matter of public interest in which are included publications in a newspaper are protected in absence of malice.

In the matter of: Publishers and Editors of Divya Himachal & Anr V/s Prakash Chand & Ors, RFA No. 153/2003, High Court of Himachal Pradesh, Date of Decision: 11.12.2017, Coram: Tarlok Singh Chauhan, J., it was observed that:

…34. A newspaper has no privilege beyond any other member of the community in commenting (on) any matter of public interest and no privilege whatsoever attaches to his (its) position. When the defendant in a case for damages, takes the plea of fair comment, he is not required to justify the comment and it is sufficient for him if he can satisfy the Court that it is “fair” comment. If the words complained of, are justified as comment and the words also contain allegations of fact, the defendant is required to prove that such allegations of fact are true and it is not sufficient for him to plead that he bona fide believed them to be true. In other words, the distinction between comment and allegations of fact must be always be borne in mind in determining whether the plea of fair comment can be sustained.

35. As regards the publication by the editor, printer and publisher, it is the duty of an editor of a newspaper to check up the news of the information that is supplied to him, before publishing the same in his paper, especially when the news might be defamatory would make the editor responsible for publishing any defamatory material in his paper.

36. As regards the publisher, he would be liable for every publication, wherein any imputation concerning another person intending to harm or knowing or having reason to believe that such imputation will harm the reputation of the other person and would be guilty of defaming the other person. …”

Further, in the matter of: Langlands V/s John Leng Ltd., 1916 S.C. (H.L.) 102 (at p. 110), it was observed that, a newspaper has the right and no greater/higher right to make comment upon a public officer or a person occupying a public situation than an ordinary citizen.

Lastly, in the matter of: Mitha Rustomji Murzban V/s Nusserwanji, AIR 1941 Bom 278, it was held that, the newspapers are subject to the same rules as for other media, and have no special right or privilege, and in spite of the latitude allowed to them, it does not mean that they have any special right to make unfair comments, or to make imputations upon the character of a person, or imputations upon or in respect of a person’s profession/calling.

Duties & Rights of the Journalists:

  1. A journalist like any other citizen has the right to comment fairly and if necessary, severally on a matter of public interest, provided that the allegations of facts he makes are accurate and truthful, however, defamatory they may be otherwise.
  2. In the matter of: Rustom K. Karanjia V/s Krishnaraj M.D. Thackersey, AIR 1970 Bom 424, it was held that, since the right of a journalist to comment on matters of public interest is recognized by law, the journalist obviously owes an obligation to the public to have his facts right. Where a journalist himself makes an investigation, he must make sure that all his facts are accurate and true, so that if challenged, he would be able to prove the same, so that the public interests are better served in that way.
  3. To bring publication of a scandalous imputation under the penal law, it is not necessary to prove that it was done out of any ill-will or malice or that the complainant had actually suffered from it. It would be sufficient to show that the accused intended or knew or had reason to believe that the imputation made by him would harm the reputation of the complainant. Every sane man is presumed to have intended the consequences, which normally follow his act. (See: G. Chandrasekhara Pillai V/s G. Raman Pillai, AIR 1964 Ker 277)
  4. In the matter of: Khair-ud-din V/s Tara Singh, AIR 1927 Lah. 22 (p. 23), it was observed that:
  5. It is the duty of a journalist to only publish complaints which he is satisfied are true and if he publishes complaints of a defamatory nature, which are not true he must suffer the consequences;
  6. A journalist who publishes a statement about an individual is in the eyes of law precisely in the same position as is any other person; he is not specially privileged as to what he may say. On the contrary, he has far greater responsibility to guard against untruths, for the simple reason that his utterances have a far greater circulation than the utterances of an individual, and they are more likely to be believed by the ignorant by reason of their appearing in print.
  7. The Press Council of India on 21.01.1993 had issued the following guidelines for guarding against the commission of the following journalistic improprieties and/or un-ethicalities:
  8. Distortion/exaggeration of facts/incidents in relation to communal matters or giving currency to unverified rumours/suspicions/inferences as if they were facts and base their comment, on them;
  9. Employment of intemperate/unrestrained language in the presentation of news/views, even as a piece of literary flourish or for the purpose of rhetoric or emphasis;
  10. While it is the legitimate function of the Press to draw attention to the genuine and legitimate grievance of any community with a view to having the same redressed by all peaceful legal and legitimate means, it is improper and a breach of journalistic ethics to invent grievances, or to exaggerate real grievances, as these tend to promote communal ill-feeling and accentuate discord;
  11. Scurrilous and untrue attacks on communities, or individuals, particularly when this is accompanied by charges attributing misconduct to them as due to their being members of a particular community/caste;
  12. Falsely giving a communal colour to incidents which might occur in which members of different communities happen to be involved.
  13. Publishing alarming news which in substance is untrue and/or exaggerating actual happenings to achieve sensationalism and/or publication of news which adversely affect communal harmony with banner headlines of distinctive types.
  14. Making disrespectful, derogatory or insulting remarks on or reference to the different religions or faiths or their founders.
  15. The Law Commission of India in its 200th Report on Trial by Media, Free Speech and Fair Trial under Criminal Procedure Code, 1973 (August, 2006) stated as follows:

…The freedom of the media not being absolute, media persons, connected with the print and electronic media have to be equipped with sufficient inputs as to the width of the right under Article 19(1)(a) and about what is not permitted to be published under Article 19(2). Aspects of constitutional law, human rights, protection of life and liberty, law relating to defamation and Contempt of Court are important from the media point of view. It is necessary that the syllabus in Journalism should cover the various aspects of law referred to above. It is also necessary to have Diploma and Degree Course in Journalism and the Law…

Trial by Media:

The prejudice that results from reporting was taken note by the Hon’ble Supreme Court of India in the matter of: R.K. Anand V/s Registrar, Delhi High Court, (2009) 8 SCC 106 and while explaining the meaning of “trial by media”, the Hon’ble Court held as under:

…The impact of television and newspaper coverage on a person’s reputation by creating a widespread perception of guilt regardless of any verdict in a court of law. During high publicity court cases, the media are often accused of provoking an atmosphere of public hysteria akin to a lynch mob which not only makes a fair trial nearly impossible but means that, regardless of the result of the trial, in public perception the accused is already held guilty and would not be able to live the rest of their life without intense public scrutiny…

In the matter of: Court on its Own Motion V/s State & Ors, 2009 Crl. L.J. 677, it was observed that:

… before a cause is instituted in a Court of law, or is otherwise not imminent, the media has full play in the matter of legitimate ‘investigative journalism’. This is in accord with our Constitutional principles of freedom of speech and expression and is in consonance with the right and duty of the media to raise issues of public concern and interest. This is also in harmony with a citizen’s right to know particularly about events relating to the investigation in a case, or delay in investigation or soft-pedaling on investigations pertaining to matters of public concern and importance…

Further, in the matter of: Manu Sharma V/s State (NCT of Delhi), (2010) 6 SCC 1, it was observed by the Hon’ble Supreme Court of India that:

  1. Despite the significance of the print and electronic media in the present day, it is not only desirable but the least that is expected of the persons at the helm of affairs in the field is to ensure that trial by media does not hamper fair investigation by the investigating agency and more importantly does not prejudice the right of defence of the accused in any manner whatsoever. It will amount to travesty of justice if either of this causes impediments in the accepted judicious and fair investigation and trial.
  2. Every effort should be made by the print and electronic media to ensure that the distinction between trial by media and informative media should always be maintained. Trial by media should be avoided particularly, at a stage when the suspect is entitled to the constitutional protections. Invasion of his rights is bound to be held as impermissible.

Lastly, in the matter of: Dr. Shashi Tharoor V/s Arnab Goswami & Anr, CS (OS) 253/2017, High Court of Delhi, Date of Decision: 01.12.2017 (Coram: Manmohan, J.) it was observed that-

41…This Court is of the opinion that it is the function and right of the media to gather and convey information to the public and to comment on the administration of justice, including cases before, during and after trial, without violating the presumption of innocence. In fact, presumption of innocence and fair trial are the heart of criminal jurisprudence and in a way important facets of a democratic polity that is governed by rule of law. Journalists are free to investigate but they cannot pronounce anyone guilty and/or pre-judge the issue and/or prejudice the trial. The grant of the fairest of the opportunity to the accused to prove his innocence is the object of every fair trial. Conducting a fair trial is beneficial both to the accused as well as to the society. A conviction resulting from unfair trial is contrary to the concept of justice…

Prior Restraint Orders Against Press:

  1. In the matter of: Reliance Petrochemicals V/s Proprietors of Indian Express Newspapers Bombay, (1988) 4 SCC 592, it was observed that, the test for any preventive injunction against press must be “based on reasonable grounds for keeping the administration of justice unimpaired” and that there must be reasonable ground to believe that the danger apprehended is real and imminent. The Hon’ble Court went by the doctrine of clear, present and imminent danger.
  2. Similarly, in the matter of: Sahara India Real Estate V/s SEBI, (2012) 10 SCC 603, it was observed that, prior restraint per se is not unconstitutional, but it should be passed only when necessary to prevent real and substantial risk to the fairness of the trial and that to if reasonable alternative methods such as, change of venue or postponement of trial, will not prevent the said risk and when the salutary effects of such orders outweigh the deleterious effects to the free expression of those affected by prior restraint.
  3. The Press Council of India’s Reference Guide on the norms of journalistic conduct states that, “…in a conflict between the fair trial and freedom of speech, fair trial has to necessarily prevail because any compromise of fair trial for an accused will cause immense harm and defeat the justice delivery system…
  4. In the matter of: His Holiness Shamar Rimpoche V/s Lea Terhune & Ors, AIR 2005 Del 167, following the decision in the matter of: Khushwant Singh V/s Maneka Gandhi, AIR 2002 Del 58, the Hon’ble Court observed that:

… This court is bound by the judgment of the Division Bench in Khushwant Singh’s case (supra). The sum and substance of the said judgment is that in case of an article/publication of an allegedly offending and defamatory nature, pre-publication injunction of restraint should not be granted in case the defendant who supports the publication cites truth as a defence and pleads justification. In such a case as per Khushwant Singh’s case, damages are the appropriate remedy…”   

Excursus:

  1. The Constitution of India, 1950 is not absolute with respect to freedom of speech and expression, as enshrined in the First Amendment to the American Constitution. One of the permissible heads of restrictions on freedom of expression is defamation.
  2. Freedom of expression and democracy are the cornerstones of the Constitution of India, 1950. The framers of the Constitution of India, 1950 were of the opinion that a well-informed citizenry governs itself better. Freedom of expression as defined in Article 19 of the Constitution of India, 1950 does not specifically mention ‘freedom of press’, but the Hon’ble Supreme Court of India in catena of cases has held that freedom of the media is included in Article 19(1)(a) of the Constitution of India, 1950 and it constitutes one of the essential foundations of democratic society in India. (See: Indian Express Newspaper (Bombay) (P) Ltd. V/s Union of India, (1985) 1 SCC 641)
  3. A free and healthy press is indispensable to the functioning of a true democracy. The primary function of the press is to provide comprehensive and objective information of all aspects of the country’s political, social, economic and cultural life. Press plays an important role in molding public opinion and it is an instrument of social change.
  4. If a newspaper publishes what is improper, mischievously false or illegal and abuses its liberty then it makes itself liable to be punished by the court of law; further, the editor of a newspaper/journal has the responsibility to guard against untruthful news and publications for a simple reason that a newspaper/journal has far greater circulation and impact than any other media and public at large generally believes that which is published in a newspaper.
  5. It is the duty of a true and responsible journalist to strive to inform the people with accurate and impartial presentation of news and their views after dispassionate evaluation of the facts and information received by them and to be published as a news item. The presentation of the news has to be truthful, objective and comprehensive without any false and distorted expression. (See: Surya Prakash Khatri V/s Madhu Trehan, 2001 (92) DLT 665)
  6.  A large number of people tend to believe as correct that which appears in the print or electronic media and for these reasons alone, the mass media has to be circumspect while dealing with news. (See: Rajendra Sail V/s M.P. High Court Bar Association, (2005) 6 SCC 109)
  7. In India, ‘freedom of speech’ is not an absolute/unlimited right. Article 19 (2) of the Constitution of India, 1950 provides reasonable restrictions on what is guaranteed by Article 19 (1) (a) of the Constitution of India, 1950. The mass media is obliged to maintain high professional standards and is expected to verify the correctness of the news disseminated.
  8. Publication of false/fake news is a great disservice to the public. Moreover, the constitutional guarantee of free speech (Article 19(1)(a) of the Constitution of India, 1950) does not confer a right to defame persons and harm their reputation by false and baseless allegations and by innuendoes and insinuations.
  9. In India there can be criminal prosecution for defamation with imprisonment for up to two years and a fine. There is also the civil remedy of damages for defamation.
  10. Every individual/accused has a right to silence. Under the Constitution of India, 1950, no person can be compelled to give testimony or answer questions which may incriminate him. Undoubtedly, an individual affected by a news story must be given an option to give his version, but he cannot be compelled to speak, if he does not want to. The culture of thrusting a microphone in the face of a person needs to be deprecated.

Non-Grant of ‘Non-Grant of ‘Letters of Administration’ where ‘Suit for Partition’ is the Efficacious Remedy’ where ‘Suit for Partition’ is the Efficacious Remedy

Preface:

The scope of an administration suit is to collect the assets of the deceased to pay off the debts and other charges and to find out what is the residue of the estate available for distribution amongst the heirs of the deceased. A suit for partition is distinct from an administration suit. Though administration of the estate may ultimately after accounts are taken also entail ‘partition’, but where it is found that there is no need for administration and what is in effect sought is partition only, the court is entitled in exercise of discretion under Section 298 of the Indian Succession Act, 1925 (hereinafter referred to as the ‘ISA’) to refuse the grant of Letters of Administration and to relegate the parties to the remedy of partition.

Section 218 of the Indian Succession Act, 1925:

218. To whom administration may be granted, where deceased is a Hindu, Muhammadan, Buddhist, Sikh, Jaina or exempted person-

  • If the deceased has died intestate and was a Hindu, Muhammadan, Buddhist, Sikh or Jaina or an exempted person, administration of his estate may be granted to any person who, according to the rules for the distribution of the estate applicable in the case of such deceased, would be entitled to the whole or any part of such deceased’s estate.
  • When several such persons apply for such administration, it shall be in the discretion of the court to grant it to any one or more of them.
  • When no such person applies, it may be granted to a creditor of the deceased.

In the matter of: Illachi Devi V/s Jain Society, Protection of Orphans India, (2003) 8 SCC 413, it was held that, the object behind granting ample discretion to the court under Section 218 (2) of the ISA in the matter of grant of Letters of Administration in the matter of intestacy is that the grantee is responsible to the court and is required to carry out the directions faithfully, diligently and effectively; that the administrator would avoid occurrence of personal consideration in the matter of administration and would perform various duties and functions with all efficiency, integrity and honesty and that the administrator is entrusted to act in a ‘fiduciary capacity’.

It is important to note that, though Section 218 of the ISA provides for grant of administration of the estate in the event of intestacy to any person who according to the rules for the distribution of the estate applicable in the case of such deceased would be entitled to the whole or any part of such deceased’s estate but Section 298 of the ISA commencing with a non-obstante clause vests discretion in the court to make an order refusing any such grant, for reasons to be recorded in writing.

In the matter of: Sarla Gupta V/s State & Ors (Test. Cas. 15/2016, High Court of Delhi, Date of Decision: 18.12.2017, Coram: Rajiv Sahai Endlaw, J.), it was held that:

  1. The court, in a proceeding for grant of Letters of Administration, is concerned only with, whether the person seeking Letters of Administration is a fit person to be granted Letters of Administration of the estate of the deceased.
  2. The court in proceedings for grant of Letters of Administration does not enter into question of title to the property.
  3. Proceedings for grant of Letters of Administration are summary in nature and complicated questions of title of property (or properties) cannot be appropriately conducted in summary proceedings.

Dictum in the matter of: Shubhra Singhal V/s State (MANU/DE/4848/2013):

In the matter of Shubhra Singhal (Supra), the Hon’ble High Court of Delhi finding the relationship between the petitioner, claiming to be one of the heirs of the deceased, to be acrimonious and contentious with the other heirs of the deceased, held that-

  1. No purpose would be served in keeping the proceedings for grant of Letters of Administration pending, trying it as a contentious suit and deciding whether the Letters of Administration should be granted to the petitioner as sought or not, when from the pleadings it was evident that the petitioner cannot be said to be an appropriate person fit for grant of Letters of Administration and suit for partition being a more appropriate remedy for adjudication of the disputes raised;
  2. The grant of Letters of Administration requires the grantee to whom grant is made, to collect the estate and to distribute the same amongst rightful claimants. Where relationship is bitter, the petitioner cannot be expected to, as ‘Administrator’, fairly distribute the estate between all the claimants;
  3. Issues as to the shares in the estate cannot also be decided appropriately in a Letters of Administration proceedings, when, if there is any merit in the claim of the petitioner, partition is the only remedy;
  4. Where it is found that there is no need for administration and what is in fact sought is adjudication of a right in the estate and consequent partition of the estate, the court is entitled, in exercise of discretion under Section 298 of the ISA, to refuse the grant of Letters of Administration and to relegate the parties to the remedy of partition.

Dictum in the matter of: Ramesh Chand Sharma V/s State & Ors (High Court of Delhi, Test. Cas. 66/2011, Date of Decision: 20.01.2015, Coram: Indermeet Kaur, J.):

In the matter of Ramesh Chand Sharma (Supra) it was held that:

  1. Letters of Administration may be granted to a grantee under Section 218 of the ISA. Section 218 of the ISA provides that where any person has died intestate, the administration of his estate may be granted to a person who according to the rules for the distribution of the estate applicable in the case of the deceased, would be entitled to the whole or any part of the deceased’s estate. For example: Under the Hindu Law, a Class-I legal heir, say the son, is entitled to the estate of the deceased father if his father has died intestate.
  2. Section 273 of the ISA provides that once Letters of Administration have been given to a party, it shall have effect over all the properties of the deceased, both moveable and immovable. It is however settled position of law that the person to whom Letters of Administration are granted does not thereby become entitled to the property or estate of the deceased; the estate will succeed according to the law of succession applicable to the deceased person.
  3. The purpose of grant of Letters of Administration is only to enable the administrator so appointed by the court to collect/assimilate the properties of the deceased and to deal with the various authorities with whom the properties of the deceased may be vested or recorded and thereafter the same be transferred in the names of the successors in accordance with law of succession applicable to the deceased. The administrator in the course of the proceedings is required from time to time to file the accounts in the court with respect to the administration of the estate of the deceased.
  4. The power to grant Letters of Administration is a discretionary power which is vested with the court and where acrimony between the parties is not only evident from the pending litigation and the pleadings made in proceeding for grant of administration but is even otherwise writ large and the parties are not able to see eye to eye and even the court having made several efforts to reconcile their differences through mediation yet the efforts for mediation having failed, the purport of a grant of Letters of Administration would be an exercise in futility.

Takeaways:

  1. The grant of Letters of Administration requires the grantee to whom the grant is made to collect the estate and to distribute the same amongst the rightful claimants, but, where the relationship between heirs of the deceased are bitter and they are unwilling to see each other eye to eye, there it cannot be expected that an administrator amongst the heirs of deceased be appointed to fairly distribute the estate of the deceased amongst all the heirs. In such cases the only remedy that can be availed of is that of ‘suit for partition’. It is settled principle of law that the court will not allow its time and resources to be taken by a proceeding which is to ultimately abort.
  2. Where all legal heirs of the deceased are at cross fire with one another and there is no possibility of a settlement, all talks of mediation having failed, the petition for grant of Letters of Administration should be dismissed. The appropriate remedy lies in filing a suit for partition.
  3. The remedy of Letters of Administration is misconceived when complex questions of law and fact qua title are to be adjudicated. (See: Mt. Hajira Khatoon V/s Saiyad Mustafa Husain, AIR 1941 Oudh 474, and, Estate of Late Shri Gurcharan Dass Puri V/s State, AIR 1987 P&H 122)
  4. It is incumbent upon the court to, before granting administration of estate to anyone, determine expeditiously the status and fitness of such person to administer the estate. (See: Maung Ba Han V/s Maung Tun Yin, MANU/RA/0169/1934)
  5. A suit for partition is distinct from an administration suit and the administration of the estate may ultimately even lead to a partition but where it has been noted that there is no need for administration and it would almost be impossible for the grantee of the Letters of Administration to administer the estate of the deceased, the remedy available to the parties (heirs of the deceased person) would be to go for a ‘suit for partition’.
  6. It is incorrect to state that, application for grant of probate or Letters of Administration is not covered by Article 137 of the Limitation Act, 1963. (See: Kunvarjeet Singh Khandpur V/s Kirandeep Kaur & Ors, (2008) 8 SCC 463)

Theory of confirmation by subsequent facts: Section 27 of the Indian Evidence Act 1872

Theory of confirmation by subsequent facts: Section 27 of the Indian Evidence Act, 1872

 In the matter of: Navaneethakrishnan V/s The State by Inspector of Police, Criminal Appeal No. 1134/2013 (Supreme court of India, Date of Decision: 16.04.2018, Coram: A.K. Sikri & R.K. Agrawal, JJ.) it was held that, Section 27 of the Indian Evidence Act, 1872 incorporates the theory of confirmation by subsequent facts, that is, statements made in police custody are admissible to the extent that they can be proved by subsequent discovery of facts. Discovery statements made under Section 27 of the Indian Evidence Act, 1872 can be described as those which furnish a link in the chain of evidence needed for a successful prosecution. Section 27 of the Indian Evidence Act, 1872 reads as follows:How much of information received from accused may be proved- Provided that, when any fact is deposed to as discovered in consequence of information received from a person accused of any offence, in the custody of a police officer, so much of such information, whether it amounts to a confession or not, as relates distinctly to the fact thereby discovered, may be proved.” Section 27 permits derivative use of custodial statements in the ordinary course of events. In Indian law, there is no automatic presumption that the custodial statements have been extracted through compulsion. In short, there is no requirement of additional diligence akin to the administration of Miranda warnings. However, in circumstances where it is shown that a person was indeed compelled to make statements while in custody, relying on such testimony as well as its derivative use will offend Article 20(3) of the Constitution of India, 1950. Law as regards Section 27 of the Indian Evidence Act, 1872 can be summarised as follows:(i)      Information given by an accused person to a police officer leading to the discovery of a fact which may or may not prove incriminatory has been made admissible under Section 27 of the Indian Evidence Act, 1872.(ii)    Section 27 of the Indian Evidence Act, 1872 provides that a confessional statement made to a police officer or while an accused is in police custody, can be proved against him, if the same leads to discovery of an unknown fact.(iii)  The rationale of Sections 25 and 26 of the Indian Evidence Act, 1872 is that police may procure a confession by coercion or threat. The exception postulated under Section 27 of the Indian Evidence Act, 1872 is applicable only if the confessional statement leads to the discovery of some new fact. The relevance under the exception postulated by Section 27 of the Indian Evidence Act, 1872, is limited “…as relates distinctly to the fact thereby discovered…(iv)   The rationale behind Section 27 of the Indian Evidence Act, 1872 is that facts in question would have remained unknown but for the disclosure of the same by the accused. The discovery of facts itself, therefore, substantiates the truth of the confessional statement. And since it is truth that a court must endeavour to search, Section 27 of the Indian Evidence Act, 1872 has been incorporated as an exception to the mandate contained in Sections 25 and 26 of the of the Indian Evidence Act, 1872.(v)     So far as Section 27 of the Indian Evidence Act, 1872 is concerned, in the absence of any connecting link between the crime and the things recovered, the recovery of things at the behest of accused will not have any material bearing on the facts of the case.       When recovery is made pursuant to the statement of accused, seizure memo prepared by the Investigating Officer need not mandatorily be attested by independent witnesses. In the matter of: State Govt. of NCT of Delhi V/s Sunil & Anr, (2001) 1 SCC 652, it was held that non-attestation of seizure memo by independent witnesses cannot be a ground to disbelieve recovery of articles’ list consequent upon the statement of the accused. It was further held that there is no requirement, either under Section 27 of the Indian Evidence Act, 1872 or under Section 161 of the Code of Criminal Procedure, 1973 to obtain signatures of independent witnesses. If the version of the police is not shown to be unreliable, there is no reason to doubt the version of the police regarding arrest and contents of the seizure memos.In sum and substance, Section 27 of the Indian Evidence Act, 1872 has prescribed two limitations for determining how much of the information received from the accused can be proved against him: (1) The information must be such as the accused has caused discovery of the fact, that is, the fact must be the consequence, and the information the cause of its discovery; and, (2) The information must ‘relate distinctly’ to the fact discovered. The quintessential requirements of Section 27 of the Indian Evidence Act, 1872 have been succinctly summed up in the matter of: Anter Singh V/s State of Rajasthan, (2004) 10 SCC 657 in the following words: …16. The various requirements of the section can be summed up as follows:(1)    The fact of which evidence is sought to be given must be relevant to the issue. It must be borne in mind that the provision has nothing to do with the question of relevancy. The relevancy of the fact discovered must be established according to the prescriptions relating to relevancy of other evidence connecting it with the crime in order to make the fact discovered admissible.(2)    The fact must have been discovered.(3)    The discovery must have been in consequence of some information received from the accused and not by the own act of the accused.(4)    The person giving the information must be accused of any offence.(5)    He must be in the custody of a police officer.(6)    The discovery of a fact in consequence of information received from an accused in custody must be deposed to.(7)    Thereupon only that portion of the information which relates distinctly or strictly to the fact discovered can be proved. The rest is inadmissible… In the landmark case of: Pulukuri Kottaya V/s King-Emperor, AIR 1947 PC 67, the Privy Council has laid down the test for relevance of information received from the accused for the purpose of Section 27 of the Indian Evidence Act, 1872. The relevant extract from the judgment is as under:“…10. Section 27, which is not artistically worded, provides an exception to the prohibition imposed by the preceding section, and enables certain statements made by a person in police custody to be proved. The condition necessary to bring the section into operation is that the discovery of a fact in consequence of information received from a person accused of any offence in the custody of a police officer must be deposed to, and thereupon so much of the information as relates distinctly to the fact thereby discovered may be proved. The section seems to be based on the view that if a fact is actually discovered in consequence of information given, some guarantee is afforded thereby that the information was true, and accordingly can be safely allowed to be given in evidence; but clearly the extent of the information admissible must depend on the exact nature of the fact discovered to which such information is required to relate… In the matter of: Raju Manjhi V/s State of Bihar, Criminal Appeal No. 1333/2009 (Supreme Court of India, Date of Decision: 02.08.2018, Coram: N.V. Ramana & S. Abdul Nazeer, JJ.) it was held that: a.    It is true, no confession made by any person while he was in the custody of police shall be proved against him. But, the Indian Evidence Act, 1872 provides that even when an accused being in the custody of police makes a statement that reveals some information leading to the recovery of incriminating material or discovery of any fact concerning the alleged offence, such statement can be proved against him. b.   Test identification parade belongs to the stage of investigation, and there is no provision in the Code of Criminal Procedure, 1973 which obliges the investigating agency to hold or confers a right upon the accused to claim, a test identification parade. Test identification parades do not constitute substantive evidence and these parades are essentially governed by Section 162 of the Code of Criminal Procedure, 1973. Failure to hold a test identification parade would not make inadmissible the evidence of identification in Court. The weight to be attached to such identification should be a matter for the courts of fact. In appropriate cases it may accept the evidence of identification even without insisting on corroboration. Section 27 of the Indian Evidence Act, 1872 and the dictum in the matter of: Selvi & Ors V/s State of Karnataka, (2010) 7 SCC 263:In the matter of Selvi (Supra) it was held that: …264. In the light of these conclusions, we hold that no individual should be forcibly subjected to any of the techniques (Lie Detector Test, Polygraph Test, Narco-Analysis Test and Brain Mapping Test) in question, whether in the context of investigation in criminal cases or otherwise. Doing so would amount to an unwarranted intrusion into personal liberty. However, we do leave room for the voluntary administration of the impugned techniques in the context of criminal justice provided that certain safeguards are in place. Even when the subject has given consent to undergo any of these tests, the test results by themselves cannot be admitted as evidence because the subject does not exercise conscious control over the responses during the administration of the test. However, any information or material that is subsequently discovered with the help of voluntary administered test results can be admitted in accordance with Section 27 of the Evidence Act, 1872  Shivam Goel

Jurisprudence emanating from Section 238-A of the Insolvency & Bankruptcy Code 2016

Jurisprudence emanating from Section 238-A of the Insolvency & Bankruptcy Code, 2016: B.K. Educational Services (P) Ltd. V/s Parag Gupta & Associates (2018)

 

Preface:

Section 238-A of the I&B Code, 2016 (hereinafter referred to as the ‘IBC’) was inserted by the Insolvency & Bankruptcy Code (Second Amendment) Act, 2018 with effect from 06.06.2018. Section 238-A of the IBC reads as under:

238-A. Limitation- The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.

The moot question that arose for adjudication in the matter of: B.K. Educational Services (P) Ltd. (Supra) was:

I.                Whether the Limitation Act, 1963 will apply to applications that are made under Section 7 and/or Section 9 of the IBC on and from its commencement on 01.12.2016 till 06.06.2018?

II.              Section 238-A of the IBC is prospective or retrospective in nature?

 

Reason for introduction of Section 238-A of the Insolvency & Bankruptcy Code, 2016 vide the Insolvency & Bankruptcy Code (Second Amendment) Act, 2018:

According to the Report of the Insolvency Law Committee of March, 2018, Section 238-A of the IBC was introduced for the following reasons among others-

i.                 The intent of the Code (IBC) was not to give a new lease of life to debts which are time-barred. It is settled law that when a debt is barred by time, the right to a remedy is time barred.

ii.               Non-application of the law on limitation creates the following problems:

(1) It re-opens the right of financial and operational creditors holding time-barred debts under the Limitation Act to file for corporate insolvency resolution process, the trigger for which is default on a debt above Rs. 1,00,000/-;

(2) The purpose of the law of limitation is “to prevent disturbance or deprivation of what may have been acquired in equity and justice by long enjoyment or what may have been lost by a party’s own inaction, negligence or latches” (See: Rajinder Singh V/s Santa Singh, AIR 1973 SC 2537);

(3) IBC is not a debt recovery law, the trigger being ‘default in payment of debt’ renders the exclusion of the law of limitation counter-intuitive; and,

(4) It re-opens the right of claimants (pursuant to issuance of a public notice) to file time-barred claims with the interim resolution professional or the resolution professional, which may potentially be a part of the resolution plan; such a resolution plan restructuring time-barred debts and claims may not be in compliance with the existing laws for the time being in force as per Section 30 (4) of the IBC which states that, the Committee of Creditors (COC) may approve a resolution plan by a vote of not less than 66 percent of voting share of the financial creditors, after considering its feasibility and viability and such other requirements as may be specified by the IBBI (Insolvency & Bankruptcy Board of India).

iii.             The intent of the legislature while enacting the IBC was not to package the Code (IBC) as a fresh opportunity for creditors and claimants who did not exercise their remedy under existing laws within the prescribed period of limitation.

iv.             The Limitation Act, 1963 is not to apply to applications of corporate applicants (Section 10 of the IBC), as these are initiated by the applicant for its own debts for the purpose of corporate insolvency resolution process and are not in the form of a creditor’s remedy.

 

Decision in the matter of: B.K. Educational Services (P) Ltd. (Supra):

1.     Section 238-A of the IBC being clarificatory of the law contained in IBC and being procedural in nature, must be held to be retrospective. The ‘law of limitation’ being procedural in nature, would ordinarily apply retrospectively, save and except that new law of limitation cannot revive a dead remedy; this can be said in the context of a new law of limitation providing for a longer period of limitation than what was provided earlier. Thus, an application (under Section 7 or Section 9 of the IBC) that is filed in 2016/ 2017, after the IBC has come into force, cannot suddenly revive a debt which is no longer due as it is ‘time-barred’.

2.     Section 238-A of the IBC would not serve its object unless it is construed as being retrospective, as otherwise, applications seeking to resurrect time-barred claims would have to be allowed, not being governed by the law of limitation.

3.     The IBC cannot be triggered in the year 2017 for a debt which was time-barred, say, in 1990, as that would lead to absurd and extreme consequences of the IBC being triggered by a stale or dead claim, leading to drastic consequences of instant removal of the present Board of Directors of the corporate debtor permanently, which may ultimately lead to liquidation and, therefore, corporate death. The expression ‘debt due’ regards being had to Section 3 (11) of the IBC, refers to debts ‘due and payable’ in law, that is, the debts that are not time-barred.

4.     A debt may not be due if it is not payable in law or in fact. (See: Innoventive Industries Ltd. V/s ICICI Bank & Anr., (2018) 1 SCC 407)

5.     In the matter of Innoventive Industries Ltd. (Supra) it was held as follows:

30. … in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise…

Thus, a debt is considered to be “due” if it is not interdicted by some law; this will include the Limitation Act, 1963. A time barred debt is a debt interdicted by the Limitation Act, 1963.

6.     According to Section 3 (12) of the IBC: “default” means non-payment of debt when whole or any part or installment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be.

The definition of “default” in Section 3 (12) of the IBC uses the expression “due and payable” followed by the expression “and is not paid by the debtor or the corporate debtor”. “Due and payable” in Section 3 (12) of the IBC, therefore, only refers to the whole or part of a debt, which when referring to the date on which it becomes “due and payable”, is not in fact paid by the corporate debtor. The context of this provision, Section 3 (12) of the IBC, is therefore the actual non-payment by the corporate debtor when a debt has become due and payable. Thus, the IBC cannot be employed as a means for granting fresh lease of life to time-barred debts/dues/claims.

7.     In case of an operational creditor, the IBC cannot be invoked if there is a ‘dispute’ already existing between the operational creditor and the corporate debtor. ‘Dispute’ as defined in Section 5 (6) of the IBC includes a suit or arbitration proceeding relating to certain matters. A perusal of Section 8 (2) (a) of the IBC would make it limpid that the corporate debtor has to within a period of 10 days of the receipt of the demand notice, bring to the notice of the operational creditor the existence of a “dispute”. Under Section 8 (2) (a) of the IBC, the corporate debtor can, in order to avoid the IBC proceedings, disclose the pendency of a suit or arbitration proceedings filed before the receipt of the demand notice. Therefore, at least in the case of an operational creditor, “default” must be non-payment of amounts that have become due and payable in law. Thus, the defense of ‘existence of dispute’ in case of operational creditors would be meritorious only if it is shown that the suit or arbitration proceeding pending between the operational creditor and the corporate debtor is not interdicted by the law of limitation (the Limitation Act, 1963).

8.     When the expression “due” and “due and payable” occur in Sections 3 (11) and 3 (12) of the IBC, they refer to a “default”, which is non-payment of a debt that is due in law, that is, such debt which is not barred by the law of limitation. The corporate insolvency resolution process against a corporate debtor can only be initiated either by a financial creditor or operational creditor in relation to debts which have not become time-barred.

9.     The Insolvency Law Committee Report of March, 2018 makes it clear that the object of the IBC from the very beginning was not to allow dead or stale claims to be resuscitated.

10.  Section 433 of the Companies Act, 2013 states as under:

433.Limitation- The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to proceedings or appeals before the Tribunal or the Appellate Tribunal, as the case may be.

Constitution of NCLT (Adjudicating Authority) can be traced from the language of Section 408 of the Companies Act, 2013. The language of Section 408 of the Companies Act, 2013 clearly states that, NCLT is set up to discharge such powers and functions that are conferred on it not merely under the Companies Act, 2013 but also under “any other law for the time being in force”, that is the Competition Act, 2003 and also the IBC. So even before Section 238-A of the IBC came into force, proceedings before NCLT (which include applications under Sections 7 and 9 of the IBC) were governed by the Limitation Act, 1963 by virtue of Section 433 of the Companies Act, 2013.

11.  Section 434 (1) (c) of the Companies Act, 2013 states that:

434.Transfer of certain pending proceedings-

(1)   On such date as may be notified by the Central Government in this behalf-

(a)   XXXXX

(b)   XXXXX

(c)   All proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer;

(d)   XXXXX

(2)   XXXXX

That by virtue of Section 434 (1) (c) of the Companies Act, 2013 winding proceedings that were erstwhile pending before any District Court or the High Court, as the case may be, were to be transferred to the NCLT. When the winding up proceedings were pending before the District Court or the High Court, as the case may be, necessarily the Limitation Act, 1963 was applicable to those proceedings. But, upon the transfer of the winding up proceedings to the NCLT, it cannot be stated that because these proceedings are now before the NCLT and are to be governed by the provisions of the IBC, the Limitation Act, 1963 will cease to apply because for the period from 01.12.2016 to 06.06.2018 that is, before the enactment of Section 238-A of the IBC, the Limitation Act, 1963 was not applicable to proceedings under the IBC (especially in context of proceedings under Sections 7 and 9 of the IBC).

It is important to note that, Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016, made Section 433 of the Companies Act, 2013 applicable to the proceedings which were transferred from the High Court/ District Court, as the case may be, to the NCLT for adjudication. It is of no consequence whether the proceedings which got transferred and thereby got listed before the NCLT were in the nature of Section 7 or Section 9 of the IBC. Notwithstanding the fact that Section 238-A of the IBC came into force by virtue of the Insolvency & Bankruptcy Code (Second Amendment) Act, 2018 (which superseded the Insolvency & Bankruptcy Code (Amendment) Ordinance, 2018), the provisions of the Limitation Act, 1963 have been applicable to the proceedings under the IBC right from the inception of the IBC although there wasn’t any express provision in that regard in the IBC before the coming into force of the Insolvency & Bankruptcy Code (Second Amendment) Act, 2018. 

 

Takeaway:

1.     The Limitation Act, 1963 is applicable to applications filed under Sections 7 and 9 of the IBC from the inception of the IBC; Article 137 of the Limitation Act, 1963 gets attracted to applications filed under Sections 7 and 9 of the IBC, therefore, ‘the right to sue’ accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, 1963, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act, 1963 may be applied to condone the delay in filing such application.

2.     The Limitation Act, 1963 applies from the inception of the IBC.     

Can the Court order deletion of portions of ‘Evidence Affidavit’?

                                                                                      -Shivam Goel

Introduction:

According to Section 137 of the Indian Evidence Act, the examination of a witness by the party who calls him is called his examination-in-chief; the examination of a witness by the adverse party is called his cross-examination; and, the examination of a witness, subsequent to the cross examination by the party who called him, is called his re-examination. It is settled law that once the affidavit in lieu of examination-in-chief is filed, it partakes the character of the examination-in-chief of the concerned witness. A party to the suit cannot be permitted to travel beyond his pleadings. If any evidence is tried to be adduced which has no foundation in pleadings, the court always has the power to discard such evidence while finally deciding the suit or proceeding. The very object of Order XVIII, Rule 4 of the Code of Civil Procedure, 1908 (hereinafter referred to as the “CPC”) is to ensure that the time of the Court is not wasted in recording lengthy examination-in-chief, and, consistent with this object is the premise that the objection raised to any part of the affidavit in lieu of examination-in-chief should be considered at the time of final hearing of the suit or proceeding. It is always the duty of the Court to decide as to how much evidentiary value should be given to a particular piece of evidence, that is, if a portion of the Evidence Affidavit is found to be irrelevant or if it is found that a portion of the Evidence Affidavit has no foundation in the pleadings, the Court can always discard it while deciding the suit.

 

Object of Order XVIII, Rule 4 of the CPC:

The purpose of Order XVIII, Rule 4 of the CPC is to ensure that there is speedy trial of the case and the time of the Court is not wasted in recording lengthy examination-in-chief. The objections raised albeit any portion (or part) of the Evidence Affidavit is to be considered at the time of final hearing of the suit or proceeding. The party raising the objections cannot insist upon the Court to consider the said objections before the cross examination of the witness commences. The rival party can cross-examine the witness by inviting the attention of the concerned witness to the statements which according to the rival party are objectionable; even in such cases it is at the time of the final hearing that the objections will have to be considered by the Court though there may not be any particular objection in writing. It is settled law that, it is always the duty of the Court to decide as to how much evidentiary value should be given to a particular piece of evidence, thus, if a portion of the Evidence Affidavit is found to be irrelevant or if it is found that a portion of the Evidence Affidavit has no foundation in the pleadings, the Court can always discard it while deciding the suit. A bare perusal of Order XVIII, Rule 4 read with Order XIX, Rule 3 of the CPC makes it amply clear that no Evidence Affidavit can contain material that is hearsay or argumentative. Every ‘Evidence Affidavit’ as per law must be confined to the facts that its deponent can prove. Thus, an affidavit in lieu of examination-in-chief is constrained by two factors: (1) it must be an examination-in-chief, and, (2) it must be an affidavit; this means that it must conform to the requirements of the Indian Evidence Act and the provisions of Order XIX, Rule 3 of the CPC, and a document that does not conforms to the above stated two requirements is neither an affidavit, nor is an examination-in-chief for the purposes of Order XVIII, Rule 4 of the CPC.

 

Section 1 of the Indian Evidence Act vis-à-vis Order XVIII, Rule 4 of the CPC:

According to Section 1 of the Indian Evidence Act, the provisions of the Indian Evidence Act are to apply to the evidences presented to any court, officer or arbitral proceedings, but are not to apply to affidavits. If this is so, the moot question that arises for consideration is as to how then we are to read Order XVIII, Rule 4 which clearly mandates that examination-in-chief is to be adduced by way of an affidavit? The only way to harmonize these two provisions (Section 1 of the Indian Evidence Act and Order XVIII, Rule 4 of the CPC) is to say that since Order XVIII, Rule 4 of the CPC is a procedural innovation aimed at expedition of trial, the exclusion of Section 1 of the Indian Evidence Act is not intended to apply to such affidavits (Evidence Affidavits under Order XVIII, Rule 4) but only to affidavits covered by some, but not all, procedural provisions such as those for interlocutory applications. It must be remembered that even Order XIX of the CPC speaks of “proof”. This undoubtedly points towards the applicability of the Indian Evidence Act to affidavits contemplated by Order XIX of the CPC. It is in this context that the power of the court in relation to ruling out irrelevant material from an Evidence Affidavit, which prima facie does not constitute ‘evidence’ properly so called, is to be seen.

 

Evidence Affidavit cannot contain Submissions, Arguments and Contentions which are in the Nature of Pleadings:

The contents of an Evidence Affidavit can be segregated into the following four broad categories: (i) matters that are relevant and are within the personal knowledge of the deponent; (ii) matters that are possibly relevant but are not within the personal knowledge of the deponent; (iii) matters that are neither relevant nor are within the personal knowledge of the deponent; and (iv) statements in the nature of legal submissions, arguments and pleadings.

So far as statements in the nature of legal submissions, arguments and pleadings are concerned, these are clearly beyond the pale of examination-in-chief. Matters which are relevant and are within the personal knowledge of the deponent indisputably form an intrinsic part of the examination-in-chief. The statements which are only possibly relevant, whether based on personal knowledge of the deponent or otherwise, are within the pale of examination-in-chief, because the issue of relevancy is always subject to the final arguments at the final hearing of the suit. But the material which is completely extraneous and is entirely outside the domain of the personal knowledge of the deponent cannot possibly be part of the testimony of the deponent examined in chief. If a witness attempts to state in his examination-in-chief that he heard someone say that a particular event occurred, then, this by itself will not prove the occurrence of that particular event; at best such statements can be termed as mere hearsay.[1] However, if X says what he heard from Y, not as proof of the happening of the event, but as what was said by Y regarding the event in his hearing, there is no objection to the statement.

The Indian Evidence Act restricts as to what evidence may be led as examination-in-chief, that is, traverses in the nature of pleadings cannot form part of the Evidence Affidavit. The provisions of Order XVIII, Rule 4 of the CPC are procedural in nature and the Indian Evidence Act is substantive law; it is settled law that procedural law cannot expand the ambit and the scope of the substantive law. If an Evidence Affidavit is permitted to contain legal submissions, arguments and traverses in the nature of pleadings then the consequences qua it would be unimaginable for a cross-examination then in each case will sprawl over hundred pages and most unfortunately the objective of Order XVIII, Rule 4 of the CPC, that is, acceleration of trial, would stand defeated.

 

How should a Court approach a non-conforming affidavit, that is, the one that contains material that is clearly inadmissible or demonstrably irrelevant?

A party in a given case may, subject to facts and circumstances of each case, be permitted to replace its non-conforming Evidence Affidavit with the one that conforms. The Court has the power in each case to delete any of the portions of an Evidence Affidavit which is nothing but a verbatim reproduction of the pleadings. The Court has the power to rule that those portions which are in the nature of legal submissions and arguments be excluded from consideration as testimony and a cross-examiner will thereby be at liberty to ignore the non-conforming portions without fear of an adverse inference being drawn.

 

Is withdrawal of ‘Evidence Affidavit’ permissible?

Generally speaking, there can never be withdrawal of an Evidence Affidavit just as there can never be a withdrawal of an examination-in-chief conducted directly in court. But, there are two situations that require consideration.

First, where the witness is no longer physically available, that is, he has expired between the time of filing of his Evidence Affidavit and the time for his cross examination. The law in this regard is well settled, and it is simply this, that where the testimony is incomplete by reason of death or incapacity of the witness before cross examination, the evidence, admissible when given, does not cease to be so merely on account of that intervening factual circumstance. What probative or evidentiary value is to be attached to this evidence is another matter, and it turns on the circumstances of each case. The Court may seek independent corroboration of that evidence; it may accept it, albeit cautiously, and that is no infirmity per se in the final decision.[2]

Second, where the witness although is available and an Evidence Affidavit has been filed, but, the witness is not tendered for cross examination as a sort of litigation strategy. Here the party which led the evidence of a particular witness prefers to, as it were, take the high road. He files an Evidence Affidavit and then simply does not produce the witness for cross examination. It is impossible to allow this without consequence. The right to cross examination is a fundamental strut of adversarial legal system and is a vital facet of the principles of natural justice. Generally speaking, if a witness is not produced in the witness box for cross examination by a party then that party is divested from relying on any part of the Evidence Affidavit of that witness, however, the opposite party is always at liberty to benefit from the admissions made by that witness in his Evidence Affidavit. It is settled law that where a party does not offer itself for cross examination, it will give rise to a presumption under Section 114 of the Indian Evidence Act that the case that the party sets up is incorrect.

The question that requires some deliberation is that, if the deponent (examination-in-chief by way of an affidavit) has not made itself available for cross examination, would that mean that the documents already admitted into evidence on the basis of that Evidence Affidavit can later be rejected or removed from the evidentiary record? The Bombay High Court in the matter of, Banganga Cooperative Housing Society Ltd. v. Vasanti Gajanan Nerurkar[3], held that, it is not correct to state that, a document once properly introduced into evidence can then be expunged or excised from the record. However, in the absence of cross examination, the person propounding that document may not be allowed to rely on it, but it may be used by the other side as an admission.

 

Excursus:

  1. An Evidence Affidavit cannot contain matter that is, irrelevant, inadmissible or both, or, is in the nature of legal arguments, submissions or prayers for these are not in the nature of ‘evidence’ as required by law.
  2. No Evidence Affidavit under Order XVIII, Rule 4 of the CPC can be allowed to be withdrawn for it is evidence as soon as it is affirmed.
  • Where an Evidence Affidavit is filed and the witness or deponent, though otherwise available, is not made available for cross examination, the well established consequences in law will follow, that is, the opposite party will be entitled to submit that an adverse inference be drawn against such a witness or the party who fails to produce that witness for cross examination. Further, should the Evidence Affidavit contain any admissions, those may be used by the opposite party. Also, so much of the evidence as is against the party entitled to cross examination but which has gone untested for want of production of the witness will be liable to be ignored.
  1. It is permissible and is often necessary for a Court, with a view to expedite the trial and to avoid a needlessly protracted cross examination on irrelevancies and matter that is not ‘evidence’ to order that any such material that does not constitute evidence be struck off or be ordered or directed to be ignored without fear of adverse consequence.

[1] Harish Loyalka & Anr v. Dileep Nevatia & Ors, Suit No. 3598 of 1996, High Court of Judicature at Bombay, Decided on: 07.04.2014 (G.S. Patel, J.)

[2] Krishan Dayal v. Chandu Ram, (1969) ILR 1090

[3] 2015 SCC Online Bom 3411

Testing the Maintainability of Suit For Mandatory Injuction Against The Licensee

INTRODUCTION:

Injunction is an equitable relief and it is a settled law that equity acts in personam, therefore, injunction is a personal matter. The purpose of mandatory injunction is to restore a wrongful state of things to their former rightful order. Principal difference between prohibitory injunction and mandatory injunction is that, in the former the defendant is prohibited from doing a particular thing in a particular manner, whereas, in the latter, the defendant is directed to do a particular thing and if he fails to do as directed, the court gets it done through its officers.[1]

Section 39 of the Specific Relief Act, 1963 does not define but categorically deals with grant of mandatory injunction. Two elements have to be taken into consideration to determine the grant of mandatory injunction, these are: (a) What acts are necessary in order to prevent a breach of the obligation; and, (b) The requisite acts must be such as the court is capable of enforcing.[2] Mandatory injunction is not to be granted: (a) Where compensation in terms of money would be an adequate relief to the plaintiff; (b) Where balance of convenience is in favour of the defendant; (c) Where plaintiff has shown acquiescence in the acts of the defendant; and, (d) To create a new state of things, but rather to restore status quo.

In the case of, Dorab Cawasji Warden v. Coomi Sarab Warden[3], the Hon’ble Supreme Court of India held that, for grant of interim mandatory injunction the following test must be complied with: (a) The plaintiff has to demonstrate a strong case for trial, that is, it should be of a standard higher than that of a prima facie case; (b) The plaintiff has to lay-bare that the grant of mandatory injunction is necessary to prevent irreparable loss or serious injury, which cannot be compensated in terms of money; and, (c) The balance of convenience is in favour of the plaintiff as against the defendant. Mandatory injunctions are sometimes availed of as reliefs in the nature of ‘quia timet’, that is, in a proper case, mandatory injunction may be granted when there is a threat of infraction of the plaintiff’s right before the infraction has actually occurred.[4]

SECTION 5 AND SECTION 6 OF THE SPECIFIC RELIEF ACT, 1963:

Section 5 of the Specific Relief Act, 1963 deals with an action apropos the recovery of possession of an immovable property based on title; the essence of this section is that whoever proves a ‘better title’ is the person ‘entitled to possession’. Section 6 of the Specific Relief Act, 1963 restrains a person from using force to dispossess, or, to dispossess a person without his consent otherwise than in due course of law. Under Section 5 of the Specific Relief Act, 1963 a person dispossessed can get possession on the basis of title, whereas, under Section 6 of the Specific Relief Act, 1963 a person dispossessed may recover possession merely by proving previous possession and subsequent wrongful dispossession. A legal recourse undertaken by a licensor to dispossess the licensee, broadly, falls under Section 5 of the Specific Relief Act, 1963.

SUIT FOR MANDATORY INJUNCTION LAUNCHED TO OUST THE LICENSEE:  

If an interest in the property is created by virtue of a deed, it is a lease, but, if the document only permits another person to make use of the property of which the legal possession continues with the owner, it is a license.[5] Suit for mandatory injunction can be filed by the plaintiff-licensor to oust the defendant-licensee after the expiry of the term of license. In the case of, Sant Lal Jain v. Avtar Singh[6], it was held that, where a licensor approaches the court for an injunction within a reasonable time after the license has terminated, then, the court shall be obliged to grant him injunction, however, if the licensor causes huge delay, then, the court may refuse to exercise its discretion apropos the grant of injunction on the ground that, the licensor has not been diligent and thus, in that case the licensor will have to institute a suit for possession which in fact will be governed by Section 7(v) of the Court Fees Act, 1870.  In the case of, Milkha Singh v. Diana[7], it was observed that the principle- ‘once a licensee always a licensee’, applies to all kinds of licenses, and it cannot be said that the moment the license is terminated, the possession of the licensee becomes that of a trespasser, that is, a suit for mandatory injunction and not a suit for possession, will lie to oust the erstwhile licensee.

TITLE OF THE PROPERTY IN A CLOUD OF DOUBT:

When a suit for mandatory injunction is instituted by the licensor against the licensee to oust him of the suit property after the termination of the license, then, it shall not lie in the mouth of the licensee to state that, a suit for mandatory injunction is not maintainable because the title of the property is in a cloud of doubt and what the licensor should have preferred is a suit for possession and not mandatory injunction. Section 116 of the Evidence Act, 1872 categorically states that, a licensee obtaining possession is deemed to obtain it upon the terms that he will not dispute the title of the licensor who gave the possession to him and without whose permission he would not have got the possession.[8] Two conditions are essential to enforce the estoppel contained in Section 116 of the Evidence Act, 1872, these are: (a) Possession of the property must have been given to the licensee/tenant, and, (b) Such possession must have been taken with the permission of the licensor/landlord. Once these two conditions are fulfilled, the licensee/tenant becomes subject to estoppel, and continues to remain subject to it so long as he remains in possession of the property.[9]

DELAY DEFEATS EQUITY:

In the case of, Joseph Severance & Ors v. Benny Mathews & Ors[10], it was held that, licensee may be the actual occupant of the property but the licensor is the person having control and possession over the property through the licensee even after the termination of the license. There can be varied situations such as those whereby the licensee may require to keep the possession of the property with himself for some time post the termination of the license so that he can wind up his business; in such situations, the possession of the property that the licensee keeps with himself so that he can wind up his business from the suit premises cannot be termed as an act of trespass. But, on the other hand, there can be situations whereby despite the termination of the license, the licensee retains the possession of the property with himself and the licensor neither objects to it, nor takes necessary steps to cause the eviction of the licensee with promptitude; in such situations, the erstwhile licensee will be treated as a trespasser and the licensor will have to come up with a suit for recovery of possession and not mandatory injunction. Therefore, the position that entails in law can be summed up by saying that, the possession of licensee does not become hostile the moment the license comes to an end; none the less, the licensor is required to file a suit for mandatory injunction to oust the licensee with promptitude categorically praying that, the licensee should be directed by the court to vacate the suit property without delay.

PERMISSIVE OCCUPATION OR GRATUITIOUS LICENSEE:

If X, son of Y, starts living in the house of his father, that is, in the house of Y with the permission of Y, and then later when Y requests X to vacate the possession, it shall not lie in the mouth of X to claim ownership in the property by reason of the fact that, X is the son of Y and has been residing in the house of Y in the capacity of the son of Y. It shall be open to Y to bring an action by way of suit for mandatory injunction against X to cause his vacation from the subject property and at best the possession that X enjoyed will be termed that of ‘permissive occupier’ or ‘gratuitous licensee’.[11]

CONVERTING A SUIT FOR MANDATORY INJUNCTION INTO A SUIT FOR RECOVERY OF POSSESSION:

Where the defendant-licensee contests the suit for mandatory injunction filed by the plaintiff-licensor taking prima facie objection that, only a suit for recovery of possession can sustain and not mandatory injunction on the ground that, the possession that defendant-licensee enjoyed was neither hostile, nor intolerant, further, despite the lapse of license no swift action was taken to cause the eviction of the licensee; then, taking into account the facts and circumstances of the case and to do complete justice between the parties to the case, the court can direct the conversion of the suit for mandatory injunction into a suit for recovery of possession to avoid multiplicity of proceedings and to save the plaintiff-licensor from incurring extra cost, trouble and disbursement, subject to payment of the extra attendant court-fee as is leviable apropos a suit for recovery of possession according to the value of the property forming the subject-matter of the suit for recovery of possession. Merely because the plaint is couched in terms of ‘suit for mandatory injunction’ and not ‘suit for recovery of possession’, the necessary relief cannot be denied to the plaintiff-licensor.

VALUATION OF SUIT FOR MANDATORY INJUNCTION:

According to Order VII, Rule 1(i) of the Code of Civil Procedure, 1908, the plaint must contain a statement of the value of the subject-matter of the suit for the purposes of jurisdiction and court-fees, so far as the case admits. In the case of, Ram Narain Prasad v. Atul Chander Mitra[12], it was held that, valuation for the purposes of court-fees must be made on the basis of the averments contained in the plaint and the relief sought thereof, and the averments contained in the written statement are not material in this regard. In the case of, Padmavati Mahajan v. Yogender Mahajan & Anr[13], it was held that, a suit for permanent mandatory injunction can be valued by the plaintiff exercising his or her discretion, subject to the caveat that the said discretion is neither whimsical, nor fanciful; a suit for permanent mandatory injunction is not required to be valued at the market value of the property.

EXCURSUS:

From the above analysis, following vital points of consideration can be drawn:

(a)    Law apropos injunctions is vast and expansive, and is essentially based on the principles of equity, justice and good conscience, namely, the following: (i) One who seeks equity must come to the court with clean hands; (ii) One who seeks equity must do equity; (iii) Where there is right there is remedy; (iv) Where equities are equal, the law will prevail; (v) Equity follows the law; (vi) Equity aids the vigilant, not those who slumber on their rights.

(b)   The jurisdiction to issue mandatory injunctions (that is, interim mandatory injunction, permanent mandatory injunction or perpetual mandatory injunction) is discretionary jurisdiction and it can be exercised by the courts only in cases which strictly fall within the four-walls of the provisions contained in Sections 37 to 41 of the Specific Relief Act, 1963;

(c)    After the termination of license, it is incumbent upon the licensor to bring about a suit for mandatory injunction against the licensee compelling the licensee to vacate the suit property with promptitude. If there is substantial delay in bringing the suit for mandatory injunction to evict the licensee, then, a suit for possession (with attendant court fee affixed) will lie and not a suit for mandatory injunction;

(d)   Section 116 of the Evidence Act, 1872 is very clear on the point that, the licensee can never challenge the title of the licensor to whom he attorns till he (licensee) is in the possession of the suit premises, thus, it can never lie in the mouth of the licensee to state that, by instituting a suit for mandatory injunction the licensor has preferred a wrong remedy, for the licensor should have preferred a suit for recovery of possession;

(e)    Licensor-plaintiff is at liberty to value his suit for mandatory injunction based on his discretion so far as the exercise of discretion is not whimsical or fanciful. Suit for mandatory injunction is not to be valued based on the market value of the suit property.

[1] Puran Chand v. Nityanand, AIR 1958 Punj 460
[2] Madho Singh v. Abdul Qaiyum Khan, AIR 1950 All 505; Khazan Singh v. Ralla Ram, AIR 1937 Lah 839; Lakshi v. Tara, (1904) 31 Cal 944
[3] AIR 1990 SC 867
[4] Meghu Mian v. Kishun Ram, AIR 1954 Pat 477
[5] Udai Pratap Singh v. Collector, Varanasi, AIR 1991 All 104 (DB)
[6] (1985) 2 SCC 332
[7] AIR 1964 J&K 99
[8] Rupchand v. Sarbessur Chandra, (1906) 33 Cal 915: 10 Cal WN 747
[9] District Board Tippera v. Sarafat Ali, 1941 C 403
[10] (2005) 7 SCC 667
[11] Delhi Gate Services Pvt. Ltd. v. Caltex (India) Ltd., AIR 1962 P & H 370; Mulk Raj Khullar v. Anil Kapur & Ors, CS (OS) 1855/2011, Decision Dated: 03.10.2013, High Court of Delhi (Jayant Nath, J.)
[12] (1994) 3 SCR 196
[13] 152 (2008) DLT 363

Doctrine of ‘Per Incuriam’: Critical Analysis based on Precedents

doctrine-of-per-incuriam
Meaning: According to the Black’s Law Dictionary (Fourth Edition, 1891) per incuriam
means through inadvertence. The word ‘incuria’ literally means ‘carelessness’.1 The purport
of the doctrine of per incuriam is that, a decision should be treated as given per incuriam
when it is given in ignorance of the terms of a statute, or of a rule having the force of a
statute.2
‘Per incuriam’ means ‘through want of care’; a decision of the court which is
mistaken. A decision of the court is not a binding precedent if given per incuriam, that is,
without the Court’s attention having been drawn to the relevant authorities or statutes.3 The
‘per incuriam’ rule is strictly and correctly applicable to the ratio decidendi and not to obiter
dicta. An important caveat that is required to be borne in mind at all times is that, the nonreference
of earlier decisions in the judgment does not indicate non-consideration of those
cases in the judgment.4
When a decision/judgment can be stated to be ‘per incuriam’?
A decision/judgment can be per incuriam any provision in a statute, rule or regulation, which
was not brought to the notice of the court. A decision/judgment can also be per incuriam if it
is not possible to reconcile its ratio with that of a previously pronounced judgment of a coequal
or larger bench; or if the decision of a High Court is not in consonance with the views
of the Supreme Court.5
It is a settled rule that if a decision has been give per incuriam the court can ignore it.

6. In the case of, Buta Singh v. Union of India

7, it was held that, when a
two-judges bench without noticing or ignoring the binding decision of a three-judges bench
renders a decision, then such a decision is per incuriam. Similarly, in the case of K.H. Siraj v.
High Court of Kerala

8, it was held that, when a decision is rendered by the High Court
without having regard to the relevant line of decisions rendered by the Supreme Court, then
such a decision of the High Court is per incuriam.
In the case of, Punjab Land Development & Reclamation Corporation Ltd. v. Presiding
Officer, Labour Court (Chandigarh)

9, it was held that, the problem of judgment per incuriam
when it actually arises should present no difficulty as the Supreme Court of India can lay
down the law afresh, if two or more of its earlier judgments cannot stand together. It is
important to note that, the non-consideration of an irrelevant provision cannot make the ratio
of the decision per incuriam.
10 Lastly, in the case of, Fuerst Day Lawson Ltd. v. Jindal
Exports Ltd

11, it was held that, unless it is a glaring case of obtrusive omission, it is not
desirable to depend on the principle of judgment per incuriam; it has to be shown that some
part of the decision was based on a reasoning which was demonstrably wrong, for applying
the principle of per incuriam.
Thus, an order delivered without argument, without reference to the relevant provisions of the
Act and without any citation of authority is per incuriam.
12 Can a ‘per incuriam’ decision operate as ‘res judicata’?
Per incuriam decisions are those decisions which do not state the law correctly and hence are
not to be followed.13 In the case of, Union of India v. Indian Railway SAS Staff Association14
,
it was held that, ‘per incuriam’ decision does not operate as res judicata.
Can a ‘per incuriam’ decision operate as a precedent?
In the case of, Hyder Consulting (U.K.) Ltd. v. State of Orissa15, it was held that, a prior
decision of the Supreme Court on identical facts and law binds the court on the same points
of law in a later case. In exceptional circumstances, where owing to obvious inadvertence or
oversight, a judgment fails to notice a plain statutory provision or obligatory authority
running counter to the reasoning and result reached, the principle of per incuriam may apply.
In the case of, State of Assam v. Ripa Sarma16, it was held that, a judgment rendered in
ignorance of earlier judgments of benches of co-equal strength would render the same per
incuriam, and thus, such a judgment will not be elevated to the status of precedent. Further, in
the case of, State of M.P. v. Narmada Bachao Andolan17, it was held that, the courts have
developed the principle of per incuriam in relaxation of the rule of “stare decisis”; thus, the
“quotable in law” is avoided and ignored if it is rendered in ignorance of a statute or other
binding authority. Moreover, in the case of, Central Board of Dawoodi Bohra Community v.
State of Maharashtra18, it was held that, a ruling making a specific reference to an earlier
binding precedent may or may not be correct but it cannot be said to be per incuriam.
Lastly, in the case of, Chauharya Tripathi & Ors v. L.I.C. of India & Ors19, it was held that,
there can be no cavil over the proposition that once a judgment has been declared per
incuriam, it does not have the precedential value. However, it is worth noting that, in the case
of, Mukesh K. Tripathi v. L.I.C.20, it was held that, even though a case may not have been
expressly over-ruled but once it has been held that it has been rendered per incuriam, it
cannot be said that it lays down good law.
Doctrine of ‘per incuriam’ and Judicial Discipline:
In the case of, Jai Singh v. M.C.D.21, it was held that, judicial discipline and propriety
demands that, there should be consistency in the views as regards the decisions rendered by
co-equal benches on the same issue; however, subsequent bench is to follow the decision
rendered by the earlier co-ordinate bench, except in compelling circumstances, such as where
the order of the earlier bench can be said to be per incuriam. Further, in the case of, U.P.
Power Corporation Ltd. v. Rajesh Kumar22, it was held that, it is the duty of the court to
acknowledge the fact that, a judgment which erroneously appreciates or construes a binding
precedent is not per incuriam.
It is important to take note of the ratio laid down in the case of, K.G. Derasari v. Union of
India23, in this case the Supreme Court of India categorically observed that, if the tribunal has
not looked into previous decision of the Supreme Court which is the law of the land and by
which it was bound, the remedy available to the aggrieved person was to file an application
for review.
In the case of Chandra Prakash v. State of U.P.24, it was held that, in case a two-judge bench
finds fault with the decision rendered by a three-judge bench, then, in that case, the two-judge
bench must restrain itself from referring the matter to the Constitution Bench, as judicial
discipline and propriety as also the doctrine of binding precedent demands that a two-judge
bench must follow the decision given by a three-judge bench.25
Citing per incuriam decisions at Bar:
In the case of, State of Orissa v. Nalinikanta Muduli26, the Supreme Court of India coming
down heavily on the members of the bar, took occasion to state that, advocates are officers of
the court and they have a bounden duty to assist the court and not to mislead it; citing an
over-ruled decision before a court without disclosing the fact that it has been over-ruled is a
matter of grave concern, and the falling standards of the advocates citing over-ruled decisions
at bar has become a dreadful reality, which needs to be curbed as early as possible.
Conclusion:
From the above analysis we draw the following conclusion:
a. Principle of res judicata does not apply to decisions given per incuriam;
b. Decisions given per incuriam do not have any precedential value;
c. If ‘Case X’ did not consider a binding decision i.e. ‘Case Y’, but did consider another
case i.e. ‘Case Z’, which had considered the said binding precedent i.e. ‘Case Y’, then
in such a case, the view taken in ‘Case X’ cannot be said to be per incuriam;
d. When no relevant provision of the Constitution or any statute is left out for
consideration as regards a judgment delivered, then, in such a case, the judgment
delivered, cannot be termed as per incuriam.
27
1 See: State of U.P. v. Synthetics & Chemicals Ltd., (1991) 4 SCC 139
2 See: Municipal Corporation of Delhi v. Gurnam Kaur, AIR 1989 SC 38; Union of India v. Manik Lal
Banerjee, (2006) 9 SCC 643
3 P. Ramanatha Aiyar’s Concise Law Dictionary, Fifth Edition, Lexis Nexis Publication, p.937
4 See: Gupta Sugar Works v. State of U.P., AIR 1987 SC 2351
5 See: Sundeep Kumar Bafna v. State of Maharashtra, Criminal Appeal No. 689 of 2014, Supreme Court of
India, Judgment delivered by: Vikramajit Sen, J.
6 See: Rattiram & Ors. v. State of M.P. (Through Inspector of Police), Criminal Appeal No. 223 of 2008,
Supreme Court of India
7
(1995) 5 SCC 284
8
(2006) 6 SCC 395
9
(1990) 3 SCC 682
10 (1999) 3 SCC 176
11 (2001) 6 SCC 356
12 See: M.C.D. v. Gurnam Kaur, (1989) 1 SCC 101
13 See: A. Srimannarayana v. Dasari Santakumari, (2013) 9 SCC 496
14 (1995) Supp (3) SCC 600
15 (2015) 2 SCC 189
16 (2013) 3 SCC 63
17 (2011) 7 SCC 639
18 (2005) 2 SCC 673
19 Civil Appeal Nos. 5690-5691 of 2010, Supreme Court of India, Judgment dated: 11.03.2015
20 (2004) 8 SCC 387
21 (2010) 9 SCC 385
22 (2012) 7 SCC 1
23 (2001) 10 SCC 496
24 AIR 2002 SC 1652
25 See: Union of India v. Raghubir Singh, 1989 (2) SCC 754 (Para 27)
26 (2004) 7 SCC 19
27 See: Usha Bharti v. State of U.P., (2014) 7 SCC 663

Doctrine of Equitable Set-Off: Critical Analysis

Doctrine of Equitable Set-OffIntroduction: Set-Off- Meaning and Characteristics:

According to the Black’s Law Dictionary (Seventh Edition, 1999), a set-off is nothing but a debtor’s right to reduce the amount of a debt by any sum the creditor owes the debtor. In the case of, Union of India v. Karam Chand Thapar and Bros (Coal Sales) Ltd and Ors, referring to the concept of set-off and quoting from ‘A Treatise on the Law of Set-Off, Recoupment, and Counter Claim’, by Thomas W. Waterman, the Hon’ble Supreme Court of India held that, set-off signifies the subtraction or taking away of one demand from another opposite or cross-demand, so as to distinguish the smaller demand and reduce the greater by the amount of the less; or, if the opposite demands are equal, to extinguish both. Set-off, broadly speaking, means ‘stoppage’, much because the amount due to be set-off is stopped, or, is deducted from the cross-demand.

According to Order VIII, Rule 6 of the Code of Civil Procedure, 1908, set-off means the deduction of one demand from another cross-demand. It is the demand that the defendant makes as against the plaintiff for the purpose of liquidating the whole or part of his claim.1 Order VIII, Rule 6 of the Civil Procedure Code, 1908 which deals with the doctrine of legal set-off is in fact restricted to only an “ascertained sum”. The conditions that must exist for the applicability of a legal-set-off are the following:

Suit must be for the recovery of money;

The claim demanded to be set-off must be an ascertained sum of money2;
The ascertained sum of money must be legally recoverable from the plaintiff3;
The ascertained sum of money legally recoverable from the plaintiff must not surpass the pecuniary jurisdiction of the court in which along with the written statement, the defendant has filed the set-off;
When the defendant pleads set-off, he is put in the position of a plaintiff as regards the amount claimed by him. A defendant can claim set-off even if the plaintiff’s suit is dismissed;
It is essential that both, the claim and the set-off must be for debts due from and to the same parties in the same right;
The claim must be made at the first hearing unless it is permitted by the court to do even afterwards.
In nutshell, set-off means reciprocal acquittal of debts between two persons. As per Order VIII, Rule 6, where in a suit for recovery of money by the plaintiff, the defendant finds that he also has a claim of some ascertainable amount against the plaintiff, then the defendant can claim set-off in respect of the said amount as against the money claim of the plaintiff. A plea of set-off is a request that the debt to be found due to the plaintiff shall be treated as extinguished or reduced pro tanto by being set-off against the debt to the defendant.4 It is pertinent to note that, in both Rule 6 and Rule 6-A of Order VIII of the Code of Civil Procedure, 1908, a set-off or counter-claim cannot travel beyond the scope and the limit of the suit with which it is concerned; and it cannot bring out something, which is completely foreign to the suit.5

A claim of set-off is based on an independent cause of action which the defendant has, as against the plaintiff, and the cause of action of the plaintiff and the defendant should have arisen in the same transaction or different transaction. It is pertinent to mention here, that, both claims (that of the plaintiff as well as that of the defendant) are decided vide the same judgment and the decree is drawn-up after adjusting the set-off claim, in favour of the person whose amount is greater.

Where the defendant relinquishes (that is, forgoes) a part of his claim in the set-off then in a subsequent suit for relinquished claim, the bar of Order II, Rule 2 shall apply.6

A claim of set-off is put to an examination which is akin to an independent suit and therefore, the rules of examination of a plaint, bar of limitation, res judicata and Order II, Rule 2 are applicable pro tanto.

According to Section 3(2) (b) (i) of the Limitation Act, 1963, for the purpose of the Limitation Act, 1963, any claim by way of a set-off is to be treated as a separate suit and it shall be deemed to have been instituted on the same date as the suit in which the set-off is pleaded.7 Generally speaking, the rules relating to a written statement to be filed by a defendant, apply to, a written statement in answer to a claim of set-off.8

Doctrine of Equitable Set-Off:

There have been cases where by the defendants were allowed to set-off even an unascertained sum of money by the Courts of Equity in England, on the premise that, if the plaintiffs’ claim and the defendants’ claim arise out of the same transaction, then, it would be inequitable to drive the defendants to a separate suit. This legal ideology later came to be known as the doctrine of equitable set-off.

Right to equitable set-off is recognised only if the claim arises out of the same transaction which is the foundation of the plaintiff’s claim and the claim has not become time-barred.9 Plea in the nature of equitable set-off is not available when the cross demands do not arise out of the same transactions.10 When a plea in the nature of equitable set-off is raised, then it is not done as a matter of right and the discretion lies with the court to entertain and allow such plea or not.11

In the case of Clark v. Ratnavaloo Chetti12, it was held that, so far as equitable set-off is concerned, the right of set-off exists not only in cases of mutual debits and credits, but also where cross-demands arise out of the same transaction.13 Further, in the case of, Raja Bhupendra Narain Singha Bahadur v. Maharaj Bahadur Singh & Ors14, it was held that, a plea in the nature of equitable set-off is not available when cross-demands do not arise out of the same transaction and are not connected as regards their nature and circumstances. In the case of, M/s. Lakshmichand and Balchand v. State of Andhra Pradesh15, the Hon’ble Supreme Court of India took occasion to rule that, when a claim is founded on the doctrine of equitable set-off, all cross-demands are to arise out of the same transaction, or, the demands are to be so connected in the nature and circumstances that they can be looked upon as a part of one transaction.

In the case of, Jitendra Kumar Khan v. Peerless General Finance & Investment Co. Ltd, (2013) 8 SCC 769, it was held that, an equitable set-off is different from a legal set-off, for an equitable set-off is independent of the provisions of the Code of Civil Procedure, 1908. The concept of equitable set-off is based on the fundamental principles of justice, equity and good conscience; the discretion is with the court to adjudicate or not to adjudicate, as regards the claim, which is in the nature of an equitable set-off; the court has to exercise the discretion sparingly with application of judicial mind and sound legal principles.

Requirements of Equitable Set-Off:

In case of an equitable set-off, the original suit has to be a money-suit just like in case of a legal set-off; but, however, unlike the legal set-off, the amount claimed in case of an equitable set-off can be for ascertained or even an unascertained sum of money.
In case of an equitable set-off, the set-off claimed should arise in the same transaction in which the cause of action for the main suit arises.
A claim by way of an equitable set-off can be allowed even if it is time-barred when there is a fiduciary relationship between the parties. In the case of, Mackinnon Mackenzie & Co. (P) Ltd. v. Anil Kumar Sen & Anr16, it was held that the provisions of the Limitation Act, 1963 do not necessarily bar an equitable set-off and provisions of Order VIII, Rule 6 do not do away with the principles of equitable set-off.
Section 3 of the Limitation Act, 1963 does not at all relates to an equitable set-off.
For payment of court-fee there is no distinction between a legal set-off and an equitable set-off. Both attract applicability of Schedule I, Article 1 of the Court Fees Act, 1870.17
Equitable set-off is not specifically referred to in the Code of Civil Procedure, 1908, however, Order XX, Rule 19(3) which deals with the case of drawing of a decree when set-off or counter-claim is allowed mentions that, “provisions of this rule shall apply whether the set-off is admissible under Rule 6 of Order VIII or otherwise”. The word “otherwise” therefore can be construed to imply equitable set-off.
It was held in: Dobson & Barlow v. Bengal Spinning & Weaving Co.18; and, Girdharilal Chaturbhuj v.Surajmal Chauthmal Agarwal19, it was held that, an equitable set-off is not to be allowed where protracted (or usual) enquiry is needed for determination of the sum due.

Conclusion:

The essence of set-off is that the defendant should have a cause of action against the plaintiff apart from the suit and not merely as a defence to the plaintiff’s claim. Set-off is in the nature of a cross-action which can be entertained separately.20 On the other hand, the concept of equitable set-off is not defined in any procedural law or otherwise. This concept of equitable set-off comes from the broad principles of justice, equity and good conscience. Equitable right to set-off exists only when both the claims, that is, of the plaintiff as well as the defendant, arise out of the same transaction. For example, in the case of, M/s Anand Enterprises (Bangalore) v. Syndicate Bank21, in a suit by the bank on a term loan, damages for the loss on account of delay in giving/sanctioni ng the loan was claimed by the defendant in the written statement. It was held that, the claim of the defendant was in the nature of an equitable set-off and not a counter-claim.

Thus, when the claim of the defendant is in the nature of mutual debits and credits as against the plaintiff, arising from the same transaction, between the same parties then, equitable set-off can be claimed by the defendant as against the plaintiff, without complying with rigours of Order VIII, Rule 6 of the Code of Civil Procedure, 1908 and Section 3 of the Limitation Act, 1963. Grant or non-grant of equitable set-off is the discretion of the court.

1*Authored by: Shivam Goel (Associate, S.G. & Co); LL.M. (WBNUJS); Author of: Corporate Manslaughter & Corporate Homicide: Scope for a New Legislation in India, Penguin-Partridg e, Bloomington, 2015; and Concept of Rights in Islam, Lambert Publications, Germany, 2014. See: Sudipto Sarkar & V.R. Manohar, Code of Civil Procedure, 1908, Volume 1, Tenth Edition (2005), Wadhwa & Company Nagpur, p.1045
2 See: Thanjavur P Bank v. Dharmasamvardhan i, AIR 1964 Mad 108
3 Note: A sum the recovery of which is barred under Section 11 of the Code of Civil Procedure, 1908, or Order II, Rule 2, or by the law of limitation at the time of plaintiff’s suit is not a sum legally recoverable; but it has been held in some cases that this rule as to limitation does not apply in the case of an equitable set-off.
4 See: Andhra Paper Mills v. Anand, AIR 1951 Mad 783, 786
5 See: Aninda Saha v. Amal Saha, AIR 2001 NOC 101: 2001 AIHC 2956 (Cal)
6 See: Aakarsh Kamra, Code of Civil Procedure, Chapter 5: Pleadings in General, Lexis Nexis Publication (2015), p. 115
7 See: Section 3 of the Limitation Act, 1963
8 See: Vinayak D. Kakde, Civil Trials: Practice and Procedure, Chapter VIII: Written Statement, Set-Off and Counter-Claim (Order VIII), Universal Law Publishing (2015), p. 30
9 See: Maharashtra State Farming Corporation Ltd. v. Belapur Sugar and Allied Industries Ltd., 2004 (3) Mh LJ 414 (Bom)
10 See: Nathmal v. Kashiram, AIR 1975 Raj 217
11 See: Union of India v. Karam Chand Thapar & Bros (Coal Sales) Ltd, (2004) 3 SCC 504
12 2 M.H.C.R. 296 (1865)
13 See: Chishlom v. Gopal Chander, ILR 16 Cal 711 (1889)
14 AIR 1952 SC 782
15 (1987) 1 SCC 19
16 AIR 1975 Cal 150
17 See: Cofex Exports Ltd. v. Canara Bank, AIR 1997 Del 355 (at 365)
18 (1897) 21 Bom 126
19 AIR 1940 Nag 177
20 See: Pramada Prasad v. Sagarmal, AIR 1954 Pat 439 (at p. 441)
21 AIR 1990 Kant 175

Article 21: The Omnibus Article

Broadly speaking, the doctrine of separation of powers has not been expressly provided for in the Constitution of India, the Suprema Lex, but less to say it can be made out from the scheme of the Constitution.

Doctrine of Separation of Powers asserts the division of powers between the three wings of the state: the legislature, the executive and the judiciary.

If the work of the legislature is to frame laws and the work of the executive is to implement laws then the work of judiciary is to interpret laws. The Supreme Court in all its magnificence is the custodian of the Constitution.

There were several occasions when there was locking of the horns when question was to be decided in regards—whether judiciary comes under the ‘meaning of state’ so far as article 12 of the constitution is concerned, this question was finally settled with ruling in the case of Prem Chand Garg v. Excise Commissioner, where by it was held that judiciary is the third wing of the state howsoever functionally independent, with no deterrence to judicial activism which it enthrals.

Occasions have been there when the decisions rendered by the apex court had been put in spotlight either to appreciate its spirit of judicial activism or to criticise it for its judicial over-reach.

No legal provision has attracted more controversy than Article 21 of the constitution, which provides for ‘right to life and personal liberty’—the article on pen and paper &in black and white states:  ‘No person shall be deprived of his life or personal liberty except according to procedure established by law’

It is the judicial interpretation and judicial activism that has given enormous dimensions to this article making it an omnibus article.

One of the first time when the efficacy of this article was explored beyond any reach and bound was in case of ‘Chairman, Railway Board v. Chandrima Das’, where by the apex court went on record to state that even though article 21 is in scheme of the fundamental rights garnered by the constitution and these rights are available to citizens only, article 21 is a mighty exception as it is applicable even to foreigners. It is important to make a distinction over here between a citizen and a non-citizen, as it is a question devoid of any doubt that Article 14 of the constitution is applicable even to non-citizens such as a ‘company’ (Chiranjit Lal Chaudary v. UOI), what to say of foreigners- Article 21 limits itself to citizens and so far as non-citizens are concerned to foreigners, not to a company- whether foreign or indigenous.

Fundamental rights enshrined in part III of the Constitution form the spirit of the Suprema Lex, protection to the same is offered by article 32 and 226, the writ jurisdiction of the Supreme Court and the High Court respectively. Here so far as article 21 is concerned by way of judicial interpretation and activism a new branch of rights have aroused over the decade—reason for this is that so far as the scheme of Indian Constitution is concerned  judicial decisions so rendered by the Supreme Court have the force of being the ‘law of the land’.

A set of exhaustive rights that article 21 in matter and in spirit is capable of offering is as follows:

Serial No. Rights offered under Article 21. Case law in which the right got recognised.
1. Right to food People’s Union for Civil Liberties v. UOI
2. Right to shelter Chameli Singh v. State of U.P.
3. Right to livelihood Olega Tellis v. Bombay Municipal Corporation
4. Right to education Mohini Jain v. State of Karnataka; Unni Krishnan v. State of A.P.
5. Right to clean environment M.C.Mehta  v. UOI
6. Right to privacy Govind v. State of M.P.
7. Right to marriage Lata Singh v. State of U.P.
8. Right to travel abroad Maneka Gandhi v. UOI
9. Right to live with human dignity Maneka Gandhi v. UOI
10. Right against bondage Bandhu Mukti Morcha v. UOI
11. Right to emergency medical aid Parmanand Katara v. UOI
12. Right, not to be driven out of a state NHRC v. State of Arunachal Pradesh

 

The rights so mentioned above are regal in sense and spirit. Apart from these, this article empowered the apex court to nomenclaturefew other rights by way of judicial interpretation. These are as follows:

Right to speedy trial (Sheela Barse v. UOI)

Right against prison torture and custodial death (Sunil Batra v. Delhi Administration)

Right to compensation for illegal – unlawful detention (Rudal Shah v. State of Bihar)

Right against handcuffing (Prem Shankar Shukla v. Delhi Administration)

Right against bar fetters (Charles Sobhraj v. Suptd. Central Jail)

Right against solitary confinement (Sunil Batra v. Delhi Administration)

It is very necessary to note that in a democracy no right is absolute. All rights are subject to reasonable restrictions of: morality, health, public order, state security, public safety & public policy.

 Justice Krishna Iyer while speaking for majority in the case of Sunil Batra v. Delhi Administration made it constitutionally clear that when a person gets arrested, he steps into the prison cell with his fundamental rights intact and not in devoid of them, he also made it amply clear that Article 21 is to be interpreted in the widest possible sense because fundamental rights form the spirit of the Constitution and Article 14, 19 and 21 are the spirit of the fundamental rights- over and onto which all other fundamental rights rest.

FACETS OF ARTICLE 21:

Is right to life inclusive of right to die? – This question was answered in great detail in case of Gian Kaur v. State of Punjab, here it was held that word ‘life’ is to be read in consonance with word ‘dignity’ so far as article 21 is concerned, but right to life in no stretch on imagination shall include right to die. ‘Right to life’ means‘right to life with human dignity’ and not mere animal existence, but it shall not include right to end life even under medical supervision by way of administration of lethal drugs or otherwise. Right to die shall not be available to anyone even though the claimant of this right is suffering acute pain and agony of all sorts, incapable of taking slightest care of himself and is living on ‘life support system’, this was the majority judgement in this case.

A legal breakthrough came about with Aruna Shanbaug case where by the apex court for the first time offered legality to the concept of euthanasia or mercy killing in some form (with conditions attached to it). A person in a persistent vegetative state (PVC), deriving his existence from life support system can apply for euthanasia, but here also his death shall not be occasioned by administration of lethal injection or otherwise but by merely removing the life support system from which he (patient) draws his existence.

Hence forth it shall not be wrong to say that with sociological and psychological development of the society, Article 21 is witnessing tremendous development—truly it is a welfare piece of legislation.

 Article 21 and Sec. 377, IPC:

It was in July 2009 that a judgement of Delhi High Court gave green signal to consensual sexual intercourse between same sex adults. It was celebration time for gay rights activists generally and for NAZ foundation in particular, but the judgement gathered a lot of fume and criticism. Judicial interpretation of Article 21 formed the crux of the judgement. In no time an appeal to the Supreme Court was filed against the decision rendered by the Delhi High Court. The case is still in pending in the apex court, observations made by the SC and articles published informing the same signal that its time for sec.377, IPC to go.

As a three judge bench decision of the SC (comprising of Chief Justice K G Balakrishnan, Deepak Verma and B S Chauhan) offered legality to live in relationships and pre-marital sex, late in March 2010, stating that Article 21 is not only a welfare piece of legislation but also a progressive piece of legislation, may be the same wisdom needs to be applied to settle scores between the ongoing dispute between article 21 and sec.377, IPC.

 Article 21 and the Death Penalty:

Sec.354 (3) of Cr.P.C, 1973 states that death penalty can be given only in rarest of rare cases; whereby the facts and circumstances of the case are so grave that they intrinsically shock the conscience of the court. Also, this provision provides that– the bench heading the particular case needs to give ‘reasons’ for their decision in case the punishment rendered is life imprisonment and ‘special reasons’ in case the punishment rendered is death penalty.

In case of Bishnu Deo Shaw v. State of West Bengal, it was held that ‘life imprisonment is the rule and death penalty is an exception’– also that death penalty is ultra vires the constitutional mandate- Article 21.

But, there have been cases where by death penalty had been upheld as a matter to meet the ends of justice, cases ranging from Bachan Singh v. State of Punjab to Machhi Singh v. State of Punjab and Dhananjoy Chatterjee v. State of West Bengal.

The ‘abolitionist’ argue that- crime breeds crime and murder breeds murder, murder and capital punishment are not opposites that cancel out each other but are of same kind.

The retentionist argue that all fundamental rights are subject to reasonable restrictions of public order, morality, health, public safety and state security and Article 21 is no exception.

So far as the criminal jurisprudencein regards to‘theories of punishment’ is concerned the trend has been revolutionary in nature- from retribution and deterrent theories of punishment to preventive, reformatory & rehabilitative theory of punishment.

Death penalty in India is given in the following cases:

  1. An act of treason or waging war against Government of India—sec.121, IPC; abetment of mutiny—sec.132, IPC.

     2.Perjury resulting in conviction & death of an innocent person—sec.194, IPC.

     3.Murder—sec.302 & 303, IPC.

     4.Abetment of suicide of a minor, an insane person or intoxicated person—sec.305, IPC.

      5. Attempted murder by a life convict (a person undergoing life imprisonment)—sec.307, IPC.

       6.Dacoity with murder—sec.396, IPC.

        7.Kidnapping for ransom—sec.364-A, IPC.

 

Much has been said by the abolitionists against the death penalty and much by the retentionists in favour of death penalty, the future in regards to abolition or retention of death penalty lies in the hands of society backed by social morality and psychology.

But, the truth of the matter is that India is still in transition phase– redefining its basis of morality and ethics, breaking away from old customs, usages and practises that is dead locking its socio-economic & political growth. India is witnessing high degree of legal development but at the same time crime rate in India continues to be high.

India leads the world with the most murders, 32,719 murders per year, followed by Russia with about 28,904 murders per year. (Source: Raman Sunil; ‘India tops list of murder numbers’; BBC News- June 2008)

There are nearly 17 dowry deaths in India every day; rape every 47 minutes; women-kidnapping and abduction every 44minutes; crime against fair sex every 6 minutes. (Source: Female criminality and victimity in India, 2005- S.S.Srivastava)

Facts on record indicate capital punishment needs to be retained, so far as ethicality of death penalty in regards to Article 21 is concerned- sec.354(3) of C.R.P.C., 1973 in matter and in spirit is enough to take care of that, as words used in the section are farsighted and far-reaching.

 Article 21 and the narco-analysis test:

Article 20 speaks of three doctrines in particular: doctrine of ex post facto law i.e. no one can be punished for law that is not time being in force & no one can be given punishment more than the statutory maximum; doctrine of self-incrimination i.e. no one can be forced to be a witness against himself & doctrine of double jeopardy i.e. no one can be punished twice for the same crime or misdemeanour.

It was in the case of Selvi v. State of Karnataka, 2010, in which SC for ever over turned the fortune of country’s expert agencies specialised in conducting narco-analysis test, brain mapping test & polygraph test. Relying on the language used in Article 20(3) the apex court said that conducting such tests is violative of the citizens ‘right against self-incrimination’. The apex court went on record to further more declare narco-analysis test violative of Article 21.

This decision of the SC attracted a lot of criticism on the following grounds:

  1. A test such as the narco-analysis test, brain mapping & polygraph test are conducted under medical supervision under a medical expert and hence is within the precincts of sec.45 of the Indian Evidence Act,1872.

 

     2.Narco-analysis test is somewhat a full proof measure because first narco-analysis test is conducted and then there by its results are checked and scrutinised by way of conducting lie detector test, polygraph test and brain mapping test.

 

    3.Where the world is moving scientifically forward to decide upon the evidential permissibility of PLR tests (past life regression analysis), declaring that lie detector test or brain mapping test is not a permissible piece of evidence is a step backwards.

Point 1 & 2 are very much convincing but not point 3. Well however the apex court did not answer any of these questions. Attracting article 21 to the following case was also seen with convincing eyes.

Conclusion: Article 21 saga is endless and doubtless to say that article 21 is a welfare piece of legislation; its extent is time and again redefined and re-extended. No fundamental right was ever interpreted with so much wisdom and acuteness as of article 21. Judicial activism and fair judicial interpretation of legal provisions is the key to public welfare in all lines of action, this is what article 21 saga is an example of- alllegal and judicial wisdom must be summarised in the following words ‘Salus populi est suprema lex’, the spirit of pro bono publico.