SUPREME COURT REAFFIRMS THE LAW GOVERNING RECOGNITION AND ENFORCEMENT OF FOREIGN AWARDS

The Three-Judge Bench of the Supreme Court has in a recent case of Government of India vs Vedanta Ltd and Others., passed a Judgment dated 16-09-2020 and reaffirmed the law governing #recognition and #enforcement of #foreignawards in India.

In this case, the Government of India had executed a Production Sharing #Contract (the Contract) with the Respondent Companies to develop and explore the Ravva Gas and Oil Fields (located about 10 to 15 kms offshore in the Bay of Bengal). But soon thereafter, certain disputes arose between the Parties regarding development costs and the Respondent Companies initiated #arbitration proceedings against the Appellant in Kuala Lumpur, Malaysia, which was to be governed by the Laws of England.

The Arbitral Tribunal passed an Award dated 18-01-2011 and held that the Respondent Companies were entitled to charge development costs incurred during execution of the Project from the Appellant.

Thereafter, the Respondents filed an Application for Enforcement of the Foreign Award dated 18-01-2011 (the Foreign Award) under Section 47 and 49 of the Arbitration and Conciliation Act, 1996 (the Act) before the Delhi High Court. Whereas, the Appellant filed an Application for resisting the Enforcement of the Foreign Award under Section 48 of the Act on several grounds including that the Foreign Award was in conflict with public policy of India and that it contained decisions on matters beyond the scope of the submission to arbitration.

But the High Court dismissed the Appellant’s Application and allowed enforcement of the Foreign Award, vide Order dated 19-02-2020. Hence, the Appellant filed this Appeal before the Apex Court challenging the Delhi High Court Order.

The Supreme Court made the following observations regarding enforcement of foreign awards under the Act:

1- The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, New York (the Convention) provides that parties to the said Convention would not discriminate foreign arbitral awards against domestic awards and would ensure that such foreign awards are recognised and enforced in their jurisdiction in the same way as that of domestic awards.

2- Thus, Part II of the Act provides for recognition and enforcement of New York Convention awards and also those awards that are passed in countries with which India has reciprocal arrangements to recognise and enforce foreign awards.

3- Under Part II of the Act, enforcement of foreign awards in India can take place only after the court is satisfied that the foreign award is enforceable as a deemed decree under Section 49 of the Act.

4- For the said purpose, the court would first adjudicate the evidence filed by the party seeking recognition and enforcement of foreign award under Section 47 of the Act that includes the original arbitration agreement, original and certified copy of foreign award, etc.

5- Further, in case, a petition is filed challenging the foreign award under Section 48 of the Act, then the court would also adjudicate the said petition to determine whether the foreign award is struck by any of the grounds for rejection of enforcement. The limited conditions on which the enforcement of a foreign award may be refused are that if the parties to agreement were under some incapacity, or if the agreement was invalid, or if the other party was not given proper prior notice about arbitration proceedings, or if the award contains decisions on matters beyond the scope of the submission to arbitration, etc. The court may further refuse enforcement on the ground that the subject-matter is not capable of settlement of arbitration or if it is contrary to public policy of India.

6- The Court reiterated that an award would be contrary to public policy of India in the following cases:

  • If the enforcement would be contrary to the fundamental policy of Indian law
  • If the enforcement would be contrary to the interests of India
  • the enforcement would be contrary to justice or morality

In such cases, if by upholding the award it would shock the public conscience or would be clearly injurious to the public good or would be wholly offensive to the ordinary reasonable and informed member of the public, then the court may refuse to enforce the award. For instance, if the award is obtained through corruption or fraud, or undue means, then the award would be set aside.

But in this case the Appellants could not establish that there was violation of any procedural formality, which constitutes the integrity of alternate dispute resolution process. Also, there is no evidence to show that the Foreign Award is in conflict with the basic notions of justice or public policy of India. Thus, the Apex Court upheld and confirmed the Order of Enforcement of Foreign Award passed by the Delhi High Court on 19-02-2020.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

SUPREME COURT MODIFIES THE AMOUNT OF PENALTY ON STAMP DUTY

The three Judges Bench of the Supreme Court in the case of Trustees of H.C. Dhanda Trust v. State of Madhya Pradesh & Ors. [Civil Appeal Nos. 3195-319 6 of 2020], vide its Judgment dated 17.09.2020 modified the Order of the Collector of Stamps that imposed a penalty which was 10 (Ten) times of deficient #stampduty. The #SupremeCourt held that imposition of penalty of ten times is not automatic nor can be mechanically imposed under the provisions of Indian Stamp Act, 1899 (the Act).   

The facts of this case pertain to Late Mr. H.C. Dhanda, who by his #Will created a #trust called H.C. Dhanda Trust and put his immovable properties in Trust under the Will (“Appellant”). All Trustees under the Will were the executors of the Will. After the death of Mr. H.C. Dhanda, a resolution was passed by the Board of Trustees to transfer and vest area by executing a Deed of Transfer with a site plan from the trustees to beneficiaries by registering the same. Thereafter, Deed of Assent dated 21.04.2005 was executed between the Trustees/Executors on the one hand and the legal heirs of Late Mr. H.C. Dhanda and the title was transferred forever in the favour of the Legatee under the Will.

A Notice was issued by the Collector of Stamps; District Indore to the Appellant, informing them that the Deed of Assent dated 21.04.2005 was not properly stamped and stamp duty was payable. The Notice further stated asked the Appellant to show cause as to why the Collector of Stamps should not impose a penalty i.e. ten times of the deficit stamp duty which was Rs. 1, 62, 82,150/-.

Background of Proceedings

The Trust filed its objections against the Notice. The Collector of Stamps however passed an Order dated 22.09.2008 and held that there was a deficit duty to the extent of Rs.1, 28, 09,700/- and also imposed ten times penalty i.e. Rs.12, 80, 97,000/-. The Order called upon the Trust to deposit amount of Rs.14, 09, 06,700/- within thirty days. Aggrieved against the Order of Collector, Reference Application was filed by the Appellant before the Board of Revenue, Madhya Pradesh, Gwalior. The Board of Revenue, vide its Order dated 25.10.2011 upheld the Collector’s Order dated 22.09.2008.

Being aggrieved by the Order dated 22.09.2008 the Appellant filed a Writ Petition No.8888 of 2011 in the High Court of Madhya Pradesh. Whereby, the Learned Single Judge of the High Court, vide its Judgment dated 30.03.2017 dismissed the Writ Petition. Thereafter, an appeal was also filed by the Appellant before the Division Bench of the High Court against the said Judgment dated 30.03.2017. The Division Bench also dismissed the Writ Appeal, vide its Judgment dated 04.09.2017 holding it as not maintainable.

Aggrieved against the aforesaid two Judgments of the High Court, the Appellant approached the Supreme Court of India through the present Appeal. The Supreme Court issued a notice to the Collector of Stamps (“Respondent”).

Contentions before the Supreme Court

  1. It was contented on behalf of the Appellant that the penalty imposed by the Respondent was wholly illegal. It was contended that no reason has been given by the Respondents as to why maximum penalty of ten times was imposed on the Appellant while determining the stamp duty. The Respondents have not exercised their jurisdiction in reasonable and fair manner and imposition of ten times penalty on the Appellant deserves to be set aside.
  2. It was contended on behalf of the Respondent that the nature of the Deed of Assent was a gift and the Collector has rightly determined the deficiency in the stamp duty and levied ten times penalty. It was further contended that there was clear intention of the Appellant to evade the payment of the stamp duty which clearly called for imposition of ten times penalty.

Issue before the Supreme Court

Whether the imposition of ten times penalty by the Collector of Stamps under Section 40 of the Indian Stamp Act, 1899 was validly imposed or not.

Supreme Court Judgment

To decide the aforementioned issue the Hon’ble Supreme Court of India considered the language and contents of the Order dated 22.09.2008 passed by the Respondent in conjunction with Section 40(1)(b) of the Act, which provides that if the Collector is of opinion that such instrument is chargeable with duty and is not duly stamped, he shall require the payment of the proper duty or the amount required to make up the same, together with a penalty of the five rupees; or, if he thinks fit, an amount not exceeding ten times the amount of the proper duty or of the deficient portion thereof.

The Supreme Court interpreted the language of the provision to observe that the purpose of penalty generally is a deterrence and not retribution. When a discretion is given to a public authority, such public authority should exercise such discretion reasonably and not in oppressive manner. The reason such as fraud or deceit in order to deprive the Revenue or undue enrichment are relevant factors to arrive at a decision as to what should be the extent of penalty under Section 40(1)(b).

In this regard, the Supreme Court also read the Section 35(a) of the Act, which provides that instruments not duly stamped are inadmissible in evidence and it further observed that neither imposition of penalty of ten times under Section 40(1) (b) is automatic nor can be mechanically imposed. The concept of imposition of penalty of ten times of a sum equal to ten times of the proper duty or deficiency thereof has occurred in other provisions of the Act as well.

Held

In light of the aforesaid observations the Supreme Court relied on the case of Peteti Subba Rao vs. Anumala S. Narendra, 2002 (10) SCC 427 , wherein it was held that it is only in the very extreme situation that penalty needs to be imposed to the extent of ten times. Thus, the Supreme Court partly allowed the Appeal and modified the Order dated 22.09.2008 passed by the Collector of Stamps into five times penalty i.e. Rs.6,40,48,500/- from ten times penalty of Rs.12,80,97,000/-.

Lakshmi Vishwakarma

Associate

The Indian Lawyer

SUPREME COURT UPDATES

  1. SUPREME COURT DISCUSSES WHETHER SECTION 302 IPC BE APPLIED IN A CASE OF SINGLE INJURY

Background: An Appeal was filed before the #SupremeCourt by the Appellant against the Impugned Judgment and Order dated 18.01.2017 passed by the Madurai Bench of the High Court of Judicature at Madras in Criminal Appeal (MD) No. 122 of 2016. The High Court dismissed the said Appeal and confirmed the Judgment and Order of conviction and sentence passed by the learned IV Additional District and Sessions Court, Tirunelveli in Sessions Case No. 354 of 2012, convicting the Appellant herein under Section 302 IPC.

Relief Sought: To convert the conviction from Section 302 IPC to Section 304 Part II IPC.

Issue: Whether the conviction ought to have been under Section 304 Part II or Section 302 IPC.

Supreme Court Observation: That there is no hard and fast rule that in a case of single injury, Section 302 IPC would not be attracted. It depends upon the facts and circumstances of each case. The nature of injury, the part of the body where it is caused, the weapon used in causing such injury are the indicators of the fact whether the accused caused the death of the deceased with an intention of causing death or not are various factors based on which conviction is made. It cannot be laid down as a rule of universal application that whenever death occurs on account of a single blow, Section 302 IPC is ruled out. Considering the totality of the facts and circumstances of the case and more particularly that the Accused inflicted the blow with a weapon like knife and he inflicted the injury on the Deceased’s vital part of the body, it is to be presumed that causing such bodily injury was likely to cause the death. Therefore, the case would fall under Section 304 Part I of the IPC and not under Section 304 Part II of the IPC.

Held: The Appeal is allowed in part. The Impugned Judgment and Order passed by the High Court confirming the conviction of the Accused for the offence punishable under Section 302 IPC is hereby modified from that of under Section 302 IPC to Section 304 Part I IPC. [Citation: Stalin v. State, 2020 SCC Online SC 723, decided on 09-09-2020]

  1. GUJARAT HIGH COURT: ADVOCATE YATIN OZA’S UNCONDITIONAL APOLOGY REJECTED

Brief: Grievances may exist but they can always be conveyed in a better language. Systems can be improved but imputations should not unnecessarily be made. In connection with, Mr Yatin Narendra Oza, who is also the President of the Gujarat High Court Advocates’ Association, was stripped off from his Senior Advocate’s Designation. This has been done after Advocate Oza had levelled charges of corruption against the Registry of the Gujarat High Court. The Court cited Rule 26 of the High Court of Gujarat (Designation of Senior Advocates) Rules 2018, which states “In the event a Senior Advocate is found guilty of conduct which according to the Full Court disentitles the Senior Advocate concerned to be worthy of the designation, the Full Court may review its decision to designate the person concerned and recall the same”. [Citation: Yatin Narendra Oza v. High Court of Gujarat, 2020 (SCC Online SC 724), order dated 09-09-2020.]

Lakshmi Vishwakarma

Associate

The Indian Lawyer

BRIEF UPDATE: SUPREME COURT REITERATES SIGNIFICANT PRINCIPLES OF MAINTENANCE

The 3 Judge Bench of the #SupremeCourt has in a recent case of Abhilasha vs Parkash and Others passed a Judgment dated 15-09-2020 and reiterated the following principles of #maintenance of #wife, #children and #parents under Hindu Adoptions and Maintenance Act, 1956 (the Act) and the Criminal Procedure Code 1973 (#CrPC):

1- That Section 125 CrPC provides that a person is liable to maintain the following people who are unable to maintain themselves:

i) His wife,

ii) Minor child,

iii) Child who has attained majority, excluding a married daughter, having physical or mental abnormality or injury, and

iv) Father and mother.

2- That the 1956 Act provides that a #Hindu Man/Woman is liable to maintain the following people:

(i) A Hindu wife shall be maintained by her husband during her lifetime except in cases where she is unchaste or ceases to be a Hindu by conversion to another religion.

(ii) A Hindu wife shall be maintained by her father-in-law, after the death of her husband, if she is unable to maintain herself.

(iii) A Hindu is responsible, during his or her lifetime, to maintain his/her minor child, unmarried daughter, aged or infirm parents including a childless stepmother, all of who are incapable of maintaining and supporting themselves.

3- That in view of the provisions of maintenance under CrPC and the 1956 Act, the Supreme Court observed that the scope of maintenance under the 1956 Act is larger than that contemplated under Section 125 of CrPC. Under Section 125 CrPC, generally, summary proceedings are initiated for immediate relief and under the 1956 Act, proceedings are initiated for larger claims.

4- Therefore, the Supreme Court observed that the Appellant in this case is an unmarried Hindu daughter who is unable to maintain herself. But there is no physical or mental abnormality or injury, as required under Section 125 CrPC. So, she may take recourse under Section 20 (3) of the 1956 Act to claim maintenance from her father till the time she is married.

To read more on this Judgment, please find the Judgment dated 15-09-2020 attached below:

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

SUPREME COURT REITERATES THAT STANDARDS OF PROOF IN CIVIL AND CRIMINAL PROCEEDINGS ARE DIFFERENT

The Supreme Court has in a recent case of Pravin Kumar vs Union of India and others, passed a Judgment dated 10-09-2020 and reiterated that the #standards of #proof in #civil and #criminal #proceedings may be different from each other. 


The Appellant herein was an Officer in the Crime and Intelligence Wing of the Central Industrial Security Force (#CISF), who was in-charge of conducting surprise searches of personnel at one of the units of Bharat Petroleum Corporation Ltd (#BPCL) and taking stern action against anyone indulging in #corruptive practices. But one, Inspector Hiralal Chaudhary (the Inspector), suspected that one of the constables (the Constable) had a large sum of unauthorized #money in his possession and upon conducting a search, an amount of INR 10,780/- was seized from him. Soon thereafter, the Inspector found that one of the other officers had given false information that the said unauthorised money was a personal loan given by some official at BPCL to the Constable, as a cover-up of the offence committed by the Constable.

Thus, FIR dated 06-03-1999 was registered by the Respondent-Authorities in the Anti-Corruption Branch of the Central Bureau of Investigation (#CBI) under the Indian Penal Code 1860 (#IPC) and the Prevention of Corruption Act, 1988 against the Appellant and a few others. Simultaneously, an enquiry under Rule 34 of CISF Rules, 1969 was also initiated against the Appellant and others involved in the alleged offence. As a result of the enquiry proceedings, the Appellant was suspended by Order dated 31-05-1999.  

Under the criminal proceedings, the charges against the Appellant were that of gross misconduct and indiscipline, giving false orders and coercing an officer to give false statement to substantiate his misdeeds, and lastly, for illegally collecting #bribes from BPCL contractors through his subordinates.

During the CBI investigation, the CBI could not find any sufficient material to initiate criminal prosecution against the Appellant, but it recommended that a major disciplinary action be taken against the Appellant and such other officers.

But during the enquiry at CISF, all the aforesaid charges were proved against the Appellant based on witness testimonies and other evidences. Based on the said Enquiry Report dated 17-09-1999, the Disciplinary Authority held the Appellant guilty of collecting illegal monies, suppressing witnesses, and fabricating evidences. Therefore, considering the nature and gravity of the misconduct, the Appellant was dismissed from his service, by Order dated 20-11-1999. Thereafter, the Appellant filed an Appeal before the Deputy Inspector General of the CISF Western Zone, whereby, the Appellate Authority also upheld the Order of the Disciplinary Authority dated 20-11-1999.

Then, the Appellant filed a Writ Petition in the High Court of Bombay, which upheld both the Orders of the Disciplinary Authority and the Appellate Authority, vide Order dated 05-05-2009, on the ground that there was sufficient evidence to prove the offence against him and that all the necessary procedures and rules of natural justice were properly followed in the disciplinary proceedings. Being aggrieved, the Appellant filed an Appeal in the #SupremeCourt against the said High Court Order dated 05-05-2009.

The Apex Court made the following observations in this case:

1- Article 311 of the Constitution of India 1950 provides that persons employed in civil capacities under the Union or the State cannot be dismissed or removed or reduced in his rank except after an inquiry is made into the charges levied against him and reasonable opportunity of being heard is given to the accused in that regard. In this case, the Enquiry Officer and the Disciplinary Authority had followed all necessary rules during the disciplinary proceedings and provided adequate opportunity to the Appellant to make submissions, cross-examine the witnesses, etc.

2- That generally, an enquiry officer is expected to follow the rules of natural justice and other civil rules during disciplinary proceedings. He is not required to follow the strict rules of evidence and criminal trial procedure that are followed by courts during criminal trials. But if necessary, the enquiry officer may ask any question to the witnesses in order to discover the truth. This would not imply that he has exceeded his jurisdiction.

3- Therefore, the Supreme Court held that in this case, the Enquiry Officer and the Disciplinary Authority had followed all necessary rules before holding the Appellant guilty of grave misconduct and corruption.

4- That further, the criminal proceedings are distinct from civil/disciplinary proceedings. The procedure, evidences and standards of proof applied in disciplinary proceedings can be different from that of the criminal trials. Thus, if an accused is held guilty for committing an offence in a civil proceeding and any penalty is levied against him, it cannot be held invalid and erroneous merely because the accused was not held guilty during the criminal proceedings.

5- Thus, the punishment awarded by the Disciplinary Authority in this case cannot be held to be invalid and erroneous merely because the charges could not be proved against the Appellant in the criminal proceedings.

6- Further, the Appellant had a huge responsibility of weeding out corruption, but his own acts of intimidation, indiscipline and corruption had caused huge loss to BPCL and an adverse impact on the image and reputation of CISF.

7- Thus, the Disciplinary Authority rightfully awarded punishment to the Appellant and dismissed him from his service, after taking into consideration a wide range of factors such as the financial effect, impact of the misconduct on the society, etc.

8- Therefore, the Supreme Court held that the Disciplinary Authority and the High Court were correct in holding that the offence of corruption, misappropriation and indiscipline were so grave in nature, that dismissal was the highest and appropriate form of punishment for the Appellant.

Thus, the Apex Court has reiterated in this case that the procedure of enquiry, standards of proof, trial and punishment for an offence may differ in a civil and a criminal proceeding and that such a difference is deliberate.

Harini Daliparthy

Senior Associate

The Indian Lawyer

SUPREME COURT HOLDS THAT OWNERSHIP OF THE VEHICLE FROM WHICH DRUGS ARE RECOVERED IS IMMATERIAL UNDER THE NDPS ACT

The Narcotic Drugs and Psychotropic Substances Act, 1985, hereinafter referred to as the #NDPS Act, #prohibits a person from the production/manufacturing/cultivation, possession, sale, purchase, transport, storage, and/or consumption of any #narcoticdrug or #psychotropicsubstance.

In this regard, recently, three Judges Bench of the Hon’ble Supreme Court of India in the case of Rizwan Khan v. The State of Chhattisgarh (Criminal Appeal No. 580 OF 2020) dealt with the issue of ownership of a vehicle used for the commission of an offence under the NDPS Act. The Supreme Court, vide its Judgment dated 10.09.2020 held that the ownership of the vehicle used by an accused from which the contraband articles were found is immaterial under the NDPS Act.

The facts before the Supreme Court relates to the Rizwan Khan, who was Accused no 1 before the Trial Court and Appellant herein. The Appellant and one another – Pukhraj (Accused) was severed a search notice under the NDPS Act by the investigating officer on the information received from a source and an FIR in the police station. The Accused were given the option of getting the search done either by a Gazetted Officer or Judicial Magistrate of First Class or any other investigating officer. When the search was conducted by the investigating officer, the Accused was asked to open the sack kept on his motor cycle and on opening the same, a bag of Ganja weighing 20kgs was found. The investigating officer did not find anything objectionable on the person of the Accused. Samples of narcotics were taken from the sack that was in possession of the Appellant.

The Accused were arrested and the information of the complete investigation was given to Special Judge, NDPS and also the Municipal Police Officer. The substance seized was found to be Ganja by the Forensics. The Appellant and the other Accused were charged for the offences under the Section 20(b)(ii)(B)and Section 20(b)(ii)(C) of the NDPS Act, respectively.

The learned Special Judge held the Appellant, herein guilty for the offence under Section 20(b)(ii)(B) of the NDPS Act and sentenced him to undergo five years rigorous imprisonment with fine of Rs.25,000/­, in default, to undergo further one year rigorous imprisonment. Feeling aggrieved and dissatisfied with the Impugned Judgment and Order of conviction and sentence passed by the learned Special Judge, the Appellant herein preferred an Appeal before the High Court. However, the said Appeal was dismissed by the High Court and the High Court confirmed the sentence passed by the learned Special Judge. Hence, being aggrieved by the impugned Order dated 01.10.2018 of the High Court the Appellant preferred the present Appeal.

The present Appeal is vehemently opposed by the Learned Counsel appearing on behalf of the State of Chhattisgarh, Respondent herein.

The substantial issues/contentions raised by the Appellant for the Supreme Court’s decision thereto are as follows:-

  1. The first issue raised on behalf of the Appellant was that the person (ASI J.K. Sen) who seized the articles and lodged FIR also participated in investigation and therefore the complainant and the investigator being the same the trial is vitiated. Therefore the Accused/Appellant is entitled to acquittal.

In this regard, the Supreme Court rejected the above contention of the Appellant and said that the investigation has been carried out by police inspector Ashish Shukla, and Shri J.K. Sen, only recorded the FIR. The Supreme Court further observed that all the aforesaid police witnesses are found to be reliable and trustworthy. The Court also stated that it is a settled law that the testimony of the official witnesses cannot be rejected on the ground of non­corroboration by independent witness. The Supreme Court relied on the case of Surinder Kumar v. State of Punjab, [(2020) 2 SCC 563], on the evidence of police officials/police witnesses and held that the opinion as the police witnesses are found to be reliable and trustworthy, no error has been committed by both the courts below in convicting the accused relying upon the deposition of the police officials.

  1. The second substantial issue raised by the Appellant is that the seizure of Contraband/Ganja from the Appellant/Accused from his motor cycle is also doubtful as its number on the different documents produced by the prosecution is not same;

While dealing with this issue the Supreme Court observed and held that in the present case the Appellant and the other Accused person were found on the spot with the contraband articles in the vehicle. It said that to prove the case under the NDPS Act, the ownership of the vehicle is not required to be established. It is enough to establish and prove that the contraband articles were found from the accused. It was noted by the Court that the commission of an offence is required to be proved under the NDPS Act and which has been successfully proved by the prosecution evidence on record.

Thus, the Supreme Court did not find any discrepancy in the impugned Judgment and Order of its subordinate Courts. Therefore, the present Appeal was dismissed and the impugned Judgment and Order of the High Court was upheld by the Supreme Court.

Lakshmi Vishwakarma

Associate

The Indian Lawyer

HOW TO WRITE A BREACH OF CONTRACT CLAUSE

Contracts — legally-binding agreements between people or business entities — serve as the foundation of business as well as many social interactions. There is a well-established body of law regarding the creation and enforcement of contracts. For example, when one party to a #contract fails to live up to contract promises, it is termed a breach, or breach of contract.

Most contract lawsuits involve cases charging #breach of contract, so it’s important to get breach of contract clauses right in an #agreement. This article will explain the basics of breach of contract clauses and discuss tips to write them.

Entering into a Contract

A breach of contract #clause will only protect a party’s rights if the contract itself is valid and its terms are #enforceable. That means that the contract must be drafted with applicable contract law in mind.

In all states, any adult who is of sound mind can enter into a legally binding contract. While the law permits enforcement of some types of contracts that are not in writing (oral contracts), others (such as real property sales) must be in writing. It is advisable to put all important contracts into writing since it is much easier to prove contract terms written out in a signed document.

In its simplest form, a contract is an exchange of money for goods or services. But the parties can, at their option, include many more details in the contract. These contract clauses can be essential to the transaction, like details addressing how and when the transaction is to be completed, or the duration and scope of the contract.

Breach of Contract

When one party fails to live up to its responsibilities under a contract without a good legal excuse, it is said to “breach” the contract. A breach of contract is defined as a failure to perform a promise that is part of a contract. The promise could either be express, meaning the terms appear in the written contract, or implied.

While a written contract should contain many of the contract terms, some terms that don’t appear in writing may be read into the agreement. These terms must be equitable, reasonable, obvious, and not contradict any of the contract terms. For example, the law of many states implies some terms into agreements, such as implied warranties. A party can be sued for breach of contract for violating implied terms as well as express terms.

Material and Minor Breaches

Contract breaches can vary widely. Sometimes a party to a contract fails to comply with a term that lies at the very heart of the agreement, such as refusing to pay for a product it agreed to buy. A party may also breach less substantive provisions, such as paying by check when the contract states they must pay with cash or paying a day after the date specified for payment.

The law recognizes this difference. The former is termed a material breach, while the latter is called a minor or partial breach. The difference is significant since the remedies at law are different. A material breach by one party excuses the other party from fulfilling the contract terms. In the above example, the party’s refusal to pay for the product justifies the other party’s refusal to deliver the product. The remedies for a minor breach differ. The injured party is not excused from performance but is entitled to seek recovery for the amount of money that will compensate for any losses caused by the minor breach from the breaching party.

Anticipatory Breach

The law recognizes one other type of breach, called the anticipatory breach. This happens when one party says or does something that makes it appear that it does not intend to live up to its obligations under the agreement. The breach has to be clear, unconditional, and straightforward.

These types of breaches can be difficult to prove in court, especially if the party’s behavior is not decisive. For example, proof may be difficult where a party expresses some doubts about performance but does not unequivocally refuse to honor the contract or put performance out of their grasp.

A party faced with an anticipatory breach can sue for breach of contract and ask the court to order money damages, a suspension of its obligations under the contract, and/or reassurance of performance.

Drafting a Breach of Contract Clause

The purpose of a breach of contract clause is to provide direction about how a party should proceed in case a breach of contract occurs. It can be as specific or as general as the parties wish and can require a certain procedure to be followed (such as delivering a written breach of contract notice) before bringing a lawsuit.

Parties who prefer more general breach of contract clauses may simply state that when a party breaches the terms of the agreement, the other party can bring a court action for damages to the extent permitted under state law. On the other hand, a more detailed breach of contract clause can define a breach, distinguish between a material and minor breach, and provide remedies for certain types of breach. It can also permit or require an informal attempt to resolve the matter before taking the issues to court. ​Many breach clauses stipulate how a party must give notice of the breach (e.g. by fax, email, or registered mail).

It’s a good idea to review sample clauses to see different options when drafting a breach of contract clause. Then select the one that works best in the situation.

Drafting a Penalty Clause

When a set penalty is included in a breach of contract clause, it doubles as a penalty clause. A penalty clause sets out the amount a party must pay the other for breaching the contract. This amount is paid instead of, not in addition to, money damages. One of the purposes of a penalty clause is to dissuade the party from breaching the contract to begin with in order to avoid the penalty.

Penalty clauses should be drafted very carefully — if at all. Courts must compare the penalty set out in the contract with the actual loss the party may suffer and determine whether it is disproportionate to actual damages. If the penalty bears no relationship to actual damages, it is unenforceable. On the other hand, the clauses are considered enforceable liquidated damages provisions if the court feels it would be hard to estimate the money damage from a breach of this particular contract and the damage amount stated in the contract is a reasonable estimate of actual losses.

State Contract Law

While breach of contract clauses can provide useful guidance on how to handle a contract violation, state law also plays a role. Each state’s contract law provisions will always trump contract terms, including breach of contract clauses. Draft a breach of contract clause with this in mind.

For example, all states have laws setting out the time frame in which breach of contract actions may be brought. This statute of limitations usually requires court action within two years of a breach for oral contracts, and within four years of a breach for written contracts. Specifying a longer limitations period in a breach of contract clause would conflict with state law and be invalid.

Breach of Contract Notice

Many breach of contract clauses set out a requirement that the injured party send the other a written breach of contract notice when it believes a breach has occurred. Some attorneys refer to this notice as a demand letter. Generally, the notice must set out the facts relating to the breach and present a clear demand for specific action on the part of the breaching party.

If the breach of contract clause provides specific information on how this notice should be drafted, to whom it should be sent, and the method of delivery, those requirements must be followed. If it does not, a party should look to state law and general business practice. Notice by registered mail to the person signing the contract is generally sufficient.

Written by: Teo Spengler

BRIEF UPDATE: ACCUSED CANNOT BE ACQUITTED MERELY BECAUSE INVESTIGATING OFFICER IS THE COMPLAINANT

The Supreme Court has in a recent matter of Mukesh Singh vs State (Narcotic Branch of Delhi) passed a Judgment dated 31-08-2020 and made the following observations regarding whether the accused is entitled to acquittal merely on the ground that the investigating officer himself is the complainant under the Narcotic Drugs and Psychotropic Substances Act, 1985 (the NDPS Act):

  1. The NDPS Act does not specifically bar the informant/complainant from being an investigator and/or officer-in-charge of a police station for the investigation of offences under the said Act.
  2. Further, in case there is any doubt in the mind of the accused that the investigating officer, being the complainant/informant himself, would not conduct a fair investigation, then such question of bias or prejudice would be decided at the time of trial.
  3. That in such cases the reverse burden of proof is on the prosecution to prove that the investigation was conducted in a fair and judicious manner. The defence would also get a fair chance to cross-examine the officer and any other witnesses to the alleged crime.
  4. Thus, the credibility of the complaint and the informant should not be doubted and the accused should not be acquitted, merely on the ground the complainant himself has conducted the investigation.
  5. In the event that it is proved that the investigating officer has acted maliciously, then he would be punished under Section 58 of the NDPS Act for vexatious entry, search, seizure or arrest without reasonable ground of suspicion. The punishment extends to six months imprisonment or Rs. 1000/- fine or with both. In case of wilfully providing false information and causing arrest, the punishment extends to two years imprisonment or fine or both.
  6. Therefore, the Apex Court has overruled its judgment in Mohan Lal vs State of Punjab (2018) 17 SCC 627, and held that the accused cannot be granted acquittal merely on the ground that the trial has been vitiated because the informant and the investigator is the same person.

The Supreme Court Judgment Mukesh Singh vs State (Narcotic Branch of Delhi) 2020 SCC Online SC 700 is attached below:

Harini Daliparthy

Senior Associate

The Indian Lawyer

NOTIFICATION MUST BE CLARIFICATORY OR CURATIVE IN NATURE TO APPLY RETROSPECTIVELY

In the case of M/s. L. R. Brothers Indo Flora Ltd. v. Commissioner of Central Excise (Civil Appeal No. 7157 of 2008), the Hon’ble Supreme Court of India, vide Judgment dated 01.09.2020 held that for a #notification to apply #retrospectively, it must be established that the previous notification had any omission, mistake or error in it and as a result, the #amended notification has been passed to rectify the said mistake. In absence of these essential ingredients, a #legislation cannot be considered to have a retrospective effect.

The subject matter of this case is concerning the M/s. L. R. Brothers Indo Flora Ltd. (‘Appellant’), which is a 100% Export Oriented Unit (#EOU) that is required to export all articles produced by it. As per the #Export­Import (#EXIM) Policy under Notification No. 126/94­ Cus dated 3.6.1994(the Exemption Notification):

  1. Customs Duty exemption on inputs when finished goods have to be exported- EOUs are exempted from payment of customs duty on the inputs and materials that are imported for the purpose of being used in manufacturing articles to be exported.
  • Customs Duty exemption on inputs when finished goods have to be sold domestically- EOUs are further exempted from payment of customs duty on the inputs and materials that are imported for the purpose of being used in manufacturing articles meant for domestic sales within the Domestic Tariff Area (DTA).
  • Provided that the EOUs comply with the criteria and requirements given in the EXIM Policy.
  • EOUs have to further obtain prior permission from the Development Commissioner under the EXIM Policy, to make DTA sales.
  • Levy of Excise Duty on excisable finished goods in DTA- EOUs making DTA sales shall be charged excise duty on excisable finished goods.
  • Levy of Customs Duty on non- excisable finished goods in DTA-In case of non-excisable finished goods, EOUs making DTA sales shall be charged customs duty on the inputs used in manufacturing the non-excisable finished goods at a rate equivalent to the rate of customs duty chargeable as if such finished goods were imported into India.

The said Exemption Notification was amended by Notification No. 56/01 ­Cus dated 18.5.2015(the Amendment Notification).As per the Amendment Notification:

  1. Levy of Customs Duty on non- excisable finished goods in DTA-In case of non-excisable finished goods, EOUs making DTA sales shall be charged customs duty on the inputs used in manufacturing the non-excisable finished goods at a rate equivalent to the rate of customs duty chargeable to inputs.

In this case, the Appellant continued to make DTA sales of non-excisable goods from 1998 upto December 2000, without obtaining the prior approval of the Development Commissioner and without maintaining the requisite net foreign exchange earnings as per the EXIM Policy.

In this regard, the Additional Commissioner issued a Show Cause Notice dated 16-03-2001 to the Appellant and adjudged that the DTA sales were made without permission of the Development Commissioner and in contravention of the EXIM Policy and therefore, Customs Duty is leviable on the said unauthorized DTA sales of non-excisable goods.

Thus, the Additional Commissioner, by way of Order 18-10-2001,confirmed the levy of Customs Duty on the final articles sold in DTA i.e. Rs.9,98,177.00 and a penalty of Rs.9,98,177.00 under Section 114A the Customs Act, 1962 (the Act). This Order was further confirmed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), vide Final Order dated 17-7-2008 in a Customs Appeal.

Being aggrieved, the Appellant preferred an Appeal against the Order passed by the CESTAT before the Supreme Court and contented that as he had sold non-excisable goods in DTA, namely, cut flowers, so no excise duty can be levied upon it. Further, in such a case, as per the Exemption Notification, the customs duty is levied on the imported inputs used in manufacturing the non-excisable goods at a rate equivalent to the customs duty rate levied on the finished product as if it was imported. But in this case, there were no imported inputs used in manufacturing cut flowers and that the inputs were home grown, so, no customs duty could also be charged.

The Appellant further contended that as per the Central Board of Excise and Customs (CBEC) Circular No. 31/2001­ Cus dated 24.5.2001, the provision in the Exemption Notification to levy customs duty on non-excisable goods at the rate equivalent to the customs duty rate levied on the finished product as if it was imported, is putting the floriculture EOUs at a disadvantageous position and thus, the Amendment Notification was issued to harmonize this issue. The Appellant thus claimed that the Amendment Notification is retrospective in nature.

While dealing with this issue, the Supreme Court analyzed the Exemption Notification and recorded the following observations:

  1. That the Show Cause Notice was issued to the Appellant prior to the issuance of the Amendment Notification.
  1. That the language employed in the Amendment Notification does not offer any guidance on whether the amendments made were to apply prospectively or retrospectively. It is a settled proposition of law that all laws are deemed to apply prospectively unless either expressly specified to apply retrospectively or intended to have been done so by the Legislature. The latter would be a case of necessary implication and it cannot be inferred lightly.
  1. That in order to call the Amendment Notification clarificatory or curative in nature, it would be required to show that there had been an error/mistake/omission in the previous notification, i.e. the Exemption Notification.But there is no mention in the Amendment Notification about any mistake or error that may have crept in the Exemption Notification that is being corrected by way of amendment.
  1. Therefore, it must be construed that the Government intentionally introduced the Amendment Notification to only change and determine the Customs Duty charging rate. Thus, the amendment brought in cannot be said to be clarificatory in nature.
  2. The Supreme Court further observed that the CBEC Circular does not mention that the earlier methodology in force was deficient or devoid of clarity in any manner. It rather says that the charging rates were being disadvantageous to the EOU units as compared to the DTA units.
  3. The Court observed that an essential requirement for application of legislation retrospectively is to show that the previous legislation had any omission or ambiguity or it was intended to explain an earlier act. In absence of the above ingredients, a legislation cannot be regarded as having retrospective effect.

That in view of the aforesaid observations and analysis of the language of the said Notifications, the Supreme Court held that the Amendment Notification could not be held to be applicable retrospectively. Thus, the Appellant was obligated to comply with the conditions prescribed under the EXIM Policy in order to avail the exemption and failure to do so must deprive the person of the exemption so granted. Therefore, the Apex Court upheld the decision of CESTAT to levy Customs Duty on the Appellant for the unauthorized DTA sales, at a rate equivalent to the customs duty rate levied on the finished product as if it was imported.

Lakshmi Vishwakarma

Associate

The Indian Lawyer

Edited by

Harini Daliparthy

Senior Associate

The Indian Lawyer