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On 13th June 2018, the Union Cabinet chaired by the Prime Minister Narendra Modi approved the proposal for enactment of Dam Safety Bill, 2018 in the Parliament.

The Dam Safety Bill, 2018 shall examine the cause of any major dam failure. It has been promulgated to address issues concerning dam safety such as regular inspection of dams, emergency action plan, comprehensive dam safety review, adequate repair and maintenance funds for dam safety and safety manuals for existing and new dams in the country.

National Dam Safety Authority (NDSA) will act as a regulatory body which shall be operative to implement the policy, guidelines and standards for dam safety in the country and create database of existing dams as proposed in the Bill.

The NDSA will investigate dam failures and have the authority to fine the States if found negligent in implementing safety procedures.

The Bill comprises of uniform measures to ensure safety of dams adopted which will be adopted by all States and Union Territories. The purpose of the Bill is also to help in eliminating potential risk of floods during heavy rainfall that causes major disaster to environment. Therefore, it will also help in safeguarding human life, animal and property from floods.

The Bill will also provide constitution of a National Committee on Dam Safety which shall evolve dam safety policies and recommend necessary regulations as may be required for the purpose.

The Dam Safety Bill lays onus of dam safety on the dam owner and includes penal provisions for commission and omission of certain acts.

Taruna Verma

Senior Associate

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Pritish Natvar Sanghi, the son, had petitioned the High Court of Judicature at Bombay challenging the order of the SDO whereby the SDO declared transfer of 50% share by the Respondent No.1, the father, to the petitioner in respect of his flat, at Brooklyn Hills Co-operative Housing Society, as illegal.

The case of Pritish Natvar Sanghi v. Natvar Keshavlal Sanghvi and Anr. was decided by the High Court of Judicature at Bombay on 4th June, 2018, upholding the order of the SDO.

The Petitioner’s mother, Respondent No. 1’s wife, died in 2014. Subsequently, the Respondent No. 1 remarried. To this, the Petitioner and his wife desired that 50% share in the property of Respondent No. 1 be transferred in their name. The Respondent No. 1, to maintain peace in the family, made a gift deed on 23rd May, 2014 in favour of the Petitioner transferring 50% share in the property of Respondent No. 1.

The Respondent No. 1 alleged that after the transfer was made in favour of the Petitioner, the Petitioner and his wife started ill-treating the second wife of the Respondent No. 1. As a result, the Respondent No. 1 and his second wife were compelled to live separately in a rented accommodation.

The Respondent No. 1 moved the SDO under sections 5 and 23 of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 (hereinafter the “Act”) for maintenance and declaration of the gift deed as void.

Clause (1) of Section 23 of the Act states that where any senior citizen who, after the commencement of this Act, has transferred by way of gift or otherwise, his property, subject to the condition that the transferee shall provide the basic amenities and basic physical needs to the transferor and such transferee refuses or fails to provide such amenities and physical needs, the said transfer of property shall be deemed to have been made by fraud or coercion or under undue influence and shall at the option of the transferor be declared void by the Tribunal.

The Petitioner, before the SDO, took the stand that he is willing to let the Respondent No. 1 stay with him in the flat but not his step-mother. Consequently, the SDO revoked the gift deed in favor of the Petitioner, after which the Petitioner moved the High Court of Judicature at Bombay.

The High Court of Judicature at Bombay held that since the gift deed was made at the request of the Petitioner and his wife, they were under an obligation to not mistreat the Respondent No. 1 and his wife after the transfer of 50% share in the property. The High Court while holding that it was incumbent upon both the Petitioner and the wife to look after the Respondent No. 1 and his second wife, upheld the order of the SDO, finding no error in the same and dismissed the petition.

 

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

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The Parliament had, in 2015, come out with the Commercial Courts, Commercial Division and Commercial Appellate Division of High Court Act (hereinafter “Act”) in 2015. The Act provided for the establishment of Commercial Courts at the District level and Commercial Divisions in High Courts which have ordinary original civil jurisdiction. The Act further provided for setting up of the Commercial Appellate Divisions in High Courts to deal with appeals from the Commercial Court/Commercial Division. This was done to ensure speedy adjudication of matters relating to commercial disputes.

Since, it was felt that the Act of 2015 did not ensure a speedy legal recourse, the President of India gave his assent to The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018 (hereinafter “Ordinance”), which was published in the Official Gazette of India on May 03, 2018. The amendments in the Ordinance have been incorporated with a view to enlarge the scope of commercial courts in India. The amendments will also act as a catalyst towards improving India’s ranking on the ‘Ease of Doing Business Index’ as released by the World Bank (Ease of Business Report).

The amendments brought to the Act of 2015 by way of the Ordinance, 2018 are as follows:

  1. It reduces the pecuniary jurisdiction of the Commercial Courts and the Commercial Divisions of the High Court. Under the Act of 2015, Commercial Courts and the Commercial Divisions of the High Court could entertain matters, including Intellectual Property Rights matters, of Rupees 1 crore and above. However, the Ordinance, 2018 reduces it to Rupees 3 lakhs and above.

  2. The Act of 2015 specifically barred the constitution of Commercial Courts for the territory over which the High Court has ordinary original civil jurisdiction. The Ordinance, however, permits the states, after consultation with the concerned High Court, to set up Commercial Courts at the District Judge Level for territories where the High Court has ordinary original civil jurisdiction.
  3. Consequently, Section 9 of the Act of 2015 which deals with ‘transfer of a suit if counterclaim in a commercial dispute is of Specified Value’ and corresponding section 12(e) of the Act of 2015 have also been deleted.
  4. The state governments have additionally been given powers to establish Commercial Appellate Courts at the District Judge Level, except in territories where the High Courts exercise ordinary original civil jurisdiction, to entertain appeals from the judgment/order of a Commercial Court below the level of a District Judge.
  5. Appeals from the Commercial Courts at the District Judge Level and from the Commercial Division of a High Court will lie to the Commercial Appellate Division of that High Court.
  6. The Ordinance of 2018 creates a separate chapter for “Pre-Institution Mediation and Settlement” and mandates pre-institution mediation as a remedy to be exhausted by the plaintiff prior to filing a suit, which does not contemplate any urgent interim relief under the Act of 2015.

 

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

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In the recent times, a number of companies including Google, Whatsapp and such other global giants have reportedly shown interest to venture into the digital wallets or digital payment space. Since after the demonetization phase in 2016, the Government of India has been actively promoting and encouraging the use of online payment systems, online banking and payment transactions, etc in a bid to digitize the economy.

Therefore, there is a rising need to regulate and adopt safety and security measures the online payment systems as they hold private and significant data of the users. Thus, the Reserve Bank of India (RBI), by virtue of its powers under Section 10(2) read with Section 18 of Payment and Settlement Systems Act 2007, has recently issued a Notification dated 06.04.2018 mandating all payment system operators to store data related to payment systems operated by them within the country latest by 15.10.2018. This would enable RBI to have unfettered access to all payment data stored with the payment system providers, intermediaries, third party vendors and other entities in the payment ecosystem for supervisory purposes and also to reduce risks of data breaches. As per the Notification, such data should include the full end-to-end transaction details / information collected / carried / processed as part of the message / payment instruction. For the foreign leg of the transaction, if any, the data can also be stored in the foreign country, if required.

Upon completion of the storage of data, an audit should be conducted by the empaneled auditors of the Computer Emergency Response Team- India, the nodal agency for responding to computer security incidents as and when they occur, to certify the completion of such data storage activity by the system providers. The System Audit Report (SAR) so prepared by the auditors and approved by the board of directors of the system provider company has to be submitted to the RBI on or before 31.12.2018.

In this regard, the RBI has recently communicated to the payment system providers seeking details of their preparedness to comply with the mandate issued under the Notification. Reportedly, Paytm and PhonePe have stated that they are fully compliant with such mandates. But some have raise concern stating that RBI would be able to regulate the systems of those service providers who have their data stored in the servers in India, but the consumer data with global companies willing to do business in this sector stored in servers outside India, may not be monitored by RBI. So in such a case the manner in which such data can be kept safe and secure is unclear.

 

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

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The case of Pallav Mongia v. Union of India & Anr., decided on 2nd February, 2018 by the Delhi High Court, is one of denied aircraft boarding after confirmation of tickets.

The petitioner had challenged paragraph 3.2 of the Civil Aviation Requirement (hereinafter “CAR”), which deals with denied boarding. The petitioner, in the instant case, was denied aircraft boarding from Delhi to Patna due to overbooking of flights despite the petitioner booking the tickets well in advance and reaching the airport on time.

Paragraph 3.2 of CAR makes a provision for voluntary giving up of seats by the passengers where the number of passengers who have been given confirmed bookings for travel and who have reported for the flight well within the specified time ahead of the departure of the flight, exceed the number of seats available.

It also provides for compensation to passengers who have been denied boarding against their will.

It is stated therein that this practice of overbooking of flight to a limited extent is followed by the airlines to reduce the possibility of flights departing with unoccupied or empty seats because of ‘no shows’ by passengers having booked tickets.

Paragraph 3.5 of CAR stipulates financial compensation to the passenger in cases where the passenger has been denied boarding against his will. It also offers the passengers the choice between the following kinds of compensation:

  1. Refund of air ticket at the price it was purchased
  2. A flight to the first point of departure
  3. Alternate transportation under comparable/alternate mode of transport (whenever applicable), to the final destination.
  4. Alternate transportation under comparable/alternate mode of transport (whenever applicable), to the final destination at a later date at the passenger’s convenience, subject to availability of seats.

The petitioner had challenged the jurisdiction of the Director General of Civil Aviation (DGCA) to issue the impugned Civil Aviation Requirement and also questioned the scope of the same in as much as it restricted the amount/options of compensation to be awarded to a passenger. The Delhi High Court held that not permitting a passenger holding confirmed tickets to board a flight would definitely amount to deficiency of service for which the passenger is entitled to seek compensation/damages. The CAR does not limit the scope of compensation and the passenger is well within his rights to move against the defaulting airlines for seeking compensation. Holding the petition as misconceived, the Delhi High Court deemed it unnecessary to examine the question whether the DGCA had the jurisdiction to issue the CAR.

The Delhi High Court ruled that “a plain reading of paragraph 3.2 indicates that the DGCA has recognized that certain airlines follow the practice of overbooking of flight; however, the same cannot be read to mean that the DGCA has permitted the airlines to do so. And, it certainly cannot mean that such practice has the sanction of law.”

The Delhi High Court concurred with the suggestion of the learned counsel for Air India that it is open for the petitioner to seek fair compensation from Air India, as has been done in many a cases before the National Consumer Disputes Redressal Commission against various airlines.

 

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

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The Supreme Court, in the case of Amrit Paul Singh & Anr. v. TATA AIG General Insurance Co. Ltd. & Ors., decided on 17th May, 2018, has held that plying of the transport vehicles in public without permit is a statutory breach and if such vehicles get involved in an accident, the insurer will be absolved of liability to pay.

In the present case, the offending truck had hit a motorcycle and resultantly caused the death of driver of the motorcycle. A claim petition was preferred by the legal representatives of the deceased under section 166 of the Motor Vehicles Act, 1988 before the Motor Accident Claims Tribunal, Pathankot claiming compensation to the tune of Rs. 36,00,000/-.

The Motor Accident Claims Tribunal held that since the truck was being plied without permit, a statutory breach of policy conditions under the Motor Vehicles Act, 1988 had occurred and therefore, the insurer is not liable to pay compensation. The   Tribunal directed that an amount of Rs.   15,63,120/- shall be paid by the insurer along with interest at the rate of 9% from the date of award till its realization and the same be recovered from the owner and driver of the vehicle.

Aggrieved, the owner of the truck filed the appeal before the Punjab and Haryana High Court. The Punjab and Haryana High Court upheld the order of the Tribunal.

The Supreme Court also rejected the contentions of the owner and upheld the orders of the Tribunal and the High Court and ruled as follows:

In the case at hand, it is clearly demonstrable from the materials brought on record that the vehicle at the time of the accident did not have a permit. The exceptions under   Section   66   of   the   Act cannot be taken aid of in the course of an argument to seek absolution from liability. Use of a vehicle in a public place without a permit is a fundamental statutory infraction.  We are disposed to think so in view of the series of exceptions carved out in Section 66. The situations carved out in the said section 66 cannot be equated with absence of license or a fake license or a license for different kind of vehicle, or, for that matter,   violation   of   a   condition   of   carrying   more   number   of passengers.   It does not require the wisdom of the “Tripitaka”, that the existence of a permit   of   any   nature   is   a   matter   of   documentary   evidence. Nothing has been brought on record by the insured to prove that he had a permit of the vehicle. In such a situation, the onus cannot be cast on the insurer. Therefore, the Tribunal as well as the High Court were correct in directing that the insurer was required to pay the compensation amount to the claimants with interest with the stipulation that the insurer shall be entitled to recover the same from   the   owner   and   the   driver. The said directions are in consonance with the pay and recover principle.

 

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

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On Wednesday, 30th May, 2018, the Delhi High Court has held in Jabbar vs. State, that the Protection of Children from Sexual Offences (POCSO) Act, 2012 is a gender-neutral law and that every child under the age of 18 is covered under it.

In its recent judgement the Delhi High Court upheld the conviction of a man for sodomising a 6 year old boy and sentenced him to rigorous imprisonment of 15 years under POCSO Act.

The Bench comprising of Justice S.P. Garg and J. C. Hari Shankar stated that the POCSO Act does not discriminate between a male and a female child victim as sexual offences.

The Trial Court had convicted the Accused of committing an aggravated form of penetrative sexual assault on a six year old boy. The conviction has been made under section 6 of the POCSO Act.

The Trial Court convicted the Accused under Section 6 of the POCSO Act for committing an aggravated form of penetrative sexual assault on a 6 year old boy.  The minimum punishment under section 6 of the POCSO Act is 10 years. The Court sentenced the Accused for 15 years of rigorous imprisonment as 10 years would be insufficient in the present case due to severity of the offense.

The Bench held that, “The jurisprudence that has developed, with respect to the testimonies of girl-victims, as witnesses would, therefore, apply, so far as the POCSO Act is concerned, mutatis mutandis to boy-victim.”

The Appellant Jabbar filed an Appeal at the Delhi High Court. The Court perused the evidence on record and confirmed the Trial Court findings on Jabbar’s conviction.

Delhi High Court further held that “The right to breathe free, in the open air, is a constitutional guarantee, preambly promised to every Indian denizen, and, for the citizenry of the country, stands sanctified by Article 21 of the Constitution of India. Permanent extinction of said right, for life, must, therefore, necessarily visit only the most hardened of offenders, in the most extreme cases. The ―quality of mercy, unstrained, must always temper the hard scales of the law, if a just balance is to be achieved”

Thus, the Court in its decision has reiterated the observations made by the Supreme Court in the PIL filed by advocate Alakh Alok Srivastava, demanding death penalty for child rapists, that the Court does not discriminate in the testimonies made by a boy or a girl under the POCSO Act, stating that the Act is gender neutral in nature.

Taruna Verma

Senior Associate

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INTRODUCTION :-

Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016”) was notified by the Government of India on 28th May 2016. The Act consolidates and amends the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of these persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. IBC, 2016 also altered the order of priority various payment dues; and put the payments of workmen’s dues in foremost priority over Government dues. The payments of Government dues are kept after payment of financial debts owed to unsecured creditors. IBC, 2016 provides the complementary ecosystem for the insolvency law, and aims to ensure smoother settlement of insolvency cases, enable faster turnaround of businesses and provide for creating a database of creditors.

The Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) can be initiated by making an application to the National Company Law Tribunal (NCLT) by the  Financial Creditors under Section 7 of IBC, 2016 by Operational Creditors under Section 9 of the IBC, 2016 and by the Corporate Debtor himself under Section 10 of the IBC, 2016. The basic departure from the old law and fundamental rule under this new codified law is that a company which has gone insolvent cannot start the Liquidation process at the primary stage until and unless it has gone through the process of Corporate Insolvency Resolution Process (CIRP), under the said resolution process options for revival of the company is looked into and if the said resolution process fails then only the company goes into liquidation.

STAGE-WISE PROCESS FOR INSOLVENCY:-

In case a corporate debtor makes a default in repayment of dues of the creditors, the financial creditor/s, an operational creditor or a corporate debtor through Corporate applicant or any authorised member, a person who has the controlling capacity over the financial affairs of the corporate debtor has the power to start the insolvency resolution process. In order to initiate the resolution process, an application has to be made to National Company Law Tribunal (NCLT) under (Section 10, IBC, 2016 in case of Corporate Debtor, Section 7 and 9 of IBC, 2016 in case of Financial Creditors and Operational Creditors).

A ten days demand notice under (Section 8(2) of IBC, 2016 in case of Operational Creditors) has to be given to the corporate debtor by the Operational Creditors before he approaches the NCLT under Section 9 of IBC, 2016). However, an operational creditor can directly approach the NCLT if the corporate debtor does not repay the outstanding dues or fails to show any existing difference.

The new code states that the insolvency process of a Corporate Debtor must be concluded within 180 days from the date of initiation in the NCLT (Section 12, IBC of 2016). The claims of the Creditors shall be frozen for a period of six months on admission of application by NCLT. During this time, the NCLT shall listen to the options to revive and decide the future course of action. It is further clarified that unless a resolution plan is made or liquidation process is initiated, no legal claim shall be sought against the corporate debtor in any other forum or Court (Section 14 of IBC, 2016).

When the application for insolvency is accepted under Section 7/9/10 of IBC, 2016 the NCLT within fourteen days appoints an Insolvency Resolution Professional (IRP) on receiving a confirmation from Board of Insolvency and Bankruptcy.The appointed IP then takes up the responsibility of the debtor’s properties and functioning. He also collects all the information that is relevant with regard to the financial condition of the debtor from information utilities. IP is appointed for a term of thirty days only within which he does all the necessary scrutinization (Section 18, IBC, 2016).

The next step is to make a public announcement about the commencement of corporate insolvency process so that claims from any other creditors can also come forward, if any. A creditor’s committee is constituted by the IRP post receiving any claims by public announcement (Section 13 of IBC, 2016). In the event any financial creditor is a related party of the defaulting debtor, such a creditor will not have the right to represent, participate or vote in the committee of creditors so constituted by the IP. In order to be a part of the Creditor’s Committee, the average dues of the operational creditors must be at least ten percent of the debt. The Committee of Creditors shall first seven days of its incorporation decide through seventy five percent votes whether the interim IRP should be used as a Resolution Professional or should be replaced with someone else.

After the Committee finalizes the Resolution Professional he is appointed by the NCLT (Section 16 of IBC, 2016). The Resolution Professional so appointed can be replaced anytime by the Creditor’s Committee with a majority of seventy five percent votes. In the interim, i.e. till the appointed of any new Resolution Professional, the Creditor’s Committee can take decisions with regard to insolvency resolution by seventy five percent majority voting.

In the event majority (75%) of the financial creditors are of the view that the case is very complex and more time extension is required, the NCLT may grant a one-time extension of up to a maximum of 90 days over and above the pre decided tenure of 180 days. It shall be the sole responsibility of the Resolution Professional to manage and conduct the corporate insolvency resolution procedure during such a term (Section 18 of IBC, 2016).

To enable the resolution applicant for preparing a resolution plan, the Resolution Professional shall compile a statistics note. A resolution applicant can be defined as an individual who has the duty and responsibility to submit a resolution plan to the Resolution Professional. The Creditor’s Committee further receives the plan from the Resolution Professional for its approval.

On the resolution being approved, the next step by the Creditor’s Committee is to come up with options on restructuring which can be either coming up with a modified repayment plan or to simply liquidate the properties of the company in order to recover dues. If the Creditor’s Committee fails to take any binding decision with regard to the repayment by the debtor, the debtor’s assets are liquidated in order to pay back the creditors. If there is a plan prepared for resolution, the same shall be sent to NCLT for approval and implementation.

LIQUIDATION

The liquidation process commences only if:

The Creditors Committee fails to submit the resolution plan with the provided time frame to the NCLT.

The Resolution Plan is rejected because of non-adherence to the Code.

The Creditor’s Committee takes a decision for liquidating the assets by a majority vote.

The resolution plan is flouted by the debtor.

As mentioned above, no suit can be instituted by or against the corporate debtor during liquidation process (Section 14 of IBC, 2016). The only exception, in this case, can be through the liquidator representing the corporate debtor based on the permission of the NCLT. The liquidator shall be the same person as the Resolution Professional lest replaced. The liquidator so appointed shall constitute the liquidation estate which shall comprise of all the properties, whether financial or immovable, of the corporate debtor. The claims of the creditors may be received, verified, admitted or rejected based on the final decision of the liquidator within a prearranged time. In order to appeal to the adjudicator, the creditor gets a total of fourteen days.

Based on the priority, a security creditor may receive the proceeds from sale of assets or realize the security interest by enforcing or dealing with the secured asset as per the applicable laws related to him. He may either relinquish his security interest or realize it based on his intent. Any supplementary sum so realized shall be submitted to the liquidator. Although the security creditors will be paid by the liquidator on priority basis out of the corporate debtor’s assets, his claim shall be considered subordinate to the unsecured creditors to the extent of deficit. The distribution shall be in manner laid down in the Code. All those persons who have any sort of individual rights over the assets of the debtor shall also form a part of the liquidation procedure. There are certain funds which cannot be attached to the estate of the debtor for recovery of debts. Such funds are provident fund, gratuity fund and the pension fund because this amount belongs to the employees and workmen and hence they are given the priority with regard to these funds. Once all the assets of the corporate debtor are liquidated, the NCLT passes an order to finally liquefy the corporate debtor.

 

IMAAD M. KHAN

SENIOR ASSOCIATE

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The Authority for Advance Rulings (AAR) is a high level quasi judicial body set up in 1993 under the Income Tax Act 1961 for giving binding advance rulings which may indicate the prospective indirect tax liabilities in respect of any activity undertaken under the Customs Act, 1962, or Central Excise Act 1944, or taxable services rendered under Finance Act 1994 by a person.

The AAR has recently on 21.05.2018 ruled that payment of damages in respect of non-performance of contracts, except in certain cases, would attract goods and services tax (GST) in India (Ruling).

In contracts for supply of goods and services, parties generally stipulate that both the service provider and the service recipient would abide by the terms and conditions of the contract. In addition there is a provision of liability which states that if any of the parties breaches the contract for any reason including non-performance of contractual obligations, then such person is liable to pay damages in the form of fine/penalty/damages to the other party.

According to AAR, in such cases, the non-defaulting party is tolerating the non-performance of contract for which consideration in the form of fine or liquidated damages is payable by the defaulting party. The AAR has concluded that tolerating such non-performance of contract is an activity or transaction which is deemed to be a supply of service as they fall under the category of agreeing to the obligation to tolerate an act or a situation under clause 5 of Schedule II of CGST Act 2017. Therefore, the person who has received the damages from the defaulting party is liable to pay GST on such amount.

However, the AAR has clarified that payment of fine or liquidated damages to Government of India or any local authority, in case of non-performance or breach of contracts for supply of goods or services to the Government, violation of laws, bye-laws, rules or regulations, etc would not attract GST. Thus, the consideration received by the Government from any person or supplier for non performance of contract, or violation of laws, etc is exempted from GST.

Earlier, there was no service tax payable on the amount of fine or liquidated damages so received by a person and this position was continued under GST regime until the Ruling was published by AAR.  A number of industry experts have commented negatively on this Ruling stating that for GST to be applicable to an activity or transaction there has to be an element of supply, which is absent in the case of receipt of liquidated damages in the case of non-performance of contract. Moreover, there is a need to set up a mechanism whereby such rulings are well debated before they are published.

It is anticipated that this Ruling can lead to a lot of litigation, particularly in those sectors, such as infrastructure sector, where provisions for liquidated damages are commonly used in contracts.

 

 

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

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The Supreme Court, in M/s B. Himmatlal Agrawal v. Competition Commission of India & Anr., decided on 18th May, 2018, has held that the National Company Law Appellate Tribunal (NCLAT) has no jurisdiction to dismiss the appeal failing non-compliance of deposit as a pre-condition for grant of stay.

In the instant case, the Competition Commission of India had imposed penalty of Rs. 3.61 crores on the Appellant, namely, M/s B. Himmatlal Agrawal and nine other parties for indulging in anti-competitive and unfair trade practices. The Appellant appealed against the order before the NCLAT, and also prayed for interim stay of the penalty order. The NCLAT granted stay to the Appellant on the condition that it deposits 10% of the total penalty. The Appellant failed to deposit the amount and the NCLAT disposed off the appeal without further reference to the Bench.

The pure legal question that came up for consideration before the Supreme Court was whether the order of the NCLAT dismissing the main appeal itself for non-compliance of the direction to deposit the amount as a condition for grant of stay, is justified and legal.

The Bench of Justice A. K. Sikri and Justice Ashok Bhushan, referring to Section 53B of the Competition Act, 2002, which pertains to Appeal to NCLAT, ruled as follows:

“This statutory provision does not impose any condition of pre-deposit for entertaining the appeal. Therefore, right to file the appeal and have the said appeal decided on merits, if it is filed within the period of limitation, is conferred by the statute and that cannot be taken away by imposing the condition of deposit of an amount leading to dismissal of the main appeal itself if the said condition is not satisfied. Position would have been different if the provision of appeal itself contained a condition of pre-deposit of certain amount. That is not so. Sub-section (3) of Section 53B specifically cast a duty upon the Appellate Tribunal to pass order on appeal, as it thinks fit i.e. either confirming, modifying or setting aside the direction, decision or order appealed against. It is to be done after giving an opportunity of hearing to the parties to the appeal. It, thus, clearly implies that appeal has to be decided on merits.”

In conclusion, it needs to be understood that the condition of deposit was attached to the order of stay. In case of non-compliance of the said condition, the consequence would be that the stay has ceased to operate as the condition for stay is not fulfilled. However, non-compliance of the conditional order of stay would have no bearing insofar as the main appeal is concerned.

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

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