TaxTMI Updates e-Newsletter
Nov 19,2020

Refund of input tax credit on zero-rated supplies - acknowledgement, scrutiny and grant of refund within a strict time frame - hold on refund pending investigation by DGGI - opportunity of personal hearing under Section 54(11) of the CGST Act, 2017

Refund of input tax credit on zero-rated supplies - acknowledgement, scrutiny and grant of refund within a strict time frame - Writ petition seeking direction for release of refund in respect of exports for July-2019 and August-2019 disposed of on withdrawal with liberty to challenge communications dated 10th November, 2020. - HELD THAT: - The petitioner sought release of refund of input tax credit claimed in respect of zero-rated supplies exported under LUT for July-2019 and August-2019, asserting compliance with procedural requirements and reliance on the statutory refund code. The respondents placed the refund on hold, communicating that DGGI, Ahmedabad had booked a case for alleged fraudulent availment/passing of ITC and, separately, fixed a personal hearing under Section 54(11) of the CGST Act, 2017. In the course of hearing before this Court the petitioner elected to withdraw the writ petition but sought and was granted liberty to challenge the two letters dated 10th November, 2020 which record (a) the hold on refund due to DGGI's investigation and (b) the scheduling of the personal hearing. No adjudication on the merits of the refund claim or on the investigatory hold was undertaken by the Court. [Paras 11, 12]

Writ petition disposed of as withdrawn with liberty to the petitioner to challenge the two communications dated 10th November, 2020.

Final Conclusion: The petition was disposed of on the petitioner's withdrawal, subject to liberty to challenge the respondent authorities' letters dated 10th November, 2020 (recording an investigatory hold by DGGI and fixing a hearing under Section 54(11)), and no decision was rendered on the merits of the refund claim.

Import of service - reverse charge mechanism - fixed establishment - location of supplier of service

Import of service - reverse charge mechanism - location of supplier of service - Supply of services under the MARC between the foreign company and BCCL qualifies as import of service and IGST is payable by BCCL under reverse charge in terms of Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017. - HELD THAT: - The appellate authority examined the factual matrix and contractual documents and found that the foreign entity (IZ-Kartex named after P.G. Korobkov Ltd., Russia) entered into the MARC with BCCL, deployed a subcontractor (DDP-N) in India and raised invoices on BCCL. Applying the three elements of the statutory definition of import of service - supplier located outside India, recipient located in India, and service provided in India - the authority concluded that all elements are satisfied. Consequently, the transaction is an import of service and the tax liability arises on the recipient in India. The order was modified to declare that BCCL is liable to pay IGST under the reverse charge mechanism specified in the cited notification. [Paras 12, 13]

The supply qualifies as import of service and IGST is payable by BCCL under reverse charge.

Fixed establishment - location of supplier of service - The WBAAR's conclusion that the appellant's registered domestic entity in India constituted a fixed establishment and therefore located the supplier in India was incorrect. - HELD THAT: - The authority reviewed the WBAAR's reliance on deputation of personnel and on-site structures to characterise a permanent presence. It observed that the statutory definition of fixed establishment excludes the registered place of business and requires a place characterised by sufficient permanence and suitable structure of human and technical resources to supply services. The WBAAR had not shown that the registered domestic entity maintained such structures; instead, its findings described resources maintained at BCCL's premises. Further, the domestic entity in India was established only after the contract commenced in 2015, undermining the WBAAR's inference that the branch was the supplier throughout. For these reasons the WBAAR's finding that the registered branch was a fixed establishment locating the supplier in India was not sustained. [Paras 11, 12]

The WBAAR erred in treating the registered domestic entity as a fixed establishment and in placing the supplier's location in India on that basis.

Final Conclusion: The Advance Ruling is modified: the supply under the MARC is declared to be import of service and IGST is payable by the recipient BCCL under reverse charge; the earlier conclusion treating the appellant's registered domestic entity as a fixed establishment locating the supplier in India is set aside.

Drugs or medicines including their salts and esters specified in List 1 - Concessional rate of GST for specified drugs - Usage of the drug (route/form of administration) as basis for concessional classification - Bulk drug falls within the definition of 'drug' - Nomenclature 'for injection' denotes dry solids reconstituted for injection - Comparative application of Customs and GST notifications

Drugs or medicines including their salts and esters specified in List 1 - Concessional rate of GST for specified drugs - Usage of the drug (route/form of administration) as basis for concessional classification - Bulk drug falls within the definition of 'drug' - Nomenclature 'for injection' denotes dry solids reconstituted for injection - Sale of Micafungin Sodium by the appellant's DTA unit is eligible for GST at 5% under Serial No.114 of Entry No.180 of Schedule I to Rate Notification No.01/2017-C.T. (R). - HELD THAT: - The Authority determined that the Rate Notification grants concessional GST to drugs specified in List 1, including their salts and esters. Statutory and regulatory materials demonstrate that the term 'drug' encompasses 'bulk drug'. Micafungin Sodium is the sodium salt form of Micafungin and, although manufactured and sold as a bulk drug (lyophilised powder), is approved by the CDSCO only for administration by injection. The USP nomenclature distinguishes '[DRUG] for Injection' as dry solids that upon addition of a suitable vehicle yield solutions suitable for injection; Micafungin Sodium is a lyophilised dry solid reconstituted with a vehicle (sodium chloride) for intravenous use. The Customs Notification similarly treats 'Micafungin Sodium for Injection' as eligible for concessional rate on import, indicating a consistent treatment. On these bases the Authority concluded that the product's form and approved usage (i.e., 'for injection') bring it within Sl. No.114 of List 1 and attract the 5% GST rate, and accordingly set aside the earlier advance ruling to the contrary. [Paras 13, 14, 15, 16, 17]

Allowed; the sale of Micafungin Sodium by the DTA unit is covered by Sl. No.114 of Entry No.180 and taxable at 5% GST.

Final Conclusion: The AAAR set aside the advance ruling and held that Micafungin Sodium, supplied as a lyophilised salt form intended and approved only for injection, falls within the List 1 entry (Sl. No.114) to Entry No.180 and is liable to GST at 5%.

Rules of natural justice - right to be heard - quashing of administrative orders for breach of natural justice - remand for fresh consideration - consideration of jurisdictional objections

Rules of natural justice - right to be heard - quashing of administrative orders for breach of natural justice - Ext.P14 series of orders were passed without affording a hearing to the petitioner and whether such orders are vitiated for non-compliance with the rules of natural justice. - HELD THAT: - The Court found on the material before it and from the respondents' own statement that although notices were issued calling the petitioner for personal hearing and the petitioner had submitted a reply and sought an adjournment, the officer proceeded to consider the petitioner's reply on merits and passed final orders without granting a further opportunity of hearing. In view of this omission, the impugned orders suffer from a breach of the principles of natural justice, specifically the petitioner's right to be heard. Orders rendered in such circumstances cannot be legally sustained and must be set aside.

Ext.P14 series of orders are quashed for violation of the rules of natural justice.

Remand for fresh consideration - consideration of jurisdictional objections - Whether the matter should be remanded for fresh decision and the scope of consideration on remand. - HELD THAT: - The Court directed that the matter be remitted to the 7th respondent for passing fresh orders in lieu of the quashed orders. The 7th respondent is required to afford the petitioner a hearing and to consider explicitly and record a decision on the objections raised by the petitioner, including those challenging jurisdiction, as well as on the merits. A timeline of three months from receipt of the judgment copy was fixed for passing the fresh orders. The Court also directed a specific date and time for the petitioner to appear before the 7th respondent, either physically or via video conferencing, to facilitate the hearing.

Matter remitted to the 7th respondent to pass fresh orders after hearing the petitioner and considering jurisdictional objections and merits within three months; petitioner directed to appear on the specified date.

Final Conclusion: The impugned Ext.P14 series of orders are quashed for breach of the rules of natural justice; the matter is remanded to the 7th respondent for fresh adjudication after hearing the petitioner and considering objections on jurisdiction and merits within three months, with directions for the petitioner to appear on the stated date.

Refund under Section 163(3)(b) of the Integrated Goods and Services Tax Act, 2017 - IGST refund on export - interest on delayed refund - direction to consider and sanction refund claims - costs for non-compliance by department

Refund under Section 163(3)(b) of the Integrated Goods and Services Tax Act, 2017 - IGST refund on export - interest on delayed refund - Petitioner's pending refund claims of IGST paid on export for the period July 2017 to September 2017 were directed to be considered and disposed of by the authority. - HELD THAT: - The High Court noted the petitioner's claim that IGST paid on export is eligible for refund under the provision relied upon and that shipping bills and follow-ups had been produced, but did not adjudicate the merits of entitlement. Instead, the Court directed the second respondent to consider the petitioner's refund requests (as reflected from the shipping bills) and to sanction the refund claims and interest, completing the exercise within 45 days from receipt of the judgment. The Court expressly refrained from expressing any view on substantive merits and required the department to take a call on the application within the stipulated time-frame.

The respondent is directed to consider and decide the petitioner's IGST refund claims and interest within 45 days; the Court did not decide entitlement on merits.

Direction to consider and sanction refund claims - costs for non-compliance by department - Consequences for failure to comply with the judicial direction were specified. - HELD THAT: - The Court provided a compliance mechanism: if no action is taken by the officer concerned within the prescribed period, the officer shall be liable to pay costs of Rs. 25,000, recoverable from the officer's salary. This is an enforcement measure linked to the direction to decide the refund claims within the timeline.

Non-compliance with the direction will attract a cost of Rs. 25,000 recoverable from the officer's salary.

Final Conclusion: Writ petition disposed by directing the respondent to consider and decide the petitioner's IGST refund claims (and interest) for July 2017 to September 2017 within 45 days; failure to act will attract specified costs recoverable from the officer concerned.

Best judgment assessment - principles of natural justice - service of notice by email - remand for fresh consideration subject to deposit - stay of assessment conditional on deposit

Best judgment assessment - principles of natural justice - service of notice by email - remand for fresh consideration subject to deposit - deposit of 20% condition - Validity of the Best Judgment Assessment where notice was purportedly sent to the assessee's email but the assessee contends no notice was received, and whether the assessment should be set aside and remitted subject to conditions. - HELD THAT: - The Court found it to be an undisputed factual position that the impugned order was a Best Judgment Assessment and that no notice was addressed to the petitioner at the email ID relied upon by the assessing authority. While the respondents pointed out that appellate relief and stay are ordinarily contingent on deposit of 20% of the assessed demand, the petitioner asserted non-receipt of notice and expressed willingness to deposit 20% to demonstrate bona fides. In view of the lack of notice to the petitioner and in order to secure compliance with principles of natural justice without finally adjudicating the merits, the Court set aside the assessment order and demand notice and remitted the matter for reconsideration. The remand was made subject to the condition that the petitioner deposit 20% of the impugned demand within two weeks of receipt of certified copy of the order and inform the assessing authority by email of such deposit. Upon compliance, the assessing authority is directed to grant the petitioner an opportunity to show cause and decide the assessment in accordance with law; if the petitioner succeeds, the deposit shall be refunded as per applicable law. [Paras 5]

Impugned Best Judgment Assessment Order and consequential Demand Notice set aside and remitted for fresh consideration; remand conditional on the petitioner depositing 20% of the assessed demand within two weeks and notifying the authority by email, following which the assessing officer shall afford opportunity to show cause and decide the matter in accordance with law, with refund of the deposit if the petitioner succeeds.

Final Conclusion: Writ petition disposed of by setting aside the Best Judgment Assessment and Demand Notice and remitting the matter for fresh consideration on the condition of a 20% deposit by the petitioner within the stipulated time and notification to the assessing authority, which shall then grant an opportunity to be heard and decide the assessment in accordance with law.

Exemption under section 10(34) of the Income tax Act - Exemption under section 10(38) of the Income tax Act - Pass through treatment under section 115U - Tax paid at venture capital undertaking level suffices for investor's exemption - Treatment of VCF income by grossing up versus netting of expenses - Interest under section 234B - Penalty under section 271(1)(c)

Exemption under section 10(34) of the Income tax Act - Exemption under section 10(38) of the Income tax Act - Pass through treatment under section 115U - Tax paid at venture capital undertaking level suffices for investor's exemption - Allowability of exemption claimed on dividend and long term capital gains arising to the assessee from its share in SARA Fund (a SEBI registered VCF) for AY 2012 13. - HELD THAT: - The Tribunal held that the issues for AY 2012 13 are identical to those decided in favour of the assessee for earlier assessment years. Relying on that precedent, the Tribunal found that the conditions for exemption under section 10(34) (and analogous treatment for income characterised under section 10(38)) are to be satisfied at the level of the venture capital undertaking and not re imposed on the investor when income is distributed by the VCF. Section 115U renders the venture capital fund/company a pass through vehicle so that the investor is treated as if it had invested directly in the VCU; therefore dividends and capital gains received through the fund attract the exemption where the underlying investee had discharged the additional tax obligations required. The assessee had furnished complete computations (not disputed by Revenue) showing entitlement; consequently the additions disallowing the exemptions were unwarranted. [Paras 7]

Grounds challenging disallowance of exemption under section 10(34) and section 10(38) are allowed; the dividend income and long term capital gain additions are deleted.

Treatment of VCF income by grossing up versus netting of expenses - Pass through treatment under section 115U - Correct method of attributing income/expenses of the VCF for the assessee's tax computation for AY 2012 13. - HELD THAT: - Following the reasoning on section 115U and earlier Tribunal orders, the Tribunal held that the assessee is entitled to treat the fund's income and expenses on a pass through basis; the Assessing Officer erred in taking the assessee's share of fund income on a gross basis without allowing the corresponding share of expenses, instead of treating such items (dividend, capital gain, interest etc.) on their appropriate net basis. The assessee had produced the computation evidencing the netting which was not controverted. [Paras 7]

Grounds challenging the method of computation by grossing up are allowed; the assessments must reflect pass through/net treatment as applicable.

Interest under section 234B - Validity of levy of interest under section 234B for AY 2012 13 in view of deletion of the taxable income additions. - HELD THAT: - The levy of interest under section 234B was held to be consequential upon the additions made by the Assessing Officer. Since the Tribunal deleted the additions relating to dividend and long term capital gains, the consequential interest charged under section 234B could not be sustained. [Paras 7]

Interest under section 234B upheld by lower authorities is vacated as consequential relief.

Penalty under section 271(1)(c) - Sustainability of initiation/upholding of penalty proceedings under section 271(1)(c) for AY 2012 13. - HELD THAT: - The Tribunal found that the additions giving rise to the penalty were not justified and that the assessee had furnished required particulars and computations which were not disputed by Revenue. In view of the deletion of the substantive additions, the initiation/confirmation of penalty under section 271(1)(c) could not stand. [Paras 7]

Penalty proceedings under section 271(1)(c) are quashed/allowed in favour of the assessee.

Final Conclusion: The appeal is allowed: additions disallowing exemption on dividend and long term capital gain arising through SARA Fund are deleted, the computation should be adjusted on pass through/net basis as applicable, consequential interest under section 234B is vacated and penalty proceedings under section 271(1)(c) are quashed.

Reopening of assessment based on information received after filing - reliance on investigative agency information for treating purchases as accommodation entries - assessee's burden to prove genuineness of purchases - treatment of purchases as bogus/accommodation entries and consequent disallowance - estimation of undisclosed income by applying a gross profit percentage - use of sectoral task group report to fix appropriate gross profit margin

Reopening of assessment based on information received after filing - reliance on investigative agency information for treating purchases as accommodation entries - Validity of reopening assessment under which assessment for A.Y. 2007-08 was reopened - HELD THAT: - The Tribunal upheld the reopening of assessment because it was triggered by tangible information and materials received from DGIT(Inv.), Mumbai subsequent to the original assessment. The Coordinate Bench's conclusion that the information constituted a valid basis for invoking the re-opening provision was accepted, and no interference with the Commissioner (Appeals)'s finding that reopening was justified was found necessary. [Paras 6, 7]

Reopening of assessment was valid and the ground against reopening is dismissed.

Treatment of purchases as bogus/accommodation entries and consequent disallowance - assessee's burden to prove genuineness of purchases - estimation of undisclosed income by applying a gross profit percentage - use of sectoral task group report to fix appropriate gross profit margin - Whether purchases from certain suppliers were to be treated as non-genuine and, if so, the quantum of addition by applying a gross profit percentage - HELD THAT: - The Assessing Officer treated purchases as non-genuine relying on information that suppliers issued only accommodation entries; however, no independent enquiries were conducted by the AO in the present case and one supplier did respond to notice. The Tribunal, following a coordinate decision, accepted that where suppliers categorically deny real supplies and the assessee cannot otherwise establish delivery or movement of goods, disallowance is justified. The Tribunal directed that the profit element attributable to such bogus purchases be estimated at 4% on the basis of the Task Group report for the diamond sector and earlier coordinate bench reasoning which found margins in trading to be in the low single digits. Consequently the AO's higher estimate was reduced and the income is to be recomputed applying 4% gross profit on the impugned purchases. [Paras 8, 9, 10]

Addition on account of bogus purchases sustained in part; profit element to be computed at 4% and income to be recomputed accordingly.

Final Conclusion: Appeal partly allowed: reopening of assessment sustained; on merits the disallowance for purchases treated as bogus is sustained in principle but the profit element to be added is directed to be computed at 4% of the impugned purchases and the assessee's income is to be recomputed accordingly.

Fees for Technical Services (FTS) as a deemable income under Section 9(1)(vii) - Disallowance under Section 40(a)(i) for failure to deduct tax at source under Section 195 - Independent Personal Services (IPS) under Double Taxation Avoidance Agreements - Make available clause in DTAA - Distinction between fees for technical/consultancy services and professional/independent personal services in treaty application - Ad hoc disallowance of foreign travelling expenses

Fees for Technical Services (FTS) as a deemable income under Section 9(1)(vii) - Disallowance under Section 40(a)(i) for failure to deduct tax at source under Section 195 - Whether payments made to foreign law firms/attorneys constitute 'fees for technical services' chargeable to tax in India and liable to withholding, permitting disallowance under Section 40(a)(i) for non-deduction. - HELD THAT: - The Tribunal accepted the assessing officer's characterisation that the services rendered by foreign patent attorneys involved advisory/consultancy elements - specialised knowledge and procedural advice - and thus fall within the scope of 'managerial, technical or consultancy services' as contemplated by Explanation 2 to Section 9(1)(vii). Reliance was placed on coordinate bench decisions and the Supreme Court's dicta treating 'consultancy services' as advisory services involving human intervention. The Tribunal rejected the assessee's contention that the statutory distinction in Section 194J between 'professional' and 'technical/consultancy' services extends to payments to non residents for the purpose of deeming under Section 9(1)(vii), observing that Section 194J applies to payments to residents and cannot alter the deeming fiction in Section 9 applicable to non residents. The Tribunal therefore held that, insofar as the recipients do not obtain treaty protection, the impugned payments are taxable as FTS in India and withholding was required; consequent disallowance under Section 40(a)(i) is sustainable to that extent. [Paras 18, 19, 20, 22, 24]

Tribunal held that the services rendered by foreign attorneys constitute 'fees for technical services' chargeable to tax in India and that withholding under Section 195 was required; disallowance under Section 40(a)(i) is sustainable in respect of sums not covered by treaty relief.

Independent Personal Services (IPS) under Double Taxation Avoidance Agreements - Make available clause in DTAA - Distinction between treaty articles (IPS vs business profits) and source country taxation - Whether payments to certain foreign recipients are exempt from Indian withholding because they qualify as taxable only in the recipient's residence country under the IPS article of applicable DTAAs, and consequential treatment of the disallowance. - HELD THAT: - The Tribunal recognised that where the relevant DTAA contains an IPS (independent personal services) article and the foreign recipient qualifies as a resident liable to tax in the residence state without a fixed base/PE in India and without satisfying stay period exceptions, such payments are taxed in the residence country and are not chargeable in India; accordingly no withholding under Section 195 would be required. For payments falling within such treaty protection (identified categories totaling specific amounts for Brazil/China/Czech/Japan/Philippines/Thailand/Vietnam; amounts for Australia partnership firms; and a small payment to an individual in Korea), the Tribunal did not decide entitlement on the merits but remanded to the Assessing Officer to verify documentary evidence of the recipients' residence status and liability to tax in the treaty state and to delete the disallowance if conditions of the treaty article are satisfied. Conversely, where the recipients do not qualify for IPS relief (listed countries/recipients), the Tribunal held treaty protection absent and upheld withholding liability and disallowance to that extent. [Paras 31, 32, 33, 34, 35]

Tribunal directed verification by the Assessing Officer of residence/liable to tax status under the relevant DTAA articles and remitted the matter for deletion of disallowance if the treaty conditions are satisfied; upheld disallowance where IPS relief does not apply.

Ad hoc disallowance of foreign travelling expenses - Validity of the assessing officer's ad hoc 10% disallowance of foreign travel expenses for lack of supporting vouchers. - HELD THAT: - The Tribunal found that applying a blanket 10% ad hoc disallowance without specific finding as to which particular expenditures lacked evidence was not justified. The proper approach is to disallow only those specific amounts for which the assessee failed to produce proof of business purpose. Absent identification of particular undocumented items, an arbitrary percentage disallowance is not in accordance with law. [Paras 37, 41]

Ad hoc 10% disallowance of foreign travel expenses set aside and assessing officer directed to delete the disallowance; ground allowed.

Final Conclusion: Appeal partly allowed. The Tribunal upheld that, as a matter of domestic law, the payments to foreign patent attorneys generally fall within 'fees for technical services' and withholding under Section 195 was required where no treaty relief applies; it upheld the disallowance to the extent treaty relief did not apply. For payments potentially covered by IPS articles of applicable DTAAs, the matter was remanded to the Assessing Officer to verify residency and liability to tax in the treaty state and delete disallowance if conditions are met. The adhoc 10% foreign travel disallowance was deleted.

Allowability of interest expenditure - nexus between borrowed funds and investment income - capitalization of disallowed interest as part of cost of acquisition of shares - estimation of personal household expenses as unexplained expenditure - recomputation of interest under sections 234A, 234B and 234C after adjusting for tax deducted at source - principle of consistency and precedential effect of Coordinate Bench decisions

Allowability of interest expenditure - nexus between borrowed funds and investment income - principle of consistency and precedential effect of Coordinate Bench decisions - Disallowance of interest expenditure amounting to Rs. 2,20,45,030/- - HELD THAT: - The Tribunal allowed the claim of interest expenditure by following Coordinate Bench decisions and the assessee's earlier years where identical claims were accepted. The Tribunal found that the assessee followed mercantile accounting, liability for interest had accrued, and there was a reasonable nexus between borrowed funds and investments (sale proceeds of shares converted into fixed deposits generating interest). In absence of material showing cancellation of contracts by the custodian under the Special Court Act and given prior consistent adjudications in favour of the assessee and related entities, the disallowance was set aside and deduction was directed to be allowed in accordance with the quantification principles applied by the Coordinate Bench. [Paras 9]

Ground allowed; disallowance of interest expenditure set aside and deduction allowed following Coordinate Bench precedent.

Capitalization of disallowed interest as part of cost of acquisition of shares - disallowance under section 14A (proportionate interest) - Whether the portion of interest disallowed (u/s. 14A) should be capitalized to the cost of shares - HELD THAT: - Relying on earlier Coordinate Bench rulings in the assessee's own cases and in related matters, the Tribunal held that interest attributable to investments (disallowable under the relevant provisions) shall form part of the cost of acquisition of the shares. The AO was directed to treat the proportionate disallowed interest as part of the cost of shares for determining profit on sale. [Paras 13]

Ground allowed to the extent that proportionate disallowed interest is to be capitalized as part of cost of acquisition of shares.

Estimation of personal household expenses as unexplained expenditure - principle of reduction of ad hoc additions in family/joint household context - Sustenance of addition on account of personal household expenses made under estimation - HELD THAT: - Following Coordinate Bench precedent in the assessee's earlier years and related family member cases, the Tribunal found that ad hoc additions could be moderated in view of joint family contributions and lack of detailed expenditure particulars. Applying the established approach, the Tribunal reduced the addition sustained by the CIT(A) by fifty percent. [Paras 17]

Ground partly allowed; disallowance on account of personal household expenses reduced by 50%.

Recomputation of interest under sections 234A, 234B and 234C after adjusting for tax deducted at source - applicability of penal interest provisions to notified persons subject to computation adjustments - Levy and computation of interest under sections 234A, 234B and 234C - HELD THAT: - The Tribunal followed Coordinate Bench authority holding that the provisions relating to interest are applicable to notified persons but the computation requires adjustment by considering tax deductible at source on the income assessed. Accordingly, the matter was remitted to the AO for recomputation of interest liability after reducing the amount of tax deductible at source and after affording a reasonable opportunity of hearing. [Paras 21]

Ground allowed in part; AO directed to recompute interest under sections 234A, 234B and 234C after adjusting for TDS and to afford hearing.

Final Conclusion: Following Coordinate Bench decisions and the principle of consistency, the Tribunal allowed the appeal in favour of the assessee: the disallowance of interest expenditure was set aside and allowed; proportionate disallowed interest was directed to be capitalized as part of share cost; the ad hoc addition for personal household expenses was reduced by fifty percent; and the interest under sections 234A/234B/234C was sent back to the AO for recomputation after adjusting for tax deducted at source.

Jurisdiction of Assessing Officer - territorial jurisdiction - mandate to issue notice under section 143(2) - nullity of assessment framed without valid notice under section 143(2) - non-application of section 124(3) where the issuing officer never had jurisdiction - transfer of cases and saving of previously issued notices under section 127 - absence of statutory recognition for 'PAN jurisdiction' - limited scope of section 292BB (does not cure complete absence of notice)

Mandate to issue notice under section 143(2) - nullity of assessment framed without valid notice under section 143(2) - jurisdiction of Assessing Officer - Validity of assessment framed under section 143(3) when no notice under section 143(2) was validly issued by the Assessing Officer having territorial jurisdiction. - HELD THAT: - The Tribunal found that the assessee's principal place of business was at Guwahati and Range 3, Guwahati had territorial jurisdiction under the scheme of sections 120 and 124. The notice dated 13.08.2012 under section 143(2) was issued by ITO, Ward 1, Shillong, who did not have territorial jurisdiction over the assessee and the Revenue produced no evidence of any statutory empowerment permitting the Shillong officer to issue that notice. Issuance of notice under section 143(2) is a mandatory precondition to framing a scrutiny assessment under section 143(3); where no valid notice emanates from the competent Assessing Officer, subsequent action under section 143(3) is void. Applying the binding precedent in Hotel Blue Moon and its progeny, the Tribunal held that the assessment framed by the Gauhati officer was legally unsustainable and ab initio void because it proceeded from an invalid notice. [Paras 8, 11, 13]

Assessment framed under section 143(3) was quashed as no valid section 143(2) notice was issued by the officer who had statutory territorial jurisdiction.

Non-application of section 124(3) where the issuing officer never had jurisdiction - jurisdiction of Assessing Officer - Whether section 124(3) precluded the assessee from challenging the territorial jurisdiction of the officer who issued the notice. - HELD THAT: - Section 124(3) bars an assessee from calling in question the jurisdiction of an Assessing Officer only where that officer derives jurisdiction under section 124 by virtue of directions or orders under section 120. The Tribunal held that section 124(3) cannot be invoked to save an action taken by an officer who never had jurisdiction under section 124. In the present case the Shillong officer never had territorial jurisdiction over the assessee (whose principal place of business was in Guwahati), and therefore the estoppel in section 124(3) did not apply to validate the notice or subsequent assessment. [Paras 9]

Section 124(3) is inapplicable where the issuing officer never enjoyed jurisdiction; it does not validate the notice or assessment in this case.

Absence of statutory recognition for 'PAN jurisdiction' - territorial jurisdiction - Whether the departmental practice of 'PAN jurisdiction' can confer statutory jurisdiction to issue notices. - HELD THAT: - The Tribunal observed that the statute recognises territorial, pecuniary and class based jurisdiction but contains no provision for a 'PAN jurisdiction'. Any internal administrative arrangement described as 'PAN jurisdiction' has no statutory recognition and cannot supply authority to issue notices or oust the statutory territorial jurisdiction prescribed by sections 120 and 124. Consequently, the Revenue's reliance on PAN jurisdiction to justify the Shillong notice was rejected. [Paras 10]

Administrative 'PAN jurisdiction' does not confer statutory power to issue notices and cannot validate the impugned notice.

Limited scope of section 292BB (does not cure complete absence of notice) - mandate to issue notice under section 143(2) - Whether the assessee's participation in proceedings or section 292BB cures the absence of a valid notice under section 143(2). - HELD THAT: - Relying on Supreme Court authority discussed in the order, the Tribunal noted that section 292BB operates as a legal fiction only where a notice has emanated from the department but suffered infirmities in service or timing; it does not validate a situation where no notice at all was issued by the competent authority. Participation by the assessee in proceedings cannot remedy the foundational defect that the notice did not emanate from the statutory territorial Assessing Officer. Therefore section 292BB and the assessee's participation did not cure the complete absence of a valid section 143(2) notice. [Paras 11, 12]

Section 292BB and participation in proceedings do not cure the complete absence of a valid section 143(2) notice; the assessment remains void.

Final Conclusion: The Tribunal allowed the appeal for assessment year 2011-12, holding that the notice under section 143(2) was not validly issued by an officer having territorial jurisdiction, that section 124(3) and any alleged 'PAN jurisdiction' could not validate the notice, and that section 292BB does not cure a complete absence of a valid notice; accordingly the assessment under section 143(3) was quashed.

Unexplained investment under Section 69 read with 115BBE - speaking document / dumb document - charge based on seized document - requirement of corroborative evidence for entries in seized documents - AO's duty to investigate and correlate seized material - presumption cannot substitute proof

Speaking document / dumb document - charge based on seized document - requirement of corroborative evidence for entries in seized documents - AO's duty to investigate and correlate seized material - presumption cannot substitute proof - Whether addition on account of alleged unaccounted investment could be sustained on the basis of rough notings on a seized loose paper (page 10 of Exhibit-4 of Annexure-AS). - HELD THAT: - The Tribunal examined the seized loose paper and the material on record and agreed with the CIT(A) that the page is a 'dumb document' because it lacks essential indicia: no date, no narration (such as 'Rs.'), no signatures, no names of parties, and no direct nexus with any asset in the assessee's name. A charge to tax on the basis of a seized document is sustainable only if the document is a speaking one-either speaking on its face or by correlation with other seized material or investigation-so as to satisfy the components necessary for imposition of tax. The AO treated the scribblings as specific cash payment and stamp duty and made additions under the theory of unexplained investment, but did not carry out independent inquiries (for example, from the Sub-Registrar) or correlate the notings with other records to establish ownership, year of transaction, or source of funds. The Tribunal held that the AO relied on presumptions and surmises without the requisite corroborative evidence, and therefore the addition could not be sustained. The Tribunal also relied on precedents and the principle that mere entries or rough working papers, not supported by independent material, cannot form the basis for assessment of undisclosed income. [Paras 7, 8, 9]

The seized loose paper (page 10 of Exhibit-4 of Annexure-AS) is a dumb document and the addition made by the AO on account of alleged unaccounted investment is not sustainable; the CIT(A)'s deletion of the addition is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s finding that the notings on the seized loose paper were merely rough, non-speaking entries bereft of corroborative material; consequently the addition on account of unexplained investment for AY 2017-18 could not be sustained.

Disallowance under Section 14A and Rule 8D - Disallowance of marketing/business promotion expenses - treatment of cash payments and payments through banking channels - Reliance on statements recorded under Section 132(4) and admissibility of incriminating material seized during search - Retraction of statements recorded during search and requirement of corroborative evidence - Requirement of "acquire and install" for deduction under Section 32AC

Disallowance under Section 14A and Rule 8D - Deletion of additions made under Section 14A read with Rule 8D where no exempt income was earned in the relevant years. - HELD THAT: - The Tribunal found on record that the assessee did not earn exempt (dividend) income in the impugned assessment years and the Revenue's own admission recorded this fact. Applying settled precedent, the Tribunal held that where no exempt income arises in the year, disallowance under Section 14A (and computation under Rule 8D) cannot be made. The Tribunal therefore upheld the CIT(A)'s deletion of the Section 14A disallowances for all the assessment years before it. [Paras 10]

Upheld deletion of disallowance under Section 14A r.w. Rule 8D for all assessment years.

Disallowance of marketing/business promotion expenses - treatment of cash payments and payments through banking channels - Extent of disallowance of marketing and business promotion expenses and limited remand for verification for AY 2017-18. - HELD THAT: - The Tribunal agreed with the principle adopted by the CIT(A) and earlier Tribunal that expenditure routed through proper banking channels cannot be disallowed merely for non-furnishing of supporting bills, and that unsupported expenditure incurred only in cash may be subjected to a limited disallowance (10% as applied in the assessee's earlier years). For AYs 2014-15 to 2016-17 the Tribunal found no error in restricting disallowance for cash payments and rejected Revenue's grounds. For AY 2017-18 the Tribunal observed factual ambiguity in the record about whether the impugned payments were made through banking channels; accordingly it remitted that limited issue to the Assessing Officer to verify nature of payments and, if through banking channels, to allow them. [Paras 11]

Findings upholding 10% restriction on cash marketing disallowance affirmed for earlier years; for AY 2017-18 remitted to AO for fact verification of nature of payments (banking channel) and reassessment of disallowance accordingly.

Reliance on statements recorded under Section 132(4) and admissibility of incriminating material seized during search - Retraction of statements recorded during search and requirement of corroborative evidence - Additions based solely on the seized scribbling pad and initial statements recorded during search were deleted for assessment years 2014-15 to 2017-18 for want of corroboration. - HELD THAT: - The Tribunal examined the seized 'scribbling pad' and the sequence of admissions and subsequent retractions by the Managing Director and others. It reiterated that statements recorded under Section 132(4) are important but their evidentiary value depends on surrounding circumstances and corroboration. The seized document was a pencil-written, month-balanced notepad containing mixed entries (bank withdrawals and unexplained cash entries) without identifiable names or supporting vouchers; the AO had not corroborated entries by independent enquiries or produced unaccounted assets/liabilities or cross-verified alleged parties. The Tribunal accepted the assessee's contention regarding destruction of earlier books by floods as raising further doubt on provenance of the lone notepad. Given the lack of cogent corroborative evidence and the retraction by the principal signatory, the Tribunal concluded the materials were inadequate to sustain additions and reversed the CIT(A)'s confirmation, directing deletion of additions based on the scribbling pad. [Paras 12]

Deleted additions made on the basis of the seized scribbling pad and related statements for AYs 2014-15 to 2017-18; AO directed to delete such additions.

Requirement of "acquire and install" for deduction under Section 32AC - Assessee entitled to deduction under Section 32AC where new plant and machinery were acquired and installed within the prescribed date, notwithstanding not being put to use. - HELD THAT: - The Tribunal construed Section 32AC and held that the statutory condition is acquisition and installation of qualifying new assets on or before the specified date. Unlike Section 32 (depreciation), Section 32AC does not require that assets be put to use in the year for claiming the additional deduction. The assessee had acquired and installed assets exceeding the prescribed threshold within the period; therefore the AO and CIT(A) erred in denying the Section 32AC deduction on the ground that the plant was not yet put to use. The Tribunal directed allowance of the deduction. [Paras 13]

Allowed the claim of deduction under Section 32AC for the assessment year 2017-18 and directed deletion of the disallowance.

Final Conclusion: Revenue appeals for AYs 2014-15, 2015-16 and 2016-17 dismissed; assessee appeals for AYs 2015-16 and 2016-17 allowed; assessee appeal for AY 2017-18 partly allowed (Section 32AC allowed and marketing expenses issue remitted to AO for limited factual verification).

Disallowance under section 14A - Rule 8D of the Income Tax Rules - Requirement of recording satisfaction before invoking section 14A(2) - Applicability of section 14A to shares held as stock-in-trade - Disallowance of interest under section 36(1)(iii) - Presumption that interest-free loans are funded from interest-free funds - Netting off interest income with interest expenditure

Disallowance under section 14A - Rule 8D of the Income Tax Rules - Requirement of recording satisfaction before invoking section 14A(2) - Applicability of section 14A to shares held as stock-in-trade - Netting off interest income with interest expenditure - Whether the disallowance of Rs. 173,455 under section 14A read with Rule 8D was sustainable where the Assessing Officer applied Rule 8D without recording satisfaction after examination of accounts and where part of the securities were stock-in-trade. - HELD THAT: - The Tribunal held that recording of satisfaction about the correctness of the assessee's claim (after examination of accounts) is a primary condition before invoking any disallowance under section 14A and applying Rule 8D. The Assessing Officer proceeded to apply Rule 8D without recording such satisfaction, contrary to the mandate of section 14A(2). The Tribunal therefore accepted the assessee's contention that the suo-motu adhoc disallowance and the subsequent application of Rule 8D could not be sustained in absence of the required satisfaction; issues relating to shares held as stock-in-trade and netting of interest income were considered but the decisive defect was the failure to record satisfaction prior to invoking Rule 8D. Consequently the disallowance was deleted. [Paras 7]

Disallowance of Rs. 173,455 under section 14A deleted; ground No. 1 allowed.

Disallowance of interest under section 36(1)(iii) - Presumption that interest-free loans are funded from interest-free funds - Whether the disallowance of interest expenditure of Rs. 2,677,324 should be sustained where the assessee had substantial interest-free funds exceeding the interest-free advances and relied on the presumption that such advances were made out of interest-free funds. - HELD THAT: - The Tribunal noted that the assessee had free reserves and share capital amounting to Rs. 37.05 crores while interest-free loans and advances outstanding were Rs. 17.32 crores. Applying the principle affirmed by the Supreme Court in CIT v. Reliance Industries Ltd., the Tribunal found that where interest-free funds available with the assessee are sufficient to cover interest-free advances, it can be presumed that those advances were made from interest-free funds. In those circumstances the Assessing Officer's disallowance of the interest expenditure on the ground of diversion of borrowed funds was not sustainable. The Tribunal therefore directed deletion of the disallowance. [Paras 11]

Disallowance of interest expenditure of Rs. 2,677,324 deleted; ground No. 2 allowed.

Final Conclusion: Both impugned disallowances (under section 14A and the disallowance of interest expenditure) are deleted and the assessee's appeal is allowed; the Assessing Officer is directed to give effect to this order.

Deemed exports - refund of wrongly paid levy - duty refund under Foreign Trade Policy - reasoned decision by quasi judicial authority - judicial review for non speaking and mechanical orders

Deemed exports - duty refund under Foreign Trade Policy - Whether the appellate order rejecting the petitioner's claim for refund of Terminal Excise Duty paid on deemed exports was sustainable in the absence of reasoned consideration. - HELD THAT: - The Court found that the Development Commissioner acknowledged that Terminal Excise Duty had been deposited though it was not required in case of deemed exports, yet the claim was rejected on the ground that the Foreign Trade Policy contained no provision for refund. The appellate order (Ext.P1) was held to be sketchy and non speaking, failing to advert to the petitioner's contentions and the legal background; a quasi judicial authority is required to examine the matter with due consideration and give reasons rather than pass mechanical orders. The Court did not decide the substantive entitlement to refund on merits but directed that the appeal be revived and reconsidered afresh on lawful principles with reasons assigned.

Impugned appellate order set aside and matter remitted for fresh decision on the appeal after affording reasoned consideration.

Judicial review for non speaking and mechanical orders - reasoned decision by quasi judicial authority - Whether the appellate authority must decide the revived appeal within a stipulated time and on the basis of reasons. - HELD THAT: - Recognising that alternative remedies exist but emphasising the obligation of quasi judicial bodies to decide appeals on proper appreciation of contentions and law, the Court directed revival of the appeal (Ext.P14) and remitted the matter to the Appellate Authority to decide afresh in accordance with law. The appellate authority must assign reasons and not replicate the earlier mechanical approach. The Court imposed a timeline to ensure timely adjudication.

Appeal revived and remitted to the Appellate Authority with direction to decide afresh with reasons within two months from receipt of certified copy of the judgment.

Final Conclusion: Impugned appellate order dated 15.01.2014 set aside; appeal revived and remitted to the Appellate Authority for fresh, reasoned consideration of the refund claim in accordance with law within two months; writ petition disposed of.

Summary order. Writ Petitions Nos. 5111 and 5112 of 2014 and W.P. No. 9534 of 2014 dismissed as withdrawn, with clarification that petitioners' right to raise the same contentions in W.P. Nos. 30376 and 30377 of 2016 is preserved; connected miscellaneous petitions closed; no costs.

Transfer of suit for trial - leave to proceed under Section 446 of the Companies Act, 1956 - restoration of suit - costs of Official Liquidator and reimbursement deposit for litigation expenses

Transfer of suit for trial - restoration of suit - Whether the direction to transfer C.S.(OS) No.1719 of 2009 from the Delhi High Court to the Madras High Court and to try it along with C.P.No.303 of 2010 should be upheld. - HELD THAT: - The Company Judge had granted leave to proceed with the suit under Section 446 and directed that on restoration the suit, if restored by the Delhi High Court, would be transferred to Madras for trial along with the liquidation proceedings. The High Court, having considered convenience of parties and the practical difficulties arising from the Official Liquidator's paucity of funds, held that leave to proceed should be maintained but that the specific direction to transfer the suit to Madras should be set aside. The Court recorded that the plaintiff is willing to prosecute the suit at Delhi and offered to reimburse the Official Liquidator's costs; in view of that undertaking and the principle that restoration and venue are matters for the court where the suit is pending, the appellate court modified direction No.3 while maintaining the grant of leave and the condition that appropriate orders be obtained from the Delhi High Court upon restoration. [Paras 9, 11, 14]

Direction No.3 of the impugned order directing transfer of the suit to Madras High Court is set aside; leave to proceed before the Delhi High Court is maintained subject to appropriate orders by that Court upon restoration.

Costs of Official Liquidator and reimbursement deposit for litigation expenses - leave to proceed under Section 446 of the Companies Act, 1956 - Whether the appellant's offer to reimburse litigation expenses and the deposit proposed by the appellant should be accepted as condition for permitting the suit to proceed at Delhi. - HELD THAT: - The appellant undertook to reimburse the Official Liquidator for expenses of contesting the suit at Delhi and offered an initial deposit to meet such costs in view of the Official Liquidator's limited funds. The Court considered this undertaking appropriate to secure contestability of the suit by the Official Liquidator at Delhi and directed the appellant to make the specified initial deposit by way of demand draft in favour of the Official Liquidator, with acknowledgement, within three weeks. The Court further directed that accounts of the expenses incurred and any further deposits required will be governed by orders to be passed by the learned Company Judge. The Court also noted that the Official Liquidator may move the Delhi High Court for waiver of any earlier deposit requirement, which the Delhi High Court alone can decide upon restoration. [Paras 6, 9, 10, 11, 13]

Appellant to deposit the initial amount as directed to the Official Liquidator within three weeks; accounts of expenses and further requirements to be governed by the Company Judge and by orders of the Delhi High Court upon restoration.

Final Conclusion: The appeal is disposed of by maintaining the grant of leave to proceed with C.S.(OS) No.1719 of 2009 before the Delhi High Court (subject to that Court's orders on restoration) and by setting aside only the direction to transfer the suit to Madras; the appellant is directed to make the prescribed initial deposit to the Official Liquidator and the question of further costs or deposits and any waiver related to earlier deposit orders is left to the Company Judge and the Delhi High Court respectively.

Sanction of scheme of amalgamation under sections 230 to 232 of the Companies Act, 2013 - appointed date and effective date under schemes of amalgamation - dissolution of transferor company without winding up - acceptance of report and undertakings of the Regional Director - leave to file revised income tax returns after sanction of scheme - statutory notices to authorities under section 230(5) and in rem effect of Tribunal order when no objection is received

Sanction of scheme of amalgamation under sections 230 to 232 of the Companies Act, 2013 - appointed date and effective date under schemes of amalgamation - dissolution of transferor company without winding up - Sanction of the scheme of amalgamation between Samrut Trading P. Ltd. and Essel World Leisure P. Ltd., with appointed date of August 1, 2018, and dissolution of the transferor company without winding up. - HELD THAT: - The Tribunal examined the petition filed under sections 230 to 232 and found that the scheme, including the appointed date of August 1, 2018, was approved by the boards and that no objector appeared to contest the scheme. The Tribunal recorded that the scheme appears fair and reasonable, does not violate any provision of law, and is not contrary to public policy. In view of fulfillment of statutory compliances and acceptance of undertakings, the company petition was made absolute and the scheme sanctioned. Consequential reliefs flowing from sanction include that the transferor company shall be dissolved without winding up and that the scheme shall bind shareholders, creditors and employees. [Paras 13]

Scheme sanctioned with appointed date of August 1, 2018; transferor company ordered to be dissolved without winding up and the scheme binding on all concerned.

Acceptance of report and undertakings of the Regional Director - statutory notices to authorities under section 230(5) - official liquidator's report on affairs of transferor company - Responses to observations of the Regional Director were accepted and the Tribunal accepted the official liquidator's report that the transferor company's affairs were not conducted prejudicially to shareholders. - HELD THAT: - The Regional Director filed a report containing observations and requested clarifications. The petitioners furnished undertakings and explanations addressing the points raised (including accounting entries, confirmation of appointed date, compliance with sections 13/61 regarding authorised capital, set off of fees under section 232(3)(i), and confirmation that the scheme in application and petition are identical). The Tribunal accepted these undertakings. The official liquidator reported that the affairs of the transferor company were not prejudicial to shareholders, and recommended dissolution without winding up; the Tribunal noted and acted on this report in sanctioning the scheme. [Paras 8, 9, 10]

Undertakings and clarifications filed in response to the Regional Director's report accepted; official liquidator's report noted and relied upon to order dissolution without winding up.

Leave to file revised income tax returns after sanction of scheme - in rem effect of Tribunal order when no objection is received - Petitioner companies permitted to file revised returns with Income tax authorities arising from the delay in sanction of the scheme; Tribunal relied on precedent allowing acceptance of revised returns filed after sanction where statutory authorities raised no objection within the notice period. - HELD THAT: - The petitioners sought permission to revise financial statements and file revised returns under the Income tax Act due to the long interval between the appointed date and final sanction. The Tribunal considered the submissions and reliance placed on the Supreme Court judgment (Dalmia Power Ltd.) which held that where statutory authorities receive notice and raise no objection within the stipulated period, schemes attain in rem effect and transferee companies may be permitted to file revised returns even beyond statutory time limits. Applying that reasoning, and noting that notices under section 230(5) had been served and no objections were received, the Tribunal granted leave to the petitioner companies to file revised returns and claim refunds/credits as applicable. [Paras 11, 12, 13]

Petitioner companies permitted to file revised returns with the Income tax Department; tax authorities to accept and deal with such revised returns in accordance with law.

Final Conclusion: The Tribunal sanctioned the scheme of amalgamation with appointed date August 1, 2018, ordered dissolution of the transferor company without winding up, accepted the Regional Director's report subject to the petitioners' undertakings, and granted the petitioner companies leave to file revised income tax returns; consequential statutory steps and filings were directed.

Scheme of amalgamation - sanction under sections 230 to 232 of the Companies Act, 2013 - appointed date - transfer of assets and liabilities - continuation of pending proceedings - tax implications subject to final decision of Income-tax authorities - non-appointment of whole-time company secretary - adjudication - Competition law - requirement of CCI approval

Scheme of amalgamation - sanction under sections 230 to 232 of the Companies Act, 2013 - appointed date - The proposed scheme of amalgamation between the transferor and transferee companies is sanctioned and shall take effect from the appointed date of January 1, 2019. - HELD THAT: - On consideration of the petition, the reports of the Regional Director and Registrar of Companies, and the official liquidator's comments, the Tribunal found that the procedure specified in sub-sections (1) and (2) of section 232 has been complied with and that the scheme appears fair, reasonable and not detrimental to members, creditors or public policy. For these reasons the scheme, as approved by the boards of both companies, is sanctioned and the appointed date is fixed as January 1, 2019. The sanction is subject to the usual statutory and regulatory compliances and does not itself confer exemptions from stamp duty, taxes or other charges. [Paras 13]

Scheme of amalgamation sanctioned; appointed date fixed as January 1, 2019; sanction without exemption from statutory dues.

Transfer of assets and liabilities - continuation of pending proceedings - tax implications subject to final decision of Income-tax authorities - On sanction, the transferor's assets, liabilities and pending proceedings shall vest in and be continued by the transferee company, and tax implications arising from the scheme are subject to the final decision of the concerned Income-tax authorities. - HELD THAT: - The Tribunal ordered that upon amalgamation the transferor company shall be transferred to and vest in the transferee company for all its estate and interest, subject to existing charges. All liabilities, including taxes, levies and duties, are to be transferred and shall become liabilities of the transferee. Proceedings pending by or against the transferor shall be continued by or against the transferee. Any tax consequences arising from the scheme are to be determined finally by the competent tax authorities, whose decision will be binding on the transferee company. [Paras 13]

Assets, liabilities and pending proceedings to vest in/transferred to the transferee; tax consequences to be finally decided by Income-tax authorities.

Non-appointment of whole-time company secretary - adjudication - The transferee company's failure to appoint a whole-time company secretary for the period February 2, 2013 to February 23, 2014 is noted and the company is directed to file a separate adjudication application after approval of the scheme. - HELD THAT: - The Registrar of Companies and the Regional Director recorded that the transferee did not have a whole-time company secretary for the specified 386-day period, in contravention of the statutory requirement. The Tribunal recorded this non-compliance and directed that the transferee company shall file a separate application for adjudication of the alleged offence subsequent to sanction of the scheme, and furnish appropriate undertakings as may be required. [Paras 11]

Transferee directed to file separate adjudication application for non-appointment of whole-time company secretary.

Competition law - requirement of CCI approval - The petitioners' assertion that the scheme does not meet thresholds for notification to the Competition Commission of India is recorded; no impediment from CCI is found on the basis of the petitioners' undertaking. - HELD THAT: - The Competition Commission notified the Tribunal that no filing had been made with it and requested an undertaking that CCI approval was not required. The petitioners filed an affidavit asserting that the scheme does not meet the thresholds under the Competition Act and hence prior CCI approval is not necessary. The Tribunal considered this response along with other material on record and proceeded to sanction the scheme, subject to statutory compliance by the parties. [Paras 8, 9, 13]

Petitioners' undertaking that CCI approval is not required accepted for purposes of sanction; scheme sanctioned subject to other statutory compliances.

Final Conclusion: The Tribunal, being satisfied with compliance of the statutory procedure and material on record, sanctioned the scheme of amalgamation between the two companies with appointed date January 1, 2019; directed transfer of assets, liabilities and continuation of proceedings to the transferee; recorded and directed adjudication for the transferee's earlier non-appointment of a whole-time company secretary; accepted the petitioners' contention regarding CCI notification for the purpose of sanction; and imposed usual directions for registration, statutory filings and compliance without granting any exemptions from taxes or other statutory dues.

Liquidation under section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Failure to receive resolution plan within the maximum CIRP period of 180 days - Committee of Creditors' resolution approving liquidation by requisite voting share - Appointment of liquidator - Commencement of liquidation moratorium under section 33(5) of the IBC - Public announcement and deemed notice of discharge under section 33(7) - Liquidator's duty to investigate preferential, undervalued and fraudulent transactions - Intimation to Registrar of Companies and fiscal/regulatory authorities - Preliminary report under regulation 13 of the IBBI (Liquidation Process) Regulations, 2016

Liquidation under section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Failure to receive resolution plan within the maximum CIRP period of 180 days - Committee of Creditors' resolution approving liquidation by requisite voting share - Liquidation of the corporate debtor was ordered under section 33(2) of the IBC on the basis that no resolution plan was received within the CIRP period and the CoC resolved for liquidation with the requisite voting share. - HELD THAT: - The Tribunal recorded that CIRP was initiated and that despite issuance of public invitations and an extension of the last date for submission of expressions of interest, no resolution plan was received. The CoC, after considering the absence of bidders, the company's non-operation and adverse industry outlook, unanimously resolved to liquidate the corporate debtor and authorized the RP to act as liquidator. As no resolution plan was submitted under sub-section (6) of section 30 before expiry of the maximum 180-day CIRP period, the Tribunal exercised the powers under clause (a) of sub-section (1) of section 33 to pass the liquidation order. [Paras 9, 11]

Order made for liquidation of the corporate debtor under section 33(2) of the IBC.

Appointment of liquidator - Committee of Creditors' resolution approving liquidation by requisite voting share - Mr. S. Rajendran, the resolution professional, was appointed as liquidator of the corporate debtor. - HELD THAT: - The Tribunal accepted the CoC's resolution appointing the then resolution professional to act as liquidator, noting the written consent of the resolution professional to act as liquidator if appointed by the Authority. Having received that consent, the Tribunal formally appointed Mr. S. Rajendran as liquidator and directed him to act in accordance with the IBC, its rules and the relevant IBBI regulations. [Paras 10, 11]

Mr. S. Rajendran is appointed as liquidator and directed to perform the duties of the office in accordance with the IBC and applicable regulations.

Commencement of liquidation moratorium under section 33(5) of the IBC - Public announcement and deemed notice of discharge under section 33(7) - Liquidator's duty to investigate preferential, undervalued and fraudulent transactions - Intimation to Registrar of Companies and fiscal/regulatory authorities - Preliminary report under regulation 13 of the IBBI (Liquidation Process) Regulations, 2016 - Consequential directions were issued concerning the liquidation process, including termination of the CIRP moratorium and commencement of the liquidation moratorium, public announcement, investigations, statutory intimations and timelines for reporting. - HELD THAT: - The Tribunal directed that the moratorium under section 14 shall cease and a fresh moratorium under section 33(5) shall commence. The liquidator was ordered to make the public announcement that the corporate debtor is in liquidation and that the order operates as notice of discharge to officers, employees and workers in terms of section 33(7). The liquidator was further directed to investigate the corporate debtor's financial affairs with particular reference to preferential, undervalued and fraudulent transactions, to intimate the Registrar of Companies and other fiscal/regulatory authorities including the Income-tax Department, and to submit a preliminary report within 75 days from the liquidation commencement date as required by regulation 13 of the IBBI (Liquidation Process) Regulations, 2016. [Paras 11]

Directions given for commencement of liquidation moratorium, public announcement, statutory intimations, investigation of transactions and submission of a preliminary report within the prescribed timeline.

Final Conclusion: The Tribunal ordered liquidation of M/s. Krishna Industrial Corporation Ltd. under section 33(2) of the IBC for want of any resolution plan within the CIRP period, appointed the resolution professional as liquidator with specified duties and timelines, and issued consequential directions for the conduct of the liquidation process.

Admission of petition under section 7 of the Insolvency and Bankruptcy Code - Establishment of default as condition precedent to CIRP - Moratorium under section 14 of the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional and vesting of management in IRP - Jurisdiction of Adjudicating Authority - Public announcement, claims invitation and interim funding for CIRP

Jurisdiction of Adjudicating Authority - This Adjudicating Authority has territorial jurisdiction to hear the petition against the corporate debtor. - HELD THAT: - The corporate debtor is a private limited company incorporated in Maharashtra with its registered office in Nagpur, Maharashtra. The registry therefore possesses territorial competence to adjudicate the company petition filed under the Insolvency and Bankruptcy Code directed against that corporate debtor. [Paras 2]

Jurisdiction of this Bench to adjudicate the petition is established.

Establishment of default as condition precedent to CIRP - Admission of petition under section 7 of the Insolvency and Bankruptcy Code - The financial creditor demonstrated a debt and default sufficient to admit the section 7 petition and trigger CIRP. - HELD THAT: - The petition, supported by loan documents and bank statements placed on record, shows the existence of facilities and records the date of default as 31 August 2016. The application satisfied the statutory requirements and the quantum of default exceeded the minimum threshold in force. The Adjudicating Authority found the default established and no reason to deny admission of the petition was shown, notwithstanding absence of a substantive reply by the corporate debtor. [Paras 3, 5, 6, 15]

The section 7 petition is admitted and the corporate insolvency resolution process is ordered to be initiated against the corporate debtor.

Moratorium under section 14 of the Insolvency and Bankruptcy Code - A moratorium as contemplated by section 14 IBC is imposed from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. - HELD THAT: - Upon admission of the petition, the Adjudicating Authority directed the operation of the moratorium, restraining institution or continuation of suits and proceedings, transfer or disposal of assets, enforcement of security and recovery of property occupied by the corporate debtor, subject to prescribed exceptions for continued supply of essential goods and services and transactions exempted by the Central Government or sectoral regulators. The moratorium's temporal effect was tied to completion of CIRP or further orders under the Code. [Paras 16]

Moratorium under section 14 is declared and will remain in force for the CIRP period as ordered.

Appointment of Interim Resolution Professional and vesting of management in IRP - Public announcement, claims invitation and interim funding for CIRP - An Interim Resolution Professional (IRP) is appointed and directed to perform statutory functions; public announcement and interim funding directions are issued. - HELD THAT: - The financial creditor proposed an individual who filed the required Form No. 2 and registration certificate. The Adjudicating Authority appointed the proposed person as IRP to carry out duties under the Code, directed vesting of corporate management in the IRP during CIRP, required officers to cooperate and produce documents, ordered public announcement of CIRP and invited claims in accordance with the regulations, and directed the financial creditor to deposit interim funds to meet notice and claims-invitation expenses subject to CoC approval. [Paras 14, 16]

The proposed person is appointed as IRP; management vests in the IRP and directions for public announcement, claims invitation and interim funding are issued.

Final Conclusion: The Adjudicating Authority admitted the section 7 petition filed by the financial creditor against the corporate debtor, declared the moratorium, appointed the interim resolution professional, directed public announcement and interim funding, and ordered usual ancillary compliances; no issue was remanded for fresh consideration.

Liability of directors under Section 68 of FERA - presumption of failure to take reasonable steps under Section 18(3) FERA - failure to realise export proceeds and contravention of Sections 18(2) & 18(3) FERA - requirement to submit Exchange Control copies of Bills of Entry under Para 7A-20 of the Exchange Control Manual - pendency of set-off/write-off applications with the Reserve Bank of India not absolving statutory responsibility - non-applicability of force majeure on the facts - liability of non-executive/NRI directors for acts attributable to day-to-day management

Liability of directors under Section 68 of FERA - presumption of failure to take reasonable steps under Section 18(3) FERA - pendency of set-off/write-off applications with the Reserve Bank of India not absolving statutory responsibility - Liability of Shri Sebastian Chokkattu for contraventions and imposition of penalties - HELD THAT: - The Tribunal accepted the Adjudicating Authority's findings that substantial export proceeds remained unrealised for the period 1992-1997 and that no sufficient and visible steps for realisation were taken by the noticee companies. The record did not show that the RBI had granted an effective write-off or set-off in respect of the relevant export realizations; the solitary conditional RBI communication of 17.09.1996 did not dispose of the matters before the Authority and the appellants produced no material showing compliance with the condition. The Tribunal held that mere pendency of an application for write-off/set-off before RBI does not absolve statutory responsibility under Sections 18(2)/18(3) and that on the facts there was no force majeure. Applying Section 68, the appellant as chairman and a director was found to have not taken sufficient steps to realise the export proceeds and the penalties imposed by the Adjudicating Authority were held to be proper and proportionate.

Appeal dismissed; penalties imposed on Shri Sebastian Chokkattu upheld.

Liability of directors under Section 68 of FERA - requirement to submit Exchange Control copies of Bills of Entry under Para 7A-20 of the Exchange Control Manual - Liability of Shri B. Balakrishnan as director of M/s. Intimate Apparels (P) Ltd. - HELD THAT: - The Tribunal found that Shri V.P. Gopalakrishnan Nair was the director in charge of Indian operations until 11.07.1995 and that Shri B. Balakrishnan succeeded him on that date and thereby stepped into the role of being 'in charge of, and responsible to, the company for the conduct of business' during the period when the exports were made. On that basis, and having regard to the failure to submit requisite Exchange Control documentation and to take sufficient steps to realise export proceeds, the Tribunal found no illegality in holding Balakrishnan liable under Section 68 and in the penalty imposed by the Adjudicating Authority.

Appeal dismissed; penalty imposed on Shri B. Balakrishnan upheld.

Liability of non-executive/NRI directors - liability of directors under Section 68 of FERA - Liability of Shri Biju Thomas (NRI director) for the alleged contraventions - HELD THAT: - The Tribunal observed there was no material on record showing that Shri Biju Thomas was responsible for or in charge of the day-to-day affairs of the Trend Setters group during the period of contraventions (1992-1997). On the facts, Section 68(2) - liability where contravention is with consent or connivance or attributable to neglect - was not attracted against him. The Tribunal relied on authorities of the Delhi and Bombay High Courts (as cited in the appeals) regarding non-executive directors not being held liable where they were not in charge of day-to-day management. Accordingly, the findings and penalties against Shri Biju Thomas were held to be erroneous and set aside.

Appeal allowed; findings and penalties against Shri Biju Thomas quashed and set aside.

Liability of non-executive/NRI directors - liability of directors under Section 68 of FERA - Liability of Shri S. Sunil Kumar (joined as CEO in 1998) for contraventions occurring in 1992-1997 - HELD THAT: - The Tribunal recorded that Shri S. Sunil Kumar joined the group as Chief Executive Officer only on 01.01.1998 and there was no material that he had any role in the day-to-day affairs during 1992-1997 when the alleged contraventions occurred. The Tribunal held that attributing the earlier contraventions to him was unwarranted; reliance was placed on the same authorities as in the case of Shri Biju Thomas concerning non-executive or post-facto appointees. Accordingly, the findings and penalties imposed on Shri S. Sunil Kumar were held to be erroneous and not sustainable.

Appeal allowed; findings and penalties against Shri S. Sunil Kumar quashed and set aside.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's findings and penalties against Shri Sebastian Chokkattu and Shri B. Balakrishnan, dismissing their appeals, while allowing the appeals of Shri Biju Thomas and Shri S. Sunil Kumar and quashing the penalties imposed on them; all other reliefs dismissed and there is no order as to costs.

Cross-examination - principles of natural justice - relevancy of statements recorded during investigation - right to fair opportunity to defend - adjudicating authority's obligation to allow cross-examination under Section 9D of the Central Excise Act, 1944

Cross-examination - principles of natural justice - relevancy of statements recorded during investigation - adjudicating authority's obligation to allow cross-examination under Section 9D of the Central Excise Act, 1944 - Denial of the appellant's request to cross-examine witnesses relied upon in the show cause notice - HELD THAT: - The Tribunal found that the statements of various persons recorded during investigation were relied upon in the show cause notice and that some of those statements were made by third parties. Denial of cross-examination would deprive the appellant of an effective opportunity to defend and would amount to unfair justice and a violation of the principles of natural justice. The Tribunal referred to its earlier decision in Kudrat Corporation and held that where the noticee seeks cross-examination of witnesses whose statements have been used in the show cause notice, the adjudicating authority is under a legal obligation, in the interests of justice and having regard to the mandate of Section 9D of the Central Excise Act, 1944, to permit cross-examination. On that basis the Tribunal concluded that the appellant's prayer for cross-examination was just and proper and the order refusing it could not be sustained. [Paras 5, 6]

The impugned order denying cross-examination is set aside and the appellant's request for cross-examination of witnesses is allowed; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the order refusing cross-examination and held that the adjudicating authority must permit cross-examination of witnesses relied upon in the show cause notice to ensure compliance with principles of natural justice and the mandate of Section 9D of the Central Excise Act, 1944.

Proportionate reversal of Cenvat credit under Rule 6(3)(ii) read with Rule 6(3A) of the Cenvat Credit Rules, 2004 - value of exempted final products for computation of ineligible credit - intermediate/captive consumption not to be treated as exempted final product for valuation under Rule 6 - extended period of limitation not invokable for purely interpretational issue

Proportionate reversal of Cenvat credit under Rule 6(3)(ii) read with Rule 6(3A) of the Cenvat Credit Rules, 2004 - value of exempted final products for computation of ineligible credit - intermediate/captive consumption not to be treated as exempted final product for valuation under Rule 6 - Whether proportionate credit under Rule 6(3)(ii) read with Rule 6(3A) must be computed by taking the value of the exempted final products (Urea/SSP) and dutiable final products (Ammonia), or by reference only to the value of intermediate/captively consumed Ammonia. - HELD THAT: - The Tribunal held that Rule 6(3)(ii) read with Rule 6(3A) applies where a manufacturer produces both dutiable and exempted final goods, and the statutory formula expressly requires the values of the exempted goods and of the dutiable and exempted goods manufactured and removed during the financial year to be used in computing the proportionate reversal. An intermediate product (Ammonia) captively consumed in the manufacture of an exempted final product (Urea/SSP) cannot be equated to an exempted final product merely because it is used in further manufacture. The plain language of the Rule contemplates values of goods manufactured and removed (i.e., final products) for the denominator and numerator in the formula; therefore the Department's approach of limiting the computation to the value of Ammonia alone (on the basis that input services related primarily to Ammonia) is misconceived. Applying the statutory formula as worded, the show cause notices challenging the appellant's method were unsustainable and liable to be set aside. [Paras 30, 32, 33]

Revenue's demand based on taking only the value of Ammonia for computing proportionate reversal is rejected; Rule 6(3)(ii) read with Rule 6(3A) requires use of values of final goods manufactured and removed and the impugned show cause notices are set aside.

Extended period of limitation not invokable for purely interpretational issue - Whether the extended period of limitation could be invoked in respect of the demands when the controversy was purely interpretational and there was no suppression, fraud or malafide conduct by the appellant. - HELD THAT: - The Tribunal found that the dispute was one of interpretation of Rule 6 and allied provisions, without any allegation of suppression, fraud or concealment of material facts. In such circumstances the extended period of limitation is not attracted. The appellant's appeals being interpretational in nature therefore could not be defeated by invocation of the extended period; the Commissioner (Appeals) erred in upholding extended limitation in these facts. [Paras 25, 33]

Invocation of the extended period of limitation is not justified; the extended-period contention fails and the appeals succeed on this ground as well.

Final Conclusion: Both appeals are allowed: the demands premised on the Department's restricted valuation methodology are set aside as contrary to the scheme of Rule 6(3)(ii)/6(3A), and the extended period of limitation is held inapplicable to the purely interpretational dispute; consequential relief to the appellant follows.

Amnesty scheme applicable to outstanding dues under various statutes - separate treatment of arrears under different enactments - settlement limited to outstanding dues under the chosen enactment - amnesty under Section 23(B) of the Kerala General Sales Tax Act - acceptance of amnesty application

Settlement limited to outstanding dues under the chosen enactment - separate treatment of arrears under different enactments - acceptance of amnesty application - Whether the petitioner can be compelled to opt for settlement of outstanding dues under other enactments when it chooses the amnesty scheme only for arrears under the Kerala General Sales Tax Act. - HELD THAT: - The Court held that the statutory amnesty scheme is framed to cover outstanding dues under multiple enactments but treats arrears under each enactment separately. The scheme itself and the impugned circular indicate that different time-periods and conditions apply to dues under distinct statutes (for example, dues under the KGST Act are treated with reference to amounts prior to 1.4.2005 and separately for the period 1.4.2005 to 31.03.2020). Consequently, where an assessee offers to settle the entire arrears pertaining to a particular legislation, the department cannot insist that the assessee must simultaneously opt to settle dues under other enactments. Applying that principle to the facts, the petitioner has no other outstanding dues under the KGST Act and has offered settlement of the entire KGST arrears; therefore the assessing authority was obliged to accept the petitioner's amnesty application in respect of the KGST arrears in terms of the scheme and Section 23(B) of the KGST Act.

Intimation Ext.P1 quashed and the assessing authority directed to accept the petitioner's application for settlement of arrears under the KGST Act in terms of Section 23(B).

Final Conclusion: Writ petition allowed; impugned intimation set aside and respondents directed to accept the petitioner's amnesty application for settlement of KGST arrears in accordance with the scheme and Section 23(B) of the Kerala General Sales Tax Act.

Refund of pre-deposit - statutory interest on refund - decision of refund application within time bound schedule - assessment remand resulting in nil liability

Refund of pre-deposit - assessment remand resulting in nil liability - statutory interest on refund - decision of refund application within time bound schedule - Petition for refund of pre-deposit made during appellate proceedings following remand, and claim for statutory interest thereon, pending consideration by the revenue authorities. - HELD THAT: - The petitioner deposited a pre-deposit of Rs. 10,00,000 during appellate proceedings after the first assessment. On remand, the fresh assessment recorded nil liability and observed that the deposited amount ought to be refunded upon proper application. The petitioner submitted a refund application and subsequent representations which remain undecided. In these circumstances the Court directed the respondent-authority to decide the pending refund application in accordance with law, rules, regulations and Government policies and on the basis of the evidence on record, and to consider payment of statutory interest where payable. The Court mandated that this be done expeditiously and preferably within four weeks from the date of the order. [Paras 2, 4, 5, 6]

Respondent No.2 is directed to decide the petitioner's refund application (Annexure P-5) in accordance with law, rules and regulations and on the basis of the evidence, and to make payment including statutory interest if due, preferably within four weeks.

Final Conclusion: Writ petition disposed directing the concerned respondent-authority to decide the pending refund application and, if appropriate, grant the refund with statutory interest in accordance with law within the time specified.

Refund of input tax credit - input tax credit carry forward by TRANS-1 return - direction to decide pending application expeditiously - reference to earlier decision for guidance - no adjudication on merits

Refund of input tax credit - input tax credit carry forward by TRANS-1 return - reference to earlier decision for guidance - direction to decide pending application expeditiously - Application of the petitioner for refund of input tax credit (or alternatively for carry forward by TRANS-1) was directed to be decided by the respondent authorities in accordance with law; merits were not adjudicated by this Court. - HELD THAT: - The Court noted the petitioner's claim for payment of input tax credit and the alternative prayer for carrying forward the amount by way of TRANS-1 return, and observed that a similar matter (W.P.(C)7411/2020) had been decided on 05.10.2020. Rather than determining the substantive entitlement, the Court directed the concerned respondent authorities to decide the petitioner's pending application for refund/input credit carry forward in accordance with applicable law, rules, regulations and government policies, taking into account the earlier decision where applicable and the alternative relief pleaded. The Court explicitly refrained from adjudicating the merits of the claim and required the authorities to dispose of the application expeditiously, preferably within four weeks from receipt of the order. [Paras 4, 5]

Respondent authorities to decide the petitioner's application for refund of input tax credit or for carry forward by TRANS-1 in accordance with law and the cited earlier decision, expeditiously and preferably within four weeks; merits not adjudicated.

Final Conclusion: Writ petition disposed with direction to the respondent authorities to decide the petitioner's application for refund/input credit carry forward in accordance with law and relevant precedent, within a short specified time; court did not rule on merits.

Default bail - Proviso (a) to Section 167(2) of the Cr.PC - right to be released on default bail - requirement to offer and furnish bail - obligation of the court to apprise accused of entitlement to default bail - notice to the prosecution when default bail is sought - primacy of substance over form in matters of personal liberty - Article 21 - protection of life and personal liberty

Default bail - Proviso (a) to Section 167(2) of the Cr.PC - requirement to offer and furnish bail - primacy of substance over form in matters of personal liberty - Whether an application for regular bail under Section 439 Cr.PC (or an oral application) made after expiry of the statutory period can be treated as an application for default bail under the Proviso (a) to Section 167(2) Cr.PC. - HELD THAT: - The Court held that the Proviso (a) to Section 167(2) does not mandate a formal written invocation of the specific provision; it requires only that the accused be prepared to and does furnish bail once the statutory period has expired. Consistent with Supreme Court authorities the Court emphasised that in matters of personal liberty substance prevails over form and that whether the accused applies in writing or orally is immaterial so long as the essential conditions of the proviso are met. The Court therefore concluded that an application under Section 439 Cr.PC made after the expiry of the stipulated period, in which the accused unequivocally offers to furnish bail, must be treated as an application for default bail. The Court further noted the settled obligation of the court to apprise an accused of his entitlement to default bail and that the prosecution should be put on notice when such a claim is pressed, but that these procedural safeguards do not nullify the accused's substantive right where the proviso's conditions are satisfied. [Paras 36, 37, 40, 41, 42]

An application under Section 439 Cr.PC (including oral pleas) made after expiry of the statutory period and accompanied by an unequivocal offer to furnish bail shall be construed as an application for default bail under Proviso (a) to Section 167(2) Cr.PC; form should not defeat the substantive right.

Right to be released on default bail - obligation of the court to apprise accused of entitlement to default bail - notice to the prosecution when default bail is sought - Article 21 - protection of life and personal liberty - Whether the petitioner was entitled to default bail in the facts of this case and whether bail should be granted. - HELD THAT: - Applying the legal principle that an accused who has been in custody beyond the statutory period and who is prepared to furnish bail acquires an indefeasible right to default bail, the Court found that the petitioner had been in custody for the requisite period, had made bail applications and had unequivocally offered to furnish bail and surety. The Court observed that the investigation was complete, the principal witness was the complainant and there was little possibility of the petitioner influencing witnesses. The Court therefore exercised its jurisdiction to allow bail, subject to conditions designed to secure attendance and prevent tampering or contact with the victim and witnesses. [Paras 18, 35, 42, 43, 44]

Petitioner entitled to default bail; petition allowed and petitioner directed to be released on bail on furnishing bond and surety subject to specified conditions.

Final Conclusion: The Court held that an application for regular bail (including under Section 439 or orally) made after expiry of the statutory period, coupled with an unequivocal offer to furnish bail, suffices as an application for default bail under Proviso (a) to Section 167(2) Cr.PC; applying that principle on the facts, the petitioner was entitled to and granted default bail on conditions.

Reading down of subordinate legislation - enrolment as an advocate - withholding/deposit of enrolment certificate - provisional enrolment certificate (provisional Sanad) - compatibility of enrolment number with All India Bar Examination online portal - reasonableness and arbitrariness of rule - application of Articles 14, 19(1)(g) and 21

Reasonableness and arbitrariness of rule - application of Articles 14, 19(1)(g) and 21 - reading down of subordinate legislation - Validity of Rules 1 and 2 of the Bar Council of Gujarat (Enrollment) Rules and whether they should be struck down or read down as violative of fundamental rights - HELD THAT: - The Court examined whether Rules 1 and 2 - which bar admission of a person in service, employment or engaged in trade/profession at the stage of enrolment - offend Articles 14, 19(1)(g) and 21 or otherwise are ultravires. Applying established canons preferring interpretation that preserves constitutionality, the Court held that striking down the rules is a last resort and that a subordinate rule that produces absurd or unjust results may be read down to give effect to its object. Considering the object of maintaining the dignity and full time character of the legal profession and the statutory scheme (including Rule 49 of the Bar Council of India Rules which regulates practising advocates who take up employment), the Court construed Rules 1 and 2 so as to permit enrollment of otherwise qualified persons even if they are in employment, subject to the enrolment certificate being withheld with the State Bar Council and lying in deposit until the person declares that the disqualifying circumstances have ceased and that they intend to commence practice. This reading preserves the regulatory aim while avoiding manifest hardship and is therefore adopted instead of striking down the rules. [Paras 22, 23, 24, 32, 33]

Rules 1 and 2 are read down to allow admission of otherwise qualified persons in employment, with the enrolment certificate to be withheld/deposited with the Bar Council until the person declares cessation of the disqualifying circumstances and intention to practice.

Provisional enrolment certificate (provisional Sanad) - withholding/deposit of enrolment certificate - enrolment as an advocate - Entitlement of the writ applicant to provisional enrolment and to appear in the All India Bar Examination - HELD THAT: - Applying the read down construction, the Court directed that the Bar Council of Gujarat and the Bar Council of India act in consonance with the interpreted rules and issue a provisional Sanad to the writ applicant so as to entitle her to appear in the All India Bar Examination. The interim undertakings filed by the applicant (not to practice on the basis of provisional enrolment and to deposit the certificate if disqualifying circumstances continue after passing the exam) satisfy the regulatory concern that an enrolled person in employment should not practise concurrently, and therefore issuance of provisional enrolment was directed. [Paras 4, 33, 34]

Writ applicant entitled to provisional enrolment (provisional Sanad) to enable appearance in the All India Bar Examination subject to the undertaking that she will not practise and will deposit the certificate if disqualifying circumstances persist.

Compatibility of enrolment number with All India Bar Examination online portal - enrolment as an advocate - Requirement that the Enrollment Number issued to the applicant be in the same format as given to other applicants and compatible with the All India Bar Examination online registration system - HELD THAT: - The Court found that issuance of a non standard enrolment number that the online portal would not accept would frustrate the purpose of allowing provisional enrolment and appearance in the exam. To give effect to the relief granted and to prevent circumvention of the order, the Bar Council of Gujarat was directed to issue an enrollment number in the same format as other applicants and compatible with the online registration portal, to be provided within three days of the writ. [Paras 5, 35]

Bar Council of Gujarat to issue an enrollment number in the same format as other applicants and compatible with the All India Bar Examination online portal within three days.

Final Conclusion: The Court read down Rules 1 and 2 of the Bar Council of Gujarat (Enrollment) Rules to permit enrollment of otherwise qualified persons who are in employment, subject to withholding/deposit of the enrolment certificate until they declare cessation of the disqualifying circumstances; directed issuance of a provisional Sanad to the petitioner to enable appearance in the All India Bar Examination and ordered the Bar Council of Gujarat to issue a compatible enrollment number within three days. Miscellaneous applications were disposed of as consequential.

Regular bail - exercise of judicial discretion in bail - delay in lodging FIR - ongoing investigation and non-filing of charge-sheet - absence of criminal antecedents - nature and gravity of accusation - conditioning of bail - surrender of passport - monthly police reporting - trial court not to be influenced by preliminary observations

Regular bail - exercise of judicial discretion in bail - delay in lodging FIR - ongoing investigation and non-filing of charge-sheet - absence of criminal antecedents - nature and gravity of accusation - Grant of regular bail to the applicants in C.R.No.11193053200692 of 2020 - HELD THAT: - The Court considered the applicants' custody since 18.08.2020, that investigation was pending and charge-sheet had not been filed, apparent delay in lodging the FIR (including earlier notice dated 01.11.2018), and that prima facie no criminal antecedents were shown. Having regard to the facts, the continuing investigation, delay in lodging the complaint and absence of antecedents, and balancing the nature and gravity of the accusation, the Court exercised its discretion in favour of the applicants and declined to go into merits. The Court observed that the trial would take considerable time and accepted the applicants' assurances to comply with conditions attendant to bail. The Court referred to governing principles including the Apex Court's law in Sanjay Chandra v. CBI while exercising its discretion. [Paras 7, 8, 9]

Application allowed and applicants ordered to be released on regular bail on execution of personal bond with sureties.

Conditioning of bail - surrender of passport - monthly police reporting - trial court not to be influenced by preliminary observations - Imposition of specific bail conditions and clarifying effect of interim observations on the trial court - HELD THAT: - Bail was made subject to conditions including execution of personal bond with sureties, restriction against misuse of liberty, non-interference with investigation or evidence, surrender of passports (if any) within a week, prohibition on leaving the State without prior permission, monthly attendance at the police station for six months, and furnishing of present residential address and not changing residence without permission. The order further directed that the applicants would be released only if not required in connection with any other offence and that breach of conditions would empower the Sessions Judge to take appropriate action. The Court expressly directed that the trial court shall not be influenced by the preliminary observations made by this Court while enlarging the applicants on bail. [Paras 9, 10, 11, 12, 13]

Bail granted subject to the enumerated conditions; trial court free to modify conditions and not to be influenced by this Court's preliminary observations.

Final Conclusion: The petition for regular bail is allowed; applicants are released on bail on furnishing bonds and sureties and subject to the specified conditions, with liberty for the trial court to modify conditions and to act on any breach.

Presumption under Section 139 of the Negotiable Instruments Act - conviction under Section 138 of the Negotiable Instruments Act - statutory notice under the Negotiable Instruments Act - rebuttal of presumption - modification of sentence on grounds of family responsibility - payment of compensation and default imprisonment

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption - Whether the presumption of liability arising from the admitted issuance of the cheque was attracted and whether the accused successfully rebutted that presumption. - HELD THAT: - The cheque issued by the petitioner was admitted and presented for collection, attracting the statutory presumption under Section 139. The petitioner led evidence (examined himself and his father and marked documents ExR1-ExR19) alleging that blank cheques were taken away and misused by a third party and that there was no legally enforceable debt. The trial Court and the appellate Court considered these pleas and the supporting complaints, but found material deficiencies in the complaints relied upon (absence of dates, omission of the cheque number, and timing of complaints) and rejected the version of forcible taking and misuse as insufficient to discharge the presumption. The Courts below were held to have rightly rejected the attempt to rebut the presumption, and the revision Court agreed that the petitioner had not succeeded in rebutting the statutory presumption of liability. [Paras 12, 14, 15]

The presumption under Section 139 was attracted and the petitioner failed to rebut it; the findings of the Courts below on this issue are confirmed.

Statutory notice under the Negotiable Instruments Act - Whether the statutory notice required under the Negotiable Instruments Act was validly effected or whether non-service vitiated the complaint. - HELD THAT: - The record shows the cheque was presented and returned with endorsement 'account closed', and a statutory notice dated 13.10.2010 was issued by the complainant but was returned as 'unclaimed'. The petitioner contended that the notice was not served at his residence and was sent to his office address; reliance was placed on proximity and on absence of personal demand. The appellate Court and this Court found that service by sending the notice to the office address was sufficient in the circumstances and that the petitioner could not take the objection that no notice was effected. Consequently, lack of personal service at the residential address did not vitiate the complaint on the facts of this case. [Paras 11, 15]

Service of the statutory notice was held to be sufficient and did not invalidate the complaint.

Conviction under Section 138 of the Negotiable Instruments Act - modification of sentence on grounds of family responsibility - payment of compensation and default imprisonment - Whether the conviction and sentence imposed by the trial Court should be maintained or modified, and whether the order for payment of compensation should stand. - HELD THAT: - The trial Court convicted and sentenced the petitioner to one year simple imprisonment and directed payment of compensation. The appellate Court dismissed the appeal. On revision, this Court confirmed the conviction based on the failure to rebut the presumption and adequacy of notice. However, taking into account the petitioner's plea that he is the sole bread-winner of his family, the Court exercised its power to modify the sentence. The order directing payment of compensation to the complainant as adjudicated by the trial and appellate Courts was upheld, with a directive that the petitioner pay the compensation within three months of receipt of the order and that failure to do so would attract an additional custodial sentence as provided by the Courts below. [Paras 3, 17]

Conviction under Section 138 is confirmed; sentence reduced from one year simple imprisonment to three months simple imprisonment; the direction to pay compensation is sustained with statutory default imprisonment in the event of non-payment within the prescribed time.

Final Conclusion: The revision petition is partly allowed: the conviction under Section 138 of the Negotiable Instruments Act confirmed; the substantive sentence is reduced to three months simple imprisonment; the direction to pay compensation as ordered by the trial and appellate Courts is upheld and must be complied with within three months, failing which further imprisonment shall follow as directed.

Anticipatory bail under Section 438 Cr.P.C. - criminal liability for cheating under Section 420 read with Section 34 IPC - insufficiency of FIR/F.I. statement alone to refuse anticipatory bail - role of documentary evidence and admission in establishing complicity - custodial interrogation and cooperation with investigation - conditions of bail including sureties, appearance obligations and surrender of passport

Anticipatory bail under Section 438 Cr.P.C. - insufficiency of FIR/F.I. statement alone to refuse anticipatory bail - role of documentary evidence and admission in establishing complicity - custodial interrogation and cooperation with investigation - conditions of bail including sureties, appearance obligations and surrender of passport - Grant of anticipatory bail to the 1st accused in Crime No.315/2019 for alleged offences under Section 420 read with Section 34 IPC - HELD THAT: - The court found that the promise to arrange the visa and the subsequent agreement to repay the amount were made by the 2nd accused and that the agreement and the Section 138 complaint do not mention the applicant. The mere mention of the applicant's name in the First Information Statement and the existence of WhatsApp messages and a confession by the 2nd accused, without corroborative documentary material implicating the applicant, are insufficient at this stage to deny anticipatory bail. The court observed that the documentary agreement and dishonoured cheques indicate the 2nd accused's undertaking to repay and that, had the applicant been a party to the repayment undertaking, the agreement would likely have referred to him. While noting that further investigation is necessary (including examination of WhatsApp messages and the 2nd accused's confession), the court concluded that there is no present material to establish the applicant's complicity. Given the absence of a prima facie case against the applicant warranting denial of pre-arrest relief, the court granted anticipatory bail subject to the applicant's cooperation with the investigation, submission to interrogation, and compliance with specified restrictive conditions. The court imposed reasonable conditions to prevent tampering with evidence or influencing witnesses, to ensure the applicant's presence for investigation, and to restrict international travel by requiring surrender of the passport and leave of the jurisdictional court for going abroad. [Paras 7]

Anticipatory bail allowed; applicant to surrender to the investigating officer within two weeks and, if arrested after interrogation, to be released on bail on execution of a bond with two solvent sureties and compliance with specified conditions including non-tampering with evidence, periodic appearance for interrogation, surrender of passport and prohibition on travelling abroad without court permission.

Final Conclusion: Anticipatory bail granted to the petitioner subject to cooperation with investigation and specified conditions; prosecution remains free to apply for cancellation of bail on breach of conditions.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumptions under Section 118 of the Negotiable Instruments Act - Burden of proof in prosecution under Section 138 of the Negotiable Instruments Act - Validity of cheque issued for discharge of debt or liability - Modification of sentence

Presumption under Section 139 of the Negotiable Instruments Act - Burden of proof in prosecution under Section 138 of the Negotiable Instruments Act - Validity of cheque issued for discharge of debt or liability - Conviction under Section 138 of the Negotiable Instruments Act is sustainable. - HELD THAT: - The trial court's finding that the accused executed the cheque and that it was returned dishonoured ('insufficient funds') attracts the statutory presumptions under Sections 118 and 139 of the Act once execution is proved or admitted. Those presumptions shift the evidential burden to the accused to rebut that the cheque was issued for discharge of a debt or liability. The accused neither disputed signature nor alleged coercion, loss or theft, and failed to lead cogent evidence to show absence of any debt or liability. The appellate and trial courts' concurrent findings on these facts are not perverse and are entitled to be upheld. Consequently, the conviction under Section 138 is confirmed. [Paras 5, 7, 12]

Conviction under Section 138 of the Negotiable Instruments Act is affirmed.

Rebuttable presumptions under Section 118 of the Negotiable Instruments Act - Validity of cheque issued for discharge of debt or liability - Contention that payments under Ext.P10 or alleged monthly payments extinguished liability under the cheque is rejected. - HELD THAT: - The accused claimed that a signed blank cheque was filled later and that monthly payments as per Ext.P10 discharged part of the debt. The court found no evidence of repayment of any part of the principal amount covered by the cheque; the alleged monthly payments represented an agreement for interest/profit and did not amount to repayment of the principal covered by Ext.P1. The principle in Joseph Sartho v. Gopinathan Nair (relied upon by the defence) was held inapplicable because there was no proof of actual partial repayment of the principal. The accused therefore failed to rebut the presumption that the cheque was for discharge of debt or liability. [Paras 8, 10, 11]

Defence based on Ext.P10 and alleged payments does not rebut the statutory presumption; the contention is rejected.

Modification of sentence - Sentence imposed by the courts below is modified while conviction is maintained. - HELD THAT: - Considering the antiquity of proceedings (cheque dated 31.08.2007 and prolonged litigation) and the facts and circumstances, the High Court sustained the conviction but altered the sentence. The court substituted the earlier order of compensation with a sentence directing the accused to pay a fine of Rs. 2,00,000/- and, in default, undergo simple imprisonment for three months. Time of six months was granted to deposit the fine, and on deposit the amount shall be disbursed to the complainant as compensation. The registry is directed to return records to the trial court for execution. [Paras 13]

Conviction sustained; sentence modified to fine of Rs. 2,00,000/- with default simple imprisonment for three months and six months' time to pay.

Final Conclusion: Criminal revision is partly allowed: conviction under Section 138 of the Negotiable Instruments Act is affirmed; defence of partial repayment via Ext.P10 is rejected; sentence modified to a fine of Rs. 2,00,000/- (default three months' simple imprisonment) with six months' time for payment and directions for execution by the trial court.

Requirements of offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption of consideration under Section 118 of the Negotiable Instruments Act - liability of partners under Section 141 of the Negotiable Instruments Act - agent's right to sue for principal under Section 230 of the Indian Contract Act

Requirements of offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption of consideration under Section 118 of the Negotiable Instruments Act - agent's right to sue for principal under Section 230 of the Indian Contract Act - liability of partners under Section 141 of the Negotiable Instruments Act - Conviction under Section 138 of the Negotiable Instruments Act and constructive liability of the managing partner under Section 141 was sustainable on the evidence. - HELD THAT: - The Court examined whether the cheques were issued for discharge of a legally enforceable debt and whether statutory presumptions apply. Once execution of the cheques was admitted, presumptions under Sections 118 and 139 of the Negotiable Instruments Act arise that the instruments were drawn for consideration and to discharge liability; the burden thus shifted to the accused to rebut that presumption by cogent evidence. The accused did not adduce evidence to show absence of consideration or that the complainant could not enforce the claim; the contention that the complainant was merely an agent of the principal and therefore could not sue under Section 230 of the Contract Act was rejected on the facts because the cheques were issued in favour of the complainant and no explanation was offered by the accused. The Explanation to Section 141 renders partners liable for offences by a firm; the trial and appellate courts' concurrent findings that the cheques were issued, dishonoured for 'exceeds arrangement', and that the accused failed to rebut the statutory presumption were held not to be perverse and were therefore upheld. [Paras 8, 9, 13, 14, 16]

Convictions under Section 138 of the Negotiable Instruments Act against the firm and the managing partner (by virtue of Section 141) are upheld.

Compensation and sentence modification in criminal proceedings - execution of sentence on deposit default - Modification of sentence and compensation awarded by the appellate court: reduction of compensation to the amount due under the cheques and grant of time to deposit. - HELD THAT: - The appellate court had maintained a compensation amount exceeding the cheque value; the High Court found it just to reduce compensation so that the complainant receives the amount covered by the cheques. The High Court ordered that upon deposit by the accused of a specified fine amount, that sum together with the reduced compensation be released to the complainant, and granted six months from the order for payment; failure to deposit will permit execution of sentence by the trial court in accordance with law. The Registry was directed to send records to the trial court for implementation. [Paras 17, 18]

Compensation reduced so that the complainant receives the cheque amount; six months' time granted to deposit compensation and fine, failing which execution to follow; otherwise sentence and conviction confirmed.

Final Conclusion: The High Court affirmed convictions under Section 138 (with partners liable under Section 141) on the concurrent findings that statutory presumptions were unrebutted, while modifying the award of compensation to the amount covered by the dishonoured cheques and granting six months for deposit of compensation and fine, failing which execution may follow.

Service of notice under Section 138 of the Negotiable Instruments Act - Deeming provision in Section 27 of the General Clauses Act - Liability of directors under Section 141 of the Negotiable Instruments Act - Quashing of criminal proceedings at the cognizance stage - Requirement of specific averment to fasten vicarious liability of directors

Service of notice under Section 138 of the Negotiable Instruments Act - Deeming provision in Section 27 of the General Clauses Act - Whether notices under Section 138 were properly served or could be deemed to have been served so as to sustain cognizance. - HELD THAT: - The complaint does not contain any pleading that the petitioners did not receive the statutory notice. The Court applied the deeming fiction in Section 27 of the General Clauses Act, as explained in K. Bhaskaran v. Shankaran Vaidhyan Balan, to treat properly addressed notices dispatched by post as deemed served unless the addressee proves non-service for reasons beyond his responsibility. The petitioners did not allege incorrect addressing or non-receipt; therefore the trial court was justified in treating the notices as received and in taking cognizance. The challenge that the lower court impermissibly presumed service therefore fails. [Paras 7, 8, 9, 10, 11]

Notices are to be deemed served; no illegality in taking cognizance on the ground of non-service.

Liability of directors under Section 141 of the Negotiable Instruments Act - Requirement of specific averment to fasten vicarious liability of directors - Whether summons could be issued to the directors (including a claimed sleeping partner) on the averments in the complaint. - HELD THAT: - The law requires the complaint to aver that a director was in charge of and responsible for the conduct of the company's business at the time of the offence; only then does the onus shift to the accused to rebut. The complaint here averred that the accused Nos.2 and 3 were directors responsible for and looking after day-to-day affairs. There is no unimpeachable material before this Court at the cognizance stage to show that accused No.3 could never have been in charge. Moreover, the parties conceded that accused No.2 signed the cheques. Given these averments and the absence of cogent rebuttal evidence at this stage, the High Court correctly treated the allegations as sufficient for prima facie issuance of summons, leaving any detailed contest to the trial court. [Paras 11, 13, 14]

Averments in the complaint are sufficient at the cognizance stage to summon the directors; accused may rebut by cogent evidence at trial.

Quashing of criminal proceedings at the cognizance stage - Service of notice under Section 138 of the Negotiable Instruments Act - Whether the criminal proceedings under Section 138 could be quashed at the threshold on the grounds urged. - HELD THAT: - At the prima facie stage, the court must be cautious about quashing criminal proceedings where an offence is made out. Admittedly, cheques in favour of the complainant were issued and were not paid after statutory notices (deemed served). The question whether the alleged dues were legally payable is a matter for trial and cannot be adjudicated at cognizance. On the material before the Court, a prima facie case under Section 138 is established and thus quashing at this stage would be inappropriate. [Paras 15, 16]

Proceedings under Section 138 are not liable to be quashed at the cognizance stage; summons properly issued.

Final Conclusion: Criminal miscellaneous petitions dismissed; the impugned orders taking cognizance and issuing summons in the Section 138 complaints are upheld, leaving disputed factual and liability questions to be contested and decided at the trial.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Burden on accused to rebut statutory presumption by establishing probability - Standard of proof in criminal trial - beyond reasonable doubt and role of probability to rebut - Dishonour of cheque for insufficiency of funds - Interference in appeal against acquittal

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Burden on accused to rebut statutory presumption by establishing probability - Interference in appeal against acquittal - Accused is not guilty of the offence under Section 138 of the Negotiable Instruments Act and the trial court's acquittal is upheld. - HELD THAT: - The trial court found that, on the evidence, the complainant had not proved beyond reasonable doubt that the cheque was issued in discharge of a legally enforceable debt. The lower court noted possibilities of different transactions involving the complainant, his brother and the accused (including chitty-related explanations), and observed evasive answers by the complainant's witness which lent probability to the defence case. While recognising the statutory presumption in favour of the complainant under Section 139, the trial court held that the accused had successfully rebutted that presumption by adducing evidence creating a plausible alternative explanation; the accused was only required to establish probability and not to prove his case beyond reasonable doubt. The High Court, on appellate review of the oral and documentary evidence and the lower court's reasoning, found no reason to interfere with those findings of fact and law and therefore dismissed the appeal against acquittal. [Paras 9, 10]

Criminal appeal dismissed; judgment of acquittal in C.C.No.1597/1998 is confirmed.

Final Conclusion: The High Court affirmed the trial court's acquittal under Section 138 of the Negotiable Instruments Act, finding that the accused had rebutted the presumption arising under Section 139 by showing a probable alternative explanation, and that there was no ground to interfere in an appeal against acquittal.

Summons trial / summary trial: particulars under Section 251 Cr.P.C. and absence of framing of charge - Alteration or addition to charge under Section 216 Cr.P.C. - Discharge of accused under Section 245 Cr.P.C. and its applicability to warrant trials

Summons trial / summary trial: particulars under Section 251 Cr.P.C. and absence of framing of charge - Alteration or addition to charge under Section 216 Cr.P.C. - Whether Section 216 Cr.P.C. can be invoked to alter or add a charge in a case under Section 138 of the Negotiable Instruments Act tried as a summons/summary trial where no charge is framed. - HELD THAT: - The court found it is an admitted position that offences under Section 138 of the Negotiable Instruments Act are usually tried as summary trials or summons cases. In summons trials, framing of charge does not occur; instead, only particulars of the offence are put to the accused under Section 251 Cr.P.C. Section 216 Cr.P.C., being in the Chapter dealing with charge, applies only where a charge has been framed and permits alteration or addition to such charge before judgment. Since there is no framing of charge in the present summons-type proceedings, Section 216 cannot be attracted and cannot be used to alter or add a charge or to seek discharge on that basis. [Paras 5, 6]

Section 216 Cr.P.C. is not applicable in a summons/summary trial under Section 138 N.I. Act because no charge is framed; therefore the petition under Section 216 could not be maintained.

Discharge of accused under Section 245 Cr.P.C. and its applicability to warrant trials - Whether Section 245 Cr.P.C. can be invoked to discharge the accused in the present proceedings. - HELD THAT: - Section 245 Cr.P.C. is contained in the Chapter dealing with trial of warrant cases by Magistrate and is the provision for discharge of an accused in cases instituted otherwise than on police report. The petitioner was not facing a warrant trial; the proceedings arise from a summons/summary trial under Section 138 N.I. Act. Because Section 245 is applicable to warrant-trial contexts (and to cases instituted otherwise than on police report as placed in that Chapter), it is not available in the present summons-type proceedings. [Paras 7]

Section 245 Cr.P.C. is not applicable to the present summons/summary trial; the petitioner cannot be discharged under Section 245 in these proceedings.

Final Conclusion: The Criminal Miscellaneous Petition is dismissed: the court held that neither Section 216 Cr.P.C. nor Section 245 Cr.P.C. is available in the summons/summary trial arising from an offence under Section 138 of the Negotiable Instruments Act, and accordingly the Magistrate's order dismissing the petition was upheld.

Quashing of criminal proceedings under Section 482 of Cr.P.C. - Proceedings under Section 138 of the Negotiable Instruments Act - Counterblast or malicious prosecution - Interconnected proceedings and decision by same trial court - Exercise of inherent jurisdiction in matters of evidence - Maintainability of prosecution

Quashing of criminal proceedings under Section 482 of Cr.P.C. - Proceedings under Section 138 of the Negotiable Instruments Act - Counterblast or malicious prosecution - Interconnected proceedings and decision by same trial court - Whether Annexure-2 final report could be quashed under the inherent powers of the High Court when the petitioners admit the complaint to be a counterblast to proceedings initiated by them under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The petitioners sought quashing of the final report relying on Section 482 of the Cr.P.C. The record shows that the petitioners themselves have initiated proceedings under Section 138 of the Negotiable Instruments Act against the de facto complainant (Annexure-3), and the present complaint (Annexure-2) is pleaded to be a counterblast to those proceedings. The matters in controversy are evidentiary and both matters are connected and are to be tried by the same Court after adducing evidence. In these circumstances the High Court refrains from invoking its inherent jurisdiction to quash the criminal proceedings at the pre-trial stage. The court observed that questions as to maintainability and other legal contentions raised by the petitioners are open to be urged before the trial court and are not appropriate for summary disposal under Section 482 when the dispute is factual and evidentiary and when related proceedings are pending.

Crl.M.C. dismissed; petitioners granted liberty to raise all contentions before the trial court.

Final Conclusion: The High Court declined to quash the Annexure-2 final report under its inherent jurisdiction, noting that the complaint is connected to pending Section 138 NI Act proceedings initiated by the petitioners and that the disputes are evidentiary; the petitioners may urge their contentions before the trial court.

Power of High Court under Section 482 Cr.P.C. - scope of inquiry in Section 482 proceedings - prima facie case - trial court's role in appreciating evidence - cognizance by competent court - expeditious completion of criminal trial

Power of High Court under Section 482 Cr.P.C. - scope of inquiry in Section 482 proceedings - prima facie case - trial court's role in appreciating evidence - Validity of petition to quash proceedings in C.C. No. 450 of 2015 under Section 482 Cr.P.C. - HELD THAT: - The High Court declined to quash the cognizance taken in C.C. No. 450 of 2015 for offences under the Negotiable Instruments Act. Relying on the Supreme Court decisions cited, the Court held that a petition under Section 482 Cr.P.C. is not the forum to probe disputed facts or to re-appreciate evidence; such scrutiny is for the trial court or on appeal. The Court confined its review to whether the complaint contained allegations constituting the ingredients of the offences and whether preconditions for taking cognizance were met, and concluded that the petitioner's contentions seeking to test the prosecution evidence could not be entertained at this stage. Consequently, the petition for quashment was rejected and the matter was directed to proceed to trial. [Paras 6, 7, 8]

Petition to quash C.C. No. 450 of 2015 dismissed; proceedings before the learned Judicial Magistrate, Valliyoor, to continue.

Cognizance by competent court - expeditious completion of criminal trial - Directions regarding conduct and timeline of the trial in C.C. No. 450 of 2015. - HELD THAT: - Having refused to quash the proceedings, the High Court directed that the petitioner must be present at stages including furnishing of copies, framing of charges, examination under Section 313 Cr.P.C. and at judgment. The trial Court was directed to complete the trial in C.C. No. 450 of 2015 within six months from receipt of a copy of the High Court's order, ensuring expeditious disposal consistent with the interest of justice. [Paras 7]

Petitioner to be present at specified stages of trial; trial to be completed within six months from receipt of the order.

Final Conclusion: The High Court dismissed the criminal original petition seeking quashment of C.C. No. 450 of 2015, holding that Section 482 Cr.P.C. is not a forum to re-appreciate evidence and directing the trial court to proceed expeditiously and complete the trial within six months.

Liability for arrears of rent - invocation of contractual clause 3(h) - sub-lessee stepping into the shoes of the lessee - recovery of arrears from lessee by sub-lessee

Liability for arrears of rent - The first respondent was not liable to pay the arrears of rent claimed by the petitioner. - HELD THAT: - The court found that the second respondent (lessee) had defaulted in paying rent for specified periods and had issued a cheque which was returned for insufficiency of funds, indicating admission of liability by the second respondent. However, the first respondent (sub-lessee) stated, and the record shows, that it had resumed paying rent directly to the petitioner from 01.10.2013 and had no outstanding to the second respondent. The petitioner had delayed in asserting his claim, issuing notices only in December 2011 and later in 2015, and did not produce certain notices before the Court. On the material placed, the first respondent owed no arrears to the petitioner and could not be mulcted with liability for earlier defaults of the second respondent. [Paras 6, 10]

Writ petition insofar as it sought a direction against the first respondent to pay arrears of rent was dismissed.

Invocation of contractual clause 3(h) - sub-lessee stepping into the shoes of the lessee - recovery of arrears from lessee by sub-lessee - Clause 3(h) of the lease was rightly invoked by the first respondent, who paid rent directly to the petitioner and may pursue recovery from the second respondent as per the contractual scheme. - HELD THAT: - Clause III-6 of the head lease (incorporated as clause 3(h) in the sub-lease) provides that the sub-lessee shall not lose leasehold rights on lessee's default and may step into the lessee's shoes by paying rentals to the head lessor, with arrears so paid being recoverable by the sub-lessee from the lessee. The first respondent invoked that clause on notice of non-receipt and commenced direct payment from 01.10.2013, communicated to the petitioner by letter dated 06.06.2014 and asserted in its counter-affidavit. The first respondent advised the petitioner to seek redress against the second respondent in accordance with their contractual obligations, reflecting that any remedy for earlier arrears lies against the lessee and not against the sub-lessee who has discharged the payment obligation. [Paras 8, 9]

The first respondent validly invoked clause 3(h), paid the rent due from 01.10.2013, and the petitioner must seek recovery of earlier arrears, if at all, from the second respondent.

Final Conclusion: The writ petition seeking a direction to the first respondent to pay arrears of rent is dismissed; the first respondent has paid rent from 01.10.2013 under clause 3(h) and any claim for earlier arrears is to be pursued against the lessee (second respondent) in accordance with law.