TaxTMI Updates e-Newsletter
Dec 28,2021

Bail - cancellation of bail - violation of bail conditions - attendance/appearance condition - custodial interrogation no longer required - disclosure statements insufficient to cancel bail - socio-economic offence and grant of bail - restoration of bail subject to conditions

Disclosure statements insufficient to cancel bail - violation of bail conditions - Whether the bail granted on 05.12.2020 could be cancelled on the basis that the petitioner committed similar offences after release on bail, relying primarily on disclosure statements of co-accused. - HELD THAT: - The Court found that the prosecution's case for cancellation relied essentially on voluntary disclosure statements of two associates (Manish and Vikas). Apart from those statements, the respondent conceded that there was no other incriminating material in respect of any commission of offence by the petitioner after 05.12.2020, the investigation being still in progress. In that factual matrix, the Court held that the mere disclosure statements, without corroborative material, do not at present suffice to conclude that the petitioner violated condition no.4 (not to indulge in similar offence) of the bail order. Consequently, the finding in the impugned order that the petitioner had committed offences after release on bail could not be accepted.

Application to cancel bail on the ground of alleged post-release commission of similar offences was not sustained; the asserted violation of condition no.4 was not established.

Attendance/appearance condition - violation of bail conditions - custodial interrogation no longer required - Whether the petitioner's non-appearance on specified dates (20.12.2021 and 21.12.2021) amounted to breach of the bail condition to appear as directed and justified cancellation of bail. - HELD THAT: - The Court examined the procedural orders and the petitioner's explanation that he suffered from fever and had undergone an RT-PCR test on 19.12.2021. The trial court's orders were analysed, including the direction for personal attendance and subsequent renotification. The petition filed on 21.12.2021 explaining illness and seeking virtual appearance was placed on record. Having considered the surrounding facts and the petitioner's explanation, the Court concluded that the absence on those dates had been explained and that the record did not support a finding of deliberate, unjustified non-appearance that would amount to a breach warranting cancellation of bail.

The petitioner's non-appearance on the said dates was satisfactorily explained and did not constitute a breach of the appearance condition justifying cancellation of bail.

Cancellation of bail - restoration of bail subject to conditions - Whether the impugned order dated 22.12.2021 cancelling the bail should be set aside and on what terms the grant of bail should stand restored. - HELD THAT: - Having found no sufficiency of evidence to hold that the petitioner had committed offences after release or wilfully breached appearance directions, the Court set aside the CMM's order dated 22.12.2021 which had cancelled bail. However, the Court made a conditioning order: restoration of the bail grant was made subject to payment of costs. The Court noted that the direction in the order dated 22.12.2021 to surrender by 23.12.2021 had not been complied with, and in balancing the equities and the orderly progress of proceedings the Court required deposit of costs to the Delhi High Court Legal Services Committee within the day and production of receipt before the trial court by 3 pm.

Order cancelling bail set aside; bail restored on the condition that the petitioner deposits specified costs and places the receipt on record by the time directed.

Final Conclusion: The High Court set aside the trial court's cancellation of the bail granted on 05.12.2020, finding that the prosecution's reliance on disclosure statements alone did not establish post-release commission of offences or breach of appearance conditions; bail was restored subject to the petitioner depositing the prescribed costs and filing the receipt as directed.

Provisional attachment of bank account under Section 83 of the CGST Act - expiry of one-year period terminates provisional attachment - requirement of pending proceedings under Sections 62, 63, 64, 67, 73 or 74 for attachment - direction to de-freeze bank account subject to respondents' right to act in accordance with law

Provisional attachment of bank account under Section 83 of the CGST Act - expiry of one-year period terminates provisional attachment - direction to de-freeze bank account subject to respondents' right to act in accordance with law - Validity of continued attachment and relief to de-freeze the petitioner's bank account after the one year period prescribed by Section 83(2) had expired - HELD THAT: - The Court recorded that Section 83(2) provides that a provisional attachment order shall cease to have effect after the expiry of one year from its date. The respondents' counsel admitted that every provisional attachment order ceases to have effect after one year. The petitioner stated that the impugned provisional attachment dated 14 July 2020 ceased to have effect on 13 July 2021 and sought de-freezing of its current account. The petitioner undertook to cooperate and appear before authorities if served with summons, and the Court accepted that undertaking and held the petitioner bound by it. In view of the statutory position and the respondents' admission, the Court allowed the petition and directed that the petitioner's bank account be defrozen, while clarifying that the respondents remain at liberty to take further steps in accordance with law. [Paras 2, 5, 7, 8, 9]

Writ petition allowed; respondents directed to de-freeze the petitioner's current bank account, subject to their liberty to act further in accordance with law.

Final Conclusion: The High Court allowed the writ petition and directed that the petitioner's provisionally attached bank account be defrozen because the one year period under Section 83(2) had expired, while leaving the respondents free to pursue lawful action thereafter.

Disposal of representation by a speaking order - opportunity of hearing - payment/reimbursement of GST on works contracts spanning pre- and post-GST implementation - state policy for neutralisation of GST burden on contractors

Disposal of representation by a speaking order - opportunity of hearing - The petitioner's representation seeking payment/reimbursement of GST was directed to be decided by the Principal Secretary, Public Works Department. - HELD THAT: - The High Court concluded that the appropriate remedy is to have the representation considered and decided on its merits by respondent No.3. The Court directed that the decision shall be a speaking order and that the petitioner's representative be afforded an opportunity of hearing. The direction includes a specific timeline for disposal to ensure prompt adjudication of the grievance.

Respondent No.3 to decide the representation by a speaking order after providing opportunity of hearing to the petitioner's representative within three months from production of a copy of this order.

Payment/reimbursement of GST on works contracts spanning pre- and post-GST implementation - state policy for neutralisation of GST burden on contractors - The substantive claim for payment/reimbursement of GST and related policy questions were not adjudicated and were left open for consideration by the authority on fresh representation. - HELD THAT: - The Court did not decide the merits of the petitioner's claim for GST payment or the broader policy issues concerning works contracts awarded before but executed after GST implementation. While noting submissions regarding arrangements adopted by other authorities and prior administrative orders, the Court refrained from expressing any view on entitlement or policy and remitted those questions for decision by the Principal Secretary when deciding the representation.

Merits of the GST claim and any policy measures for neutralisation/adjustment were remitted to respondent No.3 for fresh consideration in the course of deciding the petitioner's representation.

Final Conclusion: Writ petition disposed of by directing the Principal Secretary, Public Works Department, Government of Madhya Pradesh, to decide the petitioner's representation by a speaking order after hearing the petitioner's representative within three months; the substantive GST-related claims and policy issues were not adjudicated and are left for decision by the authority.

Scope of advance ruling under Section 97(2) - admissibility of questions by an applicant under Section 95(a) - binding nature of advance ruling under Section 103 - distinction between an electronic commerce operator and suppliers under Section 52 - Tax Collected at Source under Section 52 is not a tax levied under Section 9 - advance ruling not competent on supplies not undertaken or proposed to be undertaken by the applicant

Scope of advance ruling under Section 97(2) - admissibility of questions by an applicant under Section 95(a) - advance ruling not competent on supplies not undertaken or proposed to be undertaken by the applicant - Questions other than Q.3 and Q.7 seeking classification, applicability of notifications, registration and taxability of supplies made by third party suppliers through the applicant's platform are not admissible for advance ruling by the applicant. - HELD THAT: - The advance ruling mechanism under Section 95(a) read with Section 97(2) is confined to questions in relation to supplies of goods or services being undertaken or proposed to be undertaken by the applicant. The Authority examined the applicant's role and documentary record and found that the applicant is a platform operator/marketplace which facilitates transactions and raises invoices on behalf of suppliers but does not itself undertake supply of raw water or sewage evacuation services. The ruling regime under Section 103 is binding only on the applicant who sought the ruling and the concerned jurisdictional officers; a ruling obtained by a recipient would not bind the supplier. Permitting the applicant to obtain a ruling on the taxability, classification or applicability of notifications in respect of supplies made by third party suppliers would be inconsistent with the statutory scheme. For these reasons the questions relating to whether raw water supplied by suppliers is exempt, whether supply by tanker is sale of water or transport service, applicability of notification and registration requirements for the suppliers, and the rate/taxability of sewage evacuation services do not pertain to supplies undertaken or proposed to be undertaken by the applicant and are therefore not admissible and are rejected. [Paras 6]

Questions other than Q.3 and Q.7 are not admissible and are rejected.

Distinction between an electronic commerce operator and suppliers under Section 52 - Tax Collected at Source under Section 52 is not a tax levied under Section 9 - binding nature of advance ruling under Section 103 - Questions Q.3 and Q.7 on whether the applicant must collect TCS (1%) under Section 52 from suppliers for supplies made through its platform are not within the Authority's competence and are not admissible for advance ruling. - HELD THAT: - Section 52 requires an electronic commerce operator (distinct from suppliers) to collect an amount at a notified rate on the net value of taxable supplies made through it; that collected amount is not a 'tax' levied under Section 9. The advance ruling jurisdiction under Section 97(2) relates to determination of liability to pay tax as defined under the Act. Because the TCS mechanism under Section 52 concerns collection of an amount by the operator in respect of supplies made by other suppliers and is not a tax under Section 9, the Authority held that questions on the applicability/obligation to collect TCS are outside the scope of advance rulings by this Authority in the present application. Consequently Q.3 and Q.7 are also not admissible. [Paras 6]

Questions Q.3 and Q.7 on withholding/collection of TCS under Section 52 are not covered by the Authority's advance ruling jurisdiction and are rejected.

Final Conclusion: The Authority declines to admit the advance ruling application: all questions raised (including Q.3 and Q.7) are not admissible under the advance ruling provisions and the application is rejected for the reasons stated.

Prosecution instituted - institution of prosecution - scope of inquiry by tax authority - abetment and conspiracy liability under Section 120B IPC - offence punishable under the Prevention of Corruption Act - exclusion from benefit under Section 9(c) of the DTVSV Act

Prosecution instituted - institution of prosecution - exclusion from benefit under Section 9(c) of the DTVSV Act - Whether prosecution had been 'instituted' against the petitioner on or before filing the declaration so as to attract Section 9(c) of the DTVSV Act - HELD THAT: - The Court construed the phrase 'prosecution has been instituted' in the context of Section 9(c) by applying the principle in Sashi Balasubramaniam that 'prosecution' may include the initiation of inquiry or investigation and is not confined to filing of charge sheet or taking of cognizance. The Court held that where an FIR has been lodged and investigation initiated, prosecution is to be regarded as instituted for the limited purpose of determining eligibility under Section 9(c). On the admitted facts both criminal proceedings against the petitioner had FIRs lodged and investigations initiated; in the second proceeding a charge sheet and cognizance had also occurred. Consequently, on the face of the record prosecution had been instituted prior to the filing of the declaration and Section 9(c) therefore applied. [Paras 19, 20, 21, 22, 25]

Prosecution was instituted in both proceedings prior to the filing of the declaration and therefore the petitioner falls within the exclusion in Section 9(c) of the DTVSV Act.

Offence punishable under the Prevention of Corruption Act - abetment and conspiracy liability under Section 120B IPC - scope of inquiry by tax authority - Whether the prosecution instituted was 'for any offence punishable under the provisions of' the Prevention of Corruption Act so as to disentitle the petitioner - HELD THAT: - The Court examined the chargesheet allegations and relevant authorities on whether non public persons can be prosecuted in relation to offences under the Prevention of Corruption Act by way of abetment or conspiracy. Reading the charges as a composite whole, the chargesheet expressly alleges conspiracy (Section 120B IPC) to commit offences including those under Section 13(1)(d) and Section 13(2) of the PC Act. Binding precedents establish that private persons can be tried as abettors or conspirators in relation to offences under the PC Act and that such liability cannot be neatly segregated from the substantive PC Act offences. The Court further observed that the tax authority's role is limited to a demurrer type inquiry on the face of the FIR/chargesheet to see whether a socio economic offence is alleged and prosecution is instituted; it is not to decide merits of the criminal cases. Applying these principles, the Court held that the proceedings charged the petitioner with offences in relation to the PC Act, casting a shadow over the monies offered to tax and bringing the petitioner within Section 9(c). [Paras 17, 23, 24, 25]

The charges, taken as a whole, allege offences punishable under the PC Act (by way of conspiracy/abetment) against the petitioner; therefore the petitioner is excluded from the benefit of the DTVSV Act under Section 9(c).

Scope of inquiry by tax authority - demurrer type inquiry - What is the extent of the enquiry the tax authority must undertake when determining eligibility under Section 9(c) - HELD THAT: - The Court clarified that the tax authority's enquiry is limited and confined to a demurrer type examination of the material on record (FIR, chargesheet and any attendant documents) to determine whether a socio economic offence as contemplated by Section 9(c) has been alleged and whether prosecution has been instituted. The tax authority is not to conduct a full trial or decide the merits of the criminal proceedings; to do so would illegitimately convert the tax authority into a criminal court and conflict with the jurisdiction of the court hearing the criminal case. On the admitted record the limited enquiries answered affirmatively and justified rejection of the petitioner's applications under the DTVSV Act. [Paras 23, 25]

The tax authority is limited to a demurrer type inquiry on the face of criminal documents; on that limited enquiry the petitioner was rightly found ineligible under Section 9(c).

Final Conclusion: The writ petition is dismissed. The Court held that prosecution had been instituted in the criminal proceedings against the petitioner and that the charges allege offences linked to the Prevention of Corruption Act (by way of conspiracy/abetment); accordingly the petitioner is excluded from the benefits of the DTVSV Act under Section 9(c), and the tax authority's limited demurrer type rejection of the applications was justified.

Re-opening of assessment - reasons to believe - nexus between material and formation of belief - non-application of mind - fishing enquiry - sanction for re-opening

Re-opening of assessment - reasons to believe - nexus between material and formation of belief - Validity of the notice under Section 148/formation of belief for re-opening assessment for AY 2012-13 - HELD THAT: - The Court examined whether the reasons recorded for invoking Section 148/147 established a rational connection between the material before the Assessing Officer and the belief that income chargeable to tax had escaped assessment. The reasons reproduced information received from DDIT (Investigation) about suspicious transactions involving certain entities, but the material contained no mention of or linkage to the petitioner. There was no explanation or nexus demonstrating how that information bore upon the petitioner's assessments. The absence of any quantified amount allegedly escaped in the recorded reasons and the lack of any material tying the petitioner to the cited transactions indicated a fishing enquiry rather than a bona fide formation of belief. Reliance was placed on the settled principle that reasons must have a live link with the formation of the belief to justify re-opening. [Paras 2, 3]

The notice under Section 148 and the consequent assumption of jurisdiction for AY 2012-13 were held to be invalid for want of material establishing a nexus between the recorded reasons and the petitioner; the re-opening was set aside.

Non-application of mind - sanction for re-opening - fishing enquiry - Effect of typographical error in assessment year in recorded reasons and adequacy of sanction/ application of mind - HELD THAT: - The reasons as originally recorded referred erroneously in the last paragraph to AY 2014-15, an error later corrected by a communication; the Court found that the correction only altered the typographical reference and did not supply any fresh material linking the petitioner to escapement of income. The presence of the erroneous assessment year in the reasons, and the fact that both the Assessing Officer and the sanctioning authority had signed despite the error, evidenced non-application of mind by those officers. Because the corrected communication merely rectified the year without adding substantive material, it could not validate the re-opening; the defect in reasons and absence of considered sanction supported the conclusion of an impermissible fishing exercise. [Paras 3]

The typographical error and subsequent correction did not cure the fundamental lack of nexus or the failure of the officers to apply their minds; the re-opening and the order disposing of objections were therefore set aside.

Final Conclusion: The High Court set aside the notice issued under Section 148 and the order disposing of objections in relation to AY 2012-13, holding that the recorded reasons lacked the requisite nexus to the petitioner, amounted to a fishing enquiry, and demonstrated non-application of mind by the officers; the petition is disposed accordingly.

Re-opening of assessment on ground of failure to disclose material facts - Change of opinion - Validity of notice under Section 148 - Scrutiny assessment under Section 143(3) - Explanation (1) to Section 147

Re-opening of assessment on ground of failure to disclose material facts - Change of opinion - Scrutiny assessment under Section 143(3) - Validity of notice under Section 148 - Whether the notice issued under Section 148 and the order rejecting objections for AY 2012-13 are sustainable where a scrutiny assessment under Section 143(3) had been completed and the reasons for re-opening reflect a change of opinion. - HELD THAT: - The Court examined the reasons furnished for re-opening and found them to consist of reassessment of matters already considered in the earlier scrutiny assessment. Paragraph 3.1 criticises allowance of expenditure for seven outlets when sales were shown from two, concluding those expenditures are not related to the relevant year; paragraph 3.2 similarly criticises treatment of rent and repairs on the basis that the earlier Assessing Officer had not examined these issues. The Court held that such criticisms amount to a change of opinion rather than a demonstration of failure to truly and fully disclose material facts, and therefore do not furnish the statutory satisfaction required to invoke Section 147/148 after completion of a scrutiny assessment. Reliance placed by Revenue on Explanation (1) to Section 147 did not save the notice where the reasons on record disclosed no omission of material fact but merely a difference of view on matters already adjudicated in the original assessment. [Paras 5, 6, 7]

Notice under Section 148 dated 30/03/2019 and the order rejecting objections dated 24/07/2019 quashed; reassessment proceedings for AY 2012-13 set aside.

Final Conclusion: The petition is allowed: the re-opening notice and the impugned order are quashed as based on change of opinion and not on any failure to disclose material facts in the scrutiny assessment for AY 2012-13.

Pending appeal - specified date - appellant (definition) - Sections 3 and 4 of the Direct Tax Vivad Se Vishwas Act, 2020 - delay condonation application - remand for fresh consideration

Pending appeal - specified date - delay condonation application - Sections 3 and 4 of the Direct Tax Vivad Se Vishwas Act, 2020 - Appeals filed with pending delay condonation applications were to be treated as pending on the specified date for purposes of eligibility under Sections 3 and 4 of the Direct Tax Vivad Se Vishwas Act, 2020. - HELD THAT: - The Court applied settled precedents holding that when a statute contemplates the pendency of an appeal it requires only that an appeal be pending and does not permit the court or the designated authority to qualify that pendency by treating an appeal accompanied by a delay condonation application as non-pending. Reliance was placed on the ratio in Raja Kulkarni and subsequent authorities construing similar prototype settlement schemes, and on decisions of the Supreme Court and Division Bench authority holding that pendency is to be judged by the filing and continuation of the appeal and not by the merits or competence (including condonation) which are matters for the appellate forum. On that basis the petitions' appeals, though filed with delay condonation applications and pending consideration, were to be regarded as pending on the specified date (31.01.2020) and thereby fell within the scope of Sections 3 and 4 for consideration of declaration and settlement under the Act. [Paras 34]

The appeals filed with delay condonation applications were to be treated as pending on the specified date and therefore eligible for consideration under Sections 3 and 4 of the Act.

Appellant (definition) - specified date - Section 2(1)(a)(ii) - The exclusion in Section 2(1)(a)(ii) of the Act (relating to persons in whose case an order was passed on or before the specified date and time for filing further appeal had not expired) did not apply to the petitioners on the facts of these cases. - HELD THAT: - The Court examined the statutory definitions and the factual matrix and concluded that the exception contemplated by sub-clause (ii) applies where an order had been passed on or before the specified date and the time to file a further appeal had not expired. That factual situation did not obtain here because the appeals by the petitioners were already pending since 2017 (i.e. well before the specified date) and hence the (ii) exclusion was not attracted. The Court therefore rejected the respondents' contention that the petitioners were not 'appellants' under the Act on that ground. [Paras 35]

Section 2(1)(a)(ii) does not exclude the petitioners; the provision is not attracted on the facts and does not preclude their entitlement to be treated as appellants.

Remand for fresh consideration - Sections 3 and 4 of the Direct Tax Vivad Se Vishwas Act, 2020 - Whether the respondents must re-examine the petitioners' declarations under Sections 3 and 4 of the Act. - HELD THAT: - Having held that the appeals were pending on the specified date and that the (ii) exclusion did not apply, the Court concluded that the respondents erred in rejecting the declarations on the ground that the appeals were not pending. The Court accordingly directed that the matter be returned to respondent No.1 for fresh, exclusive consideration of the declarations under Sections 3 and 4 on merits, leaving the merits of the declarations to the designated authority. [Paras 36]

Writ petitions allowed; matters remitted to respondent No.1 to reconsider the declarations under Sections 3 and 4 afresh on merits.

Final Conclusion: The court held that appeals filed with delay condonation applications are to be regarded as pending on the specified date (31.01.2020) for purposes of the Direct Tax Vivad Se Vishwas Act, 2020; the (ii) exclusion in Section 2(1)(a) was not attracted on the facts; the petitions are allowed and the matters are remitted to respondent No.1 for fresh consideration of the declarations under Sections 3 and 4 of the Act on their merits.

Penalty under section 271(1)(b) - Notice under section 142(1) - Failure to comply with statutory notice - Absence of reasonable cause for non-compliance - Assessing Officer's power to impose penalty - Confirmatory jurisdiction of Commissioner (Appeals) - Prosecution of appellate grounds and ex parte disposal

Penalty under section 271(1)(b) - Notice under section 142(1) - Failure to comply with statutory notice - Absence of reasonable cause for non-compliance - Validity of the confirmation by the Commissioner (Appeals) of penalty imposed by the Assessing Officer under section 271(1)(b) for alleged non-compliance with notice issued under section 142(1). - HELD THAT: - The Tribunal found on the material on record that the AO issued repeated notices under section 142(1) (with questionnaire) seeking production of books, documents and vouchers, and that no records were produced nor satisfactory explanation given before the AO despite a showcause notice under section 271(1)(b). The CIT(A) thereafter issued opportunities to the assessee in the appellate proceedings and invited written submissions, but the assessee did not appear, prosecute the grounds of appeal or supply the required documents. The authorities below accordingly recorded that no reasonable cause was shown for non-compliance of the statutory notice and that the AO was justified in invoking clause (b) of sub section (1) of section 271. The Tribunal accepted the Revenue's submissions, held that the AO had power to impose penalty for failure to comply with a statutory notice under section 142(1), and found no infirmity in the CIT(A)'s confirmation of the penalty where the assessee neither produced the required evidence nor offered a credible cause for non-compliance. [Paras 5, 7, 9]

Confirmation of the penalty under section 271(1)(b) by the CIT(A) was held to be justified and the ground of appeal dismissed.

Final Conclusion: The appeal is dismissed; the Tribunal upheld the penalty imposed by the AO under section 271(1)(b) for failure to comply with notices issued under section 142(1), finding no reasonable cause or prosecution of appeal by the assessee for Assessment Year 2012-13.

Disallowance under section 14A read with Rule 8D - interest disallowance attributable to amounts advanced for non commercial purposes - deduction under section 80IA and choice of initial assessment year - set off of unabsorbed depreciation prior to the initial assessment year - depreciation on expenditure incurred for efficient functioning of plant

Disallowance under section 14A read with Rule 8D - Deletion of addition of Rs. 99,89,119 made under section 14A read with Rule 8D - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that no exempt income (dividend) was received by the assessee in the year under consideration; in the absence of exempt income the AO's invocation of section 14A read with Rule 8D to make a disallowance was held not sustainable. The CIT(A)'s acceptance of a voluntary disallowance was maintained. The Tribunal relied on judicial authority indicating that section 14A cannot operate where no exempt income is claimed or received, and found no infirmity in the appellate order deleting the AO's disallowance. [Paras 8]

Order of CIT(A) deleting the section 14A disallowance (except voluntary amount) is upheld and the Revenue's ground is dismissed.

Interest disallowance attributable to amounts advanced for non commercial purposes - Deletion of addition of Rs. 2,00,910 as interest attributable to capital advance - HELD THAT: - The Tribunal agreed with the CIT(A) that the assessee's own funds (share capital and reserves) at the beginning of the year exceeded the capital advance, permitting a presumption that the advance was made out of own funds rather than borrowed funds; therefore, no proportionate interest disallowance arises. On this factual finding the Tribunal declined to interfere with the appellate order deleting the addition. [Paras 14]

CIT(A)'s deletion of the interest disallowance is upheld and the Revenue's ground is dismissed.

Deduction under section 80IA and choice of initial assessment year - set off of unabsorbed depreciation prior to the initial assessment year - Allowability of deduction under section 80IA without adjusting unabsorbed depreciation/losses of years prior to the chosen initial assessment year - HELD THAT: - The Tribunal held that an assessee has the option to choose the initial assessment year for claiming section 80IA benefits and, having chosen 2012 13, the assessee was entitled to claim deduction for the ten consecutive years beginning from that chosen year. Following authoritative judicial pronouncements and CBDT clarification, the Tribunal accepted that unabsorbed depreciation and losses of years prior to the chosen initial assessment year (which had already been set off earlier) cannot be notionally brought forward and set off against the eligible unit's profits for computing the section 80IA deduction. The Tribunal therefore found no infirmity in the CIT(A)'s deletion of the AO's disallowance. [Paras 20]

Assessee's claim for deduction under section 80IA is allowable without adjusting unabsorbed depreciation/losses prior to the chosen initial assessment year; Revenue's ground is dismissed.

Depreciation on expenditure incurred for efficient functioning of plant - Allowability of depreciation on amount paid for keeping surrounding land vacant to ensure efficient functioning of windmill - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that the payment was not for acquisition of land but for obtaining the right to keep the surrounding land vacant to enable efficient operation of the windmill; the expenditure was directly connected with the functioning of the plant and incurred for commercial expediency. Given the assessee's consistent treatment in earlier years and absence of prejudice to revenue, the Tribunal refrained from interference and allowed the depreciation as part of the windmill's cost. [Paras 26]

CIT(A)'s allowance of depreciation on the impugned payment is upheld and the Revenue's ground is dismissed.

Final Conclusion: All grounds of the Revenue's appeal were dismissed; the Tribunal upheld the CIT(A)'s deletions and allowances on the issues of section 14A disallowance, interest attributable to capital advance, section 80IA deduction with chosen initial assessment year, and depreciation on expenditure for efficient functioning of the windmill.

Income from other sources under section 56(2)(vii)(b) - use of stamp duty valuation to determine consideration for section 56(2)(vii)(b) - retrospective/clarificatory application of tax amendment - addition for unexplained cash payments as unaccounted income

Income from other sources under section 56(2)(vii)(b) - use of stamp duty valuation to determine consideration for section 56(2)(vii)(b) - retrospective/clarificatory application of tax amendment - Whether the amended provisions of Section 56(2)(vii)(b) introduced by the Finance Act, 2013 apply to the assessment year under consideration and whether the difference between registered consideration and stamp duty valuation can be treated as income under that provision. - HELD THAT: - The Tribunal held that the Finance Act, 2013, enacted at the beginning of FY 2013-14 and receiving Presidential assent on 10.05.2013, is applicable to AY-2014-15; hence the amended provision of Section 56(2)(vii)(b) is directly applicable for the assessment year under consideration. The Tribunal rejected the assessee's contention that the amendment would apply only from a later assessment year. Having found the amended provision applicable, the Tribunal sustained the addition made by the AO treating the excess of stamp duty valuation over the declared consideration as income in terms of Section 56(2)(vii)(b), noting that no explanation or evidence was furnished by the assessee against the AO's conclusion. The Tribunal observed that although the CIT(A) characterized the amendment as clarificatory, the correct position was that the amendment was directly applicable to the assessment year; regardless, the addition was held to be justified on the material before the authorities. [Paras 7]

The addition under Section 56(2)(vii)(b) on account of difference between consideration and stamp duty valuation is sustained and the grounds challenging its applicability are rejected.

Addition for unexplained cash payments as unaccounted income - Whether the cash payment made at the time of purchase, not explained by the assessee, can be treated as unexplained investment and added to income. - HELD THAT: - The AO found that a cash payment was made in relation to the purchase and, on being asked, the assessee did not explain the source. The CIT(A) confirmed the addition as the assessee failed to produce any explanation or documents. The Tribunal noted that no one appeared on behalf of the assessee before it and no documents were filed to establish the source of the cash payment. In the absence of any evidence or explanation, the Tribunal found no infirmity in treating the unexplained cash payment as unaccounted income and sustaining the addition. [Paras 8]

The addition on account of unexplained cash payment is sustained and the grounds challenging it are dismissed.

Final Conclusion: The appeal is dismissed in entirety; the additions under Section 56(2)(vii)(b) based on stamp duty valuation and the addition for unexplained cash payment are sustained.

Requirement of incriminating material to sustain additions in search-assessment proceedings - unabated assessment arising from search under the Income-tax Act - treatment of receipts from employer as unexplained credit/other income - Kabul Chawla

Requirement of incriminating material to sustain additions in search-assessment proceedings - unabated assessment arising from search under the Income-tax Act - treatment of receipts from employer as unexplained credit/other income - Kabul Chawla - Deletion of addition of Rs. 10 lakhs made in assessment framed under section 153A where the amount was received from the employer and no incriminating material was found in the search. - HELD THAT: - The Assessing Officer treated a Rs. 10 lakh receipt from the assessee's employer as other income in the assessment framed under section 153A because no satisfactory evidence of return was produced. The Tribunal observed that the assessment was unabated and that the AO did not rely on any incriminating material discovered during the search in relation to the receipt. Applying the principle that additions in an unabated search-assessment require supporting incriminating material discovered in the search, as expounded by the court in Kabul Chawla and followed by the Tribunal, the addition could not be sustained on the basis of the assessment officer's conclusion alone. For these reasons the Tribunal set aside the orders of the lower authorities and directed deletion of the addition of Rs. 10 lakhs. [Paras 9]

The addition of Rs. 10 lakhs is deleted; the grounds on this issue are allowed.

Final Conclusion: Appeal allowed; the addition of Rs. 10 lakhs made in the assessment framed under section 153A for AY 2012-13 is deleted because no incriminating material from the search supported the addition.

Revision under section 263 of the Income-tax Act (erroneous and prejudicial to the interests of the revenue) - distinction between lack of enquiry and inadequate enquiry - valuation of shares is a technical, expert-driven exercise - Assessing Officer's plausible or debatable view cannot be branded erroneous - Commissioner cannot substitute his judgment for that of the Assessing Officer - requirement of prima facie material on record before exercising revisional power

Revision under section 263 of the Income-tax Act (erroneous and prejudicial to the interests of the revenue) - distinction between lack of enquiry and inadequate enquiry - valuation of shares is a technical, expert-driven exercise - Assessing Officer's plausible or debatable view cannot be branded erroneous - Validity of the Commissioner's exercise of revisional jurisdiction under section 263 in respect of the receipt of share premium and the valuation of shares. - HELD THAT: - The Tribunal found on record that the Assessing Officer had called for and considered the valuation report and other details in the course of assessment and therefore there was not a total lack of enquiry; at best any enquiry could be termed inadequate but that does not justify exercise of revision. The law requires that the assessment order be "erroneous insofar as prejudicial to revenue" and the error must be non-debatable; a plausible view taken by the Assessing Officer cannot be branded erroneous merely because the Commissioner would have taken a different view. Valuation of shares is a technical matter reliant on expert opinion and is not an exact science; absent material showing fundamental error in methodology or prima facie material to indicate that tax law was misapplied, the Commissioner cannot supplant the Assessing Officer's judgment or order a roving enquiry. Applying these principles to the facts, the Tribunal concluded there was no basis to hold the assessment order erroneous and prejudicial in respect of share premium and valuation, and accordingly the revision was not justified. [Paras 18, 19, 21, 22, 23]

Revision under section 263 in respect of receipt of share premium and valuation of shares quashed; grounds 2 to 2.2 allowed in favour of the assessee.

Grounds not pressed - Claimed expenditure of Rs. 1,74,46,083/- and related grounds. - HELD THAT: - The appellant did not press the grounds relating to allowability of the claimed expenditure during hearing before the Tribunal. In view of non-pressing, the Tribunal did not decide the merits and treated those grounds as not pressed. [Paras 24]

Grounds 3 to 3.2 dismissed as not pressed.

Final Conclusion: Appeal partly allowed: revisional order under section 263 quashed in respect of the share premium/valuation issue; the grounds regarding claimed expenditure are dismissed as not pressed.

Deductibility of employee's contribution to EPF/ESI where deposited before filing return - disallowance of employee's contribution to EPF/ESI under Section 36(1)(va) read with Section 2(24)(x) - non-retrospective operation of Explanation 5 to section 43B - binding precedent of Calcutta High Court in CIT vs. Vijayshree Ltd.

Deductibility of employee's contribution to EPF/ESI where deposited before filing return - disallowance of employee's contribution to EPF/ESI under Section 36(1)(va) read with Section 2(24)(x) - non-retrospective operation of Explanation 5 to section 43B - binding precedent of Calcutta High Court in CIT vs. Vijayshree Ltd. - Addition made for delayed deposit of employees' contribution to EPF/ESI was deleted where the contribution was deposited before filing the return for AY 2017-18. - HELD THAT: - The Tribunal applied the binding decision of the Calcutta High Court in CIT vs. Vijayshree Ltd., as followed by the Coordinate Bench in Harendra Nath Biswas, holding that Explanation-5 to section 43B (inserted by Finance Act, 2021 with effect from 01.04.2021) does not apply retrospectively to the assessment year under consideration. Since the employee's contributions to EPF/ESI were deposited before the due date for filing the return, they are deductible and the disallowance under Section 36(1)(va) read with Section 2(24)(x) was not warranted. The CIT(A)'s reliance on Explanation-5 was thus misplaced for AY 2017-18, and the impugned addition was set aside. [Paras 3, 4]

Impugned addition deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the CIT(A)'s order, and deleted the addition relating to delayed employees' contribution to EPF/ESI for AY 2017-18 on the ground that the contribution was deposited before filing the return and Explanation-5 to section 43B is not applicable to the year in issue.

Disallowance under section 36(1)(va) - deduction of employees' contribution to EPF/ESI paid before filing return under section 139(1) - application and prospective effect of Explanation 5 inserted by Finance Act, 2021 - binding precedents of the jurisdictional High Court and coordinate Benches of the Tribunal - deletion of addition made during processing under section 143(1)

Disallowance under section 36(1)(va) - deduction of employees' contribution to EPF/ESI paid before filing return under section 139(1) - binding precedents of the jurisdictional High Court and coordinate Benches of the Tribunal - application and prospective effect of Explanation 5 inserted by Finance Act, 2021 - Whether the addition/disallowance of employees' contribution to EPF/ESI under section 36(1)(va), made because the payments were after the statutory due date but before filing the return under section 139(1), is sustainable for assessment years prior to the with effect from date of Explanation 5 of Finance Act, 2021. - HELD THAT: - The Tribunal held that the facts of the present appeal are identical to earlier decisions of coordinate Benches of the ITAT which, following binding decisions of the jurisdictional High Court, have held that employees' contributions to EPF/ESI paid after the statutory due date but before filing of the return under section 139(1) are allowable and cannot be disallowed under section 43B read with section 36(1)(va). The Bench noted that the legislative amendment (Explanation 5 of Finance Act, 2021) has been clarified to operate with effect from 1.4.2021 and therefore does not apply retrospectively to assessment years prior to that date. Relying on the cited coordinate bench orders and the line of High Court decisions referred to therein, the Tribunal deleted the addition sustained by the lower authorities and allowed the appeal. [Paras 8, 9, 11]

Impugned disallowance deleted and the appeal allowed, following coordinate bench and jurisdictional High Court precedents; the post 2021 amendment (Explanation 5) treated as prospective from 1.4.2021 and not applicable to the years under appeal.

Final Conclusion: The Tribunal allowed the assessee's appeal and directed deletion of the addition made for delayed deposit of employees' EPF/ESI where such deposits were made before filing the return under section 139(1), following binding decisions of the jurisdictional High Court and coordinate Benches; the Explanation inserted by Finance Act, 2021 was treated as prospective with effect from 1.4.2021 and not applicable to the years in controversy.

Additional depreciation under clause (iia) of Section 32(1) - proviso restricting deduction to fifty per cent where asset is used for less than 180 days - carry forward of balance additional depreciation to the succeeding assessment year - purposive and liberal construction of beneficial fiscal provision - curative amendment and removal of discrimination by Finance Act, 2015

Additional depreciation under clause (iia) of Section 32(1) - proviso restricting deduction to fifty per cent where asset is used for less than 180 days - carry forward of balance additional depreciation to the succeeding assessment year - purposive and liberal construction of beneficial fiscal provision - Balance of additional depreciation (remaining 50% of the 20% under clause (iia)) claimed in A.Y.2015-16 in respect of machinery put to use for less than 180 days in the earlier year is allowable. - HELD THAT: - The Tribunal held that clause (iia) grants an additional deduction equal to 20% of actual cost and the proviso merely restricts the quantum allowable in the year of acquisition where use is for less than 180 days to fifty per cent of that amount. There is no express prohibition in the scheme of Section 32(1) against claiming the remaining fifty per cent in the subsequent year. Applying a purposive and liberal construction to a beneficial provision, and following the reasoning of the jurisdictional High Court in CIT v. Rittal (India) Ltd., the balance additional depreciation can be availed in the next assessment year so as to give effect to the legislative purpose of encouraging investment. The Tribunal further noted the Finance Act, 2015 amendment (w.e.f. 01.04.2016) which expressly provides for allowance of balance in the immediately succeeding year as a curative measure to remove discrimination; this reinforces that allowing the balance in the subsequent year is consistent with legislative intent and does not require a retrospective enactment. Having found no contrary binding authority, the Revenue's appeal was dismissed. [Paras 6, 7, 8, 9]

The claim for the balance additional depreciation in A.Y.2015-16 is allowable; Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the allowance of the remaining 50% of additional depreciation in the succeeding assessment year so as to give effect to the one time beneficial allowance under clause (iia) of Section 32(1).

Deductibility of delayed PF/ESI paid before filing return of income - disallowance under section 36(1)(va) read with section 43B - prospective application of Explanation 5 inserted by Finance Act, 2021 - binding effect of jurisdictional High Court and coordinate Benches of the Tribunal

Deductibility of delayed PF/ESI paid before filing return of income - disallowance under section 36(1)(va) read with section 43B - prospective application of Explanation 5 inserted by Finance Act, 2021 - Validity of disallowance of employees' PF and ESI contributions paid after statutory due date but before filing the return of income under section 139(1), sustained as disallowance under section 36(1)(va). - HELD THAT: - The Tribunal found the facts of the present appeals identical to earlier decisions of coordinate Benches where it was held that contributions to PF/ESI paid after the statutory due date but before filing the return under section 139(1) are allowable and cannot be disallowed under section 36(1)(va) read with section 43B. The Tribunal relied on a series of Tribunal and High Court decisions (including orders of the Chandigarh Bench, Jodhpur Bench and others) which applied the law prior to the amendment effected by Explanation 5 of the Finance Act, 2021 and held that Explanation 5 has prospective effect w.e.f. 1.4.2021. Therefore, for assessment years prior to that date the amended explanation did not apply and the jurisdictional High Court's view binding on authorities in the State (as followed by coordinate Tribunals) requires deletion of such additions where the delayed deposits were made before filing the return. Applying these precedents to the facts, the Tribunal directed deletion of the adjustment/addition made while processing the return under section 143(1). [Paras 9, 11, 12]

The additions/disallowances premised on delayed deposit of employees' PF and ESI - where such deposits were made before filing the return under section 139(1) and prior to the prospective applicability of Explanation 5 - are deleted.

Final Conclusion: Appeals allowed by deleting the disallowances relating to employees' PF and ESI contributions deposited after statutory due date but before filing the return of income, in respect of the assessment year 2018-19, following coordinate Bench and jurisdictional precedents and noting Explanation 5 of Finance Act, 2021 is prospective from 1.4.2021.

Deductibility of employee's contribution to PF/ESI under section 36(1)(va) - application of section 43B to employee's contribution - prospective operation of Finance Act, 2021 amendments to sections 36(1)(va) and 43B - where two reasonable constructions of a taxing provision are possible, construction favourable to the assessee prevails

Deductibility of employee's contribution to PF/ESI under section 36(1)(va) - application of section 43B to employee's contribution - prospective operation of Finance Act, 2021 amendments to sections 36(1)(va) and 43B - Whether disallowance under section 36(1)(va)/section 43B is sustainable where employees' share of PF/ESI was deposited after the statutory due date under PF/ESI law but on or before the due date for filing return under section 139(1). - HELD THAT: - The Tribunal held that where the employees' contribution towards PF/ESI was deposited on or before the due date for filing the return of income under section 139(1), the amount is deductible and cannot be disallowed under section 36(1)(va) or section 43B. The Bench relied on its precedents and coordinate-bench decisions which applied the principle that employee's share falls within the scope of section 43B for the purpose of allowing deduction if deposited by the return filing date. The Tribunal further observed that the clarificatory amendments effected by the Finance Act, 2021 (inserting Explanations in sections 36(1)(va) and 43B) were to be given prospective effect from 1.4.2021 and do not affect assessment years prior to that date. Having regard to the settled principle that where two reasonable constructions are possible the one favourable to the assessee must be adopted, and to the consistent tribunal and High Court decisions referred to, the disallowances confirmed by the CIT(A) were unsustainable and were therefore deleted.

Disallowance of employees' contribution to PF/ESI deleted as the contributions were deposited on or before the section 139(1) return filing due date; Finance Act, 2021 amendments held prospective from 01.04.2021 and not applicable to the contested assessment years.

Final Conclusion: Appeals allowed; the additions/disallowances of employees' contribution towards PF/ESI for AYs 2018-19 and 2019-20 are set aside because the contributions were deposited on or before the due date for filing returns under section 139(1), and the 2021 statutory amendments operate prospectively from 01.04.2021.

Reopening assessment under section 147 r.w.s. 148 of the Income Tax Act, 1961 - reason to believe - borrowed satisfaction / reliance on information from Investigation Wing - Long Term Capital Gain exemption under section 10(38) - addition to income treated as unexplained credit under section 68 - unexplained expenditure under section 69C - requirement of independent formation of opinion by Assessing Officer - evidentiary proof of genuineness of share transactions by contract notes, demat entries and banking channel - precedential application of Coordinate Bench decision

Reopening assessment under section 147 r.w.s. 148 of the Income Tax Act, 1961 - reason to believe - borrowed satisfaction / reliance on information from Investigation Wing - requirement of independent formation of opinion by Assessing Officer - precedential application of Coordinate Bench decision - Validity of reassessment proceedings initiated for Assessment Year 2013-14 by issuing notice under section 148 read with section 147. - HELD THAT: - The Tribunal admitted the assessee's additional ground challenging the reopening as a pure point of law and examined the reasons recorded. The Assessing Officer relied primarily on general information supplied by the Investigation Wing, Kolkata concerning manipulation in penny stocks and statements relating to other taxpayers; no direct or material nexus between that information and the assessee's transactions was recorded. The Tribunal, following the analysis in the Coordinate Bench's reasoned order (paras 19-26 of that order), held that mere information from another agency cannot substitute for the Assessing Officer's independent formation of opinion that income has escaped assessment. The recorded reasons fell within mere suspicion or borrowed satisfaction and lacked the requisite rational connection or live link to the assessee's case. In those circumstances the jurisdictional requirement of a bona fide "reason to believe" under section 147 was not satisfied and reopening was invalid. The reassessment was therefore quashed, the Tribunal explicitly following the Coordinate Bench decision on identical facts. [Paras 11, 12]

Reopening proceedings for AY 2013-14 under section 147/148 quashed; appeal allowed.

Long Term Capital Gain exemption under section 10(38) - addition to income treated as unexplained credit under section 68 - unexplained expenditure under section 69C - evidentiary proof of genuineness of share transactions by contract notes, demat entries and banking channel - Whether the claimed long term capital gain for Assessment Year 2014-15 was a bogus accommodation entry liable to be added under section 68 and whether consequential addition under section 69C for commission was sustainable. - HELD THAT: - On merits the Tribunal examined the documentary evidence produced by the assessee - contract notes, broker ledger, demat statements, share certificates and transfer forms, bank statements showing receipt through banking channel and broker confirmations - and found no material on record to show that these documents were false or that the assessee was party to price manipulation. The Assessing Officer had not identified any direct nexus between the assessee and the alleged entry providers, nor shown that the credited amounts did not represent sale consideration through the recognized stock exchange. The Tribunal rejected reliance on general findings about rigged transactions as insufficient to impeach the specific evidentiary record produced by the assessee. Applying the principle that suspicion, however strong, cannot replace legal evidence, the Tribunal held that the assessee discharged the evidentiary burden of proving genuineness of the transactions and that the addition under section 68 was unjustified. Consequentially, the commission-based addition under section 69C, being dependent on the main addition, also stood deleted. [Paras 27, 28, 29]

Addition of sale proceeds treated as unexplained income under section 68 deleted; consequential addition under section 69C deleted; appeal allowed for AY 2014-15.

Final Conclusion: Both appeals are allowed: reassessment proceedings for AY 2013-14 under section 147/148 are quashed for lack of independent reason to believe (borrowed satisfaction), and for AY 2014-15 the additions under section 68 and consequential section 69C are deleted on facts as the assessee proved genuineness of the share transactions.

Delayed initiation of disciplinary proceedings - stale charges - satisfactory explanation for delay - prejudice due to delay - effect of criminal acquittal on departmental proceedings - balancing of factors for and against interdiction - retirement on superannuation as relevant factor - sealed cover procedure for promotions

Delayed initiation of disciplinary proceedings - satisfactory explanation for delay - stale charges - prejudice due to delay - retirement on superannuation as relevant factor - Whether the departmental charge-sheets issued after long delay ought to be quashed for want of a satisfactory explanation and on account of prejudice arising from stale charges, particularly where service retirement is imminent or has occurred. - HELD THAT: - The Court examined Supreme Court precedents and recent authorities and held that delayed initiation of disciplinary proceedings must be judged on facts; acceptability of the explanation, not mere length of delay, is the decisive test. The respondents were obliged to furnish a cogent explanation for the nearly six-year period between detection/recommendation and issuance of the charge-sheet. The material chronology demonstrated prolonged inaction, repeated and unnecessary correspondence, failure to obtain documents from the Board's own CVO and avoidable approaches to the ACB/CBI, culminating in issuance of the charge-sheet immediately before retirement. The Court held that such conduct amounted to an 'excuse' rather than a satisfactory explanation; where delay is unexplained or inadequately explained and other factors (including the stage of the charged officer's career and the proximity to superannuation) indicate inevitable prejudice and unfairness, the disciplinary proceedings can be interdicted. Applying the balancing test of Chaman Lal Goyal and subsequent authorities, the Court found that the factors favouring quashing (lateness, lack of satisfactory explanation, prejudice from sealed-cover promotion procedure and delay in appointment of Inquiry Officer) outweighed factors against, and therefore the charge-sheet and related proceedings were liable to be set aside. [Paras 41, 44, 45, 47, 49]

The delayed issuance of the charge-sheet was not satisfactorily explained and, having regard to prejudice arising from stale charges and the petitioner's superannuation, the charge-sheet and consequential disciplinary proceedings were quashed.

Effect of criminal acquittal on departmental proceedings - balancing of factors for and against interdiction - stale charges - What is the effect of the Special (CBI) Court's acquittal on the continuation of departmental disciplinary proceedings arising from the same facts? - HELD THAT: - The Court recognized that exoneration in criminal proceedings does not automatically bar departmental action because standards of proof differ; nevertheless, where criminal proceedings arising from the same facts have culminated in acquittal on appreciation of evidence (and, effectively, in circumstances amounting to an honourable acquittal), that outcome is a relevant factor in the balancing exercise under which courts decide whether delay and other circumstances justify quashing disciplinary proceedings. The Special Court had held that evidence did not establish the petitioner's guilt beyond reasonable doubt and further observed that even if sanction had been given, it did not necessarily amount to an offence. The High Court treated the criminal acquittal as reinforcing the conclusion reached on delay and prejudice, noting the acquittal's finality and its weight in the overall assessment. [Paras 6, 48]

While criminal acquittal does not ipso facto preclude departmental proceedings, the criminal court's findings (including an acquittal that, on its reasoning, amounts to an honourable acquittal) are a material factor which, together with undue delay and prejudice, supported quashing of the departmental proceedings in this case.

Sealed cover procedure for promotions - relief by quashing disciplinary proceedings - Consequences following quashing of the departmental proceedings: whether sealed-cover promotion recommendations must be placed for consideration and pension/terminal benefits adjusted. - HELD THAT: - The Court directed that the sealed cover containing the Departmental Promotion Committee's recommendation be opened and the petitioner's case for promotion be decided. If recommended, promotion to the specified post was to be made effective from the date peers were promoted, without monetary arrears but with pension recalculated on the basis of the higher post; if not recommended, the petitioner should be informed and pension calculated on the last pay drawn. The Court required issuance of promotion orders, if applicable, within specified timelines and directed release of terminal benefits and interest on unpaid sums at bank fixed-deposit rates. [Paras 50, 62]

Sealed-cover promotion recommendation to be considered; if recommended, promotion to be granted with effect from the peers' promotion date (no back arrears except pension recalculation); terminal benefits to be released within prescribed timeframe with interest; similar directions were ordered in both writ petitions.

Remand for fresh consideration - Whether any issue was remanded by the Court for fresh consideration. - HELD THAT: - The Court did not remand substantive issues for fresh adjudication to the lower forum in the two writ petitions decided; rather, it set aside the Tribunal's orders and quashed the departmental charge-sheets. However, in the second matter the Court enforced earlier directions (in the remand order noted in the record) by requiring consideration of the sealed cover; no further remand to the Tribunal for fresh adjudication was ordered in these disposals. [Paras 50, 62]

No issue was remanded for fresh adjudication; the Tribunal's orders were set aside and administrative directions (opening sealed cover and considering promotion) were given to the respondents.

Final Conclusion: Writ petitions allowed. The High Court quashed the departmental charge-sheets and related disciplinary proceedings for want of satisfactory explanation for prolonged delay and on account of prejudice (including the effect of the criminal court's acquittal), directed consideration of sealed-cover promotion recommendations and appropriate adjustment of pension and terminal benefits within stipulated timeframes; orders for promotions, pension recalculation and payment of benefits with interest were directed as set out in the judgment.

Export incentive as concession not a vested right - entitlement to scheme benefit subject to scheme terms and conditions - Denied Entity List (DEL) effects confined to licensing and related facilities - procedural trade notice cannot override substantive scheme rights - prohibition on indirect coercive recovery by withholding unrelated incentives

Entitlement to scheme benefit subject to scheme terms and conditions - Denied Entity List (DEL) effects confined to licensing and related facilities - procedural trade notice cannot override substantive scheme rights - Whether the petitioner, though placed on the Denied Entity List, must be permitted to apply for benefits under the Merchandise Export from India Scheme (MEIS) and have such application considered on merits. - HELD THAT: - The Court recognised that export incentives are concessions and not a vested right, but held that once a scheme is framed the exporter is entitled to claim benefits if the scheme's terms and conditions are satisfied. The DEL and the earlier administrative orders operate to deny facilities such as grant of further advance licences; nothing in the MEIS scheme or its conditions shown to the Court discloses that placement in DEL, arising from unrelated past proceedings, automatically disqualifies an entity from claiming MEIS benefits where the conditions of the scheme are otherwise met. A procedural trade notice providing for system-driven approval that excludes DEL entities from that expedited procedure is procedural and cannot be read as extinguishing substantive rights under the scheme. Further, where statutory mechanisms exist for recovery (including stay/suspension on pre-deposit in appeals), the Department cannot indirectly coerce recovery by withholding unrelated export incentives. Applying these principles, the Court directed respondents to permit the petitioner to make an application within the prescribed time and to consider it on merits in accordance with the scheme.

Respondents shall permit the petitioner to apply for MEIS benefits within the scheme timelines and consider the application on merits in terms of the scheme.

Denied Entity List (DEL) effects confined to licensing and related facilities - export incentive as concession not a vested right - Whether the Court would accede to the petitioner's prayer for deletion of its name from the Denied Entity List (DEL). - HELD THAT: - The Court noted that the petitioner has challenged the order placing it in DEL by filing an appeal and that the DEL order was not placed on record before the Court. The matter of deletion from the DEL was not adjudicated on merits; the Court declined to decide that relief and left the petitioner to pursue the statutory appellate remedy. The Court confined its order to permitting MEIS application and explicitly did not disturb or decide the correctness of the DEL placement.

Prayer for deletion from the Denied Entity List is not decided; the petitioner is left to pursue its appeal against the DEL order.

Final Conclusion: The writ petition is disposed of by directing respondents to permit the petitioner to apply for MEIS benefits within the scheme period and to consider the application on merits; the plea for deletion from the Denied Entity List is not adjudicated and is to be pursued in the pending appeal.

Confiscation under Section 111(o) - import without condition of registered foreign source - goods imported for manufacture or export of export products - binding effect of Kerala High Court decision 2018 (10) TMI 1160 - The Deputy Commissioner of Customs Cochin v. M. Chandrashekar - framing of substantial questions of law

Confiscation under Section 111(o) - import without condition of registered foreign source - goods imported for manufacture or export of export products - Whether the impugned goods are liable to confiscation under Section 111(o) of the Act when they were allowed to be imported without the condition of the registered foreign source, given that they were meant for manufacture of export products or export. - HELD THAT: - The High Court admitted the appeal for consideration of the substantial question of law stated above. The order confines itself to framing and admitting the substantial question for adjudication on merits at the final hearing; no determination on the merits of liability to confiscation under Section 111(o) is made in this order.

Appeal admitted for consideration of that substantial question of law and listed for hearing; no final decision on confiscation on merits in the present order.

Binding effect of Kerala High Court decision 2018 (10) TMI 1160 - The Deputy Commissioner of Customs Cochin v. M. Chandrashekar - framing of substantial questions of law - Whether the substantial question admitted for decision is covered by the Kerala High Court judgment reported as 2018 (10) TMI 1160 (The Deputy Commissioner of Customs Cochin v. M. Chandrashekar). - HELD THAT: - The High Court formulated and admitted the question of whether the earlier Kerala High Court decision covers the substantial question framed in this appeal. The order directs supply of the framed substantial questions to the respondent's counsel for consideration. The present order does not decide the applicability or precedential effect of the Kerala High Court judgment; that issue is kept for adjudication at the hearing on merits.

Appeal admitted to determine, among other things, whether the cited Kerala High Court decision covers the substantial question; the applicability of that precedent is not decided in the present order.

Final Conclusion: The High Court admitted the appeal on two substantial questions of law-one concerning liability to confiscation under Section 111(o) where goods were imported without the registered foreign source condition though intended for export/manufacture for export, and the other concerning whether the Kerala High Court decision 2018 (10) TMI 1160 covers the issue-and listed the matter for hearing; interim applications stood disposed of.

Judicial review of appellate tribunal's failure to consider findings - remand for de novo consideration - obligation of appellate tribunal to address and test factual findings and grounds of challenge - improper reliance on observations of a superior court by a tribunal - mens rea cannot be disregarded merely because duty is nominal

Judicial review of appellate tribunal's failure to consider findings - obligation of appellate tribunal to address and test factual findings and grounds of challenge - The correctness of the Tribunal's order dated December 23, 2019 in failing to independently examine and decide the detailed factual findings recorded by the Commissioner in the order-in-original. - HELD THAT: - The Court found that the Tribunal, both in its earlier order and in the order impugned, treated the matter perfunctorily and did not apply its mind to the detailed reasons and factual findings recorded by the Commissioner (notably the 27 sub-paragraphs in paragraph 16 of the order-in-original). Instead, the Tribunal largely reproduced observations of this Court and afforded inadequate or no consideration to specific challenges raised by the respondent to the Commissioner's findings (including findings about fabricated credit memos, inconsistencies in IEC numbers, absence of running serial numbers, non-relatability of bills of entry to the seized goods, and absence of transport documentation). The Court emphasised that the Tribunal is duty-bound to assess the grounds in support of the original order and the grounds of challenge, and that superficial treatment or abdication of that function renders the Tribunal's order exceptionable. [Paras 8, 11, 12, 13]

The Tribunal's order dated December 23, 2019 is set aside for failing to independently and adequately consider the factual findings and the respondent's challenges thereto.

Remand for de novo consideration - improper reliance on observations of a superior court by a tribunal - mens rea cannot be disregarded merely because duty is nominal - The appropriate remedy and directions for further proceedings before the Tribunal. - HELD THAT: - The Court directed that the matter be remitted to the Tribunal for fresh consideration uninfluenced by observations contained in this Court's earlier order or by the present order. The Tribunal was instructed to test and decide the grounds contained in the order-in-original and the challenge advanced by the respondent, giving proper attention to the Commissioner's factual findings and not discounting those findings on conjecture (for example, by dismissing issues of culpability because duty would be nominal). The Court expressed the expectation that the Tribunal would dispose of the appeal promptly and without further adjournments. [Paras 13, 14]

The matter is remitted to the Tribunal to be considered afresh in accordance with law; the impugned order is set aside and Cus. Appeal No.1 of 2020 is allowed to that extent.

Final Conclusion: The order of the Tribunal dated December 23, 2019 is set aside and the appeal is remitted to the Tribunal for fresh, de novo consideration of the Commissioner's findings and the respondent's challenges thereto, uninfluenced by prior observations of this Court; the appeal is allowed to that extent and there is no order as to costs.

Condonation of delay - remand to adjudicating authority - awaiting decision of the Supreme Court on a stayed High Court judgment - Tribunal's duty to keep matter pending when binding precedent is sub judice before Supreme Court - substantial question of law

Condonation of delay - Condonation of inordinate delay in filing the Revenue's appeal. - HELD THAT: - The Court, applying its discretion in the interest of justice and having regard to identical issues pending before higher forums, found that the inordinate delay in filing the Revenue's appeal ought to be condoned. Reference was made to precedent where similar delay was condoned in like circumstances, and the application for condonation was allowed so that the appeal could be adjudicated on its merits.

Delay in filing the Revenue's appeal is condoned and the application GA/1/2020 is disposed of accordingly.

Remand to adjudicating authority - awaiting decision of the Supreme Court on a stayed High Court judgment - Tribunal's duty to keep matter pending when binding precedent is sub judice before Supreme Court - substantial question of law - Whether the Tribunal was justified in setting aside the adjudication order and remanding the matter back to the adjudicating authority while the question addressed by the High Court in Mangali Impex Ltd. was sub judice before the Supreme Court and its operation stayed. - HELD THAT: - The Court noted that the appeal against the Delhi High Court decision in Mangali Impex Ltd. was pending before the Supreme Court and the operation of that decision was stayed. In that factual matrix the Court held that the Tribunal should not have remanded the matter to the adjudicating authority but ought to have kept the appeal pending on its own file and awaited the Supreme Court's decision. The Division Bench's earlier decision in Commissioner of Customs (Port), Kolkata v. M/s. Haldia Petrochemicals Ltd. was followed, wherein the Tribunal's remand was set aside and the Tribunal was directed to decide the appeals on merits or keep them pending without being influenced by the stayed High Court decision. Applying that reasoning, the present impugned order of remand was found unsustainable.

The Tribunal's order setting aside the adjudication order and remanding the matter is set aside; the appeal is restored to the Tribunal's file with a direction to await the Supreme Court's decision in the appeal arising from Mangali Impex Ltd.; the substantial question of law is answered in favour of the Revenue.

Final Conclusion: The application for condonation of delay is allowed. The Tribunal's remand of the matter to the adjudicating authority is set aside; the appeal is restored to the Tribunal with a direction to await the Supreme Court's decision on the appeal against the Delhi High Court's Mangali Impex Ltd. decision, and the substantial question of law is answered in favour of the Revenue.

Validity of a Voluntary Disclosure Scheme and immunity from penal action - presumption of illegality of exotic species in domestic possession - seizure of goods in domestic area on mere surmise or statements - applicability of Customs Act detection and confiscation provisions to exotic species - role of captive breeding, Foreign Trade Policy and CITES in preventing illegal importation

Validity of a Voluntary Disclosure Scheme and immunity from penal action - finality of prior judicial orders upholding the scheme - The Voluntary Disclosure Scheme of 11-06-2020 and the immunity it grants to declarants is valid and has been judicially upheld. - HELD THAT: - The Court observed that the same question regarding the immunity afforded by the Voluntary Disclosure Scheme has been considered and rejected by the High Court of Allahabad, Lucknow Bench and that order was affirmed by the Supreme Court by dismissal of the Special Leave Petition. The Division Bench of the Rajasthan High Court has also upheld the entitlement to immunity for those availing the scheme within the prescribed time, and that order too was left uninterfered with by the Supreme Court. Having regard to these binding precedents, the challenge to the validity of the scheme and the immunity promised under it cannot be reopened in the present proceedings. [Paras 5, 6, 10]

Challenge to the validity of the Voluntary Disclosure Scheme and its immunity is dismissed as contrary to binding judicial decisions.

Presumption of illegality of exotic species in domestic possession - seizure of goods in domestic area on mere surmise or statements - applicability of Customs Act detection and confiscation provisions to exotic species - role of captive breeding, Foreign Trade Policy and CITES in preventing illegal importation - There is no statutory presumption that exotic birds and animals found domestically are illegally imported, and authorities cannot direct seizure of such species in domestic areas on mere surmises; Customs detection provisions do not apply absent notification. - HELD THAT: - Relying on earlier High Court decisions, the Court found that exotic species are not notified under the relevant provisions of the Customs Act and that Chapter IVA provisions for detection and prevention of disposal of illegally imported goods are inapplicable where the Central Government has not issued the requisite notification. The Court noted that import/export matters are regulated at points of entry/exit under the Customs Act, and that mechanisms including the Foreign Trade Policy and CITES assist in preventing illegal importation. It was further observed that captive breeding can explain the presence of exotic species in India and that compelling domestic keepers, breeders or transporters to produce proof of importation is not required by law. Consequently, seizure in the domestic area based solely on statements or suspicion would be contrary to the Customs Act and the Wildlife Act. [Paras 8, 9, 11]

No directions can be issued to seize exotic species found within or being transported through the State of Meghalaya on the basis urged; presumption of smuggling does not arise and seizure on mere surmise is impermissible.

Final Conclusion: The Public Interest Litigation is dismissed: the Voluntary Disclosure Scheme and its immunity stand upheld by prior judicial decisions and cannot be reopened, and there can be no general direction to seize exotic birds and animals in domestic areas absent statutory notification or evidence of illegal importation.

Preventive detention under the COFEPOSA Act - use of statements recorded under Section 108 of the Customs Act as material for detention - administrative character of detention and subjective satisfaction of detaining authority - obligations and scope of the Advisory Board under Section 8(c) of the COFEPOSA Act - relevance of non-supply of documents relied upon by the detaining authority - definition and scope of 'smuggling' for preventive detention - consideration of custodial status and prospects of bail in passing detention orders

Use of statements recorded under Section 108 of the Customs Act as material for detention - administrative character of detention and subjective satisfaction of detaining authority - Detention orders under the COFEPOSA Act can validly be based on statements recorded under Section 108 of the Customs Act and the Evidence Act does not restrict materials a detaining authority may consider. - HELD THAT: - The Court held that proceedings for preventive detention under the COFEPOSA Act are administrative in character and rest on the subjective satisfaction of the detaining authority, not on proof under the Evidence Act. Authorities cited establish that normal rules of criminal evidence are inapplicable to detention decisions; consequently, confession or other statements recorded under Section 108 of the Customs Act may be considered by the detaining authority. Even where retraction is claimed, the authority may weigh the original statements along with retraction and other materials; absence of retraction in the present case strengthened the material relied upon. The Court found no misstatement in the detention order regarding those statements and concluded they furnished adequate basis for forming subjective satisfaction requisite for detention. [Paras 18, 19, 20, 21, 22]

Statements recorded under Section 108 of the Customs Act were lawfully relied upon and provided sufficient material for the COFEPOSA detention orders.

Relevance of non-supply of documents relied upon by the detaining authority - Non-supply of CCTV footage did not vitiate the detention order where the footage was not relied upon by the detaining authority to form its subjective satisfaction. - HELD THAT: - The Court noted that supply of documents aims to enable effective representation against detention, but where a particular item (CCTV footage) was only narrated and not a basis for the detaining authority's satisfaction, failure to supply it was not fatal. The Court distinguished precedents where footage had been relied upon; here no findings were based primarily on the footage, so non-supply did not prejudice the detenue's representation. [Paras 23]

Non-supply of the CCTV footage did not invalidate the detention orders as the footage was not relied upon for forming subjective satisfaction.

Definition and scope of 'smuggling' for preventive detention - The concept of 'smuggling' for COFEPOSA purposes extends beyond physical seizure from the detenue and includes abetment and persons dealing with contraband; thus detention under Section 3(1)(i) was maintainable despite absence of seizure from the detenue. - HELD THAT: - Relying on statutory definitions and precedent, the Court held that 'smuggling' as used in COFEPOSA adopts the wider meaning in the Customs Act, encompassing actual smugglers, abetters and persons dealing with contraband. Consequently, lack of direct seizure from the detenue did not preclude preventive detention when material showed involvement in a larger smuggling racket and corroboration from other facts and statements. The Court rejected the submission that only a lesser clause could be invoked absent seizure from the detenue. [Paras 24, 25]

Detention under the COFEPOSA provision was permissible despite no gold being seized from the detenue, as the statutory scope of 'smuggling' includes abetment and dealing.

Consideration of custodial status and prospects of bail in passing detention orders - Detaining authority satisfied itself about the detenues' custodial status and prospects of bail; mere custody and possibility of bail do not render a detention order unlawful if the authority has considered those factors. - HELD THAT: - The Court observed the detaining authority was aware the detenues were in jail and had considered the likelihood of enlargement on bail. Preventive detention requires only that the authority be mindful of custodial circumstances and bail prospects; several accused in the connected matters had been granted bail, and no error was shown in the authority's assessment. Hence the contention that detention was unnecessary because the detenue was already in custody and unlikely to obtain bail was rejected. [Paras 27]

Custody and potential for bail were considered and do not invalidate the detention orders.

Obligations and scope of the Advisory Board under Section 8(c) of the COFEPOSA Act - The Advisory Board is not obliged to act as the detenue's advocate by independently summoning or collecting additional documents beyond the file placed before it; its role is to decide whether sufficient cause exists for continued detention based on materials produced. - HELD THAT: - The Court clarified that Advisory Board proceedings are not judicial inquiries into guilt but administrative review of whether sufficient cause exists for detention. The Board need not summon persons or call for records beyond the material presented; the detenue may produce materials to challenge detention. In the present case the Advisory Board considered the materials before it and opined that continued detention was warranted; no denial of Article 21 or 22 protections was found. The Court also noted the detenue had not requested documents from the Board in the record. [Paras 28, 29]

There was no obligation on the Advisory Board to call for additional documents sua sponte; its confirmation of detention did not suffer from non-application of mind.

Final Conclusion: The Court found no illegality or shortcoming in the impugned COFEPOSA detention orders: statements under Section 108 of the Customs Act and other materials lawfully supported the detaining authority's subjective satisfaction, non-supply of the CCTV footage was immaterial, the scope of 'smuggling' justified preventive detention, custodial status and bail prospects were considered, and the Advisory Board acted within its administrative role; the habeas corpus petitions are dismissed.

Principles of natural justice - Imposition of penalty under Section 112 of the Customs Act, 1962 - Failure of service of show-cause notice - Compliance with remand direction

Principles of natural justice - Failure of service of show-cause notice - Imposition of penalty under Section 112 of the Customs Act, 1962 - Compliance with remand direction - Whether the penalty order dated 27.11.2017 was vitiated for breach of principles of natural justice and non-compliance with the remand direction. - HELD THAT: - The Tribunal found on the record that the adjudicating authority proceeded to impose penalty under Section 112 of the Customs Act, 1962 by order dated 27.11.2017 without issuing a hearing notice to the appellant. The appellant filed an affidavit asserting non-receipt of any show-cause notice or hearing summons and the department failed to produce proof of service when challenged before the Tribunal. Earlier remand directions by the Tribunal had expressly required reconsideration after following principles of natural justice. The Commissioner of Customs (Export-II) therefore failed to comply with the remand direction and proceeded in breach of the obligation to afford an opportunity to be heard. In those circumstances the penalty adjudication was held to be vitiated and liable to be set aside. [Paras 4, 5]

The penalty order No. CAO No. 21/2017-18/CAC/CC(E)/PS/ADJN dated 27.11.2017 imposing penalty under Section 112 of the Customs Act, 1962 is set aside.

Final Conclusion: The appeal is allowed and the penalty imposed by the Commissioner of Customs (Export-II) by order dated 27.11.2017 is quashed for non-compliance with principles of natural justice and the earlier remand direction.

Time barred appeals - limitation under section 129D(3) of the Customs Act, 1962 - date of receipt/communication of adjudicating authority's order - adequacy of documentary proof to establish date of receipt

Limitation under section 129D(3) of the Customs Act, 1962 - date of receipt/communication of adjudicating authority's order - adequacy of documentary proof to establish date of receipt - Whether the appeals filed by the department before the Commissioner (Appeals) were barred by limitation under sub section (3) of section 129D of the Customs Act, 1962. - HELD THAT: - The Tribunal examined the dates recorded in the table reproduced from the impugned order and the Commissioner (Appeals)'s reasons. Sub section (3) of section 129D requires the reviewing authority to pass the review order within three months from the date of communication or receipt of the adjudicating authority's decision. The Commissioner (Appeals) repeatedly directed the department to furnish documentary evidence of the date on which the review authority received the Order in Original, but the department failed to supply those particulars. The Commissioner (Appeals) therefore computed limitation from the latest available indicia (date of passing, dispatch date or job/OIO generation date) and concluded there was delay; the Commissioner (Appeals) ultimately disposed the appeals on limitation but had also returned the appeals to the department to enable resubmission with documentary proof. The Tribunal found that despite further opportunities and adjournments, the department did not place before the Tribunal any documentary proof of the date of receipt by the reviewing authority. On that basis the Tribunal concluded that the review orders were passed beyond the three month period prescribed by section 129D(3) and that the appeals to the Commissioner (Appeals) were therefore time barred. [Paras 7, 8, 9]

The appeals filed by the department before the Commissioner (Appeals) were time barred under section 129D(3) and are dismissed.

Final Conclusion: The Tribunal dismissed the departmental appeals as time barred under sub section (3) of section 129D of the Customs Act, 1962, noting the department's failure to furnish documentary proof of the date on which the reviewing authority received the adjudicating authority's order.

Exemption from integrated tax and compensation cess on re-imported goods - interpretation of the expression 'duty of customs' in exemption notifications - distinction between levy of integrated tax under the Integrated Tax Act and its collection under the Customs Tariff Act - construction of exemption notifications and ejusdem generis principle in subordinate legislation

Exemption from integrated tax and compensation cess on re-imported goods - interpretation of the expression 'duty of customs' in exemption notifications - distinction between levy of integrated tax under the Integrated Tax Act and its collection under the Customs Tariff Act - Integrated Goods & Service Tax (IGST) and compensation cess are covered by the exemption in notification nos. 45/2017-Cus and 46/2017-Cus on re-import of specified goods sent for repair, and therefore are wholly exempted in the circumstances of these appeals. - HELD THAT: - The Tribunal's reasoning, followed by the Appellate Tribunal, rests on the statutory meaning of "duty" in section 2(15) of the Customs Act and the charging and collection architecture created by the Customs Act, the Customs Tariff Act and the Integrated Tax Act. Section 2(15) confines "duty" to duties leviable under the Customs Act and section 12 contemplates duties of customs at rates specified in the Tariff Act; by contrast, integrated tax is levied under the Integrated Tax Act though collected on imports under section 3 of the Tariff Act. Precedents of the Supreme Court and High Courts demonstrate that expressions such as "duty of customs" or "duty of excise" in exemption notifications must be read in light of their statutory definitions and contextual usage and are not to be extended to include distinct auxiliary or additional levies unless clearly expressed. The notification's main body separately mentions "duty of customs, integrated tax, compensation cess", and the punctuation and language indicate conscious distinction among them. The omission of the phrase "specified in the said First Schedule" in the Table does not expand the meaning of "duty of customs" to encompass integrated tax and cess; such specification in the main body was understood as clarificatory. Applying these principles, the Appellate Tribunal concluded that the exemption operates to exempt integrated tax and compensation cess wholly, while the basic customs duty is dealt with separately and had already been accepted by the first appellate authority.

Impugned order set aside; appeals allowed in favour of the appellant by holding that IGST and compensation cess are exempt under the cited notifications on re-imports for repair.

Final Conclusion: Following and applying established statutory construction and earlier tribunal authority, the Appellate Tribunal allowed the appeals and held that the exemption notifications operate to exempt the integrated tax and compensation cess on the re-imported goods sent for repair.

Scheme of Amalgamation - Dispensation from convening meetings of shareholders and creditors - Consent affidavits of shareholders and creditors as basis for dispensation - Compliance with Section 230(5) and Rule 8 of the Companies (Compromise, Arrangement and Amalgamations) Rules, 2016 - Service of notice on statutory and regulatory authorities

Dispensation from convening meetings of shareholders and creditors - Consent affidavits of shareholders and creditors as basis for dispensation - Dispensation from convening meetings of equity shareholders, secured creditors and unsecured creditors of the Transferor Company - HELD THAT: - The Tribunal recorded that all five equity shareholders, the single secured creditor and the three unsecured creditors of the Transferor Company had furnished consent affidavits and that a Chartered Accountant's certificate identifying the parties was placed on record. On that basis and having considered the documents and submissions, the Tribunal exercised its power to dispense with convening meetings of the equity shareholders, the secured creditor and the unsecured creditors of the Transferor Company and issued directions accordingly. [Paras 15]

Convening of the meetings of equity shareholders, secured creditor and unsecured creditors of the Transferor Company is dispensed with.

Dispensation from convening meetings of shareholders and creditors - Consent affidavits of shareholders and creditors as basis for dispensation - Dispensation from convening meetings of equity shareholders and secured creditor of the Transferee Company and obviation of meeting of unsecured creditors - HELD THAT: - The Tribunal noted that the Transferee Company had six equity shareholders who furnished consent affidavits, one secured creditor who gave consent by affidavit, and that there were no unsecured creditors (supported by a Chartered Accountant's certificate). In view of these records and submissions, the Tribunal dispensed with convening the meeting of equity shareholders and the secured creditor of the Transferee Company and recorded that convening a meeting of unsecured creditors was obviated. [Paras 15]

Convening of the meetings of equity shareholders and the secured creditor of the Transferee Company is dispensed with; convening of a meeting of unsecured creditors is obviated.

Compliance with Section 230(5) and Rule 8 of the Companies (Compromise, Arrangement and Amalgamations) Rules, 2016 - Service of notice on statutory and regulatory authorities - Directions for service of notice of the joint application on specified statutory and regulatory authorities - HELD THAT: - The Tribunal directed compliance with statutory notice requirements by ordering that the applicants serve the notice of the joint application on the Central Government through the Regional Director (North Western Region), the Registrar of Companies, Gujarat, the Income Tax Department (with assessing officer details and PANs and copy to the Chief Commissioner of Income Tax), the Official Liquidator attached to the Gujarat High Court and any other sectoral regulatory authorities relevant to the companies, so that timely and proper replies may be filed. [Paras 16]

Applicants to serve notice of the joint application on the listed authorities in compliance with Section 230(5) and Rule 8.

Final Conclusion: The joint application under Sections 230-232 of the Companies Act, 2013 for the proposed Composite Scheme of Amalgamation is allowed; convening of the specified meetings is dispensed with or obviated as directed and the applicants are directed to serve statutory/regulatory authorities as ordered; the application is disposed of in terms of these directions.

Scheme of arrangement under Sections 230-232 of the Companies Act, 2013 - dispensation of meetings by consent affidavits - consent of secured and unsecured creditors - requirement of shareholder meeting or consent affidavits for the Transferee - service of notices to regulatory authorities under section 230(5) - appointment of advisor to assist the Official Liquidator for scrutiny of books - intra-group merger of wholly owned subsidiaries into holding company - impact of the Insolvency and Bankruptcy Code on creditor consent

Dispensation of meetings by consent affidavits - intra-group merger of wholly owned subsidiaries into holding company - Dispensation of shareholders' and unsecured creditors' meetings of six Transferor Companies and dispensation of the sole debenture holder meeting of the Sixth Transferor Company. - HELD THAT: - The Tribunal accepted the written consent affidavits procured from all equity shareholders and from unsecured creditors (constituting over 90% in value) of the First through Sixth Transferor Companies and dispensed with the convening of their meetings. It was recorded that there are no secured creditors in those six Transferor Companies. Similarly, the sole debenture holder of the Sixth Transferor Company having given its consent affidavit justified dispensing with convening a debenture holders' meeting. The dispensation was granted on the basis that the requisite written consents are on record. [Paras 7, 8, 9, 10]

Meetings of equity shareholders, unsecured creditors of the First to Sixth Transferor Companies and the sole debenture holder of the Sixth Transferor Company are dispensed with on production of the requisite consent affidavits.

Consent of secured and unsecured creditors - requirement of shareholder meeting or consent affidavits for the Transferee - impact of the Insolvency and Bankruptcy Code on creditor consent - Requirement for the Transferee Company to either convene a shareholders' meeting or file consent affidavits of its equity shareholders, and requirement of consent affidavits from unsecured creditors and IBC petitioners. - HELD THAT: - The Tribunal noted the significance of creditor protection post IBC and observed that a scheme of merger should have consent of equity shareholders either by meeting or by consent affidavits. The Transferee Company has furnished consent affidavits from its 22 secured creditors and therefore meetings of secured creditors were dispensed with. However, the Transferee Company had not submitted lists or consent affidavits of its equity shareholders or unsecured creditors; the Tribunal directed the Transferee Company to either file consent affidavits of equity shareholders or hold a shareholders' meeting (fixed option date and procedural requirements were specified). The Transferee Company was also directed to issue notice of the Scheme to all its unsecured creditors and to obtain consent affidavits of unsecured creditors aggregating at least 90% in value at the time of filing the Company Petition. Given pending IBC proceedings against applicant companies, the Tribunal further directed service of notice upon the petitioners in those IBC proceedings and directed submission of their specific consents at the time of filing the Company Petition. [Paras 21, 22, 23, 24, 25]

Transferee must either convene a shareholders' meeting or file shareholders' consent affidavits; secured creditors' meetings dispensed with on production of consents; notice and consent affidavits from unsecured creditors (90% value) and specific consents from IBC petitioners are required before filing the Company Petition.

Service of notices to regulatory authorities under section 230(5) - Directives for service of notices to statutory and regulatory authorities and for publication of shareholder meeting notice. - HELD THAT: - The Tribunal directed the Applicant Companies to serve, by Registered Post AD/Speed Post and hand delivery, copies of the Scheme and notices upon specified authorities including the Income Tax Authorities, Central Government through Regional Director, Registrar of Companies, SEBI (in case of the Transferee), BSE, NSE, GST authorities and any other applicable regulatory authority pursuant to section 230(5) and Rule 8. The Tribunal also directed publication of the convening notice for the Transferee Company's shareholder meeting in specified newspapers and transmission by email to shareholders whose email addresses are registered with the company. [Paras 15, 22, 23]

Applicants to serve prescribed notices on the listed regulatory authorities and publish the shareholder meeting notice as directed.

Appointment of advisor to assist the Official Liquidator for scrutiny of books - Appointment of a chartered accountant to assist the Official Liquidator in scrutinising books of accounts of the first six Transferor Companies and payment of fees. - HELD THAT: - Pursuant to section 230(5) and Rule 8, the Tribunal appointed Mr. Hemant Kumar Shah, Chartered Accountant, to assist the Official Liquidator in scrutinising the books of accounts of the First through Sixth Transferor Companies for the last five years and to submit a report/representation. The Transferor Companies were directed to serve notice on the Official Liquidator and to pay a total fee to be shared equally by the Transferor Companies for this purpose; if no representation is received within thirty days, it will be presumed there is no objection. [Paras 16]

Mr. Hemant Kumar Shah is appointed to assist the Official Liquidator; the Transferor Companies shall pay the prescribed fees and serve the Official Liquidator, failing which no objection will be presumed after thirty days.

Affidavit of service and compliance - Filing of affidavit of service and compliance after serving notices. - HELD THAT: - The Tribunal directed the Applicant Companies to file an affidavit of service and compliance within ten working days after serving the notices on all regulatory authorities as directed, reporting compliance to the Tribunal. [Paras 26]

Applicants to file an affidavit of service and compliance within ten working days after service of notices.

Final Conclusion: The Tribunal permitted dispensation of meetings for the First to Sixth Transferor Companies and the sole debenture holder of the Sixth Transferor Company on production of requisite consents; accepted secured creditors' consents of the Transferee; directed the Transferee either to convene a shareholders' meeting (with prescribed notice and publication) or file shareholders' consent affidavits, to procure unsecured creditors' consents (90% value), to serve notices on listed regulatory authorities and IBC petitioners, to appoint and pay the advisor assisting the Official Liquidator for scrutiny, and to file affidavits of service and compliance as directed.

Initiation of Corporate Insolvency Resolution Process - admission of Section 9 application - existence of debt and absence of pre-existing dispute - application within limitation and meeting threshold - declaration of moratorium under Section 14(1) - appointment of Interim Resolution Professional - IRP duties including public announcement and claim solicitation - continuation of supply during moratorium - operational creditor to provide advance to IRP for CIRP conduct

Admission of Section 9 application - initiation of Corporate Insolvency Resolution Process - The Company Petition under Section 9 of the IBC seeking initiation of CIRP against the corporate debtor is admitted. - HELD THAT: - The Tribunal found that goods were supplied and an invoice dated 16/07/2019 was raised. A demand notice was issued and received by the corporate debtor, which made a part-payment but failed to discharge the balance. The corporate debtor did not contest the application and the Tribunal proceeded ex parte. On the material on record the Tribunal concluded that the debt remains due and payable, there is no pre-existing dispute, the application was filed within the limitation period and meets the statutory threshold; accordingly the Section 9 petition is admitted and CIRP is ordered to be initiated. [Paras 6]

CP(IB)/401/2020 is allowed and the Corporate Insolvency Resolution Process is initiated.

Existence of debt and absence of pre-existing dispute - application within limitation and meeting threshold - The claimed operational debt is admitted, there is no pre-existing dispute, and the petition was filed within limitation and meets the threshold prescribed under the Code. - HELD THAT: - The Tribunal recorded that the invoice, delivery of demand notice, part-payment by the corporate debtor and the absence of any contesting reply establish that the debt remained unpaid. On this basis the Tribunal held that no pre-existing dispute exists and that the statutory conditions for admission (including temporal and threshold requirements as noted in the order) are satisfied. [Paras 6]

The debt is admitted as remaining payable; absence of a pre-existing dispute and compliance with limitation and threshold requirements justify admission of the application.

Declaration of moratorium under Section 14(1) - appointment of Interim Resolution Professional - IRP duties including public announcement and claim solicitation - continuation of supply during moratorium - operational creditor to provide advance to IRP for CIRP conduct - Upon admission, the Tribunal declared the moratorium, appointed an Interim Resolution Professional, directed public announcement and claims process, preserved continuation of supply, and directed the operational creditor to pay an advance to the IRP. - HELD THAT: - The Tribunal ordered the statutory moratorium prohibiting institution or continuation of suits, transfer or disposal of assets, enforcement of security and recovery of leased property from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. The Tribunal appointed Mr. Rajendra Sanghi as IRP and directed him to perform functions under the Code, make the public announcement and call for claims, preserve and manage the corporate debtor as a going concern, and noted that persons connected with the corporate debtor must cooperate with the IRP. The Tribunal further directed that supply of goods/services shall not be terminated during the moratorium and required the operational creditor to pay an advance to the IRP for smooth conduct of CIRP and to file proof of receipt in the first progress report. [Paras 6]

Moratorium is declared with effect from the date of the order; IRP is appointed and tasked with statutory duties including public announcement and preservation of the corporate debtor; continuation of supply is protected and the operational creditor must pay an advance to the IRP.

Final Conclusion: The Section 9 petition filed by the operational creditor is admitted; CIRP against the corporate debtor is initiated, moratorium is declared, an IRP is appointed with directions for public announcement, claim solicitation, preservation and management of the corporate debtor, continued supply during moratorium, and the operational creditor is directed to provide an advance to the IRP.

Liquidation estate excluded assets (including sums due from provident, pension and gratuity funds) - Priority of distribution - workmen's dues for 24 months preceding liquidation commencement date - Verification and admission of claims by Liquidator under Regulation 19 and Regulation 25 of the Liquidation Process Regulations - Requirement of proof of employment or adjudication by statutory/quasi judicial labour authorities for disputed wage claims

Liquidation estate excluded assets (including sums due from provident, pension and gratuity funds) - Priority of distribution - workmen's dues for 24 months preceding liquidation commencement date - Whether sums due to workmen from provident fund, pension fund and gratuity fund form part of the liquidation estate and can be distributed by the Liquidator. - HELD THAT: - The Tribunal held that sums due to workmen from the provident fund, pension fund and gratuity fund are excluded from the liquidation estate in terms of Section 36(4)(a)(iii) of the Code and therefore are not available for the Liquidator to attach, utilise or distribute as part of liquidation assets. The court referred to Section 53(1)(b)(i) to note the statutory priority accorded to workmen's dues for 24 months preceding the liquidation commencement date, but emphasised that excluded assets do not form part of liquidation proceeds. The Liquidator must therefore confine distribution to assets that form part of the liquidation estate and cannot appropriate or distribute third party fund sums which are expressly outside the estate. [Paras 6, 7, 8]

Sums due from provident, pension and gratuity funds do not form part of the liquidation estate and cannot be dealt with by the Liquidator; the statutory priority for workmen's dues under Section 53 does not extend to excluded third party fund assets.

Verification and admission of claims by Liquidator under Regulation 19 and Regulation 25 of the Liquidation Process Regulations - Requirement of proof of employment or adjudication by statutory/quasi judicial labour authorities for disputed wage claims - Whether the Liquidator erred in admitting only limited amounts of the appellants' claims and in rejecting or restricting other components in the absence of supporting proof or adjudication. - HELD THAT: - The Tribunal found that the Liquidator processed claims by verifying audited books of account and, where necessary, obtained an actuarial valuer's report for gratuity liability. Many claimants submitted deficient documentation or did not respond satisfactorily to requests for clarification; several claims were filed after the statutory cut off. In disputed matters of wage liability the Liquidator cannot decide on contested liabilities in the absence of crystallised claims or an order from a competent labour forum. The Tribunal noted the Settlement Agreement recognizing a valid lock out and accepted the Liquidator's reliance on financial records and the actuarial valuation for admitting amounts. Consequently, in the absence of proof of employment or adjudication in favour of the claimants, their broader claims for wages, bonus and other statutory dues could not be sanctioned. [Paras 4, 5, 9]

The Liquidator acted within the regulatory framework in admitting claims based on books of account and actuarial valuation; appellants failed to prove entitlement or produce adjudications, and therefore their appeals against limited admission of claims were dismissed.

Final Conclusion: The Tribunal dismissed all the appeals; the Liquidator's admission of claims based on audited records and actuarial valuation was upheld, excluded third party fund sums (provident/pension/gratuity) cannot be treated as liquidation assets, and unpaid/disputed wage claims lacking proof or adjudication were not permissible for sanction by the Liquidator.

Anticipatory bail - Section 45 of the Prevention of Money Laundering Act - mandatory twin conditions for grant of bail - PMLA as a special statute with overriding effect on general criminal law - economic offences / money laundering and restrictive approach to bail - presumption under the PMLA and burden on accused

Anticipatory bail - Section 45 of the Prevention of Money Laundering Act - mandatory twin conditions for grant of bail - Whether anticipatory bail under Section 438 Cr.P.C. ought to be granted to the applicant accused in ECIR/complaint under the PMLA. - HELD THAT: - The Court applied Section 45 of the PMLA which, by its non obstante clause, prescribes mandatory twin conditions before granting bail in offences triable under the Act: (i) opportunity to the public prosecutor to oppose bail; and (ii) court satisfaction that there are reasonable grounds to believe the accused is not guilty and is unlikely to commit an offence while on bail. The Court observed that PMLA is a special enactment with overriding effect over the CrPC and that the twin conditions in Section 45 must be complied with. Having considered the nature of the allegations (money laundering connected with scheduled offences), the economic character of the offence, the potential for abscondence and influence on investigation in socio economic crimes, and the settled precedents applying a restrictive approach to bail in such offences, the Court found no grounds to satisfy the Section 45 conditions in favour of the applicant and therefore declined to grant anticipatory bail. [Paras 19, 20, 21, 27]

Anticipatory bail is refused as the mandatory conditions of Section 45 PMLA are not satisfied and the case does not merit exceptional relief under Section 438 Cr.P.C.

PMLA as a special statute with overriding effect on general criminal law - economic offences / money laundering and restrictive approach to bail - Whether the character of money laundering and the overriding effect of PMLA justify a restrictive approach to grant of anticipatory bail in the present case. - HELD THAT: - The Court reiterated that Parliament enacted the PMLA to curb money laundering and conferred on it an overriding effect over other laws. Economic and socio economic offences, especially money laundering, are to be approached differently in bail considerations because they often involve deep rooted conspiracies, risk to national economic interest, and a higher probability of abscondence or interference with evidence. Relying on authoritative pronouncements recognizing the grave nature of economic offences and prior decisions interpreting Section 45, the Court held that 'jail is the rule and bail is the exception' in money laundering cases and that these considerations weighed against granting anticipatory bail to the applicant. [Paras 23, 24, 25, 26, 27]

The special character of PMLA offences and the overriding statutory scheme justify a restrictive approach; this militates against grant of anticipatory bail to the applicant.

Final Conclusion: The anticipatory bail application is rejected. The Court refused relief after applying the mandatory conditions under Section 45 of the PMLA and having regard to the special and serious nature of money laundering offences; the observations are confined to this bail application and shall not affect trial or regular bail applications.

Cenvat credit on capital goods - deferred Cenvat credit - clerical error and reconciliation of credit records - penalty for wrongful availing of credit - audit verification of documentary evidence

Cenvat credit on capital goods - deferred Cenvat credit - clerical error and reconciliation of credit records - penalty for wrongful availing of credit - audit verification of documentary evidence - Whether the alleged excess Cenvat credit of Rs. 2,83,137/- relatable to deferred credit on receipt of capital goods and the equal penalty imposed were justified - HELD THAT: - The Tribunal found that the claimed shortfall arose from a clerical omission in the figures originally submitted to the audit by the appellant's accounts/store section. The appellant produced voucher-wise schedules and invoices (annexed as Annexure-9) demonstrating that the additional duty/SAD component of deferred credit for capital goods received in financial year 2015-16 aggregated to Rs. 2,83,136.87 (rounded to Rs. 2,83,137/-), showing that the deferred credit had in fact been correctly recorded. The show cause notice and demand under Rule 14 of CCR were issued without completion of verification despite the appellant's request and documentary explanation; the adjudicating authority confirmed the demand and imposed penalty notwithstanding the available records. On this basis the Tribunal concluded there was no substantive discrepancy, the demand and penalty were misconceived, and the impugned order could not be sustained. [Paras 7, 8]

The appeal is allowed; the impugned order confirming the demand and imposing penalty is set aside and the appellant is entitled to consequential benefits in accordance with law.

Final Conclusion: The Tribunal allowed the appeal, holding that the alleged excess deferred Cenvat credit resulted from a clerical error and that the demand and penalty confirmed by the lower authority were unjustified; the impugned order is set aside and consequential relief is granted.

Discharge under Section 227 Cr.P.C. - prima facie case - criminal conspiracy - framing of charge - scope of court's power at the stage of discharge - prevention of corruption - sanction for prosecution

Discharge under Section 227 Cr.P.C. - prima facie case - framing of charge - scope of court's power at the stage of discharge - Whether there was sufficient material to refuse discharge and to frame charge against the petitioner for offences including criminal conspiracy and offences under the Prevention of Corruption Act. - HELD THAT: - The Court applied the settled principles governing Sections 227/228 Cr.P.C., including the limited but real duty of the judge to sift the prosecution materials and form an opinion whether a prima facie case or grave suspicion exists. Accepting the prosecution material at its face value for this stage, the Court recorded that the investigation disclosed transfers of PANs and records from Kolkata to Ranchi/Hazaribagh, petitions under Section 264 of the Income Tax Act filed thereafter, evidence of false addresses and non-existent business presence at the transferred addresses, transcripts of communications, and materials of illegal gratification received by the principal accused. The Court found these materials and circumstances sufficient to constitute a prima facie case that the petitioner, as director/controller of the two companies, participated in a scheme to get assessment orders set aside by transfer of PANs and revision petitions, thereby justifying framing of charges and refusal to discharge. [Paras 27, 28, 30]

Impugned orders refusing discharge and framing charge are upheld; there is sufficient material to proceed to trial.

Prevention of corruption - criminal conspiracy - sanction for prosecution - Whether the contention that a non-public person cannot be charged with offences under the Prevention of Corruption Act or with conspiracy thereto defeats framing of charge against the petitioner. - HELD THAT: - The Court considered the petitioner's submission that, being a private person, he cannot be charged under certain provisions of the Prevention of Corruption Act and that proof of demand is indispensable for prima facie liability. Noting authority on those principles, the Court nonetheless observed that the prosecution has produced material prima facie indicating demand and receipt of illegal gratification by the public servant co-accused (for whom prosecution sanction has been obtained). On that basis the Court held that the petitioner's reliance on the said submissions does not undermine the prima facie case at the discharge stage. [Paras 31, 32]

The argument that the petitioner, as a non-public servant, cannot be charged does not negate the prima facie material; the contention does not warrant discharge at this stage.

Framing of charge - discharge under Section 227 Cr.P.C. - Whether the manner of framing charges and alleged procedural infirmities (including non-compliance with provisions governing content of charge and the requirement of application of mind) vitiate the impugned orders. - HELD THAT: - The petitioner challenged the framing of charge contending that the trial court acted as a 'post office', failed to apply its mind under relevant provisions of the Cr.P.C., and contravened requirements for setting out charge. The High Court examined the trial court's application of legal tests, the materials placed on record and the limited scope of inquiry at the discharge stage. Finding that the trial court had considered the prosecution materials, noted the circumstances and recorded prima facie findings, the High Court concluded there was no illegality, perversity or material irregularity in the impugned orders. [Paras 25, 33]

No procedural infirmity found in the framing of charge; the trial court did not act without application of mind and its order cannot be interfered with in revision.

Final Conclusion: The revision petition is dismissed: the High Court found no illegality or perversity in the trial court's refusal to discharge the petitioner or in framing charges, holding that there is sufficient prima facie material to proceed to trial in respect of the matters arising from transfer of PANs, petitions under Section 264 and related allegations of conspiracy and gratification.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - bar on institution or continuation of proceedings against corporate debtor during moratorium - maintainability of proceedings under Section 138 of the Negotiable Instruments Act during corporate insolvency resolution process - liability of directors and natural persons under Sections 138/141 of the Negotiable Instruments Act - prima facie applicability of NCLT moratorium to specific operational debts

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - maintainability of proceedings under Section 138 of the Negotiable Instruments Act during corporate insolvency resolution process - Whether the moratorium under Section 14 IBC prohibits continuation or institution of proceedings under Section 138 NI Act against the corporate debtor during the corporate insolvency resolution process. - HELD THAT: - The Court applied the ratio of the Apex Court in P. Mohan Raj (paras extracted at para 6 of the order) and held that Section 14 IBC operates to prohibit continuation or institution of Section 138/141 proceedings against the corporate debtor during the moratorium. For the period of moratorium such proceedings cannot be continued or initiated against the corporate debtor, though the statutory liability of natural persons specified in Section 141 of the Negotiable Instruments Act remains unaffected. The court therefore treated Section 14 as creating a statutory bar in respect of the corporate debtor vis-a -vis Section 138 proceedings. [Paras 6, 8]

The moratorium under Section 14 IBC bars continuation or institution of proceedings under Section 138 NI Act against the corporate debtor during the corporate insolvency resolution process.

Liability of directors and natural persons under Sections 138/141 of the Negotiable Instruments Act - Whether the moratorium under Section 14 IBC extends immunity to a natural person who is an erstwhile/suspended director, so as to prevent proceedings under Section 138 NI Act being continued against him. - HELD THAT: - Relying on the same Apex Court authority (paras 120-121 as extracted and discussed at paras 9-10 of the order), the Court held that the moratorium shields only the corporate debtor (juristic person) and does not extend to natural persons such as directors who are covered by Section 141. The petitioner, a suspended/erstwhile director, falls within the class of persons who remain statutorily liable and therefore cannot claim the protection afforded to the corporate debtor by Section 14. [Paras 9, 10]

The moratorium under Section 14 IBC does not protect the petitioner (a natural person/erstwhile director); proceedings under Section 138 NI Act can continue against him.

Prima facie applicability of NCLT moratorium to specific operational debts - Whether the NCLT moratorium prima facie covered the cause of action embodied in the complaint arising from the dishonoured cheque and whether omission of specific reference to the cheque in the NCLT order undermined the moratorium's applicability. - HELD THAT: - The Court examined the NCLT order (extracted at para 5) together with the petition's particulars and observed that paragraph 2 of the NCLT order referred to operational credits, invoices and periods which prima facie coincide with the transactions underlying the dishonoured negotiable instrument. The absence of an express reference to the specific cheque does not negate the prima facie inference that the moratorium encompassed the operational debts claimed by the operational creditor. That inference would be displaced only by prima facie material on record showing non-concurrence, which is not present. [Paras 7]

Prima facie the NCLT moratorium covered the operational debt underlying the dishonoured cheque; mere omission of specific reference to the cheque in the NCLT order does not defeat the moratorium's applicability.

Final Conclusion: The petition is dismissed. The Court affirmed that Section 14 IBC bars Section 138 proceedings only against the corporate debtor but does not immunise natural persons (directors); on the record the NCLT moratorium prima facie covered the operational debt underlying the dishonoured cheque and summons issued against the petitioner, an erstwhile/suspended director, were valid.

Restraint on invocation of bank guarantee - Special equities and irrevocable injustice - Invocation not in terms of bank guarantee - Independence of bank guarantee - Territorial jurisdiction under Section 2(1)(e)(ii) and Section 2(2) of the Arbitration and Conciliation Act, 1996 - Applicability of Part I of the Arbitration and Conciliation Act, 1996 to international commercial arbitration - Maintainability of Section 9 application against a non party where necessary to give effect to the order

Territorial jurisdiction under Section 2(1)(e)(ii) and Section 2(2) of the Arbitration and Conciliation Act, 1996 - Applicability of Part I of the Arbitration and Conciliation Act, 1996 to international commercial arbitration - Jurisdiction of the Calcutta High Court to entertain the Section 9 petition seeking interim relief in aid of an international commercial arbitration. - HELD THAT: - The court held that the governing law being that of the purchaser's country (Bangladesh) does not preclude this court from assuming jurisdiction because choice of governing law determines substantive law only and is distinct from the forum/seat question (para 12). The transaction qualifies as an international commercial arbitration and, in the absence of an express exclusion of Part I, Sections 9 and related provisions apply to international arbitrations (paras 13-15). The pleadings disclose sufficient cause of action within the jurisdiction of this court and, subject to the contract not excluding Part I, the High Court has jurisdiction to entertain the Section 9 application. [Paras 12, 13, 14, 15]

This court has territorial jurisdiction and Part I of the Act (including Section 9) is applicable to the petition.

Independence of bank guarantee - Restraint on invocation of bank guarantee - Whether Citibank NA, Kolkata and Citibank NA, Dhaka should be treated as separate entities for purposes of the bank guarantee and the petition. - HELD THAT: - The factual matrix shows the petitioner applied at Citibank Kolkata for a performance security which resulted in a standby letter of credit issued by the Kolkata office in favour of Citibank Dhaka and, on that basis, Citibank Dhaka issued the performance bank guarantee (para 16). No facts were pleaded or proved to show the two offices should be treated as disparate entities; the transaction and correspondence indicate the offices acted as parts of the same undertaking in issuing and pursuing the guarantee (paras 16-18). The subsequent conduct of Citibank (Kolkata) in corresponding and pressurising the petitioner, and the Dhaka office's communications, reinforce the interconnectedness. [Paras 16, 17, 18]

For the purpose of this proceeding the banks are to be treated as connected in the transaction and not as unrelated separate entities.

Maintainability of Section 9 application against a non party where necessary to give effect to the order - Whether relief under Section 9 can be sought against the bank though it may not be a party to the arbitration agreement. - HELD THAT: - Section 9 read with the definition of "Court" requires the applicant to be a party to the arbitration agreement; however there is no absolute bar to impleading a non party where the presence of such non party is necessary to give effect to the order sought (para 21). The petition pleads that Citibank was impleaded for effective adjudication because the bank (through its Kolkata office) initiated the standby LC and the Dhaka office issued the bank guarantee; consequentially an order against the bank is necessary to render the interim relief effective. [Paras 21]

Impleading and granting relief against the bank is maintainable where necessary to effectuate the interim order.

Special equities and irrevocable injustice - Invocation not in terms of bank guarantee - Restraint on invocation of bank guarantee - Whether the petitioner established grounds to restrain encashment of the bank guarantee and justify confirming the interim injunction. - HELD THAT: - The court applied the established tripartite test permitting interference with a bank guarantee only on proof of egregious fraud, special equities/irretrievable injustice, or invocation not being in terms of the guarantee (para 26). On the facts, the petitioner had completed supply by February 2018, the warranty expired February 2019, and the demands were made years later; the petitioner had already paid certain demanded sums without prejudice and had received 90% payment leaving only 10% retention (paras 22-24). The invocation letter related to the 10% retention and did not allege breach of performance obligations; thus the invocation was not shown to be in terms of the guarantee. The court found special equity because payment would cause immediate and irreversible financial loss to the petitioner, and the bank's conduct in pressing payment despite injunctions supported continuation of relief (paras 25-28). The respondent bank's contention that payment may already have been made did not justify defeating the injunction while orders remain in force. [Paras 24, 25, 26, 27, 28]

The petitioner satisfied the tests of special equity and improper invocation; the interim injunction restraining encashment of the bank guarantee is confirmed and made absolute.

Final Conclusion: The High Court found jurisdiction to entertain the Section 9 petition, treated the involved bank offices as connected for the transaction, upheld the maintainability of relief against the bank where necessary to give effect to the order, and on the merits confirmed and made absolute the interim injunction of 10th May, 2021 as modified on 18th May, 2021 restraining encashment of the performance bank guarantee; A.P. No. 230 of 2021 disposed accordingly.