TaxTMI 
TaxTMI 
2016 (2) TMI 175
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....ES, ADVOCATE, MR DHAVAL D. VYAS, ADVOCATE FOR THE RESPONDENT : MR KAMAL TRIVEDI, LD. ADVOCATE GENERAL WITH MS S.K. VISHEN, LD. AGP, MR MIHIR THAKORE, LD. SR. ADVOCATE WITH MR MIHIR JOSHI, LD. SR. ADVOCATE WITH MR SN SOPARKAR, LD. SR. ADVOCATE WITH MR SANDEEP SINGHI WITH MR PARTH CONTRACTOR WITH MR PRANJAL BUCH, SINGHI & CO, ADVOCATE, MS DHARMISHTA RAVAL, ADVOCATE, MR SHRIJIT PILLAI FOR TRIVEDI & GUPTA JUDGMENT (PER : HONOURABLE MR.JUSTICE N.V.ANJARIA) In the present batch of group of petitions, what is at stake is the legislative competence, and therefore constitutional validity of the Sardar Sarovar Narmada Nigam Limited (Conferment of Power to Redeem Bonds) Act, 2008. 1.1 Passed by the Gujarat Legislature and received assent of the Governor on 29th March, 2008, the Act was brought into existence to confer power on the Sardar Sarovar Narmada Nigam Limited-respondent No.2 herein, to redeem premature the Deep Discount Bonds issued by it. 2. As all the captioned petitions involve common challenge, similar facts and identical issues as well as the prayers being on the same lines, they were heard together. Accordingly, they are being finally decided simultaneously by ....
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....lated on the basis of excess of maturity value over the current rate or security factored by remaining duration. It is the case of the petitioner that it purchased the Bonds with a view to hold to the same till maturity. 3.2.2 Respondent No.2-Sardar Sarovar Narmada Nigam Limited came out with an Issue of Deep Discount Bonds (DDBs) by issuing a Prospectus on 29th September, 1993. The Bonds were of the face value of Rs. 01,11,000/-. They were issued in the year 1994 at a discounted price of Rs. 03,600/-. The tenure as per the original terms was of 20 years. At the end of the said period, that is, in the year 2014, Bond-holder was to be offered the face value of Rs. 01,11,000/-. Under the conditions mentioned in the Prospectus, the Bonds were redeemable at the option of the Bond-holder at the end of 7th, 11th and 15th years commencing from 1993, for Rs. 12,500/-, Rs. 25,000/- and Rs. 50,000/- at the end of respective dates. More than seven lakhs Deep Discount Bonds issued to the public as above and they were listed in 10 Stock Exchanges across the country. 3.2.3 On 29th March, 2008, the State of Gujarat promulgated a statute being an Act No. 12 of 2008 being the impugned legisla....
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....l petitions may be referred to in a nutshell. The petitioners of Special Civil Application No.8208 of 2009 are the private individuals. The petitioners acquired 1 Bond on 07th January, 1995. 3.3.1 The petitioner of Special Civil Application No.14491 of 2008 is Indian Oil Corporation Limited (Refineries Division) Employees Provident Funds which acquired 2950 Bonds at an average rate of Rs. 56,000/- from the secondary market as per its case. 3.3.2 The petitioner of Special Civil Application No.14492 of 2008 is Indian Oil Corporation Limited Employees Superannuation Benefit Fund which is a trust set up by Indian Oil Company Limited. It is the case of the petitioner that it purchased 800 Bonds from the secondary market at the rate of Rs. 55,900/- in the year 2007, investing total Rs. 04,47,20,000/-. 3.3.3 The petitioners of Special Civil Application No.14539 of 2008 are the private individuals who acquired 1 Bond on 30th January, 1995. 3.3.4 The petitioner of Special Civil Application No.15195 of 2008 is India Tourism Development Corporation Limited, Staff Provident Fund Trust who acquired 594 Bonds in the year 2005 at the cost of Rs. 02,91,56,575/- from the secondary market. ....
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....ent, they invested Rs. 03,600/- by purchasing 1 Bond under Certificate No.128719. 3.3.13 The petitioner of Special Civil Application No.3332 of 2014 is Maharashtra State Electricity Board's Contributory Provident Fund. This petitioner acquired 22684 Bonds from the secondary market at the cost price of Rs. 13,18,95,850/- at the premium of Rs. 05,02,33,450/- over the face value of Rs. 03,600/- per Bond with the face value of Rs. 01,11,000/- as on 11th January, 2014. The said petitioner is also aggrieved by premature redemption. 3.3.14 Petitioner of Special Civil Application No.3336 of 2014 is Maharashtra State Road Transport Corporation's Contributory Provident Fund and others. It is its case that from 23rd June, 2005 onwards, the petitioner purchased 10,385 Deep Discount Bonds from secondary market in Mumbai at the cost price of Rs. 55,42,56,500/- at the premium of Rs. 51,68,70,500/- over the face value of Rs. 03,600/- per Bond with the face value of Rs. 01,11,000/- as on 11th January, 2014. It is the further case of the petitioners that they purchased the said Bonds from the secondary market at such high premium because of the clear and specific assurances given by the respon....
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....hich the complaints were made to the Securities and Exchange Board of India as to the basis on which the redemption was arrived at. SSNNL sent a pay order of Rs. 1,06,00,000/- being the redemption amount to the petitioner. 3.3.19 The petitioner of Special Civil Application No.7416 of 2014 is the private individual who purchased in the year 2004-2005 the Bonds for the value of Rs. 01,15,134/- at the relevant time. 3.3.20 The petitioner of Special Civil Application No.7418 of 2014 are the private individuals who are the residents of Gurgaon, State of Haryana. They invested in 20 Bonds at purchase price of Rs. 72,000/- and it is pleaded in the petition inter alia that the reason for investment in the Bonds was that there was no Call Option available to respondent No.3. 3.3.21 The petitioner of Special Civil Application No.16463 of 2014 is a private individual who invested in 50 Bonds. 3.3.22 The petitioner of Special Civil Application No.15435 of 2008 is the Board of Trustees Hindustan Steel Limited Bhailai Steel Project Provident Fund. It is the case of the petitioner that with an intention to reap the benefit of interest in the yield at the end of maturity period of the ....
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.... While some of the writ petitions have been filed under Article 32 of the Constitution of India, other writ petitions have been filed before different High Courts, namely, Gujarat High Court, Bombay High Court and Karnataka High Court under Article 226 of the Constitution of India which were also transferred to this Court for hearing alongwith writ petitions filed under Article 32 of the Constitution of India. On hearing the parties, we find that the main question relates to legislative competence of the State legislature to enact to Act in question. Prima facie as it appears that no question relating to petitioner's right under Part III of the Constitution of India is involved, we are of the view that the parties should pursue their case under Article 226 of the Constitution of India before one High Court i.e. Gujarat High Court. Learned counsel for the parties also agree to pursue their remedy under Article 226 of the Constitution of India before the Gujarat High Court. We, accordingly, allow the concerned petitioners to convert their petitions under Article 32 of the Constitution of India, as petitions filed under Article 226 of the Constitution of India and transfe....
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....n to such terms, the Bonds shall also be subject to such other terms and conditions to be incorporated in the Bond Trust Deed/Bond Certificates/Letters of Allotment and the guidelines for the listing of securities issued from time to time." "Nature of Instruments The Bonds are secured and are in the nature of promissory notes." "Deep Discount Bond Each Deep Discount Bond having a face value of Rs. 1,11,000 will be issue at a discounted price of Rs. 3600/- with a maturity period of 20 years from the date of allotment. An investor will have the option to withdraw the Bond, at the end of 7th, 11th and 15th year from the date of allotment. In the event of such earlier withdrawal by the investor, the deemed face value of the Bond would be as under. In case of withdrawal Deemed Face Value At the end of 7 year Rs.12,500 At the end of 11 years Rs.25,000 At the end of 15 years Rs.50,000" 3.5.1 The Bonds were non-convertible. Minimum number of Bond required to be applied was one and there was no maximum limit. The terms of payment were that the full issue price was Rs. 3600/- per Bond to be paid as indicated along with ....
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....mply send the endorsed Bond Certificate to the Company requesting transfer alongwith details of his/her name, address and occupation, if any." 3.5.4 Industrial Credit and Investment Corporation of India Limited was the Trustee of the Issue. The company executed Trust Deed on 31st December, 1994. It was stated that the Trustees confirm that they will protect the interest of the Bondholders in the event of default of the company in regard to timely payment of interest and repayment and principal and they will take necessary action including enforcement of security at the cost of the company. The major events of withdrawal which will necessitate repayment before maturity were indicated thus, "(1) Default in payment of monies due in respect of interest and principal owing upon the Bonds. (2) Default in payment of any other monies including costs, charges and expenses incurred by the Trustees. (3) Winding up of the Company (4) If the Company ceases, without the consent of the Trustees, to carry on its business or gives notice of its intention to do so. (5) If it is certified by a Chartered Accountant or a firm of Chartered Accountants appo....
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....will be entitled to their Bonds free from equalities and/or cross claims by the Company against the original or any intermediate holders thereof. (vii) The Bonds comprising the present issue shall rank pari passu interest without any preference or priority of one over the other or others of them. (viii) The Bonds will be subject to the terms and conditions, to be incorporated in the documents/agreements to be entered into with the Bond Trustees and in the Bond Certificates/Allotment Letters to be issued." 3.5.7 The power to re-purchase and re-issue Bond was mentioned in the following way, "Subject to the provisions of Section 121 of the Act, the Board shall have the power exercisable at its absolute discretion; from time to time, to repurchase all or any of the Bonds, at any time prior to the specified date of redemption and may re-issue the same or may cancel them. Where the Company has redeemed or repurchased any of the Bonds, the Company shall have and shall be deemed always to have had the right to keep such Bonds alive for the purpose of re-issue and in exercising such right the Company shall have and shall be deemed always to have had th....
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.... has been set up by the GOG as a Company whose entire share capital is owned by GOG for the implementation of the Sardar Sarovar Project (hereinafter referred to as "the Narmada Project") which is a multi-purpose joint project of four States viz. Gujarat, Madhya Pradesh, Maharashtra and Rajasthan, interalia, involving the construction of 1210 metre long concrete gravity dam in Gujarat. The completed dam would rise 146.50 Mtr. Net above the river bed and 157.5 metres above the deepest excavation point. (2) The Narmada Project would on completion create a reservoir of 5800 million cubic metres extending to more than 214 kilometers upstream, covering 370 square kilometers and also envisages the construction of a concrete canal, 460 kilometers in length going upto the Rajasthan border and also other distribution canals. Power generating facilities would be located on the river bed and on the reservoir outlet to the main canal. The River Bed Power House (RBPH) located underground on the right bank, downstream of the main dam, would be quipped with 6 reversible Francis Type Turbine Units, each with a capacity of 200 MW. The Canal Head Power House (CHPH) situated on the right ban....
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....ed by GOG viz. SSNNL is being implemented as part of the development and commercial activities of GOG and as mentioned above with a view to make available various benefits of development, irrigation, power generation and other attendant benefits to the people of Gujarat and other neighboring states (viz., Madhya Pradesh, Rajasthan and Maharashtra) who are participating in the Narmada Project and would be sharing part of the cost thereof in accordance with the decision of the Narmada Water Dispute Tribunal. (7) SSNNL upon obtaining all requisite corporate and regulatory approvals, proposes to issue bonds for subscription by investors with a view to partially bridge the net gap of Rs. 2350 crores, from out of the non-budgetary sources. SSNNL proposes to issue- (a) "Deep Discount Bonds" of the face value of Rs. 1,11,000/- each issued at deep discounted price of Rs. 3,600/- each having stipulated maturity period And (b) 18% Non Convertible (Non Cumulative) Bonds of the face value of Rs. 5000/- each redeemable after the expiry of a specified period commencing from the date of allotment. The Deep Discount Bonds referred to in sub para (a) abov....
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....rovided herein. In this connection, it is necessary that various provisions be made, setting out the circumstances under which such amounts of Additional Funding (in whatever form) may be called up by SSNNL from GOG, and, applied towards servicing of principal, interest, premium and other charges and expenses in relation to the said Bonds, and the Security to be created pursuant to the provisions hereof, and to enable the Trustees to take all steps as may be necessary for the protection of the interest of the Bondholders, as provided herein. (13) The parties being desirous of recording the terms and conditions of such arrangements have entered into this Tripartite Agreement as hereinafter appearing. NOW THEREFORE IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:- 1. Definitions: Marginal notes or sub-headings are inserted for convenience only and shall not affect the construction hereof and in these presents and Schedules hereto, unless there is something in the subject or context inconsistent therewith. The following expressions shall have the meaning hereinafter mentioned, that is to say:- (a) "Bonds" or the "said Bonds" shall mean col....
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.... towards principal, interest premium and other charges and expenses whatsoever in relation to the said Bonds and/or the Security, as being due and payable to the Bondholder/s and/or the Trustees under the provisions of this Agreement or other agreement(s) or offer Document/s or arrangement entered into pursuance hereof; (m) "Offer Documents" shall mean the prospectus and other documents regarded as offer documents in respect of the issue of said Bonds for inviting subscriptions to the said Bonds from the public. (n) "Partly Paid Shares" shall mean the partly paid shares of SSNL to be issued shortly and identified by the Board of Directors of SSNNL and/or by the Trustees as the party paid up shares for the purpose of his Agreement. (o) "Preview Date" shall mean in relation to each Service Date, a date being 45 calender days prior to the service date, both days not being included. In case the "Preview Date" falls on a holiday, the prior working day shall be the "Preview Date". (p) "Request" (whether or not used in its capitalised form but subject to the context) shall mean the Notice in the form prescribed herein for Additional Funding. (q....
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....n funds and assets. (b) SSNNL shall in consultation with the Trustees and not later than 30 days from the date of allotment of the said Bonds, set up a "No Lien Account" with a Bank approved by the Trustees, and to be called the "Designated Account". The operations of the said Designated Account and all withdrawals from the said Designated Account shall be made only in consultation with the Trustees, and shall, exclusively be utilised for the purpose of servicing the said Bonds and/or the payments of the Outstandings in relation thereto. SSNNL may in consultation with the Trustees open more than one Designated Account as may be required, all of which shall be known as "the Designated Account (s)". (c) On each Preview Date, SSNNL and the Trustees, shall, in relation to the funds available for payments to be made on the relevant Service Date, determine whether SSNNL is in a position to fully pay and discharge its payment obligations on the relevant Service Date. In the event, that on the Preview Date there are inadequate funds in the Designated Account (s) available for payment on the relevant Service Date, or if the Trustees are otherwise satisfied, having regard t....
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....r clarification shall not be a basis for withholding any disbursement prior to the Service Date or in any manner delay or postpone the provision of such Additional Funding. It is further agreed that any pending dispute or clarification regarding one or more Service Dates, shall not be a ground for withholding any further disbursements and it is an essential term of this Agreement that GOG unconditionally agrees to make available the requisite amount of Additional Funding/Disbursement in respect of each Service Date to the extent requested for by the Trustees and/or SSNNL from time to time in accordance with the provisions of this Agreement. (v) The Notice referred to in sub-clause (d) above shall be generally in accordance with the provisions of Annexure - I attached hereto and, shall be considered as having been properly communicated to the GOG if the notice or request is delivered to the Additional Chief Secretary, F.D., GOG, Gujarat or failing him or in case of redesignation, to the Chief Secretary, Government of Gujarat. (vi) It is expressly clarified that neither SSNNL nor the Trustees shall be required or obliged in any manner to inquire into or ascertain wh....
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.... shall be complied with to the end and intent that in the event of a Eligibility to Call occurring by then, SSNNL and/or the Trustees can forthwith proceed to issue the Notice upon GOG seeking Additional Funding without any delay, or having to comply with any fresh formalities or modalities in order to seek Additional Funding from Government of Gujarat prior to the Service Date. All such corporate resolutions, formalities and compliances shall be carried out and implemented to the satisfaction of the Trustees, on or before the Preview Date and any requirement in that behalf indicated by the Trustees shall be final and binding upon SSNNL and GOG. (ii) Without prejudice to (i) above, SSNNL shall also pass all such corporate resolutions and comply with all procedures and formalities as may be required by the Trustees, under the provisions of Articles of Association of SSNNL to enable the forfeiture of any shares on which calls have not been paid up by GOG or, if necessary for the enforcement of any security which may be held by the Trustees in that behalf or, for submitting to the order or direction of any Court or other appropriate authority to the extent that the exercise o....
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.... entitled to the specific performance of all such obligations in an appropriate court of law and in relation thereto require and to also claim such damages as they may be entitled to in that behalf under law. The Trustees and/or Bondholders shall give credit to SSNNL in respect of such amounts as may be recovered by the Trustees and/or Bond holders in pursuance of the above. The Trustees may without prejudice to all its other rights, including the rights to sue GOG for payment of the Additional Funding, also forfeit the Partly Paid shares where GOG does not pay the called up amount and to exercise the power of reissue thereof in favour of any party of its choice. APPROPRIATION (i) The amounts of Additional Funding received pursuant to payment or credits made by GOG in the Designated Account shall be applied for discharge of the obligations in relation to the relevant Service Date. The payment shall be applied in the first instance to payment of all costs, charges and expenses if any of recovery or realisation by the Trustees, in the second instance to all payments of interest and other charges of a revenue nature failing due on the relevant Service Date and in the....
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....es, charges and penalties which SSNNL may be required to pay according to the laws for the time being in force in the State in which its properties are situated and in the event of SSNNL failing to pay such stamp duties, other duties, cesses, taxes and penalties as aforesaid, which failure in the opinion of the Trustees is likely to prejudice the interest of the Bondholders, the Trustees will be at liberty (but shall not be bound) to pay the same or arrange for payment of the same for the purpose of protection and preservation of the Security or for enforcement of the Security by the Trustees and SSNNL shall repay the same to the Trustees on demand without demur with interest thereon at the rate of 21% per annum (c) The Trustees may, from time to time or at any time waive on such terms and conditions as to them shall seem expedient, and without reference to the Bondholders any breach by SSNNL or GOG of any of the covenants and provisions in these presents contained but without prejudice to the rights of the Trustees in respect of any subsequent breach thereof. (vii) Upon proof being given to the reasonable satisfaction of the Trustees that all the said Bonds for t....
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....cation/variation of rights, privileges, terms and conditions attached to the Deep discount Bonds, to provide that the Company shall have the right/authority for early redemption of Deep Discount Bonds at the end of the 11th year from the date of allotment with the same Deemed Face Value for the 11th year as fixed in the Prospectus for withdrawal of Deep Discount Bonds by Deep Discount Bond Holders and on exercising the right/authority for early redemption at the end of the 11th year, the Company will intimate by giving two months notice, to all the registered holders of Deep Discount Bonds, prior to the date of the early redemption and from the date of the early redemption the Deep Discount Bonds shall stand fully discharged and the Company shall not be liable to pay any interest, damage, compensation, cost, charges on such Deep Discount Bonds even if the Deep Discount Bond certificate is not surrendered for receipt of redemption amount." 3.7.2 It appears that since certain representations were made to Security Exchange Board of India about non-fixing of the Book Closure Date, upon intimation by the SEBI, the Debenture Trustees had withdrawn the notice. At that time things had r....
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.... in the terms of withdrawal appearing under condition No.9, each Bond having the face value of Rs. 1,11,000 issued at Rs. 3,600 shall be redeemed earlier on such date and with such deemed face value as the company may determine by payment of the amount so determined: Provided that the deemed face value shall be so determined as not to be less than such amount as may be arrived at by raising the deemed face value of Rs. 25,000 as on 11th January, 2005 at the rate of 18.92 per cent, for the period beginning from the said date of 11th January, 2005 till the date of redemption so determined. (b) The Company shall publish the date and the deemed face value determined under clause (a) in the newspaper in English and Gujarat language in the area having wide circulation." (2) The new condition 3A inserted in the said financial covenants and conditions by sub-section (1) shall be deemed to have been incorporated in and to have formed part of each of such Bonds with effect on and from the date of its allotment i.e. the 11th January, 1994 (irrespective of whether the Bond is in possession of a Bond holder or not.) 3. No civil court shall have jurisdiction t....
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....law stand in conflict with the central laws namely Securities Contract (Regulations) Act, 1956, the Securities and Exchange Board Act, Indian Companies Act, 1956 and Negotiable Instruments Act, 1882; and (v) the field in which the impugned legislation operate was already occupied by the central legislations. 4.1 As against the above, the defence of the side of the respondents has been that the impugned legislation falls under Entry 43 in List II under the title "Public Debt of the State" and further falls under Entry 20 in relation to "Economic and Social Planning" in List III. According to them, the subject matter of the legislation in question falls in pith and substance under the said two entries and therefore, state legislature could validity enact the law which is referable to said entries. According to the submission, the impugned law does not encroach upon the legislative field kept for the Parliament and cannot be said to be in conflict with any of the central statutes which occupy the different fields. 4.1.1 While the above are the broad stand and the grounds raised by the parties, their submissions and contentions covering the different issues and aspects on the bas....
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.... respect of Entry in List III-the Concurrent List. Decision in State of Kerala Vs Mar Appran Kuri Company Limited [(2012) 7 SCC 106, para 39, 40 and 47] was relied on. (ix) The Indian Companies Act, 1956, the Securities Contract (Regulation) Act, 1956 and the Security and Exchange Board of India Act, 1992 are the central laws which cover the entire field and are complete code in themselves. The Issue of Deep Discount Bonds and the attendant rights and liabilities are governed under the aforesaid Central laws. (x) The impugned law in its nature, effect and by virtue of the provisions enacted comes into direct conflict with the above Central laws. (xi) The impugned law is colourable legislation. Decision in K.C. Gajapati Narayan Deo Vs State of Orissa [AIR 1953 SC 375] [para 9] was relied on in this regard. 4.2.1 For assailing the impugned legislation on the ground of unreasonablity, the learned senior counsel made following further submissions-(a) No unforeseen circumstance came into existence subsequent to the contract; redemption in the interest rate was foreseeable; the amount payable eventually was crystallized before-hand at the time of contract; (....
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.... Employees' Provident Fund Act. (vi) The concept of federal supremacy would apply. This proposition was highlighted by relying on paragraphs 62 to 67, 71, 76, 89, 98, 100 from the decision of the Supreme Court in Offshore Holdings (P) Ltd. Vs Bangalore Development Authority [(2011) 3 SCC 139]. 4.3.1 On behalf of the Securities Exchange Board of India (SEBI), learned advocate Ms.Dharmishta Raval supported the case of the petitioners, submitting as under, (a) The Issue of the Deep Discount Bond was governed by the regulatory provisions of SEBI Act. She relied on the Preamble and Section 11 of the Act. (b) SEBI is a regulatory body. Once the issue is floated, the regulatory mechanism of SEBI as per the statutory provisions would come into play. Section 30 of the SEBI Act was referred to. (c) Decision in Sahara India Real Estate Corpn. Ltd. Vs SEBI [(2013) 1 SCC 1, para 66] was relied on to contend that SEBI Act is selfcontained Code. 4.3.2 Before the Supreme Court, in Transfer Petitions, Security Exchange Board of India filed affidavit and raised various contentions against the validity of the legislation concerned. It was highlighted that SSN....
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....the amount at the time of premature redemption was accepted by a Bond holder, the facts remains that the principal amount with accrued interest came to be parted with by the SSNNL and the same was received and enjoyed by the recipient Bond holder. According to the submission of the respondent, it could not be said that the Bond holders were completely deprived of the interest which could be treated as damage or loss. It was further submitted that even if it is considered for the sake of argument, this would involve quantification of damage which required fact finding inquiry in respect of the benefits claimed to have been earned by the respective Bond holders after receipt of principal amount and interest upto the date of redemption. Even if the recipient Bond holders had earned out of the amount, at what rate the earning was made and to which use the amount was put to, and what nature of investment was made are all the questions to be considered on the basis of evidence and factual inquiry. It was therefore submitted that this court may not award the damages even if the court were to hold the impugned legislation to be unconstitutional or void. Decisions relied on behalf of pet....
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.... Employees and Workers Union Vs Srinivasa Resorts Limited [(2009) 5 SCC 342, paras 78, 79 and 80] were referred to for contending that there was element of unreasonability and arbitrariness in the impugned law. (6) Mannalal Khetan Vs Kedar Nath Khetan [(1977) 2 SCC 424, para 19 to 22] was pressed into service to contend that where a contract express or implied, is expressly or by implication forbidden by statute, the Court will not lend its assistance. (7) M/s.Helos and Matheson Information Technology Limited C/o. Corporate Law Chambers India Vs Securities and Exchange Board of India [Securities Appellate Tribunal, Mumbai Appeal No.69 of 2011 decided on 16th November, 2011] was relied on to submit that the Listing Agreement is statutory in nature. (8) Sundaram Finance Limited Vs State of Gujarat [Gujarat High Court judgment, Special Civil Application No.6223 of 2011 and Special Civil Application No.12009 of 2001] was also pressed into service. Submissions of the State 4.6 Learned Advocate General Mr.Kamal Trivedi defended the impugned legislation by making following submissions, (i) The entries in the three Lists to the Seventh Schedule are....
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....greement. Referring to provisions of Sections 128 and 140 of the Contract Act and the decision in the Bank of Bihar Vs Dr.Damodar Prasad [AIR 1969 SC 297] submitted that under Section 128 in the Indian Contract Act, save as provided in the contract, the liability of surety is co-extensive with that of principal debtor. The surety become liable to pay the entire amount and the liability was immediate not to be referred until the creditor exhausts the remedy under the principal debtor. The similar proposition was canvassed by relying on Industrial Financial Corporation of India Ltd. Vs Cannanore Spg. and Wvg. Mills Ltd. [(2002) 5 SCC 54]. 4.6.2 Learned Advocate General placed reliance on paragraph 3 to 5 and Paragraph 7 of the affidavit which inter alia stated about the Sardar Sarovar Project, its object, history and its development. It was averred that SSNNL was incorporated to implement the Project speedily; that SSNNL is a wholly owned company of Government of Gujarat and a special purpose vehicle was created to meet with economic and social requirements of the State. In the affidavit, objects of SSNNL were highlighted vis-a-vis the Sardar Sarovar Project. It was further stated....
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.... SC 297, paragraphs 3,5], Industrial Finance Corpn. of India Ltd. Vs Cannanore Spg. and Wvg. Mills Ltd., [(2002) 5 SCC 54, paragraph 36] and Maharaj Umeg Singh Vs State of Bombay [AIR 1955 SC 540, paragraphs 1, 8 , 12 to 14] were pressed into service for submitting on the rights and status of guarantor vis-a-vis principal debtor as well as effect of guarantee. (6) State of T.N. Vs G.N. Venkataswamy, [(1994) 5 SCC 314, paragraphs 16 to 19] and Mardia Chemicals Ltd. Vs Union of India, [(2004) 4 SCC 311, paragraphs 2,5,33,66, 67] were pressed into service to submit as to how economic legislation should be interpreted and the principles which may be applied for considering the challenge to its constitutionality. (7) Jayantilal Ravishankar Bhatt Vs State of Gujarat [1970 ILR 844 Guj., at page 850, 860 to 862] and Animal Welfare Board of India Vs A. Nagaraja, [(2014) 7 SCC 547, paragraphs 79, 88 to 90] were referred to on the principle of incidental encroachment and repugnancy. (8) Dayaram Vs Sudhir Batham [(2012) 1 SCC 333, paragraphs 23 to 29, 32, 35] (9) G.T.L. Infrastructure Ltd. Vs State of Gujarat [2014 (1) GLR 725, paragraphs 28, 29], State of A....
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.... interest dimension, (ii) He highlighted following aspects and figures were highlighted (a) 300 crores in aggregate out of which 256.90 crores was from Deep Discount Bond being the fund raised for the project. (b) Rs. 7445 crores was required to be repaid at the end of redemption period. Bonds are issued in January, 1994 and the 20 years period was to expire in 2009. (c) On the date of redemption, that is 10th August, 2009 the total liability of repayment would have been Rs. 3346 crores and more. The amount of Rs. 3042.85 crores was already paid. (d) The petitioners are holding for Rs. 245.31 crores which constitute only 7.3% of the total redemption amount. (e) The State has allocated Rs. 18,000 crores for the project and the cost books 20% escalation. (f) The State wanted to save itself from spending about Rs. 4,000 crores more and therefore passed the Statute taking up the liability of SSNNL which was its limb. It was in realm of social and economic planning, the counsel emphasized. (g) Reliance was placed on decision of the Supreme Court and in particular paragraph 22 thereof in Viklad Coal Merchant, Patiala....
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....alid consideration. (xiv) Merely because the contractual rights are modified, it did not render the action unreasonable nor the Act was open to challenge on the ground o Article 14. There was no manifest arbitrariness because of which it could be said that a statute is against the tenats of Article 14. (xv) Retrospectivity by itself is not invalid. (xvi) The claim of larger sum at the end of the Five Years was an event yet to occur. (xvi) He relied on decision in Dharam Dutt Vs Union on India [(2004)1 SCC 712] about reasonableness in the context of Article 19 to judge the validity of the provision. (xvii) From decision in R.C. Tobacco (P) Ltd. Vs Union of India [(2005)7 SCC 725, para 21, 22 and 30] were relied on the aspect of retrospectively. (xviii) For contending that one man legislation can be a valid exercise of legislative powers, he relied on decision in S.P. Mittal Vs Union of India [(1983)1 SCC 51, paragraphs 162 to 164]. 4.8.1 Learned senior counsel for SSNNL submitted on the aspect of legislative competence that the first step is to determined the field of legislation with reference to the Entry in the List concerned. It was subm....
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.... Patiala etc. Vs Union of India [AIR 1984 SC 95]; (viii) Builders Association of India Vs Union of India [AIR 1989 SC 1371]; (ix) Association of Leasing and Financial Service Companies Vs Union of India [(2011) 2 SCC 352]; (x)State of A.P. Vs MCDOWELL & Co, [(1996) 3 SCC 709]; (xi) Dalmia Cement (Bharat) Ltd. Vs Union of India [(1996) 10 SCC 104]; (xii) S.P.Mittal Vs Union of India [(1983) 1 SCC 51]; (xiii) Dharam Dutt Vs Union of India [(2004) 1 SCC 712]; (xiv) R.C.Tobacco (P) Ltd. Vs Union of India [(2005) 7 SCC 725]. 4.9.1 Learned senior counsel Mr.S.N. Soparkar made submissions on the same lines. Learned senior counsel Mr.Mihir Thakore emphasized the approach of the court to the question of vires to submit that the court's function is not to strike down the law by picking up the holes. The court should also lean to upheld the legislation. In this regard, he relied on decision in Govt. of A.P. Vs P. Laxmi Devi [(2008) 4 SCC 720, paragraphs 39, 40 to 49, 55, 61, 64, 70, 73]. 5. In light of the above factual conspectus and the contentions canvassed on behalf of the parties, the following aspects emerge for examination, broadly stated. (a) The application and ambi....
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....ave power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this constitution referred to as the "Concurrent List"). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this constitution referred to as the "State List"). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included b [in a State] notwithstanding that such matter is a matter enumerated in the State List." 6.1.1 Article 254 is another provision to be read with Article 246. Article 254 speaks of inconsistency between laws made by Parliament and laws made by legislatures of State. It is reproduced herein. "254. Inconsistency between laws made by Parliament and laws made by the Legislatures of States (1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law with respect to on....
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....is repugnant to the Central Act is addressed; in other words, it states as to when the repugnancy arises. 6.1.4 In Govt. of A.P. and Vs J. B. Educational Society [(2005) 3 SCC 212] "9. The Parliament has exclusive power to legislate with respect to any of the matters enumerated in List I, notwithstanding anything contained in clauses (2) and (3) of Article 246. The non-obstante clause under Article 246(1) indicates the predominance or supremacy of the law made by the Union legislature in the event of an overlap of the law made by Parliament with respect to a matter enumerated in List I and a law made by the State legislature with respect to a matter enumerated in List II of the Seventh Schedule." "10. There is no doubt that both Parliament and the State legislature are supreme in their respective assigned fields. It is the duty of the Court to interpret the legislations made by the Parliament and the State legislature in such a manner as to avoid any conflict. However, if the conflict is unavoidable, and the two enactments are irreconcilable, then by the force of the non-onbstante clause in Clause (1) of Article 246, the Parliamentary legislation would prevail ....
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....y the State law. An absurd or an incongruous or irreconcilable result would emerge if two inconsistent laws or particular provisions in a statute, each of equal validity, could co-exist and operate in the same territory." (Para 63) Relevant Entries 7. The legislative Entries which were referred to in the rival submissions on behalf of the parties claiming to be bearing a relation to the subject matter of the impugned legislation may be mentioned. 7.1 In the List I, namely, the Union List, Entry 44 is in respect of "incorporation, regulation and winding up of corporations whether trading or not, with objects not confined to one State, but not including universities." 7.1.1 Entry 46 in the same List relates to "Bill of exchange, cheques, promisorry notes and other like instruments." 7.1.2 The subject of "Stock Exchanges and Futures Markets" is Entry 48 in the very List. 7.1.3 Also in Union List, Entry 35 is "Public Debt of the Union" which was juxtaposed with similar Entry in the State List. 7.2 From the State List, that is, List II, Entry 43 is "Public Debt of the State". 7.3 As far as the Concurrent List is concerned, the Entries referred to were Entry 7, En....
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....lar was the observation in Shah Goverdhan L. Kabra Teachers' College (supra) that the rule of liberal construction of an Entry would not enable the Legislature to make a law relating to a matter which has no rational connection with the subject-matter of Entry. It was observed that the Court sometime is duty-bound to guard against extending the meaning of words beyond their reasonable connotation in its anxiety to preserve the power of the Legislature. The Supreme Court stated, "while an Entry is to be given its widest meaning, it cannot be so interpreted as to override another Entry or make another Entry meaningless and in case of an apparent conflict between the different Entries it is the duty of the court to reconcile them...." For reconciliation, the doctrine of pith and substance has to be applied and brought into play, guided the Apex Court. 8.3 The decision of the Supreme Court in Gannon Dunkerley's case was referred to and relied on. From that decision and the development in law in relation thereto, it is possible to learn the interpretational. In that case, (AIR 1958 SC 560) the words "sale of goods" in Entry 48 in List II of the Seventh Schedule of the Government of I....
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....of goods' were to be given meaning accordingly. The decision in Gannon Dunkerley's case and the subsequent development in law after the said judgment on the aspect of the Entry help understand what could be the interpretational contours and the canons which may be applied for the permissible extent of extending the meaning and import of an Entry. 8.3.4 What implies is that while construing the words in an Entry, the essence and the crux of the meaning have to be adhered to and the basic ingredients of the words in the Entry cannot be divorced from it while giving an extended meaning to it. This dictum would apply with rigour when a particular Entry contains a legal terms or words or it is a technical phrase or it in its connotation justifies to give it a special meaning. 8.4 On the basis of Gannon Dunkerley's decision, it was submitted on behalf of the petitioners that wherever the Entry contains legal words, they should be given their legal meaning. They therefore contended that the words 'public debt of the State', being Entry 43 in the State List sought to be relied on by the State, has to be given a legal and technical meaning and its concept cannot be extended so as to ....
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....or democratic areas. There are other Entries which contain the words which are technical. Still there are Entries which are in the nature of legal phrases. The rainbow-range of the Entries, their subjects and the nature thereof would accommodate interpretation and meaning differently in the context of the very nature of the subject mentioned in the Entry. While the cardinal principle of broad and wide interpretation would generally govern the meaning in the Entries, the extent of enlargement which may be admissible for interpreting an Entry would vary with the Entry itself, the concept inheres, its context and its meaning per se. Where the subject-field in the Entry it technical or legal in nature or contains defining word or words, such cases would be the cases of caution. Such kind of Entries cannot be interpreted or construed for its meaning too wide in a manner as the other Entries general in nature may permit. 8.7 The summing-up principles for interpreting the legislative Entry would be that Entry should normally receive wide interpretation to include all incidental and ancillary matters. However, while enlarging, it should not be robbed off its essence and essential ingred....
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....October, 2015 was filed. Therein, it was stated that (i) the Bill relating to the impugned Act was passed by the State Legislature as a Money Bill on 26th March, 2008 as provided under Article 199 of the Constitution. (ii) Respondent No.2 company SSNNL is a public undertaking specified in Schedule-III to the Gujarat Legislative Assembly Rules, 1960. (iii) The company's accounts are examined under the provisions of Rule 200B by the committee of public undertaking constituted under Rule 200A of the Rules. (iv) As per the tripartite agreement dated 20th August, 1993, SSNNL addressed communication dated 29th December, 2008 to the State Government putting forthwith its demand for making the fund available to meet with the redemption liability. 9.3.1 The affidavit was relied on to submit that the supplementary expenditure to be incurred during the financial year 2008-2009 which was not provided in the Annual Final Statement in that year, was provided by the Supplementary Statement along with other expenditure and the same was tabled before the State Legislature. The said Supplementary Statement of Expenditure for the Year 2008-2009 is at A-II page 120. After debate in the assembly, Ap....
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.... Union of India [(1996) 10 SCC 104]. On the similar lines, it was submitted on the basis of R.C. Tobacco (P) Limited Vs Union of India [(2005) 7 SCC 725] that the Government is free to determine the priorities in the matter of utilization of finances and the Courts cannot place an embargo on the plenary power of Legislature. 9.5 The interpretation of the concept of 'Public Debt of State' canvassed as aforesaid was refuted by learned senior counsel and other learned advocates for the petitioners and it was submitted by relying on the provisions of Government of India Act, 1985, in particular Item V of List II, the Entry in the Federal Legislative List, by explaining the concept of 'Borrowing Power of State' that the phrase 'Public Debt of State' has a special meaning and the subject matter of the impugned legislation does not touch in any way to the said concept. It was submitted that even if it was a case, the charging the amount to the consolidated fund does not automatically bring the subject within the purview of public debt. 9.5.1 It was the submission on behalf of the petitioners that "public debt of the State" is a concept so specially defined. The phrase does not allow....
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....n to be ultra vires. 10.3.1 It is the following reasoning which the Supreme Court supplied to the construction of Entry 53 in List I vis-a-vis Entry 25 in List II so as to construe the scope of the State List Entry vis-a-vis Union List Entry to finally held that State Legislature did not have legislative competency to enact Gujarat Gas (Regulation, Transmission, Supply and Distribution) Act, 2001. "Natural gas being a petroleum product, we are of the view that under Entry 53 List I, the Union Government alone has got legislative competence. Going by the definition of gas as given in Section 2(g) of the Gujarat Act wherein "gas" has been defined as a"a matter of gaseous state which predominantly consists of methane", it would certainly include natural gas also. We are of the view that under Entry 25 List II of the Seventh Schedule, the State would be competent to pass a legislation only in respect of gas and gasworks and having regard to collocation of words "gas and gasworks", this entry would mean any work of industry relating to manufactured gas which is often used for industrial, medical or other similar purposes. Entry 25 of List II, as suggested for the States, wil....
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....tance of the impugned Act. Its provisions may advance so far into Federal territory as to show that its true nature is not concerned with Provincial matters, but the question is not, has it trespassed more or less, but is the trespass, whatever it be, such as to show that the pith and substance of the impugned Act is not moneylending but promissory notes or banking ? Once that question is determined the Act falls on one or the other side of the line and can be seen as valid or invalid according to its true content." 10.5 In Union of India Vs Shah Goverdhan L. Kabra Teachers' College [(2002)8 SCC 228], it was stated, "This rule, however, would not enable the legislature to make a law relating to a matter which has no rational connection with the subject-matter of any entry. The court sometimes is duty-bound to guard against extending the meaning of the words beyond their reasonable connotation in anxiety to preserve the power of the legislature. (emphasise supplied) 10.5.1 In the aforementioned case, the Supreme Court was examining sub Section (4) of Section 17 of National Council for Teachers Education Act, 1993 visà- vis Entry 66 of List I in the Seventh Schedule o....
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....h is to be seen in order to determine its pith and substance and not "the motive which actuates the Legislature" or "the ultimate and desired to be attained"." (emphasis supplied) 10.7 The situation arising in a case where a State Legislature claims to have enacted the law with reference to a subject purportedly deriving the field from an Entry which in actuality is the filed not earmarked for the State Legislature, and the consequences thereof, may be explained with reference to the decision of the Supreme Court in case of E.V. Chinnaiah Vs State of Andhra Pradesh [(2005) 1 SCC 394]. The petitions challenging validity of Andhra Pradesh Schedule Caste (Rationalisation of Reservation) Act, 2000 were dismissed by Five Judge Bench by majority of 4:1 and before the Supreme Court question was agitated for consideration inter alia on the issue whether the State of Andhra Pradesh had legislative competence under Entry 41 List II or Entry 25 of List III. By the said enactment, the Schedule Castes mentioned in the Presidential List prepared under Article 341 of the Constitution, came to be grouped as A,B,C and D, so divided and thereby the 15% reservation for backward classes in the Stat....
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....ference to the provisions, in particular Section 3A of the impugned legislation, the subject of the law does not made indeed traces its subject matter field to the Entry 43 in List II and Entry 20 in List III and having regard to the nature of provisions and their pith and substance, the said Entries could not be said to be the native field for the subject of impugned legislation. 10.9 Reverting to the impugned legislation, its nomenclature and the actual provisions deal with the redemption of Bonds. The power is conferred on SSNNL by the State by enacting law to prematurely redeem the Deep Discount Bonds. Section 3A seeks to substitute and alter the conditions of the original Issue of Bonds with regard to the time of their redemption, the date and the face value. The law in its true character and substance deals with the securities. The State by enacting the said provisions in the impugned Act has legislated to alter the special contract which was created at the time of issuance of Bond. The conditions attached to the Bonds which were listed in various stock exchanges, which provided for procedure for dealing with them, for redemption payment and the tenure were changed and rep....
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....es of invasion into the domain assigned to the other legislature but its pith and substance and its true nature and character to find whether the matter falls within the domain of the enacting legislature. The incidental or ancillary encroachment into forbidden field does not affect the competence of the legislature to make the impugned law." (Para 89) 10.10 In view of the principles governing the interpretation of Entry stated as above, coupled with the substance and true character gatherable from the contents of the provisions of the impugned legislation, it has to be ruled that the said law cannot claim the said legislative field for its competency. "Public Debt of the State" is not the legislative house for the impugned legislation a rendevzous, more particularly when its subject-matter is measured in pith and substance. 10.11 Article 246 uses the expression "with respect to", which brings into play the doctrine of pith and substance in understanding the exertion of the legislative power. Though the words with respect to persuade to interpret an Entry in wide manner, it is observed by the Supreme Court in Ujagar Print Vs Union of India [(1989)3 SCC 488] that even while vi....
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....al law and created a situation of conflict and the co-existence of both the laws is not possible. 11.1 The repugnancy will arise in the situation where the subject matter area is occupied by the legislation validly enacted by the Parliament, and a state legislature seeks to exercise its legislative powers claiming legislative competence from an Entry or Entries from either of the Lists, in respect of matter or matters for which the field is completely occupied. When such a situation is obtained, the state legislature is denuded of its right to legislate in that area, for, such would be a situation where mere existence of the state law, even if the aspect of coexistence with the state law is to be kept aside, results into a situation of disharmony and discordance for the plain reason that the Parliament has legislated completely on the subject matter. The variants of repugnancy, if to be so called, are the necessary corollary of, and the extension of, the salutary principle of federal legislative supremacy envisaged in our Constitution in the scheme of legislative powers. 11.2 On a reading of Article 254, it says that repugnancy arises where any provision of law made by a legi....
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....e question of repugnancy. In Zaverbhai Amaidas v. The State of Bombay (2), this Court laid down a similar test. At page 807, it is stated: "The principle embodied in section 107(2) and Article 254(2) is that when there is legislation covering the same ground both by the centre and by the Province, both of them being competent to enact the same, the law of the Centre should prevail over that of the State." 11.5 In M. Karunanidhi Vs Union of India [(1979) 3 SCC 431], the Supreme Court elaborated the principle thus, "1. Where the provisions of a Central Act and a State Act in the Concurrent List are fully inconsistent and are absolutely irreconcilable, the Central Act will prevail and the State Act will become void in view of the repugnancy. 2. Where however a law passed by the State comes into collision with a law passed by Parliament on an Entry in the Concurrent List, the State Act shall prevail to the extent of the repugnancy and the provisions of the Central Act would become void provided the State Act has been passed in accordance with clause (2) of Article 254. 3. Where a law passed by the State Legislature while being substantially within....
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....sions of the Karnataka Act, held that the said State law was not unconstitutional and was enacted within the legislative area demarcated in the Entry for the State, however in the judgment the Supreme Court after considering the several decisions elucidated the meaning and test of repugnancy. In that case, it was contended that the provisions of Sections 14 and 20 of the Karnataka Act were in direct conflict with the Motor Vehicles Act, 1988, the Central law. The Supreme Court rejected the contention. However the reasoning supplied by it not accepting the contention and holding the Karnataka Act to be within the legislative competence of the State, would help to understand the issues arising in the present case so as to enlighten the considerations on the basis of which a State law can be said to be within a particular Entry, that is the legislative field available to it. In the case before the Supreme Court, the State Legislation, that is, Karnataka Contract Carriages Act had received the assent of the President. 11.7.1 In Vijay Kumar (supra), the Apex Court explained how the repugnancy would arise between the two legislations, "Repugnancy between the two pieces of leg....
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....ld by laying down an exhaustive code in respect thereof displacing the State Act, provision or provisions in that Act. The Act of the Parliament may be either earlier or subsequent to the State law; (iii) Inconsistency may be demonstrated, not necessarily by a detailed comparison of the provisions of the two pieces of law but by their very existence in the statutes; (iv) Occupying the same field; operational incompatibility; irreconcilability or actual collision in their operation in the same territory by the Act /provision or provisions of the Act made by the Parliament and their counter parts in a State law are some of the true tests; (v) Intention of the Parliament to occupy the same field, held by the State legislature may not be expressly stated but may be implied which may be gathered by examination of the relevant provisions of the two pieces of the legislation occupying the same field; (vi) If one Act/ Provision/ Provisions in an Act make lawful that which the other declare unlawful the two to that extent are inconsistent or repugnant. The possibility of obeying both the laws by waiving the beneficial part in either set of the provisions ....
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....dent does not blow life into a void law. Scope and operation of Rule of Pith and Substance and predominant purpose vis a vis Concurrent List." (para 88) 11.8 A Calcutta High Court decision in O.P. Stewart Vs B.K. Roy Chaudhury [AIR 1939 Cal 628] lucidly explained the concept of repugnancy, which decision was referred to with approval by the Supreme Court in Deep Chand (supra). The Calcutta High Court stated thus, "It is sometimes said that two laws cannot be said to be properly repugnant unless there is a direct conflict between them, as when one says "do" and the other "don't", there is no true repugnancy, according to this view, if it is possible to obey both the laws. For reasons which we shall set forth presently, we think that this is too narrow a test: there may well be cases of repugnancy where both laws say "don't" but in different ways. For example, one law may say, "No person shall sell liquor by retail, that is, in quantities of less than five gallons at a time" and another law may say, "No person shall sell liquor by retail, that is, in quantities of less than ten gallons at a time". Here, it is obviously possible to obey both laws, by obeyi....
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....ctory provisions is not, however, the only criterion of repugnancy, for if a competent legislature with a superior efficacy expressly or impliedly evinces by its legislation an intention to cover the whole field, the enactments of the other legislature whether passed before or after would be overborne on the ground of repugnance. Where such is the position, the inconsistency is demonstrated not by a detailed comparison of provisions of the two statutes but by the mere existence of the two pieces of legislation. In the present case, having regard to the terms of s.18(1) it appears clear to us that the intention of Parliament was to cover the entire field and thus to leave no scope for the argument that until rules were framed, there was no inconsistency and no super- session of the State Act." (Para 15) (emphasis supplied) 12.2.1 The facts of the above case may be considered in some detail for understanding the principle. On a lease being granted by State of Orissa under Mines and Minerals (Development and Regulation) Act 1948 (Central Act), Tulloch and Company started working a manganese mine. The State of Orissa passed Orissa Mining Areas Development Fund Act, 1952 under whi....
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.... "The principle deducible from the English cases, as from the Canadian cases seems therefore to be the same as that enunciated by Issacs, J. in the Australian 44 hour case (1926) 37 CLIZ 466 if the dominant law has expressly or impliedly evinced its intention to cover the whole field, then a subordinate law in the same field is repugnant and therefore inoperative. Whether and to what extent in a given case, the dominant law evinces such an intention must necessarily depend on the language of the particular law." (Para 46) 12.2.5 The Apex Court explained, "when repugnancy is alleged between the two statutes, it is necessary to examine whether the two laws occupy the same field, whether the new or the later statute covers the entire subject matter of the old, whether legislature intended to lay down an exhaustive code in respect of the subject matter covered by the earlier law so as to replace it in its entirety and whether the earlier special statute can be construed as remaining in effect as a qualification of or exception to the later general law, since the new statute is enacted knowing fully well the existence the earlier law and yet it has not repealed it expr....
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....ppraem Kuri Co. Ltd. [(2012) 7 SCC 106] which held with reference to Entry 7 in List III, Schedule VII that the Chit Funds Act, 1982 which was a law made by the Parliament under the said Entry intended to cover entire legislative field with regard to conduct of chit funds, etc. therefore the Kerala Chitties Act, 1975 became void and stood pro tanto repealed when the Chit Funds Act, 1982 was made. 12.6 In State of J&K Vs M.S. Farooqi [(1972) 1 SCC 872], the Apex Court stated, "24. We may also refer to the observations of Evatt, J., in Stock Motor Plough Ltd. v. Forsyth [(1932) 48 SCC 128] which were extracted in Tika Ramji case: "It (the test of covering the field) is no more than a cliché of expressing the fact that, by reason of the subject-matter dealt with, and the method of dealing with it, and the nature and multiplicity of the regulations prescribed, the Federal authority has adopted a plan or scheme which will be hindered and obstructed if any additional regulations whatever are prescribed upon the subject by any other authority; if, in other words, the subject is either touched or trenched upon by State authority."" 12.6.1 In the case before t....
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....ept under Article 254(2) of the Constitution. Thus, Section 4(1a) became void for want of assent of the President under Article 254(2)." (Para 58) 12.7 The complete code doctrine which stands highlighted as above, stems from the concept of federal legislative supremacy. In the realm of legislative field demarcated by the Constitution, the Parliament enjoys position of dominance and it is vested with supremacy as far as the field of legislation is concerned. The doctrine recognizes the field for the Union Legislature as a final authority to legislate in respect of such field. If the State law is in respect of the very field or subject matter which is fully occupied by the Central legislation and the operational ambit of such Central legislation evinces and intention of the Parliament to cover the area of the subject matter in its entirety, the State is prohibited to enter into the said legislative field. The emphasis in the occupied field concept is on the "field occupied" and other considerations pale into insignificance once the parliamentary law is found to have been occupied the total field on the subject of legislation concerned. Impugned Law and Central Legislations ....
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....ether. 13.2 In a commentary on Constitution of India by Durga Das Basu, 8th Edition, 2011, the author refers to English decision in R Vs Justice of Middlesex [(1831) 2 B&Ad 891] mentions one of the circumstances as inconsistency operating as an implied repeal of the Act-"If two statues give authority to two public bodies to exercise power which cannot consistently with the object of the Legislature co-exist, the earlier must necessarily be deemed to have been repealed by the later statute." 13.3 In a decision of Apex Court in Union of India Vs C. Dinakar, IPS [(2004)6 SCC 118] it was held that when Parliament passed an enactment prescribing procedure for selection to the post of Director of C.B.I. different from the procedure contained in the Rules of Delhi Police Special Establishment Act, 1946, the Rules stood impliedly repealed especially when they were inconsistent with the provisions of the Act. (ii) SEBI Act vis-a-vis Impugned Law 14. The Securities Contracts (Regulation) Act and the SEBI Act closely interact in their provisions, operations and applicability. The requirements contained in both relating to the securities, etc., are inextricably inter-wooven. 14.....
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....er trading, etc. There are provisions for penalty and adjudication in case of defaults and breach of the regulatory flatters. Section 29 empowers Central Government to make Rules in respect of the matters enumerated whereas Section 30 invests the Board with powers to make Regulations. 14.1.3 Section 30 of the SEBI Act empowers the Board to make Regulations for the matters enumerated, of which what is provided in Clause (c) of sub-section (2) is relevant. Section 30(2)(c) says that the Board may make Regulations in respect of matters relating to issue of capital, transfer of securities and other matters incidental thereto and the manner in which such matters shall be disclosed by the companies under Section 11A. 14.1.4 Section 11A may also be referred which empowers the Board to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities for the purpose of protection of investors. Under Section 11A(1)(a) he Board may specify by Regulations the matters relating to issue of capital, transfer of securities and other matters incidental thereto as well as the manner in which such matter shall be disclosed by the companies. Unde....
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....ies Contracts (Regulation) Act and the SEBI Act is in the very subject-matter area dealt with by the impugned legislation. The impugned law suffers from the vice of irreconcilable operationality vis-a-vis the above parliamentary legislations. Similar would be the position when the impugned legislation is placed against the Companies Act. (iii) Indian Companies Act vis-à-vis Impugned Law 15. Certain provisions of the Companies Act, 1956 may be considered in the context of the impugned legislation and its field. Section 55 of the Companies Act, 1956 enjoins that: "55. A prospectus issued by or on behalf of a company or in relation to an intended company shall be dated, and that date shall, unless the contrary is proved, be taken as the date of publication of the prospectus." 15.1 Section 60, 61 and 117A may also be looked at. "60. Registration of prospectus (1) No prospectus shall be issued buy or on behalf of a company or in relation to an intended company unless, on or before the date of its publication, there has been delivered to the Registrar for registration a copy thereof signed by every person who is named therein as a director or proposed....
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.... except on authority given by, the company in general meeting." 117A. DEBENTURE TRUST DEED (1) A trust deed for securing any issue of debentures shall be in such form and shall be executed within such period as may be prescribed. (2) A copy of the trust deed shall be open to inspection to any member or debenture holder of the company and he shall also be entitled to obtain copies of such trust deed on payment of such sum as may be prescribed. (3) If a copy of the trust deed is not made available for inspection or is not given to any member or debenture holder, the company and every officer of the company who is in a default, shall be punishable, for each offence, with fine which may extend to five hundred rupees for every day during which the offence continues." 15.1.1 Section 62 of the said Act provides for payment of compensation to every person who subscribes for any shares or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included in the prospectus. Similarly, Section 63 of the said Act provides for criminal liability for mis-statements made in the prospectus. Sectio....
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....pugned Act extracted in whole above, it reveals to be providing for alteration and modification of the financial covenants and conditions which govern the issue of Deep Discount Bonds when they were floated by the Nigam. It substituted condition No.3 relating to the redemption of the Bonds by inserting condition No.3A as above. It was provided that notwithstanding anything contained in the original condition No.3 as well as in the terms regarding withdrawal in original condition No.9, the Bonds shall be redeemable at an earlier date with such deemed face value which the company namely SSNNL may determine. The SSNNL was thus empowered to redeem the Bonds earlier to its actual maturity at a deemed face value not less than Rs. 25,000/-as on 11th January, 2005. The SSNNL was enabled to publish the date for the purpose and the deemed face value by giving advertisement in the newspaper - English as well as Vernacular language. Section 3 of the Act bared the jurisdiction of the civil court to entertain any question arising out of any provision of the Act. The filing of civil suit and seeking injunction in respect of any action taken in pursuance of any condition of Bond was disallowed. ....
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....regulations contained in the Securities Contract (Regulation) Act, SEBI Act and the Companies Act, 1956, few of which are referred hereinabove to demonstrate the irreconcilability with the legislation enacted for effecting premature redemption of the Bonds, do prescribe a statutory framework in respect of Issue and trading of the securities. The Agreements which are executed in relation to the subject, are statutory agreements at times. The Prospectus is also viewed as a statutory document. The discordance, the conflict and irreconcilability between the impugned State legislation and the Central laws above may arise in many ways and on several fronts not permitting obedience of provisions of one law without committing breach of the other law. As the Central laws operate pervasive in relation to the subject-matter and occupy the entire field, there is a clear situation of standoff for the impugned law made by the State and it cannot stand constitutionally valid. 16.5 It is crystal-clear on consideration of the various provisions of the Securities Contracts Act, SEBI Act and the Companies Act, there area of operation and the subject matter that deal with, comparing the same with t....
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....e and not the extent of encroachment, which is material to judge whether law made by the State Legislature and the law made by the Parliament can stand together and can be reconciled, which is the real test to judge whether the law of the State Legislature can stand without being voided. 18. The doctrine of occupied field will entail pervasive effect. If the State Legislature has ventured to enact law in relation to the subject matter, the field of which subject matter has already been occupied by the Union legislations, State Legislature would not have legislative competency to legislate in that field. This doctrine apply where the law or laws made by the Parliament in their provisions vis-a-vis provisions of the State Legislature operate in the field of the subject and they evinces intention of the Parliament to control and occupy the field. In that case, legislation made by the State cannot stand. State legislation would be divested from its legislative competency for entering into such occupied field and legislate for its own. This principle is something which displaces forever the right of the State Legislature to legislate in respect of a subject, for which the Central Leg....
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....992, the Indian Companies Act, 1956 as the provisions of these Central legislations govern the matters and aspects sought to be dealt with and provided for by the impugned legislation. The State Legislature cannot claim and does not have the legislative competence to enact the impugned law. If the legislative head is to be traced for the impugned legislation, at the best, the same may be traced in Entry 7 in the Concurrent List for the reason that the impugned legislation and the provisions enacted therein deal with the special kind of contract which would be falling within the said Entry. But then even in this purview the State law fails to co-exist and stands in conflict with the Security Contracts (Regulation) Act. The impugned legislation could be traced for its legislative head at the best, to Entry 7 in List III-the Concurrent List to the Seventh Schedule of the Constitution, as the impugned legislation and the provisions enacted therein deal with the subject-special kind contract falling within that Entry. The impugned legislation, however in its pith and substance is a law in respect of any in connection with the Regulation of Securities and the governing mechanism therefor....
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....n and other governing legal considerations, for an aggrieved party to have a recourse thereto. The additional relief which some of the petitioners have prayed may be considered in that way only. In writ jurisdiction, even after holding the legislation to be constitutionally invalid, we cannot advert to, much less grant the consequential relief. 22.1 Even as regards the claim for consequential relief and availing the remedy of filing of Suit, it is required to be clarified, and we clarify here that a limited class of persons, and not all the Bondholders in rem would be entitled to file civil suit. The law of limitation has to be allowed its play which would bar the civil suit for all those Bond- holders who have either accepted the redemption amount with or without protest and who have not challenged the law in question and have not filed petitions before this Court. Even amongst the petitioners in the present batch of petitions, it is clarified that only those petitioners who are before this Court and who have accepted the redemption amount of the Bonds under protest would be entitled to take such recourse. It is further clarified that those Bond-holders, even though they have f....