18 November 2019


Supreme Court

Taj Mahal Hotel v. United India Insurance Company Ltd. & Ors.

MANU/SC/1566/ 2019



In a case of theft of a vehicle given for valet parking, hotel cannot claim exemption from liability on basis that they are protected by an ‘owner’s risk’ clause

In the facts of present case, on the night of 1st August, 1998, Respondent No. 2 herein (Complainant No. 2) visited the Appellant-hotel in his Maruti Zen car. While the car was insured with Respondent No. 1 herein (Complainant No. 1), the Appellant-hotel had taken a non-industrial risk insurance/liability policy from Respondent No. 3. Upon reaching the hotel, Respondent No. 2 handed over his car and its keys to the hotel valet for parking, and then went inside the hotel.

When Respondent No. 2 came out of the hotel at about 1 a.m., he was informed that, his vehicle had been driven away by another person. A complaint was lodged with the police, but the car remained untraced. Respondent No. 1 (car insurer) settled the insurance claim raised by Respondent No. 2 (car owner) in respect of the stolen car for Rs. 2,80,000. Thereafter, Respondent No. 2 executed a Power of Attorney (‘POA’) and a letter of subrogation in favour of Respondent No. 1. They both then approached the State Commission by filing a complaint against the Appellant-Hotel seeking payment of the value of the car and compensation for deficiency in service. Relying upon present Court’s decision in Oberoi Forwarding Agency v. New India Assurance Company Limited, the State Commission dismissed the complaint on the ground that, an insurance company acting as a subrogee cannot qualify as a ‘consumer’. Hence, Respondent No. 1 filed an appeal before the National Commission.

Notably, Oberoi was partly overruled by a subsequent decision of a Constitution Bench of this Court in Transport Organisation v. Charan Spinning Mills (Pvt.) Ltd. 2 In light of change in law, National Commission in appeal remanded the complaint back to the State Commission, observing that Respondent No. 1 (car insurer) had locus standi to file the complaint.

The State Commission allowed the complaint and directed the Appellant-hotel to pay Respondent No. 1 a sum of Rs. 2,80,000 (the value of the car) with interest at 12% per annum and Rs. 50,000 as litigation costs. In addition to this, it directed payment of Rs. 1,00,000 to Respondent No. 2 for inconvenience and harassment faced by him. The State Commission also held that Respondent No. 3 (insurer of the hotel) would not be liable to indemnify the loss caused to the Appellant-hotel, as the theft of the car had not been notified to it within due time.

Relying on various decisions by foreign Courts on strict liability for property kept infra hospitium, the National Commission held that, the liability of a hotel cannot be precluded by a printed notice on the parking tag disclaiming liability. Consequently, the appeal against the order of the State Commission was dismissed, although the interest awarded was modified from 12% per annum to 9% per annum. Hence, the present appeal.

In a case of theft of a vehicle given for valet parking, the hotel cannot claim exemption from liability by arguing it was due to acts of third parties beyond their control, or that they are protected by an ‘owner’s risk’ clause, prior to fulfilling its burden as required under Section 151 and 152 of Contract Act, 1872. It is by now well established, that while a case of a robbery by force is visibly beyond a bailee’s control, in cases of private stealth, or simple theft where no force or violence is involved, the bailee still has the prima facie burden of explaining that the loss or disappearance of the goods in his custody is not attributable to his neglect or want of care.

In the instant case, given finding that the theft of the car of Respondent No. 2 was a result of the negligence of the Appellant-hotel, the exemption clause on the parking tag will not exclude the Appellant’s liability. Hence, the argument of the Appellant-hotel on this count fails.

The hotel-owner cannot contract out of liability for its negligence or that of its servants in respect of a vehicle of its guest in any circumstance. Once possession of the vehicle is handed to the hotel staff or valet, there is an implied contractual obligation to return the vehicle in a safe condition upon the direction of the owner.

Even where there is a general or specific exemption clause, there remains a prima facie burden of proof on the hotel to explain that any loss or damage caused to the vehicles parked was not on account of its negligence or want of care per Sections 151 and 152 of the Contract Act. It is only after this burden of proof is discharged that, the exemption clause can come into force. The burden of proving that such loss or damage was covered by the exemption clause will also be on the hotel.

The consumer complaint in consideration is maintainable as it was filed by the insurer as a subrogee, along with the original owner as a co-complainant. Further, strict liability cannot be imposed on hotel owners in respect of loss of or damage to 54 vehicles of their guests. Instead, the rule of prima facie negligence should be adopted. Applying this rule to the present case, it is clear that the Appellant has not explained why its failure to return the vehicle to Respondent No. 2 was not on account of fault or negligence on its part. Thus, liability should be affixed on the Appellant-hotel due to want of the requisite care towards the car bailed to it. The instant appeal is dismissed accordingly.

Tags : Theft Liability Exemption

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Supreme Court

Lilavati Kirtilal Mehta Medical Trust V. M/S Unique Shanti Developers & Ors.




Provision of hostel facilities to nurses so as to facilitate better medical care is a positive duty enjoined upon hospital and cannot be linked to any commercial activity

In present matter, the Appellant’s case is that Respondent No. 1/Opposite Party No. 1 had developed two buildings ‘Madhuvan’ with thirty two ‘1 BHK’ flats in colony ‘Shanti Park’ in Thane, Maharashtra. Out of these the Appellant/complainant trust took possession of 29 flats for provision of hostel facilities to nurses employed by Lilavati Hospital, which is run by the Appellant trust. 29 agreements to sell were executed in respect of each flat, which were registered and entire consideration amount was paid for the same. The architect issued completion certificate in respect of the flats. The flats were used for the purpose of hostel facilities till 2002. However, within 2-3 years of completion of the project, because of alleged poor building quality, the structure became dilapidated.

The Appellant vacated the flats in 2002 and since 2004, the flats are lying unused. In the meanwhile, an interim Board of Trustees was constituted by this Court by order, which is a separate litigation concerning dispute over control of the appellant trust between different groups of trustees. The aforesaid interim Board of Trustees called for a structural report from Raje Consultants, which submitted their report finding that the cost of repairs would be more than the cost of reconstruction. The Appellant also claims that Respondent No. 1 obtained the occupation certificate for the flats by playing fraud upon the local municipal corporation.

The National Commission dismissed the complaint, on the ground that, the Appellant trust was not a ‘consumer’ within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986 as the aforesaid section excludes a person who obtains goods and services for a ‘commercial purpose’. Since providing hostel facility to the nurses is directly connected to the commercial purpose of running the hospital, and is consideration for the work done by them in the hospital, the Appellant would not be a ‘consumer’ under the 1986 Act. Hence, present appeal.

The question of whether a transaction is for a commercial purpose would depend upon the facts and circumstances of each case. However, ordinarily, ‘commercial purpose’ is understood to include manufacturing/industrial activity or business-to-business transactions between commercial entities. (ii) The purchase of the good or service should have a close and direct nexus with a profit-generating activity. (iii) The identity of the person making the purchase or the value of the transaction is not conclusive to the question of whether it is for a commercial purpose. It has to be seen whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the purchaser and/or their beneficiary. (iv) If it is found that the dominant purpose behind purchasing the good or service was for the personal use and consumption of the purchaser and/or their beneficiary, or is otherwise not linked to any commercial activity, the question of whether such a purchase was for the purpose of ‘generating livelihood by means of self-employment’ need not be looked into.

Applying these principles to the facts of the present case, there is no direct nexus between the purchase of flats by the Appellant trust and its profit generating activities. The flats were not occupied for undertaking any medical/diagnostic facilities within the hospital but for accommodating the nurses employed by the hospital. Moreover, the flats were being provided to the nurses without any rent. It is not the Respondents’ case that the Appellant was generating any surplus from occupying the flats or engaging in buying and selling of flats. It may be the case that provision of comfortable hostel facilities to the nurses, generates a feeling of gratitude and loyalty towards their employer and improves their overall efficiency, which indirectly results in the hospital gaining more repute and therefore generating more income. However, this is a matter of conjecture and there is no direct causal chain which can be drawn between provision of accommodation to hospital employees and increase in the Appellant’s profits.

Further, it cannot be said that the provision of such hostel facilities is integral to the Appellant trust’s commercial activities. The paramount object of providing such facilities is to cater to the needs of nurses and combat the challenges faced by those who lack permanent accommodation in the city, so as to recompense the nurses for the pivotal role which they play as co-ordinators and custodians of patients’ care. Hence, the provision of hostel facilities to nurses so as to facilitate better medical care is a positive duty enjoined upon the hospital so as to maintain the beneficial effects of the curative care efforts undertaken by it. Such a duty exists irrespective of the surplus or turnover generated by the hospital, and hence is not even remotely related to the object of earning profits or for any commercial use as envisaged under Section 2(1)(d) of the 1986 Act.

Hence, the Appellant trust is a ‘consumer’ under Section 2(1)(d) of the 1986 Act for the present transaction under consideration. The matter remanded to the National Commission for consideration in accordance with law. The appeal is allowed.

Tags : Complaint Maintainability Transaction Nature

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Supreme Court





Writ petition should normally not be entertained against mere issuance of show cause notice

Present Appeal under Section 35L of the Central Excise Act, 1944 arises out of Order passed by the Customs, Excise and Service Tax Appellate Tribunal, Kolkata (‘the Tribunal’) dismissing Appeal preferred by the Appellant herein. A search was conducted at the registered office as well as the factory premises of the Respondent herein by the officers of the Central Excise Commissionerate on the basis that, the Respondent manufactured Foots Oil, Pressed Wax, Pressed Paraffin Wax without observing the mandatory procedure and clearing Excise Duty. Soon thereafter, Writ Petition was filed by the Respondent before the High Court submitting that, the Assistant Commissioner of Central Excise had no authority to proceed in the matter as no manufacturing activity was undertaken by the Respondent.

A Show Cause Notice was issued by the office of the Commissioner of Central Excise, which stated that in terms of the aforesaid directions of the High Court, the Assistant Commissioner of Central Excise had considered the preliminary objection and decided to proceed in the matter. Manufacturing activity was being undertaken by the Respondent without following due procedure and without paying any Excise Duty.

The Respondent again approached the High Court by filing Writ Petition. Without filing any reply to the Show Cause Notice and, adopting the course in tune with the observations of the High Court in its Order, the Respondent chose to file Appeal before the Commissioner of Central Excise (Appeals-I) challenging the Internal Order. It was submitted that no manufacturing process was being undertaken by the Respondent. An objection was taken on behalf of the Appellant that the Appeal was completely premature as the matter was not yet gone into; no reply to the Show Cause Notice was filed by the Respondent and there was, as a matter of fact, no adjudication by the concerned authority. The objections were rejected by the Appellate Authority observing that an appeal could lie against any order passed under the Act by a Central Excise Officer lower in rank to the Commissioner. The appeal was thus allowed by the Appellate Authority vide order The Appellant, being aggrieved, filed Appeal before the Tribunal, which came to be dismissed by order.

The scheme of Section 11A of Act, does not contemplate that before issuance of any show cause notice, there must, prima facie, be: (a) a preliminary determination that the process or activity undertaken in the matter amounts to manufacture; and (b) before arriving at such preliminary determination, any hearing to the concerned person is contemplated. In other words, there is no segregation of the matter at different stages and all the possible contours of the matter including whether the process in question amounts to manufacture or not are to be gone into while considering the response to the show cause notice itself. It is only after considering all the relevant aspects of the matter that the final determination under sub-section 10 of Section 11A of the Act is to be arrived at.

It must be noted that while issuing a show cause notice under Section 11A of the Act, what is entertained by the Department is only a prima facie view, on the basis of which the show cause notice is issued. The determination comes only after a response or representation is preferred by the person to whom the show cause notice is addressed. As a part of his response, the concerned person may present his view point on all possible issues and only thereafter the determination or decision is arrived at. In the present case even before the response could be made by the respondent and the determination could be arrived at, the matter was carried in appeal against said Internal Order. The appellant was therefore, justified in submitting that the appeal itself was pre-mature.

It has been laid down by this Court that the excise law is a complete code in itself and it would normally not be appropriate for a Writ Court to entertain a petition under Article 226 of the Constitution and that the concerned person must first raise all the objections before the authority who had issued a show cause notice. It is thus well settled that writ petition should normally not be entertained against mere issuance of show cause notice. In the present case no show cause notice was even issued when the High Court had initially entertained the petition and directed the Department to prima facie consider whether there was material to proceed with the matter.

In the present case, there was no assessment and computation of any duty element. The matter had not gone beyond the Show Cause Notice. The questions in the matter pertained to the correctness of the view whether there was any adjudication in the matter and whether the appeal at the instance of the Respondent was maintainable. It is directed that, the proceedings pursuant to show cause notice be taken to logical conclusion. Appeal allowed.

Tags : Show Cause Notice Adjudication Maintainability

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High Court of Chhattisgarh

Abhishek Pandey Vs. State of Chhattisgarh and Ors.




Rules are constitutionally valid as framed with an object to curb filing of frivolous public interest litigations or petitions with oblique motive at initial stage itself

The Petitioner, who is a practising Advocate of present Court has filed present writ petition under the head of 'Public Interest Litigation'. The case of the Petitioner is that, public interest litigations are being filed by way of letter petitions and also by filing a writ petition, but for filing of a writ petition in the nature of public interest litigation, there is a requirement under Rule 81 of the High Court of Chhattisgarh Rules, 2007 ('Rules of 2007',) for depositing an amount of Rs. 5,000 towards security at the time of filing of the writ petition. Making it mandatory for the Petitioner filing public interest litigation for deposit of Rs. 5,000 is arbitrary because many of the public interest litigations could not see the doors of the Court only on account of heavy burden of security deposit of an amount of Rs. 5,000 as precondition for filing of the public interest litigation.

According to verdicts of Hon'ble Supreme Court, it is apparent that the attractive brand name of public interest litigation should not be used for suspicious products of mischief. It should be aimed at redressal of genuine public wrong or public injury and not publicity oriented or founded on personal vendetta. The Court must not allow its process to be abused for oblique considerations by masked phantoms who monitor at time from behind. Some persons with vested interest indulge in the pastime of meddling with judicial process either by force of habit or for as well as to enrich themselves. Often, they are actuated by a desire to win notoriety or cheap popularity. Now a days, many of the Petitioners filed public interest litigations pending to note pro bono publico, though they have no interest of the public or even of their own to protect. As held by Hon'ble Supreme Court that, frivolous petitions are to be filtered out and heavy cost to be imposed on such kind of public interest litigations.

Rule 81 of the Rules of 2007 has inbuilt mechanism for seeking an exemption of depositing security amount of Rs. 5,000 by filing an appropriate application along with the Writ Petition (PIL). It is not that the genuine public interest litigation cannot be considered or heard by the Court without depositing of the security amount of Rs. 5,000. This Court has continuously waived/exempted the requirement of depositing of Rs. 5,000 as security deposit in the petitions which raises the issue of public importance and litigations for public at large, who belongs to deprived and vulnerable sections of society and to assure them social and economic justice.

Framing of Rule 81 of the Rules of 2007 has been incorporated with an object to curb the filing of frivolous public interest litigations or petitions with oblique motive at the initial stage itself. There is no violation of any fundamental rights of the citizen as this Court is entertaining all the genuine public interest litigations by passing appropriate orders for exemption and waiver of depositing the security amount.

Non-framing of rules for depositing security amount by other High Courts itself will not make Rule 81 of the Rules of 2007 to be violative to Article 14 of the Constitution of India or fundamental rights. Though the chart prepared by learned counsel for the Petitioner showing number of public interest litigations filed in past years itself shows that filing of public interest litigation has gradually increased even after coming into force of Rule 81 of the Rules of 2007, which came into effect from December, 2007. The validity of rules cannot be tested on the ground of filing of number of petitions only as tried to be projected by the Petitioner. There may be several reasons for showing graph of public interest litigations up or down.

Whenever a public interest litigation is filed espousing a genuine cause or espousing the cause of the poor or downtrodden an application for exemption, this Court has been routinely exempting the Petitioners from giving a security deposit. Rule 81 has been incorporated under the Rules of 2007 with a purpose and object to be achieved that is to deter the Petitioners from filing the frivolous public interest litigation so as to save precious time of the Court, which can be utilised for deciding the genuine litigation. Rule 81 of the Rules of 2007 is not causing hindrance in any manner for the citizens/organisations of pro bono publico to approach this Court to knock the doors of justice for citizens incapable of seeking legal redressal. There is no violation of Article 14 of the Constitution of India or any of the fundamental rights enshrined under the Constitution of India. Petition dismissed.

Tags : Fees Deposit Requirement Legality

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High Court of Meghalaya

Dilip Kumar Singhania Vs. Basant Kumar Singhania




Exercise of powers under Article 227 of Constitution is not affected in any manner by presence of alternate remedy but the power is to be exercised sparingly

The brief facts as noted, is that the Petitioner herein had filed a suit for permanent injunction against the Respondent in claiming right title and interest over a passage in which fell in the portion of land allotted to the Petitioner under a Family Settlement dated 8th April, 1969, and also for restraining the Respondent from using the passage as an approach to the hotel of the Respondent, namely 'Hotel Nataraj' which had a separate independent entry from the Quinton Road side. An application for interim injunction was also filed therein and the trial court by order passed an order of ad interim injunction.

The Petitioner thereafter filed an application under Section 10 of the Code of Civil Procedure, 1908 (CPC) for stay of the suit of the Respondent pending in the Court of the Assistant District Judge, on the ground that a subject matter of both the suits were the same and also that any decision in one suit would operate as res-judicata in the other suit. Learned Court of the Assistant District Judge, however, by order dismissed the said application. The Petitioner being aggrieved is before this court by way of this application under Article 227 of the Constitution of India, 1950.

It is submitted that, Section 115 CPC after its amendment with effect from 1st July, 2002, under the proviso to sub-section 1 of Section 115 of CPC has provided that, the High Court shall not vary or reverse any order made, or any order deciding an issue, in the course of a suit or other proceeding, except where the order, if it had been made in favour of the party applying for revision, would have finally disposed of the suit or other proceeding. She submits that, there is no bar against challenging the impugned order under Article 227 of the Constitution of India, as, no regular revision under Section 115 CPC would lie against the said order dated 4th November, 2016, as it is only an interim order passed during the course of the suit and not a final order. The issue that necessarily needs consideration is whether the instant petition is maintainable under Article 227 of the Constitution of India.

The impugned order is an order revisable under Section 115 of CPC and as such, there was no necessity to take the recourse to Article 227 of the Constitution of India. Further, it is not a case where exercise of jurisdiction by this Court under Article 227 is warranted to keep the subordinate courts within the bounds of their jurisdiction or that the subordinate courts have exercised their powers in a manner not permitted by law or have caused grave injustice. Though, exercise of powers under Article 227 is no doubt wider than the power conferred under Section 115 of CPC and is not affected in any manner by the presence of alternate remedy, this power is to be exercised sparingly according to the facts and circumstances of the case at hand.

The exercise of jurisdiction under Article 227 being a matter concerning discipline and prudence, the instant case thus being not maintainable under Article 227 of the Constitution of India is therefore dismissed. There is no further necessity to dwell on the other grounds, merits and contentions that has been raised in the petition. Revision application dismissed.

Tags : Jurisdiction Application Maintainability

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Customs, Excise and Service Tax Appellate Tribunal

Skylark Hi-Tech Solution Pvt. Ltd. Vs. The Commissioner, Service Tax Commissionerate



Service Tax

A decision on debatable point of law or fact cannot be corrected by way of rectification

Present order disposes of an application praying for rectification of mistake in final order. Learned Counsel for the applicant has submitted that, present Tribunal in the impugned final order had erred in not dealing with contentions of the Appellant as were made against impugned order-in-original.

It is submitted on behalf of the department that the impugned appeal has been allowed by way of remand. The demand of Service Tax has been confirmed on principle, however, quantification thereof has been given to the adjudicating authority below for denovo adjudication. Thus, all the grounds as raised by the appellant are not the subject matter of rectification of mistake. All contentions have duly been considered by this Tribunal in the said final order.

The show-cause notice proposing the impugned demand was served upon the Appellant observing that, the Appellant having a number of companies under its aegis and being run by Capt. T.C. Rao was availing payment of Service Tax by suppressing the full taxable amount collected from various clients who were receiving the services as that the security agency and manpower supply services from the appellant. The impugned final order after relying upon the decision in the case of Rajasthan Ex-servicemen Ltd. Vs. CCE, Jaipur, which has also been confirmed by the Hon'ble Rajasthan High Court has set aside the contention about show-cause notice being vague and arbitrary. The contention about show-cause notice being barred by time has also been duly considered. Finally, the contention that the demand on gross turnover of all the services provided by the appellant without bifurcation thereof has also been, specifically, dealt with as the matter has been remanded back for the quantification of the demand on the basis of financial year-wise receipt service tax value. The adjudicating authority is also directed to examine the balance-sheet and other statements.

Para-13 of the impugned final order which, in fact, has been quoted in the impugned application is itself sufficient to reflect that, all the contentions as were raised by the Appellant have duly been dealt with in the said final order. As far as the arbitrary/vagueness of a show-cause notice is concerned, the same is held to be correct in principle. The decision cannot be re-opened under the guise of rectification of mistake.

In M/s. SRF Ltd. Vs. Commissioner of Central Excise, Chennai, clarifies that a decision on debatable point of law or fact cannot be corrected by way of rectification. Otherwise also the impugned final order has remanded the matter to the adjudicating authority below for quantification of the demand. In view of the entire above discussion, there seems no error which is apparent of its record in the impugned final order. Application dismissed.


Rajasthan Ex-Servicemen Ltd. vs. Commissioner of Central Excise, Jaipur MANU/CE/0136/2017

Tags : Final order Rectification Entitlement

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