1 June 2020


Supreme Court

Chairman Cum Managing Director vs Sri Rabindranath Choubey




Employer has a right to withhold the gratuity during the pendency of the disciplinary proceedings

In the facts of present case, Respondent ¬employee was in service and posted as Chief General Manager. He was served with the charge-sheet. There was very serious allegation of misconduct. The employee was thereafter suspended from service under the Conduct, Discipline & Appeal Rules, 1978 (“CDA Rules”), pending departmental enquiry against him. This suspension however was revoked without prejudice to the departmental enquiry. On completion of 60 years of age, the respondent¬-employee was superannuated. However, at the time of superannuation, the departmental enquiry which was initiated against the employee remained pending. Therefore, the Appellant – employer withheld the gratuity due and payable to the Respondent¬-employee. The Respondent herein submitted an application to the Director (Personnel) for payment of gratuity. The Appellant appeared and stated that the payment of gratuity was withheld due to the reason that the disciplinary proceedings are pending against him. The Controlling Authority held that in that view of the matter, the claim of the Respondent was pre¬mature.

The Respondent¬-employee challenged the order by filing the writ petition. The High Court ruled that, the disciplinary proceedings against the respondent were initiated prior to the age of superannuation. However, the respondent retired from service on superannuation and hence the question of imposing a major penalty of removal from service would not arise. Consequently, direction is given to the Appellant¬-employer to release the amount of gratuity payable to the Respondent-¬employee. Hence, the present appeal.

The short question of law which fell for consideration of present Court is whether is it permissible in law for the Appellant (employer) to withhold the payment of gratuity of the Respondent (employee), even after his superannuation from service, because of the pendency of the disciplinary proceedings against him. Another question raised is whether it is permissible for the disciplinary authority to impose penalty of dismissal after the employee stood retired from service.

Several service benefits would depend upon the outcome of the inquiry, such as concerning the period during which inquiry remained pending. It would be against the public policy to permit an employee to go scot¬-free after collecting various service benefits to which he would not be entitled, and the event of superannuation cannot come to his rescue and would amount to condonation of guilt. Because of the legal fiction provided under the rules, it can be completed in the same manner as if the employee had remained in service after superannuation, and appropriate punishment can be imposed.

Various provisions of the Payment of Gratuity Act, 1972 do not come in the way of departmental inquiry and as provided in Section 4(6) of Act, 1972 and Rule 34.3 in case of dismissal gratuity can be forfeited wholly or partially, and the loss can also be recovered. An inquiry can be continued as provided under the relevant service rules as it is not provided in the Act, 1972 that inquiry shall come to an end as soon as the employee attains the age of superannuation. The Act does not deal with the matter of disciplinary inquiry, it contemplates recovery from or forfeiture of gratuity wholly or partially as per misconduct committed and does not deal with punishments to be imposed and does not supersede the Rules 34.2 and 34.3 of the CDA Rules.

The mandate of Section 4(6) of recovery of loss provided under Section 4(6)(a) and forfeiture of gratuity wholly or partially under Section 4(6)(b) is furthered by the Rules 34.2 and 34.3. If there cannot be any dismissal after superannuation, intendment of the provisions of Section 4(6) would be defeated. In view of provisions of Rules 34.2 and 34.3 of the CDA Rules, the inquiry can be continued given the deeming fiction in the same manner as if the employee had continued in service and appropriate punishment, including that of dismissal can be imposed apart from the forfeiture of the gratuity wholly or partially including the recovery of the pecuniary loss as the case may be.

The Appellant – employer has a right to withhold the gratuity during the pendency of the disciplinary proceedings, and the disciplinary authority has powers to impose the penalty of dismissal/major penalty upon the Respondent even after his attaining the age of superannuation, as the disciplinary proceedings were initiated while the employee was in service.

Under the circumstances, the impugned judgment and order passed by the High Court cannot be sustained and the same is quashed and set aside and the order passed by the Controlling Authority is hereby restored. However, the appellant¬-employer is hereby directed to conclude the disciplinary proceedings at the earliest. The present appeal is accordingly allowed.

Tags : Gratuity Pendency Disciplinary proceedings

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Supreme Court

Guru Nanak Industries, Faridabad and Ors. Vs. Amar Singh (Dead) through L.Rs.




When there are only two partners and one has agreed to retire, the retirement amounts to dissolution of the firm

In present matter, on 29th March 1989, Guru Nanak Industries and Swaran Singh filed a civil suit against Amar Singh claiming that, the latter had retired from partnership with effect from 24th August 1988 and had voluntarily accepted payment of his share capital. In addition, he had been advanced loan from the funds of the partnership firm on the same date. Amar Singh had agreed that, he would not be entitled to profits and liabilities of the firm.

Amar Singh contested the suit and on 29th April 1989, filed a suit for dissolution of partnership and rendition of accounts. The plea and contention of Amar Singh was that he had never resigned. Some disputes had arisen between him and Swaran Singh on 19th August 1988 when he had written a letter to the bankers to stop operation of the bank account. Subsequently, he had written another letter dated 24th August 1988 as a partner, which letter was also signed by Swaran Singh as a partner, stating that the dispute between the partners had been settled and the bank may allow operation of the account. Amar Singh had pleaded that the receipt dated 17th October 1988 is forged and has been manipulated as he had signed and given papers to Swaran Singh.

The trial court dismissed the suit filed by Amar Singh and partly decreed the suit filed by Guru Nanak Industries and Swaran Singh primarily by relying upon letter dated 24th August 1988 and also the receipt dated 17th October 1988 observing that there is discrepancy in the two versions given by Amar Singh, the first version being that his signature on the letter dated 17th October 1988 was forged and the second version being that the receipt had been manipulated by adding the last sentence.

Two appeals preferred by Amar Singh were accepted by the first appellate court observing that, the receipt dated 17th October 1988 was certainly manipulated. Letter dated 24th August 1988 in fact, supported the case of Amar Singh that he had not resigned as the letter was signed by both Amar Singh and Swaran Singh, wherein Amar Singh has been described as a partner. Official records in the Sales Tax Department and Income Tax Department also support the case of Amar Singh that the partnership firm was not dissolved on 24th August 1988. Accordingly, Amar Singh was held to be entitled to the prayer for partition of movable and immovable property wherein 40% belonged to Amar Singh and 60% belonged to Swaran Singh. The accounts would be rendered and settled as on the date of institution of the suit for dissolution of partnership, that is, 29th April 1989. Amar Singh would also be entitled to interest @ 9% per annum.

The primary claim and submission of the Appellants is that Amar Singh had resigned as a partner and, therefore, in terms of Clause (10) of the partnership deed dated 6th May 1981, he would be entitled to only the capital standing in his credit in the books of accounts. However, the argument has to be rejected as in the present case there were only two partners and there is overwhelming evidence on record that Amar Singh had not resigned as a partner. On the other hand, there was mutual understanding and agreement that the partnership firm would be dissolved. This is apparent from even the version put forward by Swaran Singh and deposed to by his son (PW-2). Even the letter dated 5th October 1988 refers to the fact that Amar Singh is to completely withdraw the share and accounts which means that the things were yet to be settled.

There is a clear distinction between 'retirement of a partner' and 'dissolution of a partnership firm'. On retirement of the partner, the reconstituted firm continues and the retiring partner is to be paid his dues in terms of Section 37 of the Partnership Act, 1932. In case of dissolution, accounts have to be settled and distributed as per the mode prescribed in Section 48 of the Partnership Act. When the partners agree to dissolve a partnership, it is a case of dissolution and not retirement. In the present case, there being only two partners, the partnership firm could not have continued to carry on business as the firm. A partnership firm must have at least two partners. When there are only two partners and one has agreed to retire, then the retirement amounts to dissolution of the firm.

Therefore, the judgment and decree passed by the Additional District Judge, Faridabad and sustained by the High Court, except that the date of dissolution of the firm would be taken as 24th August 1988 and not 31st of March 1989 is upheld. Appeal dismissed.

Tags : Firm Dissolution Agreement

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Supreme Court

Ombir Singh vs The State Of Uttar Pradesh




Mere delay in forwarding FIR to Magistrate is not a ground to acquit accused

The Appellant has challenged the judgment by the Allahabad High Court, confirming his conviction under section 302 read with Section 34 of the Indian Penal Code, 1860 (‘IPC’) and Section 27 of the Arms Act, 1959. The Appellant has also challenged the sentence of life imprisonment and fine of Rs. 11,000 imposed by the Trial Court and confirmed by the High Court.

The prime arguments on behalf of the Appellant are that, the alleged eye-witnesses, the original complainant and brother of the deceased who has deposed as PW-1, and (PW-2) are unreliable, and they had been set-up and planted by the prosecution.

It was highlighted that, the First Information Report (‘FIR’), purportedly recorded on the details and information furnished by Dinesh Singh (PW-1), contrary to the mandate of Section 157 of the Code of Criminal Procedure, 1973 (CrPC) was belatedly sent and received by the ilaka magistrate (Chief Judicial Magistrate in this case) after 11 days, and that the FIR was not sent to Doctor (PW-3) along with the inquest papers. There was undoubtedly a delay in compliance of Section 157 of the CrPC, as the FIR was received in the office of the Chief Judicial Magistrate with a delay of 11 days. Delay in compliance of Section 157 of the CrPC cannot, in itself, be a good ground to acquit the appellant.

Further, the fact that the field unit had not recorded the name of the deceased in the proceedings, is inconsequential as these details are duly mentioned in the panchayatnama and other documents which were prepared on the same day and were sent to Doctor (PW-3) who had conducted the post mortem. The lapse on the part of the field unit in non-mentioning the name of the deceased would not justify an order of acquittal.

Further, the acquittal of co-accused by the Trial Court was for the reason that he was supposed to have used tamancha (a local firearm), but the police had not recovered the empty cartridges or the pellets from the spot. Pertinently, the Post Mortem Report also does not refer to any pellet injuries. Thus, co-accused was given a benefit of doubt. The Trial Court, on the basis of the evidence on record, had convicted the Appellant both under section 302 read with Section 34 of IPC and section 27 of the Arms Act, for the murder of deceased. The Appellant is not entitled to the same benefit. There is no merits in the present appeal and the same is dismissed confirming the conviction and sentence of the appellant under Section 302 read with Section 34 of the IPC with Section 27 of the Arms Act.

Tags : Conviction Evidence Credibility

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High Court of Chhattisgarh

Shivshankar Solvent vs Commissioner, Commercial Tax



Sales Tax/VAT

Mandatory pre-deposit is required to be deposited before Tribunal within 30 days for further benefits

Challenge in present appeal is to the order passed by learned Single Judge disposing off the petition granting 30 day's time to the appellant/petitioner for making mandatory deposit before the Tribunal in Second Appeal Case and further directed that upon depositing the said mandatory deposit, aforesaid appeal would stand restored and the Tribunal is directed to decide the appeal on its merit.

Appellant establishment is registered for the VAT. Suo-Moto proceedings were initiated by Commissioner of Commercial Tax. Appellant / Assessee submitted reply to the notice, Commissioner upon considering reply passed order assessing the liability of tax of Rs.35,84,078 upon Appellant. The order was put to challenge before Chhattisgarh Commercial Tax Tribunal. This appeal came to be dismissed for non- enclosing the receipt of deposit of 20% of the demand as envisaged under Section 48(4)(ii) of the Value Added Tax Act, 2006 (VAT Act) vide order.

Order of Tribunal was challenged by the Appellant before this Court. Learned Single Judge disposed off the petition by remitting back the case to Tribunal, granting 30 days' time to the Appellant / Petitioner for making mandatory deposit before the Tribunal and further directed the Tribunal for restoring the appeal and deciding it on merits subject to depositing the mandatory deposit of the amount as envisaged under Section 48(4)(ii) of the VAT Act. Appellant, aggrieved by the above order filed this appeal, mainly, raising the ground that Appellant is not in a position to make pre-deposit in terms of Section 48(4)(ii) of VAT Act and learned Single Judge has not considered submissions made by learned counsel for the appellant appearing therein.

Learned counsel for the Appellant submitted that, due to mishap of fire in the Appellant's factory, Appellant has suffered huge loss. Appellant is finding it extremely hard to meet the requirements of provisions of VAT particularly of the Section 48(4)(ii). He further submits that looking to the facts and circumstances of the case, as also position of appellant, entire amount of pre-deposit i.e. 20% of amount is to be relaxed and the appeal filed before the Tribunal to be considered for hearing on its merit. It is also pointed out that if the appeal filed before the Tribunal is not heard on merit, Appellant will suffer adversely. He also referred the case law pleaded in his appeal.

The Appellant wanted an opportunity to make the default good. The other thing is that, this court while passing orders in tax case has recorded the submission of the learned counsel for the Petitioner that by now somehow they managed to arrange funds to comply the provision of mandatory deposit. In the facts of the case, Appellant will not be permitted to raise the different pleas in different proceedings.

In view of aforementioned discussions, there is no tenable ground calling interference in the impugned order. Appeal is dismissed. However, looking to the facts and circumstances, as well as considering that, if time for depositing mandatory deposit in terms of Section 48(4)(ii) of VAT Act is not extended, Appellant will remain unheard, which will be prejudicial to the interest of the Appellant. Therefore, it is directed that, 30 days' time granted by learned Single Judge will start from the date of passing of this order. It is made clear that, if the Appellant deposits mandatory deposit before the Tribunal within a period of 30 days from passing of this order, then he will be entitled to get benefit of further directions issued by learned Single Judge. Appeal dismissed.

Tags : Pre-deposit Direction Legality

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Allahabad Bank Vs. Poonam Resorts Limited and Ors.




Adjudicating Authority is only required to ascertain existence of default from records of an information utility

The twin appeals preferred by the same 'Financial Creditor' viz 'Allahabad Bank' against two different 'Corporate Debtors' primarily assail the orders passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench. The impugned orders have been assailed on basis that, the Adjudicating Authority has, apart from giving a go by to the provisions of the Insolvency and Bankruptcy Code, 2016 ("I&B Code"), also failed to follow the dictum of law laid down by the Hon'ble Apex Court in "Innoventive Industries Limited v. ICICI Bank and Anr.”.

The question for consideration is whether the Adjudicating Authority was justified in ignoring the time frame prescribed under Section 7 of the 'I&B Code' and embarking upon an enquiry to determine whether the applications filed under Section 7 contained false information, when the matters were at the very threshold stage.

'I&B Code' consolidates and amends the law relating to insolvency resolution of corporate persons in a time bound manner for various objects sought to be achieved by the statute as specified in the preamble. The plain language of sub-section (4) of Section 7 leaves no room for doubt that, the Adjudicating Authority is required to ascertain existence of default from records of an information utility. The Adjudicating Authority can also ascertain the same from other evidence furnished by the 'Financial Creditor'. This has to be done within 14 days of the receipt of application. The 'I&B Code' has specified time frame for conclusion of 'Corporate Insolvency Resolution Process' within 180 days and the extended period prescribed is 270 days. With the latest amendment, provision has been made for inclusion of period of judicial intervention, thereby taking the total extended period upto 330 days. A mere glance at the legal framework governing 'Corporate Insolvency Resolution Process' brings it to the fore that speed is the password and all authorities under the 'I&B Code' have to adhere to the prescribed timelines.

The dictum of law propounded by the Hon'ble Apex Court in "Innoventive Industries Limited v. ICICI Bank and Anr.” is loud and clear. The satisfaction in regard to occurrence of default has to be drawn by the Adjudicating Authority either from the records of the information utility or other evidence provided by the 'Financial Creditor'. The Adjudicating Authority cannot direct a forensic audit and engage in a long drawn pre-admission exercise which will have the effect of defeating the object of the 'I&B Code'. If the 'Financial Creditor' fails to provide evidence as required, the Adjudicating Authority shall be at liberty to take an appropriate decision. If the application is incomplete, it can return the same to the 'Financial Creditor' for rectifying the defect. This has to be done within 7 days of the receipt of notice from the Adjudicating Authority.

However, the 'I&B Code' does not envisage a pre-admission enquiry in regard to proof of default by directing a forensic audit of the accounts of the 'Financial Creditor', 'Corporate Debtor' or any 'financial institution'. Viewed thus, the impugned order cannot be supported. Application under Section 75 of the 'I&B Code' on behalf of the 'Corporate Debtors' cannot be permitted to frustrate the provisions of the 'I&B Code' when the matter is at the stage of admission. Section 75 is a penal provision which postulates an enquiry and recording of finding in respect of culpability of the Applicant regarding commission of an offence. The same cannot be allowed to thwart the initiation of 'Corporate Insolvency Resolution Process' unless in a given case forgery or falsification of documents is patent and prima facie established.

The "common written submissions" filed on behalf of the 'Corporate Debtors' clearly admits liability to the extent of Rs. 44,60,09,790 as regards 'Poonam Resorts Limited' and Rs. 6,52,03,922 as regards 'Link House Industries Limited'. Therefore, it is futile on the part of 'Corporate Debtors' to contend that the applications under Section 7 filed by the 'Financial Creditor' must pass the muster of Section 65 of the 'I&B Code' at the pre-admission stage. The argument raised in this regard is repelled.

The impugned orders suffer from grave legal infirmity and cannot be sustained. The impugned orders in both appeals are set aside and the appeals are allowed. The Adjudicating Authority is directed to address the issue regarding admission of the applications filed by the 'Financial Creditors'. However, before proceeding further, the Adjudicating Authority may provide an opportunity to parties to settle the claims. Both the appeals are allowed.


Innoventive Industries Ltd. vs. ICICI Bank and Ors. MANU/SC/1063/2017

Tags : Application Admission Entitlement

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Hussan Kadri Vs. Edelweiss Asset Reconstruction Co. Ltd. and Ors.




The acknowledgment in the form of letters/OTS/Settlement terms made by 'Corporate Debtor' before expiry of period of limitation results in a fresh period of limitation

The limited question involved in present appeal is whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code") filed by Respondent No. 1-'Edelweiss Asset Reconstruction Company Limited'- ('Financial Creditor') is barred by limitation.

Application filed by the 'Financial Creditor' seeking initiation of 'Corporate Insolvency Resolution Process' in respect of Respondent No. 2 'M/s. K.K. Kadri Paper Mills Pvt. Ltd.' ('Corporate Debtor') for alleged default in discharge of liability in respect of financial debt to the tune of Rs. 44,51,74,964 came to be admitted in terms of the impugned order dated 25th July, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Ahmedabad which is primarily challenged on the ground that the application is barred by limitation.

The 'Corporate Debtor' approached the Bank of Baroda in 2011 to extend credit facilities for promoting its business. The said Bank sanctioned loan in the form of Cash Credit, Letter of Credit and various Term Loan Facilities amounting to Rs. 14.80 Crores to the 'Corporate Debtor' vide Sanction Letter dated 6th January, 2011. The loan was secured by executing various documents by the 'Corporate Debtor'. However, the 'Corporate Debtor' failed to repay the loan amount despite demand by the 'Financial Creditor'.

It is by now well settled that an application under Section 7 of the 'I&B Code' is governed by Article 137 of the Limitation Act, 1963 prescribing three years' time for triggering of the 'Corporate Insolvency Resolution Process' and such period of limitation is to commence from the date the financial debt is declared as NPA.

The effect of Section 18 of the Limitation Act, 1963 is that an acknowledgment of liability in respect of a right made in writing and signed by the debtor before expiration of prescribed period for a suit or an application would result in a fresh period of limitation being computed from the time when acknowledgment was so signed. It is abundantly clear that such acknowledgment of liability must be made by the debtor in writing and signed by him before the expiration of prescribed period of limitation. Interpreting this provision in Hiralal vs. Badkulal, the Hon'ble Apex Court held that, an unqualified acknowledgment of liability by a party not only saves the period of limitation but also gives a cause of action to the Plaintiff to base its claim.

Section 19 of the Limitation Act, 1963 gets attracted if two conditions are satisfied: (a) payment must be made within prescribed period of limitation (b) such payment must be acknowledged either by writing of the person making such payment or signed by him. What extends the period of limitation is the payment made and not the writing but since such writing is construed as a mode of proof of such payment, such acknowledgment becomes relevant.

It further emerges from the record that the proposal for OTS was made by the 'Corporate Debtor' on 26th March, 2014 which is in the nature of first acknowledgment of liability and the period of limitation of three years would commence from such date. This was followed by the 'Corporate Debtor' further admitting its liability and making an offer to pay Rs. 9.5 Crores in settlement to the 'Financial Creditor'. It further emerges from record that in terms of letter/acknowledgment of payment of Rs. 1.5 Crores approximately in terms of OTS by the 'Corporate Debtor' on 9th February, 2017, the limitation period would further commence w.e.f. such date. Acknowledgment has also been made by the 'Corporate Debtor' in its letter dated 19th March, 2018.

It is, therefore, abundantly clear that, the acknowledgment in the form of letters/OTS/Settlement terms has been made by the 'Corporate Debtor' before expiry of period of limitation. The sequence of events is clearly demonstrated by the documents forming a chain of events and the application under Section 7 having been filed on 16th August, 2018 by the 'Financial Creditor' is clearly within the period of limitation.

Admittedly, application under Section 7 of the 'I&B Code' has been filed within three years of the last part payment of Rs. 1.5 Crore effected on 9th February, 2017. This factual position emerging from documentary evidence on record stares in the face of the Appellant who has preferred the appeal without substantial grounds. Appeal dismissed.

Tags : Debt Application Maintainability

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