Supreme Court

Haryana Space Application Centre (HARSAC) & Anr. Vs. M/s Pan India Consultants Pvt. Ltd.

MANU/SC/0033/2021

20.01.2021

Arbitration

Section 12(5) r/w Seventh Schedule of Arbitration & Conciliation Act, 1996, which deals with ineligibility of a person to be appointed as Arbitrator, is mandatory and non-derogable provision

The Appellant No. 1 / HARSAC, Department of Science and Technology, Government of Haryana is the nodal agency for Geographic Information System (“GIS”) Application and Remote Sensing for the Government of Haryana. HARSAC invited Request for Proposal in September 2010 from qualified vendors for the modernisation of Land Record (including digitisation of cadastral Maps, Integration with records and management of old revenue documents). HARSAC vide Letter dated 28th February, 2011 awarded the contract to the Respondent – Pan India Consultants Pvt. Ltd, and three other vendors for works specified in the allotment letter.

As per HARSAC, the Respondent failed to complete the work assigned within the period specified iand was delaying the entire project. Even though two extensions were granted, the Respondent failed to complete the work. This led to the invocation of the Performance Bank Guarantee by HARSAC vide letter dated 18th March, 2014.

The Appellant herein filed Civil Revision Petition under Article 227 of the Constitution of India, 1950 before the High Court for setting aside the Order passed by the Additional District Judge, whereby an extension of time had been granted for passing the Award. It was submitted that, the extension of time had been mutually agreed by both parties upto 15th August, 2018. However, the tribunal failed to pronounce the Award even within this extended period, and did not show any inclination of doing so even on 7th January, 2019, when the letter terminating the mandate of the tribunal was sent. The tribunal failed to pronounce the Award in a period of over 28 months from the date of constitution of the tribunal.

The learned Single Judge of the High Court passed an Interim Order dated 31st July, 2020 wherein it was observed that since the period of 3 months granted by the District Court had already elapsed, both parties were directed to obtain instructions for grant of a period of 3 months on account of the prevailing Pandemic. The High Court, in light of the Pandemic, granted an extension of 4 months to enable the parties to conclude their arguments within 3 months, and a period of 1 month for the tribunal to pass the Award. Aggrieved by the said Order, HARSAC has filed the present Special Leave Petition.

The appointment of the Principal Secretary, Government of Haryana as the nominee arbitrator of HARSAC which is a Nodal Agency of the Government of Haryana, would be invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Seventh Schedule. Section 12(5) of the Arbitration Act, 1996 (as amended by the 2015 Amendment Act) provides that, notwithstanding any prior agreement to the contrary, any person whose relationship with the parties, or counsel, falls within any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator.

Section 12(5) read with the Seventh Schedule is a mandatory and non- derogable provision of the Act. In the facts of the present case, the Principal Secretary to the Government of Haryana would be ineligible to be appointed as an arbitrator, since he would have a controlling influence on the Appellant Company being a nodal agency of the State.

The Counsel for both parties during the course of hearing has consented to the substitution of the existing tribunal, by the appointment of a Sole Arbitrator to complete the arbitral proceedings. In exercise of power under Section 29A(6) of the Arbitration and Conciliation Act, 1996 (as amended), present Court appoints Justice Kurian Joseph (Retd.), former judge of this Court, as the substitute arbitrator. The matter is disposed of.

Tags : Arbitrator Eligibility Provision

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Supreme Court

Rama Narang vs. Ramesh Narang

MANU/SC/0025/2021

19.01.2021

Contempt of Court

In a contempt proceeding before a contemnor is held guilty and punished, Court has to record a finding, that disobedience was wilful and intentional

The present contempt petition arises out of an unfortunate family dispute between a father on one hand and his two sons from his first wife on the other hand. A preliminary objection was taken regarding the maintainability of the contempt petition. According to the Respondents, in the absence of any undertaking given to the Court, present Court could not exercise its jurisdiction on mere violation of the terms of the Consent Order. It is the main contention of the Petitioner that invoking the jurisdiction of the CLB and entertaining the said proceedings by the CLB, itself amounts to contempt.

Merely taking recourse to the statutory remedy available to the Respondents would not amount to contempt. Before punishing the contemnor for non-compliance of the decision of the Court, the Court must not only be satisfied about the disobedience of any judgment, decree, direction, writ or other process but should also be satisfied that, such disobedience was wilful and intentional. In a contempt proceeding before a contemnor is held guilty and punished, the Court has to record a finding, that such disobedience was wilful and intentional. The contempt proceedings are quasi-criminal in nature and the standard of proof required is in the same manner as in the other criminal cases. The alleged contemnor is entitled to the protection of all safeguards/rights which are provided in the criminal jurisprudence, including the benefit of doubt. There must be a clear-cut case of obstruction of administration of justice by a party intentionally, to bring the matter within the ambit of the said provision. In the case of Debabrata Bandopadbyay and Ors. v. State of West Bengal and Anr., it was observed, that punishment under the law of contempt is called, for when the lapse is deliberate and in disregard of one's duty and in defiance of authority.

In the present case, the Petitioner has failed to make out a case of wilful, deliberate and intentional disobedience of any of the directions given by this Court or acting in breach of an undertaking given to this Court. On the contrary, the Respondents had taken recourse to the legal remedy available to them under the statutory provisions.

Any order passed by the CLB was appellable before the higher forums. Undisputedly, the Petitioner has not challenged the said order. Having not challenged the same, it is not open for the Petitioner to argue, that since the Petitioner has taken objection as to maintainability of the proceedings before CLB, the said orders are without jurisdiction and the initiation of the proceedings and the orders passed thereon, would amount to respondent’s committing contempt of this Court. The argument needs to be rejected, in view of the judgment of this Court in the case of Tayabbhai M. Bagasarwalla. This Court in unequivocal terms has held, that even if the objection is raised to the jurisdiction of a forum, it has jurisdiction to pass interim orders till it finally decides the issue of jurisdiction and such orders are binding on the parties till the issue of jurisdiction is decided.

As could be seen from the order of the CLB dated 10th April 2008, though the CLB by referring to Sections 397, 398 and 399 of the Companies Act, prima facie, has observed, that only if maintainability is challenged either in terms of Section 399 of the Companies Act or on the ground of jurisdiction of the Board, the same will have to be considered first and challenges on other grounds, had to be considered along with the merits of the case. The CLB has further observed, that it was an admitted fact, that the Petitioner qualifies under Section 399 of the Act and the Court has the jurisdiction to deal with the petition under Section 397 or/and 398 of the Act. Having chosen not to challenge the aforesaid observations of the CLB, the argument advanced deserves no merit and needs to be rejected. However, it should not be construed, that, present Court have held that, the proceedings under the CLB were maintainable in law. Since the proceedings are pending final adjudication, the parties would be at liberty to raise all issues available to them including the issue of jurisdiction. The present contempt petition is without any merit and deserves to be dismissed, and is accordingly dismissed.

Tags : Court Order Disobedience Non-compliance

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Supreme Court

Lakhvir Singh Etc. vs The State Of Punjab

MANU/SC/0026/2021

19.01.2021

Criminal

Benefit of probation under Probation of Offenders Act, 1958 is not excluded by the provisions of the mandatory minimum sentence prescribed for offences under IPC

The Appellants were youngsters aged 20 and 19 years, when they fell foul of the law. In pursuance to the reporting of the crime by complainant, an FIR was registered under Section 382 and Section 307 read with Section 34 of Indian Penal Code, 1860 (IPC). Knife and dagger were recovered alongwith the taxi and the trial Court framed charges under Section 397 of IPC. Post trial, the Appellants was convicted by the trial Court vide judgment and sentenced to undergo Rigorous Imprisonment of 7 years each. The appeal preferred by the Appellants has been dismissed by the impugned judgment.

The Appellants approached this Court by a special leave petition. The compromise deed arrived at between the complainant and the appellants, in terms whereof the complainant has stated that, he did not want to pursue any action against the Appellants and has no objection to their release on bail or acquittal. The Appellants have already served about 50% of their sentence while in custody. Counsel for Respondent no.2 confirmed that, the dispute had been amicably resolved. However, counsel for Respondent no.1 submitted that the minimum sentence provided by the statute under Section 397 is 7 years and the same cannot be reduced below that period. Learned counsel for the Appellants sought benefit under the Probation of Offenders Act, 1958.

Section 6 of the Act provides that, a Court “must not” sentence a person under the age of 21 years to imprisonment unless sufficient reasons for the same are recorded, based on due consideration of the probation officer’s report. The relevant aspects while giving benefit under Section 6 of the Act are: the nature of offence, the character of the offender, and the surrounding circumstances as recorded in the probation officer’s report.

A more nuanced interpretation on this aspect was given in CCE vs. Bahubali. It was opined that, the Act may not apply in cases where a specific law enacted after 1958 prescribes a mandatory minimum sentence, and the law contains a non-obstante clause. Thus, the benefits of the Act did not apply in case of mandatory minimum sentences prescribed by special legislation enacted after the Act. It is in this context, it was observed in State of Madhya Pradesh vs. Vikram Das that, the Court cannot award a sentence less than the mandatory sentence prescribed by the statute.

The benefit of probation under the said Act is not excluded by the provisions of the mandatory minimum sentence under Section 397 of IPC, the offence in the present case. The facts of the present case are that, the Appellants have not served out the minimum sentence of 7 years though they have served about half the sentences. They were aged under 19 and 21 years of age as on the date of offence but not on the date of sentence. The redeeming feature in their case is that, the person who suffered, appears to have forgiven them, possibly with the passage of time. There is no adverse report against them about their conduct in jail otherwise the same would have been brought to our notice by learned counsel for the State. Present is a fit case that the benefit of probation can be extended to the Appellants under the said act in view of the provisions of Section 4 of the said Act on completion of half the sentence.

Present Court thus, release the Appellants on probation of good conduct under Section 4 of the said Act on their completion of half the sentence and on their entering into a bond with two sureties each to ensure that they maintain peace and good behaviour for the remaining part of their sentence, failing which they can be called upon to serve that part of the sentence. The appeals are disposed of.

Tags : Probation Benefit Entitlement

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High Court of Delhi

Siemens Healthcare Private Limited & Anr vs. Directorate General of Health Services, Central Procurement Agency & Ors.

MANU/DE/0097/2021

19.01.2021

Contract

Tender Evaluation Committee can reject the bid, if there is a clear non-compliance of a mandatory condition

The Petitioner has preferred the present writ petition seeking for Issuance of a writ thereby quashing the impugned order/decision dated 3rd April, 2020 and 8th April, 2020 passed by Respondent No.1 thereby unilaterally disqualifying the Petitioner and not opening the financial bid of Petitioner.

The case of the Petitioners is that, the Respondents initiated an e- tender process for the purpose of procuring 3 units of 1000mA Digital Flat Panel Fluoroscopy Radiography System and related services by way of a tender document. The Petitioner no.1, an affiliate company of Petitioner no.2, participated in the tender process and its technical bid was found to be in order. However, soon thereafter on 3rd April, 2020, the Petitioner no.1 was informed that, it was disqualified from the tender process, without being provided any reasons therefor. The Petitioner then made several representations to the Respondents requesting that the reasons for its disqualification be disclosed, which went unanswered. Finally on 29th May, 2020, the petitioner received an email from the respondents - communicating the reasons for its disqualification.

Non-affixation of the stamp and signature of the Notary Public on pages 2 and 3 of the document Annexure U, at the highest, was a minor non-conformity, or irregularity, or infirmity. The intention of the Petitioner to submit the undertaking as per Annexure U with due attestation is clear from the fact that, the document as submitted by it bears the attestation of the Notary Public, though only at the first page. Even if the Evaluation Committee of the Respondents felt that, the undertaking in Annexure U Format should bear the attestation on all the pages, they could and should have called upon the Petitioner to make good the said so-called deficiency or infirmity.

The Respondents have taken a hyper technical view of the matter to non-suit the Petitioner. The approach of the Respondents cannot be described as either fair or reasonable. The Respondent cannot sit with a magnifying glass while examining the bid document, with the objective of disqualifying the bidders on some or the other ground, howsoever petty or whimsical it may be. If there is a clear non-compliance of a mandatory condition, the Tender Evaluation Committee would be justified in rejecting the bid. At the same time, it cannot adopt an approach to unreasonably disqualify an otherwise qualified bidder. The purpose of scrutiny of a tender document submitted by a bidder should not be to non-suit the bidder on such hyper technical issues. Such exclusion on hyper technical approach would not be in public interest as it would curtail competition. The whole purpose of procuring goods and services by public authorities through the process of tender/ auction is to get the most competitive bids for the best product offered. Pertinently, in the present case, apart from the bidder, there was only one other tenderer, and exclusion of the Petitioner was certainly not in public interest, since the said exclusion was founded upon completely unjustified grounds.

Further, it is not the Respondent's case that, the Petitioner has not submitted the undertaking Annexure U within the stipulated time. The disqualification of the Petitioner in respect of the tender in question is quashed. In case, the respondents desire to call upon the petitioner to make good the infirmity in terms of Clause 27 by submitting any other undertaking in terms of Annexure U, the Respondents shall grant an opportunity to the Petitioner to do the needful, and then proceed to deal with the petitioner's tender in accordance with law. Petition allowed.

Tags : Bid Rejection Legality

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Income Tax Appellate Tribunal

Klaxon Trading (P) Ltd., New Delhi vs. Deputy Commissioner of Income Tax

MANU/ID/0047/2021

19.01.2021

Direct Taxation

Expenditure incurred towards membership fee paid by company is allowable as revenue expenditure

Present appeal filed by the assessee is directed against the order passed by the Learned Commissioner of Income Tax [CIT(A)]. The only effective ground raised by the assessee is that, on the facts and in the circumstances of the case and in law, the Learned CIT(Appeals) erred in confirming the addition of Rs.1,23,375 made by the Assessing Officer treating the expenditure incurred on membership fees as personal in nature. The assessee is a Private Limited Company and is engaged in the business of trading of metal scrap.

The Assessing Officer (AO) in the instant case disallowed an amount of Rs. 1,23,375 being the expenditure debited in the profit and loss account towards membership fees of a club treating the same as personal in nature. The Learned CIT(A) sustained the addition made by the AO. It is the submission of the assessee that, since the business premises of the assessee is located at a crowded locality and dusty, the assessee, without incurring substantial expenditure in the establishment of a separate office, opted for membership of a club to provide a better environment to its customers. It is also his submission that, since the assessee is a Company, the membership fee has always been held to be an allowable expenditure.

The Hon'ble Delhi High Court in the case of CIT vs. Samtel Colour Ltd. has held that, corporate membership fees payable to a club is revenue expenditure. The coordinate benches of the Tribunal are consistently taking the view that, expenditure incurred towards membership fee paid by company is allowable as revenue expenditure. Since in the instant case, the genuineness of payment is not in dispute, therefore, in view of decision of Delhi High Court in the case of CIT vs. Samtel Colour Ltd. present Tribunal held that, the membership fee paid to the club is an allowable expenditure. The order of CIT(A) is set aside and the AO is directed to delete the addition. The ground raised by the assessee is accordingly allowed.

Tags : Assessment Additions Legality

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Income Tax Appellate Tribunal

Deputy Commissioner of Income Tax vs. Malavika Shivakumar, Chennai

MANU/IX/0002/2021

18.01.2021

Direct Taxation

If an assessee invests full consideration from sale of original asset for purchasing or constructing another residential house, then assessee is entitled for 100% exemption from capital gain tax

Present appeal filed by the Revenue is directed against order of the learned Commissioner of Income Tax (Appeals). The learned CIT(A) held that, assessee has completed construction of building on or before May, 2017 and hence eligible for exemption under Section 54F of the IT Act. Accordingly, learned CIT(A) deleted additions made by Assessing Officer towards disallowance of exemption claimed under Section 54F of the Income Tax Act, 1961 (IT Act). It is submitted on behalf of Revenue that, learned CIT(A) has erred in deleting disallowance of claim of exemption under Section 54F of the IT Act without appreciating the fact that assessee has failed to comply with the condition mandated under the provisions of section 54F(4) of the Act to avail benefit of exemption under Section 54F(1) of the IT Act.

Assessing Officer has erred in coming to the conclusion that, building construction was not completed before May, 2017 only on the basis of non-furnishing of completion certificate from municipal authorities. No doubt, completion certificate is one evidence for having completed construction of building, but it is not material evidence to draw adverse inference against assessee, when assessee has placed all other evidences which indicate completion of construction of building. The learned CIT(A) after considering relevant facts has rightly held that, construction of building was completed within three years from the date of transfer of original asset and hence, present Tribunal is inclined to uphold the findings of learned CIT(A) and reject grounds taken by the Revenue.

As regards another observation of Assessing Officer regarding investment of balance sale consideration in capital gain account deposit scheme on or before due date for furnishing of return of income, the provisions of section 54F of the IT Act nowhere states that, assessee should invest full sale consideration in capital gain account deposit scheme in order to be eligible for exemption from capital gain. The law is very clear as per which, if an assessee invests full consideration from sale of original asset for purchasing or constructing another residential house, then assessee is entitled for 100% exemption from capital gain tax. In case, where assessee has invested part sale consideration for purchase or construction of another residential house, then proportionate deduction is allowed commensurate with investment made in new asset.

In present case, on perusal of details filed by assessee, present Tribunal find that, assessee has made investment of Rs.1,20,00,000 in capital gain account deposit scheme on or before due date of furnishing of return of income and said deposit account has been utilized for construction of building within three years from the date of transfer of original asset. Therefore, Assessing Officer has erred in rejecting the claim of assessee on the ground that, assessee ought to have invested balance consideration in capital gain account deposit scheme, more particularly, when assessee has claimed that she has paid tax on remaining sale consideration in accordance with law.

However, facts with regard to amount of exemption claimed under Section 54F of the IT Act and the amount of capital gain which was subjected to tax was not forthcoming from the orders of lower authorities. The assessee claims that, it has claimed exemption under Section 54F for Rs.3,72,81,393 and for balance capital gain she has paid tax, whereas Assessing Officer held that, assessee has claimed exemption of ` 3,70,75,929. Therefore, for the limited purpose of ascertaining facts with regard to computation of capital gain from sale of shares and amount of sale consideration invested in purchase/construction of new asset and amount of capital gain included in return and payment of taxes, Assessing Officer is directed to verify facts in light of claim of assessee that she had paid tax for balance amount of capital gains. In case, Assessing Officer found that assessee has paid tax on balance capital gain, then Assessing Officer is directed to delete additions made towards disallowance of exemption claimed under Section 54F of the IT Act. Appeal allowed.

Tags : Assessment Exemption Legality

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