Registrar cannot impose normal Stamp Duty on properties under auction: SC

By Dr Sanjay Chaturvedi, Editor.

In the matter of Registrar of Assurance & Anr Vs ASL Vyapar Pvt ltd & Anr (Supreme Court), Hon’ble Supreme Court on 10th Nov 2022 said that Section 47A of the Act cannot be said to have any application to a public auction carried out through court process/receiver as that is the most transparent manner of obtaining the correct market value of the property, also noted that undervaluation is not uncommon as payments are made through different method.

In the current matter, there were tenants in the properties interested in connecting matters. Also the Official liquidator valued the properties under public auction. A property purchased in public auction have more transparent process then any other mode of selling.

The Stamp Duty is imposed on instrument and not on transaction. Hence the landmark judgement shall have very wide impact on stamp duty determination on auction properties in real estate transaction process.

 

 

37 new High Court Judges appointed – Independence Day 2022

By Staff Reporter

37 New High Court Judges have been appointed by the Government last night. This is in continuation of the appointment of 26 High Court Judges in various High Courts on Friday. With the notification of the appointments of another 11 High Court Judges in the Punjab & Haryana High Court by the government this year i.e. 2022,  so far 138 appointments in various High Courts of the country has been made thus surpassing its earlier record of 126 High Court appointments in  2016. Last year i.e. 2021, the appointment tally in High Courts was 120 in addition to 9 appointments in the Supreme Court. Thus, the entire appointment process in higher judiciary has been put on a fast track.

Yesterday’s 11 appointments in the High Court of Punjab & Haryana includes the names (1) Ms. Nidhi Gupta, S/Shri (2) Sanjay Vashisth, (3) Tribhuvan Dahiya, (4) Namit Kumar, (5) Harkesh Manuja, (6) Aman Chaudhary, (7) Naresh Singh, (8) Harsh Bunger, (9) Jagmohan Bansal, (10) Deepak Manchanda and (11) Alok Jain, Advocates as Additional Judges of that High Court for a period of two years, with effect from the date they assume charge of their respective offices.

Supreme Court: Person who avails any banking service is ‘consumer’ under Consumer Protection Act

By Fiona Mehta

 

In the case of Arun Bhatiya vs HDFC Bank and ors, the Supreme Court has reaffirmed that a person who avails any banking service falls within the scope of the definition of ‘consumer’ under the Consumer Protection Act, and can take recourse to legal remedies provided in the Act.
A Bench of Justices DY Chandrachud and AS Bopanna ruled that the State Commission was wrong in declining to hear the case of a person on merits merely because the dispute involved the father of the person as well.
Facts of the case:
In this case, the complainant and his father had opened a joint FD in HDFC Bank. An amount of 75 Lakhs had been deposited jointly in the name of the complainant and his father for a period of 145 days. The FD amount was credited to the account of the complainant’s father on the request made by the father on 31 May 2016.
In his complaint before the State Consumer Disputes Redressal Commission at Lucknow, the complainant contended that upon the maturity of the FD, both the complainant and his father had jointly issued a direction to the bank for renewing it for a period of ten days and despite this, the amount was credited solely into the account of the father.

The SCDRC held that the dispute was primarily between the complainant and his father on the issue of the FD amount deposited, and therefore only a civil court was competent to deal with such a dispute. The NCDRC dismissed the appeal as withdrawn. Later, the complainant filed a review application stating on affidavit that he had not furnished instructions to his counsel to apply for withdrawal of the appeal. But the same was not entertained.

Decision:

The court noted that the essence of the complaint is that there was a deficiency on the part of the respondent bank in proceeding to credit the proceeds of a joint FD exclusively to the account of his father.
“The SCDRC ought to have determined whether the complaint related to deficiency of service as defined under the 1986 Act. The SCDRC had no justification to relegate the appellant to pursue his claim before a civil court. The appellant did not, in the proceedings before the SCDRC, raise any claim against his father. Therefore, the SCDRC was wrong in deducing that there was a dispute between the appellant and his father. Assuming that there was a dispute between the appellant and his father, that was not the subject matter of the consumer complaint. The complaint that there was a deficiency of service was against the bank.”, it added.

Supreme Court order: NCLT cannot coerce allottees into settlements

By Fiona Mehta

 

The Hon’ble Supreme Court’s recent decision in E. S. Krishnamurthy & Others v. Bharath Hi Tech Builders Pvt. Ltd. defined and limited the jurisdiction of the National Company Law Tribunal (“NCLT”) and the National Company Law Appellate Tribunal (“NCLAT”) as well as the courses of action available to these authorities under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”).

 

Facts of the case: A agreement was made for the M/s Bharath Hi Tech Builders Pvt. Ltd. (Respondent) to raise money for the development of some agricultural property. The Respondent was required to transmit and register the plots to the allottees within the specified timeframe after a Facility Agent of the Respondent was designated to market the plots to potential buyers (Allottees) in exchange for the payment of a lump sum price.

The Respondent took out a term loan after failing to gather the necessary funds. The Respondent also asked the allottees for extensions on when they needed to transmit the plot, promising to pay back the full amount plus interest if they didn’t succeed. The Respondent requested additional extensions and provided additional assurances in response to its subsequent inability to fulfil its responsibilities.

The Respondent’s failure to make reparation, however, prompted the Appellants to file a petition before the NCLT, Bengaluru Bench under Section 7 of the IBC. The NCLT dismissed the petition on the grounds that the Respondent was making sincere attempts to seek a settlement, had already made settlements with some of the petitioners, and was still in the process of obtaining settlements with more petitioners. It gave the Respondent a deadline by which to reach a settlement with the additional claimants.

This NCLT order was appealed to the NCLAT, which dismissed the appeal on the grounds that the NCLT had already dismissed the petition at the pre-admission stage because a settlement process was in progress and the rights of all the appellants were protected because the NCLT had set a deadline for settlement and granted leave to appeal to the NCLT if the claims were not resolved.

Aggrieved by this order of the NCLAT, the Appellants filed a Civil Appeal before the Supreme Court under Section 62 of the IBC.

Court findings: When ruling that the NCLT had violated Section 7(5) of the IBC by acting outside of its authority, the Court noted that the NCLT has only two options when filing a petition under Section 7. It must accept the application in accordance with Section 7(5)’s Clause (a) or reject it in accordance with Clause (b). The Act does not give the NCLT any other options.

The NCLT may admit the application when:

  1. A default has occurred;
  2. The application under Section 7(2) is complete; and
  3. No disciplinary proceeding is pending against the proposed resolution professional.

In the event that any of the above conditions are not met, the NCLT may reject the application.

The Supreme Court has limited the NCLT’s authority at that stage and its possibilities by strictly interpreting Section 7 to limit the NCLT’s jurisdiction there. This has increased predictability, certainty, and clarity by limiting the NCLT’s options and setting boundaries on its power.

The Supreme Court correctly viewed that the NCLT may only support settlements in a period when they are fashionable and preferred to litigation. Settlements may be a quick and effective way to resolve disputes, but they may also aggravate one or more parties. As a result, they cannot be forced onto a party in order to achieve the goal of the corporate debtor’s rehabilitation in a timely manner.

“Regulator has to act fairly”: Supreme Court orders SEBI to provide Reliance with complaint-filing documents

By Fiona Mehta

 

The Securities and Exchange Board of India (SEBI), a regulator, has a responsibility to act fairly when conducting proceedings or taking any action against the parties, the Supreme Court ruled in a decision issued on Friday, granting Reliance Industries Limited (RIL) access to certain documents that the SEBI had used as the basis for a criminal complaint against the company.

A bench led by the Chief Justice of India stated in the verdict that “it is expected that parties in such processes are transparent, especially for Regulators like SEBI, who are supposed to give all the papers, which are important for comprehending the issue” (Reliance Industries Ltd versus Securities and Exchange Board of India).

 

Facts of the case: In the case of Reliance Industries Ltd versus Securities and Exchange Board of India (2022), the matter dates back to a number of share transactions involving RIL in 1994, when the company’s proprietors and related firms received roughly 12 crore equity shares “fraudulently” distributed. The agency launched an investigation into the suspected violations in response to a complaint made by S Gurmurthy in 2002. Both Justice BN Srikrishna, a former Supreme Court justice, and YH Malegam, a chartered accountant, were consulted by the SEBI for their opinions.

The RIL asked for the release of these opinions and any associated internal paperwork. RIL filed a writ case with the Bombay High Court after SEBI rejected the proposal, but it was denied in February 2019.

In 2020, the SEBI filed a criminal charge against RIL before the Special Judge in Mumbai, citing violations of the SEBI Act and Regulations. The Court dismissed the complaint because it was over its deadline. Before the Bombay High Court, the regulator filed a revision appeal contesting the dismissal of the complaint. RIL submitted an interlocutory application in SEBI’s revision case asking for the documents to be made public. The High Court postponed RIL’s application on March 28, 2022, stating that it could only be taken into consideration in conjunction with the main revision petition. This prompted the Supreme Court to receive the extraordinary leave petition.

 

Supreme Court’s Judgement: The Supreme Court made the decision to thoroughly consider the question after noting that it touched upon “essential issues of criminal jurisprudence.” The bench, which included Chief Justice NV Ramana and Justices JK Maheshwari and Hima Kohli, emphasised the regulator’s need to act equally. The Securities and Exchange Board of India (SEBI) has been ordered by the Supreme Court to provide Reliance Industries Ltd. with access to the papers that the SEBI used to support its criminal complaint against RIL for suspected irregularities in a share transaction in 1994.

Regulators have a responsibility to conduct proceedings or take any other action against the parties fairly. As a regulator, SEBI has this responsibility. Being a quasi-judicial agency, SEBI is required by its charter to conduct itself honestly and in compliance with the laws and regulations. The responsibility of a regulator is to handle complaints and parties fairly, not to flout the law in order to secure convictions. The Regulators have a moral obligation to act fairly, which manifests itself in their treatment of the public with respect and cooperation.

Regulators should refrain from bringing pointless criminal charges against major firms. – The initiation of criminal proceedings in commercial transactions should be done with great caution, and the courts should serve as the doorkeepers for such proceedings. Frivolous criminal charges brought against major firms would have long-term negative economic effects for the nation. As a result, the Regulator must exercise caution when taking such action and carefully consider all relevant factors.

Principles of natural justice – SEBI’s obligation to behave fairly is closely linked to the principles of natural justice, which state that a party cannot be found guilty without having had a fair chance to present their case.

How a recent Supreme Court ruling extends the legal rights of a daughter to her father’s property

By Fiona Mehta

 

In the matter of Arunachala Gounder, the Supreme Court Judgment dated 20th January 2022 has whipped up a lot of interest and intrigue – more so among the general population than the legal community. The Judgment delivered by a Bench of Hon’ble Justice Abdul Nazeer and Hon’ble Justice Krishna Murari delves into the realms of a daughter’s rights on her father’s self-acquired property or his share in partitioned coparcenary/family property.

 

What was the issue?

The most recent Supreme Court decision addresses a daughter’s legal entitlement to inherit her father’s “self-acquired” property in the absence of any other legal successor with inheritable rights. This implies the Hon’ble Court decided whether the property’s lawful heir would be the daughter by ‘inheritance’ or her father’s brother’s son through survivorship. One important fact is that the Judgment deals with a scenario before the commencement of the Hindu Succession Act, 1956.

 

What the Supreme Court has said:

The Honorable Court stated unequivocally that a self-acquired property or a share received in a partition of a coparcenary property by a Hindu male who died intestate (without leaving behind a legally valid Will) will devolve (i.e. be transferred) by “inheritance” rather than “survivorship,” implying that the daughter of a Hindu male will be entitled to such property before any other collaterals.

In the present case – The Hindu male died intestate. He was living in a joint family. However, the property in question was his ‘self-acquired’ property and therefore, his sole surviving daughter had all the rights to inherit his property and not his brother’s son (through survivorship).

 

Who inherits the property after the death of the daughter of the Hindu male who died intestate?

The Hindu Succession Act of 1956 solidified inheritance among all Hindus (irrespective of school of philosophy). A Hindu female’s property (including property gained by inheritance) is her absolute property, according to Section 14 of the aforementioned Act. As a result, the misunderstanding caused by some old conventions that a Hindu girl could only enjoy the inherited property throughout her ‘lifetime’ was also dispelled.

The succession of such properties (owned by Hindu females) in absence of a Will/testament is governed by Section 15 of The Hindu Succession Act, 1956 and in terms of the ‘order of succession’ as provided for in Section 16 of the same Act.

 

Legal heirs of Hindu female who dies without a valid will:

When a Hindu female dies intestate, her self-acquired property will devolve in terms of Section 15(1), firstly by her class-I legal heirs viz. the children and the husband, if alive.

However, when a Hindu female dies intestate leaving behind inherited property, then as per Section 15 (2), if she dies issueless viz. without any children, then the property inherited from her father or mother will go to the heirs of her father. Similarly, property inherited from her husband or father-in-law will go to the heirs of the husband. The Supreme Court in the present Judgment has affirmed the sanctity of this provision by stating that the intent of the Legislature in carving out the ex ..

 

Supreme Court Decision:

The recent Supreme Court pronouncement clarifies the inheritance laws as applicable to a Hindu female as follows:

(a) The Hindu daughter inherits the self-acquired property of her father

(b) The rule of ‘inheritance’ prevails and not the rule of ‘survivorship’.

(c) The Hindu female has an ‘absolute’ right in such property (in terms of the Hindu Succession Act, 1956) and not a limited ‘lifetime’ interest.

(d) Such property can revert to the ‘source’ only when the Hindu female dies without leaving behind a child.

(e) In absence of a Will/Testament, such property devolves upon her legal heirs as per the terms of Section 15 and 16 of The Hindu Succession Act, 1956.

 

The Hon’ble Court has answered all the unanswered questions and redefined the law. While there could be a minuscule percentage of such cases, they would not drag on for many years, because the law has been clearly laid, leaving no room for any conundrum.

Supreme Court allows the settlement plan of Promoter at Liquidation stage

By Fiona Mehta

 

In the matter of Vallal RCK Vs. M/s Siva Industries and Holdings Limited and Ors. [Civil Appeal Nos. 1811-1812 of 2022] under the Supreme Court of India on 3th June 2022, it was held that when 90% or more of the creditors decide that allowing the promoter of the Corporate Debtor to file a Settlement Plan and withdrawing the Corporate Insolvency Resolution Process as per Section 12A of the Insolvency and Bankruptcy Code, 2016, will be in the best interests of all stakeholders, the adjudicating authority (NCLT) or the appellate authority (NCLAT) cannot sit in appeal over such commercial wisdom of the Committee of Creditors.

This Judgement will now change legality of Section 12 of the Insolvency ad Bankruptcy Code, 2016.

 

Facts:

IDBI Bank Limited had filed an application under Section 7 of the IBC seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s Siva Industries and Holdings Limited (Corporate Debtor). The NCLT accepted the application on July 4, 2019, and the CIRP process began. The Resolution Professional (RP) presented a resolution plan to the COC, but it was not adopted since it did not earn the required 66 percent of votes. The RP applied to start the liquidation process. Mr. Vallal Rck, the Corporate Debtor’s promoter, then submitted a settlement application under Section 60(5) of the IBC, proposing a one-time settlement plan.

The learned NCLT, in an order dated August 12, 2021, dismissed the application for withdrawal of CIRP and adoption of the Settlement Plan, stating that the said Settlement Plan was not a settlement simpliciter under Section 12A of the IBC but a “Business Restructuring Plan.” The learned NCLT began the liquidation process of the Corporate Debtor in IA/837/IB/2020 as well, pursuant to another ruling of even date. As a result of this, the appellant filed two appeals with the learned NCLAT.

 

Supreme Court Judgement:

The Court noted that Section 12A, which deals with withdrawal of petitions admitted under Sections 7, 9, or 10, was included by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, following significant consideration by the Insolvency Law Committee. The Committee had suggested that a departure be permitted if the COC supports it with a 90% vote share.

The Court noted that the Committee issued the proposal because the IBC’s aim, according to the Committee, is to prevent individual enforcement and settlement actions. In light of this, it was suggested that a settlement may be negotiated between all creditors and the debtor in order for a withdrawal to be approved. Regulation 30A was added to the Regulations, 2016 as a result of the addition of Section 12A to the IBC, which lays out the detailed procedure for withdrawing an application.

The legality of Section 12A was also confirmed in Swiss Ribbons Private Limited and Anr. v. Union of India and Ors. Furthermore, a slew of Apex Court decisions have already concluded that NCLT and NCLAT have no authority to intervene with COC’s business judgement.

The Code 2016’s major goal is to resolve corporate debtor issues through a reorganization and resolution procedure while keeping the corporate debtor as a going business. Liquidation of a corporate debtor is the last resort when all other options have failed and there is no other option than liquidation. When a better plan for the Corporate Debtor’s business exists and has been accepted by a majority of the Committee of Creditors, it is the duty of the Adjudicating Authority or the Appellate Authority not to interfere with the COC’s decision.

Supreme Court: Homebuyers can move RERA Authority against Bank’s Recovery Actions

RERABy Fiona Mehta

 

The Supreme Court of India, vide its order dated 14th February, 2022, in the matter of Union Bank of India vs. Rajasthan Real Estate Regulatory Authority & Ors. while upholding the order dated 14th December 2021 of the Hon’ble High Court of Rajasthan, inter-alia held that the RERA Authority.

The RERA Authority read with the rules and regulations made thereunder (“RERA Act”) has the jurisdiction to entertain a complaint filed by an aggrieved person against the bank as a secured creditor in the event the bank takes recourse to any of the provisions contained in Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) provided that the proceedings filed before the RERA Authority have been initiated by the homer buyers to protect their rights.

 

Background: In a recent writ petition, the division bench of the Hon’ble Rajasthan High Court issued a landmark decision protecting home-buyers’ rights and interests by ruling that secured creditors such as financial institutions and banks fall under the jurisdiction of the RERA Authority, and that home-buyers can file a complaint with the RERA against such secured creditors.

The High Court further held that:

(i) The Real Estate Regulatory Act, 2016 (“RERA Act”) operates retrospectively only in the cases where the security interest is created because of fraud or collusion between banks/financial institutions and developers;

(ii) The RERA Act would prevail over the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) in case of a conflict between the two; and

(iii) The RERA has jurisdiction to entertain complaints against secured creditors like banks/financial institutions once they take recourse under Section 13(4) of the SARFAESI Act to enforce their security interest. The High Court judgment has already been discussed in our previous update which can be accessed.

 

Supreme Court Judgement: The Hon’ble Supreme Court, in its order dated 14th February 2022, resolved one of the outstanding legal questions by concluding that Banking Institutions can be made parties before the RERA Authority and are subject to the RERA Authority’s jurisdiction.

While upholding the Rajasthan RERA authority’s landmark decision, the Hon’ble High Court further ruled that the RERA act will take precedence over the Bank’s recovery actions under the SARFAESI Act. This order of the Hon’ble Supreme Court established that the rights of Allottees are fundamental, and their interests are prioritized over the rights of banking institutions.

In light of the aforementioned judgments, a bank or financial institution taking recourse under Section 13(4) of the SARFAESI Act in response to a developer’s default in payments would be deemed to be a promoter in relation to the secured asset for the purposes of the RERA Act, allowing Allottees to file RERA Act complaints against such bank or financial institution.

SC awards builder 7 days’ jail and fine for contempt of court

By Fiona Mehta

 

In the matter of Urban Infrastructure Real Estate Fund v. Dharmesh S. Jain and another, the Supreme Court sentenced Respondent 1- real estate developer Dharmesh Jain to 7 days imprisonment at civil prison in Byculla on May 14, 2022 under the Contempt of Courts Act with a fine of Rs. 5 lakh to be deposed before the Bombay High Court in 2 weeks.

Vide detailed judgment and order dated March 10, 2022 passed in the aforesaid Contempt Petition, this Court held that Dharmesh Jain, for the contempt of this Court for wilful disobedience of the order dated October 28, 2021 passed by this Court in Miscellaneous Application No. 1668 of 2021 in Special Leave Petition (Civil) No. 14724/2021, as also, for wilful disobedience of the order passed by the High Court dated 08.08.2019 in Notice of Motion No. 960 of 2019 in Commercial Arbitration Petition No. 55 of 2019.

Two months prior, the SC had found him guilty of wilful disobedience of his October 2021 ruling as well as an August 8, 2021 Bombay High Court order. Following an arbitral award of Rs. 78 crore against him and Nirmal Infrastructure Pvt. Ltd, of which he is a director, in a commercial dispute with Urban Infrastructure Real Estate Fund over a share purchase agreement, the HC ordered him to deposit a certain amount.

The HC stated that they provided the respondents/contemnors with sufficient opportunities to either comply with the orders of this Court and the High Court, for which wilful disobedience has been established and they are liable to be punished suitably under the provisions of the Contempt of Courts Act, or to settle the dispute amicably with the petitioner herein, but neither the respondents/contemnors have complied with the orders passed by this Court and the High Court.

However, so as to give one last opportunity to the contemnor to purge the contempt and comply with the orders passed by the Bombay High Court as well as this Court, it is observed that the aforesaid sentence shall be kept in abeyance for a period of two weeks from today, failing which, the aforesaid sentence shall take effect and on non-compliance, the respondent No.1 herein – Dharmesh Jain will then surrender before the concerned Court/Authority to undergo the sentence imposed by this Court.

Live Streaming of Supreme Court Proceedings

By Staff Reporter

A Writ Petition was filed in the Hon’ble Supreme Court, seeking declaration for permitting live streaming of Supreme Court case proceedings of constitutional and national importance having an impact on the public at large and a direction to make available the necessary infrastructure for live streaming and to frame guidelines for the determination of such cases which are of constitutional and national importance. The Hon’ble Supreme Court vide its Judgment dated 26th September, 2018 in Writ Petition (Civil) No. 66 of 2018 – Indira Jai Singh versus Secretary General of Supreme Court & Others has, inter-alia, observed that : (i) it is important to re-emphasise the significance of live-streaming as an extension of the principle of open justice and open courts; (ii)The process of live-streaming should be subjected to carefully structured guidelines, (iii) Initially, a pilot project may be conducted for about three months by live-streaming only cases of national and constitutional importance which can be expanded in due course with availability of infrastructure.

The eCommittee of the Supreme Court has set up a Committee to draw up Standard Operating Procedure (SOP) for Live Streaming. Additionally, under the guidance of eCommittee, Supreme Court of India, a sub-committee was constituted for framing Model Rules for Live Streaming. The said rules have been forwarded to Computer Committee of High Courts for the feedback and suggestions.

Live Streaming of video conferencing of proceedings has been started in High Courts of Gujarat, Orissa, Karnataka, Jharkhand, Patna and Madhya Pradesh thus allowing media and other interested persons to join the proceedings.

This information was given by Shri Kiren Rijiju, Union Minister of Law and Justice, in Lok Sabha

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