Monthly Archives: July 2018

Misconduct – Possession of Pecuniary Resources

A public servant charged of criminal misconduct thereunder has to be proved by the prosecution to be in possession of pecuniary resources or property disproportionate to his known sources of income, at any time during the period of his office. Such possession of pecuniary resources or property disproportionate to his known sources of income maybe his or of anyone on his behalf as the case may be. Further, he would be held to be guilty of such offence of criminal misconduct, if he cannot satisfactorily account for such disproportionate pecuniary resources or property. The Explanation to Section 13(1)(e) of the Prevention of Corruption Act elucidates the words “known sources of income” to mean income received from any lawful source and that such receipt has been intimated in accordance with the provisions of law, rules, orders for the time being applicable to a public servant.

From the design and purport of clause (e) of sub-section (1) to Section 13, it is apparent that the primary burden to bring home the charge of criminal misconduct thereunder would be indubitably on the prosecution to establish beyond reasonable doubt that the public servant either himself or through anyone else had at anytime during period of his office been in possession of pecuniary resources or property disproportionate to his known sources of income and it is only on the discharge of such burden by the prosecution, if he fails to satisfactorily account for the same, he would be in law held guilty of such offence. In other words, in case the prosecution fails to prove that the public servant either by himself or through anyone else had at any time during the period of his office been in possession of pecuniary resources or property disproportionate to his known sources of income, he would not be required in law to offer any explanation to satisfactorily account therefor. A public servant facing such charge, cannot be comprehended to furnish any explanation in the absence of the proof of the allegation of being in possession by himself or through someone else, of pecuniary else, of pecuniary resources of property disproportionate to his known sources of income. Vasant Rao Guhe v. State of M.P., (2017) 14 SCC 442.

 

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Food Adulteration – Compliance of Mandatory Provisions

The provisions of Section 10 (7) of the Prevention of Food Adulteration Act (similar to Section 38(7) of the Food Safety and Standards Act) are mandatory. It is obligatory under Section 10 (7) of the PFA to call for one or more independent witnesses. Only if the independent witnesses are not ready to corroborate the version of the Food Inspector will he be relieved from the compliance of the mandatory provision of Section 10 (7) of the PFA. Radhey Shyam v. State of U.P., 2018 (104) ACC 70.

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Term “Interlocutory Order” – Meaning of

In Mohan Lal Magan Lal Thacker v. State of Gujarat, AIR 1968 SC 733 it was held as under:

“The term interlocutory order is a term of well known legal significance and does not present any serious difficulty. It has been used in various statutes including the Code of Civil Procedure, Letters Patent of the High Courts and other like Statutes. In Webster’s New World Dictionary “interlocutory” has been defined as an order other than final decision. Decided cases have laid down that interlocutory orders to be appealable must be those which decide the right and liabilities of the parties concerning a particular aspect. The term interlocutory order in Section 397 (2) of the CRPC has been used in a restricted sense and not in any broad or artistic sense. It merely denotes orders of a purely interim or temporary nature which do not decide or touch the important rights or the liabilities of the parties. Any order which substantially affects the rights of the accused, or decides certain rights of the parties cannot be said to be an interlocutory order so as to bar a revision to the High Court against that order. Yogish Arora v. Smt. Jennette Yogish Arora, 2018 (129) ALR 339.

 

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“Next Friend” and “Guardian ad litem” – Difference Between

 

The only practical difference between a “next friend” and a “guardian ad litem” that the next friend is a person who represents a minor who commences a lawsuit; guardian ad litem is a person appointed by the court to represent a minor who has been a defendant in the suit. Before a minor commences suit, a conscious decision is made concerning the deserving adult (next friend) through whom the suit will be instituted. The guardian ad litem is appointed by court and whereas the next friend is not. The next friend and guardian ad litem possess similar powers and responsibilities. Both are subject to control by the Court and may be removed by the Court if the best interest of the minor so requires. Nagaiah v. Smt. Chowdamma, 2018 (129) ALR 285.

 

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Appointment Obtained – Fraudulently

Fraudulently obtained order of appointment or approval can be recalled by the authority concerned. In such cases, merely because the employee continued in service for a number of years, on the basis of fraudulently obtained order, cannot get any equity in his favour or any estoppels against the employer/authority. When appointment or approval has been obtained by a person on the basis of forged documents, it would amount to misrepresentation and fraud on the employer. It would create no equity in his favour or any estoppel against the employer to cancel such appointment or approval since “Fraud and justice never dwell together.” Committee of Management v. State of U.P., (2018) 1 UPLBEC 610.

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During an Enquiry – Employee is Entitled to Subsistence Allowance

An employee is entitled to subsistence allowance during an inquiry pending against him or her but if that employee is starved of finances by zero payment, it would be unreasonable to expect the employee to meaningfully participate in a departmental inquiry. Access to justice is a valuable right available to every person, even to a criminal and indeed free legal representation is provided even to a criminal. In the case of a departmental inquiry, the delinquent is at best guilty of a misconduct but that is no ground to deny access to pension (wherever applicable) or subsistence allowance (wherever applicable). UCO Bank v. R.S. Shukla, 2018 (2) ESC 372.

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SARFAESI ACT – RIGHT OF A MORTGAGOR

Under the provisions of the SARFAESI Act and the relevant Rules applicable under Section 13(1), a free hand is given to a secured creditor to resort to a sale without the intervention of the Court or Tribunal. However, under Section 13(8), it is clearly stipulated that the mortgagor, i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all all the dues to the secured creditor at any time before the date fixed for sale or transfer. Under sub-section (8) of Section 13 the secured asset should not be sold or transferred by the secured creditor when such tender is made by the borrower at the last moment before the sale or transfer. The said sub-section also states that no further step should be taken by the secured creditor for transfer or sale of that secured asset. Dwarika Prasad v. State of U.P., 2018 (129) ALR 220.

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SARFAESI Act – Appeal under Section 17 of the Act

The “appeal” under Section 17 is available to the borrower against any measure taken under Section 13(4). Taking possession of the secured asset is only one of the measures that can be taken by the secured creditors. Depending upon the nature of the secured asset and the terms and conditions of the security agreement, measures other than taking the possession of the secured asset are possible under Section 13(4). Alienating the asset either by lease or sale, etc., and appointing a person to manage the secured asset are some of those possible measures. On the other hand, Section 14 authorises the Magistrate only to take possession of the property and forward the asset alongwith the connected documents to the borrower. Therefore, the borrower is always entitled to prefer an “appeal” under Section 17 after the possession of the secured asset is handed over to the secured creditor. Section 13(4)(a) declares that the secured creditor may take possession of the secured assets. It does not specify whether such a possession is to be obtained directly by the secured creditor or by resorting to the procedure under Section 14. By whatever manner the secured creditor obtains possession either through the process contemplated under Section 14 or without resorting to such a process, obtaining of the possession of a secured asset is always a measure against which a remedy under Section 17 is available. Dheerendra Kumar v. Authorised Officer, 2018 (129) ALR 32.

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Bank Guarantee – Invocation of

In U.P. State Sugar Corporation v. Sumac International Ltd., (1997) 1 SCC 568 it was stated that the law relating to bank guarantees is well settled. When on the course of commercial dealings an unconditional bank guarantee is given or accepted, beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. Bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. Any other view would frustrate and defeat the very purpose of such unconditional bank guarantee furnished by the party concerned. It was also observed that when an injunction is sought, Court should be slow in granting an injunction to restrain the realization of such a bank guarantee. There are two exceptions recognized, (1) a fraud in connection with such a bank guarantee and (2) where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned.
In Dwarikesh Sugar Industries v. Prem Heavy Engineering Works (P) Ltd., (1997) 6 SCC 450, it was held as under:
“If the bank could not in law avoid the payment, as the demand had been made in terms of the bank guarantee, then the Court ought not to have refused an injunction which had the effect of restraining the bank from fulfilling its contractual obligation in terms of the bank guarantee. An injunction of the court ought not to be an instrument which is used in nullifying the terms of a contract, agreement or undertaking which is lawfully enforceable.”
In Himadri Chemicals Industries Ltd. v. Coal Tar Refining Company¸ (2007) 8 SCC 110, the principles to be followed in the matter of injunction to restrain encashment of a Bank Guarantee or a Letter of Credit were laid down as under:
“(1) While dealing with an application for injunction in the course of commercial dealings and when an unconditional bank guarantee or Letter of Credit is given or accepted, the Beneficiary is entitled to realize such a Bank Guarantee or a Letter of Credit in terms thereof irrespective of any pending disputes relating to the terms of the Contract.
(2) The Bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer.
(3) The Courts should be slow in granting an order of injunction to restrain the realization of a Bank Guarantee or a Letter of Credit.
(4) Since a Bank Guarantee or a Letter of Credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the partries to the contract is not a ground for issuing an order of injunction to restrain enforcement of Bank Guarantees or Letters of Credit.
(5) Fraud of an egregious nature which would vitiate the very foundation of such a Bank Guarantee or Letter of Credit and the beneficiary seeks to take advantage of the situation.
(6) Allowing encashment of an unconditional Bank Guarantee or a Letter of Credit would result in irretrievable harm or injustice to one of the parties concerned.”
In Adani Agri Fresh Ltd. v. Mahaboob Sharif and Others, 2016 (114) ALR 871, it was held that bank guarantee is an independent contract between the bank and the beneficiary thereof. Bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance bank has given guarantee is immaterial and of no consequence. Drake and Scull Water and Energy India Pvt. Ltd. v. Paschimanchal Vidyut Vitran Nigam Ltd., 2018 (128) ALR 843.

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Transfer of Securities – Registration of

Under Section 58(2) of the Companies Act, 2013 the securities or interest of any member in a public company are freely transferable. However, under Section 58(4), it is open to the public company to refuse registration of the transfer of the securities for a sufficient cause. To that extent, Section 58(4) has to be read as a limited restriction on the free transfer permitted under Section 58(2). Section 10-F of the Companies Act, 1956, provides that an appeal against an order passed by the Company Law Board can be filed before the High Court on questions of law. Right to refuse registration of transfer on sufficient cause is a question of law and whether the cause shown for refusal is sufficient or not in a given case, can be a mixed question of law and fact. Mackintosh Burn Ltd. v. Sarkar and Chowdhary Enterprises Private Ltd., (2018) 5 SCC 575.

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