Newsletter ARBITRATION AND CONCILIATION ACT, 1996 DECEMBER, 2023 WHETHER REVENUE RECORDS ARE LEGALLY RECOGNIZED AS DOCUMENTS OF TITLE? In a recent judgment of, P. Kishore Kumar vs. Vittal K. Patkar, the Hon’ble Supreme Court made a crucial ruling stating that revenue records are not considered documents of title. Further, according to Section 100 of the Civil Procedure Code (CPC), a material legal question should be raised before the trial court. If this isn't done, a second appeal cannot be entertained additionally the judgment made by the first appellate court, as long as it aligns with established legal principles, should not have been disturbed or intervened with. The court heavily relied on the landmark case of Nazir Mohamed v J. Kamala for analyzing this principle. This case involves a dispute over the title of land in Bangalore involving (Personal & Miscellaneous) Inam Abolition Act, 1954. Under this act, properties and rights vested in Inamdar would cease and go to the State of Mysore. However, they had the opportunity to claim rights as either an occupant or a tenant under Section 9 of the Act. The petitioner acquired land from the respondent through a vendor and further applied for occupancy under Section 9, however, the Deputy Commissioner of Inams denied it. The main dispute revolved around this denial. The trial court ruled in Favor of the petitioner however later the defendant appealed under Section 96 of CPC, and subsequently, the district judge overturned the trial court's findings. The petitioner then brought a second appeal to the Hon’ble High Court, where the court framed a substantial legal question regarding whether the appellate court had erred in law. The Hon’ble Supreme Court emphasized that the understanding of a substantial question of law under Section 100 of CPC has evolved over the years. The petitioners failed to prove their status as tenants, and revenue records were not considered documents of title, as established in previous cases. The Hon’ble Supreme Court clarified that a second appellate court cannot conduct a third trial. Therefore, the High Court's decision on a substantial question of law may be one of law but not a substantial question of law under Section 100 of CPC. Consequently, the Hon’ble Supreme Court set aside the judgment passed by the Hon’ble High Court. Read More... ARBITRATION AND CONCILIATION ACT, 1996 WHETHER A PARTY BE DENIED INTERIM RELIEF UNDER SECTION 9 OF THE ARBITRATION ACT BASED ON THE GROUNDS OF INSUFFICIENT STAMP DUTY ON THE ARBITRATION AGREEMENT? The recent judgments passed by the Hon’ble High Court of Judicature at Bombay shed light on a crucial issue and observed that insufficiency of stamp duty on an arbitration agreement should not be a ground for denying interim relief. The court's decision stems from a series of commercial arbitration petitions and applications presented before the High Court of Judicature at Bombay. The core question revolved around whether a party can be denied interim relief under Section 9 of the Arbitration Act based on the grounds of insufficient stamp duty on the arbitration agreement. The court drew support on the key judgments passed by the Hon’ble Supreme Court of India, including SMS Tea Estates Pvt. Ltd. v. Chandmari Tea Co. Pvt. Ltd. (2011) and Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd. (2019). The court's analysis considered the purpose of Section 9 of the Arbitration Act, emphasizing that its primary objective is to provide interim relief to parties pending the constitution of the arbitral tribunal. Stamp duty, according to the court, is a procedural requirement and does not infringe upon the substantive rights of the parties involved. Therefore, the Hon’ble High Court concluded that denial of interim relief on grounds of insufficient stamp duty would be unjust. Crucially, the court highlighted the powers of the Civil Court in this context. It emphasized that even if a document is not sufficiently stamped, the Civil Court retains the authority to act. The court's decision underscores the distinction between procedural requirements and substantive rights asserting that the stamp duty issue is procedural and does not affect the core rights of the parties involved. This nuanced approach contributes to the overall efficiency and fairness of the arbitration process, aligning with the broader objectives of the Arbitration and Conciliation Act, of 1996. As stakeholders navigate the complexities of commercial arbitration, the Bombay High Court's guidance provides a valuable precedent, offering clarity on the treatment of stamp duty issues in the realm of interim relief. Read More... INSOLVENCY AND BANKRUPTCY CODE, 2016 WHAT IS THE SCOPE OF THE COMMITTEE OF CREDITORS' AUTONOMY IN INSOLVENCY PROCEEDINGS? In a recent judgment passed by the Hon’ble Supreme Court judgment in Ramkrishna Forgings Ltd. v. Ravindra Loonkar, RP of ACIL Ltd.& Anr., wherein the Hon’ble Court further clarified that the Adjudicating Authority-NCLT has the power, under Section 32 of the IBC, 2016, to disapprove a resolution plan only when it does not meet the criteria outlined in Section 31(1) of the Code. The Hon’ble Court urged the NCLT to exercise its power within the scope defined by the Code and not overstep its authority relying on the precedent set by the K. Shahdhar case, the court emphasized that the decisions of the Committee of Creditors (CoC) should not be unnecessarily scrutinized and intervened by the judiciary. The court stated that if the CoC, which includes Financial Creditors to whom the Corporate Debtor owes money, engaged in multiple negotiations with the appellant concerning the Resolution Plan and subsequently, with an 88.56% majority vote, approved the final plan, there should be no interference unless it violated provisions of the Insolvency and Bankruptcy Code, especially Sections 30 and 31. The Hon’ble Supreme Court highlighted that the Code is designed for a swift and time-efficient resolution of the insolvency process, and unnecessary interruptions should be avoided to prevent delays in the Corporate Insolvency Resolution Process (CIRP). Examining the case's specifics, the CoC had approved minimum upfront payments, secured an 88.56% majority vote, and, therefore, challenging the "commercial wisdom" was unwarranted and set aside the judgments passed by the Hon’ble NCLAT upholding the judgment passed by Ld. NCLT. Read More... INSOLVENCY AND BANKRUPTCY CODE, 2016 WHETHER SECTIONS 95 TO 100, OF IBC 2016 ARE CONSTITUTIONAL? The landmark judgment passed by the Hon’ble Supreme Court upheld the constitutional validity of Section 95-100 of the Code. The present judgment involved a total of 384 petitions to challenge the constitutionality of Sections 95 to 100 of IBC 2016 which are related to personal guarantors and corporate debtors. The side of the petitioners contended, that there is a need for judicial determination even before the stage mentioned in Section 100, i.e., before appointing a resolution professional. Further, the sections are violative of Article 14 of the constitution, whereas the respondent claimed that the procedure outlined in Section 99 for the resolution professional leads to a report that merely includes a recommendation for either accepting or rejecting the application. This report does not hold binding authority over the adjudicating authority. The court analysed and held that the stages from section 95 to 99 of IBC, do not involve a judicial adjudication, the role of resolution professional is merely facilitative and report submitted by him/her is recommendatory in nature. Therefore, the Hon’ble Court rejected that a judicial authority should be involved before their appointment. There is no violation of natural justice under these sections. Therefore, the Hon’ble Apex Court upheld the validity of sections 95 to 100 of IBC and dismissed the writ petitions. Read More... TRANSFER OF PROPERTY ACT, 1882 WHETHER A PROPERTY CAN BE TRANSFERRED THROUGH UNREGISTERED AGREEMENTS? In the most recent judgment passed by the Apex Court in Shakeel Ahmed v. Syed Akhlaq Hussain it was observed that the unregistered agreement to sell, or unregistered general power of attorney cannot be the basis of a transfer with respect to immovable property. For contending the same the Hon’ble Court relied on the Registration Act, 1908, according to which a document mandatorily requiring registration does not grant any rights, let alone a legally enforceable right to seek legal recourse. Even if documents like the Agreement to Sell and Power of Attorney were registered, it does not imply that the respondent gains ownership of the property. The most that could be claimed based on a registered agreement to sell is relief through specific performance, as per Sections 17 and 49 of the Registration Act and Section 54 of the Transfer of Property Act, 1882. The Hon’ble Court dismissed the argument that the 2011 decision in Suraj Lamps & Industries Pvt. Ltd. Vs. State of Haryana and Anr, which established that title transfer cannot occur through unregistered documents, has prospective application only. The Hon’ble Court opined that if the respondent aimed to remove the appellant by treating him as a licensee, they could have filed a lawsuit on behalf of the actual owner or landlord. This could involve asserting the receipt of rent from the appellant or serving as the Attorney of the true owner to initiate legal proceedings for eviction and possession. Since these aspects were not reflected in the complaint, the court deviated from the reasoning given by the high court. Consequently, the appeal was accepted. The contested judgment was annulled, and the suit was duly dismissed. Read More... PUNJAB NATIONAL BANK (OFFICERS’) SERVICE REGULATIONS, 1979 WHAT IS THE SCOPE OF PROVIDENT FUND AND GRATUTIY IN CASE OF EMPLOYEE'S COMPULSORY RETIREMENT? In the case titled Jyotirmay Ray v. The Field General Manager, Punjab National Bank & Ors. the Hon’ble Supreme Court held that the bank is allowed to withhold the PF only if the employee's actions result in proven loss to the bank however in the present case, the bank not only failed to demonstrate any proven loss but also denied the employee a fair hearing. The Hon’ble Court sided with an employee (the appellant) instructed Punjab National Bank (PNB) to release the provident fund (PF) and gratuity owed to the employee who was compelled to retire. From the factual circumstances, the Single Judge noted that the appellant was not given a chance by the Board of Directors to address the matter of alleged loss or damage to the Bank before passing the resolution to allocate the Bank's contribution from the appellant's provident fund account. Regarding the gratuity payment matter, the court examined the 1979 Regulations and the Gratuity Act provisions. The court also referred to the YK Singhla v. Punjab National Bank (2013) 3 SCC 472 judgment, asserting the precedence of the Gratuity Act overall regulations. Additionally, the court highlighted that the bank's circular specifically categorized denial of gratuity for dismissal or removal but did not address the penalty related to compulsory retirement. The court also pointed out Regulation 4 of the Punjab National Bank Officer Employees’ (Discipline and Appeal) Regulations 1977 (1977 Regulations), which categorizes compulsory retirement as a significant penalty. The court observed that, according to the regulations, gratuity would only be withheld in cases of dismissal or removal. Crucially, the penalty of compulsory retirement was not mentioned as a reason for denying gratuity benefits in the explanation. As a result, the Hon’ble Court confirmed that, as per the Circular's explanation, the appellant was eligible to receive gratuity under the 1979 Regulations. Consequently the court allowed the appeal. Read More... INCOME TAX ACT, 1961 WHETHER FOREIGN EXCHANGE FLUCTUATIONS AND EXPORT TURNOVER COME UNDER SECTION 80 HHC OF THE INCOME TAX ACT, 1961? The Supreme Court of India delivered a judgment in the case which involved Shah Originals and the Commissioner of Income Tax-24, Mumbai. The case pertained to the assessment years 2000-01 and 2001-02, and the appellant claimed to be a 100% Export-Oriented Unit. The controversy between the assessee and the Revenue was whether the profit earned on the foreign exchange falls under business income or income from other sources. The appellant had filed returns declaring the total taxable income at Rs. 28,25,080/- for the assessment year 2000-01. The relevant assessment year had adopted export turnover at Rs. 8,27,15,688/-, which included an amount of Rs. 26,62,927/- being gains on accounts of foreign currency fluctuations in the assessment year 2000-01. The appellant treated the said earning from foreign exchange fluctuations as part of the export turnover for the purpose of computing the deduction under Section 80 HHC of the Income Tax Act, 1961. The Supreme Court held that the interpretation of Clause (baa) in Section 80 HHC was not attracted to the case at hand. The gain from foreign exchange fluctuations from the EEFC account did not fall within the meaning of "derived from" the export of garments by the assessee. The profit from exchange fluctuation was independent of export earnings, and the impugned judgment correctly answered the point. Therefore, the gain from foreign exchange fluctuations could not be included in the export turnover for the purpose of computing the deduction under Section 80 HHC of the Income Tax Act, 1961. In conclusion, the Supreme Court dismissed both Civil Appeal No. 2664 of 2011 and Civil Appeal No. 2665 of 2011. The gain from foreign exchange fluctuations from the EEFC account did not fall within the meaning of "derived from" the export of garments by the assessee. The profit from exchange fluctuation was independent of export earnings, and the impugned judgment correctly answered the point. Read More... THE UTTAR PRADESH VALUE ADDED TAX ACT 2008 WHAT IS THE ELIGIBILTIY OF INPUT TAX CREDIT: EMPHASIZING ON THE INCLUSIVITY OF SECTION 13 UNDER UP VAT ACT? In the case of M/s. Modi Naturals Ltd. v. The Commissioner of Commercial Tax UP, the Hon’ble Supreme Court allowed the appeal, permitting the Assessee to claim the full amount of Input Tax Credit (ITC) on Rice Bran under the Uttar Pradesh Value Added Tax Act, 2008. The dispute arose from the production of taxable Rice Bran Oil and exempted De-Oiled Rice Bran during the manufacturing process. The Hon’ble High Court, relying on a precedent, held that ITC is a concession, not a vested right, and favoured Section 13(1)(f) over other provisions. The Hon’ble Supreme Court, however, clarified that Section 13 of the UP-VAT Act allows full ITC for registered dealers when goods are used in manufacturing taxable products. The court also stated that had it been the intention of the legislation to include only taxable goods under the ambit of “goods” then they would have expressly stated so. It noted the introduction of Section 13(3)(b) for proportionality in cases of producing exempt and non-exempt goods. Explanation (iii) to Section 13 addressed exempt goods produced as by-products during manufacturing, deeming them used in taxable goods' production. Read More... NEW DELHI X -3, Green Park Main, New Delhi, 110016, Telephones: +91 11 2652 0041-42 For further / specific information, please contact us at: info@tandonandco.com Disclaimer: The contents of this newsletter are intended for information purposes only, and parts of this newsletter are based on news reports and have not been independently verified. 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