Insolvency Process: Effect on personal guarantee of Director.

The sanction of a resolution plan and finality imparted to it by Section 31 of Insolvency and Bankruptcy Code, 2016 does not per se operate as a discharge of the guarantor’s liability.As to the nature and extent of the liability, much would depend on the terms of the guarantee itself.

Approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by this court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract.

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Click to access 26016_2020_37_1501_28029_Judgement_21-May-2021.pdf

What is a shared residence under Domestic Violence Act.

In fact, the very purpose of enacting the DV Act was to provide for a remedy which is an amalgamation of civil rights of the complainant i.e. aggrieved person. Intention was to protect women against violence of any kind, especially that occurring within the family as the civil law does not address this phenomenon in its entirety. It is treated as an offence Under Section 498-A of the Penal Code, 1860. The purpose of enacting the law was to provide a remedy in the civil law for the protection of women from being victims of domestic violence and to prevent the occurrence of domestic violence in the society. It is for this reason, that the Scheme of the Act provides that in the first instance, the order that would be passed by the Magistrate, on a complaint by the aggrieved person, would be of a civil nature and if the said order is violated, it assumes the character of criminality…”

[ Source: Kunapareddy Alias NookalaShanka Balaji Vs. Kunapareddy Swarna Kumari and Anr., (2016) 11 SCC 774]

Section 2(s), of Domestic Violence Act defines shared household asunder:

“(s) “shared household” means a household where the person aggrieved lives or at any stage has lived in a domestic relationship either singly or along with the respondent and includes such a household whether owned or tenanted either jointly by the aggrieved person and the respondent, or owned or tenanted by either of them in respect of which either the aggrieved person or the respondent or both jointly or singly have any right, title, interest or equity and includes such a household which may belong to the joint family of which the respondent is a member, irrespective of whether the respondent or the aggrieved person has any right, title or interest in the shared household;”

Questions raised before the Court:

(1) Whether definition of shared household under Section 2(s) of the Protection of Women from Domestic Violence Act, 2005 has to be read to mean that shared household can only be that household which is household of joint family or in which husband of the aggrieved person has a share?

(2) Whether judgment of this Court in S.R. Batra and Anr. Vs. Taruna Batra, (2007) 3 SCC 169 has not correctly interpreted the provision of Section 2(s) of Protection of Women from Domestic Violence Act, 2005 and does not lay down a correct law?

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Civil Suit: Trial has to be de novo after return of plaint

Jurisdiction of Civil Court:

It is no more resintegra that in a dispute between parties where two or more courts may have jurisdiction, it is always open for them by agreement to confer exclusive jurisdiction by consent on one of the two courts. Clause 16B of the agreement extracted above leaves us in no doubt that the parties clearly indicated that it was only the court at Delhi which shall have exclusive jurisdiction with regard to any dispute concerning the franchise agreement and no other court would have jurisdiction over the same. In that view of the matter, the presentation of the plaint at Gurgaon was certainly not before a court having jurisdiction in the matter.

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Mismanagement of Company and Oppression of Minority Shareholder: Locus

Family dispute about ownership of shares:

Merely disowning a son by late father or by the family, is not going to deprive him of any right in the property to which he may be otherwise entitled in accordance with the law. The pertinent question needs to be tried in a civil suit and adjudicated finally, it cannot be decided by NCLT in proceedings in question. Hence, we refrain from deciding the aforesaid question raised on behalf of the appellants in the present proceedings. In the facts and circumstances, it would not be appropriate to permit respondent No.1 to continue the proceedings for mismanagement initiated under sections 241 and 242, that too in the absence of having 10% shareholding and firmly establishing his rights in civil proceedings to the extent he is claiming in the shareholding of the companies.

Civil Dispute:

With regard to the dispute as to right, title, and interest in the securities, the finding of the civil Court is going to be final and conclusive and binding on parties. The decision of such a question has to be eschewed in instant proceedings.It would not be appropriate, in the facts and circumstances of the case, to grant a waiver to the respondent of the requirement under the proviso to section 244 of the Act, as ordered by the NCLAT.

We are of the opinion that the proceedings before the NCLT filed under sections 241 and 242 of the Act should not be entertained because of the pending civil dispute and considering the minuscule extent of holding of 0.03%, that too, acquired after filing a civil suit in company securities, of respondent no. 1. In the facts and circumstances of the instant case, in order to maintain the proceedings, the respondent should have waited for the decision of the right, title and interest, in the civil suit concerning shares in question.The entitlement of respondent No.1 is under a cloud of pending civil dispute. We deem it appropriate to direct the dropping of the proceedings filed before the NCLT regarding oppression and mismanagement under sections 241 and 242 of the Act with the liberty to file afresh, on all the questions, in case of necessity, if the suit is decreed in favour of respondent No.1 and shareholding of respondent No.1 increases to the extent of 10% required under section 244.

[Source: Aruna Oswal vs. Pankaj Oswal decided by SC on 6th July 2020]

Payment of salary to employees during Corona lock down 2020

Validity of directions given for full payment of wages:

The petitioner’s case is that notifications are arbitrary, illegal, irrational and unreasonable and contrary to the provisions of law including Article 14, Article 19(1)(g). Notifications are unreasonable and arbitrary interference with the rights of petitioner Employers under Article 19(1)(g). Notifications are also contrary to the principles of Equal work Equal Pay and also No work No pay, for it does not differentiate between the workers who are working during the lockdown period in establishment such asthe petitioner who have been permitted to operate during the lockdown period and the workers who had not worked at all. 5.The Home Secretary, Ministry of Home Affairs, Government of India, cannot invoke Section 10(2)(l) or any other provisions of Disaster Management Act, 2005,to impose financial obligations on the private sector such as payment of wages. The Central Government has the power to allocate funds for emergency response, relief, rehabilitation, mitigation of disasters under Disaster Management Act. The ultimate onus for any compensation towards workers shall ultimately be of Government and the said liability cannot be shifted upon the employers in the Private establishment. The impugned notifications have the effect of completely negating the statutory provisions under the Industrial Disputes Act, 1947.

Effect of Lock down:

It cannot be disputed that the lockdown measures enforced by the Government of India under the Disaster Management Act, 2005, had equally adverse effect on the employers as well as on employees. Various Industries,establishments were not allowed to function during the said period and those allowed to function also could not function to their capacity.There can be no denial that lockdown measures which were enforced by the Government of India had serious consequences both on employers and employees.

Paying capacity:

Some of the industries and establishments may bear the financial burden of payment of wages or substantial wages during the lock-down period to its workers and employees. Some of them may not be able to bear the entire burden. A balance has to be struck between these two competitive claims.The workers and employees although were ready to work but due to closure of industries could not work and suffered. For smooth running of industries with the participation of the workforce, it is essential that a via media be found out.

Directions by Supreme Court:

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The Will which is not last and final:

Probate of incomplete Will:

The Will in question (Ex.PW1/H) is drawn on two pages and is complete in itself and does not leave any scope for any other codicilconcerning the estate of the deceased, particularly when bequeath has been made not only of the immovable property and the bank account but also as regards the other assets of testatrix in the residuary clause, which reads as under: –

“2. I also direct that in the event of my acquiring any further movable or immovable assets hereinafter or any other assets that I may have forgotten to mention in the present Will the same shall devolve upon my daughter Mrs. Kavita Kanwar.”

Now, from the evidence on record and from the stand of the appellant, there is little to doubt that there had been several other assets of the testatrix apart from the said immovable property and the bank account.By virtue of the aforesaid residuary clause, all such other assets are bequeathed to the appellant. In the given scenario, two serious questions perforce acquire immediate attention. One that while making the application seeking probate, the appellant did not divulge all other assets which were to come in her hands by virtue of the said residuary clause of the Will in question.

Secondly, when there had not been any direction in the two page Will in question for making payment to anyone or parting with any movable to anyone, what had been the reason for the appellant making payment to different persons, including her own sons, the daughter of the attesting witness and the daughter of the respondent No. 1 apart from giving car to the daughter of the respondent No. 1 and jewelleries to the respondent No. 1 (as alleged in the written submissions before the10 In paragraph 8.2 herein before, we have reproduced the major contents of the application seeking probate with its Annexure-B wherein, only the said immovable property and the amount lying in the bank account were stated; and in paragraph 12 of the application, the appellant mentioned the immovable property as the only asset likely to come in her hands with the referred stipulations.

Both these questions on the conduct of the appellant onlythicken the suspicious circumstances surrounding the Will in question.

Neither Last nor Final Will:

On the other hand, as soon as the possibility of existence of such third page carrying the desire and directions of the testatrix about distribution of her other movable property is taken into account, the document Ex.PW1/H loses all its worth because it cannot be said the testatrix executed the same after understanding the meaning and purport of its contents. If she had the desire of distribution of movable property in a different manner and to different persons (as alleged by the appellant before the High Court), the aforesaid residuary clause would not have occurred in the Will in question at all. Secondly, if it is assumed that the testatrix issued separate directions about distribution of her assets de hors the Will then, the Will in question ceases to be her last Will.

Hence, to cap all the suspicious circumstances, the aforesaid equivocal stand of the appellant, as regards the third page of the Will and her assertion of having acted in accordance with the “directions” in the said third page of the Will, effectively knocks the entire case of the appellant down to the bottom. The suspicions arising because of the facts and factors noticed herein before, including the unnatural exclusion of the respondents from estate; uncertain and rather inexecutable stipulation about construction by the appellant for the purpose of the respondent No.1; active role played by the appellant in execution of the Will and yet seeking to avoid the factum of her role by incomplete and vague statements; and the witnesses having contradicted the appellant on material particulars etc.,have not only gone unexplained but are confounded beyond repair with such vacillating stand of the appellant regarding the said third page of the Will of the testatrix.

(As per the submissions made before the High Court, the appellant indeed carried out the directions contained in such third page of the Will.)

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Frivolous Public Interest Litigation must be avoided!

Writ Petition on false facts:

The entire judicial system has been unnecessarily brought into disrepute for no good cause whatsoever. It passes comprehension how it was, that the petitioner presumed, that there is an FIR lodged against any public functionary. There is an averment made in the writ petition that it is against the highest judicial functionaries; that FIR has been recorded. We do not find reflection of any name of the Judge of this Court in the FIR. There is no question of registering any FIR against any sitting Judge of the High Court or of this Court as it is not permissible as per the law laid down by a Constitution Bench of 5 Hon’ble Judges of this Court in the case of K. Veeraswami v. Union of India (1991) 3 SCC 655 wherein this Court observed that in order to ensure the independence of the judiciary the apprehension that the Executive being largest litigant, it is likely to misuse the power to prosecute the Judges. Any complaint against a Judge and investigation by the CBI if given publicity, will have a far reaching effect on the Judge and the litigant public. The need, therefore, is of judicious use of action taken under the Act. There cannot be registration of any FIR against a High Court Judge or Chief Justice of the High Court or the Supreme Court Judge without the consultation of the Hon’ble Chief Justice of India and, in case there is an allegation against Hon’ble Chief Justice of India, the decision has to be taken by the Hon’ble President, in accordance with the procedure prescribed in the said decision. Continue reading “Frivolous Public Interest Litigation must be avoided!” →

Restitution is a remedy against unjust enrichment or unjust benefit.

The concept of restitution is a common law principle and it is a remedy against unjust enrichment or unjust benefit. The court cannot be used as a tool by a litigant to perpetuate illegality. A person who is on the right side of the law, should not have a feeling that in case he is dragged in litigation, and wins, he would turn out to be a loser and wrongdoer as a real gainer, after 20 or 30 years.

It is a settled law that when there is stay of proceedings by court, no person can be made to suffer for no fault on his part and a person who has liability but for the interim stay, cannot be permitted to reap the advantages on the basis of interim orders of the court. In Amarjeet Singh v. Devi Ratan, (2010) 1 SCC 417, it was held that no person can suffer from the act of court and unfair advantage gained by a party of interim order must be neutralised. The Court should never permit a litigant to perpetuate illegality by abusing the legal process. It is the bounden duty of the court to ensure that dishonesty and any attempt to abuse the legal process must be effectively curbed and the court must ensure that there is no wrongful, unauthorised or unjust gain for anyone by the abuse of process of the court. No one should be allowed to use the judicial process for earning undeserved gains or unjust profits. The object and true meaning of the concept of restitution cannot be achieved unless the courts adopt a pragmatic approach in dealing with the cases. The Court observed: Continue reading “Restitution is a remedy against unjust enrichment or unjust benefit.” →

Consumer Law in India in 2019

Highlights of the provisions of Consumer Protection Act, 2019:

1. District forum is renamed as District Commission

2. The Opposite Party needs to deposit 50% of the amount ordered by District Commission before filing appeal before State Commission, earlier the ceiling was of maximum of Rs. 25,000/-, which has been removed.

3. The limitation period for filing of appeal to State Commission is increased from 30 days to 45 days, while retaining power to condone the delay.

4. State Commission shall have a minimum of 1 President and 4 Members

5. The original pecuniary jurisdiction of District Commission shall be uptil Rs. 1 Crore, State Commission from 1 Cr – 10 Cr. And NCDRC to be more than Rs. 10 crore

6. Now complainant can also institute the complaint within the territorial jurisdiction of the Commission where the complainant resides or personally works for gain besides what was provided earlier Continue reading “Consumer Law in India in 2019” →

Transfer of property by ostentatious owner

Right of Purchaser of property.

Sale without title.:

Facts of the case:

i) that the original plaintiff purchased the suit land by a registered sale deed dated 06.01.1990, executed by late Pranab Kumar Bora on payment of full sale consideration;

ii) that as on 06.01.1990, the suit land was ceiling surplus land and the government was the owner;

iii) that the land in question became ceiling free land on 14.09.1990;

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