Legal Awareness

An expression from Aristotle translated into Latin: nemo censetur ignorare legem (nobody is thought to be ignorant of the law) or ignorantia iuris nocet (not knowing the law is harmful).

Ignorantia juris non excusat or ignorantia legis neminem excusat (Latin for “ignorance of the law excuses not” and “ignorance of law excuses no one” respectively) is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely because one was unaware of its content.

PROVISIONS RELATED TO ARREST AND BAIL UNDER CRPC (Part2)

Chandni Joshi , , ,

PROVISIONS RELATED TO ARREST AND BAIL UNDER CRPC (Part2)

Link to Part 1

Bail under Section 436 of the Code

Sub-section (1): This section applies to only persons who are accused of committing a bailable offence. The presence of the word shall connote that it is mandatory that the person be let such a person out on bail. It is required that such a person seeking bail shall bring two persons as sureties and pay an amount as a bond. This is done to ensure such a persons’ appearance in court during his/her trial.

However, if such a person is unable to pay the specified sum of money or bring the sureties, bail will not be rejected. Such a person is termed as an indigent person. A person is said to be indigent when he is unable to give bail within a week of his arrest. The word appears in this section also includes a person who has voluntarily produced himself/herself before the court or police where no warrant or summons was issued. In Dharmu Naik v. Rabindranath Acharya, it was held that refusal to grant bail in contravention of this section will make the detention illegal and the police officer causing such detention may be held guilty of wrongful confinement under Section 342 of the Indian Penal Code.All you need to know about Preventive Arrest Laws in India - iPleaders

Sub-section (2): According to this subsection, if a person does not comply with the conditions of the bail-bond, the court can re-arrest such a person or issue a summons or a warrant. In Mohd. Shahabuddin v. State of Bihar, it was held that under no circumstances should the person be detained beyond the maximum period stated for the offence except when the delay is caused by the accused person itself.

Lastly, if the person accused is in detention for one half of the actual of his maximum punishment, the magistrate is to call upon the prosecution and hear their sides and on recording their reasons, either continue such a detention or release the person.

Bail under Section 437 of the code

When the offence committed is a non-bailable offence, it is upon the discretion of the Court and Police officer whether to grant bail or not. This Section deals with bails for non-bailable offences. The word may in this section connotes a certain level of discretion upon the court or the police officer granting such a bail.

The discretion which is applied should be exercised according to certain rules and principles as laid down by the code and also in line with Judicial decisions. There is no fixed rule which the court uses to determine their discretion. However, the probability of granting bail is inversely proportional to the gravity of the offence committed.

Discretion when applied to a court of justice, means sound discretion guided by law, it must be governed by law not humor and should not be arbitrary, vague and fanciful.

It is important to note that the object of detention during the criminal proceedings is not to punish the accused.

Following are a few accepted factors which the court take into consideration while granting bail in case of non-bailable offences:

  •         The severity of the punishment upon conviction,
  •         Danger of the accused absconding if granted bail,
  •         Probability of the accused tampering with witnesses and evidence if granted bail,
  •         The health, age and sex of the accused seeking such bail,
  •         The probability of the person committing more offences if released on bail, etc.

The above list is not at all exhaustive and the discretion varies from case to case. In Shahnawaz v. State of U.P, it was held that if a bail is granted to an accused by a bench then, another bench is not bound to grant bail to another similarly placed accused.

Subclause (3) states that the court can lay down certain conditions while granting bail to the accused which have to be strictly adhered to. These conditions can be imposed only by the Court and not by the police. It is important that such conditions are reasonable in nature. The conditions imposed should be such that are linked with the preventing the escape of the accused or preventing the accused from committing any further crime or such a condition in the interest of Justice.

In Mukeshbhai Nanubhai Patel v. State of Gujarat, the order of the Sessions Court granting bail on the condition that the accused should pay a certain amount, per month till the end of the proceedings was held incorrect. Further, seizure of passport and order to return dowry articles as a condition for grant of anticipatory bail was held to be incorrect by the Court.

Sub-clause (4) states that any officer or court releasing any person in a non-bailable offence is mandatorily required to record in writing the reasons for doing so. It has been held that this requirement helps the High Court or Court of Sessions to ascertain the correctness of such an order.

While releasing a person on bail there is always going to be a conflict between personal liberty of the accused and the societal interest at large. In Meenu Dewan v. State, it was held that, if the offence is of such a nature that affects the vital interest of the society and has adverse effects on social and family life of victims then, bail would not be granted.

Bail under Section 439 of Cr. P.C.

A person can move to the High Court or the Sessions Court to apply for bail under this Section only when he is in custody. In Naresh Kumar Yadav v. Ravindra Kumar, it has been held that a person is said to be in custody, within the meaning of this section only when he is in duress either because he/she is held by the investigation agency or other police or allied authority or is under the control of the court having been remanded by Judicial order, or having presented himself/herself to the court’s jurisdiction and submitted to its orders by physical presence.

The discretion granted to the High Court to grant bail is very wide and remains unfettered by Section 437 of the Code.

In Sanjay Chandra v. CBI, the followed points were clarified by the Supreme Court,

An accused is detained in custody not because of his guilt, but because there are sufficient probable grounds for the charge against him as to make it proper that he should be tried and because the detention is necessary to ensure his presence during trial.

While granting bail, three main elements are necessary to be considered, the charge, the nature of the evidence by which it is supported and the punishment to which the party will be liable if convicted.

Bail discretion, on the basis of evidence about the criminal record of the defendant is also of an exercise of relevance.

A person acquitted by the lower court for a grave offence, applying for bail at the High court will have a greater chance of getting bail as his chances of jumping the gauntlet of justice is much lesser as he already has confidence because of being acquitted once.

If the trial is to take a long period of time, it is not in the interest of justice that the accused are in jail for an indefinite period.

The accused should not be denied bail merely because of the sentiments of the community against bail. According to the law, the accused is innocent until he is proven guilty.

In A.K Gopalan v. State of Madras, it was held that the liberty of a citizen is undoubtedly important but this is to balance with the security of the community. A balance is required to be maintained between the personal liberty of the accused and the investigational right of the police.

While granting bail there is always going to be a conflict between the personal liberty of the accused which is his Fundamental Right under Article 21 versus the society being exposed to the misadventures of a person alleged to have committed a crime. Liberty exists in proportion to wholesome restraint, the more restraint on others to keep off from us, the more liberty we have.

Further, it has been held in Siddharam Satligappa Mhetre v. State of Maharashtra it was held, just as liberty is precious to an individual, is the interest of the society with respect to maintenance of peace, law and order. Both are equally important.

In State of U.P v. Amarmani Tripathi it was held that the following matters are to be considered while granting bail:

Whether there is any prima facie or reasonable ground to believe that the accused had committed the offence.

Nature and gravity of the charge

Severity of the punishment if convicted.

Danger of the accused absconding and fleeing if released on bail.

Likelihood of the offence being repeated by the accused if released on bail and

Reasonable apprehension of the witnesses being tampered with if the accused is granted bail.

In Sundeep Kumar Bafna v. State of Maharashtra, it was discussed, For the application of this section, it is necessary that the person seeking bail is in custody. Custody under this section includes when a person is arrested by the police, brought before a magistrate or when the magistrate orders remand to judicial or other custody. It is important to note that a person is said to be in (Judicial) custody even when he/she surrenders in court and submits to its direction.

Further, it was held that, if the magistrate disallows bail, the accused can move the Court of Sessions for the same. There is no such provision in the Code that prohibits a High Court from hearing a bail application and subsequently granting bail provided such a person is in custody.

Bail under Section 389 of the Code

This section can be invoked for granting bail under three circumstances: The person seeking for release of bail is already convicted for an offence, The person is in confinement and Such a person’s appeal against the conviction is pending.

This section is wide enough to include the hearing of the appeal seeking bail of a person who is convicted for an offence, punishment is life imprisonment or death. If the court accepts such an appeal and releases such a person, the prosecution is entitled to file an application for the cancellation of such a bail.

In Manu Sharma v. State (NCT of Delhi), it was held that while applying its discretion to hear such an appeal for bail, the court should inter alia consider the following things:

  •         Whether prima facie ground is disclosed for substantial doubt about the conviction and
  •         Whether there is any likelihood of unreasonable delay in the disposal of such an appeal.

An important feature of this section is that while exercising its power under this section, the appellate court can suspend the execution of the sentence as well as the conviction pending an appeal preferred by a convicted person, Held in V. Sundarami Reddy v. State. In addition to this, in Gopal v. State of M.P, it was held that the application for bail and the suspension of sentence under Section 389 is a class by itself maintainable only in a pending appeal. This is an essential component of the appeal.

The time taken by a court to dispose-off a case has to also be taken into consideration while granting bail. In Jadeja Ajitsinh Natubha v. State of Gujarat, it was held that as long as the appellate court is not in a position to hear the appeal of the accused regarding bail, within a reasonable timeframe, the court should, in the normal course release the accused on bail unless there are other valid reasons for doing otherwise. However, in Rabindra Nath Singh v. Rajesh Ranjan, it was held that the delay in hearing the appeal by itself is not a sufficient ground to grant bail.

In Khilari v State of U.P, it was held that irrespective whether the offence is bailable or non bailable, the discretion of releasing the person on bail lies in the discretion of the appellate court and this discretion is to be exercised judicially. Further, the appellate court is required to record the reasons for bail.

Bail under Section 395 of the Code

This section shall be invoked when there is a question of the Constitutional validity of any Act, regulation or Ordinance. A mere plea raised by a party challenging the validity of an act is insufficient for invoking this section and making a reference to the High Court. There should be a valid, substantial ground that challenges the validity of any Act for invoking this section. Before a lower court makes a reference to the High Court under this Section, it is required to record its reasons for doing so.

In line with this Section, Article 228 of the Constitution of India also empowers the High Court to withdraw a particular case from the subordinate court and take authority of such a case and dispose of it after hearing it.

Sub-section (2) of this Section specifies that only the Court of Sessions or the Metropolitan Magistrate have the power to make a reference to the High Court. Further, in Emperor v. Molla Fuzla Karim, it was held that such a reference can be made to the High Court only when there is a question of law and not of fact.

Section 397 of the Code

Under this section, the High Court or the Court of Sessions may call upon for the record of any proceedings before any inferior criminal court for the purpose of examining and satisfying itself as to the correctness and legality of any order passed by such an inferior court. The inferior court should be within the jurisdiction of the High Court.

In Purshottam v. State, it was held that the object of revisional jurisdiction is to confer upon the superior Criminal Courts a kind of supervisory jurisdiction. In case the superior court finds any flaw in the legality or correctness of the order passed by an inferior court within its jurisdiction, Sections 398 to 401 empower the Superior courts to pass an order correcting such flaws.

For the purpose of this section, the High Court is superior to the Court of Sessions. Hence, the High Court is empowered to call upon the records of any proceedings which were conducted In the Court of Sessions. However, in Ismat Sara v. State of Karnataka, it was held, that a magistrate holding an enquiry under section 176 of the code does not function as a Criminal Court and hence, the records of such an enquiry cannot be called upon by the High Court for the purpose of re-examination under Section 397.

Sub-section (2) of the Code disallows the practice of revisional power in relation to any interlocutory order passed in any appeal, inquiry or trial. This is done with the object of speeding up the disposal of criminal cases.

In K. Sudhakaran v. State of Kerala, it was held that revision petitions against interlocutory orders would not only delay justice but also at times defeat it. Interlocutory order has not been defined by the Code. In the normal course, interlocutory order is an order which is passed at some intermediate stage of a proceeding to advance the cause of justice with respect to the final determination of the rights between the parties.

Bail under Section 360 of the Code

This section is a piece of beneficent legislation as it empowers the court to release an accused who has been convicted on the basis of good conduct under certain circumstances. The object of this section is to avoid sending the first offender to prison for an offence which is not of a serious nature. This enables a hope of reducing the risk of turning such an offender into a regular criminal.

Sub-section (1) of section 360, Criminal Procedure Code, deals with the power of a court or a Magistrate of the second class specially empowered by the State Government in this behalf, to release a convicted offender on his entering into a bond, with or without sureties, to appear and receive sentence when called upon during such period (not exceeding three years) as the Magistrate may direct, and in the meantime to keep the peace and be of good behaviour.

The Magistrate thus has discretion either to punish the offender with imprisonment or release him on probation of good conduct. This section tries to reform the criminals by treating them leniently only in those cases where there is no serious danger or threat to the society.

In Hari Singh v. Sukhbir Singh, the learned judge held, the court is to use this discretion in respect to probation judicially, and having regard to the age, character and antecedents of the offender and the circumstances in which the offence was committed. The main of this section is to prevent youngsters from being committed to jail, where they may associate with hardened criminals, who may lead them further along the path of crime and further ruin their life due to bad influence, who may have committed the crime through ignorance or inadvertence, held in Jamal Haq v. State of Tripura

Probation cannot be claimed as a matter of right. This provision lays a discretion upon the Court as to whether to grant probation or not. It is important to note that even if all the conditions as specified under sub-section (3) are fulfilled the convict cannot claim probation as a matter of right.

Anticipatory Bails

The Code of Criminal Procedure (1898) did not contain any specific provision of anticipatory bail. The Law Commission of India, in its 41st Report dated September 24th 1969 pointed out the necessity of introducing a provision in the code of Criminal Procedure enabling the High Court and the Court of Sessions to grant Anticipatory bail.

The necessity of granting anticipatory bail arises mainly because of two reasons:

Sometimes influential persons try to implicate their rivals in false cases for the purpose of disgracing or for other mala fide intentions by getting them detained in jail for some days.

Where the likelihood of the person absconding or misusing the liberty is very insignificant.

The Indian Penal Code and Code of Criminal Procedure operates on the premise of innocent until guilty. Hence, unless there is a very strong reason to detain the person in jail before the actual conviction such a person is not detained.

Section 438 lays down the procedure for anticipatory bail. When an order of Anticipatory bail is passed by the court, what happens is that in the event of arrest at a future date, the person will be granted bail. In other words, it is a bail in the anticipation of an arrest in the near future. This section can be invoked only before the person is arrested. For invoking this section, there should be a strong belief that the said person is going to be arrested.

The belief of such a person should be on tangible grounds. This section can be invoked not only when the arrest is apprehended at the hands of the police but also when the arrest is apprehended at the instance of the magistrate. Anticipatory bail can be issued only by passing an interim order. It is mandatory for the person applying for anticipatory bail to be present in court during the final hearing of the application.

According to the Law Commission Report (41st Law Commission Report, page 321), it was stated that the need for this provision is that sometimes it is possible that influential persons with their power would try to fraudulently implicate any person in false causes to disgrace them or for malice by getting them detained in jail. This section works as a shield for such persons who are likely to be detained.

Sub-clause (2) of this section uses the words as it may think fit implying that the judges have a wide discretion with respect to granting anticipatory bail. According to the 48th Law Commission Report (page 10), it has been stated that the directions can be issued only for reasons to be recorded, and if the court is satisfied that such a direction is necessary for the interest of justice.

Initially, in the general course, an application for anticipatory bail had to be first filed In the court of Sessions and then the High Court. However, in Chendrasekhar Rao v. Y.V Kamala kumari it was clarified that an application under Section 438 could be pleaded directly in the High Court, without taking recourse to the Court of Sessions.

Section 438 has a very wide scope. If the offence is non-bailable it is immaterial whether the offence is cognizable or non-cognizable. Further, in B. Kuppa Naidu v. State an anticipatory bail was granted to a person who was accused of committing an offence under the Custom Laws. This shows the wide scope of this Section that it can be invoked not only for offences under the IPC but other codes too. Anticipatory bail can even be granted to a person who is accused of committing a crime has punishment is that of life imprisonment or death.

Gurbaksh Singh Sibbia v. State of Punjab is a landmark case with respect to anticipatory judgement. A constitution bench had passed this judgement.

Following are the pointers of this case:

The difference between a normal bail and an anticipatory bail – The normal bail is granted after the arrest whereas, an anticipatory bail is granted before the arrest. Anticipatory bail is granted in anticipation of an arrest.

There is no restriction on granting anticipatory bail merely because the alleged offence is punishable with imprisonment for life or death.

The imminence of a likely arrest founded on a reasonable belief can be shown to exist even when a FIR is not yet filed. Which is to say that the registration of an FIR is not a condition precedent for applying for anticipatory bail.

Mere fear of being arrested is not a sufficient ground for invoking this section. There have to be substantive grounds.

It is true that the discretion to grant anticipatory bail is to be exercised with care and circumspection. However, it is not true to say that this power to grant anticipatory bail should be exercised only in exceptional cases.

The limitations imposed in Section 437 on granting of bail is not completely implicit in Section 438.

The High court or Sessions Court cannot leave the question behind with respect to anticipatory bail for the decision of the magistrate under Section 437. The High Court must use its own mind to check whether a case has been made out for granting such relief.

Considering the antecedents of the accused, if it appears that he will take advantage of the anticipatory bail and flee from justice, the judge would not pass the order.

In Masroor v. State of U.P, it was held that even though the judges have a wide discretion to grant anticipatory bail, if they do grant, they should mandatorily record the reasons for doing so. The conditions mentioned in sub-section (2) are not exhaustive and the courts may impose other conditions too.

The duration of the effectiveness of the anticipatory bail is not mentioned in this section. As soon as the person is enlarged on bail on the directions of the Anticipatory bail order, it would be deemed by implication that the bail was granted under Section 437.

However, in C.H Siva Prasad v. State of A.P, it was held that the bail shall be effective until the conclusion of the trial, unless it is cancelled by the court taking action under section 437(5) or under Section 439(2) of the code on the grounds known to law and filing of Challan in the court is by itself no ground to cancel the bail.

In Afsar Khan v. State by Girinagar Police, Bangalore, 1992 Cr.LJ 1676, Karnataka High Court observed, A reading of the entire Chapter which deals with the provisions relating to bail, does not say that when a person is released on bail, the Court can also insist upon him to give cash security. After all, the object of granting bail is to see that the liberty of an individual is extended. Of course, when an accusation is made against a person, in the event of his release, it is the duty of the Court to see that the interest of the State and the public is safeguarded. For that purpose, the Court is empowered to insist upon the appearance of the accused whenever so required either by the Police or Court either for investigation or to take up trial. During this period the Court can also warn the accused of his activities or movements in any way causing a fear or resulting in tampering with the prosecution evidence.

While the Court exercises its discretion, whether it is under S. 437 or 438 or 439, it shall exercise the same properly and not in an arbitrary manner. The discretion exercised shall appear a just and reasonable one. It is true that no norms are prescribed to exercise discretion. Merely because, norms are not prescribed for the Court to exercise discretion under Ss. 437, 438 or 439 that does not mean the discretion shall be left to the whims of the Court. Guiding principle shall be as indicated earlier with sound reasoning and in no way opposed to any other law. The Legislature has given this discretion to the Court keeping full faith in the system of administration of justice. While administering justice; it is the duty of the Court to see that any order to be passed or conditions to be imposed shall always be in the interest of both the accused and the State. The conditions shall not be capricious. On the other hand, it shall be in the aid of giving effect to the very object behind the discretion.

Difference between bailable and non-bailable offence

Non-bailable

If the offence committed is non-bailable, the police officer cannot himself grant bail to the accused. Only the magistrate can authorize the bail in a non-bailable offence. An offence is said to be non bailable and when the punishment for it is more than 3 years. It is to be noted that just because the offence is non-bailable does not mean that the person accused will not be granted bail at all. In such cases it is up to the discretion of the court as to whether to grant bail or not.

Bailable

In a bailable offence, the police officer in charge has the power to grant bail to the person accused. An offence is said to be bailable when the punishment for that offence is less than 3 years. It is the right of the accused to be released on bail in a bailable offence. This right is subject to certain conditions which will be discussed later in this paper.

 CONCLUSION

An arrest of a person is a procedure where the liberty of a person is restrained to apprehend him for the commission of a crime. This may also be done in case of suspicion so that the alleged offender could be presented in court. It is important to arrest lawbreakers to ensure peace, law and order in the society. Usually, it is the police which arrests a person but in certain situations, private persons or a Magistrate are also empowered to arrest a person. The Magistrate has the power to order the arrest of a person and under certain situations also order the custody of such a person. Whereas a private person shall hand over the person arrested to the police or nearest police station as soon as possible. He shall take into consideration various factors before arresting an offender as it could be dangerous. Further, after the arrest of the person, the private person should follow the necessary protocol. They need to have a presence of mind as they are not trained to deal with such situations. Although it is dangerous for private persons to arrest offenders, they can do a commendable job by stopping an offender from getting away before the arrival of the police. 

Bail is an important check and balance to ensure that no innocent person is punished until proven guilty. But the complicated system of bail in the country’s criminal law system often fails to appreciate it. Grant or refusal of bail depends on factors that are remotely connected with the merit of the case. The recommendations of the Law Commission in its 268th report on bail reforms are important and they should be implemented so that a  fair and transparent system of bail evolves in our criminal law system. This would go a long way in upholding the rights of life and liberty enshrined in the Indian Constitution.

Radio Chip and Competition Law(Competition Act)

Chandni Joshi , , ,

Radio Chip and Competition Law(Competition Act)

Introduction

Most smartphones have chipsets installed in them that provide integrated wireless services, such as Bluetooth, Wi-Fi, and Radio services. However, the telecom service providers and mobile companies disable this feature, due to which we cannot avail radio services on our handsets. This may be because, unlike other apps that charge subscription fee, radio services are available free of cost. Due to which mobile companies cannot charge any commission from them. In Indian context, this move of the mobile companies can raise serious questions from competition law point of view because this ‘concerted practice’ has become a widely followed trend. As a result, neither the pre-existing, nor the new entrants are providing radio services on the handsets, which is ultimately hampering consumer welfare. Additionally, it is creating barriers for radio service providers thereby denying market access to them.Guest Post] Competition Act, 2002: An Overview of Competition Law in India by Prakhar Bhardwaj | Law Notes

Aiming to rectify the damage caused to consumers by restricting access to a free of cost service provider i.e. the radio, the US and the Canadian government insisted the enabling of the radio-chip feature installed in the phones. It is crucial to provide radio services in mobile phones because radio travels way farther than an LTE broadcast. Especially, in emergencies, it makes it much easier to get a signal, and reaching as many people as possible.  Relevantly, it is also free and can be accessed without the use of cellular data and hence consumes lesser battery and provides wider opportunities to consumers.

Anti competitive Practices?

In United States, telecommunication services are governed by the Federal Communications Commission (FCC). Likewise, in India, Telecom regulatory Authority of India (TRAI) along with Department of Telecommunications (DoT) and Ministry of Information and Broadcasting (MIB) regulate telecom and radio services. However, it is absolutely the company’s prerogative, whether to enable the radio chips in handsets or not. Therefore, in this article the author questions the activities of mobile companies in India.  

Almost all handsets in India have radio chips installed in them but the mobile companies opt to disable them due to various reasons such as rise in demand for mobile streaming apps, leading to very low demand for FM services. However, it is also criticised that the mobile companies are intentionally trying to keep FM service providers out of the market and are denying proper market access to them. This act of mobile companies can be adjudged as anti-competitive, by following ways:

  1. Tacit collusion: however there exists no proof of any express agreement between the mobile companies to exclude radio service providers from the market, but it can also be looked at from the concerted action of each individual mobile company. To explain it better, In the case of Interstate circuit v. US (1969), there were two kinds of theatres functioning in the US, First-run theatres and Subsequent-run theatres. The first-run theatres got into an agreement with each individual distributor to impose price restrictions on the subsequent-run theatres in order to drive them out of the market. Subsequently, concerted action among competitors for section 1 can be inferred from evidence that each gave its assent to the same proposal and adhered to it knowing that concreted action was contemplated and invited at least where they stood to suffer financial loss absent unanimous action.

Therefore, even though there was no express agreement between the distributors but it was held that their exists and tacit agreement amongst them as all of them were agreeing making sure that all of them agrees. It was also noted that, all the distributors were acting against their self interest as if anyone of them would not have agreed with the conditions then they would have gained larger market access and subsequently would have earned larger profits. This act was held to be anti-competitive.

Similarly, in the present case, although there exists no evidence of express agreement between mobile companies but they have tacitly agreed to disable radio services from their handsets in order to drive private radio service providers from the market of providing entertainment and tele broadcasting services. It won’t be completely wrong to assume that this act is done to promote other OTT applications, to name a few: Jio Saavan, Spotify, Jio News, which provides similar services to the consumers. This act of mobile companies is anti-competitive as it is denying market access to the radio service providers and is also hampering consumer welfare by barring them from using free radio services. Likewise, they are also acting against their individual self interest because if any one of the mobile company would have allowed radio services on their handsets, their demand would have rose in comparison of others as other manufacturers are not providing the same service. But in the present case, all the major market players in the mobile industry opted for disabling the same and is therefore anti-competitive.

  1. Public welfare: “Amidst the ruins and in the face of an emergency, the radio is often the first medium for survival” says Irina Bokova, Director-General of UNESCO. “It’s durability is an incomparable advantage, often enabling it to resist shocks and re-transmit messages of protection and prevention to as many people as possible, better and faster than other media, saving lives.”

In Indian context, whether it be the super cyclone of Orissa in 1999, or the killer Tsunami, 2004, or the Kosi floods in Bihar in year 200, radios have acted like a lifeline and played a crucial role during various natural disasters. During the Uttarakhand crisis, when all the mobile towers were shattered, the radio headquarters in Delhi started an SMS service for relatives of the victims to pass on plain or voice messages for broadcasting them over radio.

Keeping the safety of public during emergencies, TRAI also recommended DOT to mandate GPS in phones in order to trace exact locations of individuals in need. Similarly, after the Delhi gangrape case, DOT in its report of April, 2016 mandated the Panic button/ Emergency call feature in every smartphone, which automatically calls the police on the multiple tapping of lock button in handsets. Likewise, during natural calamities when mobile towers are also shattered, radios can function without the use of internet and can help in providing necessary news to the people who require urgent help.

Consumer Welfare as the Goal of Competition Policy 

Consumer welfare is generally defined as the maximisation of consumer surplus, which is the part of total surplus given to consumers. This is realised through, ‘direct and explicit economic benefits received by the consumers of a particular product as measured by its price and quality’.

The consumer welfare model argues that the ultimate goal of competition law should be to prevent increases in consumer prices, restriction of output or deterioration of quality due to the exercise of market power by dominant firms. Competition policy generally has as its aim to increase the overall material welfare of society through maintaining rivalry among firms. The ultimate goal is to increase overall economic efficiency while providing consumers with a fair share of this total wealth. While society’s total welfare is usually the ultimate goal of competition policy it is rarely its exclusive goal. Competition policy usually focuses on a specific reconciliation of the overall interest of society with the particular interests of consumers. The difference between competition policies lies in the particular way in which they reconcile these interests. Whether a given competition policy strives to achieve pure economic goals, in particular economic efficiency, or whether it includes non-economic goals, like income distribution, diffusion of economic and political power or fostering business opportunity, as well depends on the economic goals of the political system it is part of. Three approaches are possible. First, competition policy may ignore consumer interests and focus solely on total welfare and economic efficiency. Second, it may recognise the immediate and short-term interests of consumers as the primary aim of competition policy. Third, competition policy might recognise consumer welfare as an essential long-term goal where the immediate interests of consumers are subordinated to the economic welfare of the society as a whole.

Merger Cases 

It is in merger cases that the balancing of efficiencies and anticompetitive effects is the most explicit and therefore the outcome of competition enforcement depends very much on the chosen welfare standard. This has been illustrated by Williamson’s famous trade-off model.The consumer welfare standard is concerned with direct welfare of the purchasers in the relevant output market. While a competition authority operating on the basis of the total welfare standard makes full trade-offs between consumer and producer benefits in merger cases, a competition authority pursuing the consumer welfare standard does not weigh producer benefits against consumer losses. In this sense it favours consumers to producers. The total welfare standard considers transfers from consumers to producers as not being harmful from an efficiency point of view. There are several relevant questions: does the total welfare standard favour producers to the disadvantage of consumers, does the consumer welfare standard have a distributional bias in favour of consumers, and, ultimately, which welfare standard leads to more efficient market performance? 

In other words, does it matter which welfare standard is applied and do they lead to significantly different results in terms of welfare? The following alternative welfare standards imply that the actual outcome of merger decisions depend more on the way a given welfare standard is enforced than on the fact which welfare standard has been chosen as the basis of the competition policy.

Conclusion

The market for mobile phones in India is driven by few major players, namely Xiaomi, Samsung, Vivo & Oppo. Quarter2 results of 2019 shows 52% of the total sales followed by Quarter3 results of 2020 shows that around 50% of the total sales of mobile phones is grabbed by the later 3 companies which also have a radio chip installed in them but would need an external application to run that radio. Here, the companies are using their collective dominance in the market of mobile phones to leverage into the market of telecommunication and thereby fabricating the purpose of radios and providing advantage to OTT platforms.    

Notification of an Act in the Official Gazette- A Prerequisite

Chandni Joshi ,

Notification of an Act in the Official Gazette- A Prerequisite

 

Introduction

 

Notification in the legal terminology refers to a publication in the official gazette, the legal newspaper of a country that publishes the text of new laws, decrees, regulations, treaties, legal notices and court decisions. Most of the acts contain a clause that necessitates its notification in the official gazette by an organ of the government without which, the act cannot come into force. The following article aims to scrutinise the clause, its constitutional validity and the consequences and possible course of action in the event of the failure to notify such an act.

It also looks at section 243 of the IBC, a classic instance of the same and analyses its possible aftermath.

Government Work Suspension on December 26 | Official Gazette

 

Section 5 of the General Clauses Act 

 

Section 5 of the General Clauses Act states that 

  1. Where a central act is not expressed to come into operation of a particular day, it shall come into force on the day it receives the assent of the 
    1. Governor General in the case of an act made before the commencement of the constitution. 
    2. President in the case of an act before the act of the parliament.
  2. Unless contrary expressed, an act would come into operation immediately on the expiration of the day preceding its commencement.

Section 5 is only applicable when the act, in any of its provisions, does not expressly provide for a date of commencement. The words ‘unless the contrary is expressed’ in section 5(3) simply mean that only when such an express provision is not stated will the act come into force on the date it received presidential assent. In such cases, the act is said to be enacted on the night immediately before it receives the assent of the president.

 

Constitutional Validity of Delegating Legislative Functions

 

The practice of upholding the constitutional validity of provisions delegating legislative functions dates back to Privy Council Decisions. Post independence, in the case of Re Delhi Laws Act (1951), The judges unanimously accepted these decisions, permitting conditional legislation by the legislature to an outside agency.

As held by a ratio of 3:2 in the case of AK Roy, provisions necessitating the publication of such an act in the official gazette is neither contradictory to, nor ultra vires to the constitution of India. Such provisions merely regulate  the manner in which the act or provisions are brought into force. There is no harm in the constitutional body itself appointing a specific date on which the act comes into force. The law making agency does not lose its power by empowering or conferring upon another organ of the State such as the executive to bring a legislation into force. 

 

Whether publication in the gazette is mandatory?

 

Acts containing a provision empowering the state government to appoint a date to notify the same in the official gazette cannot come into force unless the same is complied with. Further, as long as the acts do not contemplate different dates of its commencement, the obvious intention of the legislature is to let the State Government appoint the date of the same. This principle is not unique to India; It can be seen in the legal practices of England as well as France where ‘promulgation’ or reasonably and publicly enacting an act to make it known to the public is an important aspect of enforcing an act. Similarly, it was also held in Atar Singh v. State of Allahabad that though the Arms Act was passed by the parliament and received the assent of the president, it did not become a law until its notification was issued and published in the official gazette. This stance was reiterated while deciding the date of enforcement of the Arbitration and Conciliation Act, Karnataka Industrial Areas Development Act and Nagaland Work-Charged and Casual Employees Regulation Act, 2001. 

Therefore, publication of such notifications in the official gazette is mandatory and such acts come into force only from such date of notification in the gazette.

Whether a writ of Mandamus directing the government to notify a statute can be issued?

It was held in the case of A.K. Roy that such provisions leave the question of the time within which such provisions should be brought into force to the unfettered judgement of the body entrusted to do so and hence, it was not for the court to cue the Central Government to act in a particular manner upon a matter that was left entirely to its discretion. An order of mandamus on the ground that the government has failed to act would create an anomaly in the sense that it would be equally permissible that the time was not yet ripe for notifying such an act. Unless the parliament lays down an objective standard or test directing the central government to act in a prescribed time limit, it is impossible for the judiciary to examine the cause of inaction.

However, in the case of Aeltemesh Rein v. Union of India, it was held that while it may not be open to the court to issue a writ of mandamus compelling the central government to bring a statutory provision into force, issuing a mandamus directing the government to consider whether the time for bringing an act into force is not hinged upon. Considering the fact that more than two decades had passed since the act had received president’s assent, a writ of mandamus was issued to the Central Government to consider within a period of six months whether the act should be brought into force or not. 

Be that as it may, if the executive intent behind delaying the notification of such an act is based on bonafide considerations and delays, neither a mandamus to bring the act into force nor a mandamus to prescribe a time limit for the same can be issued. 

Notification of Insolvency and Bankruptcy Code

Section 243 of the Insolvency and Bankruptcy code in its clause 1 states that the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920 are hereby repealed. Its sub-section 2 begins with a non-obstante clause, stating that all proceedings pending under the two acts immediately before the commencement of the shall continue to be governed by those acts. Similarly, any order, rule, notification, regulation, appointment, conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceeding taken, instrument executed or issued, or thing done under or in pursuance of any repealed enactment shall, if in force at the commencement of this Code, continue to be in force, and shall have effect as if the aforementioned Acts have not been repealed.

However, this particular section of the IBC has not been notified in the official gazette yet; therefore, the Ministry of Finance advised stakeholders to pursue their insolvency cases under existing laws rather than approaching debt-recovery tribunals. Sub section 2 of the act makes it very clear that pending proceedings under the acts repealed will be continued in accordance with the same provision. The non obstante clause in section 243 would mean that once notified, this code would override these acts. This might be one reason why the section has not been notified yet. 

The concluding and prevailing position of law therefore, is that if there is any initiation of proceedings under the IBC, it would effectively put the pending proceedings as well under the ambit of IBC. These proceedings will then not be governed under the Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act 1920.

Conclusion

From a thorough reading of the cases listed above, it can be concluded that clauses necessitating the publication of the notification in the official gazette are constitutionally valid and need to be complied with. Further, as long as the executive government does not unreasonably delay the publication of the same without any well-founded reasons, writ of mandamus cannot be issued. However, if the delay is unreasonable, the court can issue a writ of mandamus directing the executive organ to decide a time limit within which such an act must be notified.

Written by – Jhanvi Shah 

Edited By – Aaditya Bhatt Advocate, Chandni Joshi Advocate 

DIVORCE,  MAINTENANCE AND APPEALS UNDER THE HINDU MARRIAGE ACT

Chandni Joshi , , ,

DIVORCE,  MAINTENANCE AND APPEALS UNDER THE HINDU MARRIAGE ACT

 

Introduction

 

India is a country with a plethora of ethnicities and religions. Not surprisingly, it has developed different personal laws for communities residing therein. The Hindu Marriage Act was enacted in 1955 with the purpose of codifying and streamlining various religious specific practices that existed among Hindus, Buddhits, Jains, Sikhs and anyone domiciled in India who was not a Muslim, Christian, Parsi or Jew. It defines the conditions for a marriage, establishes the grounds for divorce, provides for maintenance and lays down the laws governing appeal to decrees and orders passed under this act.

This article aims to scrutinise mental cruelty and desertion as grounds for divorce, factors relevant for determining the amount of maintenance and the general rules applicable in appealing a decree passed under the Hindu Marriage Act.List of stages in a contest divorce proceedings and the grounds for divorce - iPleaders

 

Divorce 

 

Section 13 (1) of the Hindu Marriage Act allows for the dissolution of marriage on the grounds of adultery, cruelty, desertion, religious conversion and insanity.

  1. CRUELTY

Cruelty may be mental or physical. Section 12(1)(ia) states 

‘Any marriage solemnized, whether before or after the commencement of this act, may on a petition presented by either the husband or the wife, be dissolved by a decree of divorce on the ground that the other party has, after the solemnization of the marriage, treated the petitioner with cruelty.’

Cruelty is a conduct that inflicts such acute mental pain, agony and suffering that it makes it impossible for the other party to live with the other. It includes, but is not limited to abusive behaviour, humiliation, torture, allegation on the character of the spouse and undergoing a vasectomy or such procedures without the consent of spouse. It necessitates wilful cruel treatment of the party in a manner rendering continued living together of the spouses harmful and injurious.

Mere coldness or lack of affection, trivial irritations, quarrels, normal wear and tear of the married life cannot be adequate to invoke the grounds of mental cruelty. Similarly, mere outings and meetings with the opposite gender cannot be reasonably placed under acts of mental cruelty by inferring adulterous relationships from the same. On the contrary, such uncorroborated and untruthful allegations of infidelity themselves serve as acts of cruelty. 

 

In Vishal singh v. Priya and Anr., the husband alleged his newly wedded wife of mental cruelty through her ‘rude’ behaviour after marriage, her picking up quarrels with family members, keeping herself secluded and showing disinclination to participate in household chores. However, the court held that such conduct can, in no stretch of imagination, be described as cruel treatment. Mere trivial irritations, quarrels, normal wear and tear of the married life which happens in day to day life would not be adequate for grant of divorce on the ground of mental cruelty.

 

  1. DESERTION

 Under explanation to Section 13(1), desertion is defined as the desertion of the petitioner by the other party to the marriage without reasonable cause and without the consent or against the wish of such party, and includes the wilful neglect of the petitioner by the other party to the marriage. It requires two essential elements:

  • Factum deserendi – The presence of the fact of separation. This would be drawn from the facts and circumstances of the case. 
  • Animus deserendi– The intention to bring the cohabitation to an end. This entails the absence of consent of the spouse or the absence of conduct resulting in such a cause of action.

The mere fact that the parties were living separately is not sufficient to establish desertion. There must be a definite intention to put an end to marital obligations. In instances where the wife is maltreated by the husband and lives in a non congenial environment, desertion cannot be inferred from the mere fact that she left the husband’s house. Desertion is a total repudiation of marital obligations and cannot include trivial matters. 

 

 

Maintenance

 

A wife is eligible to claim maintenance post divorce as well as during the divorce proceedings  in order to meet her financial expenditure on basic amenities. A husband may fulfil these obligations either in the form of a lump sum amount or in the form of a fixed monthly amount.Section 25 of the Hindu Marriage Act states that 

‘If an application is made to the court by either the husband or the wife, the respondent shall pay to the applicant for maintenance and support such gross sum or such monthly or periodical sum for a term not extending the life of the applicant and having regards to the respondent’s own income and other property and income and other property of the applicant, it may seem to the court to be just and any such payment may be secured, if necessary, by a charge on the immovable property of the respondent.’

 However, this maintenance amount awarded must be reasonable and realistic. Albeit the cort should ensure that it’s not exorbitant and unbearable on the husband, it should not be too meagre that it drives the wife to penury. 

Maintenance should be calculated on the basis of status of the parties, reasonable wants of the claimant, income and property of the claimant, number of persons he/she has to maintain, amount that suffices the applicant to live in a similar lifestyle as he/she enjoyed in the matrimonial home, non-applicant’s liability, provisions for food, clothing, shelter, education, medical attendance and treatment etc. of the applicant, Payment capacity of the non-applicant.

In Vejendla Sugunamma and Ors. vs. Vejendla Irmeiah and Ors. (15.04.2021 – APHC) : MANU/AP/0453/2021, where the wife did not know any skill and specialised work to earn her livelihood and was given the custody of her daughter, the court fixed the amount of maintenance to be Rs. 8000 per month each. However, the maintenance for the daughter was only until she got married/employed. 

In Jaiveer Singh vs. Sunita Chaudhary (05.04.2021 – DELHC) : MANU/DE/0621/2021, the wife was unable to sustain herself and needed maintenance from her husband. Looking at the financial state of the husband, the court ordered the amount of maintenance to be fixed at Rs. 17,000/- per month.

In Neelam vs. Yashpal (08.03.2021 – DELHC) : MANU/DE/0493/2021, despite their own earning of Rs. 2000 per month, the party was entitled to permanent maintenance of Rs. 1,16,000/-, keeping in view the increasing prices of essential goods.

 

Appeal to a decree of divorce 

 

An appeal to a decree of divorce should be made within the limitation period. Limitation period refers to a time period within which a legal action can be brought about by a party. It begins when the cause of action arises. 

The limitation period for appealing against a decree under the Hindu Marriage Act was extended from thirty days to ninety days by Act 50 of 2003. This was pursuant to various judgements by courts that pointed out that the time period of 30 days prescribed for filing the appeal are insufficient and inadequate, considering the potential distance, geographical conditions, the financial position of the parties and therefore, a minimum period of 90 days may be prescribed for filing the appeal against any judgment and decree under the Act and any marriage solemnised during the aforesaid period be deemed to be void.

 

 

Conclusion 

 

Therefore, it is evident that Indian Legal system acknowledges and upholds the sanctity of marriage by setting up a high threshold for establishing cruelty and desertion. Further, it also allows for a reasonable amount of maintenance to be granted to either party in cases where he/she is not able to maintain him/herself. Lastly it provides a 90 months period of limitation to parties for challenging decrees of divorce. The very objective of setting up such a period is that a party cannot ‘sleep over their rights’.Therefore, it is only prudent to initiate legal actions as soon as the cause of action arises. 

 

Written by – Jhanvi Shah 

Edited By – Aaditya Bhatt Advocate, Chandni Joshi Advocate 

Applicability of Limitation Act 1963, in Insolvency and Bankruptcy Code, 2016.

Chandni Joshi ,

Applicability of Limitation Act 1963, in Insolvency and Bankruptcy Code, 2016.

Introduction:

The Limitation Act, 1963 is the Act which governs the time period within which one can file a suit to sue another to get justice. If the suit is filed after the expiration of the time period as  specified in this act, thus, it will be barred by limitation. It also includes  provisions for condonation, delay etc.The first Limitation Law was established in 1859 which came into operation in 1862. The law of limitation developed in stages and finally took the form of Limitation Act in 1963. It was enacted on 5th October, 1953 and came into force from 1st January, 1964.

Inapplicability Of Limitation Act To Insolvency And Bankruptcy Code?

Objectives of The Limitation Act, 1963:

The main objective of The Limitation Act,1963 is to provide a specific time frame within which a person can file a suit in a court. If such legislation is not enacted then it will lead to never ending litigation as the person could file a suit for the  cause of action which was done many years back. In other words the law of limitation aims to protect the lengthy process of penalising a person indirectly without an offence. In N. Balakrishnan vs M. Krishnamurthy,it was held by the Hon’ble Supreme Court that the Limitation Act 1963 is based upon public policy which is used for fixing the lifespan of a legal remedy for the purpose of general welfare.

 

The Limitation Act, 1963 signifies that it does not make any racial or class distinction since both Hindu and Muslim Law are now available under the law of limitation as per the existing statute.The major purpose of the Act is not to destroy or infringe the rights of an aggrieved person but to serve the public in a better way and to save time.This statute is basically founded on the public policy for fixing a life span for the legal actions which are taking place and to seek remedy in time with the purpose of general welfare and moreover it helps in avoiding the unexplainable delay and latches in a suit.

 

The Insolvency & Bankruptcy Code 2016 (“IBC”), enacted to address the troubling shortcomings in existing staggered insolvency laws in India and to bring them under one umbrella, is set up to face a monumental challenge and equally monumental expectations.According to the data available with the World Bank in 2016, insolvency resolution in India takes around 4.3 years on average, compared with the United Kingdom (1 year), USA (1.5 years) and South Africa (2 years). India was ranked 135th/190 countries in the World Bank Ease of Doing Business Index 2015 on the ease of resolving insolvency. Thus it is apparent that the Code is perhaps one of the most critical legislations introduced in recent years impacting the ease of doing business in India. The Insolvency and Bankruptcy Code 2016, enacted to radically change the process of insolvency resolution in India, is keenly watched by economists and jurists as well as businessmen and investors, for the reason that each aspect of the implementation of law has the potential to critically impact the ease of doing business in India. For this reason, the Code is especially sensitive to interpretation and it is vital that the issues thrown up in its inaugural year of implementation be recognized and the judicial remark on the same be understood. The present article thus traces the emerging jurisprudence of the Code through judgments of the Supreme Court of India and the National Company Law Appellate Tribunal and Applicability of Limitation Act 1963 in The Insolvency & Bankruptcy Code 2016 (“IBC”).

 

Is the Limitation Act 1963 applicable to The Insolvency & Bankruptcy Code 2016 (“IBC”) ?

 

The Insolvency and Bankruptcy code 2016 was passed on Lok sabha on 5th May 2016 and Rajya sabha on 11th May 2016 and received assent of the President on 28.05.2016 and it has come into force from 5th of August 2016. But the code was initially silent on the aspect of limitation. Because the code was silent on this aspect, different interpretations from different quarters have emerged.  Since the code was silent on this aspect, National company law Appellate Tribunal  held that the limitation act1963, is not applicable to the Insolvency and Bankruptcy code 2016. This question was first came in the case of M/s Neelkanth Township and construction  Pvt ltd Vs Urban Infrastructure Trustees ltd wherein the Hon’ble National Company Law Appellate Tribunal has categorically held that Limitation Act 1963 is not applicable to the The Insolvency & Bankruptcy Code 2016 (“IBC”). The reason attributed by the appellate authority is that the code is not meant for recovery but it is meant for resolution of stressed assets. The aspect of recovery will commence only if the resolution process ends in failure. Hon’ble National Company Law Appellate Tribunal has held that application under section 7,9,10 of the IBC 2016 can be filed even after the limitation period is over. The same opinion was reaffirmed by the Hon’ble National Company Law Appellate Tribunal in the case of M/s Black Pearls Hotel Pvt ltd Vs Planet M Retail ltd. In this case the Operational creditor has filed an application under section 9 of Insolvency Bankruptcy Code, 2016. But the Adjudicating authority has dismissed the application on the ground that the application was barred by a period of limitation. On appeal against the order of Hon’ble National Company Law Tribunal, Hon’ble National Company Law Appellate Tribunal  has held that the code has come into force on 1st December 2016. Therefore the right to file an application under this code comes from 1st December 2016 and not before that date. Hon’ble National Company Law Appellate Tribunal went on to add that even if it is accepted that the Limitation Act 1963 is applicable to the code, then article 137 of the limitation Act is applicable. As per article 137, the time period for filing an application ,where no specific period is provided under other provisions of Limitation Act, the article provides a period of three years from the date in which the right to file the application accrues. Therefore the operational creditor will get the right to file an application under section 9 of the Insolvency Bankruptcy Code, 2016 with effect from 01.12.2016 for a period of three years. Since in this case the operational creditor has filed an application within three years from commencement of code. Hence Hon’ble National Company Law Appellate Tribunal has held that the order of Hon’ble National Company Law Tribunal is not in order and allowed the application. 

 

On careful analysis of the following provisions, the hope of applicability of Limitation Act 1963 to Insolvency and Bankruptcy 2016 arises.

Section 60(6) of Insolvency and Bankruptcy code 2016  lays down: 

 

“Notwithstanding anything contained in the Limitation Act or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.”

 

Similarly as per provisions of Section 433 of the companies Act 2013, it says “The provisions of the Limitation Act 2013 shall as far as may be, apply to proceedings or appeals before the Tribunal or the appellate Tribunal as the case may be”.

 

Finally Insolvency & Bankruptcy Code (Amendment) Ordinance, 2018 (“Ordinance”) settled uncertainty regarding the applicability of Limitation Act 1963 over proceeding under the Insolvency and Bankruptcy Code 2016 (“Code”). The Ordinance introduced a new section 238 A to the Code, which categorically states that provision of Limitation Act would be applicable to proceedings before the Adjudicating Authorities and Appellate Authorities under the Code.

 

In the case of M/s BK Educational Services Private Limited v Parag Gupta and Associates, a dispute regarding liability arose between Parag Gupta & Associates, chartered accountants (the financial creditors) and BK Educational Services Private Limited (the corporate debtor). The corporate debtor, while denying the financial liability, contended that all but one financial claim was false and that the records were tampered and manipulated by the relatives of the financial creditors. Further, the amounts claimed were time-barred and there was nothing on record that would extend the limitation to recover the amount since the period was between 2012 and 2013.The order was challenged before Hon’ble National Company Law Appellate Tribunal by the financial creditors and Hon’ble National Company Law Appellate Tribunal held that the Limitation Act provisions were not applicable for the commencement of the corporate insolvency resolution process under the IBC and further passed the order to accept the application for initiation.

 

On appeal, while setting aside the Hon’ble National Company Law Appellate Tribunal order, Hon’ble Supreme Court held that an application filed after the IBC came into force in 2016 cannot revive a debt which is no longer due as it is time-barred. The expression “debt due” in the definition sections of IBC means debts that are “due and payable” in law, i.e., the debts that are not time-barred. Since the Limitation Act is applicable to applications filed under sections 7 and 9 of the IBC from inception, article 137 of the Limitation Act is evoked, which provides the period of limitation in case of “any other application for which no period of limitation is provided elsewhere” as three years from the time when the right to apply accrues.

 

“The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under article 137 of the Limitation Act, save and except in those cases where, on the facts of the case, section 5 of the Limitation Act may be applied to condone the delay in filing such applications.

 

The present appeals are concerned with Section 238A of the Insolvency and Bankruptcy Code, 2016 (“Code”), which was inserted by the Insolvency and Bankruptcy Code (Second 1 Amendment) Act, 2018 with effect from 06.06.2018. The said Section is as follows: 

 

“238A. Limitation.—The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.”

 

The question raised by the appellants in these appeals is as to whether the Limitation Act, 1963 will apply to applications that are made under Section 7 and/or Section 9 of the Code on and from its commencement on 01.12.2016 till 06.06.2018 i.e. since commencement of code and until new section 238 A was inserted. In all these cases, the Appellate Authority has held that the Limitation Act, 1963 does not so apply. Even on the assumption that Article 137 of the Limitation Act, 1963 is attracted to such applications, in any case, such applications being filed only on or after commencement of the Code on 01.12.2016, since three years have not elapsed since this date, all these applications, in any event, could be said to be within time. 

 

In view of the settled principle, while we hold that the Limitation Act, 1963 is not applicable for initiation of ‘Corporate Insolvency Resolution Process’, we further hold that the Doctrine of Limitation and Prescription is necessary to be looked into for determining the question whether the application under Section 7 or Section 9 can be entertained after long delay, amounting to laches(latches means that opposite party’s position will deteriorate due to delay in claiming the rightful remedy in a court of law within a reasonable period of time)  and thereby the person forfeited his claim. . If there is a delay of more than three years from the date of cause of action and no laches on the part of the Applicant, the Applicant can explain the delay. Where there is a continuing cause of action, the question of rejecting any application on the ground of delay does not arise.Therefore, if it comes to the notice of the Adjudicating Authority that the application for initiation of ‘Corporate Insolvency Resolution Process’ under section 7 or Section 9 has been filed after long delay, the Adjudicating Authority may give opportunity to the Applicant to explain the delay within a reasonable period to find out whether there are any laches on the part of the Applicant.The stale claim of dues without explaining delay, normally should not be entertained for triggering ‘Corporate Insolvency Resolution Process’ under Section 7 and 9 of the ‘I&B Code’. . However, the aforesaid principle for triggering an application under Section 10 of the ‘I&B Code’ cannot be made applicable as the ‘Corporate Applicant’ does not claim money but prays for initiation of ‘Corporate Insolvency Resolution Process’ against itself, having defaulted to pay the dues of creditors.By reason of this finding, the order of the Tribunal was set aside, and the matter was remanded for a hearing on all points other than the point of limitation. . Learned counsel appearing on behalf of the appellants have argued, relying upon the Report of the Insolvency Law Committee of March, 2018, that the object of the Amendment Act which introduced Section 238A into the Code was to clarify the law and, thus, Section 238A must be held to be retrospective.

 

They also referred to and relied upon the  definitions under Sections 3(11), 3(12), and Section 5(6) of the Code, which, when contrasted with Section 3(6), would show that though “claim” in Section 3(6) refers to a right to payment, the definitions of “debt” and “default” in Sections 3(11) and 3(12) respectively, refer to liability or obligation in respect of a claim which is “due” and this being the case, a time-barred debt cannot be said to be “due” so as to trigger the Code.The learned counsel further attacked the Appellate Tribunal judgment by stating that an application filed in 2017 under Section 7 or 9 of the Code, praying that the Code be triggered for a debt that has become time-barred long back, say in 2011, would lead to absurdity as it could never have been the intention of the legislature to resuscitate stale and dead claims leading to the drastic consequence of the taking away of the management of the corporate debtor, which may ultimately result in its corporate death.

 

Also, according to learned counsel for the appellants, if one were to read the definition of “Adjudicating Authority” in Section 5(1) of the Code, together with Sections 408, 424 and 433 of the Companies Act, 2013, it would become clear that proceedings before the Hon’ble National Company Law Tribunal (“NCLT”) arising under the Code would be covered by the Limitation Act via Section 433 of the Companies Act from the very inception or commencement of the Code. According to them, it is important to remember that the Eleventh Schedule to the Code, which made amendments in various Acts, did not introduce the limitation provision of the Companies Act so as to govern the Code as it was unnecessary, as Section 433 applied vide Section 5(1) of the Code read with Section 408 of the Companies Act.

 

In Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company (India) Ltd. Hon’ble Supreme Court held that the proceedings under section 7 of the IBC are “an application” and not “suits”; thus they would fall within the residuary article 137 of the Limitation Act 1963 and the right to apply will arise from the date of default. 

 

It was again reiterated by the Hon’ble Supreme Court in Jignesh Shah & Anr. vs. Union of India & Anr that the right to apply under the Insolvency & Bankruptcy Code 2016 will be from the date of default and not from the date of enactment of the IBC i.e. 01.12.2016.

 

Hon’ble National Company Law Appellate Tribunal considering the Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr. held that the period of three years from the date of the Account of Corporate Debtor is classified as NPA then it becomes impermissible to proceed with Section 7 Application as observed in the para 11 of the Judgment. All these lead to reiterate that the provisions of The Limitation Act, 1963 vide Section 238A of the I&B Code, 2016 will be applicable to all NPA cases provided they meet the criteria of Article 137 of the Schedule to The Limitation Act, 1963. The extension for the period of Limitation can only be done by way of application of Section 5 of The Limitation Act, 1963, if any case for the condonation of delay is made out.

 

Author: Adv. Sneh Purohit

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi

Demand Notice under the Insolvency and Bankruptcy Code, 2016

Chandni Joshi , ,

Demand Notice under the Insolvency and Bankruptcy Code, 2016

 

Introduction

The Insolvency and Bankruptcy code, 2016 (IBC) is a consolidation of all existing insolvency laws in India. The code provides a time bound and expedited process for resolving insolvency and bankruptcy cases in India. It was introduced in 2015 by the former finance minister of India, Late Arun Jaitley. The Code proposes two separate tribunals to oversee the process of insolvency resolution namely:

  1. The National Company Law Tribunal
  2. The Debt Recovery Tribunal

Format Of Section 8 Demand Notice Under IBC 2016 - Registrationwala

Demand Notice under IBC

Section 8 of the Insolvency and Bankruptcy Code, 2016, as mentioned below, lists down the procedure to be followed by an operational creditor in case of default by the debtor.

  1. (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed

(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor—

(a) existence of a dispute, if any, and record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;

(b) the repayment of unpaid operational debt—

(i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or

(ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.

Explanation: For the purposes of this section, a “demand notice” means a notice served by an operational creditor to the corporate debtor demanding repayment of the operational debt in respect of which the default has occurred.

The IBC Code, 2016 mandates it for an operational creditor (complainant) to send a demand notice to the debtor in question before initiating corporate insolvency resolution proceedings.

An “operational creditor” is further defined under Section 5(20) as follows:

(20) “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;

LANDMARK JUDGEMENTS

In the 2017 case of Macquarie Bank Limited vs Shilpi Cable Technologies Ltd, the Supreme Court settled the law pertaining to two important issues mentioned below.

Firstly, whether the provision under Section 9 (3)(c) of the Code which mandates that in order to trigger CIRP against the Corporate Debtor, “”a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor.” is it mandatory or not?

And secondly, whether a demand notice of an unpaid Operational Debt under Section 8 can be issued by a lawyer or an authorized representative on behalf of the Operational Creditor?

Clarifying about the provisions mentioned under Section 9(3)(c), the Supreme Court observed that, “it is equally clear that a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor is certainly not a condition precedent to triggering the insolvency process under the Code. The expression “confirming” makes it clear that this is only a piece of evidence, albeit a very important piece of evidence, which only “confirms” that there is no payment of an unpaid operational debt. This becomes clearer when we go to sub-clause (d) of Section 9(3) which requires such other information as may be specified has also to be furnished along with the application.”

This issue is specifically relevant to the foreign operational creditors who could not maintain accounts with the recognized financial institutions and thus were prevented from initiating the insolvency proceedings since such institutions were unable to produce the requisite certificate.[1]

In reference to the second issue, the Supreme Court noted that, “Section 8 of the Code speaks of an operational creditor delivering a demand notice. It is clear that had the legislature wished to restrict such demand notices being sent by the operational creditor himself, the expression used would perhaps have been “issued” and not “delivered”. Delivery, therefore, would postulate that such notice could be made by an authorized agent. In fact, in Forms 3 and 5 extracted hereinabove, it is clear that this is the understanding of the draftsman of the Adjudicatory Authority Rules, because the signature of the person “authorized to act” on behalf of the operational creditor must be appended to both the demand notice as well as the application under Section 9 of the Code. The position further becomes clear that both forms require such authorized agent to state his position with or in relation to the operational creditor. A position with the operational creditor would perhaps be a position in the company or firm of the operational creditor, but the expression “in relation to” is significant. It is clear, therefore, that both the expression “authorized to act” and “position in relation to the operational creditor” go to show that an authorized agent or a lawyer acting on behalf of his client is included within the aforesaid expression. A conjoint reading of Section 30 of the Advocates Act, 1961 and Sections 8 and 9 of the Code together with the Adjudicatory Authority Rules and Forms thereunder would further yield the result that a notice sent on behalf of an operational creditor by a lawyer would be in order.”

Another landmark judgement was delivered by the Supreme Court in the case of Alloysmin Industries Vs. Raman Casting Pvt. Ltd. on the issue of delivery of a demand notice. It was held that, “If the demand notice under Section 8 (1) is served on Corporate Debtor either on its Registered Office or its Corporate Office, it should be treated to be valid service of notice under Section 8 and application under Section 9 on failure of payment, if filed after 10 days, is maintainable.”

The case of Sandesh Ltd vs. Realm Media Solutions Pvt. Ltd. divulges into the issue of ignorance by the corporate debtor of the demand notice. The appellant rightly issued a demand notice before initiating CIPR against the debtor. No reply being received, the appellant filed a case under the Code. After NCLT rejected the application on the ground that there is no proof that the notice was delivered to the ‘Corporate Debtor’ at the registered office, the appellant issued fresh notice to the current address of the debtor. The appellant further published the notice in two newspapers but failed to get an acknowledgement from the respondent. After this incident, the NCLAT held that, “the Respondent is deliberately avoiding the service of notice and the stand taken by the Appellant that the Respondent is deliberately avoiding to receive the Demand Notice u/s. 8(1) of the Insolvency & Bankruptcy Code (I&B Code) is correct. In the circumstances, we hold that the Demand Notice u/s. 8(1) of the Insolvency & Bankruptcy Code (I&B Code) deemed to have been served on the Respondent and thereby the application u/s. 9 was maintainable.”

AUTHOR: VISMITA RATHI

 

[1] https://www.mondaq.com/india/insolvencybankruptcy/670620/demand-notice-under-section-8-of-the-insolvency-and-bankruptcy-code-2016-can-be-filed-by-lawyer-on-behalf-of-the-operational-creditor-provision-under-section-93c-of-the-code-is-not-mandatory

RECOVERY OF DUES AND REFUND OF CUSTOM DUTY AND INTEREST UNDER CUSTOMS ACT, 1962

Chandni Joshi , ,

RECOVERY OF DUES AND REFUND OF CUSTOM DUTY AND INTEREST UNDER CUSTOMS ACT, 1962

INTRODUCTION

Customs duty is determined in terms of section 15 or section 16 of the Customs Act, 1962 in respect of imported or export goods. If the duty paid / levied is found to be less than due, the importer or exporter is required to pay the short levied / non levied or short paid / non paid amount of duty. In this regard, the Customs Act, 1962 empowers officers to issue a demand cum Show Cause Notice for recovery of the amount of duty short levied/ non levied from the importer/exporter. The Show Cause Notice is then adjudicated by the appropriate authority. 

Section 28 of the Customs Act, 1962 provides for the recovery of arrears and section 142 of the Act empowers the department to take coercive actions. 

On import or export of goods, at times, it is found that duty has been paid in excess of what was actually leviable on the goods. Such excess payment may be due to lack of information on the part of importer/exporter or non-submission of documents required for claim of lower value or rate of duty. Sometimes, such excess payment of duty may be due to shortage/short landing, pilferage of goods or even incorrect assessment of duty by Customs. In such cases, refund of excess amount of duty paid can be claimed by the importer or exporter. If any excess interest has been paid by the importer/exporter on the amount of duty paid in excess, its refund can also be claimed. Section 26 of the Customs Act, 1962 prescribes provision for refund of export duty, Section 26A of the Customs Act, 1962 deals with refund of import duty in certain cases and Section 27 of the Customs Act, 1962 prescribes claim for refund of duty in case of excess payment duty on importation. 

This article would throw light on the recovery of arrears and refund of custom duty and interest under the Customs Act of 1962. Customs Law and Procedures - Bhatt & Joshi Associates

LEGAL PROVISIONS FOR RECOVERY OF ARREARS

The main statutory provisions dealing with recovery of arrears in Customs are as follows:- 

(i) Section 28 of the Customs Act, 1962 provides for recovery of any duty which has not been levied or has been short levied or erroneously refunded or if any interest payable has not been paid, part paid or erroneously refunded by way of issue of demand and pursuing with the importer/exporter.

(ii) In case recovery is not effected under section 28, section 142 of the Customs Act, 1962 further empowers department to take coercive actions such as deducting any amount payable to the defaulter, restraining any movable or immovable property or referring the case to district collector for recovery of the dues as if it were an arrear of land revenue.

(iii) The process of recovery of arrears starts with confirmation of demand against the defaulter importer/exporter and includes a number of appellate forums wherein importer/exporter as well department can go for appeal.

 

PROCEDURE FOR RECOVERY OF ARREARS OF CUSTOMS

  • Section 28 of the Customs Act, 1962 provides for recovery of any duty which has not been levied or has been short levied or erroneously refunded or if any interest payable has not been paid, part paid or erroneously refunded provided a notice demanding such duties/interests is issued within the time limit specified in that Section. Where the short levy is by reason of collusion or any willful misstatements or suppression of facts by the Importer the period for issuing the demand notice is five years from the relevant date specified in Section 28.
  • When the short levy is discovered or pointed out by Audit, a notice is served on the importer or the persons chargeable with duty to show cause as to why the amount due should not be recovered from him. Normally a period of 15 days is given to show cause why he should not pay the amount The basis and the working of the short levy is required to be clearly stated in the Show Cause Notice. Copies of relied upon documents are also furnished to the notice, to enable him to represent his case. All such notices are required to be sent by Registered Post or given to the Agent under receipt/acknowledgement after being entered in the less charge demand register maintained in the respective sections of the Custom House.
  • It is important that the demand should be served on the importer within the time limit under section 28 of the Customs Act as otherwise the demand shall become time barred and legally not recoverable. In the case of IAD or CRA objections, demands are issued immediately on receipt of the objection wherever it appears that there may be a short levy of duty as indicated in the objection.
  • Demands issued for short levy of duty as a result of audit objection, arising out of assessment etc. are to be finalised within 6 months from the date of issue of the demands and cases which could not be finalised should be reviewed for examining the reasons for delay and adopting suitable remedial measures.
  • Upon receipt of the reply from the Notice the matter is examined in detail and the Notice is offered an opportunity of Personal Hearing to explain his case before the adjudicating authority. After the Personal Hearing the adjudicating authority shall examine the material placed before him and shall come to the conclusion after taking into consideration the provisions of Law concerning the issue Generally, the issues involved are misdeclaration of the description of the goods resulting in wrong classification and levy of lesser duty, misdeclaration of value, quantity and weight having a bearing on duty, calculation error resulting in short levy of duty, non inclusion of certain components of value in the assessable value etc.
  • The adjudicating authority is required to take an independent decision as an quasi-judicial authority and pass appropriate orders either determining the amount of short levy in terms of section 28 (2) of Customs Act or dropping the proceedings where it is found that there–is no short levy in either case an appealable order is to be issued by the adjudicating authority. The duties, fines and penalties imposed, if any, are required to be paid immediately, unless the party files an appeal and obtains a stay from the competent authority.
  • As regards breach of condition of the notification after availing of the exemption thereunder, it has been held by the Apex Court that the obligation under a notification is a continuing one and the Customs authorities are well within their power to recover the duty whenever it comes to their notice that the importer has failed to fulfil the conditions. In such cases the demand can be issued irrespective of the time factor and the amount can be recovered in terms of the provisions of the Customs Act.
  • The confirmed demands are enforced and recoveries effected in accordance with the provisions under Section 142 of Customs Act, 1962. Where it is not possible to recover the amount by adjusting against any money which the department owes to such persons, or by detaining and selling any goods belonging to such persons which are under the control of the Department, action is initiated to recover the Government dues through the District Collector as if it were an arrears of land revenue. Powers are also vested with Customs for attaching/detaining and selling any movable or immovable property belonging to/or under control of such person, and these can also be resorted to.

REFUND OF CUSTOMS

The refund of any duty and interest, can be claimed either by a person who has paid the duty in pursuance to an order of assessment or a person who has borne the duty. Any person claiming refund of any duty or interest, has to make an application in duplicate in the form as prescribed in the Customs Refund Application(Form) Regulations, 1995, to the jurisdictional Deputy/Assistant Commissioner of Customs. Such application is to be made before the expiry of six months from the date of payment of duty and interest. However, in case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, application for refund can be made before the expiry of one year from the date of payment of duty and interest. The application for refund is required to be filed with documentary or other evidence including documents relating to assessment, sales invoice and other like documents to support the claim that the duty and interest was paid in excess, incidence of duty or interest has not been passed on by him to any other person, and the refund has not been obtained already. Where on scrutiny, the application is found to be complete in all respects, the Customs issues an acknowledgement in the prescribed Form as per the Customs Refund Application(Form) Regulations, 1995. However, in case the application is found to be incomplete, the Customs has to return the application to the applicant, pointing out the deficiency. The applicant has to re-submit the application after making good the deficiency, for scrutiny by Customs again for admissibility of the refund claim.

PROCESSING OF REFUND CLAIM

The application of refund found to be complete in all respects by Customs, is processed to see if the whole or any part of the duty and interest paid by the applicant is refundable. In case, the whole or any part of the duty and interest is found to be refundable, an order for refund is passed. However, in view of the provisions of unjust enrichment enshrined in the Customs Act, the amount found refundable has to be transferred to the Consumer Welfare Fund. Only in following situations, the amount of duty and interest found refundable, instead of being credited to the Consumer Welfare Fund, is to be paid to the applicant:

  1. if the importer has not passed on the incidence of such duty and interest to any other person;
  2. if imports were made by an individual for his personal use;
  3. if the buyer who has borne the duty and interest, has not passed on the incidence of such duty and interest to any other person;
  4. if amount found refundable relates to export duty paid on goods which has returned to exporter as specified in section 26;
  5. if amount relates to drawback of duty payable under section 74 and 75;
  6. if the duty or interest was borne by a class of applicants which has been notified for such purpose in the Official Gazette by the Central Government.

INTEREST ON DELAYED REFUND

The Customs has to finalize refund claims immediately after receipt of the refund application in proper form along-with all the documents. In case, any duty ordered to be refunded to an applicant is not refunded within 3 months from the date of receipt of application for refund,  the appliant shall be paid to that applicant interest at such rate, [not below five per cent] and not exceeding thirty per cent per annum as is for the time being fixed. The interest is to be paid for the period from the date immediately after the expiry of 3 months from the date of receipt of such application till the date of refund of such duty. For the purpose of payment of interest, the application is deemed to have been received on the date on which a complete application, as acknowledged by the proper officer of Customs, has been made. Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal or any Court against an order of the Assistant Commissioner/Deputy Commissioner of Customs, the order passed by the Commissioner (Appeals), Appellate Tribunal or by the Court, as the case may be is deemed to be an order for the purpose of payment of interest on delayed refund. The interest on delayed refund is payable only in respect of delayed refunds of Customs duty and no interest is payable in respect of deposits such as deposits for project imports, security for provisional release of goods etc.

INDIAN JUDGMENTS ON REFUND UNDER CUSTOMS ACT, 1962

The Hon’ble Supreme Court in the case of Priya Blue Industries Ltd v. Commissioner of Customs (Prev.), held that “Once an Order of Assessment is passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an Appeal that Order stands. So long as the Order of Assessment stands the duty would be payable as per that Order of Assessment. A refund claim is not an Appeal proceeding. The Officer considering a refund claim cannot sit in Appeal over an assessment made by a competent Officer. The Officer considering the refund claim cannot also review an assessment order” 

In the case of Vimal Alloys Pvt. Ltd v. Commissioner of Customs, held that the amount paid by the importer could not be said to be duty. At best it was a deposit converted into duty. In that view, refunds filed beyond the prescribed period could not be said to be time-barred.

In the Case of Southern Petrochem. Indus. Corpn. Ltd. v. Collector of Customs, held that “ It is now well settled that the refund claim cannot be enlarged before the Appellate Forum after the expiry of statutory period under Section 27 of the Customs Act. Therefore, we have to reject the claim of the appellants for refund of additional duty and CV duty as available under Notification No. 132/88-C.E. as being a fresh claim, which is inadmissible in law, as having been made beyond the prescribed time limit under Section 27 of the Act

The Hon’ble Tribunal larger bench in the case of DCM Shriram Consolidated Ltd. v. Commissioner of Customs, held that “though refund claim was filed on 22-4-1997 the assessment was finalized on 16-2-2001 only and the refund, if any, has become due to them only from that date. Thus, interest, if any, will be payable from 3 months after 16-2-2001 and not from 22-4-1997 as at that time no refund was due to the Applicants.

PROCEDURE OF CUSTOMS UNDER CUSTOMS ACT, 1962

Chandni Joshi , , ,

PROCEDURE OF CUSTOMS UNDER CUSTOMS ACT, 1962

INTRODUCTION:

Customs is an authority or tax collection wing appointed by the Government in every country for controlling and for collecting of tax on the flow of goods into and out of a country. ‘Customs Duty’ refers to the tax imposed on the goods when they are transported across the international borders. Custom Duty is an indirect tax, imposed under the Customs Act formulated in 1962. Following are the types of customs duty in India, 

  • Basic Customs Duty (BCD)
  • Countervailing Duty (CVD)
  • Additional Customs Duty or Special CVD
  • Protective Duty,
  • Anti-dumping Duty

The power to enact the law is provided under the Constitution of India under the Article 265, which states that ―no tax shall be levied or collected except by authority of law. Entry No. 83 of List I to Schedule VII of the Constitution empowers the Union Government to legislate and collect duties on import and exports.

The primary objective behind levying customs duty is to safeguard each nation’s economy, jobs, environment, residents, etc., by regulating the movement of goods in and out of any country. It is also to minimise the smuggling of demerit goods such as cigarettes and alcoholic beverages across borders since these items are usually highly taxed and their tax rates may also vary significantly across borders. The Quantum of Customs duty in India depends upon the provisions of Customs Act, 1962 and Customs Tariff Act, 1975 and related Customs Rules, Notifications, Circulars, case Laws and Annual Union Finance Acts. The Customs Act, 1962 is the principal act which governs entry or exit of different categories of vessels, aircrafts, goods, passengers etc., into or outside the country. The Act extends to the whole of India.

Indian Government Planning To Hike Customs Duties On Electronics - Gizbot News 

All goods imported into India have to pass through the procedure of customs for proper examination, appraisal, assessment and evaluation. This helps the custom authorities to charge the proper tax and also check the goods against the illegal import. Import and export of goods into and outside a country should undergo a customs clearance process. The importer and exporter of the goods should submit valid documents to clear this process. In this article, we look at some of the major steps and processes in clearing customs in India. Goods are imported in India or exported from India through sea, air or land. Goods can come through post parcels or as baggage with passengers. Procedures naturally vary depending on mode of import or export. Procedures discussed in this are applicable for imports by sea, air or land.

PROCEDURES FOR IMPORT:

Bill of entry:

Goods imported into the country attract Customs duty and are also required to confirm relevant and corresponding legal requirements. Thus, unless the imported goods are not meant for Customs clearance at the port/airport of arrival such as those intended for transit by the same vessel/aircraft or transshipment to another Customs station or to any place outside India, detailed Customs clearance formalities have to be followed by the importers. In contrast, in terms of Section 52 to 56 of the Customs Act, 1962, the goods mentioned in the IGMor Import Report for transit to any place outside India or meant for transshipment to another Customs station in India are allowed transit without payment of duty. In case of goods meant for transshipment to another Customs station, simple transshipment procedure has to be followed by the carrier and the concerned agencies at the first port/ airport of landing and the Customs clearance formalities have to be complied with by the importer after arrival of the goods at the other Customs station where goods are intended to be delivered to the importer. There could also be cases of transshipment of the goods after unloading to a port outside India. For this purpose, a simple procedure is prescribed and no duty is required to be paid. 

Self-assessment of imported and export goods: 

Section 17 of the Customs Act, 1962 provides that an importer entering any imported goods under section 46 or an exporter entering any export goods under section 50 shall self-assess the duty. Thus, under self-assessment, it is the importer or exporter who will ensure that he declares the correct classification, applicable rate of duty, value, benefit of exemption notifications claimed, if any, etc. in respect of the imported / export goods while presenting Bill of Entry or Shipping Bill. In cases, where the importer or exporter is not able to determine the duty liability or make self assessment for any reason, except in cases where examination is requested by the importer under proviso to Section 46(1), a request shall be made to the proper officer for provisional assessment of duty under Section 18 (1)(a) of the Customs Act, 1962. In such a situation an option is available to the proper officer to resort to provisional assessment of duty by asking the importer / exporter to furnish security as deemed fit for payment of the deficiency, if any, between the duty as may be finally assessed or reassessed, as the case may be, and the duty provisionally assessed.

Examination of Goods:

All imported goods are required to be examined for verification of correctness of description given in the bill of entry. However, a part of the consignment is selected on a random selection basis and is examined. In case the importer does not have complete information with him at the time of import, he may request for examination of the goods before assessing the duty liability or, if the Customs Appraiser/Assistant Commissioner feels the goods are required to be examined before assessment, the goods are examined prior to assessment. The importer has to request for a first check examination at the time of filing the bill of entry or at data entry stage. The reason for seeking First Appraisement is also required to be given. On the original copy of the bill of entry, the Customs Appraiser records the examination order and returns the bill of entry to the importer/CHA with the direction for examination, who is to take it to the import shed for examination of the goods in the shed. Shed Appraiser/Dock examiner examines the goods as per examination order and records his findings. 

After assessment by the appraising group or for cases where examination is carried out before assessment, a bill of entry needs to be presented for registration for examination of imported goods in the import shed. The proper officer of customs examines the goods along with requisite documents. The shipments, found in order are given clearance order by the proper officer of customs in the Import Shed.

Execution of Bonds:

Wherever necessary, for availing duty free assessment or concessional assessment under different schemes and notifications, execution of end use bonds with Bank Guarantee or other surety is required to be furnished. These have to be executed in prescribed forms before the assessing Appraiser.

Payment of duty:

The duty can be paid in the designated banks or through TR-6 challans. Different Custom Houses have authorised different banks for payment of duty. It is necessary to check the name of the bank and the branch before depositing the duty. Bank endorses the payment particulars in challan which is submitted to the Customs.

Amendment of Bill of Entry: 

Bonafide mistakes noticed after submission of documents, may be rectified by way of amendment to the Bill of Entry with the approval of Deputy/Assistant Commissioner. The request for amendment may be submitted with the supporting documents. 

Prior Entry for Bill of Entry:  

For faster clearance of the goods, provision has been made in section 46 of the Act, to allow filing of bills of entry prior to arrival of goods. This bill of entry is valid if a vessel/aircraft carrying the goods arrives within 30 days from the date of presentation of the bill of entry. The importer is to file 5 copies of the bill of entry and the fifth copy is called Advance Noting copy. The importer has to declare that the vessel/aircraft is due within 30 days and they have to present the bill of entry for final noting as soon as the IGM is filed. Advance noting is available to all imports except for into the bond bill of entry and also during the special period.

Bill of Entry for bond/warehousing:

A separate form of Bill of Entry is used for clearance of goods for warehousing. All documents, as are required to be filed with a Bill of Entry for home consumption are also required with the Bill of Entry for Warehousing which is assessed in the same manner and duty payable is determined. However, since duty is not required to be paid at the time of warehousing, the purpose of assessing the duty at this stage is only to secure the duty by way of execution of Bond. The duty is paid at the time of ex-bond clearance of goods for which an Ex-Bond Bill of Entry is filed. In terms of Section 15 of the Customs Act, 1962, the rate of duty applicable to imported goods cleared from a warehouse is the rate in- force on the date of filing of the Ex-Bond Bill of Entry. 

 

PROCEDURE FOR EXPORTS:

Shipping bill: 

For clearance of export goods, the exporter has to obtain an Importer- Export Code (IEC) number from the DGFT prior to filing of Shipping Bill. Under the EDI System, IEC number is received online by the Customs System from the DGFT. The exporter is also required to register authorized foreign exchange dealer code (through which export proceeds are expected to be realized) and open a current account in the designated bank for credit of Drawback incentive, if any. All the exporters intending to export under the export promotion scheme need to get their licenses etc. registered at the Customs Station. For such registration, original documents are required. 

Waiver of GR form: 

Generally the processing of Shipping Bills requires the production of a GR form that is used to monitor the foreign exchange remittance in respect of the export goods. However, there are few exceptions when the GR form is not required. These exceptions include export of goods valued not more than US $25,000/- and export of gifts valued upto Rs.5 lakhs. 

Arrival of goods to the dock:

The goods brought for the purpose of examination and subsequent ‘let export’ are allowed entry to the Dock on the strength of the checklist and other declarations filed by the exporter in the Service Center. The Port authorities have to endorse the quantity of goods actually received on the reverse of the Checklist.

Customs examination of export goods:

After the receipt of the goods in the dock, the exporter/CHA may contact the Customs Officer designated for the purpose present the check list with the endorsement of Port Authority and other declarations as aforesaid along with all original documents such as, Invoice and Packing list, AR-4, etc. Customs Officer may verify the quantity of the goods actually received and enter into the system and thereafter mark the Electronic Shipping Bill and also hand over all original documents to the Dock Appraiser of the Dock who many assign a Customs Officer for the examination and intimate the officers’ name and the packages to be examined, if any, on the check list and return it to the exporter or his agent. The Customs Officer may inspect/examine the shipment along with the Dock Appraiser. The Customs Officer enters the examination report in the system. He then marks the Electronic Bill along with all original documents and checklist to the Dock Appraiser. If the Dock Appraiser is satisfied that the particulars entered in the system conform to the description given in the original documents and as seen in the physical examination, he may proceed to allow “let export” for the shipment and inform the exporter or his agent.

Drawl of samples:

Where the Appraiser Dock (export) orders for samples to be drawn and tested, the Customs Officer may proceed to draw two samples from the consignment and enter the particulars thereof along with details of the testing agency. There is no separate register for recording dates of samples drawn. Three copies of the test memo are prepared by the Customs Officer and are signed by the Customs Officer and Appraising Officer on behalf of Customs and the exporter or his agent.

Stuffing / loading of goods in containers: 

In case of container cargo the stuffing of containers at Dock is done under Preventive supervision. Further, loading of both containerized and bulk cargo is to be done under Preventive supervision. The Customs Preventive Officer supervising the loading of container and general cargo into the vessel may give “Shipped on Board” endorsement on the Exporters copy of the Shipping Bill.  

Amendments: 

Any correction/amendment in the check list generated after filing of declaration can be made at the Service Centre provided the documents have not yet been submitted in the EDI system and the Shipping Bill number has not been generated. Where corrections are required to be made after the generation of the Shipping Bill number or after the goods have been brought into the Export Dock, the amendments will be carried out in the following manner: 

(i) If the goods have not yet been allowed to “Let Export” the amendments may be permitted by the Assistant / Deputy Commissioner (Exports). 

(ii) Where the “Let Export” order has already been given, amendments may be permitted only by the Additional/Joint Commissioner in charge of Export. 

Drawback claim:  

After actual export of the goods, the Drawback claim is processed through the EDI system by the officers of the Drawback Branch on a first come first served basis. There is no need for filing separate drawback claims. The status of the shipping bills and sanction of DBK claim can be ascertained from the query counter set up at the service center. If any query has been raised or deficiency noticed, the same is shown on the terminal. A print out of the query/deficiency may be obtained by the authorized person of the exporter from the service center. The exporters are required to reply to such queries through the service center. The claim will come in the queue of the EDI system only after reply to queries/deficiencies are entered by the Service Center.

Export General Manifest(EGM):

All the shipping lines/agents need to furnish the Export General Manifests, Shipping Bill wise, to the Customs electronically within 7 days from the date of sailing of the vessel. Apart from lodging the EGM electronically the shipping lines need to continue to file manual EGMs along with the exporter copy of the shipping bills as per the present practice in the export department. The manual EGMs need to be entered in the register at the Export Department and the Shipping lines may obtain acknowledgements indicating the date and time at which the EGMs were received by the Export Department. The above is the general procedure for export under EDI Systems. However special procedures exist for specified schemes, details of which may be obtained from the Public Notice/Standing Orders issued by the respective Commissionerates.

Facility 24×7 Customs Clearance:  

In order to faster Customs clearance of imported and export goods to reduce dwell time and lower the transaction cost, CBE & C, vide Circular No. 19/2014-Customs, dated 31.12.2014 has made facility of 24×7 Customs Clearance for specified imports, namely, goods under ‘facilitated “Bills of Entry and specified exports, namely factory stuffed containers and goods exported under free shipping Bills have made available in 18 sea ports. Similarly, facility of 24×7 Customs clearance for specified imports, namely, goods covered by facilities Bills of Entry and all exports viz. goods covered by all shipping Bills has been extended at 17 air cargo complexes.

Sealing of Export Goods: electronic sealing facility:

Board has laid down a simplified procedure for stuffing and sealing of export goods by introducing self-sealing subject to certain conditions.

CONCLUSION:

In line with Government’s policy “Ease of Doing Business “ the Central Board of Excise and Customs  has taken-up the various measures to facilitate trade and commerce to bring hassle free working environment as well as  reduction of transaction costs of goods and services to make them competitive in the domestic and international market.  The various initiatives taken by the Board are welcome steps and this will reduce the prices of Goods and services in the GST regime. The initiatives for “ease of doing of business certainly will boost the economic growth of the country in the coming days.

VALUATIONS OF CUSTOM DUTY UNDER CUSTOMS ACT, 1962. 

Chandni Joshi , ,

VALUATIONS OF CUSTOM DUTY UNDER CUSTOMS ACT, 1962. 

 

Introduction:

 

Customs is an authority or tax collection wing appointed by the Government in every country for controlling and for collecting of tax on the flow of goods into and out of a country. ‘Customs Duty’ refers to the tax imposed on the goods when they are transported across the international borders. Custom Duty is an indirect tax, imposed under the Customs Act formulated in 1962. Following are the types of customs duty in India, 

  • Basic Customs Duty (BCD)
  • Countervailing Duty (CVD)
  • Additional Customs Duty or Special CVD
  • Protective Duty,
  • Anti-dumping Duty

India for customs duty on computer-aided design files for 3-D printing | A2Z Taxcorp LLP

The power to enact the law is provided under the Constitution of India under the Article 265, which states that ―no tax shall be levied or collected except by authority of law. Entry No. 83 of List I to Schedule VII of the Constitution empowers the Union Government to legislate and collect duties on import and exports.

The primary objective behind levying customs duty is to safeguard each nation’s economy, jobs, environment, residents, etc., by regulating the movement of goods in and out of any country. It is also to minimise the smuggling of demerit goods such as cigarettes and alcoholic beverages across borders since these items are usually highly taxed and their tax rates may also vary significantly across borders. The Quantum of Customs duty in India depends upon the provisions of Customs Act, 1962 and Customs Tariff Act, 1975 and related Customs Rules, Notifications, Circulars, case Laws and Annual Union Finance Acts. The Customs Act, 1962 is the principal act which governs entry or exit of different categories of vessels, aircrafts, goods, passengers etc., into or outside the country. The Act extends to the whole of India. This article would help us understand the valuations of customs duty under the Customs Act of 1962. 

 

  • Legal provisions for valuation under Customs Act, 1962:

 

Section 2(41) of the Customs Act, 1962 defines ‘Value’ in relation to any goods to mean the value thereof determined in accordance with the provisions of sub-section (1) of Section 14 thereof. Sub-section (1) of Section 14, in turn, states that when a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be: –

“The price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale”.

The provisions of sub-section (1) of Section 14 apply for the valuation of both imported goods and export goods. However, a common valuation law at international level applies only to imported goods and its basic principles are laid down in Article VII of General Agreement on Tariffs and Trade (GATT), 1948, currently known as GATT 1994 (administered by the WTO). The Indian valuation law under Section 14(1) of the Indian Customs Act is based on the principles of Article VII of the GATT. This is, however, a deemed value allowing uplifting (loading) of declared value in a given case even when it represents the actual price of transaction. The Agreement on Customs Valuation (ACV), which came into force on 1st January 1981, lays down well defined methods of valuation to be strictly followed so as to ensure uniformity and certainty in valuation approach and to avoid arbitrariness. Sub-section 1A of the Indian Customs Act, 1962 requires that the value of imported goods shall be determined under the Rule made in this behalf. The Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 lays down the methods of valuation based on the ACV. Transaction value, which is the price paid or payable for the imported goods, is the primary basis for valuation. If the transaction value method is not applicable in a specific case, the other methods of valuation prescribed in the Rules (based on ACV) have to be followed in a hierarchical order, subject to certain exceptions

Under the Customs Act, 1962, the Central Government has also been empowered to fix Tariff Values for any product. If Tariff Value is fixed for any goods, then ad-valorem duties are to be calculated with reference to such Tariff Value. The tariff values may be fixed for any class of imported or export goods having regard to the trend of value of such or like goods and the same has to be notified in the official gazette. As far as export goods are concerned, provisions of sub-section (1) of Section 14 provide a complete code of valuation by itself and there are no separate valuation rules for that purpose.

 

  • Valuation of goods under the Customs Act, 1962:

 

Section 14 of the Customs Act, 1962 prescribes the mode of identifying the value of imported or export goods for the purpose of payment of customs duty. The provisions of section 14 are discussed below: 

TRANSACTION VALUE:

Sub-section (1) of section 14 lays down that for the purposes of the Customs Tariff Act, 1975, or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods. In case of export goods, the transaction value shall be the price actually paid or payable for the goods when sold for export from India for delivery at the time and place of exportation where the buyer and seller of the goods are not related and price is the sole consideration for the sale. However further conditions may be specified in the rules made in this behalf. In case of imported goods, the transaction value shall be the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation where the buyer and seller of the goods are not related and price is the sole consideration for the sale. However, in this case also further conditions may be specified in the rules made in this behalf. Such transaction value shall also include in addition to the price as aforesaid, any amount paid or payable for costs and services, including:

 

  • Commissions and brokerage,

 

  • Engineering,
  • Design work,
  • Royalties and licence fees,
  • Costs of transportation to the place of importation,
  • Insurance,
  • Loading,
  • Unloading and
  • Handling charges.

 

 

to the extent and in manner specified in the rules made in this behalf. Such rules may provide for: (a) the circumstances in which the buyer and the seller shall be deemed to be related; 

(b) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case; (c) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section. 

CONVERSION DATES

For imported goods, the conversion in value shall be done with reference to the rate of exchange prevalent on the date of filing the bill of entry under section 46. For export goods, the conversion in value shall be done with reference to the rate of exchange prevalent on the date of filing shipping bill (vessel or aircraft) or bill of export (vehicle) under section 50. In case of Samar Timber Corporation v. ACC, it was held that the relevant date in respect of rate of duty payable is the date of presentation of Bill of Entry and not the date of re-presentation after correction. 

CURRENCY CONVERSION RATE

The rate of exchange is notified by three agencies- the Central Board of Excise and Customs (Board), the Reserve Bank of India and the Foreign Exchange Dealers’ Association of India. For the purpose of customs valuation, “rate of exchange” means the rate of exchange (1) determined by the Board, or (ii) ascertained in such a manner as the Board may direct for the conversion of Indian currency into foreign currency or foreign currency into Indian currency. Thus, for the purpose of valuation under customs laws, rate notified by CBEC (Board) shall be taken into account. The CBEC notifies the rates periodically, generally every fortnight. There are separate rates for imported goods (selling rate) and export goods (buying rate). 

TARIFF VALUE

Sub-section (2) of section 14 provides that the Board may fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods by notification in the Official Gazette if it is satisfied that it is necessary to do so. Where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. Provisions of sub-section (2) have an overriding effect on the provisions of sub-section (1).

 

  • Important case laws:

 

In the case of Commissioner of Central Excise, Mangalore v. Mangalore Refinery & Petrochemicals Ltd,  Revenue contended that demurrage charges paid by the assessee are includible in the assessable value for the levy of custom duty. The court decided that Demurrage charges are incurred after the goods reach Indian Ports, thus it is a post-importation event, relying on the case of Commissioner of Customs v. Essar Steel Ltd, the Apex Court has held that Demurrage charges are not includible in the assessable value of imported goods.

In the case of Commissioner of Cus., Visakhapatnam v. Aggarwal Industries Ltd, the importer entered into a contract for supply of crude sunflower seed oil U.S. $ 435 C.l.F./Metric ton. Under the contract, the consignment was to be shipped in the month of July, 2011. The period was extended by mutual agreement and goods were shipped on 5th August, 2011 at old agreed prices. In the meanwhile, the international prices had gone up due to volatibility in the market, and other imports during August, 2011 were at higher prices. Department sought to increase the assessable value on the basis of the higher prices as contemporaneous imports. The court held that the Department view is not correct. It is true that the commodity involved had volatile fluctuations in its price in the international market, but having delayed the shipment; the supplier did not increase the price of the commodity even after the increase in its price in the international market. There was no allegation of the supplier and importer being in collusion. Thus, the appeal was allowed in the favour of the respondent- assessee.

In the case of Gira Enterprises v. CCus., the appellant imported some goods from China. On the basis of certain information obtained through a computer printout from the Customs House, the Department alleged that during the period in question, a large number of such goods were imported at a much higher price than the price declared by the appellant. Therefore, the Department valued such goods on the basis of the transaction value of identical goods as per rule 4 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and demanded the differential duty along with penalty and interest from the appellant. However, the Department did not provide these printouts to the appellant. Decision: The Supreme Court held that mere existence of alleged computer printout was not proof of existence of comparable imports. Even if assumed that such printout did exist and content thereof were true, such printout must have been supplied to the appellant and it should have been given reasonable opportunity to establish that the import transactions were not comparable. Thus, in the given case, the value of imported goods could not be enhanced on the basis of the value of identical goods as Department was not able to provide evidence of import of identical goods at higher prices. 

Conclusion:

Customs duty is considered to be an indirect tax. It is a tax on the goods and it is not a tax on the person having or owning the goods. The charge of tax is attached to the goods. Unless the tax liability is discharged, the goods are not allowed to proceed further. It therefore becomes necessary for the importer, who desires to take clearance of the goods into town for home consumption, to discharge the duty liability. Similarly in case of baggage the passenger cannot take his goods, unless the duty liability is discharged.

CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP)

Chandni Joshi , , , ,

CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP)

 

Introduction

Under the Insolvency and Bankruptcy Code, 2016, the Corporate Insolvency Resolution Process (CIRP) is a recovery mechanism made available to creditors (IBC). The concerned creditor or the corporate entity (the debtor) itself may commence CIRP if a corporate entity becomes insolvent (unable to repay debt).

Initiation of Insolvency

Chapter 2, section 6 of IBC, 2016 states that, “where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor in the manner as provided under the act”.

IBC: Getting your dues: Procedure for creditors to file under IBC - The Economic Times

Steps for CIRP (Process)

 

  • Initiation of Corporate Insolvency Resolution process by Financial Creditor

 

  • Section 5 (7) of IBC, 2016 defines “financial creditor” as any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to.
  • Section 7 of IBC, 2016 mentions process for Initiation of Corporate Insolvency Resolution process by Financial Creditor –

Submission of Application

  1. When a default has occurred, a financial creditor may submit an application with the Adjudicating Authority to begin the corporate insolvency resolution procedure against a corporate debtor, either individually or collectively with other financial creditors.
  • Adjudicating Authority for the purposes of this act, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013.
  1. The financial creditor shall make an application in such form and manner and accompanied with such fee as may be prescribed.
  2. The financial creditor shall, along with the application furnish –
  1. record of the default recorded with the information utility or such other record or evidence of default as may be specified,
  2. the name of the resolution professional proposed to act as an interim resolution professional,
  3. any other information as may be specified by the Board.
  1. The Adjudicating Authority shall, within 14 days of the receipt of the application, ascertain the existence of a default from the records of an information or on the basis of other evidence furnished by the financial creditor.
  2. The adjudicating authority must be satisfied that the application is proper and complete, that a default has occurred, and that no disciplinary proceeding against the proposed resolution professional is pending. If the adjudicating authority is not satisfied, the application may be rejected. If the application is not complete then, adjudicating authority shall give the applicant the timeline of 7 days to amend the application.
  3. The corporate insolvency resolution process shall commence from the date of admission of the application.
  4. The Adjudicating Authority shall communicate the order to the financial creditor and the corporate debtor within 7 days of admission or rejection of such application, as the case may be

Initiation of Corporate Insolvency resolution process by operational creditor

  • Section 5 (20) of IBC, 2016 defines “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.
  • Section 8 of IBC, 2016 mentions Insolvency resolution by operational creditor,

Delivery of Demand Notice

  1. On the occurrence of a default, an operational creditor may deliver to the corporate debtor a demand notice of unpaid operational debtor copy of an invoice seeking payment of the amount involved in the default in the form and manner authorised.
  2. It is the responsibility of the Corporate Debtor to respond to the Operational Creditor’s Demand Notice within 10 days of receiving it. To bring to the notice of the operational creditor—
  1. existence of a dispute, if any,
  2. the repayment of unpaid operational debt
  • A “demand notice” is a notification delivered by an operational creditor to the corporate debtor seeking repayment of the operational debt in respect of which the default has occurred for the purposes of this section.
  • Section 9 of IBC, 2016 provides Application for initiation of corporate insolvency resolution process by operational creditor –

Process after expiry of 10 days after delivering notice

  1. After the expiry of the period of 10 days from the date of delivery of the notice or invoice demanding payment, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.
  2. The application shall be filed in such form and manner and accompanied with such fee as may be prescribed.
  3. The operational creditor shall, along with the application furnish—
  1. a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;
  2. an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;
  3. a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor; and
  4. such other information as may be specified.
  1. An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional.
  2. The Adjudicating Authority shall, within 14 days of the receipt of the application, by an order admit the application and communicate such decision to the operational creditor and the corporate debtor if it is satisfied that the application made is complete, there is no repayment of the unpaid operational debt, the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor, no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility and there is no disciplinary proceeding pending against any resolution professional. If the Adjudicating Authority is not satisfied it can reject the application.
  3. If the application is not complete then, adjudicating authority shall give the applicant the timeline of 7 days to amend the application.
  4. The corporate insolvency resolution process shall commence from the date of admission of the application.
  5.     Initiation of corporate insolvency resolution process by corporate applicant.
  • As per Section 10, a corporate applicant may file an application before adjudicating Authority for initiating CIRP against corporate debtor. The corporate applicant has been defined by the Code under Section 5 (5) which is reproduced here:
  1. corporate debtor; or
  2. a member or partner of the corporate debtor who is authorised to make an application for the corporate insolvency resolution process under the constitutional document of the corporate debtor; or
  3. an individual who is in charge of managing the operations and resources of the corporate debtor; or
  4. a person who has the control and supervision over the financial affairs of the corporate debtor;
  • Section 10, IBC 2016 provides Initiation of corporate insolvency resolution process by corporate applicant
  1. When a corporate debtor defaults, a corporate applicant may submit an application with the Adjudicating Authority to initiate the corporate insolvency resolution procedure.
  2. The application shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be prescribed.
  3. The corporate applicant shall, along with the application furnish the information relating to
  1. its books of account and such other documents relating to such period as may be specified; and
  2. the resolution professional proposed to be appointed as an interim resolution professional.
  1. The application will be accepted or rejected by the Adjudicating Authority. If the application is rejected, the Adjudicating Authority shall allow the applicant a 7-day period from the date of receipt of the rejection notice to rectify or amend the application.
  2. The corporate insolvency resolution process shall commence from the date of admission of the application.

Fastrack CIRP

Chapter 4 of IBC, 2016 deals with FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS. The major goal of including the idea of fast track CIRP in the insolvency law was to enhance our country’s ease of doing business rating. The goal of fast track CIRP procedures is to reduce the unnecessary delay created by a small-scale company’s insolvency.

 

  • Fast track corporation insolvency resolution process.

 

As per section 55 of IBC, 2016 defines states that an application for initiation of Corporate Insolvency Process can be made only against these below-mentioned corporate debtors

  1. a corporate debtor with assets and income below a level as may be notified by the Central Government,
  2. corporate debtor with such class of creditors or such amount of debt as may be notified by the Central Government,
  3. such other categories of corporate persons as may be notified by the Central Government.

 

  • Time period for completion of fast-track corporate insolvency resolution process

 

As per Section 56,

  1. The fast-track corporate insolvency resolution process shall be completed within a period of 90 days from the insolvency commencement date.
  2. The resolution professional shall file an application to the Adjudicating Authority to extend the period of the fast-track corporate insolvency resolution process beyond 90 days if instructed to do so by a resolution passed at a meeting of the committee of creditors and supported by a vote of 75 percent of the voting share.
  3. On receipt of an application, if the Adjudicating Authority is satisfied that the subject matter of the case is such that fast track corporate insolvency resolution process cannot be completed within a period of 90 days, it may, by order, extend the duration of such process beyond the said period of 90 days by such further period, as it thinks fit, but not exceeding 45 days: Provided that any extension of the fast track corporate insolvency resolution process under this section shall not be granted more than once.

Manner of initiating fast track corporate insolvency resolution process.

As per Section 57,

  1.  An application for fast-track corporate insolvency resolution process may be filed by a creditor or corporate debtor as the case may be, along with
  2. the proof of the existence of default as evidenced by records available with an information utility or such other means as may be specified by the Board
  3. such other information as may be specified by the Board to establish that the corporate debtor is eligible for fast-track corporate insolvency resolution process. 
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