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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.

Anticipatory Bail - Bhatt & Joshi Associates - High Court Lawyers, High Court Advocates

What is Anticipatory Bail? Explained

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Anticipatory Bail

“In a barbaric society you can hardly ask for a bail, in civilised society you can hardly refuse it. The bail is rule and refusal is an exception.”

Black’s law dictionary (4th edition) describes ‘bail’ as procuring “the release of a person from legal custody, by undertaking that he shall appear at the time and place designated and submit himself to the jurisdiction and judgment of the court.[1]

Section 438 of the Criminal Procedure Code, 1973 provides that when any person has reason to believe that he may be arrested on accusation of committed a non-bailable offence, he may apply to the High Court or the Court of Session for a direction under this section that in the event of such arrest he shall be released on bail. Thus, the provision empowers the Court to grant bail.

But why do we have such provision of bail? The Court in Gurbaksh Singh Sibbia Etc v. State of Punjab[2] referring to the 41st Law Commission Report of 1969 pointed out the necessity of the inclusion of the provision that granting anti-bail arises because sometimes influential people try to implicate their rivals in false cases for the purpose of disgracing them or for other purposes by getting them detained in jail for some days. Apart from false cases, where there are reasonable grounds for holding that a person accused of an offence is not likely to abscond, or otherwise misuse his liberty while on bail, there seems no justification to require him first to submit to custody, remain in prison for some days and then apply for bail.

Further, Personal liberty and the rule of law find its rightful place in the Constitution in Article 22 which includes measures against arbitrary and indefinite detention and provides that no person shall be detained beyond the maximum period prescribed by any law made by the Parliament.[3]

However, this right cannot be held absolute and is to be measured in respect of other factors. The court in Superintendent and Remembrancer of legal Affairs v. Amiya Kumar Roy Chaudhary[4] held the view that the law of bails, has to dovetail two conflicting demands, namely, the requirements of the society for being shielded from the hazards of being exposed to the misadventures of a person alleged to have committed a crime and on the other hand the fundamental canon of the criminal jurisprudence i.e., the presumption of the innocence of the accused till he is found guilty.  In Kumari Hema Mishra v. State of UP[5], upholding the power to stay arrest under Article 226 of the Constitution the Supreme Court stated that police custody must be balanced against the duty of courts to uphold the dignity of every man and to vigilantly guard the right to liberty without jeopardizing the State objective of maintenance of law and order. It is the Court that has to maintain the equilibrium between the ‘Freedom of person’ and ‘social order’.

Various factors that the Court has to take into account while granting bail are also mentioned in the Section namely[6]:

  1. the nature and gravity of the accusation;
  2. the antecedents of the applicant including the fact as to whether he previously undergone imprisonment on conviction by a Court in respect of any cognizable offence.
  3. the possibility of the applicant to flee from justice; and
  4. where the accusation has been made with the object of injuring or humiliating the applicant by having him so arrested.

Further, some other factors are provided in Law Commission Report on anticipatory bail 2017[7]. These are:

  • Whether there are reasonable grounds for believing that he has committed the offence;
  • Severity of the potential punishment if the trial results in conviction;
  • Preponderance of evidence;
  • The character, means and standing of the accused;
  • Danger of the alleged offence continuing or being repeated if granted bail;
  • Danger of witnesses or evidence being tampered with;
  • Community ties;
  • Opportunity for the accused to prepare his defence;
  • Whether there is any possibility of the trial being delayed;
  • The health, age and sex of the accused.

Further, various conditions are provided in the Section namely that [8]

  1. when the Court grants such an interim order of anticipatory bail, it has to provide the prosecution side a reasonable opportunity of being heard 
  2. the also that the during such final hearing of anticipatory bail the accused must be present at the Court. 
  3. a condition that the person shall make himself available for interrogation by a police officer as and when required;
  4. a condition that the person shall not, directly or indirectly, make any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court IX to any police officer;
  5. a condition that the person shall not leave India without the previous permission of the court;
  6. such other condition as may be imposed under sub-section (3) of Section 437, as if the bail were granted under that section.

From the above discussion, it has been clear that this power of either accepting or rejecting or making of the interim order is not an ordinary one and the Court exercises a great deal of discretion here. But, it is also often noted by the Courts that this power of discretion is to be exercised with care and circumspection depending upon circumstances justifying its exercise.

 

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References
[1] “Explained: What is an anticipatory bail, for which SC has removed time limit?” The Indian Express, 31st January, 2020.
[2] 1980 AIR 1632: 1980 SCR (3) 383.
[3] Law Commission Report
[4] ILR (1974) 1 Calcutta 304
[5] (2014) 4 SCC 453
[6] Section 438 of Criminal Procedure Code, 1973.
[7] https://lawcommissionofindia.nic.in
[8] Ibid.

Bhatt & Joshi Associates, High Court Lawyers, High Court Advocates - Quashing Lawyers

Legal provisions for Quashing of FIR, High Court

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Background of legal provisions for Quashing of FIR, by High Court Advocate

The legal term quash has been derived from the Anglo- French word casser meaning “to annul” and ultimately from Latin cassus, meaning void. The court has the power to quash unreasonable or irregular or oppressive subpoenas, injections, indictments and orders. When a judge is unable to deliver a judgement in a criminal matter case, in vague of a defective indictment, the courts typically quash the indictment. 

Under section 482 of the Code of criminal Procedure the power of quashing is defined. The section reads as:

482. Saving the inherent powers of the High Court. 

Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice.

This section closely resembles section 151 of the Code of Civil procedure. In a case of CBI v. Maninder Singh, it was held that the power under section 482 of CrPC must be used very sparingly  and especially in economic offences, merely because the party had reached a settlement with the bank cannot be a ground for quashing criminal proceedings. But this section doesn’t enhance the power of the High Court. Rather protects the inherent powers of the court. It does not give any new powers. The jurisdiction of the High court has a vast scope, but it is the practice that this section should be used only in exceptional cases. 

The Supreme Court has laid down some principles which would help to govern the inherent jurisdiction of the court given under the section are as follows: 

  1. the power is not to be resorted to if there is a specific provision in the code for the redress of the grievance of the aggrieved party; 
  2. it should be exercised very sparingly to prevent abuse of the process of any court or otherwise to secure the ends of justice; 
  3. it should not be exercised as against the express bar of the law engrafted in any other provision of the code. Whenever the court has inherent power, the court does not function as a court of appeal or revision. 

Inherent powers cannot be exercised to review judgement. 

In a case N Naveen Kumar v. State of AP, the accused was convicted in this case for bribery. Some of his property was directed to be sold by auction. That was in addition to the sentence of imprisonment and fine. An appeal against this was dismissed. An application was made by the legal heirs of the accused for permission to deposit certain sums in lieu of auction sale of property. This was held to be not tenable before the Appellate Court. The bar under section 397(2) of the code is applicable to the revisional powers only not to inherent powers. Even under section 341 of the code, the inherent power overrides the express bar against revision.

Under what circumstances the powers of Quashing are exercised by the High Court 

Inherent power under Section 482 in a matter of quashing of FIR has to be exercised sparingly and with caution and when and only when such exercise is justified by the test specifically laid down in the provision itself. The power under section 482 is very wide and conferment of wide power requires the court to be more cautious. It casts an onerous and more diligent duty on the court and the said power is not to be used to choke or smother a legitimate prosecution. 

The high court can quash an FIR or a complaint in exercise of its powers under article 26 of the Constitution of India or under section 482 CrPC:

  1. Where the allegations made in the FIR or the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out a case against the accused.
  2. Where the allegations in the FIR and other materials accompanying FIR do not disclose a cognizable offence justifying an investigation under section 156(1) of CrPC except an order of a magistrate under section 155(2) CrPC.
  3. Where uncontroverted allegations in the FIR or the complaint and the evidence collected in support do not disclose the commission of any offence and make out a case against the accused.
  4. Where the allegations made in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence.
  5. Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
  6. Where there is an express legal bar engrafted in the CrPC or the concerned act to the institution of criminal proceeding or where there is a specific provision in the CrPC or concerned act providing efficacious redress.
  7. Where a criminal proceeding is manifestly attended with mala fide or where proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.

The Supreme Court also has settled that the High Court should not entertain writ petitions under Article 226 and 227 and petitions unde section 482 for granting or rejecting request for bail which is the function of lower court. The High Court’s power under section 482 is not affected by the provision in section 497(3). The Supreme Court said:

Even if it is an interlocutory order, the High court’s inherent jurisdiction under section 482 is not affected by the provisions of section 497(3) CrPC. That The High Court may refuse to exercise its jurisdiction under section 482 on the basis of self-imposed restriction is a different aspect. It cannot be denied that for securing the ends of justice, the High court can interfere with the order which causes miscarriage of justice or is palpably illegal or is unjustified.

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Travelling-with-Gold-Customs-Bhatt-Joshi-Associates-High-Court-Advocates-High-Court-Lawyers.jpg

Everything you need to know while travelling with gold & customs

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Travelling with gold? Here’s what you should know!

 

CUSTOM GUIDELINES

Every passenger entering India has to pass through Customs check. The passenger has to declare the contents of his baggage in the prescribed Indian Customs Declaration Form At airports the passenger has the option  of seeking clearance through the Green Channel or through the Red Channel subject to the nature of goods being  carried.

GREEN AND RED CHANNELS

For the purpose of Customs clearance of arriving passengers, a two channel system has been adopted:-

  1. Green Channel for passengers not having any dutiable goods.
  2. Red Channel for passengers having dutiable goods.However, Green channel passengers must deposit the Customs portion of the disembarkation card to the Customs official at the exit gate before leaving the terminal.

Passengers walking through the Green Channel with dutiable/prohibited goods are liable to prosecution/ penalty and confiscation of goods.

 

Baggage rules 2016

The question is whether the Baggage Rules, 2016 have any application to the gold bangles worn by the Applicants also arises for consideration?

Rule 3:Passenger arriving from countries other than Nepal, Bhutan or Myanmar

An Indian resident or a foreigner residing in India or a tourist of Indian origin, not being an infant arriving from any country other than Nepal, Bhutan or Myanmar, shall be allowed clearance free of duty articles in his bona fide baggage, that is to say :-

 

  • used personal effects and travel souvenirs; and
  • articles other than those mentioned in Annexure-I, upto the value of fifty thousand rupees if these are carried on the person or in the accompanied baggage of the passenger.

 

Provided that a tourist of foreign origin, not being an infant, shall be allowed clearance free of duty articles in his bona fide baggage, that is to say,

 

  • used personal effects and travel souvenirs; and
  • articles other than those mentioned in Annexure- I, upto the value of fifteen thousand rupees if these are carried on the person or in the accompanied baggage of the passenger.

 

Provided further that where the passenger is an infant, only used personal effects shall be allowed duty free.

Explanation.- The free allowance of a passenger under this rule shall not be allowed to pool with the free allowance of any other passenger.”

 

Rule 5  Jewellery:

A passenger residing abroad for more than one year, on  return to India, shall be allowed clearance free of duty in   his bona fide baggage of jewellery upto a weight, of twenty grams with a value cap of fifty thousand rupees if brought by a gentleman passenger, or forty grams with a value cap of one lakh rupees if brought by a lady passenger.

 

ANNEXURE–I

(See rule 3, 4 and 6)

 

 

  • Fire arms.
  • Cartridges of fire arms exceeding 50.
  • Cigarettes exceeding 100 sticks or cigars exceeding 25 or tobacco exceeding 125 gms.
  • Alcoholic liquor or wines in excess of two litres.
  • Gold or silver in any form other than ornaments.
  • Flat Panel (Liquid Crystal Display/Light-Emitting Diode/ Plasma) television.”

 

 

PROVISIONS UNDER WHICH PASSENGERS MADE LIABLE.

 

Section 111. Confiscation of improperly imported goods, etc.—

The following goods brought from a place outside India shall be liable to confiscation:—

 

  • any goods imported by sea or air which are unloaded or attempted to be unloaded at any place other than a customs port or customs airport appointed under clause (a) of section 7 for the unloading of such goods.
  • any goods imported by land or inland water through any route other than a route specified in a notification issued under clause (c) of section 7 for the import of such goods.
  • any dutiable or prohibited goods brought into any bay, gulf, creek or tidal river for the purpose of being landed at a place other than a customs port.
  • any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force.
  • any dutiable or prohibited goods found concealed in any manner in any conveyance.
  • any dutiable or prohibited goods required to be mentioned under the regulations in an import manifest or import report which are not so mentioned.
  • any dutiable or prohibited goods which are unloaded from a conveyance in contravention of the provisions of section 32, other than goods inadvertently unloaded but included in the record kept under sub-section (2) of section 45.
  • any dutiable or prohibited goods unloaded or attempted to be unloaded in contravention of the provisions of section 33 or section 34.
  • any dutiable or prohibited goods found concealed in any manner in any package either before or after the unloading thereof.
  • any dutiable or prohibited goods removed or attempted to be removed from a customs area or a warehouse without the permission of the proper officer or contrary to the terms of such permission.
  • any dutiable or prohibited goods imported by land in respect of which the order permitting clearance of the goods required to be produced under section 109 is not produced or which do not correspond in any material particular with the specification contained therein.
  • any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77.
  • any goods which do not correspond in respect of value or in any other particular] with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to sub-section (1) of section 54.
  • any dutiable or prohibited goods transisted with or without transhipment or attempted to be so transited in contravention of the provisions of Chapter VIII.
  • any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer 
  • any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened.”

 

 

Section 77  Declaration by owner of baggage.—The owner of any baggage shall, for the purpose of clearing it,  make a declaration of its contents to the proper officer.”

Section 112 Penalty for improper importation of goods, etc. —Any person—

 

 

  • who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or
  • who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable.
  • in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty ,not exceeding the value of the goods or five thousand rupees, whichever is the greater.
  • in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater;
  • in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees], whichever is the greater.
  • in the case of goods falling both under clauses (i) and (iii), to a penalty 220 not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest.
  • in the case of goods falling both under clauses (ii) and (iii), to a penalty 221 not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees,whichever is the highest.

 

 

NOW QUESTION ARISES WHETHER THERE IS NEED FOR ABSOLUTE CONFISCATION OR NOT? The issue of absolute confiscation of goods and option of redemption thereof has been subjected to judicial interpretation in the past with rulings of the High Court and Tribunal on the same.

In case of : Commissioner Of Customs … vs Uma Shankar Verma Calcutta High Court:

Para 10

“…..

 

has held that if the goods are prohibited then the option is with the Customs Authority to confiscate without giving any option to pay fine in lieu thereof but  when the goods are not prohibited then the Customs Authority has no other option but to allow grant of an option to the party to pay a fine in lieu of confiscation.

  ….”

 

In the case of :Kuber Casting Private Limited v. Commissioner of Commissioner of Customs, Amritsar-( Tribunal-Chandigarh):

Para 5

“….

As the goods impugned are not restricted goods, therefore, they can be released on payment of redemption fine and penalty, the Tribunal held that the redemption fine and penalty imposed on the appellant highly excessive and the goods cannot be held for confiscation on the charge of misdeclaration of Description.

….”

 

CONFISCATION OF GOLD NOT DECLARED

Central board of indirect tax and customs, vide their Letter No.  495/5/92-CUS-VI dated 10.5.93 have instructed that in case of non-declaration of gold even in respect of passengers otherwise eligible to bring gold should be absolutely confiscated.

In Shri Kamlesh Kumar In re 1993(67) ELT 1000, The Government of India in revision, it was held that such an option cannot be claimed as a right. This is because the condition regarding payment of duty in forign exchange is not satisfied (as goods were not declared) and hence these become ‘prohibited goods’. However, if a passenger is otherwise eligible to import gold, the option to pay redemption fine may be given considering all aspects. 

 

CONFISCATION EVEN IF DECLARATION MADE

 

In R Karuppan v. R Namachivayam 1998 ElT 214 

Hon’ble Madras High Court (Divisional Bench) , it was held that goods can be confiscated and penalty imposed even if the passenger had voluntarily declared the goods in his baggage.

 

GENERAL DEFENSE AVAILABLE

 

Section 2(3):“Section 2(3):includes unaccompanied baggage but does not include motor vehicles.”
Section 2(39):“Section 2(39): “smuggling”, in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113.
Section (33):“Section (33):“prohibited goods” means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported, have been complied with.

[While prohibited and restricted items may sound the same, there is an actual difference – prohibited items must never be sent in the post, while restricted items may be sent in the post, but restrictions will apply.]”

 

Section 125. Option to pay fine in lieu of confiscation

 

  • Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods an option to pay in lieu of confiscation such fine as the said officer thinks fit:

 

Provided that, without prejudice to the provisions of the proviso to subsection (2) of Section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable therein.

 

 

  • Where any fine in lieu of confiscation of goods is imposed under  subsection (1), the owner of such goods or the person referred to in Sub-section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods.”

 

 

In Collector of Customs, Bombay vs M/s Elephanata Oil and Industries Ltd.

“Hon’ble Supreme Court held that from the perusal of Section 112 and 125 of Customs Act 1962 it is apparent that both operate in different fields, namely, one requires imposition of penalty and other provides for confiscation of improperly imported goods section 111 provides that goods brought from the place outside India are liable to confiscation, discretion is given to the authority to impose penalty . Further Section 125 empowers confiscation of such goods and thereafter , confiscated goods vest in the Central Government. The Section further empowers the authority to give an option to the owner or the person from which goods are seized to pay a fine lieu of such confiscation for return of goods and the fine is also limited up to the market price of the goods. Therefore, levy of fine in lieu of confiscation is in addition to levy of penalty impossible under Section 112.”

 

CONCLUSION

 

in our respectful opinion the body of the passenger is not ‘baggage’, gold ornament worn by passengers need not be declared?

“Section 2(3): “baggage” includes unaccompanied baggage but does  not include motor vehicles.”

In vigneswaran Sethuraman v. Union Of India WP(C).No. 6281 of 2014 (I) Hon’ble High Court Of Kerala At Ernakulam stated that:

Para 15

“…             

 

that the body of a passenger is not ‘baggage’ Hence, gold ornaments worn by passengers need not to be declared. Baggage rules do not prohibit a foreign tourist entering into india from wearing a gold chain or other gold jewellery.

 

…”

 

In Kartar Singh V. State of Punjab The Hon’ble Supreme Court of India has stated  and held that: 

Para 130.

“…

 It is the basic principle of legal jurisprudence that an enactment is void for vagueness if its prohibitions are not clearly defined. Vague laws offend several important values. It is insisted or emphasised that laws should give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly. Vague laws may trap the innocent by not providing fair warning. Such a law impermissibly delegates basic policy matters to policemen and also judges for resolution on an ad hoc and subjective basis, with the attendant dangers of arbitrary and discriminatory application. More so uncertain and undefined words deployed inevitably lead citizens to “steer far wider of the unlawful zone….than if the boundaries of the forbidden areas were clearly marked.” (emphasis supplied).

…”

In Uma Balasaraswathi v. cc-1988 106 (CEGAT)

It has been held that if ornaments are worn by ladies and are not concealed anywhere, there cannot be any ‘mis-declaration’. 

 

In Shaik Jamal Basha v. Government of India

It was held that since gold is otherwise eligible for import, it is mandatory to give option to pay fine Absolute confiscation cannot be ordered even if gold was found to be concealed. 

 

[Same view in shaik shahabuddin v. CC2001 (137) ELT 127 (CEGAT)]

 

The Customs Act, 1962 or the Baggage Rules, 2016 do not stipulate that a foreign tourist or Indian Resident entering India cannot wear gold ornaments on his body. The Customs Act, 1962 and the Baggage Rules, 2016 do not provide sufficient warning to foreign tourists or Indian residents entering India that wearing a gold chain is prohibited. The Act and the Rules do not even remotely indicate that a foreign tourist or indian resident entering India cannot wear a gold chain on his person. In other words, foreign tourists entering India are in a boundless sea of uncertainty as to whether it is prohibited or not. As the Customs Act, 1962 and the rules framed thereunder contemplate confiscation and levy of penalty as also prosecution, the State has a duty to specify with a degree of certainty as to what is prohibited and what is not, without leaving it to the foreign tourist to guess what is prohibited and what is not.

 

Introduction – The Insolvency and Bankruptcy Code

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The Insolvency and Bankruptcy Code, 2016 (“Code”) is a perfect platform that oversees and addresses the Corporate Insolvency Resolution Process (“CIRP”) and liquidation proceedings for individuals, firms, corporates and others. It seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy that will provide for resolution of insolvency in a speedy and time bound manner while simultaneously balancing the interest of all the stakeholders.

The ecosystem of the Code is dependent on four pillars namely, the Insolvency and Bankruptcy Board of India (IBBI), Information Utilities (IUs), Insolvency Professional Agencies (IPAs) and Insolvency Professionals (IPs).

This book attempts to cover the role of an Interim Resolution Professional (IRP) in the Corporate Insolvency Resolution Process. The role of an IRP commences from the day he/she is appointed as such by an order of the Adjudicating Authority (within fourteen days from the insolvency commencement date) and ends on the thirtieth day from the date of his appointment. During the tenure of thirty days, the IRP is provided with tasks of great responsibility and criticality that has the potential to hugely impact the implementation and success of the Code.

The IRP shall have the power of management of the corporate debtor and shall take control of the assets of the corporate debtor. The powers of the Board of Directors of the corporate debtor shall stand suspended. The IRP shall make a public announcement pertaining to his appointment and invites creditors for submission of proof of claims. On receipt of claims from various creditors, he is also entrusted with the task of verification of the claims, on the basis of which, he prepares the list of creditors. Once the list of creditors is prepared, the IRP shall constitute the Committee of Creditors (“Committee”) and file a report in this behalf with the Adjudicating Authority. Subsequently, the first meeting of the Committee is to be convened.

With the conclusion of the first meeting of the Committee, the role of the IRP also comes to an end. At the first meeting of the Committee, the role of the IRP comes to an end either by change of his role into a resolution professional, subject to approval of his appointment by a majority of seventy five percent of the voting share of the financial creditors in the Committee or by termination of his role as an IRP and appointment of another resolution professional, where his appointment is not approved by the Committee.

It is pertinent to note the importance of the IRPs under this Code, who are endowed with mammoth and pivotal tasks that needs to be undertaken within a prescribed time frame. It is their efficiency and management that provides the Code with the impetus to fulfil its objective of resolving insolvency and bankruptcy cases in a speedy and time bound manner.

Right to Bail – How Is Bail Determined

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Right to Bail – How Is Bail Determined

Although there is a right to bail  to every accused, the term bail is not defined under CrPC. In this article I shall endeavor to analyze various provisions pertaining to Right to Bail and how is bail determined under the provisions of CrPC. To begin with, bail is a kind of security which is given by the accused to the court that he will attend the proceedings against the accusations made upon him and include personal bond and bail bond. Bail is a mechanism used to ensure that the accused is present before the court.

Right to Bail Laws - How Is Bail Determined

Right to Bail – How Is Bail Determined

The two authorities that can grant bail are police and courts.

The basic and fundamental object of bail is to ensure the attendance of accused at the trial before court. The sections from 436 to section 450 deal with the provisions of bail. The process of bail takes place while the trial of the accused person is still pending. Generally, a person seeks this option in order to get himself released from the police custody. The process of bail is a legitimate process.

Chapter 33 – Provisions As To Bail And Bonds

Section 436 – In what cases bail to be taken

Section 436A – Maximum period for which an under trial prisoner can be detained

Section 437 – When bail may be taken in case of non-bailable offence

Section 437A – Bail to require accused to appear before next appellate Court

Section 438 – Direction for grant of bail to person apprehending arrest

Section 439 – Special powers of High Court or Court of Session regarding bail

Section 440 – Amount of bond and reduction thereof

Section 441 – Bond of accused and sureties

Section 441A – Declaration by sureties

Section 442 – Discharge from custody

Section 443 – Power to order sufficient bail when that first taken is insufficient

Section 444 – Discharge of sureties

Section 445 – Deposit instead of recognizance

Section 446 – Procedure when bond has been forfeited

Section 446A – Cancellation of bond and bail bond

Section 447 – Procedure in case of insolvency or death of surety or when a bond is forfeited

Section 448 – Bond required from minor

Section 449 – Appeal from orders under section 446

Section 450 – Power to direct levy of amount due on certain recognizances

Bail when and when not to be granted:

The code of criminal procedure, 1973 has defined the term bailable offence by stating that an offence which is shown as bailable in the first schedule, or which is made bailable by any other law for the time being in force; and the term non-bailable offence states the meaning that any other offence other than bailable offence. The distinction between bailable and non-bailable offences is based on the gravity of the offence, danger of accused absconding, tampering of evidence, previous conduct, health, age and sex of the accused person. Though the schedule for classification of offences as bailable or non bailable is provided in Crpc; however, it is mostly the offences which are punishable with imprisonment for not less than three years that are classified as non-bailable.

The purpose of bail is to ensure the appearance of the accused before the court whenever required but in certain cases, granting bail is not required. The basic rules of grant or denial of bail may simply be summarized as:

  1. There are only two kinds of offences bailable and non bailable offences
  2. In case of bailable offences section 436 CRPC it is the right of the accused to demand and be granted bail.
  3. The certain basic criteria while exercising his judicial discretion for grant or denial of bail in case of non bailable offences has been laid down in section 437 CrPc in the cases related to non-bailable offences. Some of these criteria include the nature of offence, past criminal records and probability of guilt.
  4. Section 438 CRPC deals with anticipatory bail in cases where there is an apprehension to arrest.
  5. There are other factors also which are to be kept in mind by the hon’ble court before granting of bail like the possibility of threatening a witness, possibility of evidence being tampered etc.

Bail by Police

The Police Officer power, to release a person on bail who has been accused of an offence and is in his custody, is categorized under the two heads:

  1. When without any warrant the arrest is made and;
  2. When with the issuance of warrant the arrest is made .

The Power to grant bail by police has been conferred upon them by the virtue of the following sections:

  1. Sections 42, 43, 56, 59, 169, 170, 436, 437 and Schedule I Column 5 of the Code.
  2. The powers of police to grant bail under head are controlled by directions endorsed under Section 71 of the Code. It is under Section 81 of the Code however, which empowers the police officer to grant bail when the person arrested or produced before him has been accused of the commission of a bailable offence even when no direction to such effect has been given in the warrant. In case of non- bailable offence the endorsement on the warrant has to be strictly followed. Endorsement on warrant however should be by name.

Bail when arrest made without warrant

  1. Bail under section 42 Cr. P.C.: Section 42 Cr. P.C. 1973 can be invoked when the offender refuses to give name and address or gives a name and address which the police officer considers to be false. If those particulars are within the knowledge of the police officer, neither the question of arrest nor the question of bail will arise. As soon as name and address has been ascertained the police officer cannot detain him, if he is willing to execute the necessary bonds. The power to arrest and to release on bail can be exercised by any Police Officer not necessarily by an officer-in-charge of the Police station because this section has been enacted to provide for a particular non cognizable offence does not put any restrictions on the power of a Police Officer to enlarge a person on bail after the correct name and residence have been ascertained.
  2. Bail under section 43 Cr. P.C.: The Code of Criminal Procedure provides for the arrest of a private person also though his powers of arrest are very limited. After the arrest has been made the arrested person should be, without unnecessary delay handed over to a police officer, or in his absence, be brought to the nearest police station. The question of bail will depend upon what opinion the police officer forms about the person brought before him. If there is no sufficient ground to believe that the arrested person has committed any offence, he shall at once be released. If there is reason to believe that such person comes under the provisions of section 41, a police officer shall re-arrest him and then the normal procedure of investigation, determination of the question whether a non-bailable case is made out or not and the desirability of release on bail etc. will arise. If there is reason to believe that he has committed a non-cognizable offence he shall be released as soon as his name and residence have been ascertained as provided under section 42 Criminal Procedure Code. A chowkidar, not being a police officer is not entitled to receive a person arrested under this section. But where a chowkidar is a police officer as under the Chota Nagpur Rural Police Act, (Act I of 1914) he can received a person arrested under section 59, Criminal Procedure Code (old) and detain him in custody.
  3. Bail under sections 56, 57 and 59 Cr. P.C.: Section 56 mandates that a police officer affecting an arrest without warrant must take or send the offender arrested, before a magistrate having jurisdiction in the case of before the officer in charge of a police station. But in section 56, there is an inbuilt provision authorizing police officer to admit the arrested offender to bail, but power of the police officer is subject to the provisions herein contained as to bail. Section 56 of the new Code corresponds to section 60 of the old Code. Section 57 provides that person arrested not to be detained more than twenty four hours. The intention of the legislature is that an accused person should be brought before a Magistrate competent to try or commit with as little delay as possible. Section 57 is pointer to the intendment to uphold liberty and to restrict to the minimum curtailment of liberty. It has been stated in Section 59 of the Code that any person who has been arrested by a police officer shall be discharged only by his own bond, or on bail, or under special order of a magistrate.
  4. Bail under section 169 Cr. P.C.: The section refers to the grant of bail not at the start but only on the making of an investigation under Chapter XII of the Code. Till then bail is not authorized under the provisions of this section. The power to release on bail a person in custody vests in the officer in charge of the police station or the police officer making the investigation. An officer-in-charge of the Police Station or an investigating officer cannot release a person on bail if he has appeared as an accused before the magistrate on the basis of a complaint in respect of the incident which the police is also investigating. If the officer in charge of the police station on the investigating officer takes a bond from the accused for his appearance before the police it is void ab initio. The admission to bail, therefore, is only a provisional arrangement and the magistrate may either discharge the bond in order the re-arrest of the accused. The powers of an officer in charge of the police station on the investigating officer to admit a person to bail are not hampered by the nature of offence of which he is accused.
  5. Bail under section 170 Cr. P.C. : Under this section the authority to grant bail accrues to an officer in charge of the police station, “if the offence is bailable”. It is submitted that a station officer is empowered to grant bail if investigation has disclosed the offence to be bailable and it is immaterial what the initial accusation against him was. Under the imperative provisions of section 170, therefore, an officer in charge of the police station has either to forward the accused in custody or if the offence is bailable or on investigation found to be bailable, to accept bail for his appearance before a magistrate, he cannot entertain an application for the withdrawal of a complaint and, therefore, he cannot be discharged an accused.
  6. Bail under section 437 Cr. P.C.: The power to release on bail a person accused of a non-bailable offence is conferred upon only one class of police officers, namely an officer-in-charge of the Police Station under section 437 sub Section (I). When an officer in charge admits an accused to bail, it is mandatory for him to record the reasons or special reasons in the case diary and preserve the bail bonds until they are discharged either by the appearance of the accused in court or by the order of a competent court. For the purpose of bail in non-bailable offence, the Legislature has classified them under two heads: (1) those which are punishable with death or imprisonment for life; (2) those which are not so punishable. The age or sex or sickness or infirmity of the accused cannot be considered by a police officer for the purpose of granting bail. These matters may be taken in view by a court only. An officer in-charge of the police station may grant bail only when there are no reasonable grounds for believing that the accused has committed a non-bailable offence or when the non-bailable offence complained of is not punishable with death or life imprisonment.

Bail by Police when arrest made in pursuance of warrant

The relevant provisions of Code of Procedure in connection with above heading are confined in section 71 and 81 of Criminal Procedure Code.

  1. Bail under section 71 Cr. P.C.: The relevant provisions of Code of Procedure in connection with above heading are confined in section 71 and 81 of Criminal Procedure Code. It is a matter entirely at the discretion of the court issuing a warrant under this section to give a direction for the release of the arrested person on bail or not. Even in bailable offence, a court may not give such direction. In the case of Lachhmi Narain Vs. Emperor, the above has been stated.  When a person who is to be arrested is not arrested until the date on which he has to attend the court, the direction regarding the taking of bail lapses.
  2. Bail under section 80 & 81 Cr. P.C. : When a warrant of arrest is executed outside the district in which it was issued any police officer who is not a District Superintendent of police or the Commissioner of Police may release an arrested person according to the directions contained in the endorsement. But a District Superintendent of Police, the Commissioner of Police in presidency town with in the local limits of whose jurisdiction the arrest was made shall release on bail the arrested person, if the offence is bailable and such person is ready and willing to give bail to their satisfaction.

A police officer cannot release a person on bail simply because the arrested person is accused of a bailable offence. He has to comply strictly with the contents of the endorsement if any.

Bail to Lunatics :

Section 330, Cr. P.C. Bail cannot be claimed as a matter of right for persons of unsound mind. Courts have been vested with great powers and wide discretion in the matter of grant or refusal of bail. A Magistrate may release a person of unsound mind on bail even though he is charged of an offence of the most heinous type and may refuse bail in bailable case if he is of the opinion that bail should not be allowed.

An accused of unsound mind may be released on security, irrespective of the offence with which he is charged not only on the finding by the court that the accused is of unsound mind, but also prior to such finding, during the pendency of the inquiry into his state of mind [section 328 (2)]

Bail for Contempt in presence of Court under section 346 of Cr. P.C.

When an offence, as is described in section 175, Section 178, 179, 180 or 228 of I.P.C. is committed in the view or presence of a Criminal Court and that court, instead of proceeding under section 345, Cr.P.C., considers that the person accused of any of the offences referred to above should be imprisoned otherwise than in default of fine, or that a fine exceeding two hundred rupees should be imposed upon him, then the court after it has recorded the facts constituting the offence and the statement of the accused, may forward the case to a Magistrate having jurisdiction to try the same, and for the appearance of such accused person may require security to be given before such Magistrate or shall forward such person in custody to such Magistrate in case sufficient security is not given under this section as under the provisions of section 340, the person complained against has not to apply for bail to the court. It is the discretion of the court forwarding the complaint either to ensure the attendance of the accused by demanding a security for his appearance before the transferee Magistrate or it may just inform the accused of the date on which he has to appear before that court. He cannot be taken in custody merely because he has not applied for bail. He can be taken in custody if security is demanded from him and he does not give sufficient security.

Bail to First offender under section 360, Cr. P.C.

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 mean time 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.

Basic Rule

India is a democratic country and the basic concept of democracy is that every individual must have personal liberty and freedom. It is the basic right of an individual which is protected by the state. Thus the concept of bail and personal liberty goes hand in hand and therefore every individual including the accused person has the right to seek bail in order to get himself released from custody until and unless proven guilty by a court of law. As enshrined under Article 21 of the Indian Constitution that the life and personal liberty of a person can’t be deprived except by the procedures laid down by the law.

Object

The basic goal behind arresting and detaining a person behind the jail is that when the accused is required by the court during the trial he must appear in court for the trial. The process of bail is a complex mechanism, it is considered to be very delicate and conflicting at the same time. The reason it is very delicate is that an accused seeks for bail when the trial is pending in the court and it can’t be said that the accused is innocent or culprit. Sometimes when the bail is not granted to the accused person it may curtail the liberty of the innocent accused or while granting bail may result in giving extra-liberty and freedom to the actual culprit.

It is a comprehensive statement used in general that an accused person may escape his crimes but an innocent shall not pay the price of some other person’s deed. Based on this ideology the code of criminal procedure has bifurcated the offences into two categories.

Cases in which bail to be taken (section 436 of CR.PC)

In this case, if a person who is not guilty of any non-bailable offence and gets arrested without a warrant by the police authority and is prepared to give bail, then it is the duty of the police authorities to release him. The person arrested may be released on the bond without submitting any sureties.

Appealability of the order (section 439 of the code)

Section 439 of the code states that any orders passed under section 436 of the code shall be appealable.

  1.   The order made by the magistrate to the session’s judge is appealable.
  2.   In case when the court of sessions passes an order to the court where an appeal lies from an order made by such court.

Investigation incomplete (section 167 of the code)

Under section 57 of the code states that a person arrested or taken into custody has to be released after 24 hours. Within those 24 hours, he has to be presented before the magistrate with a notice. The period of 24 hours can be extended if the investigation regarding the offence or crime committed has not been completed. Section 167 states that in order to extend the period of 24 hours for the purpose of investigation prior order has to be obtained from the magistrate. If the investigation is not completed the person arrested or detained shall be released. The period of detention shall not exceed 90 days (in case where the offence is punishable with the death penalty or life imprisonment) and 60 days (in case where the offence is punishable for a term less than ten years).

The maximum period for which an under-trial prisoner can be detained (section 436-A of the code)

Under section 436 A of the code states that the detention period for an undertrial prisoner other than the one who is accused of the criminal offences punishable with death or life imprisonment shall be released from detention if the person has been detained for one half of the maximum sentence provided for the offence committed by him.

When may bail be taken in case of non-bailable offences (section 437 of the code)?

It depends upon the discretion of the court or the police officials that they may release the person arrested for non-bailable offences until and unless there exists any reasonable grounds or apprehension that person arrested has committed any crime and is not guilty of any criminal liabilities which is punishable with life imprisonment or the death penalty.

Bail to require accused to appear before the next appellate court (section 437 A of the code)

Under section 437A of the code, it has been stated that in order to appear in the higher court as and when the higher court issues the notice against the judgment of the court it becomes mandatory for the trial court or the appellate court which requires the accused to execute the bail bond with sureties.

What do you mean by the Anticipatory Bail?

Under section 438 of the code, it has been stated that the term anticipatory bail can be understood through the expression anticipatory. Anticipatory bail is the bail granted by the court in anticipation of the arrest. When this bail is granted to a person it ensures that in case if the person is arrested in the near future then such person shall be released on this anticipatory bail. No questions can be raised on the release unless the person executing this bail is arrested and therefore it totally depends upon the arrest that the order granting such bail becomes operative.

The following provision of section 438 of the code was recommended by the law commission. On its 48th report, they expressed their observations regarding the provision of anticipatory bail and stated that such provision is a useful addition to the code but it should be used in extraordinary or exceptional cases only.

Section 438 of the code runs as follows:

When any person having the reasonable apprehension that he may be accused of committing the offence of non-bailable nature then such person can apply for anticipatory bail in the high court or the sessions court. The role of the court having competent jurisdiction shall give him direction under section 438 of the code that during the time when he gets arrested he shall be released on bail after taking into consideration the following conditions shall accept or reject the application filed for anticipatory bail by the person getting arrested.

Following are the factors:

  • The accusation made shall be grave and serious
  • Likelihood of the applicant to flee or abscond from justice
  • When the accusation is made with the intention of humiliating or injuring the person by making him arrested through that accusation.

Conditions under section 438 of the code involve the following things.

  • The applicant filing for the anticipatory bail shall have the reasonable apprehension of getting arrested
  • The arrest of such person shall be in respect of the accusation of him committing non-bailable offence or cognizable offence and the courts having competent jurisdiction shall direct that in the event of the arrest the person shall be released.

Following conditions are imposed on the person seeking the anticipatory bail by the courts having competent jurisdiction

  • It is the duty of the person to appear or make himself available whenever required by the police officials for the investigation.
  • He must not induce or threat for dissuading him from disclosing facts of the case.
  • The applicant shall not go outside the territory of India without taking the prior permission of the court.
  • Or if the following conditions stated in point one and two are fulfilled and such person is ready to give bail, he should be released from custody subject.

Distinction between Bail and the anticipatory bail

Under section 437 of the code, it has been stated that a regular bail is available and granted to a person after the arrest when he is in the judicial or police custody,  however in the case of an anticipatory bail is available to a person before the arrest or if the person has reasonable apprehension of arrest.

Post-Conviction and Pre-Appeal Bail under section 389 Cr. P.C. :

The section contemplates post-conviction and pre-appeal period. Pending an appeal against conviction appellate Court may release the convict on bail and High Court can exercise this power when appeal lies to Sessions Court. So far as the court convicting the accused is concerned, the court is bond to admit the accused to bail pending order passed by appellate court or High Court when (a) the accused was already on bail and has been sentenced to imprisonment for a term not exceeding three years; or (b) when the offence was a bailable one. Even on fulfilment of the condition court on convicting the accused may refuse bail if there exists a special reason. Under this section an intention to present an appeal on the part of the convicted person is sufficient reason to justify the release of a convicted person on bail. It may further be noted that an order of bail under this section is for a limited period only and is applicable only to “convicted” persons and not to those who are bound over.

Bail while making reference under section 395 Cr. P.C. :

When a Magistrate makes a reference under section 395, CrPC, to the High Court for its opinion on the validity or otherwise of any act, Ordinance or Regulation or under any other section of this act, he may then in such case, pending the High Court’s decision, either commit the accused to jail or release him on bail to appear when called upon. The Magistrate will exercise his discretion in favour of the accused or against him according to the seriousness of the charge and severity of punishment provided in that act, Ordinance or Regulation.

Bail During Revision Under Section 397 Cr. P.C. :

The Sessions Court and the High Court in exercise of revisional power can call for records of inferior courts for the purpose of satisfying himself as to the correctness, legality or propriety of any finding, sentence or order recorded or passed and as to the regularity of any proceedings of such inferior court. When such revisional Court calls for the record of an inferior Court, he may direct that the execution of the sentence or order be suspended and, in case the accused is in confinement, then he may be released either on bail or on his own bond pending the examination of the record.

Bail under Section 437 Cr. P. C. Section 437:

It deals with bail in bailable offences. Grant of bail is a rule whereas refusal in this context is an exception. A person accused of bailable offence has the right to be released on bail. Bail in cases of bailable offences is compulsory bail. It is a discretionary option to grant a bail to a person accused of bailable offence. When a person who is suspected of committing a bailable offence is produced before a Magistrate and he is prepared to give bail, Magistrate has to release him on bail without having any other option.

Bail for non-bailable Offence: Under Section 437 Cr. P. C.:

The provisions of section 437 empower two authorities to consider the question of bail, namely-

  1. a “court” which includes a High Court and a Court of Session, and
  2. an officer-in-charge of the police station who has arrested or detained without warrant a person accused or suspected of the commission of a non-bailable offence. Although this section deals with the power or discretion of a court as well as a police officer in charge of police station to grant bail in non- bailable offences it has also laid down certain restrictions on the power of a police officer to grant bail and certain rights of an accused person to obtain bail when he is being tried by a Magistrate.

Section 437, Criminal Procedure Code, deals with the powers of the trial court and of the Magistrate to whom the offender is produced by the police or the accused surrenders or appears, to grant or refuse bail to person accused of, or suspected of the commission of any non-bailable offence.

Criteria for Judicial Discretion to Grant or Refuse Bail

This judicial discretion has to answer one of the most important fundamental rights guaranteed under Article 21 of the Constitution, namely, personal liberty. Grant of bail may he gifting personal liberty to a person who has been arrested or who is anticipating an imminent arrest. On the other hand, refusal of bail implies sending that person to jail, or to police custody, as the case may be, and thereby depriving that person of his personal liberty.

In fact, the question of “bail or jail?” has a bearing not only on the individual concerned but also on the society in general, for, an innocent person sent to jail may not augur well for a just society whereas a dangerous and hardened criminal released on bail can do more harm to the society by way of destroying the evidence, threatening the witnesses, evading the judicial process or may be by committing more offences. The importance of this judicial discretion cannot therefore be understated.

Frequently Asked Questions:

  1. When can a bail be denied?
    1. As per section 436 (2), if a person has violated the conditions of the bail bond earlier, the court may refuse to release him on bail, on a subsequent occasion in the same case. He can also be asked to pay penalty for not appearing before the court in the proceedings against him
    2. It is clear that the provisions related to bail in case of non-bailable offences gives a discretionary power to the police and to the court. However the power is not without any restraint. Section 437 disallows to be given bail under following conditions:
      • If it appears there is a reasonable ground for believing that he has committed an offence punishable with life imprisonment or death.
      • If such offence is cognizable and the person has been previously been convicted of an offence with death or life imprisonment
  2. Is cancellation of bail possible?
    • Although there was no provision for cancellation of bail but in Talib’s case (AIR 1958) it has been held by the hon’able court that the absence of such provision not as a lacuna but as a recognized power of high court for cancellation of bail. According to section 437 (5), any court which has released a person on bail may direct a person to be arrested or put into custody. Section 439 CRPC also grants power to the high court and the courts of session to cancel the bail and put the person into custody.
  3. Can a bail be refused in cases of bailable offences?
    • Section 436 (2) of chapter 38 of Crpc has empowered the court for denial of bail in   cases of bailable offences if the accused fails to comply with the conditions of bail bonds.

Appeals before the High Court

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Appeals before the High Court:

The High Court has appellate jurisdiction over both civil and criminal cases. There is a hierarchy of Civil and Criminal Courts in every state subordinate to their respective High Courts to administer civil and criminal law disputes.  It can hear appeal on civil cases tried by the Courts of Munsifs and District Judges. In criminal cases, the jurisdiction extends to cases tried by the Sessions and Additional Sessions Judges. The Courts in hierarchy below to High Courts are called as Trial Courts. Appeals before the High Court

Appeals before the High Court

In what cases an Appeal lies before the High Court?

Right of appeal is a creature of the statute and it is for the legislature to decide whether the right of appeal should be unconditionally given to an aggrieved party or it should be conditionally given. The right to appeal which is a statutory right can be conditional or qualified.[1] So it is the statutory provision which shall determine where an appeal shall lie and whether it shall lie before High Court or any other forum. Further that, right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications.[2] The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant.[3]

Statutory Appeals that lie before High Court :

  • Section 389 of the Code of Criminal Procedure, 1973
  • First Appeal: Sections 96 to 99A; 107 to 108 & Order 41 of the Code of Civil Procedure, 1908
  • Second Appeal: Section 100 of Code of Civil Procedure
  • Section 260A of the Income-Tax Act, 1961
  • Section 173 of Motor Vehicles Act
  • Section 130 of the Customs Act, 1962.

(List is not exhaustive)

APPEALS BEFORE HIGH COURT IN CRIMINAL MATTERS:

An appeal can be filed against the decision of a Session Judge if the accused has been sentenced for 7 years or more. Capital punishment given by a sessions judge cannot be executed unless it is confirmed by the High Court.

APPEALS BEFORE HIGH COURT IN CIVIL MATTERS:

Appeals arising out of Civil matters are called as Civil Appeals. The Civil Appeals are basically governed by Code of Civil Procedure. Further the High Court may also frame rules and procedures for conducting Civil Appeals. Appeals could be filed either against an order or Judgment.

SECOND APPEAL BEFORE HIGH COURT:

The decree/judgment passed by any appellate Civil Court in the first appeal can be challenged by way of a second appeal before the High Court. If the case involves a substantial question of law, the second appeal can be filed even against an ex parte decree/judgment of the first appellate court.

NO APPEAL:

No appeal can be filed against a decree/judgment which has been passed by the court with the consent of the parties. Again, no appeal can be filed, except on a question of law, from a decree in any suit of the courts of small causes, when the value of the subject matter of the suit is less than Rs. 3000/-.

Furthermore, where a decree/judgment is passed by a single judge of the High Court in second appeal, the said decree/judgment is not appealable.

Further, that 42nd Amendment, 1976 disallowed the High Court to hear appeals against Tribunals and the decisions of various Corporations established under the law of the state. But this restriction on the High Court’s appellate jurisdiction was removed by the 43rd Amendment.

GROUNDS OF APPEAL:

The basis of an appeal must be a reversible error in the application of the law, or appreciation of fact, at the trial court level (i.e., based on the facts, the court clearly misapplied the law). In criminal cases, an appeal can target the conviction itself or just the sentencing portion of the decision without regard to the underlying conviction.  An appeal may be filed only after a final judgment or order has been reached by the trial court.

  1. A judgment/decree can be challenged in the first appeal on varied grounds both on basis of facts of the case and as well the legal interpretation of various legal provisions involved.
  2. For instance a party may raise objections as regards the territorial and pecuniary competence of a court passing the challenged judgment and decree.
  3. If there has been a failure of justice on account of such incompetence.
  4. Equally, in case all the necessary parties were not joined in the original suit, a challenge to the judgment decree of such a court can be maintained.
  5. An appeal may be as well to challenge the interpretation of law as the legal provisions applied by the subordinate court while making the judgment/ decree any error, defect as irregularity in any proceeding before the subordinate court affecting the merits of the case as the jurisdiction of such a court may as well be a sustainable ground while making an appeal.
  6. The second appeal can be filed only if there exists a substantial question of law. In the case the question of law would be substantial if it is of general public importance or which directly and substantially affects rights of the parties.

How are writs and appeals of High Court different?

Writs are extraordinary court orders and only issued when a moving party (the one seeking the writ) has no other options. A writ petition is filed to protect constitutional rights, Legal Rights or fundamental rights. Whereas, an appeal is a motion filed before a judge on which a previous lower court has passed an order or orders as the case may be and the orders are unsatisfactory to the person filing the appeal and so he she files appeal in a higher court. Usually writ petitions are filed first, whereas, appeals are filed after orders or judgment of lower courts. To read more about writs, click here.

I lost my trial because my law made stupid mistakes, can’t I rely on an appeal before High Court to correct them?

Don’t count on appeals to make up for any real or perceived deficiencies at trial. You should put all of your energy into the trial itself, which includes finding the right lawyer to try the case. Successfully appealing a verdict because you had a deficient attorney is an extremely difficult proposition. You can’t appeal because you simply had a bad lawyer. But, we may firstly understand some of the basic concepts pertaining to Appeal.

What is an appeal, when is it filed ?

At the conclusion of a proceeding in a lower court, the party who lost may want to have that decision reviewed by a higher court i.e. District Court, High Court or Supreme Court or concerned Tribunal depending upon the Legislative Scheme, in the hope that it might be reversed or changed.What an appeal is not

An appeal is not:

  • a new trial;
  • a hearing with witnesses or a jury;
  • a chance to present new evidence or new witnesses to a new judge, except in exceptional circumstances; or
  • a way to avoid complying with the trial court’s order.

Does an appeal constitute a new trial?

No. In an appeal there are no new issues presented or witnesses called to testify. The appellate court will only review the Trial Court’s Judgment and evidence presented during the trial to determine whether there were errors in either procedure or application of the law. Even if there were errors, if they’re deemed minor — legally called “harmless error” – the judgment is generally not overturned, nor is a new trial be granted. You must understand that an appeal is not a new trial or a rehearing of your case. The Court of Appeal will not hear an appeal of every case. In some cases, you must ask the permission of the Court to appeal through a process called “leave to appeal”. Even if the Court of Appeal hears your appeal, it will not:

  • re-hear your case from start to finish;
  • change the decision because it seems unfair; or
  • change the decision just because the Court of Appeal disagrees with it. (The decision must be incorrect due to a factual or legal error.)

What is a possible outcome of an Appeal :

  1. Affirm the decision;
  2. Modify the ruling in some way;
  3. Consider new facts or evidence (seldom); or
  4. In extremely rare cases, may throw out the case entirely.

References:

  1. In Anant Mills Co. Ltd. v. State of Gujarat [(1975) 2 SCC 175]
  2. Shri Shyam Kishore and Ors. v. Municipal Corporation of Delhi and Anr. as reported in J.T. 1992 (5) SC 335 at page 351
  3. Gujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad [(1999) 4 SCC 468] and Vijay Prakash D. Mehta v. Collector of Customs [(1988) 4 SCC 402]

 

Writ petition before the Gujarat High Court

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What is writ petition before the Gujarat High Court

As per the Indian Constitution, under Article 226, High Courts can adjudicate on the aspects of Legal as well as Fundamental Rights, whereas Supreme Court can adjudicate on Fundamental Rights, under Article 32. In the context of State of Gujarat, a writ is an order by a Gujarat High Court to a Government authorities, Lower court or courts, directing them to do something or stop them from doing something. However, it shall be the same conceptual framework for all the High Courts. Writ is a form of written command in the name of the court. It directs you to act in a specific way. In this article we may explore the same in the context of Gujarat High Court or in the context of Article 226 of the Constitution of India.

Gujarat High Court

Gujarat High Court

Introduction

Fundamental Rights are contained in Part III of the Indian Constitution including the right to equality, right to life and liberty etc. Whereas, legal rights are rights enshrined under some statute, or they may simply be claimed by way of equity. However, mere provision for Fundamental Rights or Legal Rights may not be sufficient. The remedy to resolve, if your rights are violated is important. To protect Fundamental Rights as well as Legal Rights the Indian Constitution, under Article 226 provides the right to approach the High Court, Gujarat High Court more specifically, to any person/ citizens whose Right has been violated.

What is a writ?

Fundamentally, a writ is a formal written order issued by anybody, executive or judicial, authorized to do so. In modern times, this body is generally judicial. Therefore, a writ can be understood as a formal written order issued by a Court having authority to issue such an order. Orders, warrants, directions, summons etc. are all essentially writs. 

A writ petition is an application filed before the competent Court, i.e. in this context Gujarat High Court, requesting it to issue a specific writ. As per the Indian Constitution, Gujarat High Court holds powers under Article 226,  against the decision of any court/individual lower according to their jurisdiction. A Writ petition for a civil or criminal nature depending on the situation can be filed by an Individual/aggrieved party to a higher level of court against the order/decision of the lower court.

Under What Circumstances you may need to writ petition before High Court of Gujarat?

Writ petition is generally filed in contravention of rights or injustice is served to any individual/aggrieved. In the Context of State of Gujarat, it is a remedial measure provided by the constitution against the authority regulating the law and order in the country for the following reasons:

  1. To help citizens defend their rights against court orders.
  2. To provide an alternative to the aggrieved when impugned order is not objected by the appeals made to the authorized higher authorities in the legal system.
  3. To make sure justice served but not justice denied.

You can file the writ petition in Gujarat High Court under Article 226 of the Indian constitution. You can also file Writ Petitions in India for a civil or a criminal act.

  • You can file a criminal writ petition when the cause of action in relation to the criminal law such as the right of accused, bail, etc.
  • You can file a civil writ petition when someone commits a civil wrong such as IPR, taxes, etc.

Types of Writs before Gujarat High Court

There are about five types of Writs, which one can file before the Gujarat High Court 

  1. Writ of Habeas Corpus:
    • A petition for personal liberty or release from detention can be filed by an Individual through a petition of Habeas Corpus which means ‘to have control of body’. On receipt of the petition against the order of the lower court or the individual under which the person is or being detained, the court can issue a direction of release.
    • It is in the nature of an order calling upon the person who has detained another to produce the latter before the court
      • To know on what ground he has been detained
      • To set him free if there is no legal justification for the
        imprisonment
    • For instance, a writ petition of Habeas Corpus for release of any person can be made if he is to be placed before the magistrate within 24 hours or if he is arrested for no reason or the reason for his arrest is unjustifiable.
    • Increasing Scope of Habeas corpus
      • Kanu Sanyal v. District Magistrate: the court may examine the legality of the detention without requiring the person detained to be produced before it
      • Sheela Barse v. State of Maharashtra: if the detained person is unable to pray for the writ of habeas corpus, someone else may pray for such writ on his behalf.
      • Nilabati Behera v. State of Orissa: The petitioner was awarded compensation of Rs. 1, 50, 000.
  2. Writ of Mandamus:
    • A petition to issue a command is a Writ of Mandamus. To issue a direction to a lower authority or to any Individual to restrain him from doing any activity, which can result in injustice to the general public or any specific group or individual. Such a petition can command any public authority or tribunal to perform an act which it is bound to perform.
    • The Writ can granted against a public authority if
      • Acted against the law
      • Exceeded his limits of power
      • Acted with mala fides
      • Did not apply his mind
      • Abused his discretionary powers
      • Did not take into account relevant consideration
      • Has taken into account irrelevant consideration
    • For instance, It is the duty of the Judge of a Court to make a decision only on the basis of relevant facts presented, if he fails to do so, with the filling of a petition to a Superior Court, he can be made to do an action in a prescribed way.
    • Case Laws
      • Hemendra v Gauhati University : Mandamus was issued to direct a University to announce that the petitioner has passed where, University had refused so to declare though the petitioner had
        obtained the pass marks required by the statutory rules of the University.
      • Barada Kanta v State of West Bengal : Writ of Mandamus cannot be issued against an individual person or any private organization because they are not entrusted with a public duty.
  3. Writ of Prohibition:
    • A petition to issue a direction or command to any local authority or court to restrict it from acting beyond its jurisdictional powers. A writ of prohibition popularly known as ‘stay order’ is usually issued with the consequences for doing any act or taking action against its reserved powers.
    • It means “To be Certified”. Both preventive and curative. Issued by SC and HC’s for quashing the order of any inferior court, tribunal or Quasi Judicial body.
    • Propositions laid in issuing this writ by the High Court in Hari Vishnu Kamath Vs. Ahmad Ishaque 1955-I S 1104 : ((s) AIR 1955 SC 233)
      •  It is issued to correct the errors of Jurisdiction.
      • When court or tribunal acts illegal in its jurisdiction.
      • Order against principles of natural justice.
      • Court acts in exercise of its supervisory and not appellate Jurisdiction.
      • An error in the decision or determination itself may also be amenable to a writ of Certiorari.
    •  For instance, a Writ of Prohibition can be filed with the Supreme Court to restrict any High Court from taking any decision which is not in the authority of the High Court (‘HC’). 
    • Case Laws:
      • Nagendra Nath Bora & Anr. Vs. Commissioner of Hills Division and Appeals, Assam & Ors., (1958) SCR 1240, the parameters for the exercise of jurisdiction.
        • Check whether inferior court has exceeded its jurisdiction.
        • Mere formal and technical errors doesn’t attract this.
  4. Writ of Certiorari:
    • A petition to issue an order or command against the decision or order of the lower authority where it was found that the authority has disregarded the laws and principles of natural justice in taking the decision is a Writ of Certiorari. In short, the petition calls for the records or the facts from the lower authority on the basis of which any summon or order was issued. On the satisfaction of facts /records placed by the lower authority, the decision shall be accepted or restricted.
    • For instance, A Writ of Certiorari can be filed by any aggrieved person against the decision of any District Court (DC) to any High Court through which the is sought to be nulled/ quashed.
    • Propositions laid in issuing this writ by the High Court in Hari Vishnu Kamath Vs. Ahmad Ishaque 1955-I S 1104 : ((s) AIR 1955 SC 233)
      • It is issued to correct the errors of Jurisdiction.
      • When court or tribunal acts illegal in its jurisdiction.
      • Order against principles of natural justice.
      • Court acts in exercise of its supervisory and not appellate Jurisdiction.
      • An error in the decision or determination itself may also be amenable to a writ of Certiorari
  5. Writ of Quo Warranto:
    • A petition to restrict – a person to hold a position in any government office or involvement in any decision relating to the victim is a Writ of Quo Warranto. It is required to prevent the official to exercise any powers of the position as such which he is not entitled to hold and/or to nullify the decision taken by him if any. The writ shall be applicable to all public offices and not on private organizations.
    • Issued to restrain a person from holding a public office subject to following Conditions:
      1. Public office created by a statue
      2. Person to be appointed by a statue or statutory instrument.
    • For instance, to restrict a person incompetent to hold the position of a sub-inspector due to his incapability or low qualification, a Writ of Quo Warranto can be filed with the appropriate court of justice.
    • It means “what is your authority”.
      • Subramanian Swamy petition against Jayalalitha in 2001. Two PIL’s against her
        appointment.
      • Manohar Reddy vs Union of India: two advocates filed a petition quashing the appointment of a Judge of a HC of AP and a writ is in the nature of Mandamus commanding the Bar Council of AP to cancel the enrollment as an advocate N V Ramana.

Judicial Review

  • Over and above forms of writ, Judicial review is the idea, fundamental to the system of government, that the actions of the executive and legislative branches of government are subject to review and possible invalidation by the judicial branch. Judicial review allows the Supreme Court to take an active role in ensuring that the other branches of government abide by the constitution. Judicial review was established in the classic case of Marbury v. Madison, 5 US 137 (1803). Dealt under Article 13, Article 32 and Article 226 of the Constitution of India, Judicial review is one of the checks and balances in the separation of powers. It is the power of the judiciary to supervise the legislative and executive branches when the latter exceed their authority.
  • Judicial review should be understood in the context of both the development of two distinct legal systems (civil law and common law) and two theories of democracy (legislative supremacy and separation of powers) is that some countries with common-law systems do not have judicial review of primary legislation.

To Conclude:

The concept of Writ petition was brought in the Constitution of India to help a victim if he/she is deprived of any right or injustice made to him or to help him fight against any decision taken by the last legal authority. To file a Writ petition before Gujarat High Court the person has to either take the help of a legal adviser or hire a lawyer to file a petition on his behalf.

Please Note:

  • Concept of Writ petition is universal across all the High Courts in the Context of Legal as well as Fundamental rights, within the scope of Article 226 of Indian Constitution and also before the Supreme Court in the context of Fundamental Rights under Article 32. But the present article is written in the context of Gujarat High Court, therefore there is largely reference to Gujarat High Court. 

To know the difference between Write and Appeal, Click here.

NCLT – IBC Amendment Bill : Credit Hierarchy Restored, Resolution Plans And Time Limit Binding

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NCLT IBC Amendment Bill: Credit Hierarchy Restored, Resolution Plans And Time Limit Binding

NCLT IBC Amendment Bill: Credit Hierarchy Restored, Resolution Plans And Time Limit Binding

NCLT IBC Amendment Bill: Credit Hierarchy Restored, Resolution Plans And Time Limit Binding

The government has moved to put to rest several hurdles impeding corporate insolvencies in India via an amendment to the law. The actual text of the Insolvency and Bankruptcy Code (Amendment) Bill, 2019, is finally in the public domain and will soon seek passage in Parliament.

Whilst the salient features of the cabinet approval had been released last week, the Bill, in public domain, removes any fuzziness that commentators had on the interpretation of the eight amendments.

‘Complex’ Plans Can Be Part Of Resolution

The amendment to section 5(26) – which defines a resolution plan- now clarifies that a plan may include provisions for restructuring including by way of merger, amalgamation and merger to be entertained by NCLT. Complex plans can be part of the insolvency process and the plan can deal with one or more companies as transferee companies in the course of insolvency proceedings for reviving the corporate debtor as a going concern.

Addressing Delays In Admission

IBC requires the Adjudicating Authority, mostly the National Company Law Tribunal, to determine the existence of a default within 14 days when an application initiating the insolvency process is made.

The proposed amendment to this provision introduces judicial discipline to say if such a determination hasn’t been made, the NCLT has to pass an order within 14 days from the insolvency commencement date to record the reasons in writing for such delay in determination. This will address the significant delays in listing of insolvency applications by the NCLT. In the past, some applications for initiation of corporate insolvency resolution process have not been listed for admission for periods exceeding four months before some of the appropriate tribunals.

Speedier Disposal

Presently, the insolvency process has be to completed within 180 days, extendable up to 90 days under section 12(3). Through jurisprudence, courts have laid down that the time spent in litigation must be excluded from this 270-day period.

The amendment Bill has proposed that the insolvency process has to be completed mandatory within 330 days from the insolvency commencement date, including an extension of the period granted under section 12(3) and the time taken in legal proceedings in relation to such resolution process of the corporate debtor. If the insolvency process has been pending and has not been completed within 330 days, then as a transitory extension of the resolution process, pending matters shall be completed within 90 days from the date of commencement of the IBC Amendment 2019.

The use of the word “mandatory” and “shall be completed” are a clear indication that the amendments to IBC are not directory in nature but constitute a mandatory compulsory indication to finish the insolvency process in a specified timeline of 330 days, without exception.

Cases where over two years have been taken in dealing with the resolution process should be conclusively determined in the extra time of 90 days from the commencement of the amendments.

Home-buyers’ Vote

In order to set right the impasse for conducting voting for a large number of home buyers that share the status of financial creditors, it is made expressly clear that the authorized representative shall cast his vote on behalf of all financial creditors represented by him, with the decision taken by a vote of more than 50 percent of the voting share of the financial creditors who have cast their vote. This change is notwithstanding the provisions of Section 25A(3).

It is clarified that for withdrawal of the application under section 12A, the authorised representative will, however, cast the vote as originally provided i.e. act in the interest of the home buyers and as per prior instructions.

Credit Hierarchy Restored

Section 30(2)(b) specifies that at the resolution plan stage, payment to operational creditors shall not be less than the amount to be paid to them in the event of liquidation of the corporate debtor. At the liquidation stage, the order of payments is specified in section 53(1) – insolvency process costs, dues of workmen, secured creditors, unsecured creditors, statutory dues and then operational creditors.

The amended section 30(2)(b) is substituted to specify that payments to operational creditors for their debt would be in a manner specified by the IBBI but shall not be less than:

(i) the amount to be paid to such creditors in the event of liquidation of the corporate debtor or
(ii) the amount that would have been paid to such creditors if the distribution was done based on the priority under Section 53(1), whichever is higher.

It is specified that payments made to operational creditors shall be fair and equitable. In my opinion, it would not be permissible for any judicial interpretation to distort the priority different from what’s specified under section 53(1) and the extent and value of such payment shall also be determined based on the hierarchy specified under this section.

Further, the amendment provides that payments to dissenting financial creditors shall be decided as per regulations of the IBBI, but it shall not be less than the amount due to them in accordance with hierarchy specified at the liquidation stage.

As a clarification, it is provided that the amended section 30(2)(b) would be applicable to cases

where the resolution plan has not been approved or rejected by the Adjudicating Authority or
where an appeal has been preferred to the appellate authority or the Supreme Court or where such appeal is not time barred under any provision of law for the time being in force or
where a legal proceeding has been initiated in any court against the decision of the Adjudicatory Authority in respect of a resolution plan.
This clarifies that the amendment to Section 30 is retrospective for pending proceedings in relation to the resolution plan, as above.

Additionally, it is also clarified that the manner of distribution must take into account the order of priority amongst creditors, including the priority and value of the security interest of a secured creditor. This change makes it beyond doubt that it is not open for the Adjudicating Authority or the Appellate Authority or any court to change either the priority or the value of the security interest of a secured creditor contrary to the principles of Section 53(1) of the IBC.

Making Resolution Plans before NCLT Binding

The proposed amendments resolve the issue of the central or state government or a local authority raising demands post approval of the resolution plan by the Adjudicating Authority. It makes clear that the central or state government or a local authority – to whom statutory dues are owed – are also bound by the resolution plan as stakeholders.

If such a resolution plan has provided for cancellation of operational creditors debts or diminished taxes, which qualify as operational debts, or amounts payable to local authorities as royalty or fees are also bound by the resolution plan as approved by the Adjudicating Authority under Section 31(1) of the IBC.

Creditors’ Committee Empowered

The Bill provides that the Committee of Creditors may take the decision to liquidate the corporate debtor any time after the CoC is constituted and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum. Hence, if 66 percent of the CoC decides to liquidate the corporate debtor, it can abort an endless and futile procedure of insolvency when it is no longer justifiable to keep it going.

All in all, these eight amendments shall become effective from the coming into force of the IBC Amending Act from such date, as the Central Government by notification may appoint.

These significant changes are made to ensure that insolvency proceedings are mandatory time bound and are not judicially extendable for more than once for a period of 90 days after the expiry of the 180 days available for resolution. A further time period of 60 days has been given to account for delays as a result of legal proceedings in relation to such resolution process.

The ability of the Appropriate Authority or the Appellate Authority or the courts to interpret and state that these amendments made by the legislature are directory in nature, has been plugged. The legislative intent is that the timelines are mandatory in nature. Even pending proceedings or resolution plan, which have exceeded 330 days by now, have merely 90 days extra from the commencement date of the IBC Amendment 2019 to finalize matters or to proceed to liquidation.

With these amendments and clarifications, the process of speedy adjudication and decision making should now be finally settled. No judicial interpretation or Latin maxim should be further available to postpone the completion of the insolvency process or prevent proceedings to liquidate the corporate debtor (upon failure of the insolvency process) as determined by the requisite majority of the CoC.

Recovery Process & Enforcement Of Security Interest In India

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DEBT RECOVERY – LEGAL FRAMEWORK IN INDIA

Indian Legal system encompasses varied legal provisions for recovery of debts by the Banks and Financial Institutions as follows :-

  • Summary suits under Order XXXVII of the Code of Civil Procedure, 1908.
  • Ordinary suits for recovery, under Civil Law.
  • Original Applications to be filed by Banks and Financial Institutions before Debt Recovery Tribunal for debt not less than Rs. 10 lakhs, under Recovery of Bank Due to Banks & Financial Institutions Act, 1993 (DRT Act).
  • Action under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (Securitisation Act).
  • Arbitration proceedings under Arbitration & Conciliation Act 1996, for recovery of outstanding amount as under Arbitration Agreement / clause in the loan documents, in cases where the Recovery of Debts due to Banks and Financial Institutions Act, 1993 is not applicable.
  • Initiation of criminal action in addition to civil proceedings for prosecution and punishment as per the Indian Penal Code and other laws where debt is also tainted with fraud, cheating, misfeasance etc.
  • Filing of criminal complaint under Section 138 of Negotiable Instruments Act, 1881 for dishonor of any cheque issued by borrower to the bank in discharge of legally enforceable liability.

BROAD CLASSIFICATION OF THE DEBT WORK OUT PROCESS IN INDIA

Amount to be recoveredProcedure
Does not exceed Rs. 10,00,000/-
  1. Filing simple suit for recovery before Civil Court.
  2. Filing of summary suit under Order XXXVII of CPC, 1908.
  3. Filing suit for foreclosure of mortgage.
  4. Arbitration proceedings if arbitration agreement exists.
Exceeds Rs. 1,00,000/-In case the “Security Interest” has been created in specific movable / immovable property provisions of the Securitization Act may be invoked to repossess the mortgaged property, without intervention of the court, and sell the same, provided the account has been classified as NPA.
Exceeds Rs. 10,00,000/-Original application is to be filed before the DRT for recovery of dues. Bank can simultaneously initiate proceedings under Securitization Act as well.  Civil court / Arbitrator will not have jurisdiction to entertain such claim.

DEBT RECOVERY TRIBUNALS & PROCESS OF RECOVERY

Debts Recovery Tribunals (DRT) and Debts Recovery Appellate Tribunals (DRAT) have been constituted under the provisions of the DRT Act for establishment of Tribunals for expeditious adjudication and recovery of debts due to Banks and Financial Institutions and for matters connected therewith.

DRT has also been given the power to adjudicate  the applications filed by the Borrower/Mortgagor against the action of the Secured Creditor initiated under the Securitization Act

ESTABLISHMENT OF  DRTs

The Central Government by notification has established Tribunals known as Debts Recovery Tribunals (DRT) to exercise the jurisdiction, power and authority confers under the Act at:

Mumbai, Delhi, Kolkata, Chennai,

Bangalore, Allahabad, Ahmedabad, Aurangabad,

Chandigarh, Madurai, Coimbatore, Cuttack,

Orissa, Patna, Bihar, Ernakulam,

Guwahati, Hyderabad, Vishakhapatnam, Jabalpur,

Jaipur, Lucknow, Nagpur, Ranchi

Pune.

Establishment of DRATs

In exercise of powers, the Central Government has established DRAT at places :-

  • Allahabad – Jurisdiction over DRTs functioning at Allahabad, Lucknow and Jabalpur.
  • Chennai – Jurisdiction over DRTs functioning at Bangalore, Chennai, Coimbatore, Hyderabad, Vishakhapatnam and Ernakulam.
  • Delhi – Jurisdiction over DRTs functioning at Delhi, Chandigarh, Jaipur.
  • Kolkata – Jurisdiction over DRTs functioning at Cuttack, Guwahati, Patna, Kolkata and Ranchi.
  • Mumbai – Jurisdiction over DRTs functioning at Ahmedabad, Aurangabad, Mumbai, Nagpur and Pune.

Composition of DRT and DRAT

DRT is presided over by a Presiding Officer, who is qualified to be a District Judge, and is appointed by notification by Central Government.

DRAT is presided over by a Chairperson, who is qualified for appointment or who has been a Judge of a High Court, or has been member of the Indian Legal Services who has held the post of Grade I of such services for at least three years.

The Recovery Of Debts Due To Banks And Financial Institutions Act, 1993

Applicability (DRT  Act)

  • The Act applies to whole of India except State of Jammu & Kashmir.
  • The provisions of Act applies where the amount of debt due is not less than Rs. 10,00,000/-.
  • Original Application for recovery of Debts can be filed only by Banks and Financial Institutions.

Applications to be made to DRT  under DRT  Act

  • Only Banks and Financial Institutions defined under the DRT Act, (which includes Public Financial Institutions within the meaning of Section 4A of the Companies Act, 1956, Securitization company / Reconstruction company under the Securitization Act), can file an application before the DRT. Normal fees, based on amount claimed in O.A., has been fixed as court fee which does not exceed Rs. 1.50 lakhs.
  • Summary procedure is adopted by the DRTs for adjudication of dispute.  Evidence is taken on affidavit and cross examination is not permitted except in few deserving cases.
  • The defendants can file counter claim or claim of set off against the claimed amount.
  • The final order is passed by the Tribunal directing the borrowers to pay the amount.  In case, the borrower does not pay the ordered amount, recovery certificate is ordered to be issued against the borrower which is then executed by Recovery Officer of the DRT.

Powers of DRT

DRT has power to:

  • summoning and enforcing the attendance of any person and examining him on oath;
  • requiring the discovery and production of documents;
  • receiving evidence on affidavits;
  • issuing commissions for the examination of witnesses or documents;
  • reviewing its decisions;
  • dismissing an application for default or deciding it ex-parte.
  • make interim order by way of injunction, stay or attachment against the defendant to debar from transferring, alienating or otherwise dealing with the property or asset without permission of Tribunal.
  • direct the defendants to provide security sufficient to satisfy the debt.

Willful disobedience of powers of Tribunal are punishable under Contempt of Court Act.

Appeal against the order of DRT

Any person aggrieved on account of order passed by DRT may file an appeal before DRAT.

However, the DRAT does not entertain the appeal unless the Appellant deposits with the Appellate Authority, 75% of the amount or such other lesser amount as directed by DRAT.

Overriding Effect

Provisions of the DRT Act has overriding effect over any other law for the time being enforced except :

  1. IFCI Act
  2. State Financial Corporation Act,
  3. Unit Trust of India Act,
  4. Financial Reconstruction Bank of India Act,
  5. Sick Industrial Companies (Special Provisions) Act and
  6. Small Industries Development Bank of India Act.
  7. The Industrial Reconstruction Bank of India Act, 1984

Applicability  of Securitization Act

  • The Act applies to whole of India.
  • The provisions of the Act shall apply to  Security  Interest created in favour of Secured Creditor, except on :-
    1. A lien on any goods, money or security given by or under the Indian Contract Act, 1872 or the State of Goods Act, 1932 or any other law for the time being in force;
    1. A pledge or movables within a meaning of Section 172 of Indian Contract Act.
    1. Creation of any security in any aircraft as defined in clause (1) of Section 2 of Aircraft Act, 1934.
    2. Creation of security interest in any vessel as defined in clause (55) of Section 3 of the Merchant Shipping Act, 1958.
    1. Any conditional sale, hire purchase or lease or any other contract in which no security interest has been created.
    1. Any rights of unpaid seller under Section 47 of the Sale of Goods Act, 1932.
    1. Any property not liable to attachment (excluding the properties specifically charged with the debt recoverable under this Act) or sale under the first proviso to sub section (1) of Section 60 of the Code of Civil Procedure, 1908.
    1. Any security interest for securing repayment of any financial asset not exceeding one lakh rupees.
    1. Any security interest in agricultural land.
    1. Any case in which the amount due is less than twenty per cent of the principal amount and interest thereon.

Compliance under “The Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act 2002” (“Securitization Act”) & “Security Interest (Enforcement) Rules, 2002″(“Rules” )

CHECK LIST FOR ENFORCEMENT OF SECURITY INTEREST IN CASE OF IMMOVABLE ASSETS

SR. NO.COMPLIANCESRELEVANT PROVISIONS
1Bank/FI to give a Power of Attorney/ Letter authorising its concerned official to take steps under the Act.Sec  13 (12) read with Rule   2(a)
2Sending of Demand Notice for enforcement of Security Interest.Sec 13(2) read with Rule 2(b) & 3
3Notice can be sent by Registered Post or Speed Post or Courier or Fax or E-mailRule  3(1)
4If Borrower avoids notice, service shall be made by affixing the notice in some conspicuous place of his residence/ business and by publishing the notice in two leading newspapers, one in a vernacular language having sufficient circulationProviso to Rule 3 (1)
5If more than one Borrower (which includes guarantor), individual notice to be served on each of them.Rule 3(4)
5AIn case any reply/representations are received, the Bank  to suitably adjudicate upon and decide.Section 13(3A)
5BIssue Notice for taking possession of Secured Asset u/s 13(4) of Act .Sec 13(4)
5CTake symbolic possession of the Secured AssetsSec 13(4)
6File an application before the Chief Metropolitan Magistrate or District Magistrate for taking actual  possession of the propertySec  14(1)
7Comply with the order of the Chief Metropolitan Magistrate or District MagistrateSec  14(2)
8.Liaisoning with the Court Receiver, Police authorities, etc.
9.Deposit of fee with Police authorities, if any, in case the police force is to be made available by police station in Utter Pradesh
10After taking the possession a notice in terms of Appendix IV will be sent to the Borrower, which will also be affixed on the Property.Rule 8(1)
11The said notice will also be published in two leading newspapers one in vernacular language within 7 days.Rule 8(2)
12Name of Bank/FI to be displayed on the Property.Rule  8(1)
13Insurance cover to be arrangedRule 8(4)
14Take PhotographsNot specified
15Security Guards to be deployed at the site of the Property.Rule 8(4)
16Valuation of property by an approved valuer before effecting the saleRule  8(5)
16AServe on the Borrower a notice of 30 days for sale.Rule 8(6)
17Obtaining Quotations/Inviting tenders/Holding Public Auctions/ Signing Private Agreement for sale of the property.Rule  8(5)
18If sale is by way of inviting tenders from public or holding of public auction, a public notice to be published in two leading news papers one in vernacular language, having sufficient circulation, setting out the terms of the sale.Proviso to

Rule  8(6)

19Notice and Publications to be affixed on conspicuous part of the property and put on the website of the Bank.Rule 8(7)
20Sale other than public auction/tender to be on terms settled between the parties in writing.Rule 8(8)
21Sale to be confirmed in favour of highest bidderRule 9(2)
22No sale to be confirmed on less than reserve process. However sale at less than Reserve price can be made with the consent of BorrowerProviso to Rule 9(2
2325% of the sale price to be deposited forthwith and balance within 15 daysRule 9(3) and (4)
24If balance is not deposited the deposit would be forfeited and the property be resold.Rule 9(5)
25Sale  of  Property to be made effective from execution of  Sale DeedNot specified
26If the terms of payment have been complied with, the Bank/FI shall issue a certificate of sale in favour of the purchaserRule  9(6)
27The certificate of sale to specify whether the property is free from encumbrances known to the Bank
28Acknowledgement from buyer of having taken over the physical possession of property to be obtained by the Bank/FI.Not specified
29In case the dues of the Bank/FI are not fully met with the sale proceeds of the property, Bank/FI may file an application before Debt Recovery Tribunal  or Court having jurisdiction, for recovering the balance amount.Sec  13(10)

Read with

Rule  11

Applications to be made to DRT under said Securitisation Act

  • Any person, aggrieved by any of the measures referred to in sub-section (4) of sector 13 taken by the secured creditor may make an application under section 17 of the Act to the Debts Recovery Tribunal, within forty-five days from the date on which such measures had been taken.
  • Procedure prescribed under the DRT Act is to be adopted by the DRT for disposal of such applications filed un/s 17 of the Act.

Appeal against the order of DRT under Securitisation said Act

Any person aggrieved on account of order passed by DRT may file an appeal before DRAT.

The DRAT does not entertain the appeal unless the Appellant deposits with the Appellate Authority, 50% of the amount or such other lesser amount as directed by DRAT.

  • Powers of DRT  under Securitisation Act
  • In addition to the power of the DRT under DRT Act, a DRT has following additional powers:

a.to restore for ordering restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower.

b.to order payment of cost/compensation to the borrower if it holds that the possession of the secured assets by the secured creditor is not in accordance with the provisions of the Act.

Disposal of Application /Appeal by DRT/DRAT

  • Any application made by the Banks and Financial Institutions is to be dealt with by the Tribunal as expeditiously as possible and endeavor is to be made by Tribunal to dispose off the application finally within a period of 180 days from the date of receipt of application.
  • The appeal filed before the Appellate Tribunal is to be disposed off as expeditiously as possible and endeavor is to be made by Tribunal to dispose off the appeal finally within a period of six months from the date of receipt of appeal.
  • On practical side the proceedings before may take from 1 (one) year to 3 (three) years depending upon the facts and circumstances of the case.

IMPORTANT PRECEDENTS

  • Mardia Chemicals Ltd. Vs Union Of India (AIR 2004 SC 2371)

Ratio:  The constitutionality of the Securitisation Act was upheld except  17(2) of the Act.

  • Transcore Vs Union Of India  (AIR 2007 SC 712)

Ratio:  Withdrawal of suit pending before DRT under DRT Act, 1993 is not a pre-condition for taking recourse to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is an additional remedy, which is not inconsistent with DRT Act, 1993 and, therefore, doctrine of election has no application.

Central Bank of India Vs State of Kerla (JT 2009 (3) SC 216)

Statutory first charge over property under any law will prevail over rights created in favour of secured creditors such as banks and other financial institutions.

United Bank of India Vs Satyawati Tandon and Others (AIR 2010 SC 3413)

Where statutory remedies are available under a fiscal statute then exercise of jurisdiction under Article 226 by High Court for passing orders, which could have serious adverse impact on the right of banks and other financial institutions to recover their dues, is not warranted

OTHER IMPORTANT JUDGMENTS

  • Rajshree Sugar and Chemicals Ltd. Vs Axis Bank

AIR 2011 Madras 144

  • State Bank of India Vs Sharda Spuntex ;

I(2010) BC 562 Rajasthan

Transactions in derivatives, fall within the category of “business activity undertaken by the Bank” as they are covered by Section 6(1) of the Regulation Act . If the transaction in question gives rise to a claim by the Bank, of any liability, on the part of the Company, the Bank may certainly be able to invoke the provisions of  DRT Act. Further held that what is expressly permitted by law, cannot be held to be opposed to public policy

  • BOI Finance Ltd. Vs Custodians and Others;  AIR 1997 SC 1952

The non-compliance of the directions issued by the Reserve Bank may result in prosecution/or levy of penalty under Section 46, but it cannot result in invalidation of any contract by the bank with the third party.

  • ICICI Bank Ltd. Official Liquidator of APS Star Industries Ltd. (2010) 10 SCC 1: 

The Hon’ble Supreme Court held that an outstanding in the account of the borrower is a debt due and payable by the borrower to the bank and the bank is the owner of such debt.   The bank can always transfer its assets and such transfer in no manner affects any right or interest of the borrower.

  • Inderjeet Arya Vs. ICICI Bank Ltd., Writ Petition No. 7253/2011 

The Hon’ble Delhi High Court held that the action against the Borrower in the Debt Recovery Tribunal is not a suit and, therefore, such Guarantor cannot take protection under Section 22 of SICA.

  • Effect of the Act on the Economy / Banking Sector
  • The enactment of the Act has been a major factor in improving the health of Banks and Financial Institutions by enabling the bank to reduce their NPAs to substantially lower level.  On account of availability of dual remedy, i.e. remedy under the Securitization Act and DRT Act, the Banks and Financial Institutions have been able to substantially resolve the NPAs.
  • We have handled close to 600-650 default cases under Securitization Act for various Banks viz., Standard Chartered Bank, HDFC Bank, China Trust Commercial Bank, HSBC, Axis Bank etc. and have successfully recovered the outstanding dues in more than 80% of the cases.

How banks misuse SARFAESI Act provisions for loan recovery

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How banks misuse SARFAESI Act provisions for loan recovery

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 is a powerful instrument in the hands of the banks and financial institutions (FIs) as secured creditors. This Act helps them enforce securities held as collateral to loans disbursed by them should such loans turn out as non-performing assets (NPAs) during the currency of the loan without interference from the Courts. Section 13 of the Act gives power to the secured creditor even to evict the tenant. It is our observation that the banks have been overenthusiastic in taking recourse to SAFRAESI Act provisions as a first resort of recovering the micro, small and medium enterprises (MSME) loans, mostly violating guidelines of Reserve Bank of India (RBI).

The entire process under the Act involves several factors of fairness and technicalities. During our interactions with the borrowers and banks in the State Level Inter-institutional Sub-committee (SLIIC), we have noticed the banks jumping into coercive actions throwing overboard the due processes.  It is surprising that tech-savvy systems of banks have not put in the measured timelines before pressing the red button to put the credit traffic of the MSMEs on halt.

RBI’s timelines are as follows:

  • If the account does not reflect credits into the account, 90 days preceding the date of balance sheet of the firm. Temporary deficiencies like late/ non-submission of stock statements or balance outstanding exceeding the drawing power, non-renewal of limits should not get categorised as NPA.
  • If the borrower does not pay three instalments continuously after 90 days but up to 12 months the account becomes sub-standard and NPA. Section 13 (2) empowers the Bank/ FI to serve a notice to the borrower for taking possession of the assets held as security for the money lent by it. But there is precursor to this action: the Bank/FI shall serve notice to the borrower to discharge his full liabilities within 60 days from the date of notice that should also detail out the legal consequences and penal provisions.

Going by these two directions under the Act, the borrower should be getting at least 17 months’ time before the Bank could proceed against the defaulting MSMEs.

If the borrower becomes a ‘wilful defaulter’ as defined by the RBI Master Circular on wilful defaulters vide RBI circular (RBI/2014-15/73 DBR.No.CID.BC.57/20.16.003/2014-15 dated July 1, 2015) SARFAESI Act proceeding can be issued even without notice to the borrower.

Who is a wilful defaulter?

  • Deliberate non-payment of the dues despite adequate cash flow and good net worth;
  • Siphoning off of funds to the detriment of the defaulting unit;
  • Assets financed either not been purchased or been sold and proceeds have been misutilised;
  • Misrepresentation / falsification of records;
  • Disposal / removal of securities without bank’s knowledge;
  • Fraudulent transactions by the borrower.

Banks/ FIs throwing overboard these norms, classify all the MSME NPAs as wilful defaulters to apply the SARFAESI lever. As per the Act, valuation of the asset has to be done and notify that valuation to the borrower before issuing public notice for auction of property. Bank has to give 30 days’ notice to the borrower regarding its right to proceed against the mortgaged property if he does not pay up the entire principal and interest.

However, we have noticed that in most cases all the above timelines are followed more in breach with impunity by the banks. For example, a public sector bank (PSB) proceeded with sale of property within 15 days of declaring the asset as NPA. They have also fixed a reserve price without consulting the impugned borrower or without taking into consideration any objections raised by the borrowers as required under section 13 (3) (A) and proceed for auction of the properties. This is the case with most collateralize MSME NPAs. On top of this, almost everywhere the bank has also engaged agents for enforcing coercive recovery measures.

In quite a few other cases, the banks sold off assets to asset restructuring companies (ARCs). Here the process is that the bank bundles a few NPAs and sells them off at a discount, which is not disclosed either to the borrower or to the SLIIC sub-committee. Although it may be in order for the bank to entertain request of the enterprise under one-time settlement (OTS) within the rules of the RBI, its preference is to transfer to ARC at a far lesser price than OTS would have got to the bank.

What is ARC and how does this operate?

All transactions of securitisation, reconstruction and creation of security interest shall be registered with a Central Registry maintained with the Union Government. Within 30 days of securitising the asset, details of securities have to be filed with the central registry by paying the required fees.

RBI has issued guidelines in 2003 on the form of offer and details to be incorporated therein. The most usual form is the Security Receipt (SR) and an agreement with the originator to continue to service the assets of the securitisation. It can also take the form of a debenture at no less than 1.5% above the Bank Rate. The ARC should notify a separate scheme for each financial asset acquired or proposed to be acquired. Scheme-wise the account shall be maintained. Although Security Receipt is a tradable receipt among the investor institutions there is no such evidence thus far.

Realization of the asset is held and applied towards redemption of the investments as assured while issuing the security receipt. It acts like a trustee managing the assets and does not become the owner of the assets. ARC can sell or lease out the assets for realising the value of the assets. The recovered amount of the discounted price of the asset will be shared between the Bank and ARC in 85:15. For example, if a loan of Rs100 lakh is sold for Rs60 lakh to the ARC and the ARC realises only Rs50 lakh on sale or the entire armoury at its command, the Bank will get Rs42.50 lakh for fully wiping out the account from its books. Once the asset is sold off, it ceases to be NPA in its books.

If the intention of the Bank were to recover as much as possible from the stressed asset, it would be wise to explore OTS as first option within the RBI guidelines. We have noticed that in no more than 5% of cases that this option is exercised as the bonafides in OTS transaction is suspect. It would be prudent on the part of the RBI to ensure that the OTS option is exhausted before going for securitisation and sale of the asset.

The other option is to seek the Banking Ombudsman’s intervention as Arbitrator to settle the distressed asset closure in cases where either the borrower or the bank has reason to believe that a mutually agreed price of the loan would be a better option than proceeding against the asset under SAFRAESI Act.