PROVISIONS RELATED TO ARREST UNDER CRPC (Part1)

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PROVISIONS RELATED TO ARREST UNDER CRPC (Part 1)

Introduction

An Arrest is an act of taking a person into custody as he/she may be suspected of a crime or an offence. It is done because a person is apprehended for doing something wrong. After arresting a person further procedures like interrogation and investigation is done. It is part of the Criminal Justice System. In an action of arrest, the person is physically detained by the concerned authority.

The term Arrest has been defined neither in the CrPC (The Code of Criminal Procedure,1973) nor IPC (Indian Penal Code,1860). The definition has not been provided even in any enactments dealing with Criminal Offences. The only indication of what an arrest constitutes can be made out of Section 46 of CrPC which deals with ‘How an arrest is made’. 

All you need to know about Preventive Arrest Laws in India - iPleadersIf broadly characterized arrest is of two types-

  1. Arrest made in pursuance with a warrant issued by the magistrate.
  2. Arrest made without any warrant but within the established legal provisions.

Another type of arrest is Private Arrest in which a person is arrested by another person. But it is allowed only in case a person commits a non-bailable offence in another person’s presence or is apprehended of committing a crime against a person or his property and when he is not given the correct address of his residence or it is unknown. But before arresting a person there should be sufficient apprehension and justifiable cause to arrest that particular person.

Section 41 says the police officer has to be satisfied that such arrest is necessary:

  1. To prevent such person from further committing such offence
  2. For purposes of investigation
  3. Prevent the person from causing evidence to disappear. 

If a person commits an offence which is non-arrestable then a warrant is necessary to be issued. The police cannot make such an arrest without a warrant. The warrant is issued by a Judge or a Magistrate on behalf of the state. An arrest warrant authorizes the arrest or detention of the person or capture or seizure of an individual’s property.  Section 41(1) of CrPC,1973 explains when a person can be arrested without any warrant. Section 41(2) of CrPC, 1973 states that subject to the condition in Section 42, a person cannot be arrested without a warrant and an order of the magistrate in case of non-cognizable offence and where a complaint is made. The procedures to be followed while arresting a person find its mention in Section 46 of the Code. Section 41A –  gives direction to the police officer to issue a notice to the person if he feels the person is not required to be arrested. This in effect means that contrary to popular perception, a police officer is not required to arrest a person if he does not think such arrest is not required for the purposes mentioned in Section 41 mentioned above. 

Section 41B – enjoins that while making an arrest the police officer shall: –

  1. a) bear an accurate, visible, and clear identification of name which will facilitate the identification.
  2. b) prepare a memo of arrest which shall be:
  3. Attested by one family member or member of the society.
  4. counter signed by the accused.
  5. This evidently is in terms of Article 20/21 which insulates a person from

arbitrary arrest. 

Section 41-C: When a memo is not attested by a family member, the person so arrested must be informed that he has a right to inform a family member. This once again protects a person from arbitrary arrest and prevents mysterious disappearances.

Section 41-D: The person arrested can meet an advocate of his choice during interrogation. This is once again in line with the constitutional right of a person to counsel, even if it is free.

Arrest on refusal to give name and residence

Section 42 of CrPC states the course of action in case of arrest on refusal to give name and residence. 

Section 42(1) says that when a person has committed a non-cognizable offence refuses to give his name or address or gives a false name and address on the demand of the officer, he may be arrested by such officer to ascertain his correct name or residence.

Section 42(2) says that the person so arrested may be released after ascertaining the true name or residence but only after executing a bond, with or without sureties, to appear before the magistrate if required. But if the person is not a resident of India then the bond should be secured by a security or securities resident of India.

Section 42(3) says that if the true name or address of the person is not found within twenty-four hours or if he fails to execute the bond or required sureties then he has to be presented before the magistrate falling within the jurisdiction.

Procedure of arrest by a private person

The procedure of arrest by a private person is expressly provided in Section 43 of the Criminal Procedural Code.

Section 43(1) states that a private person can arrest another person who commits a non-bailable offence or any proclaimed offender and without wasting any unnecessary time can be taken to a police officer and in the absence of the officer the accused has to be taken to the nearest police station.

Section 43(2) says that if the arrest of that person comes under Section 41, the police officer shall re-arrest him.

Section 43(3) provides that if there is sufficient reason to believe that he has committed a bailable offence and refuses to give his true name or address to the police officer, he shall be dealt with according to the provisions of Section 42. But he shall be released if there is no sufficient reason to believe that he has committed an offence.

Arrest by magistrate

Magistrate here includes both an executive or judicial Magistrate. According to Section 44(1) of CrPC when an offence is committed in the presence of a magistrate within his local jurisdiction, he has the power to arrest that person himself or order any person for arrest and subject to the conditions relating to bail, commit the accused to custody.

Section 44(2) in addition to clause 1 also provides that the Magistrate can also arrest or direct any person in his presence, within his local jurisdiction of whom he is competent to arrest at that time and in the circumstances to arrest. 

An exception of the Armed forces

The members of the Armed Forces are protected from arrest as provided in Section 45 of CrPC.

Section 45(1) states that no member of the armed forces can be arrested for anything done while discharging the official duties except with the consent of the Central Government. It is subject to the conditions mentioned in Section 41-44 of the Code.

Section 45(2) lays out that the State Government may through a notification can direct that the sub-section (1) shall apply to any class or category of members of Armed forces who are charged with the maintenance of public order as may be specified thereupon, whenever they are serving. In other words, the State government just like the Central Government is empowered to use the power mentioned in sub-section (1).

Provisions related to arrest of women

Section 46(1) There should be a female officer to arrest a female.

Section 46(4) prescribes that no women shall be arrested after sunset and before sunrise, unless in exceptional cases, and female officers shall make the arrest in exceptional cases with permission of the Judicial magistrate.

Section 50 enjoins the police officer to inform the arrested person about the grounds of arrest and that he is entitled to the right of bail and he could arrange the sureties.

Section 50(A)(1) makes it obligatory for the police officer making the arrest to

immediately inform the arrestee’s friends, relatives or such other persons about the place

where the arrested person is being detained and inform the arrested person of such

rights. Entries of all the arrests shall be kept at the police station.

Section 50(2) says “the police officer shall inform the arrested person of his rights under sub-section (1) as soon as he is brought to the police station”.

Under Section 56, a police officer is to immediately take a person arrested without a warrant before the magistrate having jurisdiction or to the officer in charge of the police station.

Section 57 (A) says that the arrested person shall not be detained for more than 24 hours except the time taken during the journey before the production bef

ore the magistrate.

Section 58 says that the cases of all persons arrested without warrant must be reported to the local DM or SDM.

Under Section 60(A), arrests are to be made strictly according to the code, no arrest shall be made except in accordance with the provisions of the code.

Sec 50 (A)(4) prescribes that it shall be the duty of the magistrate before whom such arrested person is produced to satisfy himself that the requirement of section 50(2) – i.e., that the police had an obligation to inform relatives or such nominated persons where he is being kept in custody and the arrestee had been informed of such an obligation have been complied with.

Section 167 prescribes the procedure after the arrested person is brought before the magistrate. The police officer has to produce the relevant papers, including entries of the case diary. Sub section 3 gives discretion to the magistrate to remand an accused to police custody but only on recording his reasons.

Section 47 of CrPC provides for the search of a place sought to be entered. It further provides that the person having the warrant has the duty to enter the premises of the person being arrested. If the person is not able to easily ingress the premises or is not allowed to enter, then they have the authority to break open the door. It is done to take the person by surprise. 

But if there is any female occupying the premises then the person arrested has to give notice to that female to withdraw and shall afford every reasonable facility for withdrawing and they may break the apartment.

Any police officer or person making the arrest is authorised to break open the door in order to liberate himself if he is detained in that process. 

Secondly, in the case where the arrest is made under a warrant, the police officer under Section 75 CrPC is required to inform the person arrested about the substance of arrest and if required to show the order. If it is not done the arrest will become unlawful. 

The Indian Constitution also supports this and had emphasised upon it in Article 22(1), a fundamental right. It prescribes certain rights that are present with the accused at the time of arrest(fundamental in nature). It says that no person who is arrested shall be detained in custody without being informed about the reason for arrest and consult a legal practitioner of his choice. In re Madhu Limaye case, the petitioner was not informed about the grounds of his arrest along with his companions. He challenged this under Article 32 as it was in violation of his fundamental right before the Supreme Court. The Supreme Court observed that there was a violation of an essential and vital right of the petitioner.

Thirdly, when an arrest is made without a warrant by a police officer, it is his duty to show before the magistrate without unnecessary delay (usually within 24 hours). It is also mentioned that the person arrested cannot be taken to any place other than the police station before presenting before the magistrate. This is provided in Article 22 with Section 56 and Section 76 of the CrPC. However, there is a practice of detaining the person in isolation due to Covid -19, and the duration is not calculated towards 24 hours; which in the eyes of the author bad; because if a person is required to be produced before magistrate in 24 hours, then he can be so produced even through video conferencing, without having to produce him personally. Therefore, compromise with the constitutional provisions should not be taken lightly by the courts. 

Section 151 gives power to the police officials to arrest a person, without a warrant, on the suspicion that he may commit a cognizable offence. However, this comes with certain conditions: the anticipated offence should be cognizable and the officer should feel that the offence would be prevented only by an arrest of the suspect. Section 107 gives similar powers to the magistrate. However, Numerous petitions have been filed questioning the constitutional validity of these sections as it gives plenty of room for the misuse of powers under these sections.

 

ARREST WITH WARRANT

  1. Form of warrant of arrest and duration.—

(1) Every warrant of arrest issued by a Court under this Code shall be in writing, signed by the presiding officer of such Court and shall bear the seal of the Court. 

(2) Every such warrant shall remain in force until it is cancelled by the Court which issued it, or until it is executed. 

  1. Power to direct security to be taken.—

(1) Any Court issuing a warrant for the arrest of any person may in its discretion direct by endorsement on the warrant that, if such person executes a bond with sufficient sureties for his attendance before the Court at a specified time and thereafter until otherwise directed by the Court, the officer to whom the warrant is directed shall take such security and shall release such person from custody. 

(2) The endorsement shall state— (a) the number of sureties; (b) the amount in which they and the person for whose arrest the warrant is issued, are to be respectively bound; (c) the time at which he is to attend before the Court. 

(3) Whenever security is taken under this section, the officer to whom the warrant is directed shall forward the bond to the Court. 

  1. Warrants to whom directed.—

(1) A warrant of arrest shall ordinarily be directed to one or more police officers; but the Court issuing such a warrant may, if its immediate execution is necessary and no police officer is immediately available, direct it to any other person or persons, and such person or persons shall execute the same. 

(2) When a warrant is directed to more officers or persons than one, it may be executed by all, or by any one or more of them. 

  1. Warrant may be directed to any person.— 

(1) The Chief Judicial Magistrate or a Magistrate of the first class may direct a warrant to any person within his local jurisdiction for the arrest of any escaped convict, proclaimed offender or of any person who is accused of a non-bailable offence and is evading arrest. 

(2) Such person shall acknowledge in writing the receipt of the warrant, and shall execute it if the person for whose arrest it was issued, is in, or enters on, any land or other property under his charge. 

(3) When the person against whom such warrant is issued is arrested, he shall be made over with the warrant to the nearest police officer, who shall cause him to be taken before a Magistrate having jurisdiction in the case, unless security is taken under section 71.

RIGHT TO LEGAL REPRESENTATION

The Supreme court upheld the right of consulting a legal practitioner by an accused as a Constitutional right under Articles 21 and 22(1) of the Constitution of India.

Article 22(1) of the Constitution of India states that a person who is arrested shall not be denied the right to consult, and to be defended by, a legal practitioner of his choice.

Therefore, this mandatory procedural requirement, reiterated by the Supreme Court in the 1997 case of DK Basu v. Union of India, entails that the person arrested has to not only be informed of the grounds of such arrest, but should also be asked by the Magistrate as to whether he/she requires to consult and be defended by his choice of lawyer.

In the 2018 case of Gautam Navlakha v. State (NCT of Delhi), it had been submitted by the State the “seriousness of the offence and the urgency of the situation” may lead to overlooking the requirements of law in letter and spirit. However, the Delhi High Court observed that in such cases, the concerned Magistrate would have to be satisfied with the explanation offered for non-compliance – “the departure from the mandatory requirement of the Constitution and the CrPC ought not to be lightly countenanced”.

Moreover, mere representation by a legal aid lawyer, without ensuring whether the accused had the opportunity to consult a lawyer of her own choice, will not satisfy the requirement of Art 22(1) of the Constitution, the High Court ruled. The Court also held that the mere fact that there was a legal aid lawyer representing the accused will not satisfy the requirement of Article 22(1), if it was not an effective representation. The Court noted that the legal aid lawyer in that case had not made any submissions before the Magistrate issued the transit remand order, and therefore the representation was merely “cosmetic”.

Two paragraphs from the judgment are worthy of being quoted here : “Turning to the order dated 28thAugust 2018 of the learned CMM in the present case, the Court finds that a duty lawyer empanelled pursuant to the Scheme of the National Legal Services Authority (“NALSA‟), the statutory body under the Legal Services Authorities Act, 1987(LSAA), was shown representing the person arrested, i.e., the present Petitioner. However, the Magistrate does not appear to have asked the arrested person, as mandated by Article 22 (1) of the Constitution, whether he was informed about the grounds of arrest and whether he wishes to consult and be defended by a legal practitioner of his choice. This requirement does not get diluted one bit only because the proceedings are for transit remand”. “There is no mention of the legal aid lawyer having made any submission whatsoever. The learned CMM did not even think it necessary to record any such submission. It thus appears to the Court that the appearance of the Duty lawyer for the Petitioner was cosmetic and not in the true spirit of Article 22(1) of the Constitution read with Section 12 (g) of the LSA which guarantees free legal aid to every person in custody.

GUIDELINES FOR INTER-STATE ARREST

In Sandeep Kumar v State, a division bench of Justices Dr S Muralidhar and Talwant Singh of the Delhi High Court had also directed for the implementation of guidelines that had been proposed by the Committee and pertained to protocol that must be followed by the police in the event of inter-state investigation or arrest. Relying on Sections 48, 77, 79 and 80 of the CrPC,

The guidelines stated the following guidelines for inter-state arrest:

  1. The Police Officer after assignment of the case to him, must seek prior permission/sanction of the higher/superior officers in writing or on phone (in case of urgency) to go out of State/UT to carry out investigation.
  2. In a case when the police officer decides to effect an arrest, he must set out the facts and record reasons in writing disclosing the satisfaction that arrest is necessary for the purpose of investigation. At first instance, he should move the Jurisdictional Magistrate to seek arrest/search warrants under Section 78 and 79 Cr PC except in emergent cases when the time taken is likely to result in escape of the accused or disappearance of incriminating evidence or the procurement of arrest/search warrant would defeat the purpose. The Police Officer must record reasons as to what were the compelling reasons to visit another State without getting arrest/search warrants.
  3. Before proceeding outside the State, the police officer must make a comprehensive departure entry in the Daily Diary of his Police Station. It should contain names of the police officials and private individuals accompanying him; vehicle number; purpose of visit; specific place(s) to be visited; time and date of departure.
  4. If the possible arrestee is a female, a lady police officer will be made part of the team. The Police Officers should take their identity cards with them. All police officers in the team should be in uniform; bear accurate, visible and clear identification and name tags with their designations.
  5. Before visiting the other State, the Police Officer must endeavour to establish contact with the local Police Station in whose jurisdiction he is to conduct the investigation. He must carry with him the translated copies of the Complaint/FIR and other documents in the language of the State which he intends to visit.
  6. After reaching the destination, first of all, he should inform the concerned police station of the purpose of his visit to seek assistance and cooperation. The concerned SHO should provide/render all legal assistance to him. Entry to this effect must be made at the said police station.
  7. After reaching the spot of investigation, search, if any should be strictly conducted in compliance of the procedure laid down, u/s 100 Cr PC. All endeavour should be made to join independent public witnesses from the neighbourhood. In case of arrest, the police officer must follow the procedure u/s 41A and 41B and Section 50 and 51 Cr PC. The process of arrest carried out by the police must be in compliance with the guidelines given in DK Basu case (Supra) and the provisions of CrPC.
  8. The arrested person must be given an opportunity to consult his lawyer before he is taken out of State.
  9. While returning, the police officer must visit the local police station and cause an entry made in the Daily Diary specifying the name and address of the person(s) being taken out of the State; articles if any, recovered. The victim’s name can also be indicated.
  10. Endeavor should be made to obtain transit remand after producing the arrestee before the nearest Magistrate unless exigencies of the situation warrant otherwise and the person can be produced before the Magistrate having jurisdiction of the case without infringing the mandate of S. 56 and 57 of Cr.P.C. within 24 hours.
  11. The magistrate before whom the arrestee is produced, must apply his mind to the facts of the case and should not grant transit remand mechanically. He must satisfy himself that there exists material in the form of entries in the case diary that justifies the prayer for transit remand. The act of directing remand of an accused is fundamentally a judicial decision. The magistrate does not act in executive capacity while ordering detention of the accused. He must ensure that requirements of S. 41 (l)(b) are satisfied. The police officer must send the case diary along with the remand report so that the magistrate can appreciate the factual scenario and apply his mind whether there is a warrant for police remand or justification for judicial remand or there is no need for any remand at all. The magistrate should briefly set out reasons for his decision. (Manubhai Ratilal Patel v. State of Gujarat, (2013) 1 SCC 314).
  12. Another mandatory procedural requirement for the Magistrate considering a transit remand application is spelt out in Article 22 (1) of Constitution of India. This entitles the person arrested to be informed as soon as may be the grounds of such arrest. The Magistrate has to ensure that the arrested person is not denied the right to consult and to be defended by a legal practitioner of his choice. The Magistrate should ask the person arrested brought before him whether in fact he has been informed of the grounds of arrest and whether he requires to consult and be defended by any legal practitioner of his choice. (DK Basu, Supra) After the pronouncement of this judgment by the Hon’ble Supreme Court, new Sections 41A to 41D have been added to prevent unnecessary arrest and misuse of powers. Denying a person of his liberty is a serious matter.
  13. In terms of S. 41C, control rooms are established in every district. Names and addresses of the persons arrested and designation of the Police Officers who made the arrest be displayed. The Control Room at State level must collect details of the persons so arrested.
  14. The police officer must record all the proceedings conducted by him at the spot and prepare an ‘arrest memo’ indicating time, date of arrest and name of the relation/friend to whom intimation of arrest has been given. It must reveal the reasons for arrest.
  15. Since the arrestee is to be taken out of his State to a place away where he may not have any acquaintance, he may be permitted to take along with him (if possible), his family member/acquaintance to remain with him till he is produced before the jurisdictional Magistrate. Such family members would be able to arrange legal assistance for him.
  16. The arrested person must be produced before the jurisdictional Magistrate at the earliest, in any case, not beyond 24 hours from the date of arrest excluding the journey time so that arrest of such person and his detention, if necessary, may be justified by a judicial order. The 24 hours period prescribed u/s 57 Cr PC is the outermost limit beyond which a person cannot be detained in police custody. It does not empower a police officer to keep a person in a police station a minute longer than is necessary for the purpose of investigation and it does not give him an absolute right to keep a person till 24 hours.
  17. On arrival at the police station, the police officer must make an entry in the record and indicate the investigation carried out by him, the person arrested and the articles recovered. He should also inform his senior police officers/SHO concerned about it immediately. The superior Police Officer shall personally supervise such investigation.
  18. The police officer should effect arrest u/s 41(l)(b) Cr PC only when he has reasonable suspicion and credible information. He must satisfy himself about the existence of the material to effect arrest. There must be definite facts or averments as distinguished from vague surmises or personal feelings. The materials before him must be sufficient to cause a bona-de belief. He cannot take shelter under another person’s belief or judgment. He must affect arrest at his own risk and responsibility as the effect of illegal arrest could be commission of offence of wrongful confinement punishable u/s 342 IPC. Burden lies on the IO to satisfy the Court about his bona-de. No arrest can be made because it is lawful for the police officer to do so. Denying a person of his liberty is a serious matter.
  19. Medical examination soon after arrest to avoid possibility of physical torture during custody should be conducted.
  20. The IO must maintain a complete and comprehensive case diary indicating the investigation carried out by him.
  21. The log book of the vehicle used for transportation must be maintained and signed. The IO must indicate whether the vehicle was official or a private one; name of its driver and how and by whom it was arranged. Only official vehicles should be used for transportation to the extent possible.
  22. At the time of recovery of the prosecutrix, the police officer, if he is satisfied that she is an adult, should ascertain from her at the spot, whether she was present there with her free will. If the victim/prosecutrix is not willing to accompany the police officer or her relatives, the police officer must not exert force on the prosecutrix to take her away against her wishes. However, if the prosecutrix/victim of her own accord expresses willingness to accompany the police officer/relatives, her consent in writing should be obtained at the spot.
  23. In cases where the police officer finds the victim/prosecutrix to be a ‘minor’, soon after recovery, she should be produced before the local Child Welfare Committee for further decision regarding her custody. She must not be made to stay in the Police Station during night hours.
  24. Statement of the prosecutrix u/s 164 Cr.P.C. must be recorded at the earliest.
  25. MHA/Central Govt/Commissioner of Police must frame suitable guidelines for police officers to render all suitable assistance. The failure to adhere to the rules/guidelines should render the police officer liable for departmental action as well as contempt of the Court.
  26. The public prosecutor should provide required assistance to the police officer visiting his State at the time of seeking transit remand.
  27. The MHA/State Government should circulate the Rules/Guidelines/Notifications etc. from time to time to the Police officers in the State to create awareness. Periodically training should be provided to the Police Officers to sensitize them.
  28. Instructions/Guidelines of similar nature should exist in all the States/UTs for speedy, smooth and effective inter-State investigation.
  29. The delinquent Police Officer can be directed to pay compensation under the public law and by way of strict liability.
  30. If, in case of urgency or other considerations in the interest of investigation, it is not found feasible to inform the police station encompassing the jurisdiction of the search, seizure, arrest or investigation before the event, this should be done soon after the search, seizure, arrest etc. has been conducted.

Role of Intention for claiming exemption under section 54 of Income tax act

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Role of Intention for claiming exemption under section 54 of Income tax act

Introduction

To understand the benefits of Section 54, it is essential to understand the key essentials of the same. A Long term capital asset is that which is held for more than 36 months or 24 months or 12 months, as the case may be, immediately preceding the date of transfer is treated as long-term capital asset. The current applicability  of tax under Long term Capital gain on all transactions except on sale of equity shares/ units of equity oriented fund is 20%.Exemption from using the word 'Limited' or 'Ltd' in a company name

Factual Matrix

I had sold a house on April 4 2019 and had LTCG of 38 lakhs by the sale of this property. I had deposited an amount  in the Capital Gains Account of the State Bank of India by following proper documentation. I had purchased a new house and had made a payment of  40lakhs by Demand Drafts part of the payments on 30th March 2019 to the owner. I have an agreement with the owner. The owner has informed me today that he did not encash the DD as yet due to Covid Situation.  I have evidence that a DD is prepared but I do not have the receipt.

Available provisions under Income Tax Act?

[Section 54] -Profit on sale of property used for residence

What is the amount of capital gain exemption available under section 54?

The Section 54 of the Income Tax Act allows the lower of the two as exemption amount for a taxpayer:

  1. Amount of capital gains on transfer of residential property, or
  2. Investment made for constructing or purchasing a new residential property.

The balance amount (if any) will be taxable as per the income tax act.

Conditions for claiming exemptions under 54.

  1. Assessee: individual or HuF
  2. Which asset to transfer: residential house(buildings or lands appurtenant thereto)
  3. It must be a long-term capital asset
  4. Income from such house should be chargeable to tax under the head “Income from House Property”

Where during any assessment year, the assessee has exercised the option to purchase or construct two residential houses in India, he shall not be subsequently entitled to exercise the option for the same or any other assessment year.

This implies that if an assessee has availed the option of claiming benefit of section 54 in respect of purchase of two residential houses in Jaipur and Jodhpur, say, in respect of capital gains of rs. 1.50 crores arising from transfer of residential house at Bombay in the P.Y.2020-21 then, he will not be entitled to avail the benefit of section 54 again in respect of purchase of two residential houses in future even though the capital gains arising on transfer of the residential house does not exceed rs. 2 crore.

Amount of Exemption under section 54 will be lower of:

1 long term capital gains arising on transfer of residential house; or

2 amount invested in purchase/construction of new residential house or houses. (including the amount deposited in CGAS before due date of filing of return

If till the date of filing the return of income, the LTCG on such transfer of the house is not utilised (in whole or in part) to purchase or construct another house, then the benefit of exemption can be availed by depositing the unutilised amount into Capital Gains deposit account Scheme (CGAS) with any scheduled bank.

If the amount deposited in the Capital Gains account Scheme in respect of which the assessee has claimed exemption under section 54 is not utilised within the specified period for purchase/construction of the residential house, then the unutilised amount (for which exemption is claimed) will be taxed as income by way of long- term capital gains of the year in which the specified period of 2 years/3 years gets over. 

If the new house is also transferred within 3 years from date of acquisition or construction, the cost of the new house would be reduced by the capital gains exempted earlier under section 54.

Case Laws

Various tribunals and courts have taken into account the intention of the assessee to repurchase another residential house as a very essential component for sufficing the essentials of seeking exemption under Section 54 of the Income Tax act.

Where assessee had substantially complied with provisions of section 54(1) by purchasing new house property within prescribed time period, a mere non-compliance of procedural requirement under section 54(2) i.e. some delay in depositing amount in CGAS, could not stand in way of assessee in getting benefit under section 54.

Where assessee had executed an agreement to sell in respect of a house property and purchased a new residential property within one year from date of agreement to sell, even though sale deed could not be executed within time, section 54F relief was to be granted to assessee in respect of purchase of new residential property.

There are cases that allow that even if the new property is not bought in your own name, but in the name of some relatives, then it is allowed to claim the deduction.

If at all we have paid any advance in form of consideration in the light of the agreement to purchase, then the same can be allowed as a claiming the exemption of section 54 of IT Act.  “Where advance was paid by assessee to purchase residential flat prior to sale of capital asset, such advance was to be considered as part of purchase for purpose of section 54”

If we say that the encashment was beyond our control, yet we had our intentions to purchase the property, then we can claim it in light of;

“Where assessee sold residential property and entered into an agreement with a builder for purchasing flat for which he invested sale proceeds within prescribed period of two years, merely because assessee got occupancy certificate after 4 years and such delay was beyond control of assessee, assessee’s claim for deduction under section 54 was to be allowed.“

Few more judgements, bringing in liberal interpretation to the term purchase and the strict compliance of conditions. 

“In our view, the question whether the above agreement was finally fructified is a different matter altogether. Assessee had in our opinion for all purposes satisfied the conditions u/s 54 of the IT Act, 1961, and earnestly demonstrated his intention to invest the capital gain in a residential house. We are therefore, of the considered opinion, that the assessee ought not have been denied the claim u/s 54 of the IT Act, 1961.”

The court in the case of CIT v. Kuldip allowed a broader view of interpretation.- “It was observed that the word “purchase” used in Section 54 of the Act should be interpreted pragmatically in a practical manner and legalism shall not be allowed to play and create confusion or linguistic distortion. The argument that “purchase” primarily meant acquisition for money paid and not adjustment, was rejected observing that it need not be restricted to conveyance of land for a price consisting wholly or partly of money’s worth. The word “purchase”, it was observed, was of a plural semantic shade and would include buying for a price or equivalent of price by payment of kind or adjustment of old debt or other monetary considerations. It was observed that if you sell a house and make profit, pay Caesar (State) but if you buy a house or build another and thereby satisfy the conditions of Section 54, you are exempt. The purpose was plain; the symmetry was simple; the language was plain.”

Conclusion

Therefore in the light of the above stated case laws, a position can be derived that mere compliance necessities do not allow the taxing officers to withdraw the benefits of exemption provided under Section 54 of Income tax act. The inception of the section was brought in order to help the strive and achieve the goal of home for all and affordable housing facilities. With a liberal interpretation done as in Kuldeep Singh, only the aims and objectives of the legislature can be said to have been achieved. Thus if the assessee truly aims to and wishes without any malafide intention to purchase a single residential house for the purpose of residing, then that should be sufficient to claim the exemption under section 54 of Income tax act. 

TRANSITION OF LAWS FROM SICA TO IBC

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TRANSITION OF LAWS FROM SICA TO IBC

Introduction

The name Sick Industrial Companies Act itself connotes the reason for its existence. In the 1980s, India saw a wave of widespread industrial sickness, prompting the government to pass important legislation to address the problem. The SICA was adopted in 1985 with the goal of ensuring the timely detection of sick and potentially sick firms that own industrial undertakings, as well as the quick assessment by a panel of experts of the preventative, corrective, and other measures that must be done in their case. This was an action to free up investment in such industrial facilities that had been locked up and put to better use.

The Insolvency and Bankruptcy Code of 2016 is a legislation that consolidates and modifies the legislation governing reorganisation and insolvency resolution of Corporate Persons, Partnership Firms, Limited Liability Partnership and Individuals in a time-bound manner, for the purpose of maximising the value of such persons’ assets, promoting entrepreneurship, increasing credit availability, and balancing the interests of all stakeholders, including changing the order of priority of payment of Government dues, and establishing an insolvency and Bankruptcy Board of India, and for matters connected with or incidental thereto. Transition from SICA to IBC - Historical Analysis - iPleaders

PROBLEMS WITH SICA

The SICA’s main limitation was that it only applied to sick industrial enterprises, excluding enterprises engaged in trading, service, or other operations. However, the whole experience was unsatisfactory due to a number of variables, including SICA’s inapplicability to non-industrial and small/ancillary businesses. The Sick Industrial Companies (Special Provisions) Act was abolished and replaced by the Sick Industrial Companies (Special Provisions) Act of 2003, which diluted some of SICA’s provisions and filled in some loopholes. One of the most significant modifications in the new law was that it attempted to decrease the growing prevalence of occupational disorders by guaranteeing that firms do not utilise a medical certificate to avoid legal duties. The other reasons why SICA fell short are:

  1. The scope of SICA was defined by the terms “sickness” and “industrial nature.” Since the passage of SICA, there has been a discussion about the meaning and breadth of the term “sick industries” and what happens if a business that has been referred to BIFR and is currently under moratorium loses its industrial nature. Even after the Code’s enactment and repeal, the question remained unsolved.
  2. Only the Board of Directors, the Central Government, the RBI, state-level agencies, or scheduled banks might recommend a company to SICA. If a creditor is not a scheduled bank or just a vendor with a large quantity of past due payments, he or she cannot file for insolvency.
  3. The SICA did not set any deadlines for the BIFR to complete its investigation and issue an order requiring an operating agency to prepare a rehabilitation plan. Only once such an order was passed were deadlines set.
  • There was inadequate oversight of companies who exploited SICA to implement a moratorium and dodge lenders and the Board of Directors could utilise it for its own purposes. SICA gives the company an advantage over lenders because other lenders will be unable to pursue the company if it is referred to BIFR.
  • It was up to the discretion of the BIFR to appoint an operating agency for the sick industrial company referred to it, only in suitable cases. As a result, the SICA system was not standardised, and it did not guarantee that a company’s rehabilitation would be carried out in a prescribed manner.

Development of IBC

The Code is significantly influenced by other jurisdictions and was written to address the numerous flaws that existed in previous processes for corporate reconstruction and rehabilitation. The code in comparison is much simpler and effective as it involves an integrated “Corporate insolvency resolution process”. Upon default, any financial creditor, operational creditor, or the corporate debtor itself may file an application with the National Company Law Tribunal [“NCLT”) to begin the insolvency resolution process. The NCLT may accept the application if the existence of a default and non-payment of dues by the defaulter is established. The following elements of the Code make it a successful instrument for a company’s rehabilitation:

  1. Lenders participate actively in the decision-making process as members of a “committee of creditors.” Lenders also have the authority to determine which investment plans are acceptable. Under the SICA, the BIFR was in charge of receiving and deciding on creditors’ comments and objections. With the involvement of lenders, such commercial decisions become easier, and all stakeholders have a clear stake in the company’s recovery.
  2. The activities and routine business are continued and handled by the resolution professional with prior consent from the committee of creditors, despite the moratorium prohibiting any action by creditors or anyone against the defaulting company. As a result, the company is preserved as a going concern.
  3. For all parties involved in insolvency procedures, the Code has established distinct levels of accountability and responsibility. As a result, the creditors’ committee is responsible for the resolution professional’s activities and vice versa. In addition, the resolution professional must provide regular progress reports to the NCLTs to keep them informed of the insolvency’s progress.
  4. From the beginning to the finish of the procedure, timelines have been established. The entire insolvency resolution procedure is limited to 180 days; however it can be extended to 270 days if necessary thus making it a strictly time bound process.

Conclusion

Any corporate body, whether through service or sale agreements, loans from banks and financial institutions, judgments, or even interactions with the government, incurs a variety of obligations while operating. A corporate entity’s debt load can sometimes become so high that it endangers its continued existence and operation, while creditors risk losing their whole investment. It should be emphasised that a business’s liquidation or wind-up, as an alternative to insolvency procedures, would result in a complete wrap-up of the firm in such a way that it would no longer exist. When compared to insolvency processes, wind-up processes cause the economy to suffer a bigger loss. Therefore, The Code has revolutionized the process of insolvency resolution in India. IBC is, without a doubt, a comprehensive law with a swift and precise mechanism for dealing with insolvency issues. The time-bound aspect of IBC is a win-win situation since the Companies’ resources are deployed in the appropriate place at the appropriate time, whether it’s by paying creditors or winding up. The company does not continue to lose money indefinitely, inflicting a setback to the economy as whole and impacting individual debtors. Thus, the Code has established a new and improved framework for corporate insolvency resolution, which is far superior to the SICA regime.

Author: Aaditya Sharma

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi

INTERFACE BETWEEN ADMIRALTY LAW AND IBC

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INTERFACE BETWEEN ADMIRALTY LAW AND IBC 

INTRODUCTION

Admiralty Law regulates shipping, navigation, commerce, towage, recreational boating, and piracy by private entities on domestic and international waters. It covers both natural and man-made navigable waters, such as rivers and canals. 

In rem admiralty proceedings and the insolvency of a ship owner is fraught with tension. The advantage of arresting a ship, which elevates a maritime claimant to the status of a secured creditor, sits uncomfortably with principles of insolvency law, which do not contemplate an action in rem and the peculiar consequences that follow from it. Admiralty law is already universal; it applies to maritime disputes all over the world. Hong Kong SAR: IRD issues guidance on ship leasing tax concessions | International Tax Review

Many professionals on international insolvencies have called for an international insolvency to solve the issues encountered by the growing range of transactional businesses facing bankruptcy under multiple and regularly conflicting countrywide laws. When an insolvent company’s operations span several countries, the company may be subject to conflicting national bankruptcy laws. When an insolvency spreads across several nations, different courts may not treat creditors equally. A universalist international insolvency treaty would resolve these problems by ensuring cooperation and mutual recognition of bankruptcy proceedings involving various nations’ courts. 

Despite the advantages of a universal insolvency system, a treaty to implement such a system would adversely affect another specialized area of law, admiralty. Both admiralty and bankruptcy laws apply when a shipowner becomes insolvent. Admiralty law is substantially similar internationally, unlike Bankruptcy laws. 

The IBC was introduced with the main aim to facilitate a corporate faltering in its debt obligations and to protect the interests of all the stakeholders with equity and the Admiralty (Jurisdiction and Settlement of Maritime Claims) Bill, 2016, was introduced with the intent to consolidate the existing laws on civil matters of admiralty jurisdiction of courts, admiralty proceedings on maritime claims, and arrest of ships. The conflict arises when a shipping company, being the owner of the vessel, becomes insolvent and goes into liquidation under the IBC.

The vessel is the subject matter under both the proceedings, as an offender under the Admiralty Act and as an asset under the IBC. In such a scenario, it becomes imperative to ascertain as to which Court or Tribunal would exercise its jurisdiction over the vessel and under which law. The issue of whether the IBC prevails over the Admiralty Act or vice versa has been decided by the High Court of Bombay in Atlantic Shipping Pvt. Ltd vs. Barge by an order passed on May19,2020.  The High Court of Bombay applied the rule of Harmonious Construction . Applying this principle, the High Court attempted to seek out the dispute between Admiralty Law and Insolvency Law.

Emphasis was placed on the distinction between an action in rem against a vessel and an action in personam. It was noted that once this distinction is recognized, whereby the vessel is a separate and distinct entity dehors its owner, it is easy to resolve the apparent conflict between admiralty and insolvency proceedings. Hence, it was held that an action in rem against the ship is neither an action against the owner of the ship who may be the corporate debtor as defined under the IBC nor a proceeding against the asset of the corporate debtor. It is a proceeding against the ship to recover the claim from the ship, whereby an action in rem continues as an action in rem, notwithstanding that the owner may have entered appearance, if security is not furnished for the release of the vessel.

Therefore, it is clear that there is no conflict between the Admiralty Law and the IBC, and both can be construed harmoniously . 

CASE LAWS

In Cliffs Neddrill Turnkey International vs. M/T Rich DukeThe collision of two vessels off the coast of Aruba was adjudicated in the District of Delaware because the two injured ships had limped into Delaware. The maritime law of Aruba applied, the plaintiff shipowner was Dutch, and the defendants were Bahamian and Japanese, the crews were South Korean, Dutch and American. All of these nations are unlikely to sign the same international insolvency treaty. 

In ABC Shipbrokers vs. The Ship ‘Offi Gloria’, while the shipowner was undergoing an insolvency proceeding in Texas, the vessel, registered under the flag of Cyprus, was arrested in New Zealand (after aborted attempts to arrest it in Indonesia, Hong Kong and Singapore), and plaintiffs were Greek and American. Again, these radically different nations are unlikely to sign an international insolvency treaty. 

In rem admiralty proceedings and the insolvency of a ship owner is fraught with tension. The advantage of arresting a ship, which elevates a maritime claimant to the status of a secured creditor, sits uncomfortably with principles of insolvency law, which do not contemplate an action in rem and the peculiar consequences that follow from it.

The conflict between these two special jurisdictions came to a head before the Bombay High Court, which in a recent judgement in Raj Shipping Agencies vs. Barge Madhwa and Anr, attempted to reconcile the irreconcilable.

Arrest orders were passed by the Bombay High Court against vessels, whose owners were insolvent. The High Court issued a winding up order against one of the ship owners under the Companies Act, 1956 (“Companies Act”). In parallel, insolvency proceedings were commenced against another ship owner by the National Company Law Tribunal and a moratorium ordered against commencement or continuation of all proceedings against that owner and its assets under the Insolvency and Bankruptcy Code, 2016 (IBC). 

The official liquidator in the winding up proceedings objected to the continuation of the admiralty actions without the leave of the Company Court under Section 446 of Companies Act, 1956 . As regards the insolvency proceedings against the other vessel owner, the maritime claimants argued that the morat

under the IBC would not prevent continuation of the admiralty actions in the Bombay High Court.

Question of law 

Issue 1. Is there a conflict between actions in rem filed under the Admiralty Act and IBC and if so, how is the conflict to be resolved?

The Court observed that its endeavour would be to give effect to both statutes and their objectives so as to avoid conflict. The judgement proceeded to analyse the distinction between an action in rem under the Admiralty Act and an action in personam under IBC. The Court reasoned that an action in rem is not an action against the corporate debtor/owner of the ship or the assets of the corporate debtor/owner. It accordingly concluded that the moratorium under the IBC would not apply to an action in rem under the Admiralty Act for arrest of the ship and consequently would not prevent the commencement of admiralty proceedings.

According to the court, maritime claimants apart from being treated as secured creditors, should ordinarily be ascribed full value for their claim and the scheme of priorities under the Admiralty Act should be adopted in the resolution plan. The Court ruled that vessels arrested before the moratorium can only be released by the Admiralty Court, upon full payment of security.

The Court similarly reasoned that Section 33(5) of the IBC which bars the commencement or continuation of proceedings in liquidation, would not apply to an action in rem, as the claim is against the res and not against the corporate debtor.

Issue 2. Whether leave under Section 446(1) of the Companies Act is required for the continuation of an Admiralty action where a winding up order has been made or the Official Liquidator has been appointed that owns the ship?

The Court observed that the Admiralty Act, 2017 is a consolidating enactment dealing with arrest of ships, maritime claims, judicial sale of ships and determination of priorities. The jurisdiction of the Admiralty Court was found to be special, unlike that of regular civil courts. A judicial sale of a ship by an Admiralty Court in a public auction is free from all prior claims, liens and encumbrances and the purchaser at the auction acquires a clean title free from any maritime liens, claims or encumbrances. This is unlike a sale of property conducted by the Company Court. The Court accordingly held that no leave of the Company court was required as the Admiralty Act, 2017 being a special enactment, would prevail over Companies Act, 1956

Diagrammatic Representation of Various Scenarios:

 

Conclusion

The jurisprudence in relation to the interaction and interplay of admiralty law and insolvency law is far from fully developed, and several issues still remain unanswered. In an admiralty action, jurisdiction may be exercised irrespective of the nationality of the ship or that of its owners, or the place of business, domicile or residence of its owners, or the place where the cause of action arose wholly or in part. In such a scenario, situations arise where the ship owner of a vessel is incorporated outside India and is subject to insolvency proceedings in the respective country. 

The law in this respect is still evolving and  it will be interesting to witness the interpretation and application of the principles of law in times to come.

Author: Khushi Kabra

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi

Customs not an excuse: provisions of Customs Act to know while travelling and importing gold jewellery in India

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Customs not an excuse: provisions of Customs Act to know while travelling and importing gold jewellery in India

Introduction

Many Indian residents live abroad and earn their living. On entering India, they have to go through a customs check. The passenger has to declare the contents of his baggage within the prescribed Indian Customs Declaration Form. At airports, the passenger has the choice of seeking clearance through the Green Channel or the Red Channel subject to the character of products being carried. This becomes very important to know especially while travelling and importing gold jewellery in India; Customs Law and Procedures - Bhatt & Joshi Associates

Provision of Red channel and Green channel

In many countries, customs procedures for arriving passengers at many international airports and a few road crossings are separated into red and green channels. 

Red Channel

Passengers with goods to declare (carrying goods above the permitted customs limits and/or carrying prohibited items) undergo the red channel.

Green Channel

Passengers with nothing declared (carrying goods within the permitted customs limits and not carrying prohibited items) undergo the green channel.

However, entry to a specific channel constitutes a legal declaration, if a passenger browsing the green channel is found to be carrying dutiable goods above the customs limits or prohibited items, he or she could also be prosecuted for creating a false declaration to customs (also amounting to smuggling), by virtue of choosing green channel despite carrying dutiable goods, especially more important in case of Gold Jewellery. It may be noted that wearing gold is permissible only upto ___; and rest will be considered as baggage and baggage rules will be applicable; 

Each channel may be a point of no return, once a passenger has entered a specific channel, they can’t return or revisit the other channel. Passengers walking through the Green Channel with dutiable/prohibited goods are susceptible to prosecution/ penalty and also for confiscation of products.

Filling customs declaration form

Fill a Customs Declaration Form(at the airport) or use ATITHI mobile app to file declaration of dutiable items as well as currency with Indian Customs even before boarding the flight to India.

Baggage rules in India differ for various categories of individuals. Tourists have one set of rules while people transferring residence to India or returning to India after an extended stint of employment abroad are subject to a different.

The Baggage Rules 2016

Passengers 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, up to 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, up to 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.

Passengers arriving from Nepal, Bhutan or Myanmar.

An Indian resident or a foreigner residing in India or a tourist, not being an infant arriving from 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 up to the value of fifteen thousand rupees if these are carried on the person or in the accompanied baggage of the passenger: Provided that where the passenger is an infant, only used personal effects shall be allowed duty-free: Provided further that where the passenger is arriving by land, 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.

Here, Annexure 1 includes the following things. 

  • Firearms
  • Cartridges of firearms 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. 

Provision related to the import of gold 

An Indian passenger who has been residing abroad for over one year is allowed to bring jewellery, free of duty in his bonafide baggage up to 20 grams with a value cap of Rs.50,000/- (in case of a gentleman passenger) or up to 40 grams with a value cap of Rs.1,00,000/- (in the case of a lady passenger).

 

 

  • Can a person send jewellery to any manufacturer in India as a sample?

 

  1. Gold jewellery or studded jewellery including samples thereof is not allowed to be imported by or sent to ordinary persons in India through courier route. However, the units in export processing zones or Export Oriented Units are allowed to import gems and jewellery, including samples thereof, through an authorised courier. However, the jewellery and its samples can be exported by all units through the courier.

NEED FOR ABSOLUTE CONFISCATION ? 

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 the grant of an option to the party to pay a fine instead of confiscation.

 ….”

 

In the case of Kuber Casting Private Limited v. 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 is highly excessive and the goods cannot be held for confiscation on the charge of misdeclaration of Description.

….”

Mandatory documents for export/import of goods from/into India:

  1. Mandatory documents required for export of goods from India: 
    1. Bill of Lading/ Airway Bill/ Lorry Receipt/ Railway Receipt/Postal Receipt 
    2. Commercial Invoice cum Packing List*
    3. Shipping Bill/Bill of Export/ Postal Bill of Export.
  2. Mandatory documents required for import of goods into India.
    1. Bill of Lading/Airway Bill/Lorry Receipt/ Railway Receipt/Postal Receipt in form CN-22 or CN 23 as the case may be.
    2. Commercial Invoice cum Packing List*
    3. Bill of Entry [Note: *(i) As per CBEC Circulars issued under the Customs Act, 1962 (ii) Separate Commercial Invoice and Packing List would also be accepted.]
  3. For export or import of specific goods or categories of goods, which are subject to any restrictions/policy conditions or require NOC or product-specific compliances under any statute, the regulatory authority concerned may notify additional documents for purposes of export or import. 
  4. In specific cases of export or import, the regulatory authority concerned may electronically or in writing seek additional documents or information, as deemed necessary to ensure legal compliance.

CONFISCATION OF GOLD NOT DECLARED

Since gold, figured at S. No. 4 of the Negative List it was considered to be a prohibited item liable for action under Section 124. However, by subsequent instructions later on, considering the import liberalization policies, directions were issued, not to order absolute confiscations of Gold, in cases where the passengers had even cleared the “Green Channel”, but were otherwise eligible for the import and had enough foreign exchange to cover the duty. The approach in the two Act viz, “Imports and Exports (Control) Act, 1947” and Foreign Trade (Development & Regulation) Act, 1992 have vastly changed objects and reasons.

In Shri Kamlesh Kumar In re, 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.

Section 125. Option to pay fine in place 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 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 place 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 thereon.

  • Where any fine instead 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 the 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 the 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 place of confiscation is in addition to levy of penalty impossible under Section 112.”

CONCLUSION

According to our respectful opinion, we think that the human body is not ‘baggage’, a gold ornament worn by a human body isn’t their luggage. Then, do we need to declare the ornaments worn by a person? 

“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 Hon’ble High Court Of Kerala At Ernakulam stated that:

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: :”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 ‘misdeclaration’. 

 

In Shaik Jamal Basha v. Government of India

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

 

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

 

The customs act,1962 or the baggage rules,2016 does not stipulate that a foreign tourist or Indian Resident entering India cannot wear gold ornaments on his body. Gold is not a prohibited good; it is a restricted good and thus should be treated at par with the other dutiable goods. 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.

Author: Pooja Shukla

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi

Corporate Legal Battle: TATA vs MISTRY ( PART 1)

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Corporate Legal Battle: TATA vs MISTRY ( PART 1)

BRIEF BACKGROUND OF THE CASE

Tata conglomerate is India’s largest business group running businesses in seven sectors in more than eighty countries. Tata Sons is the holding company of the Tata Group. Tata Sons is an unlisted company. Around 66 % of its shares are owned by the various Tata trusts, most importantly Sir Dorabji Tata Trust (27.97%) and Sir Ratan Tata Trust (23.56%). 

The next major chunk of 18% is controlled by Shapoorji Pallonji Group, whose heir apparent is Cyrus Mistry. (“Mistry”). Cyrus Pallonji Mistry  is an Irish businessman of Indian origin . He was the chairman of Tata Group, an Indian business conglomerate, from 2012 to 2016.[He was the sixth chairman of the group, and only the second (after Nowroji Saklatwala) to not bear the surname Tata. In mid-2012, Cyrus Mistrywas chosen by a selection panel to head the Tata Group and took charge in December the same year. 

In 2016, the Board removed Cyrus Mistry from and the Board constituted a Selection Committee comprising Mr. Ratan N. Tata, Mr. Venu Srinivasan, Mr. Amit Chandra, Mr. Ronen Sen and Lord Kumar Bhattacharyya, as per the provisions in the Articles of Association of Tata Sons, to choose a new Chairman within four month.

 

 

BREAKING] Supreme Court to pronounce Judgment tomorrow in Tata Sons v. Cyrus Mistry dispute

STAKES OF TATA SONS 

Cyrus Mistry, son of pallonji Mistry who is the owner of the shapoorji pallonji group and one of the biggest stakeholder in the Tata Group .

He was appointed to the top position in 2012

ShareholderNo. of SharesShareholding percentage (%)
Shapoorji Pallonji Mistry1080.26723
Sterling investment Corp

Shapoorji PAllonji Group

371209.18489
Cyrus Investment

( Shapoorji Pallonji Group)

371209.18489
Ratan Tata33680.83337
Sir Dorabji Tata Trust11306727.97705
Sir Ratan Tata Trust9521123.558

COMPLAINT BY CYRUS MISTRY BEFORE HON’BLE NATIONAL COMPANY LAW TRIBUNAL 

The acts of oppression and mismanagement complaint against Tata Sons revolved around 

  1. alleged abuse of the Articles of Association, particularly Articles 121, 121A, 86, 104B and 118, to enable the trusts and its nominee Directors to exercise control over the Board of Directors; 
  2. alleged illegal removal of Cyrus Mistry as Executive Chairman without any notice and an all out attempt to remove him from the Directorship of all the operating companies of the Tata group; 
  3. alleged dubious transactions in relation to Tata Teleservices Limited, alongwith one Mr. C. Sivasankaran; 
  4.  Ratan Tata allegedly treating Tata Sons as a proprietorship concern with all others acting as puppets, resulting in the Board of Directors failing the test of fairness and probity 
  5. acquisition of Corus Group PLC of UK at an inflated price and then jeopardising the talks for its merger with ThyssenKrupp 
  6. Nano car project becoming a disaster with losses accumulating year after year and the conflict of interest that Ratan Tata had in the supply of Nano gliders to a company where he had stakes; 
  7. providing corporate guarantee to IL & FS Trust Company for the loan sanctioned by Standard Chartered Bank to Sterling 
  8. making Kalimati Investments Ltd, a subsidiary of Tata Steel to provide an inter corporate bridge loan to Sterling; 
  9. the dealings with NTT DoCoMo and Sterling resulting in an arbitration award for a staggering amount; 
  10. leaking information to Siva of Sterling that resulted in Siva issuing legal notices to Tata Teleservices and Tata Sons
  11. Ratan Tata making a personal gain for himself through the sale of a flat owned by a Tata group company to Mehli Mistry; 
  12. companies controlled by Mehli Mistry receiving favours due to the personal relationship that Ratan Tata had with him; and 
  13. fraudulent transactions in the deal with Air Asia which led to financing of terrorism.

 

REPLY OF RATAN TATA TO THE ALLEGATIONS

Tata Sons filed a reply to the company petition contending interalia: 

  1. that Cyrus Mistry, who was removed from the post of Executive Chairman, after having lost the confidence of 7 out of 9 Directors, has sought to use the complainant companies to besmirch the reputation of Tata Group; 
  2.  that even the decisions to which Cyrus Mistry was a party have been questioned in the petition;
  3. that Tata Group founded in 1868 is a global enterprise,headquartered in India, comprising over a hundred operating companies, having presence in more than 100 countries across six continents, collectively employing over 6,60,000 people; 
  4. that Articles 104Band 121 were introduced through a new version of Articles of Association at the Annual General Meeting of Tata Sons held on 13.09.2000 and Article 121 was subsequently amended byResolution dated 09.04.2014;
  5. that though the mail was marked confidential, it was simultaneously leaked to the press;
  6. that Cyrus Mistry also breached his fiduciary and contractual duties by disclosing confidential information and documents pertaining toTata Sons to third parties;
  7. that the complainant companies have cherry picked certain business decisions to launch a vitriolic attack on the Tata Trusts; 
  8. that while the complainant companies have talked about bad business deals, such as Corus acquisition and Nano Project, they have deliberately omitted to talk about Tetley acquisition by Tata Global Beverages Limited, the immensely successful Jaguar Land Rover acquisition by Tata Motors and the phenomenal success of Tata Consultancy Services;
  9. that Corus acquisition, the Nano Project, contracts awarded to the business concerns of Mr. Mehli Mistry and the investment by Mr.C. Sivasankaran have surfaced only after the replacement of Mr. Cyrus Mistry as the Executive Chairman; 
  10. that Cyrus Mistry has been the Director of Tata Sons since the year 2006 and was also the Executive Chairman from December, 2012 to October, 2016 and was fully aware of how the decisions relating to these projects were taken when they were taken;
  11. that courts cannot be called upon to sit in judgment over the commercial decisions of the Board of Directors of companies; and
  12. that even commercial misjudgments of the Board of Directors cannot be branded as instances of oppression and mismanagement.

RELIEF SOUGHT BY CYRUS MISTRY FROM HON’BLE NATIONAL COMPANY LAW TRIBUNAL 

  1. The necessity of an affirmative vote of the majority of directors nominated by the Trusts, which are majority shareholders, be deleted; 
  2. The Petitioners be entitled to proportionate representation on the Board of Directors of Respondent No .1; 
  3. The Petitioners be entitled to representation on all committees formed by the Board of Directors of Respondent No.1; and 
  4. The Articles of Association be amended accordingly

JUDGEMENT OF HON’BLE NATIONAL COMPANY LAW TRIBUNAL  (2016)

  1.  Removal of Mr. Cyrus Mistry as Executive Chairman on 24.10.2016 is because the Board of Directors and Majority of Shareholders, ie., Tata Trusts lost confidence in Mr. Cyrus as Chairman, not because by contemplating that Mr. Cyrus would cause discomfort to Mr. Tata, Mr. Soonawala and other answering Respondents over purported legacy issues. Board of Directors are competent to remove the Executive Chairman; no selection committee recommendation Is required before removing him as Executive Chairman. 
  2. Removal of Mr. Cyrus Mistry from the position of Director is because he admittedly sent the company information to Income Tax Authorities; leaked the company information to Media and openly come out against the Board and the Trusts, which hardly augurs well for smooth functioning of the company, and we have not found any merit to believe that his removal as director falls within the ambit of section 241 of Companies Act 2013. 
  3. We have not found any merit to hold that proportional representation on Board proportionate to the shareholding of the petitioners is possible so long as Articles do not have such mandate as envisaged under section 163 of Companies Act, 2013. 
  4. We have not found any merit in purported legacy issues, such as Siva issue, TISL issue, Nano car issue, Corus issue, Mr. Mehli issue and Air Asia issue to state that those issues fall within the ambit of section 241 and 242 of Companies Act 2013. 
  5. We also have not found any merit to say that the company filing application under section 14 of Companies Act 2013 asking this Tribunal to make it from Public to Private falls for consideration under the jurisdiction of section 241 & 242 of Companies Act 2013. 
  6. We have also found no merit in saying that Mr. Tata & Mr. Soonawala giving advice and suggestions amounted to interference in administering the affairs of the company, so that to consider their conduct as prejudicial to the interest of the company under section 241 of Companies Act 2013. 
  7. We have found no merit in the argument that Mr. Tata and Mr. Soonawala acted as shadow directors superimposing their wish upon the company so that action would be taken under section 241 & 242 of Companies Act 2013. 
  8. We have not found any merit in the argument that Articles 75, 1048, 118, 121 of the Articles of Association per se oppressive against the petitioners. 
  9. We have not found any merit in the argument that Majority Rule has taken a back seat by introduction of corporate governance in Companies Act, 2013, it is like corporate democracy is genesis, and corporate governance is specific. They are never in conflict with each other; the management is rather more accountable to the shareholders under the present regime. Corporate governance is collective responsibility, not based on assumed free-hand rule which is alien to the concept of collective responsibility endowed upon the Board.
  10. We have observed that prejudice remedy has been included in 2013 Act in addition to oppressive remedy already there and also included application of “just and equitable” ground as precondition to pass any relief in mismanagement issues, which was not the case under old Act.

Author: Vinay Sachdev

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi

Corporate Legal Battle: TATA vs MISTRY (PART 2)

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Corporate Legal Battle: TATA vs MISTRY (PART 2)

 

Check Part 1 of Tata vs Mistry Corporate Legal Battle, here

After the judgement of Hon’ble National Company Law Tribunal, Interlocutory Applications have been preferred by the Registrar of Companies, Mumbai for seeking amendment in Judgment.

[BREAKING] Supreme Court to pronounce Judgment tomorrow in Tata Sons v. Cyrus Mistry dispute

 

JUDGEMENT OF HON’BLE NATIONAL COMPANY LAW APPELLATE TRIBUNAL  (2018)

Hon’ble National Company Law Appellate Tribunal  held that the removal of Mistry from his post was neither discussed nor expected as the records show the company under his leadership flourished and hence a case of lack of performance cannot be built. Hence, he was restored as Director of various companies and even the Executive Chairman of Tata Sons but after four weeks of the judgment.

While Hon’ble National Company Law Appellate Tribunal , accepting the consequences of this article in light of the facts, ordered Tata sons to refrain from invoking against Shapoorji Pallonji Group. 7 Hon’ble National Company Law Appellate Tribunal , on the other hand, identified a case of prejudice and oppression by the board against the minority shareholders and the company. It held that the conversion from public to private was hurriedly done amidst a pending litigation and it was illegal and unsustainable as it did not even follow proper procedures under Section 14 clause 8. The verdict asked the Registrar of Companies to make the correction and declared Tata to remain public. . Although Hon’ble National Company Law Appellate Tribunal  accepted this claim, they refused to accept that legitimate expectations, which are a result of mutual trust and confidence, arising from such a partnership can be a factor of oppression. Through a plethora of judgments, the Hon’ble Supreme Courthas established certain principles in order to determine a company as a quasi-partnership but Hon’ble National Company Law Appellate Tribunal  ignored these principles and used its own understanding to back such reasoning. 

IT also held that mismanagement can be easily visible through the losses incurred by Tata Sons and other firms through prejudicial decisions taken by the respective Board of Directors which were essentially filled with a majority of Tata Trust’s representatives. Hon’ble National Company Law Appellate Tribunal  set aside the judgment and ruled in favour of Mistry and Shapoorji Pallonji Group. These are very contrasting judgments with respect to every aspect of law which the case dealt with. 

The same now has been appealed to the Hon’ble Supreme Court by Tata Sons. Post the stay of the Hon’ble National Company Law Appellate Tribunal  order by the Supreme Court, Mistry appealed against this same order seeking judicial protection and Board of Directors representation for his family i.e. the minority shareholders. This new appeal will be heard along with the appeal of Tata Sons before a Hon’ble Supreme Court bench comprising Chief Justice S.A. Bobde, Justice Surya Kant and Justice B.R. Gavai.

RATAN TATA APPEAL IN SUPREME COURT

Tata Sons (Private) Limited has come up with two appeals in Civil Appeal Nos.1314 of 2020, challenging a final order dated 18/12/2019 passed by the National Company Law Appellate Tribunal, which is,

  1. Holding as illegal, the proceedings of the sixth meeting of the Board of Directors of TATA Sons Limited held on 24.10.2016 in so far as it relates to the removal of Shri Cyrus Mistry.  
  2.  Restoring the position of Cyrus Mistry as the Executive Chairman of Tata Sons Limited and consequently as a Director of the Tata Companies for the rest of the tenure; 
  3.  Declaring as illegal the appointment of someone else in the place of Cyrus Mistry as Executive Chairman; 
  4. Restraining Shri Ratan N. Tata and the nominees of Tata Trust from taking any decision in advance; 
  5. Restraining the Company, its Board of Directors and Shareholders from exercising the power under Article 75 of the Articles of Association against the minority members except in exceptional circumstances and in the interest of the Company; and 
  6. Declaring it illegal, the decision of the Registrar of Companies for changing the status of Tata Sons Limited from being a public company into a private company.

QUESTION OF THE LAW ARISES IN THE CASE

  1. Whether the formation of opinion by the Appellate Tribunal that the company’s affairs have been or are being conducted in a manner prejudicial and oppressive to some members and that the facts otherwise justify the winding up of the company on just and equitable ground, is in tune with the well settled principles and parameters, especially in the light of the fact that the findings of Hon’ble National Company Law Tribunal  on facts were not individually and specifically overturned by the Appellate Tribunal ?
  2. Whether the reliefs granted and the directions issued by the Appellate Tribunal, including the reinstatement of Cyrus Mistry into the Board of Tata Sons and other Tata companies, are in consonance with the pleadings made, the reliefs sought and the powers available under Subsection (2) of Section 242 ?
  3.  Whether the Appellate Tribunal could have, in law, muted the power of the Company under Article 75 of the Articles of Association, to demand any member to transfer his ordinary shares, by simply injuncting the company from exercising such a right without setting aside the Article ?
  4. Whether the characterization by the Tribunal, of the affirmative voting rights available under Article 121 to the Directors nominated by the Trusts in terms of Article 104B, as oppressive and prejudicial, is justified especially after the challenge to these Articles have been given up expressly and whether the Tribunal could have granted a direction to Ratan Tata and the Nominee Directors virtually nullifying the effect of these Articles ?
  5. Whether the reconversion of Tata Sons from a public company into a private company, required the necessary approval under section 14 of the Companies Act, 2013 or at least an action under section 43A(4) of the Companies Act, 1956 during the period from 2000 (when Act 53 of 2000 came into force) to 2013 (when the 2013 Act was enacted) as held by Hon’ble National Company Law Appellate Tribunal  ?

ISSUES BEFORE HONOURABLE Hon’ble Supreme Court(2020)

  1. What constitutes oppression and mismanagement at a company? 
  2. How far do a tribunal’s powers go when deciding such a case? 
  3. Should nominee directors of a majority shareholder have substantial affirmative powers? 
  4. The legality of Tata Sons’ conversion from public company to private company. 
  5. The fate of Mistry’s directorship on the Tata Sons board. And, what this 5-year long battle says about India’s foremost conglomerate, the Tata Group – with over $100 billion in revenue.

HON’BLE APEX COURT JUDGEMENT ON CYRUS-MISTRY CASE

The Hon’ble Supreme Court has comprehensively dismissed every charge of oppression and mismanagement made by entities owned by Cyrus Mistry against Tata Sons Pvt. Not just that, the court has gone so far as to suggest there never was a case to begin with. That the original cause of action was Mistry’s dismissal as chairman of Tata Sons. Everything else was a dressing up of that cause. 

“Though the complainant companies padded up their actual grievance with various historical facts to make a deceptive appearance, the causa proxima for the complaint was the removal of Cyrus Mistry (Cyrus Pallonji Mistry) from the office of executive chairman.” But removal of a chairman, or even director of a company is not grounds enough to determine oppression or prejudicial behaviour, the apex court said whilst overturning the decision of the National Company Law Appellate Tribunal that had found oppression and mismanagement and ordered the reinstatement of Mistry. 

While Mistry made several specific charges against Tata Sons in the oppression case, the Hon’ble Supreme Courtexamined only a few. The court’s explanation for this was that the National Company Law Tribunal had dismissed each of the charges whereas the Hon’ble National Company Law Appellate Tribunal  overturned only a few of the tribunal’s dismissals. Since tribunals are courts of fact and the Hon’ble Supreme Court of law, it limited its proceedings to the conclusions arrived at by the Hon’ble National Company Law Appellate Tribunal .

On Mistry’s removal as executive chairman of Tata Sons, the top court noted that it is a well settled position that certain failed business decisions or a removal of a person from directorship cannot be called as acts oppressive to minority shareholders. In such a case (under Section 241, 242 of company law) a tribunal, the court said, cannot ask whether the removal was correct/valid but it has to see whether such removal would tantamount to oppression of the minority shareholders.

Both, with regard to Mistry’s oppression case and the Hon’ble National Company Law Appellate Tribunal ’s findings, the top court examined several aspects of the Articles of Association of Tata Sons, including rights such as affirmative votes, pre-consultation with Tata Trusts. It dismissed each of Mistry’s arguments and stated the Tata Group was guided by corporate governance and had included many practices, such as board committees, etc. even though it was not required by law to have them.

Article 121 of Tata Sons’ Articles of Association grants affirmative voting rights to the nominee directors of the Tata Trusts in certain matters. The top court pointed out that such rights are a global norm and in this case they confer only a limited right on the nominee directors. Going by the shareholding, Tata Trusts with 66% could have packed the board, the court said, while noting it didn’t

Article 75 allows Tata Sons to resolve by special resolution the transfer of any shareholder’s shares. Mistry has termed this as coercive. The Hon’ble Supreme Court viewed it as an exit clause. Besides, it said Article 75 had never been invoked and future action is not covered under oppression. Also, Article 75 has existed for decades and Mistry was himself party to an amendment in the year 2000 which gave article 75 in its present form.

The court opined that given the charitable objectives of the Tata Trusts, their nominee directors on board Tata Sons are not like any other ordinary directors. It also questioned whether the need for having independent directors on the board itself was an acknowledgment that not every director could be expected to exercise completely independent judgment irrespective of who nominated them. A nominee director of the Trusts holds a fiduciary duty towards their beneficiaries.

The top court also detailed the shifting arguments of the Mistry side through the five-year long litigation on seeking certain reliefs. The plea for reinstatement of Mistry was later amended to seek proportionate representation on the board. While challenging the affirmative voting rights of the Tata Trusts’ nominee directors on Tata Sons’ board, Mistry’s case sought the same rights for his SP Group. The court termed the request for the same rights as “quite funny”.

CONCLUSION

Thus in fine, all the questions of law are liable to be answered in favour of the appellants Tata group and the appeals filed by the Tata Group are liable to be allowed and the appeal filed by S.P. Group is liable to be dismissed. But before we do that we should also deal with the application moved by S.P. Group before us during the pendency of these proceedings, praying for the alternative relief of directing Tata Sons and others to cause a separation of ownership interests of the S.P. Group in Tata sons through a scheme of reduction of capital by extinguishing the shares held by the S.P. Group in lieu of fair compensation effected through a transfer of proportionate shares of the underlying listed companies, with the balance value of unlisted companies and intangibles including brand value being settled in cash.

Interestingly, such an application was filed after Tata Group moved an application for restraining S.P. Group from raising money by pledging shares and this court passed an order of status quo on 22.09.2020. For the first time S.P. Group seems to have realized the futility of the litigation and the nature of the order that the Tribunal can pass under Section 242. This is reflected in Paragraph 62 of the application, where S.P. Group has stated that they are seeking such an alternative remedy as a means to put an end to the matters complained of.

As a matter of fact, S.P. Group should have sought such relief from the Tribunal even at the beginning. As we have pointed out elsewhere a divorce without acrimony is what is encouraged both in England and in India under the statutory regime.

But in an appeal under Section 423 of the Companies Act, 2013, this Court is concerned with questions of law arising out of the order of Hon’ble National Company Law Appellate Tribunal . Therefore, we will not decide this prayer. It should be pointed out at this stage that Article 75 of the Articles of Association is nothing but a provision for an exit option (though one may think of it as an expulsion option). After attacking Article 75 before Hon’ble National Company Law Tribunal , the S.P. Group cannot ask this Court to go into the question of fixation of fair value compensation for exercising an exit option. What is pleaded in Paragraph 72 of the application for separation of ownership interests, requires an adjudication on facts,of various items. The valuation of the shares of S.P. Group depends upon the value of the stake of Tata Sons in listed equities, unlisted equities, immovable assets etc., and also perhaps the funds raised by SP group on the security/pledge of these shares. Therefore, at this stage and in this Court, we cannot adjudicate on the fair compensation. We will leave it to the parties to take the Article 75 route or any other legally available route in this regard. In the result, all the appeals except C.A. No.1802 of 2020 is allowed and the order of Hon’ble National Company Law Appellate Tribunal  dated 18.12.2019 is set aside. The Company Petition C.P. No. 82 of 2016 filed before Hon’ble National Company Law Tribunal  by the two Companies belonging to the S.P. Group shall stand dismissed. The appeal C.A. No.1802 of 2020 filed by Cyrus Investments Pvt. Ltd., and Sterling Investments Corporation Pvt. Ltd. is dismissed. There will be no order as to costs. All IAs including the one for causing separation of ownership interests of the S.P. Group in Tata Sons namely IA No.111387 of 2020, are dismissed.

 

Author: Vinay Sachdev

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi

IMPORTANCE OF HASH VALUE IN THE CONTEXT OF DIGITAL EVIDENCE COLLECTION

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IMPORTANCE OF HASH VALUE IN THE CONTEXT OF DIGITAL EVIDENCE COLLECTION

INTRODUCTION

“A “hash value” is an electronic fingerprint. The data within a file is represented through the cryptographic algorithm as that hash value”. Digital forensics professionals use hashing algorithms to generate hash values of the original files they use in the investigation. This ensures that the information isn’t altered during the course of the investigation since various tools and techniques are involved in data analysis and evidence collection that can affect the data’s integrity. Another reason why hash values are important is that electronic documents are shared with legal professionals and other parties during investigation, and it’s important to ensure that everyone has identical copies of the files. Hash values are used to identify and filter duplicate files (i.e. email, attachments, and loose files) from an ESI collection(electronically stored information ) or verify that a forensic image or clone was captured successfully.

Digital Forensic Investigator At Work Photograph by Microgen Images/science Photo LibraryGUIDELINES RELATED TO HASH VALUE:

Following are the rules regarding the hash value extracted from the Digital Evidence Investigation Manual Central Board of Direct Taxes ,Department of Revenue, Ministry of Finance, Government of India:

  • Accessing a system or hard disk in any way without the use of “write-protect” devices causes change in the hash value or digital fingerprint of the disk. This can render the evidence on such disks inadmissible.
  • Mathematical hashing is equivalent to one-way encryption. Every digital evidence at the lowest level translates into a big numerical number. When the digital device or data is encrypted using a hashing algorithm, it results in a new number of a fixed length called the dark message digest. The hashing algorithm has some unique characteristics, which are as follows:
  1. Message digest always of a fixed length: The digital evidence may be of any size, but on application of the hash algorithm the resultant message digest would always be of a fixed length.
  2. Message digest is a randomly generated number: The message digest is a randomly generated number. However, if the contents of the digital evidence remain the same, the hash algorithm would generate the same message digest every time it is applied on the digital evidence. This property is useful in authenticating seized digital evidence before a court of law. If application of hash algorithm on digital evidence in a court of law results in the same message digest as was obtained during the time of seizure, it indicates that the presented evidence is the same as what was seized.
  3. One-way hash function: It is computationally not feasible to determine the contents of the digital evidence if somebody knows the message digest. Hash algorithm is a one-way function. This property is of great importance from the legal point of view, since it prevents manipulation of digital evidence as no one can predict the message digest that would be generated if the evidence is manipulated.
  4. collision-free hash: The odds that two digital pieces of evidence with different contents have the same message digest is roughly 2 to the power128 (i.e. 34 followed by 37 zeros).
  • On completion of the imaging process, the device displays the hash value of the cloned hard disk. The image/clone has to have the same hash value as that of the target hard disk. The Hash value should be recorded in the Panchnama and the assessee can be given the option of seeking a copy of the imaged/ cloned hard disk by paying the copying charges.
  • Before seizing any of the digital evidence, their hash value must be calculated using forensic tools such as cyber check or duplicator or anything else. There will be a report generated by these tools which can be attached along with the panchnama.
  • Digital Forensic Report( Given by Forensic Examiner) containing details of hash value and the details of all mahazar drawn to open the digital evidence at various times to gather further evidence should be included as an annexure to the assessment order. If the chain of custody form is present, the same can be annexed to the assessment order. This will establish the integrity of the data before any court of law.
  • 11.4.3 Procedure for imaging seized hard disks

In cases where hard disks cannot be cloned at the site and are therefore seized, two sets of images/clones should be created in the lab in presence of the assessee or his representative and the authorized officer following the same procedure as described above. A panchnama should be prepared for this activity recording the hash value of each of the hard disks imaged and the other particulars mentioned above. The assessee may be given an option to obtain a copy of the image at his cost.

  • Sec. 3. Of the IT Act: Authentication of electronic records.

(1) Subject to the provisions of this section any subscriber may authenticate an electronic record by affixing his digital signature.

(2) The authentication of the electronic record shall be effected by the use of an asymmetric cryptosystem and hash function which envelopes and transforms the initial electronic record into another electronic record.

Explanation.- For this sub-section, “hash function” means an algorithm mapping or translation of one sequence of bits into another, generally smaller, set known as “hash result” such that an electronic record yields the same hash result every time the algorithm is executed with the same electronic record as its input making it computationally infeasible-

(a) to derive or reconstruct the original electronic record from the hash result produced by the algorithm;

(b) that two electronic records can produce the same hash result using the algorithm.

CASE LAWS

  • United States vs. Cartier: the district court found that the files with the same hash value have 99.99% probability of being identical.
  • Shirley Williams v. Sprint/United Management Company  : The court observed that When an electronic file is sent with a hash mark, others can read it, but the file cannot be altered without a change also occurring in the hash mark.  The producing party can be certain that the file was not altered by running the creator’s hash mark algorithm to verify that the original hash mark is generated.  This method allows a large amount of data to be self-authenticating with a rather small hash mark, efficiently assuring that the original image has not been manipulated.
  • Dramatico Entertainment Ltd. vs. British Sky Broadcasting Ltd: While commenting on the role of hash values in identifying the impugned data by the investigation agency in Peer to Peer Network and its admissibility in the court, it was observed that “the hash value is a reference code comprising a string of letters and numbers, which is used to identify each piece of the content to be shared. This enables the tracker to recognize pieces of the content file as they are shared and is intended to ensure that the content files are correctly downloaded and unmodified.”
  • Lorraine v. Markel:The court dealing with the issue search by Hash Value also observed that it would narrowly restrict the searched of digital devices and observed that “A file can be mislabeled; its extension (a sort of suffix indicating the type of file) can be changed; it can actually be converted to a different file type (just as a chat transcript can be captured as an image file, so can an image be inserted into a word-processing file and saved as such).  Any of these manipulations could change a document’s hash value. And in any event a limited hash-value search would not have turned up any chat transcripts (which, again, can be saved as image files)”

CONCLUSION

Thus, the hash value is internationally accepted scientifically attested means to authenticate the reliability and authenticity of the electronic evidence which has also been recognized as admissible by the Courts in USA as well as various other digitally advanced countries. The provision of Information Technology Act, 2000 also recognize the hash value as unique and MD5 & SHA-2 as the standard hash function attuned to International Standards.Therefore, before seizing any of the digital evidence, their hash value must be calculated using forensic tools such as cyber check or duplicator or anything else. There will be a report generated by these tools which can be attached along with the panchnama and it can be concluded from the above-mentioned guidelines that any digital evidence does not have any evidentiary value if the hash value is not taken into account while considering it. 

Author: Priyanka Jaiswal

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi

Retraction Of statements and confessions

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Retraction Of statements and confessions

Introduction

A Confession is an admission made by a person charged with a crime at any time stating or suggesting the inference that he committed that crime. Confession is received in criminal cases upon the principle that a person will not  make an untrue statement against his own interest. Confession may be divided into two categories; judicial confession and extra-judicial confession. 

  • Judicial confessions are those confessions which are made before a Magistrate or in Court in the due course of legal proceedings.
  • Extra-judicial confessions are those confessions which are made by the accused anywhere other than before a Magistrate or in Court and extrajudicial confession can be made to any particular person or to a group of persons.

The term confession has not been defined in the Indian Evidence Act, 1872 and it attains its first appearance in section 24 of the Indian Evidence Act.883 Police Confession Stock Photos, Pictures & Royalty-Free Images - iStock

Sections 24, 25, 26 and part of Section 27 of the Indian Evidence Act, 1872 deals with irrelevant confession. Apart from Section 27, relevant confessions have been dealt with under Sections 28, 29 and 30 of the Indian Evidence Act, 1872.

Evolving of the concept of retraction of statements and confession basically comes from the Article 20(3) of the constitution which states, ‘No person accused of any offence shall be compelled to be a witness against himself’.

A retracted confession is a confession voluntarily made by a person and subsequently retracted. The credibility of such a confession is a matter to be decided by the court according to the facts and circumstances of each case and if the court is of the opinion that such confession is proved; the court is bound to act upon it so far as the person making the confession is concerned. The retracted confession may also form the basis of conviction and punishment if it is believed to be true and voluntary.

Retracted confession can also be used against the person making it if it is supported by independent and corroborative evidence. In the case of Pyare Lal v. State of Rajasthan. The Supreme Court held that a retracted form of confession can form the basis of a conviction if and only if the Court is satisfied that it was true and was made voluntarily.

Relevant and specific Provisions

Section 24 made all the confessions made by an accused under any form of inducement by the means of either threat or promise from any person as irrelevant in any criminal proceeding. It was held in the case State of Punjab v. Gurdeep Singh that if the circumstances are such that the Courts believe the witness and are satisfied that such a confession is made on a voluntary basis, an order of conviction can be found on the same.

 

The conditions of irrelevance under section 24 of Indian Evidence Act, 1872 are as follows:

  1. a) The confession must be a result of inducement or a threat or a promise;
  2. b) Inducement, etc. should proceed from a person in authority;
  3. c) It should be relating to the charge that is in question;
  4. d) It should obtain a worldly benefit or any form of disadvantage

 

The Confession must be a result of inducement or threat or a promise.

A confession will justly be admitted if and only if it is voluntary and any confession that is obtained by the means of a threat, promise or inducement cannot be admitted. An inducement to confess may be upon a promise of pardon. A promise or threat made to one accused will not render a confession made by another, who was present and heard the inducement, irrelevant.

 

Person in the authority

The particular inducement or threat caused must flow from a person who has authority. This refers to the government officials who are having a particular authority due to their position in the services. Every government official is the person who is capable of influencing the course of prosecution.

 

A confession is made relevant even it is obtained in the following circumstances:

  1. On promising the accused that the information obtained will be kept a secret or that it will not be used against him 

It may be recalled that an admission made in a civil case under promise that evidence of it shall not be given is not relevant, (Section 23) the policy being that litigants should be encouraged to compromise their differences. That policy has no relevance to criminal cases because here the public interest lies in prosecuting criminals and not compromising with them. Consequently, therefore, where an accused person is persuaded to confess by assuring him of the secrecy of his statements, the confession is nevertheless relevant.

  1. By practicing a deception on the accused for the purpose of obtaining his confession

When the confession is the outcome of a fraud being played with the accused, it stands relevant. Thus, where the two accused persons were left in a room where they thought they were all alone, but secret tape recorders were recording their conversation, the confessions thus recorded were held to be relevant. Similarly, where an accused was persuaded to submit for a medical examination for an innocent purpose which was in fact conducted for criminal purpose, his statements to the doctor and the doctors report were held to be relevant at the discretion of the Court. A confession secured by intercepting and opening a letter has also been held to be relevant.

 

  1. Circumstances when the accused was drunk

A confession obtained by intoxicating the accused is equally relevant. The law is concerned to see that the confession is free and voluntary and if this is so it does not matter that the accused confessed under the influence of drink. According to the English practice the judge will have discretion in the matter.

 

Section 30 deals with the consideration of proven confession affecting the person making it and others jointly under for the same trial for the same offence. It provides that When more persons than one are being tried jointly for the same offence and a confession made by one of such persons affecting himself and some other of such person is proved, the court may take into consideration such confession as against such other persons as well as against person who make such confession.

 

 In Reference to the case of State of Maharashtra v. Mohd. Ajmal Mohd. Amir Kasab,

The courts held that it is safe to place reliance on retracted confessions if it can be established that the confession is true and has been made voluntarily. It is also important to keep in mind that the confession has been corroborated sufficiently. The courts have the power to discard the exculpatory facts and consider the inculpatory facts.

 

The courts laid down the following essential principles:

  1. A confession can be acted upon only if the court is satisfied that it is true and has been made voluntarily.
  2. The confession must stand true to the facts and should not counter it.
  3. It is a rule of judiciousness as to not base a conviction on the basis of a confession that has not been corroborated.

 

Retraction of Statement made under the Customs Act or Income tax act

Statement Under Section 108 of Customs Act, 1962 is an admissible piece of evidence before court of law. Section 108 is a machinery section to gather evidence in case of violations/offence under Customs Act. The power of recording of statements and calling for documents is vested in Officers not lower than the rank of Superintendent and Appraiser (AO in short) in rank. Whoever is found involved in violation of customs law, his/ her statement can be recorded to gather evidence in order to bring the guilty home. 

Section 108 of the customs Act states that, 

(1).Any gazetted officer of customs duly empowered by the Central Government on this behalf, shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under this Act.]

(2).A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under control of the person summoned.

 

     Retraction or rebuttal of earlier statements/admitted facts can, inter alia, be:

  • In the form of statement which is recorded later on ; or
  • In the form of a letter; or
  • In the form of an affidavit filed.

It is a settled situation of law that affirmation made by the assessee u/s 132(4) is a significant piece of proof however the equivalent isn’t convincing. It is available to the assessee who made the admission to show that it is erroneous and the equivalent is given under mixed up conviction of actuality or law. 

 

  • In the case of Jyotichand Bhaichand Saraf and Sons (P.) Ltd. v DCIT ,the Hon’ble ITAT Pune held that however It is a settled position that confession made by assessee under area 132(4) of the IT Act is a significant piece of proof yet the equivalent isn’t decisive. It is available to the assessee who made the admission to show that it is wrong and the equivalent is given under mixed up conviction of truth or law.

 

  • In the case of Union of India v. Kisan Ratan Singh,

K.R. Shriram, J. observed, “If I have to simply accept the statement recorded under Section 108 as gospel truth and without any corroboration, I ask myself another question, as to why should anyone then go through a trial. The moment the Customs authorities recorded the statement under section 108, in which the accused confessed about his involvement in carrying contraband gold, the accused could be straightaway sent to jail without the trial court having recorded any evidence or conducting a trial.”

The Court also reiterated that in absence of any corroboration by an independent and reliable witness, a statement recorded under Section 108 in isolation could not be relied upon. 

  • It was observed in Haroom Hazi Abdulla v. State of Maharashtra that a “retracted confession must be looked upon with greater concern unless the reasons given for having made it in the first instance are on the face of them false.” There was a further observation that; retracted confession is a weak link against the maker and more so against a co-accused.” 
  •  In the case of  K.I. Pavunny v. Asst. Collector (HQ) Central Excise Collectorate, Cochin the Supreme Court held:

 

“Even though the Customs officers have been invested with many of the powers which an officer in charge of a police station exercises while investigating a cognisable offence, they do not, thereby, become police officers within the meaning of Section 25 of the Evidence Act and so the confessional statements made by the accused persons to Customs officials would be admissible in evidence against them.

“Confessions can be acted upon if the court is satisfied that they are voluntary and that they are true. The voluntary nature of the confession depends upon whether there was any threat, inducement or promise and its truth is judged in the context of the entire prosecution case. The confession must fit into the proved facts and not run counter to them. When the voluntary character of the confession and its truth are accepted, it is safe to rely on it. Indeed a confession, if it is voluntary and true and not made under any inducement or threat or promise, is the most patent piece of evidence against the maker. Retracted confession, however, stands on a slightly different footing. As the Privy Council once stated, in India it is the rule to find a confession and to find it retracted later. A court may take into account the retracted confession, but it must look for the reasons for the making of the confession as well as for its retraction, and must weigh the two to determine whether the retraction affects the voluntary nature of the confession or not. If the court is satisfied that it was retracted because of an after-thought or advice, the retraction may not weigh with the court if the general facts proved in the case and the tenor of the confession as made and the circumstances of its making and withdrawal warrant its user. All the same, the courts do not act upon the retracted confession without finding assurance from some other sources as to the guilt of the accused. Therefore, it can be stated that a true confession made voluntarily may be acted upon with slight evidence to corroborate it, but a retracted confession requires the general assurance that the retraction was an after-thought and that the earlier statement was true. This was laid down by this Court in an earlier case reported in Subramania Gounden v. The State of Madras.”

In case of Satinder Kumar , their lordships held that it is true that an admission made by an assessee constitutes a relevant piece of evidence but if the assessee contends that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts such an admission cannot be relied upon without first considering the aforesaid contention.

Conclusion

Retraction of statements and confession is a result of Article 20(3) and thus, if the         accused is retracting the statements or any confession within the stipulated time period according to the  set provisions then it should be validated and considered. A retracted statement under Section 132(4) of the Act would require some corroborative material for the AO(Officers not lower than rank of Superintendent and Appraiser) to proceed to make additions on the basis of such statement.

From the standards of law set down as references thus above, it could be derived that admission is one significant piece of proof however it can’t be said that it is definitive. It is rebuttable. It is available to an assessee who made an admission to set up that the admission was involuntary and the equivalent was extricated under pressure and coercion.

Of course, where the retraction is not for any convincing reason, or where it is not shown by the Assessee that he was under some coercion to make the statement in the first place, or where the retraction is not followed by the Assessee producing material to substantiate his defense, the AO(Officers not lower than rank of Superintendent and Appraiser ) might be justified in make additions on the basis of the retracted statement. And thus, confessions and statements, whether retracted or not; should always result in the justice for all because justice is a Right and not a privilege. 

Author: Pooja Shukla

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi

Criticism of the Gujarat Land Grabbing (Prohibition) Act, 2020 (Part 1)

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Criticism of the Gujarat Land Grabbing (Prohibition) Act, 2020 

BACKGROUND:

In 2020, The Government of Gujarat passed the Gujarat Land Grabbing (Prohibition) Act to “ensure that no criminals and land mafia usurp land of farmers”. A central means of achieving this was to create a new offence of “land grabbing” and to create “Special Courts” for dealing with land grabbing cases that would finish them within six months. Similar land Grabbing laws have been introduced in the States of Assam (2010), Odisha (2015 ordinance), Andhra Pradesh (1982), and Karnataka (2016). Earlier some people were making false claims on the title of land parcels and then extorting money from lawful owners to let go their “claim”. So the government has brought up this stringent law.

This article discusses an attempt to discuss some problems with the Karnataka version of the Land Grabbing Act. The problems are not restricted to issues with the constitutional validity of the law, but cover more ground that touches broader policy issues. Before proceeding further though, a caveat. Surprisingly, it seems that the constitutional validity of these statutes has rarely come up for scrutiny before the state High Courts. Searching for cases, I only came across constitutional challenges to how the Special Court is constituted under the Gujarat law. We couldn’t find anything from Odisha or Assam. Thus, whatever is argued here is based on an assumption that the issues of constitutional validity have not directly come up before any High Court or Supreme Court yet. If they have, please share the judgment! 

All about Gujarat Land Grabbing and Prohibition Bill, 2020 | Housing News

 WHAT IS “LAND GRABBING”? HOW SERIOUS IS IT?

Land Grabber [defined under Section 2(d) of the Act] is a person who commits land grabbing, or abets others in doing so. Land here means land belonging to government, essentially [Section 2(c)]. As defined under Section 2(e), “Land Grabbing” means:

 …  every activity of land grabber to occupy or attempt to occupy with or without the use of force, threat, intimidation and deceit, any land over which he or they have no ownership, title or physical possession, without any lawful entitlement and with a view to illegally taking possession of such land or creating illegal tenancies or lease or licence, agreements or transfer or sale or by constructing unauthorized structures … 

The definition is not very helpful. It contains a clear “physical conduct” requirement: there must be “grabbing of any land without lawful entitlement”. But there must be an associated mental state with this conduct that makes it criminal. Here, this is grabbing land to which you have no title, with a view to (i) take illegal possession, (ii) create illegal tenancies / lease / license deals, (iii) build structures for sale / hire, (iv) hand over the land to someone else to do all of these things. Since you would rarely end up “grabbing” any land which you don’t own without wanting to take illegal possession over it, one would think that it isn’t too difficult to prove this crime. But more on that later.

This is not the only offence under the statute. Section 5 lists “Penalty for other offences in connection with land grabbing” and criminalises other acts, such as (i) selling grabbed land / advertising about it, (ii) instigating or inciting someone to grab land, (iii) uses grabbed land for any purpose, or knowingly permits it to be used, (iv) enters into deals about constructing on grabbed land, (v) “causes or procures or attempts to procure any person” to do any of the above. Again, one wonders why this was needed given the massive overlap between the two provisions.  

Land Grabbing and all other offences in connection with it, are punishable with at least 10 year and potentially up to 14 years in prison, along with a fine which could go up to Jantri Value of such grabbed land[Sections 4, 5]. If that doesn’t sound serious enough,  Moreover, since the statute does not provide whether the offence is bailable or not, the Cr.P.C. makes it non-bailable by virtue of it being punishable up to ten years in prison. Why would such broad powers be given to states? The definition of “Land Grabber” gives a hint. It is not only talking about persons who take illegal possession. Rather, it focuses on the idea of organised activity geared towards land grabbing. It speaks of “a group of persons or a society” engaging in this, or giving “financial aid” to another for grabbing land or illegally constructing upon it. The definition even speaks of persons “collecting or attempting to collect” money from occupiers of grabbed land by “criminal intimidation”, again hinting at organised crime.* It is quite common for organised crime to not be limited to just one activity, which is why allowing police powers of arrest for these things may help them get dangerous persons off the streets.

That is the logic behind having these powers, but as we know, it is quite common for such powers to be misused. That is a serious concern given how loosely the definition is crafted, and how widely the net is cast. Take a hypothetical: someone tells the police that X is illegally occupying some land. Since illegal occupation would rarely mean that it is not done with a view toward illegal possession, that is enough for police to arrest. Someone needn’t even tell the police that actually, as they can do it themselves. The problem goes further: the act penalises a person who “causes or procures or attempts to procure” anyone to engage in land grabbing. This is not a regular law that penalises attempting to commit a crime. It penalises attempting to get someone to attempt the crime – “attempts to procure any person to do any of the above”. That theoretically means anyone can be arrested and sent to jail, and practically means that the police have a tool to arrest and jail persons on the pretext of allegedly committing this offence.      

In Act of Andhra Pradesh, it states specifically under section 5 that “the Special Tribunal shall, before passing an order under this sub-section, give to the land grabber an opportunity of making his representation or of adducing evidence, if any, in this regard and consider every such representation and evidence” and also section 8(1-A) states that “the Special Court shall not take cognizance of any such case without hearing the petitioner” but  there are no such specific provisions in Act of Gujarat.

Proving “Land Grabbing” in Court – More Reverse Burdens

Section 11 of the Karnataka, Section 10 of the Andhra Pradesh Act and Section 11 of the Gujarat act, all three acts provide that in any proceedings under the Act, if the government can prima facie prove that the land in question was government owned, then the Special Court shall presume that the person is a Land Grabber, and the burden to prove he is not guilty of the crime lies on the person accused. Using reverse onus clauses – where the state does not have to prove guilt – to make it easy for the government to get convictions is now very common. It is a practice blessed by the Supreme Court, which has held them legal as long as the government proves initial facts to shift the burden on to the accused. Here, the government is asked to prove something: that the land was government owned. Does this justify the shifting of burdens? I am not so sure.       

First, the provision here applies to all proceedings under the Act: which means that at every stage such as bail, initial remand, and the start of the trial, the accused will be contesting innocence. This, at the stage of bail where the accused may not yet have the means to assemble a defence, make the bargain particularly unfair. Second, the state needs to prima facie prove something. But what does it mean to prima facie “prove” anything? The Evidence Act in Section 113-B asks the state to “show” facts, and usually the law asks it to “prove” facts. But prima facie proof suggests a lower standard. If the state already doesn’t need to prove guilt, is it legal for the burden to prove initial facts to be even lower than proper proof beyond reasonable doubt? Third, Section 11 asks the government to prima facie prove that the land in question was government owned. Is this enough? Logically, one imagines that the state will also need to prove that the land was being occupied by the accused. Assuming this condition is incorporated into the provision, we come to the remainder of the offence-requirement. The accused would then have to prove that her occupation of the land was not illegal. That seems fine – property documents etc. should be with the accused and this would simply require her to bring them to court. But poor persons often don’t have property documents, despite paying good money for being able to live on land which may not even be government land. Eventually then, they are the ones who stand to suffer.

There are some relevant facts about the Burden of Proof in the Case of Noor Aga vs. State of Punjab and Ors., it states that presumption of burden of proof would operate in the trial of accused only in the event the circumstances contained therein are fully satisfied. An initial burden exists upon the prosecution and only when it stands satisfied, the legal burden would shift to an accused.

So the question is. “ under what circumstances, it is said that prima facie it is proven about the burden of innocence?” it is not clearly mentioned in this act. So there should any justification regarding the burden of proof where it reverses. 

FURTHER DOUBTS AS TO THE CONSTITUTIONAL AND LEGAL VALIDITY OF THE ACT:

  1. Violation of Article 20- Section 9 of the act provides taking an action by the Special Court in respect of the land grabbed whether before or after the commencement of the Act. Thus, the Act has retrospective applicability and it makes the past innocent person as a criminal by post facto law which violates the fundamental rights of a citizen.
  2. Violation of Article 21-  The Section 4,9 and 11 of the act infringe the fundamental right of the person which are concerned under Article 21. The act also does not provide any summary procedure of eviction of an unauthorized occupant with a detailed procedure of issuance of notice for eviction, its adjudication by the competent authority. The fair and reasonable procedure is not contemplated under the Act and hence it would violate the fundamental rights of the person concerned under Article 21 of the Constitution of India.
  3. Conflicts with Limitation Act 1963: The Section 27, 65, 111 and 112 of the Limitation Act 1963 provides a statutory period of limitation that is allowed for possession of immovable property or any interest is 12 years in the case of private property and 30 years for public prop property, from the date the trespasser occupies the property. Section 27 read with Article 65 of the Limitation Act extinguishes the right of a lawful owner in respect of land or immovable property if within the time stipulated therein the owner fails to assert his right to have possession. The provisions of the Act are repugnant to and in conflict with the above provisions because the act does not provide any remedy to the occupier which exceeded the tenure of 30 years instead, it declares the person guilty who have occupied the land before the commencement of this act.
  4. Eviction of unauthorized person– The section 5 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 and the Gujarat Public Premises (Eviction of Unauthorized Occupants) Act, 1972. provide for a summary procedure of eviction of an unauthorized occupant with a detailed procedure of issuance of notice for eviction, its adjudication by the competent officer and providing an appeal against the order of the competent authority. But the provisions of Gujarat land grabbing act do not have such fair and reasonable procedure, hence it also conflicts with the above two acts.
  5. Creates contradiction with Code of criminal procedure – The section 167 (2) (a) of CRPC provides for 60 or days 90 days for submitting final report after the registration of the FIR and arrest but In Gujarat land grabbing act, the Rule 5 (10) provides for submission of the final report by Police within 30 days of the registration of the FIR which is absolutely unreasonable as the property and land disputes involve many complex legal and factual issues, which takes lot of time and understanding.
  6. Contradiction the doctrine of proportionality-  The doctrine of proportionality means the administrative action should not be more drastic than it ought to be for obtaining the desired result.  The section 4 of the land grabbing and prohibition Act which states that the convicted person should   be punished with imprisonment for a term which shall not be less than ten years but which may extend to fourteen years and with fine which may extend to Jantri value of such properties violates the doctrine of proportionality which has been used by apex court since 1950..
  7. Contradiction with Section 202 of the Gujarat Land Revenue Code, 1879- The Section 202 of the Gujarat Land Revenue Code,1879 provides a detailed procedure on how to evict an unauthorized occupant  by serving him a notice and a reasonable time to vacate the land but Gujarat Land Grabbing (Prohibition) Act, 2020 does not provide any such fair and reasonable time or any detail procedure, hence it conflicts with the Gujarat Land Revenue Code, 1879.
  8. Conflicts with section 101 and 102 of the Evidence Act, 1872- The section 101 states that whoever desire any court to give judgement as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exists. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.  The section 102 of the Evidence Act, 1872 states that the burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side. But According to section 11 of the Gujarat Land Grabbing (Prohibition) Act, 2020, the special court is bound to presume that the person who is alleged to have grabbed land is a land grabber. The burden of proof that the land has not been grabbed by him, shall be on such a person. The section 11 of the Gujarat Land Grabbing (Prohibition) Act, 2020 doesn’t deem to be fit and the interest of justice equity and good conscience.
  9. Limit the scope of interference of Higher Court- In the Karnataka Land Grabbing (Prohibition) Act, 2011, the court can proceed to rehear the case in manner provided by the Code of Criminal Procedure, 1973 but in Gujarat Land Grabbing (Prohibition) Act, 2020 in section 9(2), it states that in respect of alleged act of land grabbing determination of question of title and ownership to, or lawful possession of any land grabbed under this act, shall, subject to the provision of Gujarat Land Grabbing(Prohibition) Act, 2020. The decision of the special court will be final. There is no option to appeal, a revision or a review. The only option he has is the writ of certiorari.
  10. Burden of proof on victim- The provisions of Sections 11 of the Gujarat Land Grabbing Act being draconian in nature imposing reverse burden on an accused and, thus, being contrary to Article 14(2) of the International Covenant on Civil and Political Rights providing for ‘an accused to be innocent until proven guilty’ must be held to be ultra vires Articles 14 and 21 of the Constitution of India. The Act contains draconian provisions. Only because the burden of proof under certain circumstances is placed on the accused, the same, by itself, in our opinion, would not render the impugned provisions unconstitutional. The approach of the Common Law is that it is the duty of the prosecution to prove a person guilty. Indisputably this common law principle was subject to parliamentary legislation to the contrary. The concern now shown worldwide is that the Parliaments had frequently been making inroads on the basic presumption of innocence. Unfortunately, unlike other countries no systematic study has been made in India as to how many offences are triable in the Court, where the legal burden is on the accused. Presumption is raised only when certain foundational facts are established by the prosecution. The accused in such an event would be entitled to show that he has not violated the provisions of the Act. Fairness and reasonableness of trial as also maintenance of the individual dignity of the accused must be uppermost in the court’s mind.
  11. Demolition under BPMC Act, 1949- BPMC Act, 1949 clearly states the provision regarding the demolition over any illegal possession of the property. Here the Gujarat Land Grabbing (Prohibiton) Act, 2020 overrules the BPMC Act and provides provisions a not in interest of justice, equity and good conscience.
  12.  THE STREET VENDORS (PROTECTION OF LIVELIHOOD AND REGULATION OF STREET VENDING)      ACT,2014- The Gujarat Land Grabbing (Prohibition) Act, 2020 has failed to check the ground reality of the state. There are many street vendors who do occupy the land and vacate after the particular time. There is a special act called THE STREET VENDORS (PROTECTION OF LIVELIHOOD AND REGULATION OF STREET VENDING) ACT,2014 which describes rules, provisions, punishment for street vendors but there are no provision in The Gujarat Land Grabbing (prohibition) Act, 2020 for the street vendors. This act is not in interest of justice or equity for the Street Vendors. Further that this act can create a threat to the Street Vendors who occupy land for sometime for their livelihood.

Author: Vinay Sachdev & Dhruvil Kanabar

Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi