List of Current Affairs

Source: Supreme Court

Why in News?

Justice Aniruddha Bose and Justice Vikram Nath heard the admissibility of an unregistered lease deed as evidence.

• Supreme Court gave its observation in the case of M/S Paul Rubber Industries Private Limited v. Amit Chand Mitra & Anr.

What is the Background of M/S Paul Rubber Industries Private Limited v. Amit Chand Mitra & Anr.?

• In 2003, a Landlady and Tenant agreed to an unregistered Lease Agreement for a property for a duration of 5 years.
• Once the initial 5-year term expired, the Tenant did not renew the lease but continued to occupy the property without paying rent.
• In 2008, the Landlady issued a notice to the Tenant, referring to them as a monthly tenant, instructing them to vacate the Premises within 15 days. However, the Tenant did not adhere to the notice.
• The landlady filed a civil suit for recovery of possession and mesne profit as the tenant did not vacate the premises.
• The Tenant argued that the Premises were intended for manufacturing purposes and, according to Section 106 of the Transfer of Property Act, 1882 (TOPA), could only be terminated with a 6-month notice.
• Additionally, since the lease agreement exceeded one year, it required compulsory registration and it being unregistered cannot be admissible in court as evidence.
• The Trial Court held in the favor of landlady stating that the lease was on a month-to-month basis under the TOPA and not for manufacturing purposes. Therefore, a 15-day notice was valid.
• The High Court upheld the decision of the Trial Court.
• The tenant then filed the appeal before SC arguing that the Trial Court should not have accepted the unregistered Tenancy Agreement as evidence due to the prohibition under Section 49 of the Registration Act, 1908.

What were the Court’s Observations?

• SC observed that an unregistered lease deed will only be allowed to show the ‘nature and purpose of a possession’ when the ‘nature and purpose of the possession’ is not the main term of the lease and does not constitute the main dispute.

What is a Lease Agreement?

• About:
  • Under Section 105 of TOPA, a lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity.
• Consideration and Duration under Section 105 of TOPA:
  • It is made in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.
• Parties:
  • The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.
  • The TOPA lays down the rights and duties of both the lessor and the lessee. For example, the lessor must ensure that the lessee gets peaceful possession of the property, and the lessee must pay rent and maintain the property as agreed.
• Types of Leases:
  • Leases can be of various types, including leases for a fixed term, periodic leases, and leases in perpetuity.
• Registration:
  • In some cases, lease agreements may need to be registered, depending on the duration and terms of the lease, as per local laws. However, law related to duration of lease and procedure of lease is mentioned under Section 106 & 107 of TOPA.
• Termination:
  • A lease can be terminated on several conditions such as expiration of the lease term, breach of terms by either party, or mutual agreement.

What were the Legal Provisions Involved?

• Section 106 of TOPA: Duration of certain leases in absence of written contract or local usage
  • In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months' notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days' notice.
  • Notwithstanding anything contained in any other law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of notice.
  • A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period specified under that sub-section, where a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.
  • Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.
• Section 107 of TOPA: Lease how made -
  • A lease of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.
  • All other leases of immoveable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.
  • Where a lease of immoveable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee.
  • Provided that the State Government may, from time to time, by notification in the Official Gazette, direct that leases of immoveable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.
• Section 49 of Registration Act. 1908: Effect of non-registration of documents required to be registered.—
  • No document required by Section 17 (or by any provision of TOPA), to be registered shall—
    • affect any immovable property comprised therein, or
    • confer any power to adopt, or
    • be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:
  • Provided that an unregistered document affecting immovable property and required by this Act or TOPA to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (SRA) as evidence of any collateral transaction not required to be effected by registered instrument.

Source:Delhi High Court

Why in News?

Justice Manoj Kumar Ohri observed that pledgee’s right to sell pledged shares would be subservient to the pledgor’s right to redeem.

• Delhi High Court gave this observation in the case of DLF Limited v. PNB Housing Finance Limited.

What is the Background of DLF Limited v. PNB Housing Finance Limited Case?

• The petitioner no. 1 (DLF), petitioner no. 2 (Chinsha Property) and the respondent no.4 (Hubtown) were shareholders in respondent no. 3 (JHL). They held 100% shares of the company.
• JHL borrowed a big loan amount of 800 Crores, from Punjab National Bank (PNB) in 2017. The petitioners were not a party to this loan agreement. However, they were called 'Promoters' of PNB.
• The loan was secured by a mortgage and shareholdings of respondent no. 1 was pledged as security.
• Respondent no. 3 failed to pay resulting which the assets being declared as Non-performing Assets (NPA) and being declared for auction which failed due to a lack of bids.
• The respondent no. 1 invoked the pledge and asked shareholders of respondent no. 3 to use their first right of refusal.
• Petitioner no. 1 offered to acquire entire shareholding of respondent no. 3 however respondent no. 1 failed to reply to that offer.
• The shares were sold to an undisclosed third party, hence respondent no.1 approached the court asking the court to disclose the identity of the transferee(s) and to restrain them from creating any third-party interest again.

What were the Court’s Observations?

• Delhi HC observed that as per Section 177 of Indian Contract Act, 1872 (ICA), pawnor’s (pledgor of shares) right of redemption is sacrosanct.
  • This right cannot be defeated in a casual manner through the process adopted to conclude the sale at express speed.

What is Pledge under Indian Contract Act, 1977?

• About:
  • As per Section 172 of ICA a pledge refers to a type of bailment where a pledgor deposits goods or valuable items to pledgee as security for the performance of a promise or repayment of a debt.
  • The act of creating a pledge is often referred to as "pawning."
  • The goods or items deposited in pledge are known as "pledged goods" or "pledged property".
• Key Features:
  • Delivery of Possession:
    • In a pledge, the pledgee must take actual possession of the pledged goods.
    • This means the goods are physically delivered to the pledgee, and they have control over them during the period of the pledge.
  • Security for a Debt or Promise:
    • Pledges are typically created to secure the performance of a debt or a promise.
    • For example, if a person borrows money from a lender, they might pledge their jewelry as security until the borrowed amount is repaid.
  • Return of Goods:
    • Once the debt or promise is fulfilled, the pledgee is obligated to return the pledged goods to the pledgor.
    • If the pledgor fails to perform their obligation, the pledgee may have the right to sell the pledged goods to recover the debt.

What are the Rights of Pledgee and Pledgor?

• Rights of Pledgee: -
  • Right to Retain:
    • The pledgee has the right to retain the pledged property until the debt or obligation for which the property was pledged is discharged.
    • This means that the pledgee can keep the property in their possession until the borrower (pledgor) repays the debt in full.
  • Right to Sue:
    • If the pledgor fails to repay the debt within the agreed-upon time or breaches any other terms of the pledge agreement, the pledgee has the right to sue the pledgor for the recovery of the debt.
  • Right to Appropriate:
    • If there is more than one debt owed to the pledgee by the pledgor, the pledgee has the right to appropriate the pledged property to any of the debts as long as there is no specific agreement to the contrary.
  • Right to Extraordinary Expenses:
    • The pledgee has the right to recover any extraordinary expenses incurred in preserving the pledged property.
    • These expenses may include costs related to the maintenance or protection of the property.
  • Right to Receive Income:
    • Unless otherwise agreed, the pledgee is entitled to receive any income or benefits generated by the pledged property during the period of the pledge.
  • Right of Sale:
    • If the pledgor defaults on the debt and there is no agreement to the contrary, the pledgee has the right to sell the pledged property after giving reasonable notice to the pledgor.
    • The sale must be conducted in a commercially reasonable manner, and the proceeds of the sale are used to satisfy the debt. Any surplus is returned to the pledgor.
  • Right to Compensation:
    • If the pledgor has made any fraudulent misrepresentations about the pledged property, the pledgee may have the right to seek compensation or damages for any loss suffered as a result of the misrepresentation.
• Rights of Pledgor: -
  • Right to Retain Possession:
    • The pledgor has the right to retain possession of the pledged goods or assets unless there is an agreement to the contrary.
    • This means that the pledged items remain in the possession of the pledger, but they are held as security for the debt.
  • Right to Redemption:
    • The pledgor has the right to redeem (get back) the pledged goods or assets upon repayment of the debt or fulfillment of the obligation for which the pledge was made.
    • The pledgor must pay the debt, including any interest or charges, as agreed upon.
  • Right to Receive Surplus:
    • If the pledged goods or assets are sold by the pledgee (the person to whom the pledge is made) due to non-payment of the debt or violation of the agreement, the pledgor has the right to receive any surplus amount after the debt and expenses are settled.
    • However, if there is a shortfall, the pledger may still be liable for the remaining amount.
  • Right to Terminate the Pledge:
    • If the pledgee has not used the pledged goods or assets and the purpose of the pledge is fulfilled, the pledgor has the right to demand the termination of the pledge and the return of the pledged items.

Source: Kerala High Court

Why in News?

The Kerala High Court has laid down that a trust, whether it is a public, private, or charitable entity, is a Juristic Person and can be made liable for the offence of dishonor of cheques under Section 138 of the Negotiable Instruments Act (NI Act).

What is the Background of the Case?

• A cheque was issued to the complainant in discharge of liability, drawn on the account maintained by the accused (Prana Educational and Charitable Trust) and the same was dishonored for the reason “funds insufficient”.
• The complainant initiated prosecution against the accused alleging commission of offence punishable under Section 138 of the NI Act in the court of Judicial Magistrate First-Class (Trial Court).
• The trial court convicted and sentenced the accused under Section 138, the sentence and conviction was challenged by the accused before the Sessions Court.
• The learned Sessions Judge also confirmed the conviction and the sentence imposed by the trial court.
• Challenging the concurrent verdicts of conviction and sentence imposed by the trial court as well as the Appellate Court, the present revision petition was filed in the High Court of Kerala (HC) under Sections 397 and 401 of Code of Criminal Procedure, 1973.
  • The Counsel for the petitioners primarily argued that the prosecution by the complainant was not legally sustainable, since a Trust is not a juristic person under Section 141 of the NI Act.
• Petitioners' reliance was placed on the case K.P. Shibu & Ors. v. State of Kerala & Anr. (2019), in which the Kerala High Court held that prosecution against a Trust alleging commission of offence punishable under Section 138 NI Act would not be maintainable, since the Trust is neither a body corporate, nor an association of persons, as provided in Section 141 of NI Act.
• The respondent placed reliance on:
  • Abraham Memorial Educational Trust v. C. Suresh Babu (2012), the Madras High Court held that, a Trust can be prosecuted, though there is compulsory sentence of imprisonment prescribed under Section 138 of the NI Act, a Trust can be imposed only with fine or compensation.
  • In the case of Dadasaheb Rawal Co-op. Bank of Dondaicha Ltd v. Ramesh & Ors. (2008) and Shah Rajendrabhai Jayantilal v. D.Pranjivandas and sons Prop. Dhirajlal Pranjivandas Popat (2015) of Mumbai and Gujarat HCs respectively, it was held that a 'company' as provided in Section 141 NI Act would include any 'association of individuals', and an 'association of individuals' would include a club, Trust, or Hindu Undivided Family (HUF) Business.

What were the Court’s Observations?

• The Court provided a summary of the legal stance that has evolved from multiple precedents in the following manner.:
  • The expression 'company' in sub-clause (a) of explanation of Section 141 of N.I. Act includes anybody corporate or other 'association of individuals' and the term 'association of individuals' is to be interpreted by applying the principle of ejusdem generis.
    • Ejusdem generis means “of the same kind.” Where general words or phrases follow a number of specific words or phrases, the general words are specifically construed as limited and apply only to persons or things of the same kind.
    • For example, if in a sentence reference is made to ships, boats, steamers and other vehicles, the court might use ejusdem generis to hold that such vehicles would include only water transport vehicles.
  • A Trust, either private or public, charitable or otherwise, is a Juristic Person and is liable for punishment for the offence punishable under Section 138 of the NI Act.
  • A Trust, either private or public, charitable or otherwise, having either a single trustee or two or more trustees, is a company in terms of Section 141 of NI Act.
  • In cases where a Trust commits an offense under Section 138 of the NI Act, every trustee responsible for overseeing the daily operations of the Trust shall be subject to punishment in addition to the Trust itself.
• Justice A. Badharudeen of Kerala HC dismissed the revision petition, and the petitioners were directed to pay the fine/compensation imposed by the trial court within a period of two weeks from the date of judgment.

Who is a Juristic Person?

A juristic person is a non-human legal entity recognized by the law and entitled to rights and duties in the same way as a human being.

What are the Legal Provisions of NI Act Involved?

Section 138 - Dishonour of cheque for insufficiency, etc., of funds in the account -

Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Section 141 - Offences by companies —

(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

What are the Legal Provisions of CrPC Involved?

Section 397 - Calling for records to exercise powers of revision —

(1) The High Court or any Sessions Judge may call for and examine the record of any proceeding before any inferior Criminal Court situate within its or his local jurisdiction for the purpose of satisfying itself or himself; to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior Court, and may, when calling, for such record, direct that the execution of any sentence or order be suspended, and if the accused is in confinement that he be released on bail or on his own bond pending the examination of the record.

Explanation — All Magistrates, whether Executive or Judicial, and whether exercising original or appellate jurisdiction, shall be deemed to be inferior to the Sessions Judge for the purposes of this sub-section and of section 398.

(2) The powers of revision conferred by sub-section (1) shall not be exercised in relation to any interlocutory order passed in any appeal, inquiry, trial or other proceeding.

(3) If an application under this section has been made by any person either to the High Court or to the Sessions Judge, no further application by the same person shall be entertained by the other of them.

Section 401 - High Court's powers of revision —

(1) In the case of any proceeding the record of which has been called for by itself or which otherwise comes to its knowledge, the High Court may, in its discretion, exercise any of the powers conferred on a Court of Appeal by sections 386, 389, 390 and 391 or on a Court of Session by section 307, and, when the Judges composing the Court of Revision are equally divided in opinion, the case shall be disposed of in the manner provided by section 392.

(2) No order under this section shall be made to the prejudice of the accused or other person unless he has had an opportunity of being heard either personally or by pleader in his own defence.

(3) Nothing in this section shall be deemed to authorize a High Court to convert a finding of acquittal into one conviction.

(4) Where under this Code an appeal lies and no appeal is brought, no proceeding by way of revision shall be entertained at the instance of the party who could have appealed.

(5) Where under this Code an appeal lies but an application for revision has been made to the High Court by any person and the High Court is satisfied that such application was made under the erroneous belief that no appeal lies thereto and that it is necessary in the interests of Justice so to do, the High Court may treat the application for revision as a petition of appeal and deal with the same accordingly.