List of Current Affairs

Source: Supreme Court

Why in News?

In this case the Supreme Court held that when it is not the mandate of the law that the act should be done within a fixed time, it would mean that the act must be done within a reasonable time. It was held in the context of Section 102 (3) of Code of Criminal Procedure, 1973 (CrPC).

What was the Background of Shento Varghese v. Julfikar Husen & Ors. Case?

• The accused (respondents) placed an order for 47 Kerala model gold chains from the appellant, who worked as a delivery agent in a company.
• Accused was ready to provide gold bars of same value to the appellant in the consideration of gold chains.
• As per the complaint of appellant the gold bars which were handed over to him were fake.
• He registered the First Information Report (FIR), and the police started an investigation and during the investigation the police found that certain monies to the tune of Rs.19,83,036/- were deposited in the bank accounts of the accused.
• The investigating officer directed the bank to freeze the bank accounts of the accused on 09^th January 2023.
• The order of freezing was reported to the Magistrate on 27^th January 2023.
• The accused approached the jurisdictional magistrate to take custody of the seized bank accounts.
• After that they approached the High court by filing a petition under Section 482 of CrPC sought for de-freezing of the bank accounts.
• The High Court passed an order for de-freezing the bank accounts and therefore set at naught the seizure order on the sole ground that the order of seizure was not forthwith reported to the Magistrate.
• The appeal was filed before the Supreme Court (SC) against the order of High Court.

What were the Court’s Observations?

• The SC held that the line of precedents which have taken the position that ‘seizure orders’ are vitiated for delay in compliance with the reporting obligation are declared to be manifestly erroneous and are accordingly, overruled.
• The court observed that the obligation to report the seizure to the Magistrate is neither a jurisdictional pre-requisite for exercising the power to seize nor is the exercise of such power made subject to compliance with the reporting obligation.
• Since there is an obligation cast on the officer to report the seizure ‘forthwith', it necessary to understand the meaning of ‘forthwith’ and SC explained the meaning of ‘forthwith’. The expression ‘forthwith’ means ‘as soon as may be’, ‘with reasonable speed and expedition’, ‘with a sense of urgency’, and ‘without any unnecessary delay’.
• In that sense, the interpretation of the word ‘forthwith’ would depend upon the terrain in which it travels and would take its color depending upon the prevailing circumstances which can be variable.
• Therefore, in deciding whether the police officer has properly discharged his obligation under Section 102(3) CrPC, the Magistrate would have to, firstly, examine whether the seizure was reported forthwith.
• The SC reiterated that the act of seizure would not get vitiated by virtue of such delay.

What is Legal History of Provision Related to Power of Police Officer to Seize Certain Property?

What are the Landmark Judgments related to Section 102 of CrPC?

• Nevada Properties Private Limited Through its Directors v. State of Maharashtra and Another (2019):
  • A three Judges bench of the SC held that the term ‘any property’ under Section 102 of CrPC would not include 'immovable property'.
  • The SC held that the power of a police officer under Section 102 of the Code to seize any property, which may be found under circumstances that create suspicion of the commission of any offence, would not include the power to attach, seize and seal an immovable property.
• Ratan Babulal Lath v. The State of Karnataka (2021):
  • In this case the SC observed that a bank account of a person who is accused under the Prevention of Corruption Act, 1988 cannot be attached by invoking Section 102 of CrPC.
  • The SC stated that it is not possible to sustain the freezing of the bank account of the appellant taking recourse to Section 102 CrPC as the Prevention of Corruption Act is a Code by itself.

Why in News?

Recently the Punjab and Haryana High Court in the case of Serious Fraud Investigation Office v. Anil Jindal has overturned bail orders granted in serious fraud cases under the Companies Act, 2013.

What was the Background of Serious Fraud Investigation Office v. Anil Jindal Case?

• The case involves multiple petitions seeking a common verdict due to shared legal questions and relief sought.
• The crux of the matter lies in bail orders granted to respondents accused of a financial scam.
• Despite being alleged masterminds, they were granted regular bail by the trial court.
• The petitioner contended that the court overlooked important evidence of the respondents' involvement in the economic offense.
• The petitioner sought to cancel the bail granted on 19^th December 2023.
• Notably, the respondent previously failed three bail attempts, making the fourth, successful attempt, and subsequent bail order particularly distressing for the petitioner.

What were the Court’s Observations?

• The court noted that simply failing to comply with formalities outlined in the Companies Act Rules does not necessarily constitute a breach of the mandate outlined in Section 212(8) of the Act of 2013, especially when the accused person has not been formally arrested.
• Under Section 212(8) of the Act, if a Director, Additional Director, or Assistant Director of the SFIO, authorized by the Central Government, has reasonable belief, based on recorded grounds, that an individual has committed an offense punishable under the mentioned sections, they may arrest that person and must promptly inform them of the grounds for arrest.
• The Court observes that Mere non-compliance of the formality encapsulated in Rule 4 of the Rules of 2017 cannot be construed to be the breach of the mandate carried in Section 212(8) of the Act of 2013, as in the case at hand, since no formal arrest had taken place, therefore, there arose no occasion for the petitioner to make compliance of the said Rules, which could have only been done had a formal arrest of the respondent been made by the petitioner."
• Further the court emphasized that the main objective behind including these provisions is to limit the discretionary powers of the authorized arresting officer and to introduce fairness and accountability into the arrest process of the SFIO, especially considering that, following arrest, the accused must undergo the provisions of Section 212(6) of the 2013 Act.
• The Court also added Since the SFIO diligently followed all legislative safeguards by providing detailed materials in the applications for production warrants and judicial custody remand, the accused had no reason to request an "arrest order" per the 2017 Rules, especially considering no formal arrest had occurred.

What is Section 212 of the Companies Act, 2013?

• About:
  • Section 212 deals with Investigation into the affairs of Company by Serious Fraud Investigation Office.
  • It empowers the Central Government to order investigations into the affairs of a company by the Serious Fraud Investigation Office (SFIO) if it believes that the business is being conducted with fraudulent intent or in a manner prejudicial to the public interest.
  • This section outlines the powers, procedures, and authorities of the SFIO to conduct such investigations, including the power to arrest individuals suspected of committing offenses related to company fraud.
• Legal Provision:
  • Section 212(8) if the Director, Additional Director or Assistant Director of Serious Fraud Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in sub-section (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.
• Case Law
  • The Supreme Court Pankaj Bansal v. Union of India & Ors., it was emphasized that failure to comply with the provisions of Section 212(8) of the 2013 Act and Rule 4 of the 2017 Rules renders the arrest of a person invalid, entitling them to regular bail.

What are Corporate Frauds?

• India has been grappling with corporate frauds for decades, with notable incidents such as the LIC/Mundhra scam in the 1950s. However, the Companies Act of the time did not provide a distinct definition of 'fraud' as the Indian Penal Code already encompassed such offenses comprehensively.
• The Companies Bill of 2008, proposed to replace the 1956 Act, didn't include a provision akin to Section 447 addressing fraud, based on the Irani Report.
• The major corporate scandals of 2007-08 prompted the Parliamentary Standing Committee to recommend:
• Introducing a distinct definition of fraud under Section 447 of the Companies Act, 2013.
• Establishment of the Serious Fraud Investigation Office (SFIO) under Section 212 of the Act for investigating such frauds.

What are the Legal Provisions for Fraud in Companies Act, 2013?

• Section 447 deals with the punishment of fraud.
• It stipulates that anyone found guilty of fraud faces imprisonment for at least six months to a maximum of ten years. Additionally, they are subject to a fine not less than the amount involved in the fraud, up to three times that amount.

What are Offences Punishable for Corporate Fraud?

Pre-Fraud Offences

Post – Fraud Offences

Source: Allahabad High Court

Why in News?

Recently the bench of Justice J J Munir held that "If on the date of demise of the employee in harness, it can be shown that a married daughter is dependent upon him, or his widow and minor family members could be taken care of by the married daughter, if granted compassionate appointment, it may be a case for considering the claim and judging the validity of the prohibitive rule”.

• The Allahabad High Court gave this observation in the case of Akhtari Khatoon v. State of U.P. and Ors.

What was the Background of Akhtari Khatoon v. State of U.P. and Ors. Case?

• The petitioner's father, Nasir Ahmad, was an employee of the Purvanchal Vidyut Vitran Nigam Limited (the Corporation) who died in harness.
• The petitioner claimed to be divorced from her husband Nisar Ahmad through a Talaqnama.
• The petitioner sought compassionate appointment and family pension from the Corporation as the legal heir of her deceased father.
• The Corporation sought a succession certificate from her, which she obtained from the District Court declaring her entitled to her father's retiral dues.
• However, the petitioner filed the petition alleging that though she was paid her father's retiral dues and pension for some period in 2019-20 initially, it was stopped by the corporation without any justifiable reason.
  • She sought a direction for grant of compassionate appointment to herself from the Corporation, as the legal heir of her deceased father.

What were the Court’s Observations?

• The court held that a divorced daughters must show her dependence on the deceased employee at the time of his death to get compassionate appointment.
• Hence, the Court held that the petitioner failed to establish:
  • Her dependence on the deceased employee at the time of his death
  • Authenticity of the Talaqnama to prove her divorce
  • Full particulars about the deceased's other dependents whom she claimed to support
• On family pension, the Court held that the petitioner did not point out any statutory rule entitling her to receive family pension for her father's services.
  • The petition was dismissed.

What are the Landmark Cases on Compassionate Appointment?

• Smt. Vimla Srivastava v. State of U.P. and another (2016)
  • Division bench of Allahabad High Court struck down the word 'unmarried' qualifying 'daughter' in Rule 2(c)(iii) of the Uttar Pradesh Recruitment of Dependants of Government Servants Dying in Harness Rules, 1974 as violative of Articles 14 and 15 of the Constitution.
• State of U.P. and another v. Madhavi Mishra and others (2021):
  • Allahabad High Court held that a married daughter cannot claim compassionate appointment as a matter of right.
• Director of Treasuries in Karnataka and another v. V. Somyashree, (2021):
  • Supreme Court summarised the principle governing the grant of appointment on compassionate ground as under:-
    • that the compassionate appointment is an exception to the general rule;
    • that no aspirant has a right to compassionate appointment;
    • the appointment to any public post in the service of the State has to be made on the basis of the principle in accordance with Articles 14 and 16 of the Constitution of India;
    • appointment on compassionate ground can be made only on fulfilling the norms laid down by the State’s policy and/or satisfaction of the eligibility criteria as per the policy;
    • the norms prevailing on the date of the consideration of the application should be the basis for consideration of claim for compassionate appointment.
• The State of Maharashtra and Anr. v. Ms. Madhuri Maruti Vidhate (2022):
  • In this case SC observed that, a married daughter of the deceased employee, cannot be considered dependent on her deceased mother, especially after a significant period of time had passed since the death of the employee.