List of Current Affairs

Source:  Delhi High Court 

Why in News? 

The Delhi High Court in Sh. Anupam Gahoi v. State (Govt. of NCT Of Delhi) And Anr. recently quashed a matrimonial case where a husband had sought to invalidate an FIR filed by his wife in 2018 under the Code of Criminal Procedure, 1973 (CrPC) and the Bharatiya Nagarik Suraksha Sanhita 2023 (BNSS). 

•  Justice Anup Jairam Bhambhani ruled that despite the husband's petition being filed after July 1, 2023, under the BNSS, it would be treated under CrPC provisions due to ongoing proceedings. 
• The decision followed a settlement between the parties, mediated through family court, leading to the dissolution of their marriage by mutual consent and transfer of property as per settlement terms, thereby rendering the FIR unnecessary and quashed. 

What was the Background of Sh. Anupam Gahoi v. State (Govt. of NCT Of Delhi) And Anr. Case? 

• An FIR was registered on 27th February 2018 against the petitioner (husband) by complainant (wife), who is respondent No. 2 under sections 498-A/406/34 of the Indian Penal Code, 1860 (IPC). 
• The couple had two children, aged about 17 and 19 years. 
• On 15th March 2021, the parties settled through mediation at the Family Courts. 
• A divorce decree was granted on 20th April 2022 dissolving their marriage by mutual consent. 
• The petitioner (husband) filed this petition seeking quashing of the FIR under Section 482 of CrPC. 

What were the Court’s Observations?  

• The court noted that the petition was filed under CrPC after 1st July, 2024,BNSS came into effect. 
• It observed that as per Section 531(2)(a) of BNSS, only proceedings pending before July 1, 2024 were to be continued under CrPC. New petitions should be filed under BNSS. 
• The court interpreted that Parliament's intention in drafting Section 531 of BNSS was to avoid disrupting ongoing proceedings by changing the governing law mid-way. 
  • To avoid unnecessary delay, the court treated the petition as one filed under Section 482 CrPC read with Section 528 of BNSS. 
• The court took note of the Settlement Deed dated 15th March 2021 reached through mediation and the Divorce Decree dated 20th April 2022. 
  • It verified that no appeal had been filed against the divorce decree. 
  • The court took note that the State had no objection to quashing the FIR. 
• Citing Supreme Court precedents (Gian Singh vs. State of Punjab and Narinder Singh v. State of Punjab), the court saw no reason not to quash the FIR. 
• It observed that continuing with the FIR and related proceedings would be futile and not conducive to peace between the parties, given their settlement. 
• The court clarified that quashing the FIR would not affect the legal rights of the children in relation to their father. 

What is Section 482 of CrPC? 

• About: 
  • This Section deals with the saving of inherent powers of the High Court. It states that nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice. 
  • This section does not confer any inherent power on the High Courts, and it only recognizes the fact that High Courts have inherent powers. 

What is Section 528 of BNSS? 

• About: 
  • Section 528 of Bharatiya Nagarik Suraksha Sanhita (BNSS) deals with the calling for records to exercise powers of revision. 
  • This Section deals with the saving of inherent powers of the High Court. It states that nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice. 
    • This section does not confer any inherent power on the High Courts, and it only recognizes the fact that High Courts have inherent powers. 
• Purpose: 
  • Section 528 lays down as to when the inherent power may be exercised. 
  • It enumerates three purposes for which the inherent power may be exercised: 
    • to make orders necessary to give effect to any order under the Code. 
    • to prevent abuse of the process of any court. 
    • to secure the ends of justice. 

What are the Cases Where the Inherent Powers of the High Court cannot be Invoked? 

• In the following cases, the inherent powers of the High Court cannot be invoked: 
  • To quash the proceedings in police investigation consequent upon a FIR made to the police in a cognizable case; to interfere with the statutory rights of the police to investigate a cognizable case. 
  • To quash an investigation just because the FIR does not disclose any offence when investigation could be done based on other materials. 
  • To enquire about the reliability or genuineness of the allegations made in the FIR/complaint. 
  • Inherent jurisdiction can be invoked only against final orders and not against interlocutory orders. 
  • To order stay of arrest of accused during investigation. 

Section 528 of BNSS and Bail Provisions: 

• The inherent power under Section 528 of BNSS cannot be used by the High Court to reopen or alter an order, after disposing a bail petition decided on merits. 
• Bail cannot be granted by virtue of Section 528 CrPC. 
• If bail is granted for a bailable offense, there is no provision in CrPC to cancel it. However, the High Court can cancel it by invoking inherent power on the grounds of tampering with the witness, bribing the officials, or an attempt to abscond etc. 

Section 528 of BNSS (Earlier 482 of CrPC) and Quashing of the Proceedings 

• R.P. Kapoor v. State of Punjab (1960), the Supreme Court ruled that in the following cases the inherent jurisdiction of High Court could be exercised to quash the proceedings: 
  • Where there is a legal bar against the institution or continuance of proceedings. 
  • Where the allegations in the FIR or complaint do not constitute the offence alleged. 
  • Where either there is no legal evidence adduced in support of the charge or the evidence adduced clearly failed to prove the charge. 

Case Laws 

• In the case of M/s Pepsi Food Ltd. v. Special Judicial Magistrate (1998), the Supreme Court held that a fresh investigation or re-investigation after filing of chargesheet by police can be ordered by High Court under Section 482 of CrPC to secure the ends of justice. 
• In the case of Sakiri Vasu v. State of U.P and Ors. (2008), the Supreme Court cautioned against entertaining Section 482 CrPC petitions if the FIR remains unregistered, advocating for the pursuit of alternative remedies like approaching police officers or the Magistrate. 
• In the case of Bhisham Lal Verma v. State of Uttar Pradesh and Anr.,(2023), the Supreme Court held that a second petition under Section 482 of CrPC would not be maintainable on grounds that were available for challenge at the time of filing of the first petition. 

Source: Supreme Court 

Why in News? 

A bench of Justice Abhay Oka and Justice Pankaj Mithal held that “A holding company and its subsidiary are always distinct legal entities. The holding company would own shares of the subsidiary company. That does not make the holding company the owner of the subsidiary's assets”. 

• The Supreme Court gave this judgment in the case of BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd. & Anr. 

What is the Background of BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd. & Anr.?  

• Gujarat Hydrocarbon and Power SEZ Limited (corporate debtor) took a loan of Rs. 100 crores from SREI Infrastructure Finance Limited (financial creditor) in 2011. 
• The loan was secured by mortgage of leasehold land, pledge of shares, and a corporate guarantee from Assam Company India Limited (ACIL). 
• Due to default, the financial creditor invoked ACIL's corporate guarantee and filed for insolvency proceedings against ACIL. 
• ACIL underwent insolvency resolution, with the appellant as the successful resolution applicant. The appellant paid Rs. 38.87 crores to the financial creditor against its admitted claim of Rs. 241.27 crores. 
• In 2020, the financial creditor filed for insolvency proceedings against the original corporate debtor (Gujarat Hydrocarbon) for the remaining loan amount of Rs. 1428 crores. 
• The appellant challenged this, arguing that the corporate debtor's liabilities were extinguished through ACIL's resolution process. 

What are the Court’s Observations?  

• Separate Proceedings Allowed:  
  • The court affirmed that separate insolvency proceedings can be filed against both the corporate debtor and corporate guarantor, simultaneously or otherwise. 
• Assets of Subsidiary Not Included:  
  • The court clarified that assets of a subsidiary company cannot be part of the resolution plan of the holding company. ACIL's resolution did not include Gujarat Hydrocarbon's assets. 
• Limited Subrogation Rights:  
  • The court held that subrogation rights under Section 140 of the Contract Act are limited to the amount actually paid by the surety (Rs. 38.87 crores in this case). 
• Continuing Liability of Corporate Debtor:  
  • The court ruled that the corporate debtor's liability to repay the loan is not extinguished by the partial payment made during the guarantor's insolvency resolution. 
• Validity of Second Insolvency Application:  
  • The court upheld the validity of filing a separate insolvency application against the original corporate debtor for the remaining debt. 
• Distinction Between Holding and Subsidiary Companies:  
  • The judgment emphasized the legal separation between holding and subsidiary companies, stating that a holding company does not own its subsidiary's assets. 

What is a Holding Company and Subsidiary Company? 

Holding Company: 

• A holding company is a corporate entity that owns a controlling interest in other companies, known as subsidiaries.  
• Under the Companies Act, 2013 in India, a holding company is one that holds at least 50% of the shares of another company or controls the composition of its board of directors. 

Subsidiary Company: 

• A subsidiary company, on the other hand, is a company whose operations and decision-making are controlled by another company (the holding company).  
• The holding company typically owns more than 50% of the subsidiary's shares.  
• If the holding company owns 100% of the shares, it's called a wholly-owned subsidiary. 

What is the Difference Between a Holding and Subsidiary Company? 

What are the Landmark Judgments on Holding Company and Subsidiary Company? 

• Life Insurance Corporation of India v. Escorts Ltd. & Others (1986) 
  • This case addressed the issue of control in holding-subsidiary relationships: 
  • "The mere fact that a company has a controlling shareholding in other companies does not make the other companies its subsidiaries unless the holding company is in a position to control the composition of the Board of Directors of the other companies." 
• State of Madhya Pradesh v. Dalia (2001) 
  • This case dealt with the issue of piercing the corporate veil in cases of holding-subsidiary relationships: 
  • “The corporate veil may be lifted where the subsidiary is the mere alter ego of the parent company and where the subsidiary has been used for tax evasion or to circumvent tax obligation”. 
• GVK Industries Ltd. & Anr v. The Income Tax Officer & Anr (2011) 
  • This constitutional bench judgment laid down the principles for extra-territorial application of laws: 
  • The court held that Parliament is entitled to legislate with respect to extra-territorial aspects or causes that have a substantial and direct connection to India. 
• Vodafone International Holdings BV v. Union of India (2012) 
  • This landmark case emphasized the separate legal status of holding and subsidiary companies. The Supreme Court of India held: 
  • "A company is a separate legal persona and the fact that all its shares are owned by one person or by the parent company has nothing to do with its separate legal existence. If the owned company is wound up, the liquidator, and not its parent company, would get hold of the assets of the subsidiary." 
• Securities and Exchange Board of India v. Pan Asia Advisors Limited and others (2015) 
  • This case dealt with SEBI's jurisdiction over foreign subsidiaries: 
  • The Supreme Court held that if SEBI can demonstrate that a provision would protect against fraud and secure the interests of investors and the stock market in India, it can uphold such an extra-territorial operation of the law under the 'India Nexus test'. 

Source: Delhi High Court 

Why in News? 

A bench of Justice Sachin Datta held that High Court can intervene if an award is based on fundamental misinterpretation of evidence or contractual terms.       

• The Delhi High Court held this in the case of Trans Engineers Private Limited v. Otsuka Chemicals (India) Private Limited. 

What is the Background of Trans Engineers Private Limited v. Otsuka Chemicals (India) Private Limited. Case? 

• The Respondent (Otsuka Chemicals) issued two purchase orders to Petitioner (Trans Engineers India Private Limited) for expansion of it’s plant in Rajasthan. 
• An agreement was also executed which outlined the Petitioner's responsibilities to supply, erect, manufacture, and commission various equipment and materials for the project. 
• Disputes emerged concerning the Petitioner's claim for payment for additional work performed at Respondent’s request for which the Petitioner issued 26 proforma invoices. 
• The matter went to the Arbitrator who rejected the claims of the petitioner and the counterclaim of the respondent by way of an arbitration award. 
• This Arbitral Award was challenged in the High Court. 

What were the Court’s Observations? 

• The High Court observed in this case referred to the minutes of the meeting which set out the scope of work for the petitioner/claimant. These minutes clearly specified that the work should be performed based on the P&ID drawings finalized by 26th July 2016. 
• Further, it was observed that Agreement executed on 20th January 2017 also supported the interpretation.  
  • Clause 12.2 of the Agreement stated that any changes beyond the contractual terms would warrant additional payment based on mutually agreed rates. 
• It was held by the High Court that the arbitral award failed to consider the fundamental contractual context and redefined the agreement’s foundation. 
• It was held that the High Court can intervene if an award is based on fundamental misinterpretation of evidence or contractual terms. 
• Thus, the Court held that the award is liable to be set aside under Section 34(2)(b)(ii) and 34(2A) of the Arbitration and  Conciliation Act, 1996 (A&C Act). 

What is Setting Aside of Arbitral Award under Section 34 of Arbitration and Conciliation Act, 1996? 

• An application for setting aside an arbitral award can be made under Section 34 of A&C Act. 
• Section 34 (1) provides that recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).  
• Section 34(2) provides that arbitral award may be set aside only if: 
  • the party making the application establishes on the basis of the record of the arbitral tribunal that- 
    • a party was under some incapacity, or 
    • the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or 
    • the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or 
    • the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: 
    • Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside. 
    • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part, or 
  • the Court finds that- 
    • the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or 
    • the arbitral award is in conflict with the public policy of India. 
      • Explanation 1 provides that for the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— 
        • the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or 
        • it is in contravention with the fundamental policy of Indian law; or 
        • it is in conflict with the most basic notions of morality or justice. 
      • Explanation 2 provides that for the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. 
• Section 34 (2A) provides for setting aside of arbitration award other than international commercial arbitration i.e. domestic arbitration.  
  • This provision provides that an arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award. 
    Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. 
• Section 34 (3) provides that an application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:  
• Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. 
• Section 34 (4) provides that on receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. 
• Section 34 (5) provides that An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. 
• Section 34 (6) provides that an application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party   

What is Public Policy under Section 34? 

• Renusagar Power Co. Ltd v. General Electric Co. (1994) 
  • The term ‘public policy’ was discussed in this landmark case. 
  • Supreme Court held that the award passed by the arbitrator will be against the public policy if the award was in contravention of “Fundamental policy of Indian law, Interest of India and Justice and Morality”. 
• ONGC Ltd v. Saw Pipes Ltd. (2003) 
  • In this case the term public policy was again broadened and the court added a new ground of “Patent illegality” in addition to the grounds mentioned in Renusagar case.  
  • The court stated that “the concept of public policy connotes some matter which concerns public good and public interest which varied from time to time”. 
  • This lead to opening of the gates of litigation. 
• Associate Builders v. Delhi Development Authority (2015) 
  • The court in this case explained the ambit of “most basic norms of justice and morality” and held that the award can be set aside on the ground of justice and morality if the award is of such a nature that it shocks the conscience of the court. 
• 2015 Amendment 
  • In 2015 the Law Commission reacted to the above and certain amendments were introduced. 
  • The Commission criticised the judgments of Saw Pipes, Associate Builders. 
  • The Law Commission brought an amendment in Section 34 and added an explanation for the grounds mentioned under the public policy i.e. “For the avoidance of doubt the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. 
  • This means that the award will not be set aside if the tribunal has made a mistake of law or if the court takes another view of the evidence.   
• Thus, the ground of public policy has undergone a sea change. The amendments were introduced to make the current regime arbitration friendly.