List of Current Affairs

Source: Supreme Court  

Why in News? 

The Supreme Court recently invoked the Henderson Doctrine while hearing a contempt petition against a borrower and transferee for failing to comply with an order to hand over auction property possession. The respondents attempted to re-litigate the auction's validity, arguing non-compliance with SARFAESI rules.  

• The doctrine, rooted in constructive res judicata under Section 11 of the Code of Civil Procedure,1908 (CPC) 
• The Court observed that all issues arising from the same subject matter should be addressed in a single proceeding. 

What was the Background of Celir LLP v. Mr. Sumati Prasad Bafna & Ors case (2024)? 

• Mr. Sumati Prasad Bafna took a loan of Rs. 100 crore from Union Bank of India, using a property in Navi Mumbai as security. 
• After defaulting on loan repayments, the bank-initiated auction proceedings to recover the outstanding amount of Rs. 123.83 crore. 
• Celir LLP won the 9th auction by bidding Rs. 105.05 crore for the property. 
• Just before the sale was finalized, the borrower filed an application to redeem the mortgage, which the Bombay High Court allowed by permitting payment of Rs. 129 crore. 
• The borrower paid the amount, obtained a Release Deed, and immediately transferred the property rights to Greenscape IT Park LLP on the same day. 
• Celir LLP challenged the High Court's order in the Supreme Court, which set aside the original order and directed Celir LLP to pay an additional Rs. 23.95 crore. 
• After the sale certificate was issued, the borrower continued to resist handing over the property and its title deeds. 
• The case now centers on whether the borrower and other parties violated the Supreme Court's order by preventing Celir LLP from taking possession of the property. 
• The key legal questions involve the validity of the property transfer, the borrower's rights after the Supreme Court's judgment, and potential contempt of court. 
• Key Issues: 
  • Did the respondents (borrower, bank, and Greenscape IT Park) violate the Supreme Court's order? 
  • After the sale certificate was issued, did the borrower have any right to continue legal proceedings or transfer the property? 
  • Was the property transfer to Greenscape IT Park valid, considering the ongoing legal dispute? 

What were the Court’s Observations? 

• The Supreme Court affirmed its comprehensive judicial power to issue remedial directions and take restitutive measures at any stage of proceedings, ensuring that court orders are not merely procedural formalities but substantive instruments of justice. 
• The Henderson doctrine, a critical principle of constructive res judicata, mandates that parties must present their entire case comprehensively in a single litigation, thereby preventing repetitive and vexatious legal challenges. 
• The court observed that once a matter has been adjudicated by a competent jurisdiction, parties are categorically barred from re-litigating issues that could have been raised in previous proceedings, irrespective of negligence or inadvertence. 
• The judicial principle states that the fundamental objective of preventing abuse of the judicial process by discouraging procedural tactics that fragment disputes, prolong litigation, or undermine judicial outcomes. 
• The doctrine is not a rigid rule but a flexible principle designed to maintain the sanctity of judicial adjudications, ensuring litigation is conducted in good faith and with utmost procedural integrity. 
• Courts retain the discretionary power to nullify advantages gained through contumacious conduct, thereby safeguarding the fundamental principles of fair judicial process and preventing parties from exploiting legal technicalities. 
• The overarching goal is to provide conclusive resolution, promote judicial efficiency, and ensure that legal proceedings serve the larger interests of justice rather than becoming endless cycles of redundant litigation. 

Doctrine of Res Judicata 

Meaning and Origin: 

• Res Judicata literally translates to "a thing already decided" 
• It is a fundamental legal principle designed to bring finality to legal proceedings and prevent endless litigation 

Legal Maxims:

• Interest Republicae Ut Sit Finis Litium: It is in the state's interest to limit litigation 
• Nemo Debet Bis Vexari Pro Una Et Eadem Causa: No one should be harassed twice for the same cause 
• Res judicata pro veritate accipitur: A judicial decision must be accepted as correct 

Legal Framework: 

• Codified under Section 11 of the Code of Civil Procedure, 1908 (CPC) 
• Applies when:  
  • The matter directly and substantially in issue was previously decided 
  • The parties are the same or claim under the same title 
  • The previous court was competent to try the suit 

Key Characteristics: 

• A mixed question of law and facts 
• Applies to the decision and the surrounding circumstances 
• A decree passed without jurisdiction over the subject matter is not res judicata 

What is Constructive Res Judicata? 

• Defined under Explanation IV of Section 11 
• Prevents parties from raising in a subsequent suit matters that could have been raised in the previous suit but were not. 
• It is aimed at preventing not only the relitigating of issues that were decided in a previous suit but also those issues that could have been raised and decided but were not.   
• It is opposed to public policies on which the principle of res judicata is based. 
• A decree passed by a court without jurisdiction over the subject matter is not res judicata. 
• It is a mixed question of law and facts, and the bar does not only apply to the decision itself but also to the facts and circumstance involved in the case. 
• Constructive Res Judicata implies that the matter that might and ought to have been raised in a suit but has not been raised cannot be taken up in a subsequent suit fulfilling conditions prescribed under Section 11. 

What are Landmark Case Laws on Constructive Res Judicata? 

State of U.P. v. Nawab Hussain (1977) 

• A sub-inspector of police (SI) faced dismissal from his position by the Deputy Inspector General (D.I.G.). 
• He challenged this dismissal by initiating a writ petition in the High Court, asserting that he was not granted a fair opportunity to present his case before the order of dismissal was issued. 
• However, this argument was dismissed, and his petition was rejected. 
• Subsequently, the SI filed a lawsuit, introducing an additional claim that the D.I.G. lacked the authority to terminate him since his appointment had been made by the Inspector General of Police (I.G.P.). 
• The state argued that this lawsuit was barred by the doctrine of constructive res judicata. The trial court, the appellate court, and the high court all determined that the lawsuit was not barred. 
• The Supreme Court ultimately ruled that the lawsuit was barred by constructive res judicata because the plaintiff was aware of this argument and could have raised it in the earlier writ petition. 

What is Henderson v. Henderson (1843)?  

• The Case Principle:  
  • When a matter is litigated and decided by a competent court, parties are obligated to present their entire case comprehensively during the initial proceedings. 
• Comprehensive Litigation Requirement:  
  • Parties must bring forward all possible and probable points related to the subject of litigation during the first judicial proceedings. 
• Restrictive Approach to Subsequent Litigation:  
  • Parties are prevented from reopening or relitigating issues that could have been raised in the original suit, regardless of whether the omission was due to negligence, accident, or inadvertence. 
• Broad Interpretation of Res Judicata:  
  • The principle applies not just to points specifically adjudicated by the court, but to every potential point or issue that properly belonged to the subject of litigation and should have been raised by the parties at the time. 
• Doctrine of Henderson 
  • The doctrine suggests that all issues arising in litigation regarding the same subject matter must be addressed in a single suit. It also bars re-litigating issues that could or should have been raised in prior proceedings. 

Source: Supreme Court 

Why in News? 

Recently, the Supreme Court in the matter of Celir LLP v. Ms Sumati Prasad Bafna and other (2024) has held that a sale that is confirmed cannot be set aside merely based on irregularities except when the concerned matter is based on Fraud, Collusion, Inadequate Pricing, Under-bidding etc. 

What was the Background of the Celir LLP v. Ms Sumati Prasad Bafna and others Case?

• Original Loan and Security 
  • A bank provided a Lease Rental Discounting (LRD) credit facility to a borrower (respondent), initially sanctioning Rs. 100 crore on 03rd July 2017 and later adding Rs. 6.77 crore. 
  • As security for this loan, the borrower created a simple mortgage over a 16,200 sq. meter parcel of industrial land located in Navi Mumbai, Maharashtra.  
• Loan Default and Initial Recovery Proceedings 
  • The borrower defaulted on the loan, and on 31st March 2021, the loan account was declared a Non-Performing Asset (NPA). 
  • On 7^th June 2021, the bank issued a demand notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI) for repayment. 
  • By 30^th April 2023, the total outstanding amount had grown to Rs. 123.83 crore. 
  • On 4^th February 2022, the bank took symbolic possession of the secured asset. 
• Auction Attempts 
  • Between April 2022 and June 2023, the bank attempted eight auctions of the secured asset, all of which failed to receive bids. 
  • The borrower informed the bank they might be able to sell the assets for Rs. 91-92 crore. 
  • On 14^th June, 2023, the bank published a notice for a 9th auction with a reserve price of Rs. 105 crores. 
• Ninth Auction Proceedings 
  • On 27^th June 2023, the auction was conducted. 
  • The petitioner (auction purchaser) submitted the highest bid of Rs. 105.05 crore and paid an initial deposit. 
  • The bank sent a sale confirmation letter on 30.06.2023, requesting full payment by 15th July 2023. 
  • The petitioner completed the full payment on 27th July 2023. 
• Borrower's Redemption Attempt 
  • Realizing the auction's success, the borrower filed an application with the Debt Recovery Tribunal (DRT) to redeem the mortgage by paying the outstanding amount. 
  • Simultaneously, the borrower filed a writ petition in the High Court seeking to redeem the mortgage. 
• High Court Intervention 
  • On 17^th August 2023, the High Court allowed the borrower's petition, permitting them to redeem the mortgage by paying Rs. 25 crore immediately and the balance Rs. 104 crore by 31st August 2023. 
• Supreme Court Appeals 
  • The petitioner appealed against the High Court's order through Special Leave Petitions. 
  • On 21st September 2023, the Supreme Court set aside the High Court's order and directed the petitioner to pay an additional Rs. 23.95 crore. 
  • The borrower filed a review petition against the Supreme Court's judgment. 

What were the Court’s Observations? 

• The Supreme Court made the following observations: 
  • Stance of the Borrower: 
    • The court was perplexed by the Borrower's changing stance throughout the litigation 
    • Initially, the Borrower argued that its right of redemption was dependent on the adjudication of Securitization Application.  
  • Observations about the Writ Petition: 
    • In the writ petition, the Borrower did not challenge the 9th auction notice 
    • The Borrower had challenged earlier auction notices and SARFAESI Act proceedings, but not the specific 9th auction notice 
    • The Borrower effectively abandoned its right to challenge the Bank's actions under SARFAESI Act 
  • High Court's Order: 
    • The High Court held that on passing its order, the entire challenge to the Bank's actions would end 
    • Even if the Borrower failed to redeem the mortgage, no challenge could be laid to the sale of the secured asset 
    • The court treated the Borrower's agreement to withdraw as an undertaking 
    • The court specified that if the Borrower defaulted on payment, the auction purchaser would get the secured asset free from litigation 
  • Subsequent Supreme Court Proceedings: 
    • The petitioner (auction purchaser) challenged the High Court's order 
    • The Borrower claimed it had already redeemed the mortgage during the pendency of the main appeals 
    • The only remaining issue was the refund of the amount deposited by the petitioner 
    • The court essentially observed that the Borrower had multiple opportunities to challenge the auction proceedings but did not do so consistently and had effectively waived its rights to challenge the sale through its actions and agreements in the High Court.   
  • On the Right of Redemption: 
    • The court examined the interpretation of Section 13(8) of the SARFAESI Act after its 2016 amendment. 
    • It held that under the unamended Section 13(8), the borrower's right to redeem the secured asset was available till the sale or transfer of the asset. 
    • Under the amended provisions, the right to redeem is available only till the date of publication of the notice under Rule 9(1) of the SARFAESI Rules.  
  • Application of the Henderson Principle: 
    • The court discussed the Henderson Principle, which mandates that all claims and issues that could and ought to have been raised in a previous litigation should not be relitigated in subsequent proceedings. 
    • This principle embodies procedural fairness, prevents abuse of process, and promotes judicial efficiency. 
  • The core observation was that the Borrower had multiple opportunities to raise challenges to the auction proceedings but chose not to do so and therefore should not be allowed to relitigate the same issues in subsequent proceedings. 
  • Based on the document, here are the key observations of the court regarding the Henderson Principle and the Doctrine of Lis Pendens:  
  • Regarding the Doctrine of Lis Pendens: 
    • The doctrine bars the transfer of a suit property during the pendency of litigation. 
    • Key conditions for applying the doctrine include: 
      • A pending suit in a competent court 
      • The suit must not be collusive 
      • The right to immovable property must be directly in question 
      • The property must be transferred by a party to the litigation  
    • The rationale is to prevent alienations that could defeat the purpose of ongoing legal proceedings and ensure the court can effectively deal with the subject matter of litigation. 
  • In the present case the Special Leave Petitions were already pending when the Assignment Agreement was executed the transfer of the Secured Asset was therefore hit by lis pendens.   
  • Contempt of Court Principles: 
    • Any act of disobedience, defiance, or attempt to malign court authority amounts to contempt 
    • Contempt jurisdiction exists to preserve the sanctity of law and protect judicial institutions 
    • Judicial decisions must remain unimpaired and free from external pressures 
    • The court noted several actions by the Borrower and Subsequent Transferee that attempted to undermine the court's judgment, including: 
      • Writing letters to MIDC and Sub-Registrar to prevent asset transfer. 
      • Filing stay applications. 
      • Lodging police complaints. 
    • Filing a suit seeking to invalidate the sale certificate.  
  • Regarding the 9th Auction: 
    • The Borrower did not allege any collusion or fraud in the 9th auction. 
    • The only irregularity noted was the lack of a 15-day gap between the notice of sale and auction notice. 
    • The Borrower did not demonstrate any prejudice caused by this procedural irregularity. 
    • Despite eight previous auctions from April 2022 to June 2023, the Borrower never expressed desire to redeem the mortgage. 
  • On Sale/Auction Principles: 
    • Public auctions once confirmed should not be set aside lightly 
    • Interference is warranted only for fundamental issues like: 
      • Collusive or fraudulent conduct 
      • Inadequate pricing 
      • Underbidding 
    • Mere procedural irregularities don't invalidate the foundation of such sales. 
    • Courts should avoid entertaining challenges that could have been raised earlier. 
• The Supreme Court upheld the validity of the 9th auction proceedings and allowed the Subsequent Transferee to pursue legal remedies against the Borrower for recovery of amounts paid 

Case Laws 

• Janak Raj v. Gurdilal Singh (1956) 
  • In this case it was concluded that even if a decree is set aside, the auction purchaser's rights remain protected 
• V.S. Palanivel v. P. Sriram (2024) 
  • In this case it was held that unless there are some serious flaws in the conduct of the auction as for example perpetration of a fraud/collusion, grave irregularities that go to the root of such an auction, courts must ordinarily refrain from setting them aside keeping in mind the domino effect such an order would have. 

What is Section 13 of the SARFAESI Act? 

• General Provision 
  • Enforcement without court intervention permitted for security interests 
  • Overrides sections 69 and 69A of Transfer of Property Act, 1882 
• Default and Notice Process 
  • Initial Notice Requirements 
    • Applies when borrower defaults on secured debt. 
    • Accounts must be classified as non-performing assets. 
    • 60-day notice required for borrower to discharge liabilities. 
• Exception for Debt Securities 
  • NPA classification is not required for debt securities. 
  • Debenture trustees can enforce security interest. 
• Notice Contents and Response 
  • Must detail payable amount and secured assets. 
  • Borrowers can make representations/objections. 
  • Secured creditors must respond within 15 days. 
• Enforcement Measures 
  • Right to possess secured assets. 
  • Authority to transfer via lease/assignment/sale.  
  • Can manage borrower's business. 
  • Severable management possible. 
  • Authority to appoint manager for secured assets. 
• Payment Collection 
  • Can demand payment from third parties who owe borrower. 
• Property Sale Provisions 
  • Reserve Price Rules 
    • Officers can bid on behalf of secured creditors. 
    • Purchase price adjustable against claim. 
    • Banking Regulation Act provisions apply. 
• Rights and Recovery 
  • Transfer Rights 
    • Transferee gets full rights as if from owner 
    • Valid for possession or management takeover 
• Cost Recovery 
  • All reasonable costs recoverable from borrower 
  • Funds held in trust 
  • Priority order: costs → dues → residue 
• Pre-auction Settlement 
  • Tender of Dues 
    • If full amount tendered before auction notice: 
    • Asset transfer prohibited. 
    • Includes all costs and expenses. 
• Joint Financing 
  • Requires 60% creditor agreement by value. 
  • Binding on all secured creditors. 
  • Special provisions for company liquidation. 
• Additional Rights 
  • Can proceed against guarantors 
  • Officers authorized to exercise rights 
  • Borrower restricted from transferring assets after notice 

Source: Supreme Court 

Why in News? 

A bench of Justice PS Narsimha and Justice Manoj Misra refused to extend the benefit of Scheduled caste reservation to a person who belonged to ‘Tanti’ caste which was notified in Other Backward Caste category.                    

• The Supreme Court held this in the case of Union of India & Others v. Rohit Nandan (2024). 

What was the Background of Union of India & Others v. Rohit Nandan Case?  

• The Respondent was appointed as a Postal Assistant under the Other Backward Caste (OBC) category on the basis of his ‘Tanti’ Caste Certificate. 
• The State Government by a notification dated 2nd July 2015 deleted ‘Tanti’ caste from the list of OBCs to enable members of the said community to avail benefits of Scheduled Caste (SC) category by merging it with Pan/Swasi caste which figures in the list of Scheduled Castes. 
• The Respondent requested the Chief Post Master General, Patna on 29th June 2016 to change his category from OBC to Scheduled Caste (SC) in his service book in terms of the new notification. 
• The Respondent in the meanwhile applied for promotion to Postal Service Group ‘B’ as the SC candidate and appeared in the examination held on 18th December 2016. 
• Though he was declared successful in the examination his his name was not approved for the promotion and his result was put on hold for further consideration. 
• The office of the Postmaster General, Bihar, however changed the category of Respondent to SC in his Service Book. 
• Finally, the Department of Posts, after consulting the Department of Social Justice and Empowerment ordered that the respondent was not entitled to the benefit of SC category as he did not belong to the SC category and deleted his name from the list of candidates successful. 
• Aggrieved by the above order the Respondent filed before the Central Administrative Tribunal which was dismissed on 1st April 2022. 
• The decision of the Tribunal was challenged before the High Court in a Writ Petition and the same was allowed. 
• During pendency of the appeal the very same question was taken by the Court in the case of Dr. Bhim Rao Ambedkar Vichar Manch Bihar, Patna v. The State of Bihar and Others (2024) wherein the Court held that the exercise of taking out ‘Tanti’ from the EBC (Extremely Backward Classes) lists and it’s merger with the SC list is bad, illegal and unsustainable. 
• The Learned Counsel relied on the judgment of K. Nirmala v. Canara Bank (2024) where the Court protected bank employees from certain castes who previously held Scheduled Caste certificates, even after those certificates were withdrawn. 
• The Court ruled that these employees were entitled to service protection through government circulars issued in 2003 and 2005, ensuring they would be considered as unreserved candidates for future purposes. 

What were the Court’s Observations?  

• The court distinguishes this case from previous judgments in Bhim Rao Ambedkar Vichar Manch Bihar, Patna v. The State of Bihar and Others (2024) and K. Nirmala v. Canara Bank (2024), which exercised equity jurisdiction to protect long-standing employees. 
• The respondent was initially serving as an OBC candidate, but a state government notification on 2nd July 2015 shifted his caste (Tanti) from OBC to Scheduled Caste, with the service record changed on 17th August 2018. 
• The respondent applied for a Limited Departmental Competitive Examination on 7th October 2016 as a Scheduled Caste candidate, which was initially rejected by the government. 
• The Tribunal dismissed the respondent's original application on 1st April 2022, but the High Court allowed his writ petition on 19th January 2023. 
• The respondent was appointed to the promotional post on 14th December 2023 during the appeal's pendency, benefiting from the illegal categorization for less than a year. 
• Unlike previous cases where courts protected long-standing employees on equitable grounds, this case lacks similar equities. 
• The court concludes that due to the clear legal position and lack of equitable considerations, it cannot direct the continuation of the respondent's appointment based on the illegal Scheduled Caste certification.

What are the Provisions on Reservations? 

• Part XVI of the Constitution of India, 1950 (COI) deals with reservation of SC and ST in Central and State legislatures. 
• Article 15(4) and 16(4) of the COI enabled the State and Central Governments to reserve seats in government services for the members of the SC and ST. 
• The Constitution was amended by the Constitution (77th Amendment) Act, 1995 and a new clause (4A) was inserted in Article 16 to enable the government to provide reservation in promotion. 
• Later, clause (4A) was modified by the Constitution (85th Amendment) Act, 2001 to provide consequential seniority to SC and ST candidates promoted by giving reservation. 
• Constitutional 81st Amendment Act, 2000 inserted Article 16 (4 B) which enables the state to fill the unfilled vacancies of a year which are reserved for SCs/STs in the succeeding year, thereby nullifying the ceiling of fifty percent reservation on total number of vacancies of that year. 
• Article 330 and 332 of COI provides for specific representation through reservation of seats for SCs and STs in the Parliament and in the State Legislative Assemblies respectively. 
• Article 243D provides reservation of seats for SCs and STs in every Panchayat. 
• Article 233T provides reservation of seats for SCs and STs in every Municipality. 
• Article 335 of the constitution says that the claims of STs and STs shall be taken into consideration constituently with the maintenance of efficacy of the administration.

What are the Provisions of Constitution that Provide for Specification of SC/ST and OBC? 

• Socially and Educationally Backward Classes 
  • Article 342 A of the COI provides for the following: 
    • The President has the authority to specify socially and educationally backward classes for any State or Union territory, consulting with the Governor for states. 
    • These specified classes will be deemed socially and educationally backward for constitutional purposes within that specific State or Union territory. 
    • Parliament is empowered to modify the Central List of socially and educationally backward classes by including or excluding specific classes through legislative action. 
    • Once a notification is issued under this clause, it cannot be altered by subsequent notifications, except through parliamentary legislative intervention. 
• Scheduled Castes 
  • Article 341 of the COI provides for the following:  
    • The President has the power to specify castes, races, tribes, or groups within these categories as Scheduled Castes for any State or Union territory. 
    • For states, the President must consult with the Governor before issuing a public notification identifying these Scheduled Castes. 
    • The specified castes, races, or tribes will be considered Scheduled Castes for constitutional purposes within that particular State or Union territory. 
    • Parliament can modify the list of Scheduled Castes through legislation by including or excluding specific castes, races, tribes, or groups. 
    • Once a notification is issued under this clause, it cannot be altered by any subsequent notification, with the exception of changes made through parliamentary legislation. 
• Scheduled Tribes 
  • Article 342 of the COI provides for the following: 
    • The President holds the authority to specify tribes, tribal communities, or groups within these communities as Scheduled Tribes for any State or Union territory. 
    • For states, the President is required to consult with the Governor before issuing a public notification identifying these Scheduled Tribes. 
    • The tribes or tribal communities specified in the notification will be considered Scheduled Tribes for constitutional purposes within that specific State or Union territory. 
    • Parliament has the legislative power to modify the list of Scheduled Tribes by including or excluding particular tribes, tribal communities, or groups within them. 
    • Once a notification is issued under this clause, it cannot be altered by any subsequent notification, with the sole exception of changes implemented through parliamentary legislation. 

What are the Case Laws that Provide for Alteration of the Caste Lists? 

• Dr. Bhim Rao Ambedkar Vichar Manch Bihar, Patna v. The State of Bihar & Others (2024) 
  • The Bihar Government's 2015 resolution merging "Tanti-Tantwa" with the Scheduled Caste list was struck down as unconstitutional.  
    • The Court ruled that state governments have no authority to modify Scheduled Caste lists published under Article 341 of the Constitution.  
    • Only Parliament has the power to amend, add, delete, or modify the Scheduled Castes list through enacted law. 
  • The Court deemed the state's action as mala fide and in violation of constitutional provisions. 
  • The Court criticized the state for depriving legitimate Scheduled Caste members of their benefits by extending them to an undeserving community. 
• State of Maharashtra v. Milind (2001) 
  • The Supreme Court held that only those castes mentioned in the Presidential Order under Article 341 can be deemed Scheduled Castes. State governments cannot expand this list.