Assignment on……

Recent Judgments Pronounced by the Supreme court On Literal Rule

of Interpretation

Submitted To Submitted By

Dr. Rakesh Meena Name – Kumari Diksha

Roll no- 210605

Sub- Interpretation of Statutes

Class- LL.M

Course – Department of Law

Session- 2021-2022

Semester- 1st

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 INTRODUTION

 WHAT IS INTERPRETATION - Laws are often enacted by legal experts under the
guidance of experts of different fields and hence, the wordings or phrases used in
these laws might cause confusion or result in ambiguity. Interpretation literally means
to explain or to understand. The basic purpose of interpretation is to help understand
the various statutes and provisions of law.

 LITERAL RULE OF INTERPRETATION- In order to interpret statutes, the

courts use various principles which help them understand the principles. One of the
principles is called the “Literal Rule of Interpretation”

The literal rule of interpretation has been termed as the primary rule of interpretation. As the
name suggests, the literal rule of interpretation means that the judge literally interprets the
statute. It can also be called the plain-meaning rule or the grammatical rule.

Statutes are constructed using the ordinary meaning of language given to the term and the
judges are not required to interpret the terms in any other way.

In the literal rule of interpretation, the courts are required to observe the ordinary and natural
meaning of words, interpret the phrase or words as it is. Judges are not required to add words
or modify meaning and they must observe the actual intent of the legislature. It is the safest
rule of interpretation.

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CASES…

1. Sushil Kumar Agarwal vs Meenakshi Sadhu - Supreme Court Important

Judgment

On 9th October, 2018, in the case of Sushil Kumar Agarwal vs Meenakshi Sadhu and Ors. [Civil
Appeal No.1129 of 2012],

The issue raised was whether Section 14(3)(c) of the Specific Relief Act, 1963 is a bar to a suit
by a developer for specific performance of a development agreement between itself and the
owner of the property. While dealing with this issue, the crux of the matter which came up for
consideration was whether the word “defendant” in Section 14(3)(c)(iii) of the Specific Relief
Act, 1963 has the effect of confining the scope of the suit for specific performance only to a
particular class (consisting of owners) or whether a purposive interpretation to the legislation
would be required, so as to provide a broader set of remedies to both owners and developers.

 It was held that “if the rule of literal interpretation is adopted to interpret Section 14(3)(c)(iii), it
would lead to a situation where a suit for specific performance can only be instituted at the behest
of the owner against a developer, denying the benefit of the provision to the developer despite an
interest in the property having been created.”

The Supreme Court observed that “this anomaly is created by the use of the words “the defendant
has, by virtue of the agreement, obtained possession of the whole or any part of the land” in
Section 14(3)(c)(iii). Under a development agreement, an interest in the property may have been
created in favour of the developer. If the developer is the plaintiff and the suit is against the
owner, strictly applied, clause (iii) would require that the defendant should have obtained
possession under the agreement. In such a case if the developer files a suit for specific
performance against the owner, and the owner is in possession of the land by virtue of a lawful
title, the defendant (i.e. the owner) cannot be said to have obtained possession of the land by way
of the agreement. This would lead to an anomalous situation where the condition in Section 14(3)
(c)(iii) would not be fulfilled in the case of a suit by a developer. Application of the literal rule of
interpretation to Section 14(3) (c) (iii) would lead to an absurdity and would be inconsistent with
the intent of the Act.”

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“By giving a purposive interpretation to Section 14(3) (c) (iii)”, it was held that “the anomaly
and absurdity created by the third condition [in sub clause (iii) of Section 14(3)(c)] “will have
no applicability in a situation where the developer who has an interest in the property, brings
a suit for specific performance against the owner.”” The Supreme Court held that “the
developer will have to satisfy the two conditions laid out in sub clause (i) and (ii) of Section
14(3)(c), for the suit for specific performance to be maintainable against the owner. This will
ensure that both owners and developers can avail of the remedy of specific performance
under the Act. A suit for specific performance filed by the developer would then be
maintainable.” However, it was also held “whether specific performance should in the facts
of a case be granted is a separate matter, bearing on the discretion of the court.” 

2. Commissioner of Customs v. Dilip Kumar (2018) 9 SCC 1 (FB)(SC)

In a judgment with far-reaching consequences, the Constitution Bench of the Supreme Court
in Civil Appeal No. 3327 of 2007, in the matter of Commissioner of Customs (Import),
Mumbai Vs Dilip Kumar & Company & Others, delivered its five judge decision on July 30,
2018. The Bench set up to examine the correctness of the ratio in Sun Export Corporation
Mumbai Vs Collector of Customs, Mumbai, as reported in (1997) 6 SCC 564, was mainly
concerned with the question as to what should be the interpretive rule to be applied while
interpreting a tax exemption provision/notification, especially when there is an ambiguity on
its applicability with reference to the entitlement of the assessee or the rate of tax to be
applied.

The Bench, after considering the decision in Sun Export’s case (three judge Bench), along
with other relevant case laws, concluded that the exemption notification should be interpreted
strictly; the burden of proving applicability would be on the assessee to show that his case
comes within the parameters of the exemption notification. Also, when there is ambiguity in
an exemption notification which is subject to strict interpretation, the benefit of such
ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of
the Revenue. It also held that the ratio in Sun Export case (supra) is not correct and all the
decisions which took a similar view as in Sun Export case (supra) stand overruled.

The Court, while arriving at the aforesaid decision, examined various judgments that were for
and against the proposition that the benefit of ambiguity in a taxing statute must go to the
assessee, but held that the principle applicable to the taxing statute may not apply to an

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exemption notification—as it is in the nature of exception and has to be construed strictly
even in the face of ambiguity. The benefit of ambiguity or obscurity in an exemption
notification, thus, cannot go to assessee but to the state, as exception operates even in the
domain of an exemption notification when it comes to ambiguity.

The judgment, though well-reasoned and properly dissects and analyses various case laws on
the subject, presents a devil in its implementation by the Executive. A vital point to consider,
and which appears to have been missed out and is raising quite a few eyebrows, is that if the
state is negligent or the wrongdoer, and an ambiguity appears/occurs for whatever reasons
including improper draftsman ship in an exemption notification—and the assesse interprets it
in a particular manner beneficial to him and if there is an ambiguity that is likely to have an
alternate interpretation and proceeds on that basis, should he be penalised by demand of duty,
interest and even penalty, simply because the government/Department of Revenue issuing an
exemption notification left ambiguities in its scope? It has to be remembered that the state has
all powers to delete, amend or alter any exemption notification, if ambiguity comes to its
notice.

Currently, the state has sufficiently armed itself even with the power to amend exemption
notification at any time during the course of the year, while the same was earlier being done
mostly at the time of the Budget. The peril inbuilt in the instant interpretation is that an
assessed suffers even though he has no hand in the drafting of the notification. For the
Revenue, it is “heads I win, tails you lose.”
In the matter of ITC Ltd Vs CCE, New Delhi, reported in 2004 (171) ELT 433 (SC), a
judgment that was incidentally not examined by the Constitution Bench in the Dilip Kumar
case, the following practical solution was provided by the Lordships while dealing with an
ambiguity in the notification: “Presumably the phrase ‘badly drafted’ was used to mean that
the language of the Entry was ambiguous.

In case of such ambiguity ‘close reasoning’ will be employed—but without stretching the
language to arrive at the only reasonable construction. These decisions exemplify the general
rule of statutory construction that words have to be construed strictly according to their
ordinary and natural meaning, particularly when the statute is a fiscal one irrespective of the
object with which the provision was introduced.

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Of course if there is ambiguity in the statutory language, reference may be made to the
legislative intent to resolve the ambiguity. But if the statutory language is unambiguous then
that must be given effect to. The legislature is deemed to intend and mean what it says. The
need for interpretation arises only when the words used in the statute are, on their own terms
ambivalent and do not manifest the intention of the legislature.” Therefore, the solution
provided was to first look for legislative intent behind the ambiguous notification rather than
giving outright benefit to the state.

The result of the Dilip Kumar judgment is that the assessee will end up paying for the
ambiguity which is caused/created or is left by the Revenue. The interpretation will not only
redefine justice by tilting it in the favour of the Revenue, but may also end up encouraging
the Revenue to become callous/casual while drafting exemption notifications. Armed with the
Dilip Kumar judgment, it will have nothing to lose but only gain out of loose ends of an
exemption notification through demands of duty, interest and penalties, and even extended
period demands, which it otherwise makes at the drop of a hat. The assessee in case of doubt
may have to either reach out authorities, and wait for their reply, which is often delayed as
field authorities, in turn, refer the matter to Board for interpretation and all this may even
defeat the purpose for those actually deserving exemption.

It is a cardinal principle of justice that one who does wrong, has to pay for it. But this may
not remain the case in the future with tax exemption notifications. With the state allowed to
have the cake and eat it too, it will eventually be a premium on casualness. Surely, not the
way the justice system may have wanted it to be.

3. The Supreme Court in the matter of Canara Bank vs United Indian Insurance
Corporation and Ors.  on February 06, 2020 held that the beneficiaries of the policies
taken out by the insured are also ‘consumers’ under the Consumer Protection Act,
even though they are not parties to the contract of insurance.

Brief Facts of the case

 The claimants in the captioned appeal are farmers who had stored their produce in a
cold store, during the year 2012-2013.

Contention by the claimants (farmers, cold store)

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 1. The farmers contended that the cold store while levying general charges had also
charges for the insurance premium to be paid to the insurance company, therefore,
they were well within the ambit of filing the The cold store also pressed on the same
fact

2. The farmers also contended that they had entered into a tripartite agreement with the
bank regarding their loan as the cold store had got the stocks insured from the
insurance company and the stocks belonged to the farmers.

Contentions by the Insurance Company –

1. The insurance company was of the view that farmers had no locus standi to make any
claim as there was no privity of contract between farmers and the insurance company.

2. The insurance company further contended that farmers were not ‘consumers’ under the
Consumer Protection Act, 1986.

3. They further went on to deny that the farmers had actually produced the agricultural
produce and stored it in the cold store. They also contended that the fire was not
accidental and hence they were not liable to pay any compensation for the same.

Issue

Whether in facts of the present case, the farmers/ beneficiaries could be defined as
consumers?

Decision of State Commission

The Karnataka State Consumer Disputes Redressal Commission at Bangalore held that the
farmers had proved that the fire took place on account of electrical short circuit and no
element of human intervention or use of kerosene was found. The State Commission also
found that as per the tripartite agreement entered into between the farmers, the Bank and the
cold store, it was mandatory for the cold store to insure the goods so hypothecated by the
farmers with the Bank. The insurance company was held liable to pay the amount to the
farmers.

Decision of the National Commission

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The National Commission concurred with the findings of the State Commission and held that
the farmers very well fall within the definition of ‘Consumer’ under the Consumer Protection
Act, 1986..

Definition of "Consumer" is very wide- Supreme Court

In the subsequent appeal, the Hon’ble Supreme Court in consonance with the observations
made by the Hon’ble State Commission, Karnataka and Hon’ble National Commission
observed that the definition of ‘consumer’ under the Consumer Protection Act is very wide
and not only includes a ‘person who hires or avails of the services for consideration’ but also
includes ‘the beneficiary of such services ‘who may be a person other than the person who
hires or avails of services. In the present case, even though the farmers were not directly
involved in undertaking the services of the insurance company, they were certainly the
beneficiary to the same. The Hon’ble Court further disregarded other claims of the insurance
company including the claim that the fire was not accidental and was a result of human
intervention.

Considering the same, the Hon’ble Supreme Court held that the definition of ‘consumer’
includes beneficiaries who can take benefit of the insurance availed by the insured.

The Supreme Court vide this decision has come to the rescue of farmers by giving a vivid and
categorical representation to them within the definition of ‘consumer’ under the Consumer
Protection Act, 1986. While the decision does not clearly categorize ‘farmers’ as
‘consumers’, it surely provides a way for them to be considered as ‘consumer’ when they are
beneficiaries.

4. Macquarie Bank Limited vs. Shilpi Cable Technologies

Facts of the Case

The Corporate Debtor/Respondent (Uttam Galva Metallics) defaulted in the payment to the
Operational Creditor/Appellant (Macquarie Bank) amounting to USD 6,321,337 equivalent to
Rs. 43,11,15,190. Although repeated reminders as to the payment of the debt via emails were
made, but such communications could not influence the Debtor to make the payment,
pursuant to which a Statutory Notice was sent by the Appellant under Section 433 and 434 of
the Companies Act. The reply to such notice denied the existence of any such outstanding
debt on the part of the Respondent. After, the Insolvency and Bankruptcy Code was enacted
in 2016, the Appellant furnished a Demand Notice to the Corporate Debtor under Section 8 of

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the Code. The Respondent replied to the notice saying that there existed no outstanding
default on its part and simultaneously, also questioned the validity of the Purchase
Agreement. The Appellants approached the National Company Law Tribunal and applied for
the initiation of the Corporate Insolvency Resolution Process.

NCLT Order
The NCLT rejected the application of the Appellant based on two grounds that:

(1) The application for initiation of the Corporate Insolvency Resolution Process was
incomplete as it did not comply with the mandatory requirements under Section 9(3)(c) of the
Insolvency and Bankruptcy Code which required a certificate from a financial institution with
regards to the non-payment of the outstanding amount by the Corporate Debtor. The
certificate from the Appellant Bank itself was not held to be a certificate from a financial
institution as it was a foreign bank which did not fulfill any of the requirements to qualify as
a "financial institution" as per Section 3 (14)1 of the Code.

(2) There was an existence of dispute before the Demand Notice was furnished upon the
Corporate Debtor as per Section 8(2)(a) of the IB Code which was also raised at the time
when a reply to the Statutory Notice was furnished under Section 433 and 434 of the
Companies Act by the Respondent.

NCLAT Decision
The Appellants aggrieved by the order of the NCLT approached the National Company Law
Appellate Tribunal for remedy against the Respondent. But, the NCLAT upheld the NCLT
order stating that the application has to be complete before the initiation of the Corporate
Insolvency Resolution Process and that the appellant failed to comply with the mandatory
requirement of furnishing a certificate by a financial institution in which the Corporate
Debtor has its account with regards that it has failed to pay the outstanding debt. Moreover, it
reiterated that the Appellant Bank was not a "financial institution" as per Section 3(14) of the
IB Code. Also, as it is a mandatory document which acts as an evidence to the existence of
default, it has to be necessarily furnished and without it the application is incomplete.

Furthermore, the Appellant tribunal took cognizance of the Demand Notice which was
furnished by the lawyer of the Appellant and noted that such Demand Notice has to be in
compliance with Form 3 under Rule 5 of the Insolvency and Bankruptcy Code Rules, 2016. It

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was also observed that such Demand Notice was invalid as it has to be furnished as per Form
3 by the Creditor himself or by any authorized person on his behalf and lawyer cannot come
under such purview as there was absence of any authority by the Operational Creditor.

Thus, the appeal was dismissed based on such grounds and the issue relating to the 'existence
of the dispute' adjudicated by the NCLT was left unmentioned in the said order of NCLAT.

Supreme Court's Judgment

The Appellants further aggrieved by the order of the NCLAT appealed before the Hon'ble
Supreme Court. It was contended by the Appellants that if Section 9(3)(c) is read conjointly
with Rule 6 and Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating
Authority) Rules, 2016, it could be observed that the requirement of the certificate by the
financial institution is not mandatory but is only directory in nature as it is just another
document along with the other documents which could be relied upon by the Operational
Creditor in order to prove the existence of an Operational Debt. On the other hand the
Respondent contended that Section 9 uses the word 'shall' which clearly shows the intention
of the legislature to make it a necessary and a mandatory requirement and cannot be
derogated upon.

The Hon'ble Supreme Court observed that a creative interpretation of Section 9(3)(c) is
necessary in the present case as the literal interpretation would be unreasonable and would
create hardships for Appellants and other foreign banks in the future. Also, the requirement of
certificate as a document is not necessary for substantiating the existence of default as it can
be proved by other documents as well. Also, in such cases where such certificates are
impossible to furnish, serious inconvenience will be caused to the innocent persons like
Appellant when such requirements are not even necessary to further the object of the Act.

While dealing with the other issue related to whether a lawyer can issue a demand notice on
behalf of the Creditor, the Hon'ble Supreme Court read sections 8 and 9 of the IB Code
conjointly along with Section 30 of the Advocates Act which talks about the Right of the
Advocates to practice. The Hon'ble Supreme Court relied upon the judgment of "Byram
Pestonji Gariwala v. Union Bank of India"2 where a signature affected by the lawyer on
behalf of his client on a document related to a compromise was held to be effective in law. It
was observed in the judgment that "the courts in India have consistently realized the role of
lawyer when it comes to disputes and the extent and nature of the implied authority to act on

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behalf of their clients, which included compromising matters on behalf of their clients. The
Court held there is no reason to assume that the legislature intended to curtail such implied
authority of counsel."

Therefore, the decision of the NCLT and NCLAT was overruled by the Hon'ble Supreme
Court and the matter was remanded back for consideration.

Conclusion
In my opinion, the Hon'ble Supreme Court did a fair job by overriding the procedural
irregularities by observing the subjective nature of the case where the general procedure was
clearly out of place. Also, the objective of the statute was kept in mind at all times by the
Supreme Court and language of the statute was construed in a manner which is not unjust to
any party. Moreover, a liberal interpretation of the procedural aspects of the case would help
the creditors recover their debts in an efficient manner, while not allowing the debtors to pull
out loopholes in order to evade liability while delaying the process on the expense of the
creditor.

5. Indore Development Authority v. Shailendra - Supreme Court Important Judgment

On 8th February, 2018, in the case of Indore Development Authority v. Shailendra (Dead)
Through Lrs. & Ors. [Civil Appeal No.20982 of 2017],

issue relating to interpretation of Section 24 of the Right to Fair Compensation and

Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and section 31
of the Land Acquisition Act, 1894 came up for consideration.

A three Judge Bench per majority held as follows:-

(i).“The word ‘paid’ in section 24 of the Act of 2013 has the same meaning as ‘tender of
payment’ in section 31(1) of the Act of 1894. They carry the same meaning and the
expression ‘deposited’ in section 31(2) is not included in the expressions ‘paid’ in section 24
of the Act of 2013 or in ‘tender of payment’ used in section 31(1) of the Act of 1894. The
words ‘paid’/tender’ and ‘deposited’ are different expressions and carry different meanings
within their fold. In section 24(2) of the Act of 2013 in the expression ‘paid,’ it is not
necessary that the amount should be deposited in court as provided in section 31(2) of the Act
of 1894. Non-deposit of compensation in court under section 31(2) of the Act of 1894 does

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not result in a lapse of acquisition under section 24(2) of the Act of 2013. Due to the failure
of deposit in court, the only consequence at the most in appropriate cases may be of a higher
rate of interest on compensation as envisaged under section 34 of the Act of 1894 and not
lapse of acquisition. Once the amount of compensation has been unconditionally tendered
and it is refused, that would amount to payment and the obligation under section 31(1) stands
discharged and that amounts to discharge of obligation of payment under section 24(2) of the
Act of 2013 also and it is not open to the person who has refused to accept compensation, to
urge that since it has not been deposited in court, acquisition has lapsed.
Claimants/landowners after refusal, cannot take advantage of their own wrong and seek
protection under the provisions of section 24(2)”;

(ii) “The normal mode of taking physical possession under the land acquisition cases is
drawing of Panchnama”;

(iii) “The provisions of section 24 of the Act of 2013, do not revive barred or stale claims
such claims cannot be entertained”;

(iv) “Provisions of section 24(2) do not intend to cover the period spent during litigation and
when the authorities have been disabled to act under section 24(2) due to the final or interim
order of a court or otherwise, such period has to be excluded from the period of five years as
provided in section 24(2) of the Act of 2013. There is no conscious omission in section 24(2)
for the exclusion of a period of the interim order. There was no necessity to insert such a
provision. The omission does not make any substantial difference as to legal position”; and

(v) “The principle of actus curiae neminem gravabit is applicable including the other
common law principles for determining the questions under section 24 of the Act of 2013.
The period covered by the final/ interim order by which the authorities have been deprived of
taking possession has to be excluded. Section 24(2) has no application where Court has
quashed acquisition.” 

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