ASSIGMENT ON…

Recent Judgments Pronounced by the Supreme court On Golden Rule

of Interpretation

Submitted To Submitted By

Dr. Rakesh Meena Name- Vivek Raj

Roll no- 210619

Sub- Interpretation Of Statutes

INTRODUCTION

“The essence of law lies in the spirit, not its letter, for the letter is significant only as being
the external manifestation of the intention that underlies it” – Salmond

Statutory interpretation is the process of interpreting and applying legislation to decide cases.
Interpretation is necessary when the case involves subtle or ambiguous aspects of a statute.
Generally, the words of a statute have a plain and straightforward meaning. But in some
cases, there may be ambiguity or vagueness in the words of the statute that must be resolved
by the judge. The reason for ambiguity or vagueness of legislation is the fundamental nature
of language. It is not always possible to precisely transform the intention of the legislature
into written words.

MEANING OF GOLDEN RULE OF INTERPRETATION

The rule was defined by Lord Wensleydale in the Grey v Pearson case (1857)[5] as: “The
grammatical and ordinary sense of the words is to be adhered to unless that would lead to
some absurdity or some repugnance or inconsistency with the rest of the instrument in which
case the grammatical and ordinary sense of the words may be modified so as to avoid the
absurdity and inconsistency, but no farther.”

Therefore, it is the modification of the literal rule of interpretation. The literal rule
emphasises on the literal meaning of legal words or words used in the legal context which
may often lead to ambiguity and absurdity. The golden rule tries to avoid anomalous and
absurd consequences from arising from literal interpretation. In view of the same, the
grammatical meaning of such words is usually modified.

The court is usually interested in delivering justice and in order to foresee the consequences
of their decisions the golden rule is usually applied. This rule of interpretation aims at giving
effect to the spirit of the law as the mere mechanical and grammatical meaning may not be
sufficient.

CASES...
 1. Rajesh Sharma & Ors. v State of U.P. & Anr.
Abstract

The Supreme Court of India in Rajesh Sharma & Ors. v. State of U.P. & Anr., has provided
arrest guidelines in cases under Section 498A of the Indian Penal Code. While some view this
as a positive step towards preventing unnecessary arrests under the section, the judgment has
been criticized by many for ignoring the victim’s side of the equation. What follows is a
critical analysis of the said judgment from a socio-legal perspective.

Introduction

On July 27, 2017, the Supreme Court of India delivered a judgment that changed the
procedural aspect of Section 498A of the Indian Penal Code, in Rajesh Sharma & Ors. v State
of U.P. & Anr.[2]The judgment effectively prohibited the arrest of accused persons in cases of
Section 498A. It ordered the establishment of Family Welfare Committees in each district,
and provided that “Every complaint under Section 498A received by the police or the
Magistrate be referred to and looked into by such committee”. The committee must submit its
report within a month from the date of receipt of such complaint, and no arrest should be
affected until such report is received.

The two-judge bench, consisting of Justice Adarsh Kumar Goel and Justice Uday Umesh
Lalit, asserted that there was substantial misuse of the provision of Section 498A which often
led to unnecessary arrest and harassment of family members of the accused husband. The
guidelines in the judgment were issued to curb such arrests. The Court directed the District
Legal Services Authorities to provide training to the members of such committees and review
their functioning.

Background

In the decade of 1980, dowry deaths rose at an alarming rate in India. To facilitate rapid
intervention by the state and protect young women who were unable to meet the unlawful
demands of their in-laws, the Indian Penal Code (I.P.C.), 1860, was amended by way of the
Criminal Law (2nd Amendment) Act, 1983, and the new section 498A under Chapter XX-A,
“Of Cruelty By Husband Or Relatives Of Husband”, was inserted on the 26 th of December,
1983. The amendment focused on dowry deaths and cases of cruelty towards married women
by their in-laws. Subsequent amendments were made in the Code of Criminal Procedure
(Cr.P.C.), 1973, and the Indian Evidence Act, 1872, by the same amendment to solidify this
provision.

Analysis

The judgment starts with a summary of the facts of the case. It cites part of the judgment
delivered by the trial court which states the court’s conviction that the accused husband
Rajesh Sharma had demanded a car and three lacs rupees in the form of dowry. It appeared to
the court that he had tortured the complainant and retained her stridhan. Since the trial court
did not deem the summoning of appellants’ no. 2 to 5 i.e. the father, mother, brother and
sister of appellant no. 1, Rajesh Sharma, to be required, respondent no. 2 i.e. the original
complainant, preferred a revision petition and submitted that appellants no. 2 to 5 should also
have been summoned. When the trial court was directed to take a fresh decision in the matter,
an appeal was preferred before the High Court as per Section 482 of Cr.P.C. by the
appellants. On failure of mediation, the High Court deemed it unnecessary to interfere with
the order of summoning, as a result of which, said appeal was preferred.

The Supreme Court referred to statistics by the National Crime Records Bureau (NCRB) to
ascertain how many cases reported under Section 498A were later declared false on account
of mistake of fact or law. It also referred to the low conviction rate of 15.6% in such cases.
Referring to Sushil Kumar Sharma v. Union of India,[3]Preeti Gupta v. State of Jharkhand,
Ramgopal v. State of Madhya Pradesh,[5]Savitri Devi v. Ramesh Chand[6]etc, it submitted
[4]

that misuse of the provision isjudicially acknowledged. It quoted various guidelines provided
by different courts in cases of arrest under Section 498A, such as ChanderBhan v. State [7] and
Arnesh Kumar v. State of Bihar. [8] The Court acknowledged the contrasting arguments
provided by both sides and referred to the object behind insertion of Section 498A in the IPC.
In pursuance of its conviction that relatives of the accused husband should not be wrongfully
arrested, the Court issued a set of guidelines.

The primary question regarding the case is as to how appropriate the judgment in question
was. Said judgment is erroneous to the extent that it warrants the possibility of excess of
judicial power. In trying to defend innocent relatives of the accused husband, the Court has
provided protection from arrest to the accused husbands as well. As a result of this, there will
be no arrests of accused persons under Section 498A, thus rendering the protective nature of
the provision completely ineffective.

This decision is in dire contradiction with the existing statute of I.P.C. Though the reasoning
provided by the court was consistent with the cases cited in the judgment, it failed to
appreciate the very object of insertion of Section 498A i.e. to protect the complainant from
further harassment until a solution is reached. Said decision has provided for the constitution
of Family Welfare Committees and invested them with massive powers by making their
report a prerequisite for arrest, if arrest is to be made at all. The decision will adversely affect
genuine complaints made under Section 498A by delaying arrests and thus risking the safety
of many a complainant.

The analysis made by the Court of the National Crime Records Bureau data is questionable as
well. According to said NCRB statistics, in 2005, 10.56% of cases registered under Section
498A were later declared false on account of mistake of fact or law. The same was reduced to
9.32% in 2009, as per the NCRB. The Court also mentioned the low conviction rate in cases
of Section 498A. An argument can be made that the overall conviction rate in India is
significantly poor as a whole for every type of crime, not just for offences under Section
498A. Thus a low conviction rate should not necessarily be interpreted as misuse of said law.
The higher acquittal rate may also result from inadequate investigation, benefit of doubt
given to the accused, reconciliation between the spouses, etc.

Furthermore, the judgment started out by suggesting that the guidelines would be meant to
prevent arrest of innocent, aged, and non-Indian residential relatives of the accused husband.
This was omitted and the blanket of protection was extended to all the accused persons, the
husband included. This significantly reduces the merit of the said judgment and was
perceived by various organizations as “an exercise in male bonding”.

The implications of the decision can be perceived to be against women’s rights. In order to
prevent misuse of Section 498A to harass unwitting relatives of the husband, the Court could
have made the guidelines specifically against arrest of such persons alone. The Family
Welfare Committees could have been vested with the power to investigate into the matter
only as regards other accused persons and not the primary accused. By holding the primary
accused i.e. the husband to the strict provisions of arrest under Section 498A, a balance could
have been maintained between safeguarding the complainant’s rights and preventing false
implication of the husband’s relatives into the matter by making their arrest subject to the
report of the Family Welfare Committee.

Conclusion

In this case, the Court gave more impetus to the rights of the accused husband and his
relatives, than those of the complainant woman. The fact exists that women have been
discriminated against and continue to be so. The laws that aim to provide better legal
protection to these persons against gender-specific crimes is in place for reasons well-
founded. Despite of modernization and “woman development”, there has not been any
significant improvement towards reducing crimes against women. Specific provisions of law
such as S. 498A secure to women the right to life under Article 21 of the Constitution, and
the right to equality under Article 15. Denying the required protection of law to a specific sex
is discrimination in one of its basest forms.

Possible misuse is an unfortunate but common after-effect of the enforcement of a law.

Numerous provisions of law are abused to harass innocent people, S. 498A not being an
exception. However, the amount of its misuse is not so significant that it can dwarf the
positive change it has brought into society. The guidelines issued in the present judgment will
serve as mere hindrances to the proper implementation of Section 498A. Women’s rights
activists and legal minds all over the country eagerly await the judicial review of this
judgment by the Supreme Court of India.

2. NAHI Vs. M Hakim

Introduction

1. The Supreme Court of India has passed a judgment in a batch of over 50 appeals on the
question as to whether the Courts are empowered to modify an arbitral award under
Section 34 of the Arbitration & Conciliation Act, 1996 (“Arbitration Act”) when they
are adjudicating an application for setting aside an award under Section 34

2. While passing the judgment, the Supreme Court has extensively analysed the passed
judicial precedents on the scope of “Setting Aside” of an arbitral award under Section
34, examined the provisions of the National Highways Act, 1956 vis-à-vis the
 provisions of The Land Acquisition Act, 1984, as also the scope of powers of the
Supreme Court under Article 136 and Article 142 of the Constitution of India.
3. While the Supreme Court clarified the position that the power under Section 34 of the
Arbitration Act does not include the power to modify an award, it was pleased to
dismiss the appeals filed by the National Highways Authority of India (“NHAI”)
wherein challenges were raised to the modification of awards in the underlying Section
34 and Section 37 proceedings. This was done by the Supreme Court on the peculiar
facts of the cases before it.
4. In a nutshell, the Supreme Court declined to interfere with payment of higher
compensation to landowners by way of modification of the award in the Section 34 and
Section 37 proceedings, after extremely low amounts of compensation were granted to
various landowners pursuant to acquisition of their respect land parcels by NHAI under
the provisions of the National Highways Act.

Background Facts

5. The competent authority under the National Highways Act issued various notifications
from 2009 onwards for acquisition of certain land parcels of the Respondents in these
appeals. Awards for compensation against such acquisition of land parcels were made
on the basis of “guideline value” of the lands in question and not on the basis of sale
deeds of similar lands. Resultantly, the compensation that was awarded by the
competent authority was much lower than the market value of the said lands.
6. The determination of such amounts by competent authority can be contested before an
Arbitrator under Section 3G(5) of The National Highways Act. This provision also
postulates that the arbitrator is to be appointed by the Central Government. Section
3G(6) further provides that subject to the provisions of the National Highways Act, the
provisions of the Arbitration Act shall apply to every arbitration under the National
Highways Act. Further, Section 3G(7)(a) mandates the competent authority or the
Arbitrator take into account the market value of the land on the date of publication of
the notification (Notification U/s 3A for Acquisition of land for a public purpose).
7. Since the Respondents were not satisfied with the determination of the competent
authority, the matter was referred to arbitration before the District Collector, who was
appointed by the Central Government in the terms of Section 3G(5) of the National
 Highways Act. The District Collector found no infirmity in the amounts awarded by
the competent authority for the land acquisitions.

5. The Respondents, therefore, filed section 34 petitions before the District & Sessions
Judge, wherein the amount of compensation was significantly enhanced in favour of
the Respondents and award of the District Collector was modified by the District Court
under Section 34 of the Arbitration Act. In the appeals which were filed under section
37 by NHAI, the modification of the awarded amounts was upheld by the High Court.
6. It was this modification of the awarded amounts under section 34 and is subsequent
upholding of the same in section 37 by the High Court, that was assailed before
Supreme Court.

Submissions on behalf of NHAI

10. Briefly, the submissions raised on behalf of NHAI were as follows:

1. National Highways Act was amended in 1997 by the National Highway Laws
(Amendment) 1997. The amendments included introduction of section 3 to 3J for
speeding up the land acquisition process for important public purposes such as
construction of national highways.
11. Before the land vests with the Government under Section 3E of the amended National
Highways Act, compensation is determined under Section 3G of the Act, which is an
amount determined by the competent authority.
12. While the Land Acquisition Act prescribes a detailed appellate process to
determination of compensation, the applicability of the said Act is expressly excluded
under Section 3J of the amended National Highways Act. Instead, the process of
arbitration under a Central Government appointed Arbitrator is prescribed to be
followed under Section 3G.
13. Since the object of National Highways Act, inter alia, is to expedite the land
acquisition procedure, the speedy procedure of challenging any compensation
amounts awarded postulates firstly arbitration under a Central Government appointed
Arbitrator followed by a petition under Section 34 of the Arbitration Act (if so
required). It is settled law that a challenge to the award under Section 34 of the Act is
not a challenge on the merits of the award and is not akin to the power of an Appellate
Court under the Land Acquisition Act.
 14. The power under Section 34(4) is only limited to either setting aside the award or
remitting the award back to the Arbitrator so as to eliminate any ground of challenge
under Section 34. This is in line with the UNCITRAL Model Law.
15. This power under Section 34 is far more limited in contrast to the provisions of 1940
Act wherein the Court was expressly empowered to modify or correct an award.

1. Since the Central Government appoints the Arbitrator under the National
Highways Act at the request of either of the parties, the arbitration is not
consensual in nature, and it would make no difference to the interpretation of
Section 34 of the Arbitration Act in its application to the National Highways Act.
2. The judgment of Madras High Court in Balaswamy Vs. ISG Novasoft
Technologies Limited (2014 SCC OnLine Mad. 6568) has been wrongly relied
upon in the impugned judgment since the single Judge could not have deferred
from the view taken by Supreme Court that no modification of an award is
possible under Section 34 of the Arbitration Act.

Submission on behalf of Respondents

11. Briefly, the submissions raised on behalf of Respondents were as follows:

1. In at least three cases arising out of the same notification for the same village and
the same purpose as in one of the petitions of the batch, the NHAI had deposited
the compensation before the learned court and the same was received by the
claimants. The judgment of the learned District Judge was thus complied with.
2. In two other cases also, the NHAI had deposited the entire award amount with
the accrued interest before the District Judge in accordance with the District
Judge’s judgment, no appeal being filed therefrom. NHAI being ‘State’ under
Article 12 of the Constitution of India, could not have selectively filed appeals
against some District Judge judgments and not against others.
3. On the facts of the case, an abysmally low sum had been given as
compensation which was then raised by the District Judge, having regard to
the relevant sale deeds in the vicinity.
4. Even if the Single Judge in Gayatri Balaswamy case had not laid down the
law correctly so far as matters arising under the Arbitration Act are concerned,
yet the impugned judgment correctly distinguished between consensual
arbitration and an arbitrator appointed by the Central Government, who is
 none other than some government servant who merely rubber stamps awards
that are passed by yet another government servant.
5. If Section 34 is construed narrowly, then landowners having been awarded
very low compensations would not have any effective remedy since all that the
District Judge could then do to set aside the award, resulting in a fresh
arbitration before either the self-same bureaucrat or another bureaucrat
appointed by the Central Government.

Analysis by the Court

12. The Court firstly analysed provisions of the National Highways Act including its
statement of object and reasons, and Sections 3 to 3J of the Act and then observed as
follows:
1. Competent authority as authorized by the Central Government determines the
amount of compensation payable;
2. On application by either of the parties, the amount determined is sent to an
Arbitrator;
3. The aforesaid process is not consensual in fact, the landowner has no say at all in
the appointment of the Arbitrator, who is appointed only by the acquiring
authority i.e. the Central Government;
13. The Court then examined the scope of judicial interference under Section 34 and
observed as follows:
1. Section 34 is not in the nature of an appellate provision and only provides for
setting aside awards on very limited grounds;
2. Considering the marginal note of Section 34 i.e. “Recourse”, which means
enforcement or method of enforcing a right; the enforcement of a truncated right
(setting aside under Section 34 on limited grounds) can also be only limited in
nature;
3. Section 34 is based on Article 34 of UNCITRAL Model Law under which, the
Court which is hearing a challenge to an award has no power to modify an
award;
4. On the contrary, under Sections 15 and 16 of the Arbitration Act, 1940, the Court
had the power to modify or correct an arbitral award under certain circumstances
or remit the award. Under the scheme of the old Act, an award could be remitted,
 modified or set aside on the grounds contained in Section 30 of the Old Act,
which were broader, and the grounds contained in Section 34 of the Arbitration
Act;
5. Following judgments were referred to emphasising the position that Section 34
proceeding do not envisage any challenge to arbitral award on merits:
1. MMTC Ltd. v. Vedanta Ltd.[2];
2. Ssangyong Engg. & Construction Co. Ltd. v. NHAI[3];
3. Renusagar Power Co. Ltd. v. General Electric Co.[4];
4. Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear
Ltd.[5];
5. McDermott International Inc. v. Burn Standard Co. Ltd.[6];
6. Kinnari Mullick v. Ghanshyam Das Damani[7];
7. Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.[8]; and
8. Puri Construction P. Ltd. v. Larsen and Toubro Ltd.[9] (*this
judgment inter alia, examined various legal authorities holding
diametrically opposite positions on the power of Court to modify, vary
or remit the arbitral award under Section 34 and the lack thereof)
14. After conclusively observing that Section 34 of the Arbitration Act cannot be held to
include within it, a power to modify an award, the Supreme Court then went on to
examine Gayatri Balaswamy judgment more particularly in light of powers of the
Supreme Court under Article 142 of the Constitution of India. Court observed that
power to modify an award under Article 142 of the Constitution was vested only in
the Supreme Court, it being a final court of last resort. The Supreme Court also
referred to various judgments, where an award was affirmatively modified in certain
aspects in exercise of its powers under Article 142 of the which were as follows:
1. Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India[10]; and
2. Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy[11].

12. The Court then observed that the Gayatri Balaswamy judgement and a subsequent
division bench judgement in ISG Novasoft Technologies Limited v. Gayatri
Balasamy[12], suffered from infirmities since they did not take into account another
division bench judgment of the Madras High Court i.e. Central Warehousing Corpn.
v. A.S.A. Transport[13], which relied on McDermott’s case to hold that power of
modification of an award is not available under Section 34 of the Arbitration Act.
13. While concluding on the issue of Section 34, Supreme Court made the following key
observations:
1. Section 34 envisages limited judicial interference on extremely limited grounds
not dealing with the merits of an award. As such, the limited remedy under
Section 34 is co-terminus with a limited right i.e. either setting aside of the award
or remand the matter to the Arbitrator under circumstances mentioned in Section
34.
2. Under the Arbitration regimes of England, United States, Canada, Australia and
Singapore there are express provisions permitting variation of an award unlike
Section 34 of the Indian Arbitration Act.
3. Section 34 of the Arbitration Act is not on the same pedestal as Section 115 of
the Code of Civil Procedure since Section 34 does not grant the Court the power
to make “such order as it thinks fit”; this phrase is missing in Section 34 which
only highlights the legislative intent behind limited scope of judicial interference
under Section 34.
4. There is a distinction between constitutional interpretation and statutory
interpretation. Purposive construction of statutes and any creative interpretation
of statutes has its limits insofar as the Court can iron out the creases in a statute
but not alter the very fabric of the statute itself.
5. The difference between “is” and “ought” has to be seen and the Judge has to put
himself in the place of a legislator and ask himself whether ‘a legislator intended
a certain result’ as against ‘this must have been the intent of the legislator’
(relying upon the judgement in Eera v. State (NCT of Delhi))[14].
6. If one were to include the power to modify an award in Section 34, one would be
crossing the Lakshman Rekha.
7. Parliament very clearly intended that no power of modification of an award
exists in Section 34 of the Arbitration Act, 1996. It is only for Parliament to
amend the aforesaid provision in the light of the experience of the courts in the
working of the Arbitration Act, 1996, and bring it in line with other legislations
the world over.
Court’s finding on the Issue of Compensation

17. Although, the Supreme Court categorically held and reiterated its previous position that
Section 34 of the Arbitration Act does not empower a court to modify an arbitral
award, it noted that NHAI had filed the appeals selectively and did not file appeal in
several cases in similar matters, whereby, many landowners received enhanced
compensation given to them by the District Court.
18. The Court made the following observations while dealing with the issue of
compensation:
1. The competent authority awarded compensation by taking into account
‘guideline value’ which is only relevant for stamp duty purposes, rather than
taking into account sale deeds which would have reflected the proper market
value of the lands. (*It is pertinent to note that Section 3G(7)(a) of the National
Highways Act postulates taking into account market value of the lands and not
guideline value).
19. If the Court was to interfere on facts, set aside the awards and remand the matter back
to the very same person who considered depressed land values which were only
relevant for stamp duty purpose, grave injustice would be done.
20. The case of Union of India vs. Tarsem Singh[15] has declared that Section 3J of the
National Highways Act is violative of Article 14 of the Constitution insofar as it does
not grant solatium and interest in the manner envisaged under Sections 23(1A) and (2)
and Section 28 of the Land Acquisition Act.
21. The process of land acquisition under the National Highways Act has been made
faster by cutting down the time periods of various milestones in this process.
Introduction of Section 20A to the Specific Relief Act from 1 st October 2018 onwards
has also placed an embargo on seeking injunction against highway projects.
22. The wholesome regime of appeals available under Land Acquisition Act is taken
away and in its place, limited challenge to an arbitrator’s award is provided in terms
of Section 3G of the National Highways Act read with Section 34 of the Arbitration
Act. In such a scenario, there would be discrimination between the processes of award
of compensation under the above two regimes even if there was a single landowner
owning two different parcels of land which are acquired by two separate mechanisms
envisaged above.
 23. As held in the case of Nagpur Improvement Trust v. Vithal Rao[16], different
principles of compensation cannot be formulated for acquiring lands on the basis of
unreasonable classification.

Court’s decision and its exercise of plenary powers under Article 142 of the
Constitution

19. The Supreme Court declared the correct position under Section 34 and set aside the
High Court’s judgment on law. However, the Court categorically also observed that
justice of the case does not require interference under Article 136 of the Constitution
and consequently, did not interfere with the High Court’s judgment on facts.
20. The Court observed that NHAI had allowed similarly situated persons to receive
compensation at much higher rates than those awarded by the competent authority and
following the law laid down in Nagpur Improvement Trust judgment, it declined to
exercise jurisdiction under Article 136. While doing so, the Court also specifically
noted that most of the awards were made 7 to 10 years ago at it would not be fair for
such cases to be started de novo before an arbitrator is not consensually appointed.
21. What appears to have weighed with the Supreme Court is the expression “make such
order as is necessary for doing complete justice in any cause or matter pending before
it ” as it appears in Article 142, more particularly in light of the fact that NHAI filed
selective appeals only, while allowing various other land owners to receive the
enhanced compensation pursuant to the Section 34 proceedings, as well as the fact that
the determinations for compensation were done 7-10 years ago.

19. The Supreme Court has in the past recognized and elaborated upon the existence and
scope of its plenary powers under Article 142 of the Constitution. It has categorically
observed that such powers are complementary to the powers conferred on it but are not
limited by specific statutes, and that such powers exists in order to serve complete
justice. Prevention of any visible injustice has been observed to be the basis of such
plenary powers, and the Court exercises such powers whenever it is just and equitable
to do so.[17] On the other hand, the Court has also recognized that the power to do
complete justice between the parties must not be inconsistent with the substantive
provisions of the statutory laws.[18] Interestingly, the above observations have been
made by two different 5 judge benches of the Supreme Court. In the In the process of
passing the judgment, the Supreme Court has made a visible departure the position in
 exercise of power under Article 142, Supreme Court generally does not pass an order
in contravention of or ignoring the statutory provisions, or by directing the statutory
authority to act in contravention of law[19]. What seems to have therefore been
weighed by the Supreme Court was whether any statutory provisions would be violated
in upholding the modification of award by the Court adjudicating the Section 34
application as against the injustice occasioned by the conduct of NHAI in filing
selective appeals against the land owners. This was a significant consideration since the
legal position firmly stood as the lack of any vesting of power with the Courts to
modify an award under Section 34. However, NHAI did not assert this position of
Section 34 powers being contravened in the case of each and every land owner who
was awarded enhanced compensation. NHAI in fact allowed various land owners to
receive the enhanced compensation without seeking any recourse against them. Such
selective challenge to the modification of awards would have then led to an
injusticiable position against the Respondent M. Hakeem and several other land owners
who were arraigned as Respondents in the Supreme Court, but not the others.
20. The Supreme Court has therefore played a balancing act on the factual circumstances
and legal position in this case and thereby delivered a judgment which not only affirms
the correct position of law but also exemplifies the exercise of its powers under
Articles 136 and 142 in order to do complete justice to the contesting parties.
21. On the one hand, the Court has set aside the High Court’s judgement on law by
affirming that no power to modify arbitral award under Section 34 of the Arbitration
Act. On the other hand, the Court was mindful of the conduct of NHAI in not only
filing selective appeals against the District Court’s decision in several compensation
grant cases, while not contesting high compensations received by other landowners, but
also the unlawful approach of the Central Government in determining the value of the
land parcels de hors the legislative postulation of Section 3G(7)(a) by ignoring the
market value of the land parcels and downgrading the value of the lands on the basis of
guideline values.
22. In this sense, the judgment of the Supreme Court is a unique illustration of exercising
its discretion not to entertain a petition under Article 136, and yet exercise jurisdiction
under Article 142(1) to do complete justice to the land owners.
 3. MS. EERA THROUGH DR. MANJULA KRIPPENDORF V.
STATE (GOVT. OF NCT OF DELHI)

Decided by the Division Bench comprising of JJ Dipak Misra and R.F. Nariman on
21st July, 2017
In the instant case, rape was committed on a woman of 38 years of age but she was suffering
from Cerebral Palasy (R. Hemiparesis) and, therefore, though she is biologically 38 years of
age, yet her mental age is approximately 6 to 8 years.
The POCSO Act, 2012 under Section 2(d) provides the definition of child in the following
words:
“child” means any person below the age of eighteen years.
In light of this factual and legal situation it was pleaded before the Supreme Court that
biological age should not be the yardstick in determining the age rather mental age of the
victim should also be taken into consideration i.e. the procedure contemplated under the of
the Protection of Children From Sexual Offences Act, 2012 should be followed in the instant
case and the victim suffering from mental disease in the instant case should get the benefit of
this benevolent piece of legislation.
Arguments in Favour
The word “age” defined under Section 2(d) of the Act should be interpreted to include both
biological and mental age. The protective umbrella of the law should be expanded to included
mentally disabled children. The purpose of the law will be served effectively.
On the other hand
It was suggested that in the absence of any ambiguity, the plain meaning should be assigned
to the word “age” under Section 2(d).
The physically and mentally disabled children are covered in the definition of aggravated
penetrative sexual assault.
Section 5(k) to which my attention has been drawn reads thus:
“(k) whoever, taking advantage of a child’s mental or physical disability, commits penetrative
sexual assault on the child;”
The adoption of the interpretation suggested would lead to confusion, chaos and also delay in
proceedings.
The mental element has been specially addressed in JJ Act, 2015. Had it been the intention of
the legislature, it would have done it directly here also. There is no need to read it by way of
implication.
 The Supreme Court referred to the purposive interpretation and role of judge in interpreting
the law. The Court said that the judges also have certain limitations while they take recourse
to purposive interpretation.
Observation of the Supreme Court
1. The situation can be viewed from another aspect. The POCSO Act has identified minors and
protected them by prescribing the statutory age which has nexus with the legal eligibility to
give consent. The Parliament has felt it appropriate that the definition of the term “age” by
chronological age or biological age to be the safest yardstick than referring to a person having
mental retardation. It may be due to the fact that the standards of mental retardation are
different and they require to be determined by an expert body. The degree is also different.
The Parliament, as it seems, has not included mental age. It is within the domain of
legislative wisdom. Be it noted, a procedure for determination of age had been provided
under Rule 12 of the Juvenile Justice (Care and Protection of Children) Rules, 2000. The
procedure was meant for determination of the biological age. It may be stated here that
Section 2(12) of the Juvenile Justice (Care and Protection of Children) Act, 2015 (2 of 2016)
defines “child” to mean a person who not completed eighteen years of age. There is a
procedure provided for determination of the biological age. The purpose of stating so is that
the Parliament has deliberately fixed the age of the child and it is in the prism of biological
age. If any determination is required, it only pertains to the biological age, and nothing else.
2. The purpose of POCSO Act is to treat the minors as a class by itself and treat them separately
so that no offence is committed against them as regards sexual assault, sexual harassment and
sexual abuse. The sanguine purpose is to safeguard the interest and wellbeing of the children
at every stage of judicial proceeding. It provides for a child friendly procedure. It
categorically makes a distinction between a child and an adult. On a reading of the POCSO
Act, it is clear to us that it is gender neutral. In such a situation, to include the perception of
mental competence of a victim or mental retardation as a factor will really tantamount to
causing violence to the legislation by incorporating a certain words to the definition. By
saying “age” would cover “mental age” has the potential to create immense anomalous
situations without there being any guidelines or statutory provisions. Needless to say, they are
within the sphere of legislature. To elaborate, an addition of the word “mental” by taking
recourse to interpretative process does not come within the purposive interpretation as far as
the POCSO Act is concerned. I have already stated that individual notion or personal
conviction should not be allowed entry to the sphere of interpretation. It has to be gathered
from the legislative intention and I have already enumerated how the legislative intention is
to be gathered. Respect for the dignity of a person, as submitted, has its own pedestal but that
conception cannot be subsumed and integrated into a definition where the provision is clear
and unambiguous and does not admit of any other interpretation. If a victim is mentally
retarded, definitely the court trying the case shall take into consideration whether there is
consent or not. In certain circumstances, it would depend upon the degree of retardation or
degree of understanding. It should never be put in a straight jacket formula. It is difficult to
say in absolute terms.
4. Southern Motors vs. State of Karnataka

Issue:

Whether the post sale discounts granted by the assessee by issuing credit notes are eligible for
deduction from total turnover to quantify their taxable turnover?

Facts & Background:

M/s Southern Motors (“the Appellant” or “the Company”) is a dealer in motor vehicles and
registered under the Karnataka Value Added Tax Act, 2003 (“The KVAT Act”). The
Appellant raised the tax invoices on the purchasers as per the policy of manufacturers of
vehicles to maintain uniformity in the price thereof. After the sales were completed, credit
notes were issued to the customers granting discounts, in order to meet the competition in the
market and for allied reasons. Consequentially, the Company has received only the net
amount that is the amount shown in the invoice less the sum of discount disclosed in the
credit note. Accordingly, the net amount, so received was reflected in his books of account
and returns were filed under the Income Tax Act, 1961. However, the Department disallowed
the claim of deduction towards discounts from the total turnover in terms of Rule 3(2)(c) of
the Karnataka Value Added Tax Rules, 2005 (“the KVAT Rules”) on the ground that the
same were not revealed at the time of issuance of tax invoices, though credit notes were
issued subsequently. Thus, after an unsuccessful challenge before the High Court, the
Appellant preferred an appeal before the Hon’ble Supreme Court.

Appellant’s view:

Section 30 of the KVAT Act read with Rule 31 of the KVAT Rules (dealing with ‘credit and
debit notes’) clearly states that the assessee is entitled to claim deduction of the discount
allowed to their customers by credit notes, from the total turnover to quantify their taxable
turnover. As some discounts, especially those linked to targets to be achieved in a particular
period are not comprehendible at the time of sale, these logically cannot be reflected in the
tax invoices. Further, in no view of the matter, Rule 3(2)(c) of the KVAT Rules can be
conceded a primacy to curtail or abrogate Section 30 of the KVAT Act or Rule 31 of the
KVAT Rules, lest the latter provisions are rendered otiose. Further, it is no longer res
integra that trade discount is not constituent to sale price and therefore not taxable. Moreover,
it has been insistently pleaded that a post sale discount through credit notes is revenue neutral
in terms of Section 30(3) of the KVAT Act, as a consequence whereof the selling and the
purchasing dealers accordingly remodel their returns and pay taxes as due.

Revenue’s view:

A discount to qualify for deduction to compute the total and eventual taxable turnover, as
contemplated in Rule 3(2)(c) of the KVAT Rules has to be essentially reflected in the tax
invoice or the bill of sale issued in respect of the sales. According to them, Section 30 of the
KVAT Act and Rule 31 of the KVAT Rules deal with a situation where after a tax invoice is
issued, it transpires that the tax charged has either exceeded or has fallen short of the tax
payable for which a credit/debit note, as the case may be, would be issued. As these two
provisions do not regulate the computation of a taxable turnover, there is no correlation
thereof with Rule 3(2)(c) of the KVAT Rules which has been assigned an independent role to
determine the tax liability. In absence of any specific provision in the parent statute granting
tax exemption based on deduction founded on post sale trade discount, Section 30 of the
KVAT Act and Rule 31 of the KVAT Rules are of no avail to the assesses. It is maintained
that in any view of the matter, a taxing statute has to be construed strictly and any exemption
is permissible only if the legislation permits the same.

Held:

The Hon’ble Supreme Court after observing the various legal pronouncements has held that
the requirement of reference of the discount in the tax invoice or bill of sale to qualify it for
deduction has to be in relation to the final sale/purchase price and not limited to the original
sale without the trade discount. However, the transactions allowing discount have to be
proved on the basis of contemporaneous records and the final sale price after subtracting the
trade discount must mandatorily be reflected in the accounts as stipulated under Rule 3(2)(c)
of the KVAT Rules. The sale/purchase price has to be adjudged on a combined consideration
of the tax invoice or bill of sale as the case may be along with the accounts reflecting the
trade discount and the actual price paid. Further, the first proviso to Rule 3(2)(c) of the
KVAT Rules has to be so read down, to be in consonance with the true intendment of the
legislature and to achieve as well the avowed objective of correct determination of the taxable
turnover. The contrary interpretation accorded by the High Court being in defiance of logic
and the established axioms of interpretation of statutes is thus unacceptable and is negated.
Treatment of post supply discounts in the GST Regime –Our Comment:

As per Section 15(3)(b) of the Model CGST/SGST Act, 2016, the value of supply shall not
include any discount that is given after the supply has been effected provided that: Such
discount is established in terms of an agreement entered into at or before the time of such
supply and specifically linked to relevant invoices.  Also Input tax credit has been reversed
by the recipient of the supply as is attributable to the discount on the basis of document
issued by the supplier.  Such post supply discounts will always be under challenge. Further, it
would be a complex procedure to determine if the receiver of the discount has reduced his
claim of input tax also. Hence, this provision should be duly amended keeping in mind of
existing legal jurisprudence as held in the above decision of the Hon’ble Supreme Court
wherein it was held that the sale/purchase price has to be adjudged on a combined
consideration of the tax invoice or bill of sale as the case may be along with the accounts
reflecting the trade discount and the actual price paid. Thus, the provision in respect of
discount should be made in the context of the decision of the Hon’ble Supreme Court as
generally, post sale discounts are linked to targets to be achieved in a particular period which
is not comprehendible at the time of sale and accordingly, this discount is logically cannot be
linked with the tax invoice

5. Phoenix Arc Private Limited v. Spade Financial Services Limited & Ors

A three Judge Bench of the Supreme Court comprising of Justices Dr. D. Y. Chandrachud,
Indu Malhotra and Indira Banerjee while hearing an appeal challenging the orders passed by
the NCLAT and the NCLT wherein two entities namely AAA Landmark Private Limited and
Spade Financial Services Limited were excluded from the Committee of Creditors constituted
for corporate insolvency resolution process initiated against Corporate Debtor, AKME
Projects Limited; held that since the  commercial arrangements between the creditor and
corporate debtor is collusive in nature, the debt does not constitute as ‘financial debt’ and
hence both the entities (Spade and AAA) are not financial creditors of the corporate debtor.
 The applications were filed by Phoenix Arc Private Limited and YES Bank under Section
60(5)(c) of the Insolvency and Bankruptcy Code, 2016 at the NCLT and later an appeal
against the same was preferred at the NCLAT.  The NCLT held that both the entities cannot
be termed as ‘Financial Creditors’, as the transaction between them and the corporate debtor
is collusive in nature and consequently the entities cannot be included in the CoC. In the
appeal, the Appellate Authority reversed the findings of the Adjudicating Authority and held
that the entities are financial creditors but are still disqualified to be the part of the CoC on
the ground that they are ‘Related Parties’ of the corporate debtor.

In the appeal before the Apex Court, Phoenix submitted that although the NCLAT rightly
dismissed the appeal filed by Spade and AAA holding that they are related parties of the
Corporate Debtor and hence cannot be included in the CoC, the finding that they are financial
creditors is erroneous in nature. It challenged the finding on the following grounds:

 It is contrary to record; and

 Both AAA and Spade are not even creditors of the corporate debtor, let alone financial
creditor.

Facts of the case:

Corporate insolvency resolution process (CIRP) was initiated against the Corporate Debtor
on 18.04.2018 on an application filed by the Operational Creditor under section 9 of the
Insolvency and Bankruptcy Code, 2016 (IBC).

Claim of Spade:

During the process, claims were invited by the Interim Resolution Professional (IRP) and
Spade filed its claim as Financial Creditor for its amount on 10.05.2018 but later revised the
sum and filed the claim again after a few days.

The basis for claim filed by Spade was an alleged MOU executed with the CD which stated
an amount of Inter Corporate Deposits (ICDs) granted to the CD by Spade bearing interest of
24% repayable in terms of mutual agreement between the parties.
Spade submitted before the Court that it has granted ICDs of Rs. 66,00,00,000 (approx.) to
the Corporate Debtor between June 2009 and January 2013. Out of this amount, Spade
claimed a principal amount of Rs. 23,00,00,000. The balance amount of Rs. 43,06,00,000 was
credited in the account of AAA, which is a wholly owned subsidiary of Spade. The total
claim of Spade increased to Rs. 109,11,00,000 in 7 years on account of interest at the rate of
24%.

Claim of AAA:

AAA filed its claim before the IRP as a creditor for its sum on 10.05.2018. Thereafter, it filed
a revised claim as a financial creditor for a revised amount on 23.05.2018. AAA said that it
had entered into a Development Agreement with the CD on 01.03.2012 for a sale
consideration to purchase development rights in a project. On 25.10.2012, that Development
Agreement was terminated and an Agreement to Sell along with a Side Letter was executed
between AAA and the CD for purchase of flats. The sale consideration amount was further
enhanced in the Development Agreement. AAA further paid a certain sum as advance
payment under the Agreement to Sell, which was adjusted out of the ICDs payable to Spade
as noted above. The claim of AAA is with respect to the principal amount of Rs.
43,06,00,000, which along with interest at the rate of 18% increased to Rs. 109,72,00,000 in
5 years.

Constitution of COC:

The CoC was constituted on 22.05.2018. The IRP rejected the claim of Spade on the ground
that the claim was not in the nature of a financial debt in terms of section 5(8) of IBC as there
was an absence of consideration for the value of money, i.e., there was  no stipulated time
period for repayment of the claimed ICDs.

Further, the claim of AAA was also rejected on the ground that its revised claim as a financial
creditor was filed after the expiry of the period for filing such a claim.

Proceedings before NCLT:

 Aggrieved by the rejection, AAA and Spade filed an application to be included in CoC and
the same was allowed by the NCLT. The other financial creditors- Phoenix and YES Bank
were not made party to this proceeding.

The NCLT observed the following:

 AAA’s original claim was filed on time and it only amended its claim later.

 Amount given by the Spade in the form of ICDs has been received as a deposit which
attracted interest as reflected in the deducted TDS on interest.

Accordingly, NCLT allowed Spade and AAA to submit their claims as financial creditors and
directed the IRP to consider their claims.

Later, after a CoC meeting that was also attended by newly approved financial creditors AAA
and Spade; Phoenix and YES Bank filed applications for exclusion from the CoC before the
NCLT on the grounds that they are related parties.

Accordingly, NCLT held that Spade and AAA do not qualify as financial creditors. It took
note of first proviso of Section 21(2) of the IBC which states that a financial creditor who is a
related party of the corporate debtor shall not have the right of representation, participation or
voting in the CoC.

Proceedings before NCLAT:

In an appeal before the NCLAT, it observed that ‘admittedly’ Spade and AAA ‘are financial
creditors of the corporate debtor’. Further, it held that both the entities were related parties
within section 5(24) of IBC on the grounds that:

 After cancellation of Development agreement, AAA and CD entered into an Agreement to

Sale and Side Letter which was merely a camouflage under which they were partners in
developing a residential project to be sold to a third party.

 According to Section 5(24)(f), during the transaction period 2010 to 2013, Spade led by Mr
Arun Anand made multiple financial arrangements on the basis of advice provided by the CD
which was led by its management and directors including Mr. Anil Nanda and Mr. Sonal
Anand (relative of Mr. Arun Anand).
 Due to various reasons, it found that Mr. Arun Anand had direct relations with the day to day
happenings of the corporate debtor.

 Arun Anand and Mr. Sonal Anand were directors of the Corporate Debtor till 2013. Hence,
Mr. Arun Anand would be a related party under Section 5(24)(a) read with 5(24A)(a)7, being
a relative of another director.

 A holding company of the Corporate Debtor, Joint Investment Private Limited (“JIPL”) holds
shareholding in Spade.

Hence, NCLAT came to the conclusion that the Adjudicating Authority had rightly excluded
both Spade and AAA from participation in the CoC.

The issues before the Supreme Court:

1. Whether Spade and AAA are financial creditors of the Corporate Debtor;

2. Whether Spade and AAA are related parties of the Corporate Debtor;

3. Whether Spade and AAA have to be excluded from the CoC.

The Supreme Court held that:

 The decision of the NCLAT wherein Spade and AAA have been referred as financial
creditors has been set aside. Due to collusive nature of their transactions that have been
alleged to be financial debt under Section 5(8), Spade and AAA cannot be labeled as
financial creditors under section 5(7).

 The decision of the NCLAT holding Spade and AAA as related parties of the Corporate
Debtor under section 5(24) has been affirmed.

 The decision of the NCLAT wherein it excluded Spade and AAA from the CoC in
accordance with the first proviso of section 21(2) has been affirmed.

Accordingly the appeal was dismissed by the Supreme Court with the directions that pending
applications(s), if any, stand disposed of.

Another important observation made by the Apex Court that is a big take away from this
judgment is “While the default rule under the first proviso to Section 21(2) is that only those
financial creditors that are related parties in praesenti would be debarred from the CoC, those
related party financial creditors that cease to be related parties in order to circumvent the
exclusion under the first proviso to Section 21(2), should also be considered as being covered
by the exclusion thereunder.” Ideally the disqualification should apply even though the
default rule is that the financial creditor must be a “related party” in present, to be
disqualified from being included in the CoC.