Legal Blog: August 2011

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Tuesday, August 30, 2011

Adjournments are a Cancer Corroding the Judicial System : Supreme Court

Justice R.M. Lodha
Supreme Court of India
The Supreme Court in M/s Shiv Cotex v. Tirgun Auto Plast Pvt. Ltd. & Ors. has lamented the conduct of unscrupulous litigants in delaying the justice delivery system in the country. Justice Dalveer Bhandari in an earlier judgment had highlighted the bottlenecks in the judicial system which lead to pendency of cases for decades or more. We have covered that judgment in our post 'Justice, Courts and Delay : Remedial Measures'. In the present judgment, Justice R.M. Lodha has hit out at unscrupulous litigants and lawyers who have allowed the concept of adjournments to grow in to a cancer corroding the entire judicial delivery system. The relevant extracts from the judgment are reproduced hereinbelow;

15. Second, and equally important, the High Court upset the concurrent judgment and decree of the two courts on misplaced sympathy and non – existent justification. The High Court observed that the stakes in the suit being very high, the plaintiff should not be non-suited on the basis of no evidence. But, who is to be blamed for this lapse? It is the plaintiff alone. As a matter of fact, the trial court 

Unfortunately, the High Court failed to keep in view the had given more than sufficient opportunity to the plaintiff to produce evidence in support of its case. As noticed above, after the issues were framed on July 19, 2006, on three occasions, the trial court fixed the matter for the plaintiff’s evidence but on none of these dates any evidence was let in by it. What should the court do in such circumstances? Is the court obliged to give adjournment after adjournment merely because the stakes are high in the dispute? Should the court be a silent spectator and leave control of the case to a party to the case who has decided not to take the case forward? It is sad, but true, that the litigants seek – and the courts grant – adjournments at the drop of the hat. In the cases where the judges are little pro-active and refuse to accede to the requests of unnecessary adjournments, the litigants deploy all sorts of methods in protracting the litigation. It is not surprising that civil disputes drag on and on. The misplaced sympathy and indulgence by the appellate and revisional courts compound the malady further. The case in hand is a case of such misplaced sympathy. It is high time that courts become sensitive to delays in justice delivery system and realize that adjournments do dent the efficacy of judicial process and if this menace is not controlled adequately, the litigant public may lose faith in the system sooner than later. The courts, particularly trial courts, must ensure that on every date of hearing, effective progress takes place in the suit. 

16. No litigant has a right to abuse the procedure provided in the CPC. Adjournments have grown like cancer corroding the entire body of justice delivery system. It is true that cap on adjournments to a party during the hearing of the suit provided in proviso to Order XVII Rule 1 CPC is not mandatory and in a suitable case, on justifiable cause, the court may grant more than three adjournments to a party for its evidence but ordinarily the cap provided in the proviso to Order XVII Rule 1 CPC should be maintained. When we say ‘justifiable cause’ what we mean to say is, a cause which is not only ‘sufficient cause’ as contemplated in sub-rule (1) of Order XVII CPC but a cause which makes the request for adjournment by a party during the hearing of the suit beyond three adjournments unavoidable and sort of a compelling necessity like sudden illness of the litigant or the witness or the lawyer; death in the family of any one of them; natural calamity like floods, earthquake, etc. in the area where any of these persons reside; an accident involving the litigant or the witness or the lawyer on way to the court and such like cause. The list is only illustrative and not exhaustive. However, the absence of the lawyer or his non-availability because of professional work in other court or elsewhere or on the ground of strike call or the change of a lawyer or the continuous illness of the lawyer (the party whom he represents must then make alternative arrangement well in advance) or similar grounds will not justify more than three adjournments to a party during the hearing of the suit. The past conduct of a party in the conduct of the proceedings is an important circumstance which the courts must keep in view whenever a request for adjournment is made. A party to the suit is not at liberty to proceed with the trial at its leisure and pleasure and has no right to determine when the evidence would be let in by it or the matter should be heard. The parties to a suit – whether plaintiff or defendant – must cooperate with the court in ensuring the effective work on the date of hearing for which the matter has been fixed. If they don’t, they do so at their own peril. Insofar as present case is concerned, if the stakes were high, the plaintiff ought to have been more serious and vigilant in prosecuting the suit and producing its evidence. If despite three opportunities, no evidence was let in by the plaintiff, in our view, it deserved no sympathy in second appeal in exercise of power under Section 100 CPC. 

We find no justification at all for the High Court in upsetting the concurrent judgment of the courts below. The High Court was clearly in error in giving the plaintiff an opportunity to produce evidence when no justification for that course existed.

Monday, August 29, 2011

Existence of Arbitration Agreement & Section 11 of the Arbitration & Conciliation Act : The Law

Justice R.V. Raveendran
Supreme Court of India
The Supreme Court recently in Bharat Rasiklal Ashra Vs. Gautam Rasiklal Ashra had the occasion to deal with Section 11 of the Arbitration & Conciliation Act, 1996. The question posed before the Supreme Court was whether the Chief Justice or his designate, under section 11 of the Arbitration & Conciliation Act, can appoint an arbitrator without deciding the question with regard to the existence of an arbitration agreement between the parties, leaving it open to be decided by the arbitrator? While answering the question, the Supreme Court held as under;

Therefore, the following question arises for consideration in this appeal: 

"Where the arbitration agreement between the parties is denied by the respondent, whether the Chief Justice or his designate, in exercise of power under section 11 of the Act, can appoint an arbitrator without deciding the question whether there was an arbitration agreement between the parties, leaving it open to be decided by the arbitrator?" 

8. The question is covered by the decisions of this Court in S.B.P. & Co. vs. Patel Engineering Ltd. [2005 (8) SCC 618] and National Insurance Co. Ltd. vs. Boghara Polyfab Pvt. Ltd. [2009 (1) SCC 267]. In S.B.P.& Co., a Constitution Bench of this court held that when an application under section 11 of the Act is filed, it is for the Chief Justice or his designate to decide whether there is an arbitration agreement, as defined in the Act and whether the party who has made a request before him, is a party to such an agreement. The said decision also made it clear as to which issues could be left to the decision of the arbitrator. Following the decision in S.B.P. & Co., this court in National Insurance Co. Ltd. held as follows : 
"17. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under section 11 of the Act into three categories, that is (i) issues which the Chief Justice or his Designate is bound to decide; (ii) issues which he can also decide, that is issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide. 
(17.1) The issues (first category) which Chief Justice/his designate will have to decide are: 
(a) Whether the party making the application has approached the appropriate High Court. 
(b) Whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to such an agreement. 
(17.2) The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the arbitral tribunal) are: 
(a) Whether the claim is a dead (long barred) claim or a live claim. 
(b) Whether the parties have concluded the contract/ transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 
(17.3) The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral tribunal are : 
(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). 
(ii) Merits or any claim involved in the arbitration." 
(emphasis supplied) 
9. It is clear from the said two decisions that the question whether there is an arbitration agreement has to be decided only by the Chief Justice or his designate and should not be left to the decision of the arbitral tribunal. This is because the question whether there is arbitration agreement is a jurisdictional issue and unless there is a valid arbitration agreement, the application under section 11 of the Act will not be maintainable and the Chief Justice or his designate will have no jurisdiction to appoint an arbitrator under section 11 of the Act. This Court also made it clear that only in regard to the issues shown in the second category, the Chief Justice or his designate has the choice of either deciding them or leaving them to the decision of the arbitral tribunal. Even in regard to the issues falling under the second category, this court made it clear that where allegations of forgery or fabrication are made in regard to the documents, it would be appropriate for the Chief Justice or his designate to decide the issue. In view of this settled position of law, the issue whether there was an arbitration agreement ought to have been decided by the designate of the Chief Justice and only if the finding was in the affirmative he could have proceeded to appoint the Arbitrator.

Sunday, August 28, 2011

Framing of Charge - Purpose and Interpretation : The Law

Justice A.K. Ganguly
Supreme Court of India
In our previous post we have dealt with the principles relating to the framing of charge in criminal prosecutions. In another judgment the Supreme Court, in Mohan Singh v. State of Bihar, has examined the law relating to charge while highlighting the purpose of framing a charge against the accused in criminal cases. The court has also laid down the law, while examining various authorities on the subject, with relation to the interpretation of words in a charge. The relevant extracts from the judgment are reproduced hereinbelow;



16. The purpose of framing a charge is to give intimation to the accused of clear, unambiguous and precise notice of the nature of accusation that the accused is called upon to meet in the course of a trial. (See decision of a four-Judge Bench of this Court in V.C. Shukla v. State Through C.B.I.,reported in 1980 Supplementary SCC 92 at page 150 and paragraph 110 of the report). Justice Desai delivering a concurring opinion, opined as above.

17. But the question is how to interpret the words in a charge? In this connection, we may refer to the provision of Section 214 of the Code.

Section 214 of the Code is set out below:

214. Words in charge taken in sense of law under which offence is punishable. In every charge words used in describing an offence shall be deemed to have been used in the sense attached to them respectively by the law under which such offence is punishable.

18.The other relevant provisions relating to charge may be noticed as under:

211. Contents of charge.- (1) Every charge under this Code shall state the offence with which the accused is charged.

(2) If the law which creates the offence gives it any specific name, the offence may be described in the charge by that name only.

(3) If the law which creates the offence does not give it any specific name, so much of the definition of the offence must be stated as to give the accused notice of the matter with which he is charged.

(4) The law and section of the law against which the offence is said to have been committed shall be mentioned in the charge.

(5) The fact that the charge is made is equivalent to a statement that every legal condition required by law to constitute the offence charged was fulfilled in the particular case.

(6) The charge shall be written in the language of the Court.

(7) If the accused, having been previously convicted of any offence, is liable, by reason of such previous conviction, to enhanced punishment, or to punishment of a different kind, for a subsequent offence, and it is intended to prove such previous conviction for the purpose of affecting the punishment which the Court may think fit to award for the subsequent offence, the fact date and place of the previous conviction shall be stated in the charge; and if such statement has been omitted, the Court may add it at any time before sentence is passed.

215. Effect of errors. No error in stating either the offence or the particulars required to be stated in the charge, and no omission to state the offence or those particulars, shall be regarded at any stage of the case as material, unless the accused was in fact misled by such error or omission, and it has occasioned a failure of justice.

464. Effect of omission to frame, or absence of, or error in, charge. (1) No finding sentence or order by a Court of competent jurisdiction shall be deemed invalid merely on the ground that no charge was framed or on the ground of any error, omission or irregularity in the charge including any misjoinder of charges, unless, in the opinion of the Court of appeal, confirmation or revision, a failure of justice has in fact been occasioned thereby.

(2) If the Court of appeal, confirmation or revision is of opinion that a failure of justice has in fact been occasioned, it may-

(a) in the case of an omission to frame a charge, order that a charge be framed and that the trial be recommenced from the point immediately after the framing of the charge;

(b) in the case of an error, omission or irregularity in the charge, direct a new trial to be had upon a charge framed in whatever manner it thinks fit:

Provided that if the Court is of opinion that the facts of the case are such that no valid charge could be preferred against the accused in respect of the facts proved, it shall quash the conviction.

19. While examining the aforesaid provisions, we may keep in mind the principles laid down by Justice Vivian Bose in Willie (William) Slaney v. State of Madhya Pradesh reported in (1955) 2 SCR 1140. At page 1165 of the report, the learned judge observed:-

We see no reason for straining at the meaning of these plain and emphatic provisions unless ritual and form are to be regarded as of the essence in criminal trials. We are unable to find any magic or charm in the ritual of a charge. It is the substance of these provisions that count and not their outward form. To hold otherwise is only to provide avenues of escape for the guilty and afford no protection to the innocent.

20. The aforesaid observation of Justice Vivian Bose in William Slaney (supra) has been expressly approved subsequently by this Court in V.C. Shukla (supra).

21. Reference in this connection may be made to the decision of this Court in the case of Tulsi Ram and others v. State of Uttar Pradesh reported in AIR 1963 SC 666. In that case in paragraph 12 this Court was considering these aspects of the matter and made it clear that a complaint about the charge was never raised at any earlier stage and the learned Judges came to the conclusion that the charge was fully understood by the appellants in that case and they never complained at the appropriate stage that they were confused or bewildered by the charge. The said thing is true here. Therefore, the Court refused to accept any grievance relating to error in the framing of the charge.

22. Subsequently, in the case of State of Andhra Pradesh v. Cheemalapati Ganeswara Rao and another reported in AIR 1963 SC 1850, this Court also had to consider a similar grievance. Both in the case of Tulsi Ram (supra) as also in the case of Cheemalapati (supra) the charges were of conspiracy. The same is also a charge in the instant case. Repelling the said grievance, the learned Judges held that the object in saying what has been set out in the first charge was only to give notice to the accused as to the ambit of the conspiracy to which they will have to answer and nothing more. This Court held that even assuming for a moment that the charge is cumbersome but in the absence of any objection at the proper time and in the absence of any material from which the Court can infer prejudice, such grievances are precluded by reason of provision of Section 225 of the Cr.P.C. Under the present Code it is Section 215 which has been quoted above.

23. Reference in this connection may also be made in the decision of this Court in Rawalpenta Venkalu and another v. The State of Hyderabad reported in AIR 1956 SC 171 at para 10 page 174 of the report. The learned Judges came to the conclusion that although Section 34 is not added to Section 302, the accused had clear notice that they were being charged with the offence of committing murder in pursuance of their common intention. Therefore, the omission to mention Section 34 in the charge has only an academic significance and has not in any way misled the accused. In the instant case the omission of charge of Section 302 has not in any way misled the accused inasmuch as it is made very clear that in the charge that he agreed with the others to commit the murder of Anil Jha. Following the aforesaid ratio there is no doubt that in the instant case from the evidence led by the prosecution the charge of murder has been brought home against the appellant.

24. In K. Prema S. Rao and another v. Yadla Srinivasa Rao and others reported in (2003) 1 SCC 217 this Court held that though the charge specifically under Section 306 IPC was not framed but all the ingredients constituting the offence were mentioned in the statement of charges and in paragraph 22 at page 226 of the report, a three-Judge Bench of this Court held that mere omission or defect in framing of charge does not disable the criminal court from convicting the accused for the offence which is found to have been proved on the evidence on record. The learned Judges held that provisions of Section 221 Cr.P.C. takes care of such a situation and safeguards the powers of the criminal court to convict an accused for an offence with which he is not charged although on facts found in evidence he could have been charged with such offence. The learned Judges have also referred to Section 215 of the Cr.P.C., set out above, in support of their contention.

25. Even in the case of Dalbir Singh v. State of U.P., reported in (2004) 5 SCC 334, a three-Judge Bench of this Court held that in view of Section 464 Cr.P.C. it is possible for the appellate or revisional court to convict the accused for an offence for which no charge was framed unless the court is of the opinion that the failure of justice will occasion in the process. The learned Judges further explained that in order to judge whether there is a failure of justice the Court has to examine whether the accused was aware of the basic ingredients of the offence for which he is being convicted and whether the main facts sought to be established against him were explained to him clearly and whether he got a fair chance to defend himself. If we follow these tests, we have no hesitation that in the instant case the accused had clear notice of what was alleged against him and he had adequate opportunity of defending himself against what was alleged against him.

26. In State of Uttar Pradesh v. Paras Nath Singh reported in (2009) 6 SCC 372 this Court, setting out Section 464 of Cr.P.C., further held that whether there is failure of justice or not has to be proved by the accused. In the instant case no such argument was ever made before the Trial Court or even in the High Court and we are satisfied from the materials on record that no failure of justice has been occasioned in any way nor has the appellant suffered any prejudice.

27. In Annareddy Sambasiva Reddy and others v. State of Andhra Pradesh reported in (2009) 12 SCC 546 this court again had occasion to deal with the same question and referred to Section 464 of Cr.P.C. In paragraph 55 at page 567 of the report, this Court came to the conclusion that if the ingredients of the section charged with are obvious and implicit, conviction under such head can be sustained irrespective of the fact whether the said section has been mentioned or not in the charge. The basic question is one of prejudice.

28. In view of such consistent opinion of this Court, we are of the view that no prejudice has been caused to the appellant for non-mentioning of Section 302 I.P.C. in the charge since all the ingredients of the offence were disclosed. The appellant had full notice and had ample opportunity to defend himself against the same and at no earlier stage of the proceedings, the appellant had raised any grievance.

Apart from that, on overall consideration of the facts and circumstances of this case we do not find that the appellant suffered any prejudice nor has there been any failure of justice.

Framing of Charge : Principles and Law

Justice P. Sathasivam
Supreme Court of India
The Supreme Court in Sajjan Kumar Vs. Central Bureau of Investigation has examined the legal provisions and authorities on framing of charge in criminal prosecutions. While reiterating the legal principles evolved by the courts over the years, the Hon'ble Supreme Court held as under;

14. In Prafulla Kumar Samal (supra), the scope of Section 227 of the Cr.P.C. was considered. After adverting to various decisions, this Court has enumerated the following principles: 
"(1) That the Judge while considering the question of framing the charges under Section 227 of the Code has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out. 
(2) Where the materials placed before the Court disclose grave suspicion against the accused which has not been properly explained the Court will be fully justified in framing a charge and proceeding with the trial. 
(3) The test to determine a prima facie case would naturally depend upon the facts of each case and it is difficult to lay down a rule of universal application. By and large however if two views are equally possible and the Judge is satisfied that the evidence produced before him while giving rise to some suspicion but not grave suspicion against the accused, he will be fully within his right to discharge the accused. 
(4) That in exercising his jurisdiction under Section 227 of the Code the Judge which under the present Code is a senior and experienced court cannot act merely as a Post Office or a mouthpiece of the prosecution, but has to consider the broad probabilities of the case, the total effect of the evidence and the documents produced before the Court, any basic infirmities appearing in the case and so on. This however does not mean that the Judge should make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial." 
15. In Dilawar Balu Kurane (supra), the principles enunciated in Prafulla Kumar Samal (supra) have been reiterated and it was held: 
"12. Now the next question is whether a prima facie case has been made out against the appellant. In exercising powers under Section 227 of the Code of Criminal Procedure, the settled position of law is that the Judge while considering the question of framing the charges under the said section has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out; where the materials placed before the court disclose grave suspicion against the accused which has not been properly explained the court will be fully justified in framing a charge and proceeding with the trial; by and large if two views are equally possible and the Judge is satisfied that the evidence produced before him while giving rise to some suspicion but not grave suspicion against the accused, he will be fully justified to discharge the accused, and in exercising jurisdiction under Section 227 of the Code of Criminal Procedure, the Judge cannot act merely as a post office or a mouthpiece of the prosecution, but has to consider the broad probabilities of the case, the total effect of the evidence and the documents produced before the court but should not make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial (see Union of India v. Prafulla Kumar Samal). 
14. We have perused the records and we agree with the above views expressed by the High Court. We find that in the alleged trap no police agency was involved; the FIR was lodged after seven days; no incriminating articles were found in the possession of the accused and statements of witnesses were recorded by the police after ten months of the occurrence. We are, therefore, of the opinion that not to speak of grave suspicion against the accused, in fact the prosecution has not been able to throw any suspicion. We, therefore, hold that no prima facie case was made against the appellant." 
16. It is clear that at the initial stage, if there is a strong suspicion which leads the Court to think that there is ground for presuming that the accused has committed an offence, then it is not open to the court to say that there is no sufficient ground for proceeding against the accused. The presumption of the guilt of the accused which is to be drawn at the initial stage is only for the purpose of deciding prima facie whether the Court should proceed with the trial or not. If the evidence which the prosecution proposes to adduce prove the guilt of the accused even if fully accepted before it is challenged in cross-examination or rebutted by the defence evidence, if any, cannot show that the accused committed the offence, then there will be no sufficient ground for proceeding with the trial. A Magistrate enquiring into a case under Section 209 of the Cr.P.C. is not to act as a mere Post Office and has to come to a conclusion whether the case before him is fit for commitment of the accused to the Court of Session. He is entitled to sift and weigh the materials on record, but only for seeing whether there is sufficient evidence for commitment, and not whether there is sufficient evidence for conviction. If there is no prima facie evidence or the evidence is totally unworthy of credit, it is the duty of the Magistrate to discharge the accused, on the other hand, if there is some evidence on which the conviction may reasonably be based, he must commit the case. It is also clear that in exercising jurisdiction under Section 227 of Cr.P.C., the Magistrate should not make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial. 

17. Exercise of jurisdiction under Sections 227 & 228 of Cr.P.C. On consideration of the authorities about the scope of Section 227 and 228 of the Code, the following principles emerge:- 
(i) The Judge while considering the question of framing the charges under Section 227 of the Cr.P.C. has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out. The test to determine prima facie case would depend upon the facts of each case. 
(ii) Where the materials placed before the Court disclose grave suspicion against the accused which has not been properly explained, the Court will be fully justified in framing a charge and proceeding with the trial. 
(iii) The Court cannot act merely as a Post Office or a mouthpiece of the prosecution but has to consider the broad probabilities of the case, the total effect of the evidence and the documents produced before the Court, any basic infirmities etc. However, at this stage, there cannot be a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial. 
(iv) If on the basis of the material on record, the Court could form an opinion that the accused might have committed offence, it can frame the charge, though for conviction the conclusion is required to be proved beyond reasonable doubt that the accused has committed the offence. 
(v) At the time of framing of the charges, the probative value of the material on record cannot be gone into but before framing a charge the Court must apply its judicial mind on the material placed on record and must be satisfied that the commission of offence by the accused was possible. 
(vi) At the stage of Sections 227 and 228, the Court is required to evaluate the material and documents on record with a view to find out if the facts emerging therefrom taken at their face value discloses the existence of all the ingredients constituting the alleged offence. For this limited purpose, sift the evidence as it cannot be expected even at that initial stage to accept all that the prosecution states as gospel truth even if it is opposed to common sense or the broad probabilities of the case. 
(vii) If two views are possible and one of them gives rise to suspicion only, as distinguished from grave suspicion, the trial Judge will be empowered to discharge the accused and at this stage, he is not to see whether the trial will end in conviction or acquittal.

Wednesday, August 24, 2011

Doctrine of Repugnancy : The Law

Justice M.K. Sharma
Supreme Court of India
The Supreme Court in Zameer Ahmed Latifur Rehman Sheikh Vs. State of Maharashtra has examined the law relating to the Doctrine of Repugnancy. In essence, Part XI of the Indian Constitution describes the legislative relations between the States and the Centre. Further, Article 254 establishes the doctrine of Repugnancy which acts as a safeguard to solve disputes arising between the states and the Union. The term ‘Repugnancy’ means inconsistency between the State-made law and the Union-made law. The relevant extracts from the judgment are reproduced hereunder;

46. Before we proceed to analyze the said aspect, it would be appropriate to understand the situations in which repugnancy would arise. 

47. Chapter I of Part XI of the Constitution deals with the subject of distribution of legislative powers of the Parliament and the legislature of the States. Article 245 of the Constitution provides that the Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the State. 

48. The legislative field of the Parliament and the State Legislatures has been specified in Article 246 of the Constitution. Article 246, reads as follows: - 
"246. Subject-matter of laws made by Parliament and by the legislature of States.— 
(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the `Union List'). 
(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the `Concurrent List'). 
(3) Subject to clauses (1) and (2), the legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the `State List'). 
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List." 
Article 254 of the Constitution which contains the mechanism for resolution of conflict between the Central and the State legislations enacted with respect to any matter enumerated in List III of the Seventh Schedule reads as under: 
"254. Inconsistency between laws made by Parliament and laws made by the legislatures of States.— 
(1) If any provision of a law made by the legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to the provisions of Clause (2), the law made by Parliament, whether passed before or after the law made by the legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the legislature of the State shall, to the extent of the repugnancy, be void. 
(2) Where a law made by the legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State: Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the legislature of the State." 
49. We may now refer to the judgment of this Court in M. Karunanidhi v. Union of India, [(1979) 3 SCC 431], which is one of the most authoritative judgments on the present issue. In the said case, the principles to be applied for determining repugnancy between a law made by the Parliament and a law made by the State Legislature were considered by a Constitution Bench of this Court. At para 8, this Court held that repugnancy may result from the following circumstances: 
"1. Where the provisions of a Central Act and a State Act in the Concurrent List are fully inconsistent and are absolutely irreconcilable, the Central Act will prevail and the State Act will become void in view of the repugnancy. 
2. Where however a law passed by the State comes into collision with a law passed by Parliament on an Entry in the Concurrent List, the State Act shall prevail to the extent of the repugnancy and the provisions of the Central Act would become void provided the State Act has been passed in accordance with clause (2) of Article 254. 
3. Where a law passed by the State Legislature while being substantially within the scope of the entries in the State List entrenches upon any of the Entries in the Central List the constitutionality of the law may be upheld by invoking the doctrine of pith and substance if on an analysis of the provisions of the Act it appears that by and large the law falls within the four corners of the State List and entrenchment, if any, is purely incidental or inconsequential. 
4. Where, however, a law made by the State Legislature on a subject covered by the Concurrent List is inconsistent with and repugnant to a previous law made by Parliament, then such a law can be protected by obtaining the assent of the President under Article 254(2) of the Constitution. The result of obtaining the assent of the President would be that so far as the State Act is concerned, it will prevail in the State and overrule the provisions of the Central Act in their applicability to the State only. Such a state of affairs will exist only until Parliament may at any time make a law adding to, or amending, varying or repealing the law made by the State Legislature under the proviso to Article 254." In para 24, this Court further laid down the conditions which must be satisfied before any repugnancy could arise, the said conditions are as follows:- 
"1. That there is a clear and direct inconsistency between the Central Act and the State Act. 
2. That such an inconsistency is absolutely irreconcilable. 
3. That the inconsistency between the provisions of the two Acts is of such nature as to bring the two Acts into direct collision with each other and a situation is reached where it is impossible to obey the one without disobeying the other." 
Thereafter, this Court after referring to the catena of judgments on the subject, in para 38, laid down following propositions:- 

1. That in order to decide the question of repugnancy it must be shown that the two enactments contain inconsistent and irreconcilable provisions, so that they cannot stand together or operate in the same field. 

2. That there can be no repeal by implication unless the inconsistency appears on the face of the two statutes. 

3. That where the two statutes occupy a particular field, but there is room or possibility of both the statutes operating in the same field without coming into collision with each other, no repugnancy results. 

4. That where there is no inconsistency but a statute occupying the same field seeks to create distinct and separate offences, no question of repugnancy arises and both the statutes continue to operate in the same field." 

50. In Govt. of A.P. v. J.B. Educational Society, [(2005) 3 SCC 212], this Court while discussing the scope of Articles 246 and 254 and considering the proposition laid down by this Court in M. Karunanidhi case (supra) with respect to the situations in which repugnancy would arise, in para 9, held as follows:- 
"9. Parliament has exclusive power to legislate with respect to any of the matters enumerated in List I, notwithstanding anything contained in clauses (2) and (3) of Article 246. The non obstante clause under Article 246(1) indicates the predominance or supremacy of the law made by the Union Legislature in the event of an overlap of the law made by Parliament with respect to a matter enumerated in List I and a law made by the State Legislature with respect to a matter enumerated in List II of the Seventh Schedule. 
10. There is no doubt that both Parliament and the State Legislature are supreme in their respective assigned fields. It is the duty of the court to interpret the legislations made by Parliament and the State Legislature in such a manner as to avoid any conflict. However, if the conflict is unavoidable, and the two enactments are irreconcilable, then by the force of the non obstante clause in clause (1) of Article 246, the parliamentary legislation would prevail notwithstanding the exclusive power of the State Legislature to make a law with respect to a matter enumerated in the State List. 
11. With respect to matters enumerated in List III (Concurrent List), both Parliament and the State Legislature have equal competence to legislate. Here again, the courts are charged with the duty of interpreting the enactments of Parliament and the State Legislature in such manner as to avoid a conflict. If the conflict becomes unavoidable, then Article 245 indicates the manner of resolution of such a conflict. Thereafter, this Court, in para 12, held that the question of repugnancy between the parliamentary legislation and the State legislation could arise in following two ways:- 
"12. ......... First, where the legislations, though enacted with respect to matters in their allotted sphere, overlap and conflict. Second, where the two legislations are with respect to matters in the Concurrent List and there is a conflict. In both the situations, parliamentary legislation will predominate, in the first, by virtue of the non obstante clause in Article 246(1), in the second, by reason of Article 254(1). Clause (2) of Article 254 deals with a situation where the State legislation having been reserved and having obtained President's assent, prevails in that State; this again is subject to the proviso that Parliament can again bring a legislation to override even such State legislation." 
51. In National Engg. Industries Ltd. v. Shri Kishan Bhageria [(1988) Supp SCC 82], Sabyasachi Mukharji, J., opined that the best test of repugnancy is that if one prevails, the other cannot prevail.

Fraud and its Effects : The Law


Justice Dr. B.S. Chauhan
Supreme Court of India
The Supreme Court in Meghmala & Ors. v. G. Narasimha Reddy & Orshas examined the concept of fraud and its effect on proceedings in a court of law. The Supreme Court reiterated that 'fraud vitiates all' and also the age old saying 'Fraud avoids all judicial acts ecclesiastical or temporal'. The relevant extracts from the judgment are reproduced hereinbelow;

20. It is settled proposition of law that where an applicant gets an order/office by making misrepresentation or playing fraud upon the competent Authority, such order cannot be sustained in the eyes of law. “Fraud avoids all judicial acts ecclesiastical or temporal.” (Vide S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagannath (dead) by L.Rs. & Ors. AIR 1994 SC 853). In Lazarus Estate Ltd. Vs. Besalay 1956 All. E.R. 349), the Court observed without equivocation that “no judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud, for fraud unravels everything.”

21. In Andhra Pradesh State Financial Corporation Vs. M/s. GAR Re-Rolling Mills & Anr. AIR 1994 SC 2151; and State of Maharashtra & Ors. Vs. Prabhu (1994) 2 SCC 481. this Court observed that a writ Court, while exercising its equitable jurisdiction, should not act as to prevent perpetration of a legal fraud as the courts are obliged to do justice by promotion of good faith. “Equity is, also, known to prevent the law from the crafty evasions and sub-letties invented to evade law.”

22. In Smt. Shrisht Dhawan Vs. M/s. Shaw Brothers AIR 1992 SC 1555, it has been held as under:–
“Fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It is a concept descriptive of human conduct.”
23. In United India Insurance Co. Ltd. Vs. Rajendra Singh & Ors. AIR 2000 SC 1165, this Court observed that “Fraud and justice never dwell together” (fraus et jus nunquam cohabitant) and it is a pristine maxim which has never lost its temper over all these centuries. 

24. The ratio laid down by this Court in various cases is that dishonesty should not be permitted to bear the fruit and benefit to the persons who played fraud or made misrepresentation and in such circumstances the Court should not perpetuate the fraud. (See District Collector & Chairman, Vizianagaram Social Welfare Residential School Society, Vizianagaram & Anr. Vs. M. Tripura Sundari Devi (1990) 3 SCC 655; Union of India & Ors. Vs. M. Bhaskaran (1995) Suppl. 4 SCC 100; Vice Chairman, Kendriya Vidyalaya Sangathan & Anr. Vs. Girdharilal Yadav (2004) 6 SCC 325; State of Maharashtra v. Ravi Prakash Babulalsing Parmar (2007) 1 SCC 80; Himadri Chemicals Industries Ltd. Vs. Coal Tar Refining Company AIR 2007 SC 2798; and Mohammed Ibrahim & Ors. Vs. State of Bihar & Anr. (2009) 8 SCC 751).

25. Fraud is an intrinsic, collateral act, and fraud of an egregious nature would vitiate the most solemn proceedings of courts of justice. Fraud is an act of deliberate deception with a design to secure something, which is otherwise not due. The expression “fraud” involves two elements, deceit and injury to the person deceived. It is a cheating intended to get an advantage. (Vide Dr. Vimla Vs. Delhi Administration AIR 1963 SC 1572; Indian Bank Vs. Satyam Fibres (India) Pvt. Ltd. (1996) 5 SCC 550; State of Andhra Pradesh Vs. T. Suryachandra Rao AIR 2005 SC 3110; K.D. Sharma Vs. Steel Authority of India Ltd. & Ors. (2008) 12 SCC 481; and Regional Manager, Central Bank of India Vs. Madhulika Guruprasad Dahir & Ors. (2008) 13 SCC 170).

26. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata. Fraud is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false. Suppression of a material document would also amount to a fraud on the court. (Vide S.P. Changalvaraya Naidu (supra); Gowrishankar & Anr. Vs. Joshi Amba Shankar Family Trust & Ors. AIR 1996 SC 2202; Ram Chandra Singh Vs. Savitri Devi & Ors. (2003) 8 SCC 319; Roshan Deen Vs. Preeti Lal AIR 2002 SC 33; Ram Preeti Yadav Vs. U.P. Board of High School & Intermediate Education AIR 2003 SC 4628; and Ashok Leyland Ltd. Vs. State of Tamil Nadu & Anr. AIR 2004 SC 2836). 

27. In Kinch Vs. Walcott (1929) AC 482, it has been held that “….mere constructive fraud is not, at all events after long delay, sufficient but such a judgment will not be set aside upon mere proof that the judgment was obtained y perjury.” Thus, detection/discovery of constructive fraud at a much belated stage may not be sufficient to set aside the judgment procured by perjury.

28. From the above, it is evident that even in judicial proceedings, once a fraud is proved, all advantages gained by playing fraud can be taken away. In such an eventuality the questions of non-executing of the statutory remedies or statutory bars like doctrine of res judicata are not attracted. Suppression of any material fact/document amounts to a fraud on the court. Every court has an inherent power to recall its own order obtained by fraud as the order so obtained is non est.

Tuesday, August 23, 2011

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Monday, August 22, 2011

Valuation of Goods under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

Justice M.K. Sharma
Supreme Court of India
The Supreme Court in Commissioner of Customs Excise Vs. Living Media (India) Ltd. had the occasion to deal with the issue of the valuation of imported goods, when royalty is / was paid by the importer to the overseas supplier of such goods. The issue before the Supreme Court was whether such royalties are / were to be included in the transaction value of the imported goods, in the light of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The Supreme Court held as under;

24. In order to appreciate the contentions of the parties, we propose to extract the provisions of Section 14 of the Customs Act, 1962 which deals with valuation of goods for the purpose of assessment. The said section reads as follows:- 
"14. Valuation of goods
(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf; Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf: Provided further that the rules made in this behalf may provide for, - 
(i) the circumstances in which the buyer and the seller shall be deemed to be related; 
(ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case; 
(iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section: 
Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50. 
(2) Notwithstanding anything contained in sub- section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value." 

25. In exercise of the power vested under the Customs Act, the Central Government has made Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter for short called "the Rules"). 

26. Rule 2(f) of the Rules defines "transaction value" where it says that it means the value determined in accordance with rule 4 of the Rules. Rule 3 of the Rules deals with the determination of the method of valuation where it states as follows:- 
"Determination of the method of valuation.- For the purpose of these rules – 
(i) subject to rules 9 and 10-A the value of imported goods shall be the transaction value; 
(ii) if the value cannot be determined under the provisions of Cl. (i) above, the value shall be determined by proceeding sequentially through rule 5 to 8 of these rules." 
27. What is transaction value is stated in Rule 4 in the following manner:-
"4. Transaction value – 
(1) The transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules." 
28.Rule 9(1)(c) of the Rules states as follows:- 
"9. Costs and services (1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods – 
***** ***** ***** ***** ***** ***** ***** ***** 
(c) - royalties and license fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable." 
29. In the case of Commissioner of Customs Vs. Ferodo India Pvt. Ltd. reported in 2008 (4) SCC 563 this Court had occasion to analyze the aforesaid relevant provision of Rule 9(1)(c) with which we are also concerned in the present appeals. The relevant portion of which is extracted herebelow: 
"16. Under Rule 9(1)(c), the cost of technical know- how and payment of royalty is includible in the price of the imported goods if the said payment constitutes a condition prerequisite for the supply of the imported goods by the foreign supplier. If such a condition exists then the payment made towards technical know-how and royalties has to be included in the price of the imported goods. On the other hand, if such payment has no nexus with the working of the imported goods then such payment was not includible in the price of the imported goods. 
17. In Essar Gujarat Ltd. the condition prerequisite, referred to above, had direct nexus with the functioning of the imported plant and, therefore, it had to be loaded to the price thereof. 
18. Royalties and license fees related to the imported goods is the cost which is incurred by the buyer in addition to the price which the buyer has to pay as consideration for the purchase of the imported goods. In other words, in addition to the price for the imported goods the buyer incurs costs on account of royalty and license fee which the buyer pays to the foreign supplier for using information, patent, trade mark and know how in the manufacture of the licensed product in India. Therefore, there are two concepts which operate simultaneously, namely, price for the imported goods and the royalties/license fees which are also paid to the foreign supplier. 
19. Rule 9(1)(c) stipulates that payments made towards technical know-how must be a condition prerequisite for the supply of imported goods by the foreign supplier and if such condition exists then such royalties and fees have to be included in the price of the imported goods. Under Rule 9(1)(c) the cost of technical know-how is included if the same is to be paid, directly or indirectly, as a condition of the sale of imported goods. At this stage, we would like to emphasize the word indirectly in Rule 9(1)(c). As stated above, the buyer/importer makes payment of the price of the imported goods. He also incurs the cost of technical know-how. Therefore, the Department in every case is not only required to look at T AA, it is also required to look at the pricing arrangement/agreement between the buyer and his foreign collaborator. For example, if on examination of the pricing arrangement in juxtaposition with TAA, the Department finds that the importer/buyer has misled the Department by adjusting the price of the imported item in guise of increased royalty/license fees then the adjudicating authority would be right in including the cost of royalty/license fees payment in the price of the imported goods. In such cases the principle of attribution of royalty/license fees to the price of imported goods would apply. This is because every importer/buyer is obliged to pay not only the price for the imported goods but he also incurs the cost of technical know-how which is paid to the foreign supplier. Therefore, such adjustments would certainly attract Rule 9(1))(c)." 
30. While laying down the aforesaid proposition this Court has considered the case of Collector of Customs (Prev.), Ahmedabad Vs. Essar Gujarat Ltd. reported in 1996 88 ELT 609 (S.C.) to which also reference was made at the time of hearing of the appeals. 

31. There is yet another decision on the aforesaid issue rendered by three Judges' Bench of this Court in the case of Associated Cement Companies Ltd. Vs. Commissioner of Customs reported in (2001) 4 SCC 593. Having referred to the case of Essar Gujarat (supra) and after having noted Rules 3, 4 and 9 of the Rules, this Court has stated thus in paragraph 42, 43 and 44 as follows:- 
"42. .............................. Therefore, the intellectual input in such items greatly enhances the value of the paper and ink in the aforesaid examples. This means that the charge of a duty is on the final product, whether it be the encyclopaedia or the engineering or architectural drawings or any manual. 
43. Similar would be the position in the case of a programme of any kind loaded on a disc or a floppy. For example in the case of music the value of a popular music cassette is several times more than the value of a blank cassette. However, if a pre-recorded music cassette or a popular film or a musical score is imported into India duty will necessarily have to be charged on the value of the final product. 
...................................................... ..................................................... 
44. It is a misconception to contend that what is being taxed is intellectual input. What is being taxed under the Customs Act read with the Customs Tariff Act and the Customs Valuation Rules is not the input alone but goods whose value has been enhanced by the said inputs. The final product at the time of import is either the magazine or the encyclopaedia or the engineering drawings as the case may be. There is no scope for splitting the engineering drawing or the encyclopaedia into intellectual input on the one hand and the paper on which it is scribed on the other. For example, paintings are also to be taxed. Valuable paintings are worth millions. A painting or a portrait may be specially commissioned or an article may be tailor-made. This aspect is irrelevant since what is taxed is the final product as defined and it will be an absurdity to contend that the value for the purposes of duty ought to be the cost of the canvas and the oil paint even though the composite product, i.e., the painting, is worth millions." 
32. The issue that arises for our consideration is therefore appears to be answered by the aforesaid decision in Associated Cements Companies Ltd. (Supra). In the said decision this Court had stated clearly that if a pre-recorded music cassette or a popular film or musical score is imported into India, duty will necessarily have to be charged on the value of the final product. As per Rule 9, in determining the transaction value there has to be added to the price actually paid or payable for the imported goods, royalties and the license fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of sale of goods. Therefore, when pre-recorded music cassette is imported as against the blank cassette, definitely its value goes up in the market which is in addition to its value and therefore duty shall have to be charged on the value of the final product. Therefore, there can be no dispute with regard to the fact that value of the royalty paid is to be included in the transaction value. 

33. In all these cases, there is no dispute that the cassettes under question are brought to India as pre-recorded cassettes which carry the music or song of an artist. There is an agreement existing in all the matters that royalty payment is towards money to be paid to artists and producers who had produced such cassettes. Such royalty becomes due and payable as soon as cassettes are distributed and sold and therefore, such royalty becomes payable on the entire records shipped less records returned. It could therefore, be concluded that the payment of royalty was a condition of sale. Counsel appearing for the Respondent relied upon the commentary on the GATT Customs Valuation Code. We failed to see as to how the aforesaid commentary on the GATT Customs Valuation Code could be said to be applicable to the facts of the present case. The specific sections and the rules quoted hereinbefore are themselves very clear and unambiguous. 

We are required only to give interpretation of the same and apply the same to the facts of the present case.

Sunday, August 21, 2011

'Inclusive' & 'Exhaustive' Definitions - Meaning and Difference - The Law

Justice G.S. Singhvi
Supreme Court of India
The Supreme Court in West Bengal State Warehousing Corporation Vs. Indrapuri Studio Pvt. Ltd. has examined the meaning of 'inclusive' and 'exhaustive' definitions as appearing in various statutes. While relying on various judicial pronouncements on the subject, the Supreme Court has culled out the difference between the two types of definitions, and held as under;

13. Section 3(b) of the 1894 Act, which also contains definition of the expression `person interested' and which was interpreted by the Constitution Bench in U.P. Awas Evam Vikas Parishad v. Gyan Devi (supra), reads as under: 
"3(b). the expression "person interested" includes all persons claiming an interest in compensation to be made on account of the acquisition of land under this Act; and a person shall be deemed to be interested in land if he is interested in an easement affecting the land." 
14. A comparative study of the two definitions of expression `person interested', one contained in Section 3(b) of the 1894 Act and the other contained in Section 2(d) of the Act shows that while the first definition is inclusive, the second definition is exhaustive. The difference between exhaustive and inclusive definitions has been explained in P. Kasilingam v. P.S.G. College of Technology (1995) Supp 2 SCC 348 in the following words: 
"A particular expression is often defined by the Legislature by using the word `means' or the word `includes'. Sometimes the words `means and includes' are used. The use of the word `means' indicates that "definition is a hard- and-fast definition, and no other meaning can be assigned to the expression than is put down in definition". (See : Gough v. Gough; Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court.) 
The word `includes' when used, enlarges the meaning of the expression defined so as to comprehend not only such things as they signify according to their natural import but also those things which the clause declares that they shall include. The words "means and includes", on the other hand, indicate "an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions". (See: Dilworth v. Commissioner of Stamps (Lord Watson); Mahalakshmi Oil Mills v. State of A.P. The use of the words "means and includes" in Rule 2(b) would, therefore, suggest that the definition of `college' is intended to be exhaustive and not extensive and would cover only the educational institutions falling in the categories specified in Rule 2(b) and other educational institutions are not comprehended. Insofar as engineering colleges are concerned, their exclusion may be for the reason that the opening and running of the private engineering colleges are controlled through the Board of Technical Education and Training and the Director of Technical Education in accordance with the directions issued by the AICTE from time to time." 

In Bharat Cooperative Bank (Mumbai) Ltd. v. Employees Union (2007) 4 SCC 685, this Court again considered the difference between the inclusive and exhaustive definitions and observed: 
"When in the definition clause given in any statute the word "means" is used, what follows is intended to speak exhaustively. When the word "means" is used in the definition it is a "hard-and-fast" definition and no meaning other than that which is put in the definition can be assigned to the same. On the other hand, when the word "includes" is used in the definition, the legislature does not intend to restrict the definition: it makes the definition enumerative but not exhaustive. That is to say, the term defined will retain its ordinary meaning but its scope would be extended to bring within it matters, which in its ordinary meaning may or may not comprise. Therefore, the use of the word "means" followed by the word "includes" in the definition of "banking company" in Section 2(bb) of the ID Act is clearly indicative of the legislative intent to make the definition exhaustive and would cover only those banking companies which fall within the purview of the definition and no other." 
In N.D.P. Namboodripad v. Union of India (2007) 4 SCC 502, the Court observed : 
"The word "includes" has different meanings in different contexts. Standard dictionaries assign more than one meaning to the word "include". Webster's Dictionary defines the word "include" as synonymous with "comprise" or "contain". Illustrated Oxford Dictionary defines the word "include" as: (i) comprise or reckon in as a part of a whole; (ii) treat or regard as so included. Collins Dictionary of English Language defines the word "includes" as: (i) to have as contents or part of the contents; be made up of or contain; (ii) to add as part of something else; put in as part of a set, group or a category; (iii) to contain as a secondary or minor ingredient or element. It is no doubt true that generally when the word "include" is used in a definition clause, it is used as a word of enlargement, that is to make the definition extensive and not restrictive. But the word "includes" is also used to connote a specific meaning, that is, as "means and includes" or "comprises" or "consists of"." 
In Hamdard (Wakf) Laboratories v. Dy. Labour Commissioner (2007) 5 SCC 281, it was held as under: 
"When an interpretation clause uses the word "includes", it is prima facie extensive. When it uses the word "means and includes", it will afford an exhaustive explanation to the meaning which for the purposes of the Act must invariably be attached to the word or expression." 
15. The judgment in U.P. Awas Evam Vikas Parishad v. Gyan Devi (supra) is clearly distinguishable. The question which fell for consideration of the Constitution Bench was whether the appellant was entitled to participate in the proceedings of the Tribunal constituted under Section 64 of the Uttar Pradesh Awas and Vikas Parishad Adhiniyam, 1965 and lead evidence on the issue of payment of compensation to the land owners. After adverting to the definition of `person interested' contained in Section 3(b), Sections 11, 17, 18 and 50 of the 1894 Act, as amended in 1984, and making a reference to an earlier judgment in Himalayan Tiles and Marble (P) Ltd. v. Francis Victor Coutinho (1980) 3 SCC 223, this Court held that local authority is entitled to be impleaded as a party in the proceedings before the Reference Court and in case the amount of compensation is enhanced by the Court, the local authority can file an appeal with the leave of the Court subject to the condition that no appeal is filed by the Government. The ratio of this decision cannot be invoked for declaring that the appellant falls within the definition of the expression `person interested' within the meaning of Section 2(d) of the Act and is entitled to challenge the award of the Arbitrator because the definition which was interpreted by the Constitution Bench was inclusive and not exhaustive. The other judgments in which Section 3(b) of the 1894 Act is interpreted are likewise not relevant for deciding the issue raised in this case.

Amendment of Pleadings : Broad Principles

Justice P. Sathasivam
Supreme Court of India
We have already dealt with a post on the Law relating to Amendment of Pleadings, and the different tests to be applied in cases of amendment of Plaint as against a Written Statement. The Supreme Court in State of Madhya Pradesh Vs. Union of India has re-itereated the law relating to amendment of pleadings under the Code of Civil Procedure, 1908. The Court, while considering Order VI Rule 17 of the Code, in several judgments has laid down the principles applicable in the case of amendment of plaint which are as follows: 

8. In order to consider the claim of the plaintiff and the opposition of the defendants, it is desirable to refer the relevant provisions. Order VI Rule 17 of the Code of Civil Procedure, 1908 (in short `the Code') enables the parties to make amendment of the plaint which reads as under; 
"17. Amendment of pleadings - The Court may at any stage of the proceedings allow either party to alter or amend his pleadings in such manner and on such terms as may be just, and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties: Provided that no application for amendment shall be allowed after the trial has commenced, unless the Court comes to the conclusion that in spite of due diligence, the party could not have raised the matter before the commencement of trial." 
The above provision deals with amendment of pleadings. By Amendment Act 46 of 1999, this provision was deleted. It has again been restored by Amendment Act 22 of 2002 but with an added proviso to prevent application for amendment being allowed after the trial has commenced, unless the Court comes to the conclusion that in spite of due diligence, the party could not have raised the matter before the commencement of trial. The proviso, to some extent, curtails absolute discretion to allow amendment at any stage. Now, if application is filed after commencement of trial, it must be shown that in spite of due diligence, such amendment could not have been sought earlier. The purpose and object of Order VI Rule 17 of the Code is to allow either party to alter or amend his pleadings in such manner and on such terms as may be just. Amendment cannot be claimed as a matter of right and under all circumstances, but the Courts while deciding such prayers should not adopt a hyper-technical approach. Liberal approach should be the general rule particularly, in cases where the other side can be compensated with costs. Normally, amendments are allowed in the pleadings to avoid multiplicity of litigations. 

9. Inasmuch as the plaintiff-State of Madhya Pradesh has approached this Court invoking the original jurisdiction under Article 131 of the Constitution of India, the Rules framed by this Court, i.e., The Supreme Court Rules, 1966 (in short `the Rules) have to be applied to the case on hand. Order XXVI speaks about "Pleadings Generally". 

Among various rules, we are concerned about Rule 8 which reads as under: 
"The Court may, at any stage of the proceedings, allow either party to amend his pleading in such manner and on such terms as may be just, but only such amendments shall be made as may be necessary for the purpose of determining the real question in controversy between the parties." 
The above provision, which is similar to Order VI Rule 17 of the Code prescribes that at any stage of the proceedings, the Court may allow either party to amend his pleadings. However, it must be established that the proposed amendment is necessary for the purpose of determining the real question in controversy between the parties. 

10. This Court, while considering Order VI Rule 17 of the Code, in several judgments has laid down the principles to be applicable in the case of amendment of plaint which are as follows: 

(i) Surender Kumar Sharma v. Makhan Singh, (2009) 10 SCC 626, at para 5: 
"5. As noted hereinearlier, the prayer for amendment was refused by the High Court on two grounds. So far as the first ground is concerned i.e. the prayer for amendment was a belated one, we are of the view that even if it was belated, then also, the question that needs to be decided is to see whether by allowing the amendment, the real controversy between the parties may be resolved. It is well settled that under Order 6 Rule 17 of the Code of Civil Procedure, wide powers and unfettered discretion have been conferred on the court to allow amendment of the pleadings to a party in such a manner and on such terms as it appears to the court just and proper. Even if, such an application for amendment of the plaint was filed belatedly, such belated amendment cannot be refused if it is found that for deciding the real controversy between the parties, it can be allowed on payment of costs. Therefore, in our view, mere delay and laches in making the application for amendment cannot be a ground to refuse the amendment." 
(ii) North Eastern Railway Administration, Gorakhpur v. Bhagwan Das (dead) by LRS, (2008) 8 SCC 511, at para16: 
"16. Insofar as the principles which govern the question of granting or disallowing amendments under Order 6 Rule 17 CPC (as it stood at the relevant time) are concerned, these are also well settled. Order 6 Rule 17 CPC postulates amendment of pleadings at any stage of the proceedings. 
In Pirgonda Hongonda Patil v. Kalgonda Shidgonda Patil which still holds the field, it was held that all amendments ought to be allowed which satisfy the two conditions: 
(a) of not working injustice to the other side, and 
(b) of being necessary for the purpose of determining the real questions in controversy between the parties. Amendments should be refused only where the other party cannot be placed in the same position as if the pleading had been originally correct, but the amendment would cause him an injury which could not be compensated in costs." 
(iii) Usha Devi v. Rijwan Ahamd and Others, (2008) 3 SCC 717, at para 13: 
"13. Mr Bharuka, on the other hand, invited our attention to another decision of this Court in Baldev Singh v. Manohar Singh. In para 17 of the decision, it was held and observed as follows: (SCC pp. 504-05) 
"17. Before we part with this order, we may also notice that proviso to Order 6 Rule 17 CPC provides that amendment of pleadings shall not be allowed when the trial of the suit has already commenced. For this reason, we have examined the records and find that, in fact, the trial has not yet commenced. It appears from the records that the parties have yet to file their documentary evidence in the suit. From the record, it also appears that the suit was not on the verge of conclusion as found by the High Court and the trial court. That apart, commencement of trial as used in proviso to Order 6 Rule 17 in the Code of Civil Procedure must be understood in the limited sense as meaning the final hearing of the suit, examination of witnesses, filing of documents and addressing of arguments. As noted hereinbefore, parties are yet to file their documents, we do not find any reason to reject the application for amendment of the written statement in view of proviso to Order 6 Rule 17 CPC which confers wide power and unfettered discretion on the court to allow an amendment of the written statement at any stage of the proceedings." 
(iv) Rajesh Kumar Aggarwal and Others v. K.K. Modi and Others, (2006) 4 SCC 385, at paras 15 & 16: 
"15. The object of the rule is that the courts should try the merits of the case that come before them and should, consequently, allow all amendments that may be necessary for determining the real question in controversy between the parties provided it does not cause injustice or prejudice to the other side. 
16. Order 6 Rule 17 consists of two parts. Whereas the first part is discretionary (may) and leaves it to the court to order amendment of pleading. The second part is imperative (shall) and enjoins the court to allow all amendments which are necessary for the purpose of determining the real question in controversy between the parties." 
(v) Revajeetu Builders and Developers v. Narayanaswamy and Sons and Others, (2009) 10 SCC 84, at para 63: 
"63. On critically analysing both the English and Indian cases, some basic principles emerge which ought to be taken into consideration while allowing or rejecting the application for amendment: 
(1) whether the amendment sought is imperative for proper and effective adjudication of the case; 
(2) whether the application for amendment is bona fide or mala fide; 
(3) the amendment should not cause such prejudice to the other side which cannot be compensated adequately in terms of money; 
(4) refusing amendment would in fact lead to injustice or lead to multiple litigation; 
(5) whether the proposed amendment constitutionally or fundamentally changes the nature and character of the case; and 
(6) as a general rule, the court should decline amendments if a fresh suit on the amended claims would be barred by limitation on the date of application. These are some of the important factors which may be kept in mind while dealing with application filed under Order 6 Rule 17. These are only illustrative and not exhaustive." 
The above principles make it clear that Courts have ample power to allow the application for amendment of the plaint. However, it must be satisfied that the same is required in the interest of justice and for the purpose of determination of real question in controversy between the parties.
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