31 May 2010

Re-examination best in paper leaks: Supreme Court

The Supreme Court in a recent decision has declared that re-examination is the best alternative where allegations of mass-copying / paper leakage are involved. The Court, reversing the decision of the High Court, held that applying the test of reasonableness holding re-examination was the best course of action available to the authorities. The Supreme Court inter alia took into account the origin and development of the Wednesbury's principles of reasonableness and also the doctrine of proportionality, which we have written about separately in a different post, to hold that the High Court has failed to appreciate the legal position correctly.

Applying these tests, the Supreme Court inter alia observed as under;

14. We will first examine whether the High Court was justified in directing the Board to go ahead with the recruitment process based on the first written test in the wake of the report of the Vigilance and the materials collected by the CBI subsequently. Report of the Vigilance has prima facie wstablished that the allegations of leakage of question papers, large scale impersonation of candidates, mass copying etc. was true. Possibility of the involvement of the staff of Railways and outsiders was also not ruled out by the Vigilance. In such circumstances, we fail to see how the High Court has concluded that there is no illegality in going ahead with the recruitment process on the basis of the first written test. We may indicate that the Railway Board had three alternatives viz., (1) to cancel the entire written test, and to conduct a fresh written test inviting applications afresh; (2) to conduct a retest for those candidates who had obtained minimum qualifying marks in the first written test; and (3) to go ahead with the first written test (as suggested by the High Court), confining the investigation to 62 candidates against whom there were serious allegations of impersonation.
35. We have already indicated the three alternatives available to the decision- maker (Board) when serious infirmities were pointed out in the conduct of the first written test. Let us examine which was the best alternative, the Board could have accepted applying the test of Wednesbury unreasonableness. Was the decision taken by the Board to conduct a re-test for those candidates who had obtained minimum qualifying marks in the first written test so unreasonable that no reasonable authority could ever have decided so and whether the Board before reaching that conclusion had taken into account the matters which they ought not to have taken into account or had refused to take into account the matters that they ought to have taken into account and the decision taken by it was so unreasonable that no reasonable authority could ever have come to it? Judging the decision taken by the Board applying the standard laid down in the Wednesbury principle unreasonableness, the first alternative that is the decision to cancel the entire written test and to conduct a fresh written test would have been time consuming and expensive. Initially 10,02,909 applications were received when advertisement was issued by the Board out of which 5,86,955 were found to be eligible and call letters were sent to them for appearing in the written test held at various centres. 3,22,223 candidates appeared for the written test, out of which 2690 were selected. Further the candidates who had approached the Court had also not opted that course instead many of them wanted to conduct a re-test for 2690 candidates, the second alternative. The third alternative was to go ahead with the first written test confining the investigation to 62 candidates against whom there were serious allegations of impersonation. The Board felt in the wake of the vigilance report and the reports of the CBI, it would not be the best option for the Railway Administration to accept the third alternative since there were serious allegations of malpractices against the test. From a reasonable man’s point of view it was felt that the second option i.e. to conduct a re-test for those candidates who had obtained minimum qualifying marks in the first written test was the best alternative.
36. We will now apply the proportionality test to three alternatives suggested. Principle of proportionality, as we have already indicated, is more concerned with the aims of the decision maker and whether the decision maker has achieved the correct balance. The proportionality test may require the attention of the Court to be directed to the relative weight according to interest and considerations. When we apply that test and look at the three alternatives, we are of the view that the decision maker has struck a correct balance in accepting the second alternative. First alternative was not accepted not only because such a process was time consuming and expensive, but nobody favoured that option, and even the candidates who had approached the court was more in favour of the second alternative. Applying the proportionality test also in our view the Board has struck the correct balance in adopting the second alternative which was well balanced and harmonious.
37. We, therefore hold, applying the test of Wednesbury unreasonableness as well as the proportionality test, the decision taken by the Board in the facts and circumstances of this case was fair, reasonable, well balanced and harmonious. By accepting the third alternative, the High Court was perpetuating the illegality since there were serious allegations of leakage of question papers, large scale of impersonation by candidates, mass copying in the first written test.

Legal position of 'Master Plan': The law revisited

Municipal agencies ofter prepare 'Master Plans' stating out the vision statement for the development of the city. These master plans serve as a reminder to those entrusted with the task of urban development as to the parameters required to be followed while granting sanction for use of various properties in the city. The Master Plan, however, can also serve as a legal instrument to test the validity of land usage. The law to this regard seems to the fairly settled in as much as off late the courts in the country have been emphasising the use of land strictly in terms of the notified Master Plans. 

In this post we bring to you a not too long back pronounced decision of the Delhi High Court wherein a Division Bench headed by the then Chief Justice himself discussed the various legal aspects of a notified Master Plan, in that case the Master Plan 2021 for Delhi. The High Court was examining the correctness of the actual land usage at Ajmal Khan Park in Karol Bagh of Delhi in a public interest litigation which alleged violation of various norms and in particular the Master Plan of 2021 in respect of the usage of the park. In this respect the Bench discussed the legal position of a Master Plan in the following terms;
37. The settled law as regards the sanctity of master plan norms as explained in several decisions of the Supreme Court and the High Courts may be noticed. In Dr. G.N. Khajuria v. Delhi Development Authority, AIR 1996 SC 253 the Supreme Court disapproved of the conversion of an area meant for a park for the use of a school. The Court on that occasion observed as under: 
“the land which was allotted to respondent No. 2 was part of a Park. We further hold that it was not open to the DDA to carve out any space meant for park of a nursery school. We are of the considered view that the allotment in favour of respondent No. 2 was misuse of power, for reasons which need not be adverted. It is, therefore, a fit case, according to us, where the allotment in favour of respondent No. 2 should be cancelled and we order accordingly. The fact that respondent No. 2 has put up some structure stated to be permanent by his counsel is not relevant, as the same has been done of a plot of land allotted to it in contravention of law. As to the submission that dislocation from the present site would cause difficulty to the tiny tots, we would observe that the same has been advanced only to get sympathy from the Court inasmuch as children, for whom the nursery school is meant, would travel to any other nearby place where such a school would be set up either by respondent No. 2 or by any other body.” 
38. The inviolability of the provisions of a statutory Master Plan was explained by the Supreme Court in Bangalore Medical Trust v. B.S. Muddappa (1991) 4 SCC 54. It explained the legal position thus (SCC, p. 69):
”The scheme is a statutory instrument which is administrative legislation involving a great deal of general law-making of universal application, and it is not, therefore, addressed to individual cases of persons and places. Alteration of the scheme must be for the purpose of improvement and better development of the City of Bangalore and adjoining areas and for general application for the benefit of the public at large. Any alteration of the scheme with a view to conferring a benefit on a particular person, and without regard to the general good of the public at large, is not an improvement contemplated by the section.” 
In the same decision it was further emphasized that a space earmarked for a particular purpose under the Master Plan cannot be used for any other. It was observed (SCC, p. 70, 75): 
“………once appropriated or applied or earmarked by formation of 'open spaces' or for building purposes or other development in accordance with a duly sanctioned scheme should not be used for any other purpose unless the scheme itself, which is statutory in character, is formally altered in the manner that the BDA as a body corporate is competent to alter. This section, of course, empowers the BDA to lease or sell or otherwise transfer any property. But that power has to be exercised consistently with the appropriation or application of land for formation of 'open spaces' or for building purposes or any other development scheme sanctioned by the Government. Property reserved for open space in a duly sanctioned scheme cannot be leased or sold away unless the scheme itself is duly altered. Any unauthorised deviation from the duly sanctioned scheme by sacrificing the public interest in the preservation and protection of the environment by means of open space for parks and play grounds and 'ventilation' will be contrary to the legislative intent, and an abuse of the statutory power vested in the authorities…..”
“Protection of the environment, open spaces for recreation and fresh air, play grounds for children, promenade for the residents, and other conveniences or amenities are matters of great public concern and of vital interest to be taken care of in a development scheme. It is that public interest which is sought to be promoted by the Act by establishing the BDA. The public interest in the reservation and preservation of open spaces for parks and play grounds cannot be sacrificed by leasing or selling such sites to private persons for conversion to some other user. Any such act would be contrary to the legislative intent and inconsistent with the statutory requirements. Furthermore, it would be in direct conflict with the constitutional mandate to ensure that any State action is inspired by the basic values of individual freedom and dignity and addressed to the attainment of a quality of life which makes the guaranteed rights a reality for all the citizens."
39. In Panchsheel Enclave Residents v. UOI, 2002 (6) AD (Delhi) 641 (DB) the court prohibited the carrying on of construction in the vicinity of ancient monuments Blocks A and A1 of Panchsheel Enclave which fell in an area declared as a green belt. In EC Pocket Maya Enclave Residents Welfare Association v. Delhi Development Authority (decision dated 28.8.2006 in WP (C) Nos. 10546-51/2006) the residents of EA, EB and EC Blocks of Maya Enclave complained that part of an area meant for a park had been allotted to the third respondent, IGL, for the purpose of constructing a "CNG mega bus filling station". This Court held: 
“The DDA seems to have proceeded on the assumption that the Zonal Plans having been changed, there was no need to inquire further, and the area could be allotted for use of a mega gas filling station. While the need to have such a station cannot be doubted, the balancing of relevant considerations, such as the developed nature of the park, the substantial amounts expended to maintain it, every year, its use by residents all these years, security and safety concerns on account of the populace and structures, including residences and educational institution in its vicinity, and the likely impact of such a gas station on the persons living or using the area, had to be necessarily balanced, particularly in the light of the Central Government's directive not to use any developed park for setting up a petrol pump.” “The decision to allot the land for use by IGL as petrol pump, cannot be sustained.”
40. In Vivek Srivastava v.Union of India, 2005 (3) AWC 2897 the petitioners contended that the respondents were planning to construct residential buildings in the "Polo Ground" which had remained an open land for the last hundred years. The petitioner alleged that the polo ground acted as the lungs for the citizens of Allahabad and if the residential buildings were allowed to be constructed thereon, the “lungs” would get choked. Further, the constructions would disturb the ecology and create a serious imbalance in the environment of the city. Accepting these contentions, the Allahabad High Court held: “the land in question known as 'Old Polo Ground' measuring approximately 22.77 acres of land, should not be used for the residential construction for the married accommodation project for the married officers of the Army.” Consequently, a writ of mandamus was issued to the respondents, restraining them from making any construction on the Polo ground and maintain it as an open piece of land. In D.D. Vyas v. Ghaziabad Development Authority, Ghaziabad, AIR 1993 All 57 the grievance of the petitioners, who belonged to a locality where the Adu Park was situated, was that though the said area was earmarked for being developed as a public park, the G.D.A. had taken no steps to develop it as a public park. Further the respondents were seeking to carve out plots in such open space in the plan and sell them for huge profits. The attempt by the G.D.A. to alter the plan for that purpose was challenged. Accepting the petition, the High Court held: “Neither the Authority nor can the State Government amend the plan in such a way so as to destroy its basic feature allowing the conversion of open spaces meant for public parks.”
41. The Andhra Pradesh High Court has consistently held that attempts at changing the use of green areas to commercial and other purposes in the layout plans would be impermissible in law. In Sri Ramakrishna Educational Society v. Chairman, Nandyal Municipality, 2006 (3) ALD 242, it was held by the High Court of Andhra Pradesh that an area earmarked as playground in the layout plan could be used by the residents of Nandyal Town for the purpose of children's games and sports, for a walking track, growing tree clusters or as a common meeting place. It was held that “once the layout was approved considering the playground is part of the common area, the same cannot be converted into a business/commercial area by allowing a Rythu Bazar. Such conversion is impermissible in law.” In Bhagya Nagar Colony Welfare Association v. Government of A.P., 2003 (4) ALD 74 multi-storeyed residential complexes/group housing were constructed and houses were allotted in a portion of the land admeasuring 2,897 sq. yards which had been earmarked as a park/open space. It was held by the High Court of Andhra Pradesh that the “Municipality shall immediately take action for demolishing and dismantling all structures, which have come up in the open area admeasuring 2897 sq. yards in the layout approved by the Hyderabad Urban Development Authority, whatever be the amount spent on such structures, forthwith.” The court however made an exception for a temple. It said: “The actual area occupied by Shirdi Sai Baba Temple shall be excluded and other structures, be it, temporary or permanent, shall also be dismantled and removed forthwith. The area of about 2,597 sq, yards after excluding 300 sq. yards occupied by the temple shall be developed as a park.” In Co-operative Housing Society, Saleemnagar Limited v. Municipal Corporation of Hyderabad and others, 2001 (5) ALD 663 the first respondent had, instead of developing the area as a park, leased out about 1800 square yards of the park site to the second respondent for construction of school. Some other encroachments were also made in the said area. The first respondent was directed to take appropriate steps for removal of the encroachments in accordance with law and restore the park to its original position. 
42. In Mittakola Venkata Rama Rao v. Sarpanch, Grampanchayath, 1998 (6) ALD 343 it was held: “The Gram Panchayat cannot convert a part of the public park into a commercial complex and such construction would definitely have the effect of polluting the environment and ecology of the park and the town.” The park had been in existence for more than 70 years and also had a historical importance, which had “to be preserved not only by the Gram Panchayat, but by every citizen of Mahaboobabad and in fact they should be proud of such a park and if necessary it is their duty to develop the park into a beautiful park, so that the people of the area, including the children may go and relax during their off time.” In P. Venkateswarlu v. Govt. of Andhra Pradesh, 2001 (6) ALD 533 the action of respondents 1 to 4 in permitting respondents 5 to 8 to construct a multi-storeyed commercial complex in an open space reserved for park, according to sanctioned layout, was held to be illegal. It was observed:
“The Court while considering such a matter is not concerned with the consequences particularly where it concerns ecology. A park provides for some lung space. It is well settled that the community requires certain lung space and may also use open space for sports and other recreational activities. Parks or wetlands are also necessary for the purpose of maintaining ecological balance. The doctrine of public trust applies in relation to park wherefor the open space is earmarked for the purpose of park, and it becomes the statutory duty of the local authorities and other statutory bodies to maintain the same. The authorities of the Board have no right to do away therewith unless the Master Plan is modified in terms of the provisions of Section 12 of the 1975 Act read with Rules 13 and 13-A of the 1977 Rules. The Development Act, as noticed hereinbefore, envisages preparation of a Master Plan, which consists of various zones-the user of such zone is specified therein. Stages of development are also specified. A planned development is contemplated under the Master Plan and Zonal Development Plans. While doing so, larger public interest must be kept in view. A creature of a statute therefore cannot be permitted to violate the provisions of the Act whereunder it was created."
43. In Harijan Layout Sudhar Samiti v. The State of Maharashtra (1997) 99 Bom LR 434 the Bombay High Court held that the action of the respondents in Nagpur converting areas earmarked for green belt/open space for housing purposes and allotting it to the respondent No. 8was not permissible. It was observed that: “neither the Development Authority nor the State Government can amend the plan, in such a way, so as to destroy its basic feature, allowing the conversion of open space meant for public parks.” It was further observed: “Undisputedly, the City of Nagpur is one of the crowded city where the resident do not get anything but atmosphere polluted by smoke and fumes emitted by endless vehicle traffics. Besides this, the pollution is being caused by 'Koradi Thermal Powers house'. Hence, the importance of public parks, plantations and creation places cannot be under estimated. The Public Park is a gift of modern civilisation and is a significant factor, in the improvement of quality of life. It is, thus, clear that the action of the respondents.1 to 7, being inconsistent with and contrary to the legislative intent to safeguard the health, safety and general welfare of the people of the locality, the orders smack colourable exercise of powers and are opposed to the statutory scheme. Thus, it is a fit case, to issue writ of mandamus as prayed by the petitioners.”
44. In Modern Educational and Cultural Society v. Nizam, RLW 2007 (4) Raj 3214 the allotment of an open space reserved as per approved scheme under Rajasthan Urban Areas (Sub-Division, Reconstruction and Improvement of Plots) Rules, 1975 by the Jaipur Development Authority to a private person/body for a school was held by the Single Judge to be illegal. The Division Bench in Nizam v. Jaipur Development Authority, AIR 1994 Raj 87 affirmed this and held: “The action of JDA in making allotment of the site in question in favour of Modern School to establish a school is invalid and without jurisdiction, being contrary to the legislative intent to safeguard healthy, safety and general welfare the people of the locality. It was also opposed to the statutory Scheme/ Plan.” In Rajasthan Housing Board Shopping Centre Vikas Samiti v. State of Rajasthan, RLW 2006 (1) Raj 588 the grievance was that the respondents were permitting vegetable vendors to construct shops in Park-A in Shastri Nagar, Jaipur. The Court held: “There is no dispute the park-A was a facility area and further the Housing Board has not revised the scheme under Sections 29, 30 and 32 of the Housing Board provisions which was published in Gazette. The alleged allotment/permission is also contrary to the scheme as well as the provisions of the Housing Board and later on transfer of maintenance to the Municipal Corporation will also not give any right to the Municipal Corporation to issue the allotment order or grant permission to construct the platform.“ The action of the respondents was held to be illegal.
45. In President, Kanan Vihar Development Societyv. State of Orissa, 2008 (II) OLR 677 the Orissa High Court observed: “In case a particular area has been earmarked to be left as open space for public park in order to achieve the environmental equilibrium, it should not be altered by any means by any authority unless there were compelling circumstances and the procedure prescribed by law has to be followed for the same.” 
46. For an instance of courts not permitting an underground water treatment plant in a park, reference may be made to the decision of the Court of Appeals of New York in Friends of Van Cortlandt Park v. City of New York 95 N.Y.2D 623, 630. The court was informed that the public would be deprived of the use of the park for five years during which the water treatment plant would be constructed and thereafter the park would be restored. That court held that prior legislative approval of the change in user was mandatory even if the proposal was that the park would ultimately be restored. Referring to the decision in Williams v. Gallatin 229 NY 248 the Court of appeals invoked the “public trust” and said: “Though the water treatment plant plainly serves an important public purpose – indeed eve the State Attorney General believes it should be built at the site selected – our law is well settled: dedicated parks in New York are impressed with a public trust for the benefit of the people of the State. Their „use for other than park purposes, either for a period of years or permanently, requires the direct and specific approval of the State legislature, plainly conferred‟.” Our Supreme Court too has reiterated the public trust doctrine as forming part of the environmental jurisprudence in this country (See generally M.C.Mehta v. Kamal Nath (1997) 1 SCC 388).

30 May 2010

Shares 'vest' in Nominee and not Heirs: High Court

In a recent decision the Bombay High Court has declared that shares of a company vest in the Nominee for such shares upon the death of the shareholder and not with the heirs of the deceased. It was contended by a widow that she was entitled to the ownership of the shares held by her deceased husband in view of the fact that she was heir to his property. The High Court, taking note of the fact that a third party was declared as a nominee to those shares, held otherwise. The Bench examined the provisions of the Companies Act and other enactments to come to such conclusion.

The High Court inter alia observed as under;

4. The law relating to nomination is set out in 109A of the Companies Act pursuant to the amendment which came into effect on 31st October 1998. It is common knowledge that prior to 1996 shares were not held in dematerialised form. Consequent upon the Dematting of the shares the Share Certificates in physical form are not mandatorily required to be issued by the Limited Companies listed on the Stock Exchanges. Shares can be transferred by word of mouth or on the Internet from person to person. Upon such transfer the membership rights of the holder of the shares changes. Since the share is an intangible movable property it is bequeathable estate The nomination in respect of the shares is, therefore, important. Section 109A sets out the rights of the holder of shares to nominate as well as the rights of the nominees thus:
109A. Nomination of shares – (1) Every holder of shares in, or holder of debentures of a company may, at any time, nominate, in the prescribed manner, a person to whom his shares in or debentures of, the company shall vest in the event of his death.
(2) xxx
(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares in, or debentures of, the company, where a nomination made in the prescribed manner purports to confer on any person the right to vest the shares in, or debentures of, the company, the nominee shall, on the death of the shareholder or holder of debentures of the company or, as the case may be, on the death of the joint holders become entitled to all the rights in the shares or debentures of the company or, as the case may be, all the joint holders, in relation to such shares in, or debentures of the company to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner.
(4) xxx
It can be seen from the aforesaid provision that nomination is required to be made in the prescribed manner. Upon such nomination the shares would vest in the nominee in the event of the death of the holder. Further upon it being made in the prescribed manner the nominee would become entitled to all the rights in the shares of the Company to the exclusion of all other persons. That is the effect of vesting the shares in the nominee.
5. Mr. Maheshwari drew my attention to the Depositories Act 1996. Section 9.11 thereof relates to transmission of securities in the case of nomination. Section 9.11 runs thus:
9.11.1. In respect of every account, the Beneficial Owner(s) (“Nominating Person(s)”) may nominate any person (“Nominee”) to whom his securities shall vest in the event of his death in the manner prescribed under the Business Rules from time to time.
9.11.2. The securities held in such account shall automatically be transferred in the name of the Nominee, upon the death of the Nominating Person, or as the case may be, all the Nominating Persons subject to the other Bye Laws mentioned hereunder.
9.11.3 xxx
9.11.4. Beneficial Owner(s) may substitute or cancel a nomination at any time. A valid nomination, substitution or cancellation of nomination shall be dated and duly registered with the Participant in accordance with the Business Rules prescribed therefor. The closure of the account by the Nominating Person(s) shall conclusively cancel the nomination.
9.11.5. A Nominee shall not be entitled to exercise any right conferred on Beneficial Owners under these Bye Laws, upon the death of the Nominating Person(s), unless the Nominee follows the procedure prescribed in the Business Rules for being registered as the Beneficial Owner of the securities of the Nominating Person(s) in the books of the Depository.
9.11.6. A nominee shall on the death of the Nominating  Person(s) be entitled to elect himself to be registered as a Beneficial Owner by delivering a notice in writing to the Depository, along with the certified true copy of the death certificate issued by the competent authority as prescribed under the Business Rules. Subject to scrutiny of such election, the securities in the Account shall be transmitted to the account of the Nominee held with any depository.
9.11.7. Notwithstanding anything contained in any other disposition and/or nominations made by the Nominating Person(s) under any other law for the time being in force, for the purposes of dealing with the securities lying to the credit of deceased Nominating Person(s) in any manner, the Depository shall rely upon the last nomination validly made prior to the demise of the Nominating Person(s). The Depository shall not be liable for any action taken in reliance upon and on the basis of nomination validly made by the Nominating Person(s).
9.11.8 xxx
6. Upon such nomination the securities automatically get transferred in the name of the nominee upon the death of the holder of shares. The nomination is required to be dematted duly registered with the Depository Participant (Bank) in accordance with the Business Rules. The nominee is required to follow the prescribed procedure in the Business Rules. Upon the death of the holder of the shares the nominee would be entitled to elect to be registered as an beneficiary owner by notifying the Bank along with the certified copy of the death certificate. The Bank would be required to scrutinise the election and nomination of the nominee registered with it. Such nomination carries effect notwithstanding anything contained in a Testamentary Disposition or nominations made under any other law dealing with the Securities. The last of the many nominations would be valid.
7. Under the said Section the holders of the shares would nominate any person in whom the securities would vest in the event of his death. This nomination has to be made in the manner prescribed under the Business Rules.
8. It can be seen that since all the shares are held in Demat form with the Depository Participant and the portfolio of the holder may change each day. Hence one nomination is specifically required to be made as provided in the aforesaid legislation. The nomination would have the effect of vesting in the nominee complete title in the shares. He would be entitled to elect to be registered as a beneficial owner of the shares or he would have the right to transfer the shares. These are inter alia the rights of every shareholder of a listed Companies. These rights show that the vesting of the shares is upon the death of the shareholder provided only that the nomination is made as per the procedure set out by the Depository participant. This procedure is the registration of the form of nomination constituting the nomination of the nominee with his photograph signed by the holder as well as the nominee and witnessed by at least 2 persons and registered with the Bank. The purpose and object of this Section is clear. It is simplifies the procedure relating to the transmission of shares which is otherwise an intangible movable property. As the shares are now held in Dmat form and can be purchased and sold in the market by word of mouth or on the Internet, and no physical share certificates are issued by Companies, only one nomination for all the shares in all the companies need be made. That can be registered only with the Depository Participant who records all the share transactions of the holder of the shares who is mandatorily required to open a Dmat account with the Depository Participant. Hence the legislature has simplified and specified the procedure for vesting of shares by nomination made in the prescribed manner.
14.The meaning and definition of the word “Vest” is required to be considered. Black’s Law Dictionary 8th Edition at page 1594 shows the meaning of “Vest” thus:“
Vest:1. To confer ownership of (property) upon a person. 
2. To invest (a person) with the full title to property.
3. To give (a person) an immediate, fixed right of present or future enjoyment.
4. Hist. To put (a person) into possession of land by the ceremony of investiture.
Vested: Having become a completed, consummated right for present or future enjoyment; not contingent; unconditional; absolute."
Further the meaning of vested right is given in the aforesaid Dictionary at page 1349 thus: “Vested right. A right that so completely and definitely belongs to a person that it cannot be impaired or taken away without the person’s consent”.
15. The meaning of Vested Interest in the said Dictionary is explained at page 829 thus: “Vested interest. An interest the right to the enjoyment of which, either present or future, is not subject to the happening of a condition precedent”.
16.The meaning of Vested Estate at page 588 is shown thus: “Vested estate. An estate with a present right of enjoyment or a present fixed right of future enjoyment.
17.Advanced Law Lexicon by P. Ramanatha Aiyar 3rd Edition 2007 at page 2677 when explains the term Vested Legacy thus: VESTED LEGACY. A legacy the interest in which is so fixed as to be transmissible to the personal representative of the legatee.
18. The judgment in the case of The Fruit & Vegetable Merchants Union Vs. The Delhi Improvement Trust, A.I.R. 1957 SC 344 at page 353 holds that the word “Vest” can be used differently upon considering the English Law.
19. It is observed that the word “Vest” is a word of variable import even under Indian Statutes. The illustrations given in the judgment are the Insolvency Act which provides that the property vests in the Receiver. Such vesting is held to be temporary and only for the purpose of management of the properties of the insolvent for payment of his debts after distributing his assets. Consequently, the Receiver would have no interest of his own in the property vested in him. The vesting under the Land Acquisition Act is shown to be different. Under that Act the property would vest “absolutely in the Government free from all encumbrances”. Hence upon such vesting the property acquired becomes the property of the Government without any conditions or limitation either as to its title or possession. Consequently, it is held at page 353 runs thus:
“ It would thus appear that the word “vest” has not got a fixed connotation, meaning in all cases that the property is owned by the person or the authority in whom it vests. It may vest in title, or it may vest in possession, or it may vest in a limited sense, as indicated in the context in which it may have been used in a particular piece of legislation.”
20. Hence under that judgment which considered the provisions of the U.P. Town Improvement Act it was held that the land vesting in the Municipal or Legal Body was so vested only for the purpose of managing that land and would not transfer ownership of the property to the Authority.
21.In the case of Dr. M. Ismail Faruqui Vs. Union of India A.I.R. 1995 S.C. 605 the concept of vesting the property in the Acquiring Authority came to be considered under the Acquisition of Certain Area at Ayodhya Act (33 of 1993). Considering the pith and substance of the Act, which was for the acquisition of the property at Ram Janma Bhoomi Babri Masjid site under a legislation, it was held that vesting of the disputed land (Ram Janma Bhoomi Babri Masjid) was limited to holding it by the Civil Government as Statutory Receiver and vesting of the area in excess of the disputed structure was absolute. Hence, it is seen that the intention of the Legislature is of primary importance in considering the effect of the term “vest” in a given legislation.
22. In the case of Municipal Corporation of Greater Bombay Vs. Hindustan Petroleum Corporation (2001) 8 SCC 143 the vesting of watercourse in the Municipal Corporation was held not to be except for entrustment of the duty of the Municipality to maintain them in the manner provided under Section 220A of the Bombay Municipal Corporation Act, 1888. This would be in consonance with the intention of the legislation – no land can become of the ownership of the Municipality merely because the Municipality is enjoined to maintain it and for which the vesting in possession alone would take place; the ownership would not vest.
23. Considering some of these judgments it has been held in the case of Bharat Coking Coal Ltd. Vs. Karam Chand Thapar & Bros. 2002 (8) SCALE 388 that the term vest in common English acceptation would mean and imply conferment of ownership of properties upon a person and in similar vein it gives immediate and fixed right of present and future enjoinment. However, it is observed, following the decision in the case of Fruit and Vegetables (supra) and Dr. M Faruqui (supra) that the term vest is a word of variable import. In that judgment the right, title and interest of the Coke oven plant which is vested in the Central Government under the Coking Coal Mines (Nationalisation) Act, 1972 was considered. In that case the Appeal of the Company, in which the right, title and interest of the owners of the plants were to have vested under the aforesaid legislation, was dismissed holding that pursuant to the legislation the right, title and interest could not stand transferred to the Government Company since no infraction by the title holders was seen.
24. In the light of these judgments Section 109A of the Companies Act is required to be interpreted with regard to the vesting of the shares of the holder of the shares in the nominee upon his death. The act sets out that the nomination has to be made during the life time of the holder as per procedure prescribed by law. If that procedure is followed, the nominee would become entitled to all the rights in the shares to the exclusion of all other persons. The nominee would be made beneficial owner thereof. Upon such nomination, therefore, all the rights incidental to ownership would follow. This would include the right to transfer the shares, pledge the shares or hold the shares. The specific statutory provision making the nominee entitled to all the rights in the shares excluding all other persons would show expressly the legislative intent. Once all other persons are excluded and only the nominee becomes entitled under the statutory provision to have all the rights in the shares none other can have it. Further Section 9.11 of the Depositories Act 1996 makes the nominee’s position superior to even a testamentary disposition. The nonobstante Clause in Section 9.11.7 gives the nomination the effect of the Testamentary Disposition itself. Hence, any other disposition or nomination under any other law stands subject to the nomination made under the Depositories Act. Section 9.11.7 further shows that the last of the nominations would prevail. This shows the revocable nature of the nomination much like a Testamentary Disposition. A nomination can be cancelled by the holder and another nomination can be made. Such later nomination would be relied upon by the Depository Participant. That would be for conferring of all the rights in the shares to such last nominee.
25. A reading of Section 109A of the Companies Act and 9.11 of the Depositories Act makes it abundantly clear that the intent of the nomination is to vest the property in the shares which includes the ownership rights thereunder in the nominee upon nomination validly made as per the procedure prescribed,, as has been done in this case. These Sections are completely different from Section 39 of the Insurance Act set out (supra) which require a nomination merely for the payment of the amount under the Life Insurance Policy without confirming any ownership rights in the nominee or under Section 30 of the Maharashtra Cooperative Societies Act which allows the Society to transfer the shares of the member which would be valid against any demand made by any other person upon the Society. Hence these provisions are made merely to give a valid discharge to the Insurance Company or the Cooperative Society without vesting the ownership rights in the Insurance Policy or the membership rights in the Society upon such nominee. The express legislature intent under Section 109A of the Companies Act and Section 9.11 of the Depositories Act is clear.
26.Since the nomination is shown to be correctly made by her husband who was the holder of the Suit shares, the Plaintiff would have no right to get the shares of her deceased husband sold or to otherwise deal with the same.

Path-breaking legislations in the vicinity

It has been sometime since we last updated our readers on the pending legislations. Meanwhile there have been a number of path-breaking legislations which have been introduced in the Parliament and given the fact that they come at a critical time when the country is slowly pursuing the mandate towards attaining the status of a developed nation, these in our view definitely carry the intent further. 

The NATIONAL ROAD SAFETY AND TRAFFIC MANAGEMENT BOARD BILL, 2010 which seeks "to provide for the establishment of the National Road Safety and Traffic Management Board for the purpose of orderly development, regulation, promotion and optimisation of modern and effective road safety and traffic management system and practices in relation to the national highways and improved safety standards in highway design, construction, operation and regulate high standards in production and maintenance of mechanically propelled vehicles and for matters connected therewith or incidental thereto." 

The EDUCATIONAL TRIBUNALS BILL, 2010 which seeks "to provide for the establishment of Educational Tribunals for effective and expeditious 
adjudication of disputes involving teachers and other employees of higher educational institutions and other stake holders (including students, universities, institutions and statutory regulatory authorities) and to adjudicate penalties for indulging in unfair practices in higher education and for matters connected therewith or incidental thereto."

ENTRY AND OPERATIONS) BILL, 2010 which seeks "to regulate entry and operation of foreign educational institutions imparting or intending to impart higher education (including technical education and medical education and award of degree, diploma and equivalent qualifications by such institutions) and for matters connected therewith or incidental thereto." As the name suggests, the proposed law would regulate the entry and operations of foreign educational institutions in India in as much as it provides that "no foreign educational institution shall admit any person as a student, or collect any fee from such person or its students in India for any course of study leading to the award of a degree or a diploma, by whatever name called, unless such institution has been notified by the Central Government as a foreign education provider". 

The NATIONAL ACCREDITATION REGULATORY AUTHORITY FOR HIGHER EDUCATIONAL INSTITUTIONS BILL, 2010 which seeks "to make provisions for assessment of academic quality of higher educational institutions, programmes conducted therein and their infrastructure through mandatory accreditation by independent accreditation agencies and to establish a statutory Authority for the said purpose and to provide for matters connected therewith or incidental thereto". The proposed law seeks to establish the 'National Accreditation Regulatory Authority for Higher Educational Institutions' and inter alia make accreditation to be mandatory for every higher educational institution and every programme conducted therein.

The PROHIBITION OF UNFAIR PRACTICES IN TECHNICAL EDUCATIONAL INSTITUTIONS, MEDICAL EDUCATIONAL INSTITUTIONS AND UNIVERSITIES BILL, 2010 which seeks "to provide for the prohibition of certain unfair practices in technical educational institutions, medical educational institutions and universities and to protect interests of students admitted or seeking admission therein and to provide for matters connected therewith or incidental thereto". The proposed law inter alia seeks to regulate / prohibit "capitation fees"; "accepting admission fee and other fees and charges without receipt"; "admission without specified admission tests or inter se merit for selection of students"; "advertisements not based on facts or misleading", etc.

Then we have the Copyright (Amendment) Bill, 2010 which seeks to update the Copyright law of India in line with the international standards, especially in tune with the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonographs Treaty (WPPT) [both instituted under the aegis of the World Intellectual Property Organisation (WIPO)]; provide for 'performers rights' and 'moral rights of authors' at par with the international best practices; and a number of other changes to this effect.

29 May 2010

Fees on assignment of insurance policy illegal: High Court

In a recent decision the Bombay High Court has declared the fees of Rs. 250/- collected by the Life Insurance Corporation of India on assignment of insurance policies in favour of finance companies to be illegal being ultra vires their powers. The High Court quashed the Circular in terms of which the fees was being collected being of the view that there was no power vested in LIC, in terms of the LIC Act or otherwise, to collected fees of such nature and thus there was no legal justification for collection of such fees which was being charged under the garb of 'service charges'.

Holding such, the High Court inter alia observed as under;
33. In Sri Krishna Das vs. Town Area Committee, Cirgaon (supra), the Supreme Court posed the question as under :- 
“The question to be determined is whether the power to levy the tax or fee is conferred on that authority and if it falls beyond, to declare it ultra vires.”
The Court then noted that the power of the State under the Constitution to levy a fee is not identical with its power to levy a tax. The power to levy fees is co-extensive with the power to legislate with respect to substantive matters and it may levy a fee with reference to the services that will be rendered by the State under such law. The State may delegate such a power to a local authority.
34. From Ahmedabad Urban Development Authority vs. Sharadkumar J.Pasawalla & Ors. (supra), we may refer the following extracts from paras 7 & 8 which read as under :-
“7. After giving our anxious consideration to the contentions raised by Mr. Goswami, it appears to us that in a fiscal matter it will not be proper to hold that even in the absence of express provision, a delegated authority can impose tax or fee. In our view, such power of imposition of tax and/or fee by delegated authority must be very specific and there is no scope of implied authority for imposition of such tax or fee. It appears to us that the delegated authority must act strictly within the parameters of the authority delegated to it under Act and it will not be proper to bring the theory of implied intent or the concept of incidental and ancillary power in the matter of exercise of fiscal power.”
“8.....It has been consistently held by this Court that whenever there is compulsory exaction of any money, there should be specific provision for the same and there is no room for intendment. Nothing is to be read and nothing is to be implied and one should look fairly to the language used.”
35. In Gupta Modern Breweries vs. State of J & K (supra), the Supreme Court observed as under :-
“It is now well settled principle of law that the regulatory powers are generally to be widely construed. However, empowering the State Government to impose taxes, fees or duties and such demands must be authorised by the Statute and must contain sufficient guidelines.”
36. It would, thus, be clear that there must be a specific provision conferred by the Act on the delegate to levy a fee. We do not find that the power to make rules under the LIC Act as also the Insurance Act, 1938 is conferred on the Respondent-Corporation. Under the LIC Act, the power to make rules is conferred on the Central Government while the power to make regulations is conferred on the Corporation with the previous approval of the Central Government. The power to charge fee is specifically conferred on the Central Government by making rules. Under the Insurance Act, the power to make rules is conferred on the Central Government and under Section 114-A, the power to make regulations is conferred on the authority. “Authority” has been defined to mean “the Insurance Regulatory and Development Authority” established under sub-section (1) of Section 3 of the Insurance Regulatory and Development authority Act. The impugned circular therefore issued by the Corporation is neither based on the provisions of the LIC Act nor the Insurance Act. As consistently observed by the Supreme Court, it is not possible to read the concept of incidental and ancillary power in the matter of exercise of fiscal power. There is no scope of implied authority for imposition of a fee. The fee must be authorised by the statute and the exercise of the power must be governed by sufficient guidelines. In the instant case, we do not find that the impugned circular has been issued pursuant to the express power conferred on the Corporation. We have already explained Section 6 of the Insurance Act. In that context, the impugned circular would clearly be violative of both the provisions of the Insurance Act as also the LIC Act. The service charge/fee is ultra vires both the abovementioned Acts.
37. Once a service charge/fee is imposed without the authority of law, it affects the petitioners’/ right to carry on business under Article 19(1) (g) of the Constitution of India. It may be possible to contend that the respondents are entitled to defray expenses required to meet the cost of the service to be rendered, but such recovery could be made only if it was authorised by law. We are, therefore, of the opinion that the service charge/fee is not authorised by law. The demand is in contravention of the petitioners’ fundamental right to carry on trade and business and therefore violative of Article 19(1)(g) of the Constitution of India. Consequently, as the demand is without authority of law, it infringes also Article 300(A) of the Constitution of India.

Wednesbury's principles of reasonableness: The law revisited

Examining the correctness of a decision of the High Court in the context of disallowing retest in examination where the High Court had applied the test of 'proportionality' and the 'Wednesbusy's principles of reasonableness', the Supreme Court in a recent judgment took an opportunity to explain the two principles as operating in English law and their applicability in Indian legal context. 

Acknowledging that there was some overlapping between the two two tests and that the Courts of late have preferred the test of proportionality as compared to applying the Wednesbury's principles, the Supreme Court traced the origin and development of the two principles and the inclination of the courts in applying them. The Court inter alia observed as under;
16. Judicial review conventionally is concerned with the question of jurisdiction and natural justice and the Court is not much concerned with the merits of the decision but how the decision was reached. In Council of Civil Service Unions Vs. Minister of State for Civil Service (1984) 3 All ER 935 the (GCHQ Case) the House of Lords rationalized the grounds of judicial review and ruled that the basis of judicial review could be highlighted under three principal heads, namely, illegality, procedural impropriety and irrationality. Illegality as a ground of judicial review means that the decision maker must understand correctly the law that regulates his decision making powers and must give effect to it. Grounds such as acting ultra vires, errors of law and/or fact, onerous conditions, improper purpose, relevant and irrelevant factors, acting in bad faith, fettering discretion, unauthorized delegation, failure to act etc., fall under the heading “illegality”. Procedural impropriety may be due to the failure to comply with the mandatory procedures such as breach of natural justice, such as audi alteram partem, absence of bias, the duty to act fairly, legitimate expectations, failure to give reasons etc.
17. Ground of irrationality takes in Wednesbury unreasonableness propounded in Associated Provincial Picture Houses Limited v. Wednesbury Corporation (1947)2 All ER 680, Lord Greene MR alluded to the grounds of attack which could be made against the decision, citing unreasonableness as an ‘umbrella concept’ which covers the major heads of review and pointed out that the court can interfere with a decision if it is so absurd that no reasonable decision maker would in law come to it. In GCHQ Case (supra) Lord Diplock fashioned the principle of unreasonableness and preferred to use the term irrationality as follows:
“By ‘irrationality’ I mean what can now be succinctly referred to as “Wednesbury’s unreasonableness”, ……. It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it.
18. In R. v. Secretary of State for the Home Department ex parte Brind (1991) 1 All ER 720, the House of Lords re-examined the reasonableness of the exercise of the Home Secretary’s discretion to issue a notice banning the transmission of speech by representatives of the Irish Republican Army and its political party, Sinn Fein. Court ruled that the exercise of the Home Secretary’s power did not amount to an unreasonable exercise of discretion despite the issue involving a denial of freedom of expression. House of Lords however, stressed that in all cases raising a human rights issue proportionality is the appropriate standard of review. The House of Lords in R (Daly) v. Secretary of State for the Home Department (2001) 2 AC 532 demonstrated how the traditional test of Wednesbury unreasonableness has moved towards the doctrine of necessity and proportionality. Lord Steyn noted that the criteria of proportionality are more precise and more sophisticated than traditional grounds of review and went on to outline three concrete differences between the two:-
(1) Proportionality may require the reviewing Court to assess the balance which the decision maker has struck, not merely whether it is within the range of rational or reasonable decisions.
(2) Proportionality test may go further than the traditional grounds of review in as much as it may require attention to be directed to the relative weight accorded to interests and considerations.

(3) Even the heightened scrutiny test is not necessarily appropriate to the protection of human rights. 
19. Lord Steyn also felt most cases would be decided in the sameway whatever approach is adopted, though conceded for human right cases proportionality is the appropriate test.
20. The question arose as to whether doctrine of proportionality applies only where fundamental human rights are in issue or whether it will come to provide all aspects of judicial review. Lord Steyn in R. (Alconbury Development Limited) v. Secretary of State for the Environment, Transport and the Regions (2001) 2 All ER 929 stated as follows:-
“I consider that even without reference to the Human Rights Act, 1998 the time has come to recognize that this principle (proportionality) is part of English administrative law not only when Judges are dealing with Community acts but also when they are dealing with acts subject to domestic law. Trying to keep the Wednesbury principle and proportionality in separate compartments seems to me to be unnecessary and confusing”.
21. Lord Steyn was of the opinion that the difference between both the principles was in practice much less than it was sometimes suggested and whatever principle was applied the result in the case was the same. Whether the proportionality will ultimately supersede the concept of reasonableness or rationality was also considered by Dyson Lord Justice in R. (Association of British Civilian Internees: Far East Region) v. Secretary of State for Defence [2003] QB 1397 and stated as follows:-
“We have difficulty in seeing what justification there now is for retaining Wednesbury test ….. but we consider that it is not for this Court to perform burial rights. The continuing existence of the Wednesbury test has been acknowledged by House of Lords on more than one occasion. A survey of the various judgments of House of Lords, Court of Appeals, etc. would reveal for the time being both the tests continued to co-exist.”
22. Position in English Administrative Law is that both the tests Wednesbury and proportionality continue to co-exist and the proportionality test is more and more applied, when there is violation of human rights, and fundamental freedom and the Wednesbury finds its presence more on the domestic law when there is violations of citizens ordinary rights. Proportionality principle has not so far replaced the Wednesbury principle and the time has not reached to say good bye to Wednesbury much less its burial. 
23. In Huang case (2007) 4 All ER 15 (HL), the House of Lords was concerned with the question whether denial of asylum infringes Article 8 (Right to Respect Family Life) of the Human Rights Act, 1998. House of Lords ruled that it was the duty of the authorities when faced with individuals who did not qualify under the rules to consider whether the refusal of asylum status was unlawful on the ground that it violated the individual’s right to family life. A structured proportionality test has emerged from that decision in the context of the violation of human rights. In R (Daly) (supra) the House of Lords considered both common law and Article 8 of the convention and ruled that the policy of excluding prisoners from their cells while prison officers conducted searches, which included scrutinizing privileged legal correspondence was unlawful.
24. Both the above-mentioned cases, mainly concerned with the violation of human rights under the Human Rights Act, 1998 but demonstrated the movement away from the traditional test of Wednesbury unreasonableness towards the test of proportionality. But it is not safe to conclude that the principle of Wednesbury unreasonableness has been replaced by the doctrine of proportionality.
25. Justice S.B. Sinha, as His Lordship then was, speaking for the Bench in State of U.P. v. Sheo Shanker Lal Srivastava and Others (2006) 3 SCC 276 after referring to the judgment of the Court of appeal in Huang v. Secretary of State for the Home Department (2005) 3 All ER 435, R. v. Secretary of State of the Home Department, ex parte Daly (2001) 3 All ER 433 (HL) opined that Wednesbury principle may not now be held to be applicable in view of the development in constitutional law and held as follows:-
“24. While saying so, we are not oblivious of the fact that the doctrine of unreasonableness is giving way to the doctrine of proportionality.
25. It is interesting to note that the Wednesbury principles may not now be held to be applicable in view of the development in constitutional law in this behalf. See, for example, Huang v. Secy. of State for the Home Deptt. wherein referring to R. v. Secy. of State of the Home Deptt., ex p Daly, it was held that in certain cases, the adjudicator may require to conduct a judicial exercise which is not merely more intrusive than Wednesbury, but involves a full-blown merit judgment, which is yet more than ex p. Daly, requires on a judicial review where the court has to decide a proportionality issue.” 
26. Sheo Shanker Lal Srivastava case was later followed in Indian Airlines Ltd. v. Prabha D. Kanan (2006) 11 SCC 67. Following the above mentioned two judgments in Jitendra Kumar And Others v. State of Haryana and Another (2008) 2 SCC 161, the Bench has referred to a passage in HWR Wade and CF Forsyth on Administrative Law, 9th Edition. (2004), pages 371-372 with the caption “Goodbye to Wednesbury” and quoted from the book which reads as follows:-
“The Wednesbury doctrine is now in terminal decline but the coup de grace has not yet fallen, despite calls for it from very high authorities” and opined that in some jurisdictions the doctrine of unreasonableness is giving way to doctrine of proportionality.”
27. Indian Airlines Ltd.’s case and Sheo Shanker Lal Srivastava’s case (supra) were again followed in State of Madhya Pradesh and Others v. Hazarilal, (2008) 3 SCC 273 and the Bench opined as follows:-
“Furthermore the legal parameters of judicial review have undergone a change. Wednesbury principle of unreasonableness has been replaced by the doctrine of proportionality.”.
28. With due respect, we are unable to subscribe to that view, which is an overstatement of the English Administrative Law.
29. Wednesbury principle of unreasonableness as such has not been replaced by the doctrine of proportionality though that test is being applied more and more when violation of human rights is alleged. H.W.R. Wade & C.F. Forsyth in the 10th Edition of Administrative Law (2009), has omitted the passage quoted by this court in Jitender Kumar case and stated as follows:
“Notwithstanding the apparent persuasiveness of these views the coup de grace has not yet fallen on Wednesbury unreasonableness. Where a matter falls outside the ambit of 1998 Act, the doctrine is regularly relied upon by the courts. Reports of its imminent demise are perhaps exaggerated.”
30. Wednesbury and Proportionality - Wednesbury applies to a decision which is so reprehensible in its defiance of logic or of accepted moral or ethical standards that no sensible person who had applied his mind to the issue to be decided could have arrived at it. Proportionality as a legal test is capable of being more precise and fastidious than a reasonableness test as well as requiring a more intrusive review of a decision made by a public authority which requires the courts to ‘assess the balance or equation’ struck by the decision maker. Proportionality test in some jurisdictions is also described as the “least injurious means” or “minimal impairment” test so as to safeguard fundamental rights of citizens and to ensure a fair balance between individual rights and public interest. Suffice to say that there has been an overlapping of all these tests in its content and structure, it is difficult to compartmentalize or lay down a straight jacket formula and to say that Wednesbury has met with its death knell is too tall a statement. Let us, however, recognize the fact that the current trend seems to favour proportionality test but Wednesbury has not met with its judicial burial and  state burial, with full honours is surely not to happen in the near future. 
31. Proportionality, requires the Court to judge whether action taken was really needed as well as whether it was within the range of courses of action which could reasonably be followed. Proportionality is more concerned with the aims and intention of the decision-maker and whether the decision-maker has achieved more or less the correct balance or equilibrium. Courts entrusted with the task of judicial review has to examine whether decision taken by the authority is proportionate, i.e. well balanced and harmonious, to this extent court may indulge in a merit review and if the court finds that the decision is proportionate, it seldom interferes with the decision taken and if it finds that the decision is disproportionate i.e. if the court feels that it is not well balanced or harmonious and does not stand to reason it may tend to interfere.
32. Leyland and Anthony on Textbook on Administrative Law (5th edn. OUP, 2005) at p.331 has amply put as follows: 
“Proportionality works on the assumption that administrative action ought not to go beyond what is necessary to achieve its desired results (in every day terms, that you should not use a sledgehammer to crack a nut) and in contrast to irrationality is often understood to bring the courts much closer to reviewing the merits of a decision”.
33. Courts have to develop an indefeasible and principled approach to proportionality till that is done there will always be an overlapping between the traditional grounds of review and the principle of proportionality and the cases would continue to be decided in the same manner whichever principle is adopted. Proportionality as the word indicates has reference to variables or comparison, it enables the Court to apply the principle with various degrees of intensity and offers a potentially deeper inquiry into the reasons, projected by the decision maker.

Nalini not to be released prematurely: High Court

Rejecting the petition filed by Nalini praying for early release from prison, the Madras High Court did not allow the convict in the case of assassination of former Prime Minister of India, Sri Rajiv Gandhi to be released. Noting that she had already received the benefit of commutation of sentence from the Governor of Tamil Nadu where the death punishment awarded to her was reduced to one of life imprisonment, the High Court held that the case of Nalini was not fit for being considered for remission of sentence given the facts and circumstances relating to the offence committed by her.

In making this decision, the High Court made some interesting observations, as under;

  • In the case of heinous, brutal and barbaric assassination of former Prime Minister of India, wherein the present appellant is a convict prisoner, undergoing life sentence, the SIT has investigated a crime that was cunning in conception, meticulous in planning and ruthless in execution and the SIT has carried out a tremendous job with its meticulous investigation which was able to unearth the mystery from some slender clues. When the offence proved against the appellant is that of a higher magnitude rather sending shocking waves throughout the world as by such inhuman and barbaric act, the appellant and the other co-accused have taken away the life of a former Prime Minister of India, resulting in the specialised investigating team to take over the case, this argument advanced on the part of the appellant needs only to be rejected. [para 30]
  • Coming to the other ground urged by the appellant that the classification introduced by the impugned G.O., among the life convicts viz. those life convicts falling under Section 435 Criminal Procedure Code and those who do not fall under the said Section, by the Governor, while exercising powers under Article 161 of the Constitution is arbitrary, discriminatory, unfair and unreasonable and violative of Articles 14 and 21 of the Constitution, as has already been observed by us supra, the appellant is a convict prisoner in a case of doing away the life of a former Prime Minister of India, in a barbaric manner of plotting human bombs and taking away the life of many others. It must be borne in mind that branding the case as one falling under the category of 'rarest of rare', originally death sentence was awarded to the appellant, which was later on commuted to one of life imprisonment, which seems to be purely on humanitarian grounds. Such commutation of death sentence to one of life imprisonment does not in any manner reduce the gravity of the offence proved to be involved by the appellant. That being so, in terms of the judgment of the Honourable Apex Court in Sadu Singh's case (1984 SCC (Cri) 241), she constitute a distinct class and cannot claim equality with those sentenced to life imprisonment' and the gravity of an offence and the quantum of sentence prescribed in the Code could be a reasonable basis for a valid classification if the object of such classification is to grant or not to grant remission. If all the prisoners, irrespective of the gravity of the offences for which they are convicted are classified and considered similarly, it will have serious repercussions on the safety and security of the society besides shaking the foundation of the entire criminal justice system of awarding appropriate quantum of sentence depending on the nature of the offence proved to be committed by the accused. Therefore, the classification incorporated by the Government in the impugned G.O. among the life convicts falling within and outside the ambit of Section 435 Cr.P.C., is a reasonable classification, which the Government is empowered to bring in to uphold the majesty and to meet the real ends of justice. Therefore, this classification cannot at all be branded as arbitrary or discriminatory or unfair or even unreasonable, so as to say and hold that it violates Articles 14 and 21 of the Constitution. [para 31]

National Stock Exchange covered under RTI: High Court

In a recently delivered decision, the Delhi High Court has declared that 'National Stock Exchange' is covered under the ambit of the Right to Information Act, 2005 and thus required to provide the information sought under the Act. Senior Advocate Ashok Desai argued for the National Stock Exchange of India Limited that it was not a 'public authority' as defined under the Act. However, holding that the Stock Exchange was "an 'authority or institution of self-government‘ constituted or established by notification or order issued by the appropriate Government" and also controlled by the Government, the High Court repelled the challenged and declared the Exchange to be governed by the provisions of the Right to Information Act, 2005. 

28 May 2010

No recovery agents for Banks: High Court

In a recently reported decision [AIR 2010 NOC 398 (Mad)], the Madras High Court has declared that use of recovery agents by the banks for recovery the loan amounts is against the provisions of law. Even though the High Court declared that such instances cannot be challenged in a writ petition under Article 226 of the Constitution where private banks were involved, nonetheless it stated in no unclear terms "that recovery through musclemen giving them the title 'Recovery Agents' is not permitted by law".

The High Court was hearing a case wherein the petitioner challenged the 

6. The question as to whether ICICI bank would come within the meaning of "other authorities" as defined under Article 12 of the Constitution of India was considered by the Division Bench of our High Court in ICICI Bank Ltd. Vs. Lakshminarayanan [2008 (3) LLN 320] and after considering the matter in extenso, the Division Bench held that the writ petition is not maintainable against ICICI bank. The said judgment was followed by another Division Bench in W.A.No.480 of 2007 (S.Sundaram and others v. ICICI Bank Ltd and another, judgment dated 09.02.2009), wherein it was clearly held that ICICI bank would not come within the purview of  Article 12 of the Constitution of India.  
7. Even though this Court cannot interfere in the realm of contract entered into between the petitioner and the respondent bank, still the bank cannot be heard to say that they are entitled to proceed against the petitioner without resorting to the procedure recognized by law. The respondent bank is bound to act as per the directions and guidelines issued by the Reserve Bank of India from time to time. The practice adopted by the respondent bank in hiring recovery agents and deputing musclemen to seize the vehicles were deprecated by the Hon'ble Supreme Court in ICICI Bank Ltd. v. Prakash Kaur reported in 2007(2) SCC 711. While supplementing the judgment delivered by His Lordship Mr. Justice ALTAMAS KABIR, His Lordship Mr. Justice AR.LAKSHMANAN was pleased to indicate certain factors, which were prevailing in the banking industry in the matter of recovery. The factors so indicated would run thus:-
"* Now the bank is the aggressor and the public is the victim. The first step to recovery of the money due is through the so-called recovery/collection agents. A very dignified term used for paid recovery agents who are individual and independent contractors hired by the banks both to trace the defaulters and to physically, mentally and emotionally torture and force them into submitting their dues.
* A man's self-respect, stature in society are all immaterial to the agent who is only primed at recovery. This is the modernised version of Shylock's pound of flesh. No explanation is given regarding the interest charge and the bank takes cover under the guise of the holder of the card or loan having signed the agreement whose fine print is never read or explained to the owner.
* When a harassed man approaches the court or the police station he is not armed with a recording phone and finds it difficult to give evidence of the abuse he has suffered. Here the bank gets away with everything. Young and old members of the family are threatened on streets, institutions and also at home at godforsaken hours by these agents who have the full support of their contractor bank. The stance taken by the bank in any suit alleging such incidents is that no such agent has been appointed by them or their agents do not misbehave in the manner aforesaid and if found guilty the agents have to bear the cross and the bank gets away scot-free.
* Using of the abusive language for recovery is the norm of the day for most nationalised or multinational banks or non-nationalised banks.  Though some are smart enough to record the abuse and proceed to establish the same through the court of law, most of them are unfortunate not to have recourse to it. Such people form the majority and such litigations are pending in large volumes before the civil and consumer courts. Again the banks escape liability since these agents are not salaried employees of the bank and hence not directly liable for anything."
8. The Hon'ble Supreme Court in Prakash Kaur's case strongly deprecated the practice of the respondent bank in removing the vehicle from the possession of the debtor by hiring recovery agents in the following words:-  
"16. Before we part with this matter, we wish to make it clear that we do not appreciate the procedure adopted by the Bank in removing the vehicle form the possession of the writ petitioner. The practice of hiring recovery agents, who are musclemen, is deprecated and needs to be discouraged. The Bank should resort to procedure recognized by law to take possession of vehicles in cases where the borrower may have committed default in payment of the installments instead of taking resort to strong-arm tactics."
9. The respondent bank being the appellant in the Prakash Kaur's case cited supra, must take note of the strong observation made by the Hon'ble Supreme Court in the matter of recovery, while taking steps to proceed against the hypothecated vehicle involved in the present writ petition and their action should be in accordance with the contract entered into between the parties and it should also be in accordance with the procedure recognized by law. 
10. It is needless to mention that recovery through musclemen giving them the title "Recovery Agents" is not permitted by law.