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28 Nov

No Jurisdiction of NCLT can be Invoked if Termination of Contract is Unrelated to Insolvency of Corporate Debtor

Insolvency and Bankruptcy, Uncategorized

In the recent case of TATA Consultancy Services Limited v. Vishal Ghisulal Jain, Resolution Professional, SK Wheels Private Limited in Civil Appeal No 3045 of 2020, the Bench of Hon’ble Apex Court consisting of Dr. Dhananjaya Y Chandrachud, J and A S Bopanna J, decided an appeal preferred against the order of National Company Law Appellate Tribunal (NCLAT) upholding an ad-interim stay granted by the National Company Law Tribunal (NCLT) for staying termination by the Appellant of Facilities Agreement executed with the Corporate Debtor (SK Wheels Private Limited).

The Facilities Agreement obligated the Corporate Debtor to provide premises with certain specifications and facilities to the Appellant. The termination clause of the Facilities Agreement entitled the parties to terminate the agreement immediately by written notice to the other party provided that a material breach committed by the latter is not cured within thirty days of the receipt of the notice.

On account of alleged multiple lapses by the Corporate Debtor in fulfilling its contractual obligations, which were not cured satisfactorily, despite Appellant writing various e-mail communications, the Appellant issued the termination notice dated 10.06.2019 which immediately came into effect. This was subsequent to the initiation of Corporate Insolvency Resolution Process on 29.03.2019.

The corporate debtor denied the allegation of material breaches and challenged the termination of the Agreement on the ground that corporate debtor had cured the issues highlighted by the Appellant and that the Appellant did not serve mandatory notice of 30 days.

When RP filed application under section 60(5)(c) of the IBC, NCLT granted ad-interim stay on termination of the Agreement stating that it is the duty of Resolution Professional to preserve and protect the assets of the ‘Corporate Debtor’ (Section 25 of the IBC) along with the fact that moratorium under section 14 is imposed to ensure the smooth functioning of the Corporate Debtor and accordingly, granted stay on termination of the Agreement. The Order was upheld by NCLAT.

On Appeal, it was argued before the Supreme Court that section 14 shall not be applicable as it is the Appellant who is availing the services of the Corporate Debtor and the Facilities Agreement was not the sole contract of the corporate debtor, termination of which would lead to its corporate death. The Appellant also insisted on third party’s contractual right of termination and argued that IBC does not permit a statutory override of all contracts entered with the Corporate Debtor. Further, it was argued that the obligation under section 25 cannot be stretched to convert a determinable commercial contract into a non-terminable contract. The Appellant further challenged the exercise of residuary jurisdiction by the NCLT under Section 60(5)(c) of the IBC to decide a contractual dispute.

The Appellant further submitted that the ratio in Gujarat Urja Vikas v. Amit Gupta & Ors [(2021) 7 SCC 209] shall not be applicable since in the present matter, the contract in question was the sole contract of the corporate debtor, and the termination of the contract by the third party was merely on the ground of initiation of CIRP without there being any contractual default on part of the corporate debtor.

On the other hand, it was argued on behalf of the RP that firstly, the Appellant had not served the 30 day notice and secondly, the judgment in Gujarat Urja Vikas shall apply since the corporate debtor had only one source of income left out of the two when one dealership was already terminated before the initiation of CIRP.

Accordingly, the Court framed two issues for its consideration -:

(i) Whether the NCLT can exercise its residuary jurisdiction under Section 60(5)(c) of the IBC to adjudicate upon the contractual dispute between the parties; and

(ii) Whether in the exercise of such a residuary jurisdiction, it can impose an ad-interim stay on the termination of the Facilities Agreement?

The Apex Court analysed the arbitration clause provided in the Agreement along with the provision under Section 238 of the IBC which provides that the IBC overrides other laws, including any instrument having effect by virtue of law. The Court accordingly observed that the Facilities Agreement, being an ‘instrument’ under Section 238 of the IBC, can be overridden by the provisions of the IBC.

On analysis of section 60(5)(c) of the IBC, the Court observed that the existence of arbitration clause does not oust the jurisdiction of the NCLT to exercise its residuary powers under Section 60(5)(c) to adjudicate disputes relating to the insolvency of the Corporate Debtor. The Court further clarified that while RP can approach the Adjudicatory Authority for adjudication of disputes which relate to the insolvency resolution process, however, “when the dispute arises dehors the insolvency of the Corporate Debtor, the RP must apply to the Adjudicatory Autority.”

With respect to the objection by the Appellant that the adjudicatory Authority has, through its order, changed the nature of the Agreement from determinable to non-terminable, the Court clarified that intervention of NCLT/NCLAT, which are vested with responsibility of ascertaining the survival of the Corporate Debtor, cannot be said to be re-writing of the contract.

On the question of applicability of section 14, the Court agreed that section 14 shall not be applicable in the facts of the present case since the Appellant is neither supplying any goods or services to the corporate debtor in terms of Section 14 (2) nor is it recovering any property that is in possession or occupation of the corporate debtor as the owner or lessor of such property as envisioned under Section 14 (1) (d). The Appellant is, in fact only availing of the services of the Corporate Debtor by using the property that has been leased to it by the Corporate Debtor.

The Court, however, while referring to Gujarat Urja, was quick to add that jurisdiction of NCLT is not limited by Section 14 and that it can exercise its residuary jurisdiction under Section 60(5)(c) to adjudicate on questions of law and fact that relate to or arise during an insolvency resolution process. It was quoted from the judgment of Gujarat Urja – “If the jurisdiction of NCLT were to be confined to actions prohibited by Section 14 of IBC, there would have been no requirement for the legislature to enact Section 60(5)(c) of IBC. Section 60(5)(c) would be rendered otiose if Section 14 is held to be exhaustive of the grounds of judicial intervention contemplated under IBC in matters of preserving the value of the corporate debtor and its status as a “going concern”.

Having laid down the background, the Court went on to analyse the facts of the case. It was observed that the termination by the Appellant was not motivated by insolvency but by Corporate Debtor clearly having failed to fulfil its contractual obligations which the Appellant had brought to the attention of the corporate debtor before the initiation of CIRP through various e-mails. The deficiency of service was also highlighted in the Termination Notice by the Appellant.

In this background, the Court distinguished the facts in Gujarat Urja where the contract in question was terminated on the ground of insolvency itself which, as per the contract, constituted an event of default. In other words, the contractual dispute between the parties arose in relation to the insolvency of the corporate debtor and therefore it was amenable to the jurisdiction of the NCLT under Section 60(5)(c). This Court quoted from the judgment that “….NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor… The nexus with the insolvency of the corporate debtor must exist”.

Therefore, while heavily relying on the reasoning in the judgment of Gujarat Urja, the Apex Court laid down the law that the residuary jurisdiction of the NCLT cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of the corporate debtor and since NCLT has no jurisdiction in such matters, the NCLT had incorrectly imposed an ad-interim stay on the termination of the Facilities Agreement.

Additionally, the Court also issued a note of caution for the NCLT/NCLAT regarding interference with a party’s contractual right to terminate a contract in the following words – “Even if the contractual dispute arises in relation to the insolvency, a party can be restrained from terminating the contract only if it is central to the success of the CIRP. Crucially, the termination of the contract should result in the corporate death of the Corporate Debtor”. The Court finally observed that NCLT had failed to apply its mind to “the centrality of the Facilities Agreement to the success of the CIRP and Corporate Debtor’s survival as a going concern” and therefore, the judgment of NCLAT that confirmed NCLT order of ad-interim stay on termination was set aside.

18 Nov

PIL to exclude healthcare services from purview of the Consumer Protection Act, 2019, dismissed

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Consumer

In a Public Interest Litigation No. 58 of 2021 [Medicos Legal Action Group v. Union of India], a Trust approached the High Court of Judicature at Bombay, to declare that services performed by healthcare service providers (“HSPs”) are not included within the purview of the Consumer Protection Act, 2019 (“2019 Act”) and to direct all consumer fora within the territorial jurisdiction of this Court not to accept complaints filed under the 2019 Act against HSPs. The Trust heavily relied on the parliamentary debates and statement of Minister for Consumer Affairs, Food and Public Distribution on the Consumer Protection Bill, 2018 that ‘healthcare’ had been deliberately kept out of the 2019 Act. Therefore, according to the Trust, since the 2019 Act having been brought into force upon repeal of the Consumer Protection Act, 1986 (“1986 Act”), registration of complaints, which are filed against doctors by the consumer fora in the State of Maharashtra are illegal.

The Court compared the definition of ‘service’ as given in Section 2(1)(o) of the 1986 Act and section 2(42) of the 2019 Act and observed that there is no material difference between the two and the only term added subsequently under 2019 Act is ‘telecom’.

The Court went on to observe that even in the 1986 legislation, the definition of ‘service’ did not include the services rendered by the doctors. However, the Hon’ble Supreme Court has held that the Consumer Act is applicable in case of services by a medical practitioner. The Court heavily relied on the landmark case of Indian Medical Association Vs. V. P. Shantha & Ors ((1995) 6 SCC 651) as a binding precedent where it was held that “Service rendered to a patient by a medical practitioner (except where the doctor renders service free of charge to every patient or under a contract of personal service), by way of consultation, diagnosis and treatment, both medicinal and surgical, would fall within the ambit of ‘service’ as defined in Section 2(1)(o) of the Act.”

In the matter of Indian Medical Association, the Supreme Court hadclarified that there is a difference between ‘contract of personal service’ and ‘contract for personal services’. According to the Court, “[I]n the absence of a relationship of master and servant between the patient and medical practitioner, the service rendered by a medical practitioner to the patient cannot be regarded as service rendered under a ‘contract of personal service’. Such service is service rendered under a `contract for personal services’ and is not covered by exclusionary clause of the definition of ‘service’ contained in Section 2(1)(o) of the Act.”. To further bring clarity, it was held that the expression ‘contract of personal service’ in case of a medical practitioner will apply in case of employment of a medical officer for the purpose of rendering medical service to the employer. In such arrangement, “the service rendered by a medical officer to his employer under the contract of employment would be outside the purview of ‘service’ as defined in Section 2(1)(o) of the Act”.

The Court in Indian Medical Association also discussed various scenarios where the medical services may be given free of cost. Broadly, services` rendered – (i) free of charge by a medical practitioner attached to a hospital/Nursing home or a medical officer employed in a hospital/Nursing home where such services are rendered free of charge to everybody and (ii) at a Government hospital/health centre/dispensary or non-Government hospital/Nursing home, where no charge whatsoever is taken from any person availing the services, would not be “service” as defined in Section 2(1)(o) of the Act. This position shall remain as it is even if a token registration fee has been charged from the patients.

The Court further listed the scenarios where a medical service will fall within the purview of the expression ‘service’ under the 1986 Act. As a general rule, service rendered by hospitals/nursing homes where charges are required to be paid by the persons availing such services, will constitute a ‘service’ under the Act. However, the following services shall additionally fall within the definition – they are – (i) Service rendered at a Government and non-Government hospital/health centres/nursing homes where charges are required to be paid by persons who are in a position to pay and persons who cannot afford to pay are rendered service free of charge; (ii) when services are availed by a person who is covered by an insurance policy for medical care where under the charges for consultation, diagnosis and medical treatment are borne by the insurance company; and (iii) when the employer bears the expenses of medical treatment of an employee and his family members dependent on him.

While addressing the precise premise taken by the Trust, the Court referred to State of Travancore-Cochin vs. Bombay Co. Ltd. AIR 1952 SC 366 where in Justice Patanjali Shastri had made an acute observation regarding the relevance of speeches in course of debate in a Parliament. It was observed that opinion in such speeches at best can be indicative of the subjective opinion of the speaker. The Court also referred to other cases decided by the Hon’ble Supreme Court where in it was held that ‘speeches made on the floor of the Parliament are not admissible as extrinsic aids to the interpretation of statutory provisions’ because a statute is the expression of the collective intention of the Legislature as a whole and any statement made by an individual, albeit a Minister, of the intention and object of the Act, cannot be used to cut down the generality of the words used in the statute. On this basis, the Court found that the submissions made by the Trust as least relevant.

The Court also considered the submission made in the PIL that ‘health care’ was initially included in the definition of the term “service” in the Bill but the same was deleted after extensive debates. The Court in this regard opined that the parliamentarians might have thought of not including `health care’ as the same has already been understood and interpreted by the Supreme Court in Indian Medical Association and such express inclusion would have amounted to a ‘mere surplusage’. The Court further observed that “If at all the Parliament while repealing and replacing the 1986 Act with the 2019 Act had intended to give a meaning to the term “service” different from the one given by the Supreme Court, such intention ought to have been reflected in clear words by a specific exclusion of ‘health care’ from the purview of the 2019 Act.”

With this background and reasoning, the Court dismissed the PIL as being ‘thoroughly misconceived’ and imposed a cost of Rs.50,000/- to be paid to the Maharashtra State Legal Services Authority.

18 Nov

Whether a losing party can sue her Advocate before the Consumer Forum for deficiency in Service

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Consumer

In a recent matter decided by the Supreme Court [Nandlal Lohariya v. Jagdish Chand Purohit and others (Special Leave Petition(C) Diary No. 24842 of 2021), the petitioner filed a complaint against three advocates who appeared on behalf of the petitioner in three complaints against BSNL. The Petitioner alleged deficiency in service on their part in contesting his cases against BSNL before the District Forum.

The District Forum dismissed the complaint filed by the petitioner and the State Commission and the National Commission confirmed the decision of the District Forum where it was held that there was no negligence on the part of the advocates at all and that there was no deficiency in service.

The Court found that there was no substance in the present special leave petitions and upheld the decision of the National Commission. The Court observed that “In each and every case where a litigant has lost on merits and there is no negligence on the part of the advocate/s, it cannot be said that there was any deficiency in service by the advocate/s”. The Court further stated that if the submission advanced on behalf of the petitioner is accepted, in that case, in each and every case where a litigant has lost on merits and his case is dismissed, he will approach the consumer fora and pray for compensation alleging deficiency in service. The Court clarified that it cannot be said to be deficiency in service on the part of the advocate when the party has lost the case after the advocate argued the matter on merits. Further, one party is bound to lose in a litigation and it is not permissible that the party who loses in the litigation may then approach the consumer fora for compensation alleging deficiency in service.

On the grounds stated above the Special Leave Petition was dismissed.

16 Nov

Whether 2015 Amendments apply to Section 34 proceedings filed before 23.10.2015?

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Arbitration

In the recent case of Ratnam Sudesh Iyer v. Jackie Kakubhai Shroff [Civil Appeal No. 6112 of 2021], dispute arose between two parties who were shareholders in the investment holding company called Atlas Equifin Private Limited, India (‘Atlas’) which held 11,05,829 equity shares of Rs.10 each in Multi Screen Media Pvt. Ltd. (‘MSM’). The Appellant, who was based in Singapore, with an intention to sell its share in Atlas entered into a placement instruction in 2005 with the Respondent which authorised Standard Chartered Bank (‘SCB’) as their agent to identify the purchaser for the appellant’s shares in Atlas. However, the Respondent challenged the placement instruction and alleged that his signature was forged. The respondent lodged a complaint with the Economic Offences Wing, Mumbai Police (‘EOW’) in 2010 against both the appellant and the SCB. Subsequently, the Parties decided to settle the matter and entered into a Deed of Settlement dated 03.01.2011 which provided, amongst other things, that respondent would withdraw all complaints and proceedings filed against the appellant and going forward shall not write any letter or communication or complaint to any police authority/ies and/or any other judicial, quasi-judicial authority or statutory authority or any person or entity complaining about the subject matter of the Settlement Deed.

In return, the Appellant was to pay to the Respondent an amount of US$ 1.5 million vide banker’s cheque which was to be held in an escrow account, and was to be handed over to the respondent on confirmation by the EOW that the complaint has been withdrawn. Further, the respondent was to be paid US$ 2 million within seven (7) days of the receipt of the proceeds from the sale of MSM’s shares.

On any breach on part of the respondent, the Settlement Deed was to terminate and the US$ 1.5 million kept in escrow would then be released back to the appellant. Very soon, the disputes arose and the Arbitration Clause was triggered when both the parties alleged breach of the terms of the Settlement Deed. The Appellant filed a Section 9 of the Arbitration and Conciliation Act, 1996 (the “Act”) application claiming that the amount should not be released to the respondent on account of the breach of the Deed of Settlement since the wife of the Respondent wrote an e-mails to the Appellant which were defamatory and therefore sought interim relief against the respondent, his wife, and the escrow agent. In the court proceedings the wife of the respondent was dropped from the array of parties and the matter was referred to arbitration with the direction that the escrow agent would hand over the cheque for US$ 1.5 million only after the direction of the arbitrator.

One of the claims of the Appellant before the Arbitrator was the refund of US$ 1.5 million with 18 per cent interest per annum.

The learned arbitrator made the final award on 10.11.2014, awarding a claim for liquidated damages of US$ 1.5 million in favour of the appellant, as per the Deed of Settlement. The award further held that the respondent would not be entitled to the second cheque of US$ 2 million held in escrow, on account of the respondent’s breach of the Deed of Settlement.

Against the Award, the Respondent preferred an application under Section 34 of the Act and the Appellant moved an application under section 36. Consequently, the respondent also filed for stay of the enforcement of the award which was granted and the Bombay High Court finally set aside the award vide judgment dated 19.05.2020. The Appellant filed an appeal under section 37 of the Act which was dismissed by the Division Bench of the Bombay High Court vide impugned judgment dated 20.04.2021. The High Court also granted interim protection against withdrawal of the amount specified under the Deed of Settlement for a limited period of time. In the Special Leave Petition while issuing notice on 02.08.2021, the interim arrangement by the High Court was extended.

The following questions arose for consideration:

Whether the award arose out of an international commercial arbitration and what is the distinction between a domestic award arising from an international commercial arbitration and a purely domestic award? Further, whether the test for interference was made more stringent by the amendment in respect of a domestic award arising from an international commercial arbitration?

The Court, on the nature of Award, held that since the Appellant was based out of Singapore, it would be an international commercial arbitration in term of section 7 of the Act. The Court observed that vide the Arbitration and Conciliation (Amendment) Act, 2015 (‘2015 Amendment Act’), Explanations to Section 34(2) of the said Act as well Sub-Section 2A to Section 34 were inserted and therefore, beyond doubt, the “scope of interference by the Court became more restrictive with the amendments coming into force. “

While interpreting the provision under sub- section 2A of Section 34 of the Act, the Court observed that “the plea of patent illegality is not available for an award which arises from international commercial arbitration post the amendment” and that “… the judgments of the learned Single Judge and the Division Bench decide the challenge to the award on the plea of patent illegality without noticing this distinction.” The Court observed that both the courts proceeded on the basis that the award cannot be sustained in either situation, i.e. for a purely domestic award or a domestic award arising from an international commercial arbitration.

The Court then proceeded to answer the question whether the 2015 Amendment Act would apply in the facts of the present case?

While observing that Section 34 proceedings in the matter commenced prior to 23.10.2015, the Court observed that the law provided under Section 26 of the 2015 Amendment Act as to when the amendment would apply in this regard was well settled. The Court also referred to the decision in Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. & Ors. (2018) 6 SCC 287 in this regard. The Court clarified that “The judgment derived that the intention of the legislature was to mean that the 2015 Amendment Act is prospective in nature and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the said Act, on or after the 2015 Amendment Act, and to court proceedings which had commenced on or after the 2015 Amendment Act came into force.”

The Court further referred to the decision in Ssangyong Engineering and Construction Company Ltd. v. National Highways Authority of India (2019) 15 SCC 131 and Hindustan Construction Company Ltd. and Anr. v. Union of India & Ors. 2019 SCC OnLine 1520, for understanding the applicability of sub-section 2A of section 34 of the Act. It was opined the said case that Section 34 as amended will apply only to Section 34 applications that have been made to the Court on or after 23.10.2015, irrespective of the fact that the arbitration proceedings may have commenced prior to that date.

The Appellant however, contended that as the Arbitration Clause in the Deed of Settlement, provided that “the Arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 of India or any amendment thereto”, and therefore, any future amendments to the said Act shall be applicable to the arbitration in question.

Therefore, the Court proceeded to examine the impact of the phraseology used in the arbitration clause, mainly, “the Arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 of India or any amendment thereto”.

The Court referred to S.P. Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh & Anr. (2019)2SCC488 in which the arbitration clause provided that the arbitration would be subject to the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof. In the matter the Supreme Court opined that such general conditions of the contract cannot be taken to be an agreement between the parties to apply the provisions of the 2015 Amendment Act and the provisions of the 2015 Amendment Act would apply only in relation to arbitral proceedings commenced on or after the date of commencement of the 2015 amendment. A similar view was taken in the case of Union of India v. Parmar Construction Company (2019) 15 SCC 682. It was further observed that the provisions of the 2015 Amendment Act shall not apply to arbitral proceedings which had commenced in terms of the provisions of Section 21 of the said Act unless the parties otherwise agree.

While the above referred cases were in relation to arbitration proceedings, the matter before the Court dealt with a section 34 application which was moved before the 2015 Amendment Act came into force. In this regard, the Court referred to the case of ABB India Ltd. v. Bharat Heavy Electricals Ltd. OMP (T) (Comm) No.48/2020 decided by the Single Bench of Delhi High Court which distinguished the judgment in Thyssen Stahlunion Gmbh v. Steel Authority of India Limited (1999) 9 SCC 334 from Parmar Construction Company. The Court observed that Thyssen Stahlunion Gmbh dealt with Section 85(2)(a) of the said Act, which is dissimilar to Section 26 of the 2015 Amendment Act. Section 26 starts with a negative covenant which is subject to an exception in the case of an agreement between the parties, whereas the observations in Thyssen Stahlunion Gmbh were coloured by Section 85(2)(a) of the said Act which is structured differently.

The court therefore held that “the general phraseology of a clause which seeks to include any amendment to the Act would not be able to be availed of to expand the scope of scrutiny as it would appear to run contrary to the legislative intent of Section 26 of the Amendment Act..” The Court therefore reached the conclusion that it would be the pre-2015 legal position which would prevail. Keeping this in the background, the Court went on to analyse the correctness of the decisions reached by the courts below.

In the factual findings the court found that the necessary conditions of the Deed of Settlement stood satisfied since firstly, the respondent complied with the condition to withdraw all complaints and proceedings against appellant and all other named and unnamed persons before the EOW. Therefore, US $ 1.5 million, which were kept in escrow to ensure that those proceedings came to an end, had to be released to the respondent. Secondly, the sale of shares did take place, even though delayed and therefore, the respondent was also entitled to US$ 2 million which was to be paid on sale of shares. The Court further opined that it was not the case that the respondent breached clause 6 of the Settlement which provided that amount of US$ 1.5 million shall return to the Appellant in case the representations/assurances of the respondent turn out to be false or incorrect. The Court therefore concluded on facts that the effect of the arbitral award would be to deprive the respondent of the due valuation of the shares and what was paid to him to bring his complaints to an end. The court also went on to scrutinise the contents of the e-mails written by the wife of the respondent which according to the Court was never ratified by the respondent himself. Further, the wife was not party to the Deed. Although the Court found one of the wife’s e-mails as indiscreet, the Court held that this itself cannot deny the respondent of his dues.

In conclusion the court held that “We find that the arbitrator’s conclusions are not in accordance with the fundamental policy of Indian law, and can thus be set aside under the pre-2015 interpretation of S. 34 of the said Act. We may also note that clause 6 of the Deed of Settlement could not have been relied on to award liquidated damages in favour of the appellant, we agree with the observations of the Single Judge and the Division Bench in this regard.”

30 Oct

Power of the Higher Courts to quash the criminal proceedings in non-compoundable offence and offences under Special Statutes

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Criminal Law

In the matter of Ramawatar Vs. State of Madhya Pradesh(Cr. A. No. 1393/2011) [decided on 25.10.2021], two important questions of law came for consideration before the Hon’ble Supreme Court regarding the jurisdictions of the Supreme Court and the High Court. The first question was whether the jurisdiction of the Supreme Court under Article 142 of the Constitution of India and of the High Courts under Section 482 of the Code of Criminal Procedure can be invoked for quashing proceedings arising out of a ‘non-compoundable offence’? If the answer is ‘yes’, a follow up question that arose for consideration was whether such power to quash can be extended to the criminal proceedings relating to offences under Special Statutes like the Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989 (“SC/ST Act”)?

The issue arise out of the following facts. The appellant Ramawatar was convicted by the Trial Court for offences under Section 3(1)(x) of the SC/ST Act and was sentenced to six months rigorous imprisonment and a fine Rs. 1000/-. His appeal against conviction was dismissed by the Hon’ble High Court of Madhya Pradesh and against the said dismissal of his appeal, he preferred the aforesaid Criminal Appeal No. 1393/2011 before the Hon’ble Supreme Court. However, by the time the case reached for hearing before the Hon’ble Supreme Court, the matter was settled between the appellant and the complainant and therefore the appellant prayed for invoking Article 142 of the Constitution of India to quash the instant criminal proceedings against him.

The Hon’ble Supreme Court referred to its earlier decision in the case of Ramgopal & Anr. Vs. State of Madhya Pradesh [Cr. A. No. 1489/2012] where identical questions were answered in affirmative and it was clarified that the jurisdiction of a Court under Section 320 of the Code of Criminal Procedure cannot be construed as a proscription against invocation of inherent powers vested in the Supreme Court under Article 142 of the Constitution of India and in the High Courts under Section 482 of the Code of Criminal Procedure. Referring to the said decision, the Hon’ble Supreme Court held that the touchstone to exercise powers under Article 142 of the Constitution of India and under Section 482 of the Code of Criminal Procedure is to do complete justice and therefore it cannot have any fetters.

The Hon’ble Supreme Court answered the second question also in affirmative and held that powers under Article 142 of the Constitution of India and under Section 482 of the Code of Criminal Procedure can be exercised to quash the criminal proceedings relating to offences under special statutes like the SC/ST Act also.

The Hon’ble Supreme Court, however, put certain caveats for exercise of such inherent powers. Referring to the case of Ramgopal, the Hon’ble Supreme Court held that such powers must be exercised bearing in mind (i) the nature and effect of the offence on the consciousness of the society; (ii) the seriousness of the injury, if any; (iii) voluntary nature of the compromise between the accused and the victim; (iv) conduct of the accused persons prior to and after the occurrence of the offence; and/or (v) other relevant considerations.

The Hon’ble Supreme Court put a further caveat that powers under Article 142 of the Constitution of India and under Section 482 of the Code of Criminal Procedure are exercisable in post-conviction cases only if appeal is pending before one Court or the other. Such powers cannot be exercised after all the remedies have been exhausted and the conviction and sentence have attained finality. In other words, it was held that pendency of judicial proceedings at some stage is a sine-qua-non for exercise of such powers. Relying on the Constitution Bench Decision in the case of Supreme Court Bar Association Vs. Union of India & Anr.[(1998) 4 SCC 409], the Hon’ble Supreme Court held that such powers cannot be controlled by any statutory provisions, however, while exercising such powers in relation to offences punishable under special statutes like ST/ST Act the Court will be extremely circumspect in its approach. The mere fact that the offence is covered under the special statute will not restrain the Supreme Court or the High Courts to exercise their respective powers under Article 142 of the Constitution of India and Section 482 of the Code of Criminal Procedure. However, while exercising such powers the Court must be satisfied that the underlying objective of the special stature would not be contravened or diminished by such exercise of powers.

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