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13 Nov

R. 14(2)(b) of Building & Other Construction Workers Welfare Cess Rules, 1998 ultra vires the provisions of S. 11 Building and Other Construction Workers Welfare Cess Act, 1996

Labour Commissioner, the Appellate Authority constituted under the Building and Other Construction Workers Welfare Cess Act, 1996, gave an order dated 05.08.2013 dismissing the appeal of the Petitioner on the ground that Petitioner failed to deposit 100% of cess, penalty and interest as a precursor to the appeal getting admitted. According to the Appellate Authority, the appeal was not viable, as it did not comply with the provisions of Rule 14(2) of the 1998 Rules. The order was challenged before the Delhi High Court along with the challenge laid to the vires of Rule 14 of the Building & Other Construction Workers Welfare Cess Rules, 1998. The core issue, which arises for consideration is, whether the petitioner could have been called upon to pay 100% of cess, penalty and interest, for progressing its appeal, which was filed before the Appellate Authority?

The Petitioner contended that the provisions of Rule 14(2)(b) of the 1998 Rules are beyond the provisions of Section 11 of the 1996 Act. Section Section 11 of the 1996 Act prescribes for deposit of fees while instituting the appeal, and not cess and penalty.

The Court began by examining the width and scope of Section 11 of the 1996 Act with the background of the settled position that the rule making authority cannot frame a rule, which is beyond the power conferred under the 1996 Act. As per section 11(2) of the 1996 Act, “[e]very appeal preferred under sub-section (1) shall be accompanied by such fees as may be prescribed”.

As per Rule 14(2)(b) and (c) of the 1998 Rules, the appeal shall be accompanied inter alia with — “a certificate from the cess collector to the effect that the amount of cess or penalty or both, as the case may be, relating to such appeal has been deposited” and “a fee equivalent to one per cent, of the amount in dispute or penalty or both, as the case may be, under such appeal”. The Court concluded that the provision made in sub-clause (b) of sub-rule (2) of Rule 14 of the 1998 Rules is clearly beyond the provisions of Section 11(2) of the 1996 Act.

7 Nov

Court’s Permission not Required in Renewal of Passport Where a Criminal Case is Pending

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Criminal

In a recent case before the Division Bench of the Bombay High Court [Abbas Hatimbhai Kagalwala v. The State of Maharashtra and Anr. Writ Petition No.384 of 2019], a petitioner approached with the main contention that permission from the Court is not necessary for renewal of the Passport where a criminal case is pending against the Petitioner. According to the Counsel, the only limitation, where a criminal case is pending against a person, would be that the Petitioner shall not travel abroad without the permission from the Court. While a criminal case was pending against the Petitioner u/s 420, 465, 467 r/w 120-B of the Indian Penal Code, the validity of the Passport of the Petitioner came to an end in the year 2017. The Petitioner applied for renewal but the said application was pending for more than 4 years.

The contention from the side of the Government was limited to the argument that as per the Notification dated 25.8.1993 and Section 6.2 (f) of the Passport Act, 1967, a permission of the Court where criminal case is pending against the Petitioner is required to be obtained for the purpose of issuance of the Passport. As per the provision:

(2) Subject to the other provisions of this Act, the passport authority shall refuse to issue a passport or travel document for visiting any foreign country under clause (c) of sub-section (2) of section 5 on any one or more of the following grounds, and on no other ground, namely:—

…

(f) that proceedings in respect of an offence alleged to have been committed by the applicant are pending before a criminal court in India; The court while underlining the difference between issuance of passport on one hand and renewal of passport on the other, held that where a criminal case is pending against the Petitioner, the authority shall process the application of the petitioner for renewal of Passport without insisting for permission of the Court. It is only if the Petitioner is travelling abroad, that the Petitioner would be required to seek permission from the Court where criminal case is pending.Court’s Permission not Required in Renewal of Passport Where a Criminal Case is Pending

19 Oct

Understanding the Aspects of Legacy of Fundamental Right to Privacy- Can Legal Heirs of a Deceased Claim It?

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Constitution of India, Right of Privacy

The two plaintiffs are mothers of victims, namely, Ms. Abinta Kabir and Ms. Tarishi Jain, of Holey Artisan (Dhaka, Bangladesh) Terrorist Attack that was carried on 1^st July, 2016. The defendants are producers of a movie by the name of “FARAAZ” which according to the plaintiffs may depict the daughters of the plaintiffs in bad light in relation to the Terrorist Attack which would be difficult for the plaintiffs as they would have to revisit the traumatic incident all over again. The plaintiffs sought ad-interim injunction for restraining the defendants from releasing the movie “FARAAZ” and to restrain the defendants from using plaintiff’s daughters’ names and also the name of their best friend Faraaz Ayaaz Hossain and their image/caricature/ lifestyle/likeness in the movie in any manner, amongst other related relieves. According to the plaintiffs, such depiction of the daughters of the plaintiffs or their friend Faraaz amounts to defamation as it indirectly impacts their reputation and further is in violation of fundamental right to privacy. The plaintiffs also alleged that the release of the movie shall influence the trial of the accused being tried before Indian Courts in relation to the same terrorist attacks and shall violate their right to Fair Trial under Article 21 of the Constitution of India. One of the prayers before the court was for the pre-screening of the film ot the plaintiffs in order to determine the extent of violation.

After becoming aware of the movies, the plaintiffs separately sent Legal Notices calling upon the defendants to refrain from production/release of the movie. The defendants declined to comply with the demands of the plaintiffs in their reply.

The plaintiffs approached Hon’ble High Court of Delhi. While relying on the judgment in the case of K.S. Puttaswamy and Ors. v. Union of India (UoI) and Ors. (2017) 10 SCC 1, the main argument of the plaintiffs was that the movie is made in violation of the right of privacy being an inalienable human right and an intrinsic part of right to life and liberty guaranteed under Article 21 of the Constitution of India. As per the judgment in K.S. Puttaswamy, the right to privacy can be claimed both against the State and non-State actors. The plaintiffs have not only right of privacy but also right of being left alone to grieve in privacy of their homes which is superior to the right of the defendant to commercially exploit a tragic incident. It was argued that plaintiffs were private persons living a life away from public glare unlike persons holding public office or celebrities. Further, the right to make a feature film cannot be equated to right to of press to report events.

In their written statement, the defendants argued that the story of the Terrorist Attack has been documented in podcasts and books and has also been made into an awarded motion picture. The material is available in public domain and reveals intricate details of the attack including the identities of all the victims including the daughters of the plaintiffs, their ordeal and the manner in which the terrorists conducted themselves. The defendants pressed their fundamental rights guaranteed under Article 19(1)(a) and 19(1)(g) of the Constitution to create and produce the feature length cinematograph film. Not only did the defendants claimed that the movie is a work of fiction but also that the film is not about the daughters of the plaintiff and no character in the film has the names of the daughters of the plaintiff. The defendants also mentioned that Faraaz Hossain was posthumously awarded the Mother Teresa Memorial International Award for Social Justice in 2016 for his acts of bravery on the day of attack. His bravery has been recognised worldwide. It was further stated that although the Bangladeshi Censor Board may have prohibited the exhibition of the Bangladeshi film on the Terrorist Attack, the laws and constitutional rights in India impose no such restrictions and in any event, the movie shall be released only after the approval from the Central Board for Film Certification in India. Further, the family of Faraaz has already given a “No Objection” to the use of name of Faraaz in the movie.

The Court divided the analysis into three headings. First head was made to see whether there is a prima facie case. In order to further simplify it the Court went into the right to privacy being a right in personam – whether this right extends even after the death of a person and can be agitated by the legal heirs to protect the dignity of the person who is no more in this world? The Court referred to the judgment of Madras High Court in the case of Managing Director, Makkal Tholai Thodarpu Kuzhumam Limited v. Mrs. V. Muthulakshmi, (2007) 6 Mad LJ 1152 wherein it was held that the right to privacy does not subsist after the death and therefore the Court declined to grant interim injunction to restrain the release of the serial ―Santhana Kaadu based on the life of Late forest brigand Veerappan. The Court also referred to Melepurath Sankunni Ezhuthassan v. Thekittil Geopalankutty Nair, (1986) 1 SCC 118 wherein a broader principle of acto personalis moritur cum persona was discussed. It means a personal action dies with the person. Therefore, on the death of either party extinguishes the cause of action in Tort by one against the other and in a suit for defamation, the cause of action does not survive in favour of the legal heirs and it being the personal right and the suit has to necessarily fail. In a more recent case (Deepa Jayakumar v. A.L. Vijay & Ors. 2021 SCC OnLine Mad 2642), which was filed for grant of ad interim injunction against release of the movie Thallaivi, it was affirmed that “right of privacy of an individual” cannot be inherited by the legal heir after death like other assets and that “posthumous right” is not an “alienable right”. The Court therefore, concluded that “[a]fter the death of a person, the reputation earned cannot be inherited like a movable or immovable property by his or her legal heirs. Such personality right, reputation or privacy enjoyed by a person during his life time comes to an end after his or her life time”. In the light of discussion thus, the case of plaintiffs was squarely covered by the settle law that mothers cannot inherit the right of privacy of the daughters. The Court however, added a general exception to the rule – “The only circumstance wherein the plaintiffs may be able to sustain an injunctive relief is in the case of appropriation of identity as defined by Prosser which means that where one person uses another’s name, the focus is on plaintiff’s name as a symbol of identity and not on the name per se.” This exception was not applicable in the present case.

10 Oct

The Arbitral Tribunal is Cast With Duty to Give Reasons While Exercising Its Discretion Under Section 31(7) of the Arbitration and Conciliation Act

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Arbitration

Hon’ble Supreme Court in a recent judgment[1] held that when a discretion is vested in the Arbitral Tribunal under Section 31(7) of the Arbitration and Conciliation Act, 1996 to determine the rate of interest, whether the interest is payable on whole or any part of the money and whether it is to be awarded to the whole or any part of the period stipulated, the Tribunal has the duty to apply its mind and give reasons as to how it deems a certain interest rate as reasonable and to decide why the interest is payable on whole or any part of the money and also as to why it is to be awarded to the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. While exercising its jurisdiction under Article 142 of the Constitution of India, The Hon’ble Court reduced the rate of interest from 18% to 9% and further reduced the period by 20 odd years on account of the lapse of the Claimant-Respondent in taking timely action.

The Respondent was awarded the contract for construction of missing link of 3 kms stretch on NH6 on 16^th December, 1971 to be completed within one year. The contract amount was Rs.4,59,330/. However the work could be completed by 30^th August 1977. The Respondent was already paid an amount of Rs.3,36,465/ by then. The Respondent issued a notice to the Appellant regarding his claim only on 25^th July 1989 followed by the Respondent filing his claim of Rs.1,45,28,198/ and interest @ 19.5% from 1^st April 1976 to 15^th March 2002. The learned Arbitrator, vide award dated 24^th August 2004, awarded a sum of Rs.9,20,650/ and an interest pendent lite with effect from 1^st April 1976 to the date of the award at the rate of 18% per annum which came to Rs. 46,90,000/. The learned Arbitrator further directed the future interest to be paid at the rate of 18% per annum on the total of the aforesaid two amounts till actual payment.

The Award was challenged on various grounds including on the ground that the interest amount of Rs.46,90,000/ is almost five times that of the main award amount of Rs.9,20,650/. The Appellant relied on the judgments in Rajendra Construction Co. v. Maharashtra Housing & Area Development Authority and Others [(2005) 6 SCC 678], Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy and Another [(2007) 2 SCC 720] and Mcdermott International Inc. v. Burn Standard Co. Ltd. and Others [(2006) 11 SCC 181].

The Court examined the issue in the light of the discretion given to an Arbitral Tribunal under Section 31(7) of the Arbitration and Conciliation Act, 1996 (“1996 Act”) to determine the rate of interest, whether interest would be applicable on the whole or any part of the money awarded, and whether it shall be applicable for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. The Court arrived at the decision that such discretion when vested in the Arbitral Tribunal, it has a duty to exercise the discretion while applying its mind to the facts and circumstances of the case and give reasons for arriving at a certain interest rate, the sum of which it shall be applicable, and period for which it shall apply.

The Court observed that the Arbitral Tribunal in the matter did not do any such exercise of reasoning and further failed to exclude the period of more than 20 years during which it was the Respondent-Claimant who did not raise its claim and further did not take any action after decree was passed in 1990 and then after passing of 1996 Act until 2001 when the Respondent-Claimant finally filed an application under section 11 of the 1996 Act. The Court in this regard held that a party cannot be permitted to derive benefits from its own lapses. With regard to the determination of the rate of interest, the Court made reference to various judgments including the observation made by the Court in Mcdermott International Inc. wherein it was held that given the long lapse of time, it will be in furtherance of justice to reduce the rate of interest while exercising the jurisdiction under Article 142 of the Constitution of India. The Court, accordingly found that the present case was also a fit case wherein this Court needed to exercise its powers under Article 142 of the Constitution of India to reduce the rate of interest. While taking into consideration the conduct of the Respondent in delaying the proceedings at every stage which led to a long pendency of the dispute, the Court concluded that, though it will not be in the interest of justice to interfere with the principal award, it would be a fit case wherein the interest at all the three stages, that is prereference period, pendente lite and postaward period, requires to be reduced. The Court, therefore, was pleased to reduce the rate of interest to 9% from 18%

[1] Executive Engineer (R and B) and Ors. v. Gokul Chandra Kanungo (Dead) Thr. His Lrs. [CIVIL APPEAL NO. 8990 OF 2017 decide on 30.09.2022]

1 Oct

Trademarks And Copyrights Would Constitute ‘Goods’ Under Section 5(21) Of IBC And Royalty Payable Against Licensing IPR Shall Be Operational Debt

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Insolvency and Bankruptcy

In a recent order passed in Somesh Choudhary v Knight Riders Sports Private Limited & Anr. under Company Appeal (AT) Insolvency No. 501 of 2021, the Hon’ble National Company Law Appellate Tribunal, Principal Bench, New Delhi (“NCLAT“) dismissed the appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“Code“) and upheld the order dated passed by the National Company Law Tribunal, New Delhi, and held that the claims arising out of the grant of an exclusive license to use intellectual property rights fall within the ambit of the definition of operational debt.

Global Fragrances Pvt Ltd (“Corporate Debtor“) and Knight Riders Sports Private Limited (“Respondent“) entered into a licensing agreement. The Respondent granted exclusive rights and allowance to the Corporate Debtor to use the trademark ‘KKR‘ to manufacture, distribute and advertise licensed products including deodorants, hair gels, and perfumes in return of payment of Minimum Guaranteed Royalties by the Corporate Debtor as compensation for enjoying the exclusive rights. On delivery of the rights, the Respondent raised invoices for an aggregate sum of Rs. 40,60,147/- towards the outstanding Minimum Guaranteed Royalties payable by the Corporate Debtor as per the agreement. The Respondent received only a part payment. Since the Corporate Debtor failed to keep its payment obligations the Respondent filed an application for initiation of the corporate insolvency resolution process under Section 9 of the Code, claiming the amount due as an operation debt under the Code. The application was admitted by the National Company Law Tribunal, New Delhi and aggrieved by the same, Mr Somesh Choudhary (a shareholder of the Corporate Debtor) filed this appeal.

The Corporate Debtor had opposed the petition on the ground that claims arising out of non-payment of Minimum Guaranteed Royalties did not pertain to non-payment of any goods or services as proided under section 5(21) of the Code and therefore Minimum Guaranteed Royalties were not operational debt. The Corporate Debtor further contented that the Respondent has failed to show that how the Corporate Debtor has used the trademark of the Respondent for sale, marketing etc. and hence does not fulfill the parameter set out in the judgment of the NCLAT in M. Ravindranath Reddy v Mr. G. Kishan & Ors. [Company Appeal (AT) (Ins.) No. 331/2019], which held that any “‘debt’ arising without nexus to the direct input to the output produce or supplied by the ‘Corporate Debtor’, cannot be considered as an ‘Operational Debt’.

In order to test the direct nexus, the NCLAT examined the licensing agreement between the parties and held that the trademark ‘KKR‘ was used in the development, packaging and advertisement of the Licensed Products which established a direct nexus between the payment of the MGR and the business operations of the Corporate Debtor. NCLAT, however, dismissed the argument advanced by the Corporate Debtor referring to M. Ravindranath Reddyjudgment and stated that Ravindranath Reddy judgment had been overturned as it did not correctly deal with the meaning of “service” under section 5(21) of the Code and referred to the judgment by the larger bench in Jaipur Trades Expocentre Private Limited v. M/s. Metro Jet Airways Training Private Limited [2022 SCC OnLine NCLAT 263]. The NCLAT dismissed the appeal and upheld the order of NCLT stating that Minimum Guaranteed Royalties are operational debts to be paid against the licensing of trademarks which in turn constitute moveable property and accordingly would be considered as “goods” under the Sale of Goods Act, 1930 wherein the term “goods” includes all moveable property other than actionable claims and money. The NCLAT relied on the decision of the Hon’ble Supreme Court in Vikas Sales Corporation v. Commissioner of Sales Tax [(1996) 4 SCC 433]. Further, the NCLAT observed that pursuant to Section 7 of the Central Goods and Service Act 2017, any utilisation or enjoyment of intellectual property rights would be considered a service provided by the intellectual property rights holder. The NCLAT referred to the decision of the Madras High Court in the matter of AGS Entertainment Private Limited v. Union of India[2013 SCC Online Mad 1823] and held that by providing the Corporate Debtor with a right to utilise the trademark of ‘KKR‘ in its Licensed Products, the Respondent had temporarily provided permission to use its trademark, which would constitute the provision of a service by the Respondent. The Appellate Tribunal further reasoned that a guaranteed minimum royalty is a periodic payment made by a licensee towards a licensor to utilise a licensed product for an agreed period.

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