s bba.llb. iii y n l u o - national judicial academyadll.rm... · h.j. kania, c.j., j.s. verma,...

RESEARCH ON DIFFERENT TOPICS FOR TRAINING PROGRAMME ON ADVANCED COURSE ON

COMMERCIAL MATTERS (P-965)

16TH

– 23RD

JANUARY, 2016

SUBMITTED TO-

DR. GEETA OBEROI

DIRECTOR IN-CHARGE

NATIONAL JUDICIAL ACADEMY INDIA

BHOPAL (M.P.)

SUBMITTED BY-

SHIKHAR STHAPAK

BBA.LLB. (H.)

IIIRD

YEAR

NATIONAL LAW UNIVERSITY ODISHA

RESEARCH ON DIFFERENT TOPICS FOR TRAINING PROGRAMME: 16TH

– 23RD

JANUARY,

2016

TRAINING PROGRAMME ON ADVANCED COURSE FOR COMMERCIAL MATTERS (P-965) 2 | P a g e

TABLE OF CONTENT

Sr.

No.

Contents Page

1. SESSION 1- INTERPRETATION OF INTERNATIONAL TAX LAW & BEPS 4

2. SESSION 2- BEPS, TAX AVOIDANCE & BLACK MONEY 5

3 SESSION 3- THE ECONOMICS OF ADVANCE PRICING AGREEMENTS 13

4 SESSION 4- CROSS BORDER TRANSACTION EXCHANGE CONTROL & THE LAW 17

5 SESSION 5- ISSUES ARISING OUT OF INTERPLAY BETWEEN LAWS PERTAINING

TO FOREIGN TRADE AND CENTRAL TAX LAWS 26

6

SESSION 6- ONE TRANSACTION- MANY TAXES: THE CONTINUING TUSSLE

BETWEEN THE STATES AND THE CENTRE TO LEVY TAXES ON CERTAIN

TRANSACTIONS

39

7 SESSION 7- TAXATION OF E-COMMERCE TRANSACTIONS 47

8 SESSION 8- ADDRESSING THE TAX CHALLENGES OF THE DIGITAL ECONOMY 48

9 SESSION 9- DEVELOPMENT OF TECHNOLOGY LAW JURISPRUDENCE IN INDIA 49

10 SESSION 11- PRIVACY AND DATA PROTECTION ISSUES 50

11 SESSION 12- THE GAME OF CHANCE AND GAME OF SKILL: LEGALITY OF

ONLINE POKER IN INDIA 56

12 SESSION 17- POWERS OF SEBI- JUDGE, JURY AND EXECUTIONER? 58

13 SESSION 18- INSIDER TRADING, FRAUD AND MANIPULATION IN THE

SECURITIES MARKETS 66

14 SESSION 19- PUBLIC OFFER OF SECURITIES AND IPOS 75

15

SESSION 20- MUTUAL FUNDS, COLLECTIVE INVESTMENT SCHEME,

INVESTMENT ADVISOR AND PORTFOLIO MANAGEMENT REGULATIONS OF

SEBI- AN INTRODUCTION

82


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16 SESSION 25- JUDICIAL INTERVENTION IN INTERNATIONAL COMMERCIAL

ARBITRATION: IMPLICATIONS AND RECENT DEVELOPMENTS 90

17 SESSION 26- THE TENSIONS BETWEEN CONFIDENTIALITY AND TRANSPARENCY

IN INTERNATIONAL ARBITRATION 105

18 SESSION 27- ECONOMIC REGULATION OF AIRPORTS 106

19 SESSION 28- PUBLIC PROCUREMENT PROCESSES 108

20 SESSION 29- DOMAIN NAME DISPUTE RESOLUTION 109

21 SESSION 30- FRAND LICENSING DISPUTES 111


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2016


ADVANCED COURSE ON COMMERCIAL MATTERS

1. SESSION 1

INTERPRETATION OF INTERNATIONAL TAX LAW & BEPS

Articles:

i. Addressing Base Erosion and Profit Shifting- by OECD

ii. An Evolutionary Approach to Comparative Taxation: Methods and Agenda

for Research- by Carlo Garbarino

iii. BEPS: The Shifting International Tax Landscape and What Companies Should

Be Doing Now- by Michael Plowgian

iv. Exchange of Information under International Tax Conventions- by Ernest A.

Seemann

v. IFA's Growth with International Tax Law- by Mitchell B. Carroll

vi. Income Taxation, International Competitiveness and the World Trade

Organization's Rules on Subsidies: Lessons to the U.S. and to the World from

the FSC Dispute- by Rosendo Lopez-Mata

vii. International Capital Tax Evasion and the Foreign Tax Credit Puzzle- by

Kimberley A. Scharf

viii. International Tax as International Law- by Reuven S. Avi-Yonah

ix. International Tax Law- by Bruce Zagaris

x. International Tax Law- by Sharon Stern Gerstman, Elinore Richardson,

Salvatore Mirandola, Stephanie Wong and Pamela A. Fuller

xi. International Tax Policy: Recent Changes and Dynamics under Globalization-

by Johan Deprez

xii. Limits of international tax structuring- by Gerhard Laule

xiii. Report of the Committee on International Double Taxation- by Annual

Proceedings

xiv. What the BEPS- by Yariv Brauner

xv. Tax Treaty Interpretation- by John A. Townsend

xvi. Tax Base Erosion and Profit Shifting (BEPS) and International Economic

Law- by Isabel Lamers, Pauline Mcharo and Kei Nakajima

xvii. OECD/G20 Base Erosion and Profit Shifting Project: Measuring and

Monitoring: BEPS


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2016


2. SESSION 2

BEPS, TAX AVOIDANCE & BLACK MONEY

C.B. GAUTAM

VS.

UNION OF INDIA AND ORS.

IN THE SUPREME COURT OF INDIA

Transferred Case No. 26 of 1987

Decided On: 17.11.1992

Citation- (1993)1SCC78

Judges:

H.J. Kania, C.J., J.S. Verma, S.C. Agrawal, Yogeshwar Dayal and Dr. A.S. Anand, JJ.

We shall discuss the question whether the provisions of Chapter XX-C confer an unfettered

discretion on the appropriate authorities concerned to acquire immovable properties which

are agreed to be sold in the areas to which the provisions of the Chapter are applicable. In this

regard, as we have already pointed out, the very historical setting in which the provisions of

this Chapter were enacted suggests that it was intended to be resorted to only in cases where

there is an attempt at tax evasion by significant under-valuation of immovable property

agreed to be sold. This conclusion is strengthened by Instruction N0. 1A88 issued by the

Central Board of Direct Taxes of the Government of India, Ministry of Finance, Department

of Revenue, which was filed in the Court by learned Attorney General. In the said document


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2016


it is emphasized by the Central Board that the main objective of the provisions of Chapter

XX-C is to check proliferation of black money in real estate transactions and to enforce

declaration of the true value of immovable properties that are subject of transfer between the

parties. The Central Board has pointed out in the said Instructions that, in administering the

provisions of the said Chapter, it has to be ensured that no harassment is caused to bona fide

and honest purchasers or sellers of immovable property and there is no erosion of the

confidence of the public in the sense of justice and fair play of the Income Tax Department.

Paragraph 3 of the Instruction makes it clear that the right of pre-emptive purchase has to be

exercised by the appropriate authority only when it has good reason for acquiring the

property. When the property purchased by the Central Government by an order of an

appropriate authority is put up for sale the reserve price is required to be fixed at a minimum

of 15% above the purchase price shown as the apparent consideration under the agreement

between the parties. Thus it is pointed out by the Board that the right of pre-emptive purchase

has to be exercised only if the fair market value is found to be at least 15% more than the

apparent consideration.

In Commissioner of Income-tax, Gujarat-II v. Smt. Vimlaben Bhagwandas Patel and Anr.

MANU/GJ/0029/1979 : [1979]118ITR134(Guj) , a Division Bench of the Gujarat High Court

took the view that the entire scheme as conceived and incorporated in Chapter XX-A of the

Income tax Act, 1961, postulates a basic premise that the under-statement of consideration in

an instrument of transfer of sale is untruly made if it falls short of the fair market value by

15% and the ulterior motive should be presumed to be concealment of income or tax evasion

unless rebutted by the parties to the transfer. Parliament has provided artificial rules of

evidence so as to raise the presumption about the guilt of the parties to the transfer in respect

of the offence of tax evasion of concealment. It has been pointed out that, before resorting to

the provisions of the said Chapter, the competent, authority must have reason to believe that

the fair market value of the property of more than Rs. 25,000 exceeds the apparent

consideration stated in the instrument of transfer and the parties have agreed to make the

untrue statement with the ulterior motive of tax evasion or concealment of income. The

satisfaction of the competent authority for initiation of the acquisition proceedings is a

subjective satisfaction of the objective facts set out above. The reason for formation of belief

must have a rational and direct connection with the material coming to the notice of the


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competent authority, though the question of sufficiency or adequacy of the material is not

open to judicial review.

In the light of what we have observed above, we are clearly of the view that the requirement

of a reasonable opportunity being given to the concerned parties, particularly, the intending

purchaser and the intending seller must be road into the provisions of Chapter XX-C. In our

opinion, before an order for compulsory purchase is made under Section 269UD, the

intending purchaser and the intending seller must be given a reasonable opportunity of

showing cause against an order for compulsory purchase being made by the appropriate

authority concerned. Unless an intending purchaser or intending seller is given an opportunity

to show cause against the proposed order for compulsory purchase, he would not be in a

position to rebut the presumption of tax evasion and to give an interpretation to the provisions

which would lead to such a result would be utterly unwarranted. The very fact that an

imputation of tax evasion arises where an order for compulsory purchase is made and such an

imputation casts a slur on the parties to the agreement to sell lead to the conclusion that

before such an imputation can be made against the parties concerned, they must be given an

opportunity to show cause that the under-valuation in the agreement for sale was not with a

view to evade tax.

It cannot, therefore, be said that the provisions of said Chapter confer an unfettered discretion

on the appropriate authorities to order the purchase by the Central Government of immovable

properties agreed to be sold and hence they cannot be regarded as conferring arbitrary or

unfettered discretion on the appropriate authorities. The challenge to the provisions of the

said Chapter as being violative of article 14 of the Constitution must therefore, fail.


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2016


VODAFONE INTERNATIONAL HOLDINGS B.V.

VS.

UNION OF INDIA (UOI) AND ANR.


Civil Appeal No. 733 of 2012 (Arising out of S.L.P. (C) No. 26529 of 2010)



Judges:

S.H. Kapadia, C.J.I., K.S. Panicker Radhakrishnan and Swatanter Kumar, JJ.

Tax Planning/Tax Avoidance or Tax Evasion

General Anti-Avoidance Rules (GAAR)/Judicial Anti-Avoidance Rules (JAAR). Invocation

of GAAR like look through and limitation of benefits (LOB) vis--vis invocation of JAAR like

substance over form, nature and character of transaction, piercing corporate veil, true

beneficial ownership or alter ego, participative investment, preordained transaction and fiscal

nullity read with look at principle. Held, said GAAR may be invoked by Revenue only when

expressly incorporated in legislation or treaty. However, said JAAR may be invoked if

Revenue, after first applying look at test to the transaction upon a review of all the facts and

circumstances surrounding impugned transaction, still establishes at threshold that dominant

purpose of impugned transaction or holding structure is a sham or tax evasion.


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Meaning and permissibility of distinction from tax evasion, explained. Principles and tests to

be applied by court/Revenue to determine whether a transaction amounts to genuine tax

planning or is a colourable device meant to evade tax. Matters to be considered by

court/Revenue. Legal position in India and England extensively surveyed and summarized.

Invocation of General Anti-Avoidance Rules (GAAR) like look through and limitation of

benefits (LOB) vis--vis invocation of Judicial Anti-Avoidance Rules (JAAR) like substance

over form, nature and character of transaction, piercing corporate veil, true beneficial

ownership or alter ego, participative investment, preordained transaction and fiscal nullity if

still warranted after application of look at principle. Cardinal importance for impugned

transaction is to have some genuine corporate, commercial, economic or business purpose to

establish its legitimacy as a tax planning device. Application of these principles in context of

foreign direct investment (FDI). Diversification of corporate holding structure to take

advantage of tax havens for tax planning purposes. Permissibility- Exit by one foreign

investor coupled with continuity of business by transferee investor, as strong indicium of

legitimacy of transaction. Firstly, reiterated (per curiam), legitimate avoidance of tax liability

i.e. strategic tax planning is permissible provided it is within framework of law. It is only

colourable devices, dubious methods and subterfuges to evade tax which are impermissible.

A subject is not to be taxed by inference or analogy, but only by the plain words of a statute

applicable to facts and circumstances of each case. It is a cornerstone of the law that every

taxpayer is entitled to arrange his affairs so that his taxes shall be as low as possible and he is

not bound to choose that pattern which will replenish Treasury. Fact that motive for a

transaction is to avoid tax does not invalidate it unless a particular enactment so provides; but

it is essential that the transaction has some economic or commercial substance. Secondly,

held (per curiam), to determine whether a transaction or device is legitimate or colourable, it

is task of Revenue and court to ascertain true legal nature of transaction concerned by first

applying look at principle i.e. by looking at the entire impugned transaction as a whole and

not by adopting a dissecting approach nor by looking at the impugned transaction isolated

from the context to which it properly belongs. Revenue or court cannot start with question as

to whether transaction was a tax evasion device but should first apply look at test to ascertain

its true legal nature. If, upon application of look at test Revenue still establishes abuse or

intent to evade tax, then above stated JAAR may be applied. JAAR can be applied even in the

absence of any statutory authorisation to that effect. However, court may apply GAAR like

look through principle or limitation of benefits (LOB) principle only if statute or treaty


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concerned expressly incorporates said principle(s). Thirdly, in context of FDI the above

principles (in Secondly) amount to determining if transaction is a participative investment in

which case it shall qualify as legitimate tax planning, or it is a preordained tax evading

transaction in which case it shall be struck down as a colourable device. Holistic view of

transaction is to be adopted so as not to discourage genuine FDI into India. For a transaction

to be a declared a fiscal nullity there should be a set of preordained steps inserted for no

commercial purpose. Fourthly, to determine whether a transaction/FDI is

legitimate/participative or colourable/preordained Revenue/courts must consider following

parameters: (i) duration and timing of coming into existence of holding structure or part

thereof via which FDI in question entered India; (ii) period of business operation in India;

(iii) generation of taxable revenues in India; (iv) time of exit from India; and (v) continuity of

business on exit in India. Existence of stable business over a period of time is an indication of

participative investment. Fifthly, exit right secured by a foreign investor by itself, and exit

thereupon from India does not necessarily lead to inference of tax evasion when transaction

otherwise appears bona fide. Exit is an important right of an investor in every strategic

investment. Exit by one investor coupled with continuity of business by transferee investor is

an important tell-tale circumstance which indicates legitimate commercial/business substance

of the transaction, indicating its nature as a legitimate participative investment venture.

Sixthly, so as to invoke JAAR of ``substance over form'', ``nature and character of

transaction'', ``piercing of corporate veil'', ``true beneficial ownership or alter ego'' and fiscal

nullity, onus is on Revenue to establish that dominant purpose of transaction or holding

structure is a sham or tax evasion. This must be done by first applying the look at test (see for

details Secondly, above) upon a review of all the facts and circumstances surrounding

impugned transaction and adopting a holistic view. Existence of a genuine corporate or

business purpose as the basis for impugned transaction is evidence that impugned transaction

is not a colourable or artificial device. However, stronger the evidence of colourable device,

more compelling must be the corporate business purpose underlying the impugned

transaction to overcome evidence of a colourable device. For instance, if it is established that

corporate holding structure is being used for circular trading, round tripping, bribery or has

no real commercial/business worth or purpose, then Revenue may resort to the abovesaid

JAAR and impose tax ignoring titular entity. Seventhly, it is a common practice in

international law, which is the basis of international taxation, for foreign investors to invest in

Indian companies through an interposed foreign holding or operating company, such as a


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Cayman Islands or Mauritius-based company (i.e. tax haven based companies) for both tax

and business purposes. Tax havens may be utilised by diversification of corporate structure

for sound commercial and legitimate tax planning reasons. To prevent tax avoidance, proper

course is to update laws. However, courts and Revenue authorities can go behind outward

cloak and investigate real purpose. Burden to prove that corporate restructuring is not for

bona fide purpose, is on Revenue (again, principles in Secondly and Sixthly become

applicable). Eighthly, (per Radhakrishnan, J.), abus de droit ``abuse of rights doctrine'', not to

be imported into India. Thus, on facts held (per curiam), impugned transaction between HTIL

and appellant VIH, when looked at, not a sham nor tax evasion device nor a preordained tax

evasive transaction nor a fiscal nullity as it was entered into for a genuine

business/commercial purpose. These business/commercial purposes, explained in detail - It

was a bona fide participative investment which had to be viewed holistically. Hutchison

structure had genuine business presence in India for a fairly long time, invested significantly

in India and contributed significantly to Indian revenues. Revenue overlooked fact that the

impugned share purchase agreement dt. 11-2-2007 (SPA) between HTIL to VIH was a single

transaction involving transfer of CGP share alone. Separate values could not therefore be

assigned to different rights and benefits flowing from it (none of which were property rights

other than the share itself), nor could the transfer of some underlying asset situate in India be

divined, as erroneously contended by Revenue and held by High Court (see for details

Shortnote V). Lastly, Hutchison's exit from India could not be doubted as a tax evasion

device when control of telecom business in India which stood transferred from Hutchison to

Vodafone via the impugned transaction, had been continued by Vodafone, and continued to

contribute significantly to Indian economy and Indian revenues thereafter. Thus, it could not

be said that the intervened entity CGP had no business or commercial purpose in execution of

impugned SPA.

Judicial initiative in India. Held, GAAR are already in place by means of legal precedents in

India. GAAR, therefore is not a new concept for India. There are deficiencies in present

Indian concept and its effect. Lack of clarity and absence of appropriate statutory and treaty

provisions regarding circumstances in which JAAR like substance over form, nature and

character of transaction, piercing corporate veil, true beneficial ownership or alter ego,

participative investment, preordained transaction and fiscal nullity would apply, held, has

generated litigation.


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Foreign investments in India and sources of overseas companies. Misuse of law and need for

updating of laws. Creation of adequate regulatory mechanism to prevent tax evasion.

Creation of Offshore Finance Centres (OFC) and Joint Ventures (JVs) and wholly owned

subsidiaries (WOS). What is permissibility in law and the uses and misuses thereof?

Vodafone-Hutchison offshore deal regarding CGP sale which led to transfer of controlling

interest in Hutch/Vodafone India, held (per Radhakrishnan, J.), exposes loopholes in existing

Indian set up through which foreign companies could dodge tax authorities. Besides, there

must be certainty in foreign investment policy. Appropriate regulatory measures therefore

urgently needed. India can take benefit from experience of other countries and bring its laws

in tune with present day realities.


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2016


3. SESSION 3

THE ECONOMICS OF ADVANCE PRICING AGREEMENTS

ADMINISTRATORS OF THE TULANE EDUCATIONAL FUND, ALSO KNOWN AS

TULANE UNIVERSITY; DAVID H. COY, PH.D.

VS.

IPSEN, S.A.; IPSEN PHARMA SAS, FORMERLY NAMED SOCIETE DE CONSEILS DE

RECHERCHE ET D'APPLICATIONS SCIENTIFIQUES SAS.

COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 10-30211.


Citation- 450 Fed.Appx. 326

Judges:

SMITH, BENAVIDES and HAYNES, Circuit Judges

<

This dispute involves the rights to a drug called Taspoglutide, or BIM-51077, which

Plaintiffs assert could potentially be critical in treating diabetes. Plaintiffs entered into an

Amended and Restated Research Funding Agreement ("RFA") with Biomeasure in

1990.[fn2] The agreement was amended in 1997 and 1998. Plaintiffs claim that Taspoglutide

was developed by Dr. Coy pursuant to research performed under the RFA. Tulane and

Biomeasure filed a joint patent application for certain compounds resulting from this research


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on December 7, 1998. Tulane and Biomeasure entered into an agreement under which

Biomeasure had exclusive license to compounds developed under the joint patent ("Licensing

Agreement"). On the same day that Tulane and Biomeasure filed the patent application,

Biomeasure filed another "Biomeasure only" application, that did not include Tulane or Dr.

Coy. The Biomeasure-only application resulted in United States Patent # 6, 903,186 (the

`"186 patent"), which was subsequently assigned to Ipsen Pharma. Ipsen Pharma then

proceeded to grant exclusive rights to develop and market BIM-51077 to a Swedish

pharmaceutical company. Plaintiffs claim that the patenting and licensing of the ' 186 patent

violated the terms of the RFA and the Licensing Agreement, and brought seven related

causes of action against Biomeasure, Ipsen Pharma, and Ipsen. Ipsen and Ipsen Pharma

moved to dismiss the claims against them for lack of personal jurisdiction.

Biomeasure is a Massachusetts corporation, with its principal place of business in Milford,

Massachusetts. Biomeasure is a wholly-owned subsidiary of SUTREPA, S.A.R.L.

("SUTREPA"), a French corporation that is, in turn, jointly owned by Ipsen and Ipsen

Pharma, two French companies having their respective offices in France. Ipsen's direct and

indirect affiliates, including Biomeasure, collectively comprise the "Ipsen Group" of

companies. Through SUTREPA, Ipsen and Ipsen Pharma indirectly own 100% of

Biomeasure.

The district court initially determined that Plaintiffs failed to demonstrate personal

jurisdiction over Ipsen and Ipsen Pharma, but allowed them to conduct limited jurisdictional

discovery and file a supplemental memorandum. After discovery and further briefing, the

district court granted Ipsen and Ipsen Pharma's motions and dismissed the case without

prejudice, ruling that Plaintiffs still had not adequately demonstrated that personal

jurisdiction existed, with respect to both Ipsen and Ipsen Pharma.

Ipsen Plaintiffs' arguments to establish a "plus factor" over Biomeasure can be divided into

two basic categories: (1) Ipsen's control over Biomeasure established a prima facie alter-ego

relationship, and (2) the public image of Biomeasure was such that Biomeasure served as

Ipsen's agent, actually or impliedly.

Assuming arguendo that the arrangement were attributed to Ipsen, it still does not establish an

alter-ego relationship. Biomeasure and Ipsen Pharma appear to have an arrangement under

which Ipsen Pharma finances Biomeasure's research in return for Biomeasure assigning its


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2016


patents to Ipsen Pharma. As noted by the district court, Biomeasure entered into an advance

pricing agreement ("APA") with the Internal Revenue Service ("IRS") which determined that

under the terms of the APA, the compensation that Biomeasure receives from non-U.S. Ipsen

subsidiaries is commercially reasonable and reflects arm's-length transactions. Therefore, this

showing is not enough to establish a prima facie case of alter ego. To the extent that

Plaintiffs' evidence establishes that Biomeasure's purpose is to benefit Ipsen, that is in the

nature of a parent-subsidiary relationship.

Plaintiffs have thus failed to show that Ipsen is an alter ego of Biomeasure.

Plaintiffs' implied agency argument also fails. To establish implied agency in this case,

Plaintiffs must show: (1) that Ipsen made some overture or inference directly to the Plaintiffs

and (2) that Plaintiffs reasonably relied on Biomeasure's purported authority as a direct

consequence of these representations. See id. at 669. Assuming arguendo that Plaintiffs could

prevail on the first prong, they have provided no evidence of reliance by Tulane or Dr. Coy.

Although Dr. Coy has declared that he believed Ipsen or Ipsen Pharma would finance the

joint research, he has not stated at any point that his belief was founded on any

representations or inferences made by Ipsen. Similarly, the mere fact that Dr. Coy met with

Ipsen employees does not establish an agency relationship when the declaration does not state

for what purposes he met with Ipsen employees or that the employees represented to him that

Biomeasure was acting on behalf of Ipsen. Because Plaintiffs at no point assert reliance on

representations made by Ipsen, their implied agency claim cannot succeed.

For the foregoing reasons, we AFFIRM the district court's dismissal without prejudice of all

claims against Ipsen and Ipsen Pharma.

Articles:

i. OECD transfer Pricing Guidelines for Multinational Enterprises and Tax

Administrations, July, 2010.

ii. Using Bilateral Advance Pricing Agreements to Resolve Tax Transfer Pricing

Disputes- by Anja De Waegenaere, Richard Sansing and Jacco L.

Wielhouwer.


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2016


iii. Tax Competition and Transfer Pricing Disputes- by Kashif S. Mansori and

Alfons J. Weichenrieder.

iv. Transfer Pricing Rules and Competing Governments- by Pascalis Raimondos-

Møller and Kimberley Scharf.

v. Integrating Transfer Pricing Policy and Activity-Based Costing- by Thomas H.

Stevenson and David W. E. Cabell.

vi. Review- by Steven Globerman.

vii. Transfer Pricing under Bilateral Bargaining- by Peter Chalos and Susan Haka.

viii. 2015 Global Transfer Pricing Country Guide- Deloitte.

ix. Advance Pricing Agreement Frequently Asked Questions- Deloitte.


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4. SESSION 4

CROSS BORDER TRANSACTION EXCHANGE CONTROL & THE LAW

PINO BISAZZA GLASS (P.) LTD.

VS.

ASSISTANT COMMISSIONER OF INCOME TAX

IN THE ITAT AHMEDABAD

'D' BENCH

ITA Nos. 1622, 1690/Ahd/2010 and 3201/Ahd/2011

Assessment Year: 2005-2006;2007-2008


Citation- (2014)159TTJ(Ahd)90

Judges:

Mukul Kr. Shrawat, Member (J) and A. Mohan Alankamony, Member (A)

<Mukul Kr. Shrawat, J.>

Computation of Arm‟s Length Price Associated Enterprise (ALPAE) incurring losses.

Transfer pricing provisions are applicable to cross border transactions made by an Indian

entity with its foreign AE, even if its AE had incurred losses. The contention of the assessee

is that the Associate Enterprise (in short, A.E.) T Group SPA has suffered losses, therefore,

there was no intention of shifting of the profit outside India. This Tribunal has examined this


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aspect carefully. The Income Tax Act has prescribed Chapter X, incorporating therein,

special provision relating to computation of income from International Transaction having

regard to Arm‟s Length Price (ALP). The Chapter applies where in an international

transaction the Associated Enterprises (AE) enters into a mutual agreement or arrangement

for the allocation or apportionment of any cost or expense incurred, then such allocation or

apportionment is to be determined having regard to the Arm‟s Length Price. Rather, sub-

section (3) of section 92 is very specific that these provisions are applicable to the assessee in

India because in case the effect of such adjustment reduces the income chargeable to tax or

increases the loss, then no such adjustment is required in the case of the said Indian entity.

Thus, an analogy can be drawn that the entire Chapter X is devoted to determine the Arm‟s

Length Price in respect of a cross border transaction made by an Indian entity, which is to be

taxed in India. Whether the said foreign A.E. is having losses, or otherwise not benefited in

any tax savings in that country, is not the matter of examination in this Chapter-X. This

Tribunal therefore, holds that this ground being not in line with the intention of the

legislation, thus erroneously raised, hence hereby dismissed.


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2016


AGRI TRADE INDIA SERVICES PVT. LTD. AND ANR.

VS.

UNION OF INDIA (UOI) AND ORS.

IN THE HIGH COURT OF DELHI

W.P.(C) 11691-11692/2006 and CM 8807/2006(stay)


Citation- (2007)ILR 2Delhi477

Judges:

Mukul Mudgal and Dr. S. Muralidhar, JJ.

Facts-

Important questions of law concerning the interpretation of Section 5 of the Foreign Trade

(Development and Regulation) Act, 1992 (hereinafter `the Act') and certain notifications

issued there under arise for consideration in this writ petition. The cause for this invitation to

judicial determination is a cross-border transaction that requires the petitioners before us to

export 30,000 metric tonnes (MT) of Chick Peas from this country to her neighbour,

Pakistan.

The relevant provisions of the Act may be first noticed. Section 3 of the Act reads as follows:


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3(1) The Central Government may by order published in the Official Gazette, make

provisions for the development and regulation of Foreign Trade by facilitating

imports and increasing exports;

(2) The Central Government may also, by order published in the Official Gazette,

make provisions for prohibiting, restricting or otherwise regulating in specified

classes of cases and subject to such exceptions, if any, as the case may be made by or

under the order, the import and export of goods;

(3) All goods to which any order under Sub Section (2) applies shall be deemed to be

goods the import of export of which has been prohibited under Section 11 of the

Custom Act, 1962 and all the provisions of that Act shall have effect accordingly.

The power to formulate and announce the export and import policy as well as amend that

policy is contained in Section 5 of the Act which reads thus:

5. The Central Government may, from time to time formulate and announce by

notification in the Official Gazette the import and export policy and may also in the

like manner amend that policy.

The power to amend the policy, Therefore, flows from Section 5 itself. This power to make

the policy and to amend the policy has been delegated by the Act to the Central Government.

Around this time, the Cabinet Committee on Pricing was engaged in finding means to tackle

the seasonal rise in the prices of some essential commodities. The Central Government

identified three essential commodities that were driving the prices up - wheat, sugar and

pulses. At a Meeting of the Cabinet Committee on Pricing held on 22.6.2006, it was decided

that there would be a ban on the export of pulses with a view to augmenting the supply side.

It was decided to allow private players to import wheat and to a limited extent, sugar.

The Finance Minister met the Press soon after the Meeting of the Cabinet Committee on

Pricing and announced these decisions. The newspapers of 23.6.2006 (photocopies of the

news clippings have been placed on record) prominently announced the aforesaid decision of

the Government of India. The Asian Age and the National Herald from New Delhi, both

dated 23.6.2006, indicated in the headlines that the export of pulses was banned. The

government claims that the electronic media also carried this news on 22.6.2006 itself.


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JANUARY,

2016


Admittedly, the aforementioned ban on the export of pulses was not issued in the form of a

notification simultaneously. That notification was issued on 27.6.2006, five days after the

news of the ban appeared in the press.

Issue-

Whether the notification imposing a ban on export under Section 5 of Foreign Trade

(Development and Regulation) Act, 1992 valid or not?

Decision-

<S. Muralidhar, J.>

Petitioners filed this writ petition for quashing notification by which Central Government

made amendments to Policy prohibiting export of several pulses. A mandamus to respondents

to allow petitioners to export contracted quantity of Chick Peas as per letters of credit already

is also prayed for by petitioner. Petitioners contended that said notification is ultra-virus

Section 5 of Act. Held, ban on export of Chick Peas was notified on relevant date and it must

be held that this was date on which ban became effective. Therefore it cannot be said that ban

imposed on export of pulses became effective before relevant date when it was announced in

media and when it was actually notified in accordance with mandatory requirements of

Section 5 of Act. In area of export and imports, Act under Section 5, prescribes specific mode

by which Government will announce policy changes. It is not possible to avoid mandate of

Section 5 of Act by resorting to public interest. Therefore, it is held that impugned

notification is ultra-virus Section 5 of Act. Writ petition is allowed accordingly


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JANUARY,

2016


HARIDAS EXPORTS

VS.

ALL INDIA FLOAT GLASS MANUFACTURERS' ASSN. AND ORS.


(2002) 6 SCC 600

If power is not given to the MRTP Commission to have jurisdiction with regard to that part of

trade practice in India which is restrictive in nature then it will mean that persons outside

India can continue to indulge in such practices whose adverse effect is felt in India with

impunity. A competition law like the MRTP Act is a mechanism to counter cross border

economic terrorism. Therefore, even though such an agreement may enter into outside the

territorial jurisdiction of the Commission but if it results in a restrictive trade practice in India

then the Commission will have jurisdiction Under Section 37 to pass appropriate orders in

respect of such restrictive trade practice.


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JANUARY,

2016


RAM JETHMALANI AND ORS.

VS.



Writ Petition (Civil) No. 176 of 2009 and I.A. No. 1 of 2009 [Under Article 32 of the

Constitution of India]



Judges:

B. Sudershan Reddy and S.S. Nijjar, JJ.

The scrutiny, and control, of activities, whether in the economic, social or political contexts,

by the State, in the public interest as posited by modern constitutionalism, is substantially

effectuated by the State "following the money." In modern societies very little gets

accomplished without transfer of money. The incidence of crime, petty and grand, like any

other social phenomena is often linked to transfers of monies, small or large. Money, in that

sense, can both power, and also reward, crime. As noted by many scholars, with increasing

globalization, an ideological and social construct, in which transactions across borders are

accomplished with little or no control over the quantum, and mode of transfers of money in

exchange for various services and value rendered, both legal and illegal, nation-states also

have begun to confront complex problems of cross-border crimes of all kinds. Whether this

complex web of flows of funds, instantaneously, and in large sums is good or bad, from the


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2016


perspective of lawful and desired transactions is not at issue in the context of the matters

before this Court.

The worries of this Court also relate to whether the activities of engendering such

unaccounted monies, transferring them abroad, and the routing them back to India may not

actually be creating a culture that extols the virtue of such cycles, and the activities that

engender such cycles are viewed as desirable modes of individual and group action. The

worries of this Court also relate to the manner, and the extent to which such cycles are

damaging to both national and international attempts to combat the extent, nature and

intensity of cross-border criminal activity. Finally, the worries of this Court are also with

respect to the extent of incapacities, system wide, in terms of institutional resources, skills,

and knowledge, as well as about incapacities of ethical nature, in keeping an account of the

monies generated by various facets of social action in the country, and thereby developing

effective mechanisms of control. These incapacities go to the very heart of constitutional

imperatives of governance. Whether such incapacities are on account of not having devoted

enough resources towards building such capacities, or on account of a broader culture of

venality in the wider spheres of social and political action, they run afoul of constitutional

imperatives.

Disclosure of documents referenced by Union of India (UOI). Denial of information on the

ground of infringing right to privacy on individuals concerned. Held, right to privacy is an

integral part of right to life, a cherished constitutional value. Revelation of bank account

details of individuals, without establishment of prima facie grounds to accuse them of wrong

doing, would be a violation of their rights to privacy. Mere fact that a citizen has a bank

account in a bank located in a particular jurisdiction cannot be a ground for revelation of

details of his or her account that the State has acquired. State cannot compel citizens to

reveal, or itself reveal details of their bank accounts to the public at large, either to receive

benefits from the State or to facilitate investigations, and prosecutions of such individuals,

unless the State itself has, through properly conducted investigations, within the four corners

of constitutional permissibility, been able to establish prima facie grounds to accuse the

individuals of wrong doing. It is only after the State has been able to arrive at a prima facie

conclusion of wrong doing, based on material evidence, would the rights of others in the

nation to be informed comes into play. UOI to disclose to the Petitioners all documents and

information secured in connection with the matters specifically subject to the conditions that


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JANUARY,

2016


UOI is exempted from revealing the names of those individuals who have accounts in banks

of Liechtenstein, and revealed to it by Germany, with respect of who investigations/enquiries

are still in progress and no information or evidence of wrongdoing is yet available, names of

those individuals with bank accounts in Liechtenstein, as revealed by Germany, with respect

of whom investigations have been concluded, either partially or wholly, and Show Cause

Notices issued and proceedings initiated may be disclosed. SIT as constituted to take over the

matter of investigation of the individuals whose names disclosed by Germany as having

accounts in banks in Liechtenstein, and expeditiously conduct the same and to review the

concluded matters also in this regard to assess whether investigations have been thoroughly

and properly conducted or not, and on coming to the conclusion that there is a need for

further investigation shall proceed further in the matter. After conclusion of investigations by

SIT, the names may be disclosed with regard to whom show cause notices have been issued

and proceedings initiated.


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JANUARY,

2016


5. SESSION 5

ISSUES ARISING OUT OF INTERPLAY BETWEEN LAWS PERTAINING TO FOREIGN

TRADE AND CENTRAL TAX LAWS

CHHOTALAL SAMJI

VS.

INCOME TAX OFFICER


Civil Appeal No. 3142 of 2009 (Arising out of SLP(C) No. 22604 of 2007)

Assessment Year: 2001-2002



Judges:

S.H. Kapadia and Aftab Alam, JJ.

This civil appeal pertains to assessment year 2001-02.

By the Finance Act, 1990, Section 28 of the Income-tax Act, 1961 has been amended by

inserting therein, clauses (iiia), (iiib) and (iiic) with retrospective effect with a view to ensure

that cash compensatory support (CCS), duty drawback (DD) and profit on sale of import

entitlement licences (IL) shall be taxable under the head "Profits and Gains of Business or


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JANUARY,

2016


Profession". In view of this amendment, the above three export incentives have got to be

included in the profits of the business for computing the deduction under Section 80HHC.

In this case we are only concerned with two out of three above-mentioned export incentives,

namely, duty drawback and profits arising from sale of DEPB licence. We quote hereinbelow

Section 28(iiia) and (iiic) of the 1961 Act which read as under:

Profits and gains of business or profession.

28. The following income shall be chargeable to income-tax under the head "Profits

and gains of business or profession"-

(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955,

made under the Imports and Exports (Control) Act, 1947 (18 of 1947);

(iiic) any duty of customs or excise re-paid or re-payable as drawback to any person

against exports under the Customs and Central Excise Duties Drawback Rules, 1971.

According to the A.O., under Section 28(iiia) of the said Act, profits on sale of a licence

granted under Imports (Control) Order, 1955, made under the Import and Exports (Control)

Act, 1947 and duty drawback repayable against exports under the Customs and Central

Excise Duties Drawback Rules, 1971, are alone includible in the profits of a business for

computing the deduction under Section 80HHC. However, according to the A.O., in the

present case, the assessee claims to have earned profits on the sale of DEPB licence under

Foreign Trade (Development and Regulation) Act, 1992 and not under Imports (Control)

Order, 1955, made under the Import and Exports (Control) Act, 1947 and, therefore, such

profits were not includible in business profits for computing the deduction under Section

80HHC of the said Act.

Similarly, according to the A.O., in this case, the assessee has earned duty drawback under

Customs and Central Excise Duties Drawback Rules, 1995. It has not earned duty drawback

under Customs and Central Excise Duty Drawback Rules, 1971 and, therefore, the assessee

was not entitled to include such incentives in the business profits for computing the deduction

under Section 80HHC. One more finding has been given by the A.O., namely, that the

assessee was not entitled to claim the benefit under Section 80HHC because the assessee


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2016


during the assessment year in question has derived negative profits (loss) from export of

trading goods.

None of the above questions have been decided by the High Court. In the circumstances, we

set aside the impugned order and restore Tax Appeal No. 1127 of 2006 for de novo

consideration by the High Court in accordance with law. Accordingly, the civil appeal stands

allowed with no order as to costs.


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JANUARY,

2016


LIBERTY INDIA

VS.

COMMISSIONER OF INCOME TAX


Civil Appeal No. 5891 of 2009 (Arising out of S.L.P. (C) No. 5827/07), Civil Appeal Nos.

5892- 93/09 (Arising out of SLP (C) Nos. 22083-22084/07), Civil Appeal Nos. 5897-98/09

(Arising out of SLP (C) Nos. 7956-7957/08), Civil Appeal No. 5894/09 (Arising out of SLP

(C) No. 11416/08), Civil Appeal No. 5895/09 (Arising out of SLP (C) No. 16875/08), Civil

Appeal No. 5896/09 (Arising out of SLP (C) No. 11404/08), Civil Appeal No. 5271/07, Civil

Appeal No. 5571/07, Civil Appeal No. 1465/08, Civil Appeal No. 1499/08, Civil Appeal No.

1500/08, Civil Appeal No. 1438/08, Civil Appeal No. 1439/08, Civil Appeal No. 1440/08,

Civil Appeal No. 1915/08, Civil Appeal No. 2408/08, Civil Appeal No. 2409/08, Civil Appeal

No. 2411/08, Civil Appeal No. 2410/08, Civil Appeal No. 5157/07, Civil Appeal No. 3479/08,

Civil Appeal No. 2648/08, Civil Appeal No. 4125/08, Civil Appeal Nos. 6217-6218/08, Civil

Appeal No. 427/09, Civil Appeal No. 430/09, Civil Appeal No. 429/09, Civil Appeal Nos.

364-365/09, Civil Appeal Nos. 1257-1258/09, Civil Appeal No. 3532/09 and Civil Appeal No.

451/06

Assessment Year: 2001-2002



Judges:



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2016


Facts-

Income Tax deduction under Duty Entitlement Passbook Scheme (DEPB). Increased profits

were deducted under Section 80IB of Income-tax Act, 1961 as profit of the industrial

undertaking on account of DEPB and Duty Drawback credited to the Profit and Loss account.

Issue-

Whether profit from DEPB and Duty Drawback Scheme could be said to be profit derived

from the business of the Industrial Undertaking eligible for deduction under Section 80IB

Decision-

<S.H. Kapadia>

Held, there is a distinction between profit linked tax incentives and investment linked tax

incentives. Sections 80I, 80IA and 80IB have a common scheme. Said sections provide for

incentives in the form of deduction(s) which are linked to profits and not to investment.

DEPB is an incentive. Source of duty drawback receipt lies in Section 75 of Customs Act and

Section 37 of Central Excise Act. Remission of duty is on account of the statutory/policy

provisions in the Customs Act/Scheme(s) framed by the Government of India. Profits derived

by way of such incentives do not fall within the expression profits derived from industrial

undertaking in Section 80IB. AS-2 deals with Valuation of Inventories. Trade discounts,

rebate, duty drawback, and such similar items are deducted in determining the costs of

purchase. Therefore, duty drawback, rebate etc. should not be treated as adjustment (credited)

to cost of purchase or manufacture of goods. They should be treated as separate items of

revenue or income and accounted for accordingly. Duty drawback receipt/DEPB benefits do

not form part of the net profits of eligible industrial undertaking for the purposes of Sections

80I/80IA/80IB. Appeal dismissed.

Ratio Decidendi:

Remission of duty drawback and DEPB, is on account of policy and thus does not fall within

the expression in Section 80(IB).


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JANUARY,

2016


YASHA OVERSEAS

VS.

COMMISSIONER OF SALES TAX AND ORS.

AND

JINDAL DRUGS LTD. AND ANR.

VS.

STATE OF MAHARASHTRA AND ANR.

AND

INTERNATIONAL CREATIVE FOODS LTD.

VS.

STATE OF KERALA


Civil Appeal Nos. 2155 of 2000, 6893 of 2003 and 4075 of 2007 and Civil Appeal Nos. 3316,

3318 and 3320 of 2008 (Arising out of SLP (C) Nos. 16270/01, 6907/02 and 17894/02)



Judges:

B.N. Agrawal, G.S. Singhvi and Aftab Alam, JJ.


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JANUARY,

2016


Issue-

Whether REP licences different from Delhi Sales Tax Act, 1975, Kerala General Sales Tax

Act, 1963 and Bombay Sales Tax Act, 1959?

Decision-

<Aftab Alam, J.>

REP licences were granted under the Import and Export Policy for the period April 1988 to

March 1991 issued under the Imports and Exports (Control) Act, 1947. Replaced by Duty

Entitlement Passbook (DEPB) provided for in the Exim Policy 1997-02 under the Foreign

Trade (Development and Regulation) Act, 1992. Appellant submitted that DEPB credit is not

exigible to sales tax just as REP licences as held in Vikas Sales Corporation v. Commnr. Of

Commercial Taxes. According to the Appellant Vikas was impliedly overruled by Sunrise

Associates v. Govt. of NCT of Delhi wherein it was held that lottery tickets were actionable

claims and were, therefore, excluded from the definition of goods under the Sales Tax Act

and hence, said sale of lottery tickets not taxable. Whether the decision in Vikas can be said

to be impliedly overruled by the Constitution Bench decision in Sunrise; (ii) And, if Vikas is

still good law, would it also apply to sale of DEPB? - Held, analyzing the two Judgments it

was observed that in Vikas, the Court held that REP licence/exim scrip fell within the

definition of goods quite independently as REP licenses had their own value and they were

freely bought and sold in the market for their intrinsic value and could not be classified as

actionable claims. In Sunrise, it was held that a lottery ticket has no value itself and was a

mere piece of paper. Decision in Sunrise in no way affects the position insofar as REP

licences are concerned and the legal position in regard to their sale is concluded by the

decision in Vikas. DEPB like REP licence has its own intrinsic value and the purchaser, on

payment of consideration, buys something for its value - DEPB is not a licence because under

the liberal import policy no licence is required to import a very large number of goods and

very few items, placed under the negative list, require a licence for import. DEPB credit

clearly goods within the meaning of sales tax laws of Delhi, Kerala and Mumbai and its sale

clearly exigible to tax. Appeals dismissed.

Ratio Decidendi:


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JANUARY,

2016


DEPB credit is clearly goods within the meaning of sales tax laws of Delhi, Kerala and

Mumbai and its sale is exigible to tax.

TOPMAN EXPORTS

VS.

COMMISSIONER OF INCOME TAX, MUMBAI


Civil Appeal No. 1699 of 2012 (Arising out of SLP (C) No. 26558 of 2010) and etc etc.

Assessment Year: 2001-2002;2004-2005



Judges:

S.H. Kapadia, C.J.I., A.K. Patnaik and Swatanter Kumar, JJ.

<A.K. Patnaik, J.>

Profit on the transfer of the Duty Entitlement Pass Book Scheme. Computation of deduction

in respect of profits retained for export business under Section 80HHC of the Act.

Whether the entire amount received on the sale of the Duty Entitlement Passbook does not

represent profits chargeable under Section 28(iii)(d) of the Income Tax Act, 1961 and that the


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JANUARY,

2016


face value of the Duty Entitlement Passbook shall be deducted from the sale proceeds?

Whether the face value of the Duty Entitlement Passbook is chargeable to tax under Section

28(iii)(b) at the time of accrual of income i.e. when the application for Duty Entitlement

Passbook is filed with the competent authority pursuant to the exports made and that the

profits on the sale of Duty Entitlement Passbook representing the excess of the sale proceeds

over the face value is liable to be considered under Section 28(iii)(d) at the time of sale?

Held, the objective of DEPB scheme is to neutralize the incidence of customs duty on the

import content of the export products. Hence, it has direct nexus with the cost of the imports

made by an exporter for manufacturing the export products. The neutralization of the cost of

customs duty under the DEPB scheme, however, is by granting a duty credit against the

export product and this credit can be utilized for paying customs duty on any item which is

freely importable. DEPB is issued against the exports to the exporter and is transferable by

the exporter. Under clause (iii)(b) of Section 28 cash assistance (by whatever name called)

received or receivable by any person against exports under any scheme of the Government of

India is by itself income chargeable to income tax under the head Profits and Gains of

Business or Profession. DEPB is a kind of assistance given by the Government of India to an

exporter to pay customs duty on its imports and it is receivable once exports are made and an

application is made by the exporter for DEPB. Therefore, DEPB is cash assistance receivable

by a person against exports under the scheme of the Government of India and falls under

clause (iiib) of Section 28 and is chargeable to income tax under the head Profits and Gains

of Business or Profession even before it is transferred by the assessee. Under clause (iii)(d) of

Section 28, any profit on transfer of DEPB is chargeable to income tax under the head Profits

and Gains of Business or Profession as an item separate from cash assistance under clause

(iii)(b). The word profit means the gross proceeds of a business transaction less the costs of

the transaction. While the face value of the DEPB will fall under clause (iii)(b) of Section 28

of the Act, the difference between the sale value and the face value of the DEPB will fall

under clause (iii)(d) of Section 28 of the Act. The High Court was not right in taking the view

in the impugned judgment that the entire sale proceeds of the DEPB realized on transfer of

the DEPB and not just the difference between the sale value and the face value of the DEPB

represent profit on transfer of the DEPB.

Correctness of the impugned finding as under challenge. High Court reasoned that clause

(iii)(a) of Section 28 treats profits on the sale of an import license as income chargeable to tax


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JANUARY,

2016


and when the license is sold, the entire amount is treated as profits of business under clause

(iii)(a) of Section 28 and thus there is no justification to treat the amount which is received by

an exporter on the transfer of the DEPB any differently than the profits which are made on

the sale of an import license under clause (iii)(a) of Section 28 of the Act.

Held, in taking the view that when the import license is sold the entire amount is treated as

profits of business, the High Court has visualized a situation where the cost of acquiring the

import license is nil. The cost of acquiring DEPB, on the other hand, is not nil because the

person acquires it by paying customs duty on the import content of the export product and the

DEPB which accrues to a person against exports has a cost element in it. Accordingly, when

DEPB is sold by a person, his profit on transfer of DEPB would be the sale value of the

DEPB less the face value of DEPB which represents the cost of the DEPB. The second

reason given by the High Court in the impugned judgment is that under the DEPB scheme,

DEPB is given at a percentage of the FOB value of the exports so as to neutralize the

incidence of customs duty on the import content of the export products, but the exporter may

not himself utilize the DEPB for paying customs duty but may transfer it to someone else and

therefore the entire sum received on transfer of DEPB would be covered under clause (iii)(d)

of Section 28. The High Court has failed to appreciate that DEPB represents part of the cost

incurred by a person for manufacture of the export product and hence even where the DEPB

is not utilized by the exporter but is transferred to another person, the DEPB continues to

remain as a cost to the exporter. When, therefore, DEPB is transferred by a person, the entire

sum received by him on such transfer does not become his profits. It is only the amount that

he receives in excess of the DEPB which represents his profits on transfer of the DEPB. The

High Court has sought to meet the argument of double taxation made on behalf of the

assessees by holding that where the face value of the DEPB was offered to tax in the year in

which the credit accrued to the assessee as business profits, then any further profit arising on

transfer of DEPB would be taxed as profits of business under Section 28(iii)(d) in the year in

which the transfer of DEPB took place. This view of the High Court, was held to be contrary

to the language of Section 28 of the Act under which cash assistance received or receivable

by any person against exports such as the DEPB and profit on transfer of the DEPB are

treated as two separate items of income under clauses (iii)(b) and (iiid) of Section 28. If

accrual of DEPB and profit on transfer of DEPB are treated as two separate items of income

chargeable to tax under clauses (iii)(b) and (iii)(d) of Section 28 of the Act, then DEPB will


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JANUARY,

2016


be chargeable as income under clause (iii)(b) of Section 28 in the year in which the person

applies for DEPB credit against the exports and the profit on transfer of the DEPB by that

person will be chargeable as income under clause (iii)(d) of Section 28 in his hands in the

year in which he makes the transfer. Accordingly, if in the same previous year the DEPB

accrues to a person and he also earns profit on transfer of the DEPB, the DEPB will be

business profits under clause (iii)(b) and the difference between the sale value and the DEPB

(face value) would be the profits on the transfer of DEPB under clause (iii)(d) for the same

assessment year. Where, however, the DEPB accrues to a person in one previous year and the

transfer of DEPB takes place in a subsequent previous year, then the DEPB will be

chargeable as income of the person for the first assessment year chargeable under clause

(iii)(b) of Section 28 and the difference between the DEPB credit and the sale value of the

DEPB credit would be income in his hands for the subsequent assessment year chargeable

under clause (iii)(d) of Section 28. The interpretation as above, therefore, does not lead to

double taxation of the same income, which the legislature must be presumed to have avoided.

Correctness of the impugned finding as under challenge. High Court has held that as the

assessees had an export turnover exceeding Rs.10 crores and did not fulfil the conditions set

out in the third proviso to Section 80HHC(3) of the Act, the assessees were not entitled to a

deduction under Section 80HHC on the amount received on transfer of DEPB and to get over

this difficulty the assesses have contended that the profits on transfer of DEPB in Section

28(iii)(d) would not include the face value of the DEPB so that the assessees get a deduction

under Section 80HHC on the face value of the DEPB.

Held, the above finding of the High Court held to be as not based on an accurate

understanding scheme of Section 80HHC of the Act. Sub-section (1) of Section 80HHC

makes it clear that an assessee engaged in the business of export out of India of any goods or

merchandise to which this Section applies shall be allowed, in computing his total income, a

deduction to the extent of profits referred to in sub-section (1B), derived by him from the

export of such goods or merchandise. Sub-section (1B) of Section 80HHC gives the

percentages of deduction of the profits allowable for the different assessment years from the

assessment years 2001-2002 to 2004-2005. Subsection (3)(a) of Section 80HHC provides that

where the export out of India is of goods or merchandise manufactured or processed by the

assessee, the profits derived from such exports shall be the amount which bears to the profits


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JANUARY,

2016


of the business, the same proportion as the export turnover in respect of such goods bears to

the total turnover of the business carried on by the assessee. Explanation (baa) under Section

80HHC states that profits of the business in the aforesaid formula means the profits of the

business as computed under the head Profits and Gains of Business or Profession as reduced

by (1) ninety per cent of any sum referred to in clauses (iii)(a), (iii)(b), (iii)(c), (iii)(d) and

(iii)(e) of Section 28 or of any receipts by way of brokerage, commission, interest, rent,

charges or any other receipt of similar nature including any such receipts and (2)the profits of

any branch, office, warehouse or any other establishment of the assessee situated outside

India. Thus, ninety per cent of the DEPB which is cash assistance against exports and is

covered under clause (iii)(b) of Section 28 will get excluded from the profits of the business

of the assessee if such DEPB has accrued to the assessee during the previous year. Similarly,

if during the same previous year, the assessee has transferred the DEPB and the sale value of

such DEPB is more than the face value of the DEPB, the difference between the sale value of

the DEPB and the face value of the DEPB will represent the profit on transfer of DEPB

covered under clause (iii)(d) of Section 28 and ninety per cent of such profit on transfer of

DEPB certificate will get excluded from profits of the business. But, where the DEPB accrues

to the assessee in the first previous year and the assessee transfers the DEPB certificate in the

second previous year, as appears to have happened in the present batch of cases, only ninety

per cent of the profits on transfer of DEPB covered under clause (iii)(d) and not ninety per

cent of the entire sale value including the face value of the DEPB will get excluded from the

profits of the business. Thus, where the ninety per cent of the face value of the DEPB does

not get excluded from profits of the business under explanation (baa) and only ninety per cent

of the difference between the face value of the DEPB and the sale value of the DEPB gets

excluded from profits of the business, the assessee gets a bigger figure of profits of the

business and this is possible when the DEPB accrues to the assessee in one previous year and

transfer of the DEPB takes place in the subsequent previous year. The result in such case is

that a higher figure of profits of the business becomes the multiplier in the aforesaid formula

under subsection (3)(a) of Section 80HHC for arriving at the figure of profits derived from

exports.

Where an assessee has an export turnover exceeding Rs.10 crores and has made profits on

transfer of DEPB under clause (d) of Section 28, he would not get the benefit of addition to

export profits under third or fourth proviso to sub-section (3) of Section 80HHC, but he


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2016


would get the benefit of exclusion of a smaller figure from profits of the business under

explanation (baa) to Section 80HHC of the Act and there is nothing in explanation (baa) to

Section 80HHC to show that this benefit of exclusion of a smaller figure from profits of the

business will not be available to an assessee having an export turnover exceeding Rs.10

crores.

Thus, where the export turnover of an assessee exceeds Rs.10 crores, he does not get the

benefit of addition of ninety per cent of export incentive under clause (iii)(d) of Section 28 to

his export profits, but he gets a higher figure of profits of the business, which ultimately

results in computation of a bigger export profit. The High Court, therefore, was not right in

coming to the conclusion that as the assessee did not have the export turnover exceeding

Rs.10 crores and as the assessee did not fulfill the conditions set out in the third proviso to

Section 80HHC (iii), the assessee was not entitled to a deduction under Section 80HHC on

the amount received on transfer of DEPB and with a view to get over this difficulty the

assessee was contending that the profits on transfer of DEPB under Section 28(iii)(d) would

not include the face value of the DEPB. It is a well-settled principle of statutory interpretation

of a taxing statute that a subject will be liable to tax and will be entitled to exemption from

tax according to the strict language of the taxing statute and if as per the words used in

explanation (baa) to Section 80HHC read with the words used in clauses (iii)(d) and (iii)(e) of

Section 28, the assessee was entitled to a deduction under Section 80HHC on export profits,

the benefit of such deduction cannot be denied to the assessee.

Accordingly, the Assessing Officer was directed to compute the deduction under Section

80HHC in the case of the appellants in accordance with the present judgment.


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2016


6. SESSION 6

ONE TRANSACTION- MANY TAXES: THE CONTINUING TUSSLE BETWEEN THE

STATES AND THE CENTRE TO LEVY TAXES ON CERTAIN TRANSACTIONS

ALL INDIA FEDERATION OF TAX PRACTITIONERS AND ORS.

VS.



Civil Appeal No. 7128 of 2001



Judges:

S.H. Kapadia and B. Sudershan Reddy, JJ.

<S.H. Kapadia, J.>

Competence of Parliament to levy service tax on practising chartered accountants and

architects having regard to Entry 60 List II of the Seventh Schedule to the Constitution and

Article 276 of the Constitution. Jurisdiction questioned in the appeal on the ground that the

State Legislature alone has absolute jurisdiction and legislative competence to levy tax on

them. It was submitted that service tax was a tax on profession and that service tax fell within

the ambit of Entry 60 of List II and that the word „profession‟ in Entry 60 List II was

synonymous with the word „service‟ and therefore, tax on profession would include tax on


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2016


service, which tax could be levied only by the State Legislature and that the word

„profession‟ in Entry 60 of List II was nothing but service and therefore, levy of service tax

came within the competence of State Legislature alone. Held, Entry 60 of List II of the

Seventh Schedule to the Constitution, which refers to profession cannot be extended to

include services, therefore, Parliament had absolute jurisdiction and legislative competence to

levy tax on services. Hence, appeal dismissed.

Scope in the context of profession of CA, CWA, Architect, etc. Held, Entry 60 List II refers

to taxes on professions etc. It is the tax on the individual person/firm or company and status.

A chartered accountant or a cost accountant obtains a licence or a privilege from the

competent body to practice and on that privilege the State is competent to levy tax under

Entry 60. Entry 60 List II of constitution however not a general entry and cannot be read to

include every activity undertaken by a chartered accountant/cost accountant/architect for

consideration. Service tax is a tax on each activity undertaken by a chartered accountant/cost

accountant or an architect. For each transaction or contract, the chartered accountant/cost

accountant renders professional based services. Activity undertaken from the point of view of

the chartered accountant/cost accountant is an activity based on his performance and skill, but

from the client‟s point of view, the chartered accountant/cost accountant is his service-

provider. It is a tax on „services‟. As long as a person/firm remains in the profession, he/it has

to pay professional tax. Said tax has nothing to do with the commercial activities which is

undertaken for client. Even if the chartered accountant has no work throughout the

accounting year, still professional tax has to be paid till he remains in the profession. Entry 60

contemplates tax on professions. Entry 60 List II refers to „Tax on employments‟

Facts-

An appeal filed by All India Federation of Tax Practitioners against the Division Bench

Judgment of the Bombay High Court upholding the legislative competence of Parliament to

levy service tax vide Finance Act, 1994 and Finance Act, 1998. According to the impugned

Judgment, service tax falls in Entry 97, List I of the Seventh Schedule to the Constitution. On

1st June, 1998 Finance Bill, 1998 was introduced in Parliament. Clause 119 of the Notes

sought to substitute Sections 65, 66 and 68 and amend Section 67 of the Finance Act, 1994

relating to service tax so as to levy a tax on services rendered by a practicing chartered

accountant, cost accountant and architect to a client in professional capacity at the rate of five


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2016


per cent of the amount charged to the client. On 3rd June, 1998, Bombay Chartered

Accountants Association made a representation to the Central Government objecting to the

aforestated Bill. On 1st August, 1998 the Finance Bill was however passed and the Finance

(No. 2) Act, 1998 received the assent of the President of India. Hence, the present petition.

The question which arises for determination in this Civil Appeal concerns the constitutional

status of the levy of service tax and the legislative competence of Parliament to impose

service tax under Article 246(1) read with Entry 97 of List I of the Seventh Schedule to the

Constitution. The issue arising in this appeal questions the competence of Parliament to levy

service tax on practicing chartered accountants and architects having regard to Entry 60 List

II of the Seventh Schedule to the Constitution and Article 276 of the Constitution.

Decision-

Entry 60 of List II, mentions 'Taxes on professions, trades, callings and employments'. Entry

60 is a taxing entry. It is not a general entry. Therefore, tax on professions etc. has to be read

as a levy on professions, trades, callings etc., as such. Therefore, Entry 60, which refers to

professions, cannot be extended to include services. This is what is called as an Aspect

Theory. If the argument of the Appellants is accepted, then there would be no difference

between interpretation of a general entry and interpretation of a taxing entry in List I and List

II of the Seventh Schedule to the Constitution. Therefore, 'professions' will not include

services under Entry 60. Parliament had absolute jurisdiction and legislative competence to

levy tax on services. While interpreting the legislative heads under List II, we have to go by

schematic interpretation of the three Lists in the Seventh Schedule to the Constitution and not

by dictionary meaning of the words 'profession' or 'professional' as was sought to be argued

on behalf of the Appellants otherwise the distinction between general entries and taxing

entries under the three Lists would stand obliterated. The words 'in relation to' and the words

'with respect to' are no doubt words of wide amplitude but one has to keep in mind the

context in which they are used.

Entry 60 List II refers to taxes on professions etc. It is the tax on the individual person/firm or

company. It is the tax on the status. A chartered accountant or a cost accountant obtains a

licence or a privilege from the competent Body to practise. On that privilege as such the State

is competent to levy a tax under Entry 60. However, Entry 60 List II of constitution is not a

general entry. It cannot be read to include every activity undertaken by a chartered


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2016


accountant/cost accountant/architect for consideration. Service tax is a tax on each activity

undertaken by a chartered accountant/cost accountant or an architect. The cost

accountant/chartered accountant/architect charges his client for advice or for auditing of

accounts. Similarly, a cost accountant charges his client for advice as well as doing the work

of costing. For each transaction or contract, the chartered accountant/cost accountant renders

professional based services. The activity undertaken by the chartered accountant or the cost

accountant or an architect has two aspects. From the point of view of the chartered

accountant/cost accountant it is an activity undertaken by him based on his performance and

skill. But from the point of view of his client, the chartered accountant/cost accountant is his

service-provider. It is a tax on 'services'. The activity undertaken by the chartered accountant

or cost accountant is similar to a saleable or marketable commodities produced by the

Assessee and cleared by the Assessee for home consumption under the Central Excise Act.

For each contract, tax is levied under the Finance Acts, 1994 and 1998. Tax cannot be levied

under that Act without service being provided whereas a professional tax under Entry 60 is a

tax on his status. It is the tax on the status of a cost accountant or a chartered accountant. As

long as a person/firm remains in the profession, he/it has to pay professional tax. That tax has

nothing to do with the commercial activities which he undertakes for his client. Even if the

chartered accountant has no work throughout the accounting year, still he has to pay

professional tax. He has to pay the tax till he remains in the profession. This is the ambit and

scope of Entry 60 List II which is a taxing entry. Therefore, Entry 60 contemplates tax on

professions, as such. Entry 60 List II refers to 'Tax on employments'.

Parliament has legislative competence to levy service tax by way of impugned Finance Acts

of 1994 and 1998 under Entry 97 of List I on chartered accountants, cost accountants and

architects.

Ratio Decidendi:

“Entry 60 of List II of the Seventh Schedule to the Constitution, which refers to profession

cannot be extended to include services, therefore, Parliament had absolute jurisdiction and

legislative competence to levy tax on services.”


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2016


“Entry 60 List II of constitution is not a general entry and cannot be read to include every

activity undertaken by a chartered accountant/cost accountant/architect for consideration.”

“Service tax is a tax on each activity undertaken by a chartered accountant/cost accountant or

an architect.”

A AND G PROJECTS AND TECHNOLOGIES LTD.

VS.

STATE OF KARNATAKA


Civil Appeal No. 7233 of 2008 (Arising out of S.L.P. (C) No. 1065/08)



Judges:


Facts-

Inter-State sale of goods fell under Section 3(a) of CST ACT 1956 and, therefore, was not

entitled to exemption under Section 6(2) of Act. Hence, this Appeal


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2016


Issue-

Whether, a particular sale was an inter-State sale or an intra-State sale?

Decision-

<S.H. Kapadia, J.>

Held, in order to attract Section 6(2), it was essential that concerned sale must be a

subsequent inter-State sale effected by transfer of documents of title to goods during

movement of goods from one State to another. However, it must be preceded by a prior inter-

State sale if this condition were fulfill then it was only that Section 6(2) may be attracted in

order to make such subsequent sale exempt from levy of sales tax. Thus, According to AO all

three sales were inter-State sales falling under Section 3(a) and consequently Section 6(2)

never stood attracted and therefore, appellant was not entitled to exemption.

We may, at this stage refer to the decision of the Bombay High Court in CST v. Barium

Chemicals Ltd. (1981) 48 STC 121. A particular transaction of inter-State sale was subjected

to Central sales tax in Andhra Pradesh. The same sale was again sought to be taxed under

Central Sales Tax Act in Maharashtra, which was questioned. The High Court adopted the

following approach: Central sales tax is levied and collected by the Central Government; it is

immaterial in which State it is collected; it cannot be levied or collected twice over; the State

Governments are merely agents of the Central Government in the matter of levy and

collection of Central sales tax; if so, once levied and collected in one State, rightly or

wrongly, it cannot be levied and collected in another State. In our opinion, this may be an

oversimplification of the matter. Maybe, from the point of view of the assessee, this approach

is sound enough but from the point of view of the States (keeping Article 269 in mind) and

the provisions of the Central Sales Tax Act, this may not be correct. Section 9(1) specifies the

State wherein Central sales tax shall be levied and collected and the Central sales tax has to

be levied and collected in that State and in no other State. The approach of the Bombay High

Court makes Section 9(1) [which is enacted pursuant to Section 269(2), as pointed out

hereinabove] otiose and superfluous. It would not be proper to say, in the light of the above

constitutional and statutory provisions, that the dispute as to in which State a particular inter-

State sale is to be taxed is a matter between the States and that so far as the assessee is

concerned, it is enough if he pays the tax at one place, whether it is really leviable in that


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2016


State as per Section 9(1) or not. The law requires that it should be levied and collected in the

State from which the movement of goods commences [Section 9(1) read with Section 3(a)].

Ratio Decidendi:

"If assesses fulfill all condition related to his subsequent sales of Section 6(1) of Central Sales

Tax ACT 1956 then his sales exempt from levy of sales tax."

STATE OF WEST BENGAL

VS.

UNION OF INDIA



Citation- [1964]1SCR371

Judges:

B.P. Sinha, C.J., J.C. Shah, J.R. Mudholkar, K. Subba Rao, N. Rajagopala Ayyangar and

Syed Jaffer Imam, JJ.

Distribution of legislative powers is effected by Art. 246. In respect of matters set out in List

I of the Seventh Schedule Parliament has exclusive power to make laws : in respect of

matters set out in List II the State has exclusive power to Legislate and in respect of matters

set out in List III Parliament and the State Legislature have concurrent power to legislate. The


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2016


residuary power, including the power to tax, by Art. 248 and item 97 of List I is vested in the

Parliament. The basis of distribution of powers between the Union and States is that only

those powers and authorities which are concerned with the regulation of local problems are

vested in the States, and the residue specially those, which tend to maintain the economic,

industrial and commercial unity of the nation are left with the Union.

Power of taxation (which is exercisable by the States in comparatively minor fields, the more

important such as Income-tax, wealth-tax, excise-duties other than those on certain specified

articles, and customs, being reserved to the Union) conferred by various entries under List II

on the States is also severely restricted. Property of the Union, save in so far as the

Parliament may by law otherwise provide, is exempt from all taxes imposed by the State or

by any authority within the State. By Art. 286 imposition of a tax on sale or purchase of

goods where such sale or purchase takes place outside the State or in the course of import of

the goods into, or export of the goods out of, the territory of India can only be imposed by

Parliamentary legislation. A State is also prohibited unless the Parliament by law otherwise

provides, from imposing a tax on the consumption or sale of electricity which is consumed by

the Government of India or in the construction, maintenance and operation of any railway.

Nor can levy of a tax be authorised in respect of water consumed or distributed or sold by any

authority established by any existing law or any law made by Parliament for regulating or

developing any inter-State river or river valley, except in so far as the Parliament may by law

so provide.

The States depend largely upon financial assistance from the Union. A share in certain taxes

levied and collected by the Union such as tax on non-agricultural income, duties in respect of

succession to property other than agricultural land, estate duty in respect of property other

than agricultural land, terminal taxes on goods or passengers carried by railway, sea or air,

taxes on railway fares and freights, taxes on the sale or purchase of newspapers and on

advertisements published therein, taxes on the sale or purchase of goods other than

newspapers where such sale or purchase takes place in the course of inter-State trade or

commerce, is given to the States.

It is manifest that the States depend for financial assistance upon the Union, their own

resources, because of their restricted fields of taxation, being inadequate


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2016


7. SESSION 7

TAXATION OF E-COMMERCE TRANSACTIONS

Articles:

i. E-commerce: Tax in the Digital Domain- by Tim Dumichen, Brett A. Weaver

and Mike Camburn

ii. Electronic Commerce Taxation Evolves in India- by Daksha Baxi and Bijal

Shah

iii. Evolution of E‐Commerce in India Taxation of e‐Commerce Transactions

(Part 3)- by M.M.K. Sardana

iv. Taxation of Electronic Commerce: A Developing Problem- by Richard Jones

and Subhajit Basu

v. The Taxation of Electronic Commerce: Background and Proposal- by Charles

E. McLure


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2016


8. SESSION 8

ADDRESSING THE TAX CHALLENGES OF THE DIGITAL ECONOMY

Articles:

i. OECD/G20: Base Erosion and Profit Shifting Project: Addressing the Tax

Challenges of the Digital Economy: ACTION 1: 2015 Final Report

ii. Addressing Base Erosion and Profit Shifting in South Africa Davis Tax

Committee Interim Report


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2016


9. SESSION 9

DEVELOPMENT OF TECHNOLOGY LAW JURISPRUDENCE IN INDIA

Articles:

i. Development in Law and Use of Technology: Relevance for Judge‟s

Research- by Jasdeep Kaur

ii. Policy-Making, Technology and Privacy in India- by Subhajit Basu

iii. Science & Technology Law: Blogging and Podcasting- by Matthew J. Smith

iv. Science, Technology and Law in Modern Society- by Lee Loevinger

v. Technology Transfer and Indigenous Technology: Petrochemical Industry in

India- by Kewal Ram

vi. Technology, Law, Freedom and Development- by Yochai Benkler

vii. The Future of Information Technology Law- by B. W. Napier

viii. Transfer of Technology and Agricultural Development in India- by G. S.

Bhalla


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2016


10. SESSION 11

PRIVACY AND DATA PROTECTION ISSUES

BIHAR PUBLIC SERVICE COMMISSION

VS.

SAIYED HUSSAIN ABBAS RIZWI AND ANR.


Civil Appeal No. 9052 of 2012 (Arising out of SLP (C) No. 20217 of 2011)



Judges:

Swatanter Kumar and S.J. Mukhopadhaya, JJ.

<Swatanter Kumar, J.>

The interviewers hold the position of an 'agent' vis-a-vis the examining body which is the

'principal'. This relationship per se is not relatable to any of the exemption clauses but there

are some clauses of exemption, the foundation of which is not a particular relationship like

fiduciary relationship. Section 8(1)(g) can come into play with any kind of relationship. It

requires that where the disclosure of information would endanger the life or physical safety of

any person or identify the source of information or assistance given in confidence for law


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2016


enforcement or security purposes, the information need not be provided. The High Court has

rejected the application of Section 8(1)(g) on the ground that it applies only with regard to

law enforcement or security purposes and does not have general application. This reasoning

of the High Court is contrary to the very language of Section 8(1)(g). Section 8(1)(g) has

various clauses in itself.

On the plain reading of Section 8(1)(g) of the Act, it becomes clear that the said clause is

complete in itself. It cannot be said to have any reference to the expression 'assistance given

in confidence for law enforcement or security purposes'. Neither the language of the Section

nor the object of the Section requires such interpretation. It would not further the cause of this

section. Section 8 attempts to provide exemptions and once the language of the Section is

unambiguous and squarely deals with every situation, there is no occasion for the Court to

frustrate the very object of the Section.

It will amount to misconstruing the provisions of the Act. The High Court though has referred

to Section 8(1)(j) but has, in fact, dealt with the language of Section 8(1)(g). The reasoning of

the High Court, therefore, is neither clear in reference to provision of the Section nor in terms

of the language thereof. The ancillary question that arises is as to the consequences that the

interviewers or the members of the interview board would be exposed to in the event their

names and addresses or individual marks given by them are directed to be disclosed. First, the

members of the Board are likely to be exposed to danger to their lives or physical safety.

Secondly, it will hamper effective performance and discharge of their duties as examiners.

This is the information available with the examining body in confidence with the

interviewers. Declaration of collective marks to the candidate is one thing and that, in fact,

has been permitted by the authorities as well as the High Court. There is no error of

jurisdiction or reasoning in this regard. But direction to furnish the names and addresses of

the interviewers would certainly be opposed to the very spirit of Section 8(1)(g) of the Act.

Every expression used by Legislature must be given its intended meaning and in fact,

purposeful interpretation.


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2016


NAMIT SHARMA

VS.

UNION OF INDIA (UOI)


Writ Petition (Civil) No. 210 of 2012 (Under Article 32 of the Constitution of India)


Citation- (2013)1SCC(LS)244

Judges:

A.K. Patnaik and Swatanter Kumar, JJ.

The Central and State Information Commissions have played a critical role in enforcing the

provisions of the Act of 2005, as well as in educating the information seekers and providers

about their statutory rights and obligations. Some section of experts opined that the Act of

2005 has been a useful statutory instrument in achieving the goal of providing free and

effective information to the citizens as enshrined under Article 19(1)(a) of the Constitution. It

is true that democratisation of information and knowledge resources is critical for people's

empowerment especially to realise the entitlements as well as to augment opportunities for

enhancing the options for improving the quality of life. Still of greater significance is the

inclusion of privacy or certain protection in the process of disclosure, under the right to

information under the Act. Sometimes, information ought not to be disclosed in the larger

public interest.


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2016


The rule of equality or equal protection does not require that a State must choose between

attacking every aspect of a problem or not attacking the problem at all, and particularly with

respect to social welfare programme. So long as the line drawn, by the State is rationally

supportable, the Courts will not interpose their judgment as to the appropriate stopping point.

A statute is not invalid because it might have gone further than it did, since the legislature

need not strike at all evils at the same time and may address itself to the phase of the problem

which seemed most acute to the legislative mind. A classification based on experience was a

reasonable classification, and that it had a rational nexus to the object thereof and to hold

otherwise would be detrimental to the interest of the service itself.

RAM JETHMALANI AND ORS.

VS.



Writ Petition (Civil) No. 176 of 2009 and I.A. No. 1 of 2009 [Under Article 32 of the

Constitution of India]



Judges;

B. Sudershan Reddy and S.S. Nijjar, JJ.


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2016


Disclosure of documents referenced by Union of India (UOI). Denial of information on the

ground of infringing right to privacy on individuals concerned. Held, right to privacy is an

integral part of right to life, a cherished constitutional value. Revelation of bank account

details of individuals, without establishment of prima facie grounds to accuse them of wrong

doing, would be a violation of their rights to privacy. Mere fact that a citizen has a bank

account in a bank located in a particular jurisdiction cannot be a ground for revelation of

details of his or her account that the State has acquired. State cannot compel citizens to

reveal, or itself reveal details of their bank accounts to the public at large, either to receive

benefits from the State or to facilitate investigations, and prosecutions of such individuals,

unless the State itself has, through properly conducted investigations, within the four corners

of constitutional permissibility, been able to establish prima facie grounds to accuse the

individuals of wrong doing. It is only after the State has been able to arrive at a prima facie

conclusion of wrong doing, based on material evidence, would the rights of others in the

nation to be informed comes into play. UOI to disclose to the Petitioners all documents and

information secured in connection with the matters specifically subject to the conditions that

UOI is exempted from revealing the names of those individuals who have accounts in banks

of Liechtenstein, and revealed to it by Germany, with respect of who investigations/enquiries

are still in progress and no information or evidence of wrongdoing is yet available, names of

those individuals with bank accounts in Liechtenstein, as revealed by Germany, with respect

of whom investigations have been concluded, either partially or wholly, and Show Cause

Notices issued and proceedings initiated may be disclosed. SIT as constituted to take over the

matter of investigation of the individuals whose names disclosed by Germany as having

accounts in banks in Liechtenstein, and expeditiously conduct the same and to review the

concluded matters also in this regard to assess whether investigations have been thoroughly

and properly conducted or not, and on coming to the conclusion that there is a need for

further investigation shall proceed further in the matter. After conclusion of investigations by

SIT, the names may be disclosed with regard to whom show cause notices have been issued

and proceedings initiated.

Ratio Decidendi:

“Right to privacy is an integral part of right to life, a cherished constitutional value and it is

important that human beings be allowed domains of freedom that are free of public scrutiny

unless they act in an unlawful manner.” “Revelation of bank account details of individuals,


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without establishment of prima facie grounds to accuse them of wrong doing, would be a

violation of their rights to privacy.” “State cannot compel citizens to reveal, or itself reveal

details of their bank accounts to the public at large, either to receive benefits from the State or

to facilitate investigations, and prosecutions of such individuals, unless the State itself has,

through properly conducted investigations, within the four corners of constitutional

permissibility.”

Article:

i. The Four Parts of Privacy in India- by Bhairav Acharya


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2016


11. SESSION 12

THE GAME OF CHANCE AND GAME OF SKILL: LEGALITY OF ONLINE POKER IN

INDIA

Rules/Regulations:

i. Sikkim On-Line Gaming (Regulation) Rules, 2009.

ii. Sikkim On-Line Gaming (Regulation) Amendment Rules, 2010.

MAHALAKSHMI CULTURAL ASSN.

VS.

DIR. INSPECTOR GEN. OF POLICE & ORS.


Petitions for Special Leave to Appeal C Nos.15371/2012

Date of Order: 13.08.2015

MANU/SCOR/06760/2015

Judges:

Hon'ble Mr. Justice Madan B. Lokur Hon'ble Mr. Justice S. A. Bobde

We have heard learned counsel for quite some time. We find that the judgment and order

dated 22nd March, 2012 passed by the High Court of Judicature at Madras in W.A. No.2287

of 2011 has not at all dealt with online rummy. In fact, learned counsel for the respondents


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2016


states that they have not yet taken any decision whether online rummy falls foul of the law or

not.

Under these circumstances, we are of the opinion that since there is no discussion at all in

regard to online rummy in the impugned judgment and order, it is not necessary for us to

entertain these petitions, the issue being res integra.

We make it clear that the impugned judgment and order of the High Court of Judicature at

Madras has not dealt with online rummy and, therefore, any observations made in the

impugned judgment and order may not necessarily relate to online rummy.

With these observations, these petitions are disposed of. 4 SLP(C) Nos.15371/2012,

15568/2015, W.P.(C) Nos.1060/2013, 1061/2013, 1073/2013, 859/2014, 402/2014,

200/2014. It is stated by learned counsel for the petitioner in SLP(C) No.15371/2012 that he

has received telephonic instructions that the petitioner has already been acquitted in the trial

and he would like to confirm the same.


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2016


12. SESSION 17

POWERS OF SEBI- JUDGE, JURY AND EXECUTIONER?

ARUN KUMAR AGARWAL

VS.

UNION OF INDIA


Writ Petition (Civil) No. 374 of 2012

Decided on- 01.11.2013

(2014) 2 SCC 609

Judges:

J. S.S. Nijjar and J. Pinaki Chandra Ghose

<J. S.S. Nijjar>

SEBI is an institution of high integrity. A bare perusal of the SEBI Act makes it apparent that

SEBI was established to protect the interests of investors in securities and to promote the

development of, and to regulate the securities market. In fact, the SEBI Act gives wide

ranging powers to the Board to take such measures as it thinks fit to perform its duty to

protect the interests of investors in securities and to promote the development of, and to

regulate the securities market. These measures may provide for regulating the business in

stock exchanges and any other securities markets. Further measures are set out in Sections

11(1), (2)(a to m) to enable SEBI to perform its duties and functions efficiently. Section


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2016


11(2)(a) provides that the Board may take measures to undertake inspection of any book,

register, or other document or record of any listed public company or a public company

which intends to get its securities listed on any recognised stock exchange. The Board can

exercise its power where it has reasonable grounds to believe that such company has been

indulging in insider trading or fraudulent and unfair trade practices relating to securities

market. To enforce its directions, the Board has powers under Section 11(4) to issue any

suspension/restraint orders against the persons including office bearers of any stock exchange

or self regulatory organisation. It can impound and retain the proceeds or securities in respect

of any transaction which is under investigation. The wide sweep of the powers of SEBI

leaves no manner of doubt that it is the supreme authority for the control and Regulations and

orderly development of the securities market in India. It would not be mere rhetoric to state

that in this era of globalisation, the importance of the functions performed by SEBI are of

paramount importance to the well being of the economic health of the nation.

Therefore, it is absolutely correct in emphasising that the Chairman of SEBI has to be a

person of high integrity. This is imperative and there are no two ways about it. The

importance of the functions performed by SEBI has been elaborately examined by this Court

in the case of Sahara India Real Estate Corporation Ltd. and Ors. v. Securities and Exchange

Board of India and Anr. 2013 (1) SCC 1 Justice Radhakrishnan, upon examination of the

various provisions of the SEBI Act, has observed that it is a special law, a complete code in

itself containing elaborate provisions to protect interest of the investors. The paramount duty

of the Board under the SEBI Act is to protect the interest of the investors and to prevent

unscrupulous operators to enter and remain in the securities market. It is reiterated in

paragraph 67 that SEBI is also duty bound to prohibit fraudulent and unfair trade practice

relating to securities markets. Similarly, Justice Khehar in the concurrent judgment has

emphasised the importance of the functions performed by SEBI in exercise of its powers

under Section 11. In paragraph 303.1, it is observed as follows:

303.1. Sub-section (1) of Section 11 of the SEBI Act casts an obligation on SEBI to

protect the interest of investors in securities, to promote the development of the

securities market, and to regulate the securities market, "by such measures as it thinks

fit". It is therefore apparent that the measures to be adopted by SEBI in carrying out

its obligations are couched in open-ended terms having no prearranged limits. In other

words, the extent of the nature and the manner of measures which can be adopted by


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SEBI for giving effect to the functions assigned to SEBI have been left to the

discretion and wisdom of SEBI. It is necessary to record here that the aforesaid power

to adopt "such measures as it thinks fit" to promote investors' interest, to promote the

development of the securities market and to regulate the securities market, has not

been curtailed or whittled down in any manner by any other provisions under the

SEBI Act, as no provision has been given overriding effect over Sub-section (1) of

Section 11 of the SEBI Act.


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2016


NIRMA INDUSTRIES LTD. AND ANR.

VS.

SECURITIES AND EXCHANGE BOARD OF INDIA




(2013) 8 SCC 20

Judges:

J. S.S. Nijjar and J. Anil R. Dave

Facts-

On 22nd March, 2002, the Promoters (including friends, relatives and associates) of SRMTL

– a listed company - borrowed a sum of Rs. 48.94 crores from the Appellants and pledged

equity shares of SRMTL worth Rs. 1,42,88,700/- (24.25% of equity capital) as security. The

debt was in form of issue of Secured Optionally Fully Convertible Premium Notes by three

closely held unlisted companies (Issuer Companies) for an issue price of Rs. 1,00,000/- each

having nominal value of Rs. 1,35,000/- each. The issue was made by the Issuer Companies

by way of subscription agreements and the individual premium notes were issued.

The Issuer Companies pledged equity shares in the capital of SRMTL and other closely held

companies as security in favour of the Appellants till the redemption of the Premium Notes

by way of pledge agreements (Pledged Shares). In May-June, 2002, the pledge over the


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2016


shares, which were in dematerialized form, was carried out in the form prescribed by

National Securities Depository Limited and was recorded in the records of the respective

depositories of the Appellants and the Issuer Companies. On June 10, 2005, the Appellants,

in terms of the enforcement provisions contained in the subscription agreements and the

pledge agreements issued notices to the Issuer Companies calling upon them to redeem the

outstanding Premium Notes within a period of 30 days, failing which the Appellants would

be constrained to invoke the pledge. Premium notes were not redeemed (i.e. debt was not

repaid). Upon default, under the provisions of the Notes, the Appellants called upon each of

the Issuer Companies to redeem the outstanding Notes within 30 days. Since the Notes were

not redeemed within the notice period, the pledge was invoked on July 22, 2005.

Thus, the invocation of the pledge triggered Regulation 10 of the Takeover Code. On 26th

July, 2005, in accordance with the Regulation 10 of the Takeover Code, the Appellants made

a Public Announcement (PA) for proposed open offer to acquire upto 20% of the shares of

the existing shareholders. The Public Announcement was published in the Financial Express,

Mumbai Edition. According to the Appellants, the price offered in the PA, being Rs. 18.60/-

per share, was arrived at as per Regulation 20(4) of the Takeover Code (applicable to

frequently traded shares). The PA stated that SRMTL has suffered business losses and its net

worth has been eroded. The PA also clearly stated that the offer may be withdrawn as per

Regulation 27 of the Takeover Code.

Since the Appellants did not receive any response from the Respondent, a request was made

on July 1, 2006 to the Merchant Bankers requesting them to forward an application for

withdrawal of the open offer to the Respondent.

Issue-

Whether the SEBI under the Takeover Regulations/code has wide powers to allow

withdrawal of offer under section 11 and section 11B of Act?

Decision-

<J. S.S. Nijjar>


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2016


Held, SEBI had all powers to protect interests of investors in securities and also to ensure

orderly, regulated, and transparent functioning of stock markets. Further, it would be of no

assistance to Appellants who sought to walk away from public offer merely to avoid

economic loses - however, permitting such a withdrawal would lead to encouragement of

unscrupulous elements to speculate in stock market. Thus, encouraging such a practice of an

offer being withdrawn which had become uneconomical would have a destabilizing effect in

securities market. Hence, this would be destructive of purpose for which Takeover Code was

enacted.

SEBI

VS.

INFORMATICS VALUATION AND RATING PVT. LTD.




(2013) 9 SCC 532

Judges:

J. S.S. Nijjar and J. M.Yusuf Eqbal

Facts-

In July, 1999, SEBI issued a notification to bring CRAs under its regulatory ambit, in

exercise of powers conferred Under Section 30 read with Section 11 of the SEBI Act. The


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2016


CRA Regulations, 1999 empowers the Appellant to regulate CRAs operating in India. Under

the CRA Regulations, 1999, a CRA had been defined as a body corporate, which is engaged

or proposes to be engaged in the business of rating of securities offered by way of public or

rights issue. SEBI has also prescribed a Code of Conduct to be followed by the CRAs in the

aforesaid Regulations.

Issue-

The controversy is regarding the interpretation of the provisions contained in Regulation 4(e),

Form A read with Regulation 7 of the CRA Regulations, 1999?

Decision-

<J. S.S. Nijjar>

In order to appreciate the true scope and ambit of the aforesaid provisions, it is necessary to

take a bird's eye view of the SEBI Act and the CRA Regulations, 1999. As noticed earlier,

the Regulations have been made in exercise of the powers conferred on the Board by Section

30 read with Section 11 of the SEBI Act. Section 30 empowers the Board by notification to

make Regulations consistent with the Act and to carry out the purposes of SEBI Act. Section

30(2)(d) empowers the Board to make Regulations with regard to the conditions subject to

which certificate of registration is to be issued, the amount of fee to be paid for the certificate

of registration and the manner of suspension or cancellation of certificate of registration

Under Section 12. Section 11 empowers the SEBI to take measures to protect the interest of

investors and to regulate the security market, inter alia by regulating and registering the

working of stock progress and other intermediaries such as credit rating agencies, who may

be associated with the securities market in any manner. Regulation 2(h) defines a CRA as a

body corporate, which is engaged in or proposes to be engaged in the business of rating of

securities offered by way of public or rights issue. Regulation 2(b) defines an associate in

relation to a credit rating agency. 4. The Board shall not consider an application under

Regulation (3) unless the applicant is promoted by a person belonging to any of the following

categories, namely: (e) any company or a body corporate, having continuous net worth of

minimum rupees one hundred crores as per its audited annual accounts for the previous five

years prior to filing of the application with the Board for the grant of certificate under these


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2016


Regulations. 7. (1) The Board may require the applicant to furnish such further information or

clarification as the Board may consider necessary, for the purpose of processing of the

application. (2) The Board, if it so desires, may ask the applicant or its authorised

representative to appear before the Board, for personal representation in connection with the

grant of a certificate.

We are satisfied that the aforesaid certificate did not conform to the provisions contained in

the Regulations which requires that the certificate of the Chartered Accountant should be in

confirmation of the Audited Accounts of the promoters/applicant for the five years preceding

the date of the application. We are unable to approve the observations made by SAT that

"neither the Regulations nor the eligibility criteria in Form A requires the applicant to

produce the annual accounts of the promoter." We are also unable to approve the

observations of SAT that "it is doubtful whether the Board could have asked for this

information without doubting the veracity or the correctness of the certificate of the

Chartered Accountant that accompanied the application." The certificate of the Chartered

Accountant is evidence of the required net worth of the promoter. Therefore, it has to be in

strict conformity with Regulation 4(e). Since the certificate issued by the Chartered

Accountants did not categorically state that it is based on the audited accounts for the 5 years

preceding the date of application, the Board certainly had the power to direct the Respondent

to produce the audited accounts. That being so, under Regulation 6, it was the duty of the

Board to have rejected the application of the Respondent.

Since the Board had extended the time to the Respondent, even though not permissible in

law, we are not inclined to modify the directions issued by the SAT. Especially in view of the

submission of Mr. Suri that Respondent is willing at this stage to produce the Audited

Accounts of the promoter even for the subsequent two years.


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13. SESSION 18

INSIDER TRADING, FRAUD AND MANIPULATION IN THE SECURITIES MARKETS

A.R. DAHIYA

VS.

SEBI




MANU/SC/1350/2015

Judges

Vikramajit Sen and Shiva Kirti Singh, JJ.

While interpreting the term acquisition, we must conceptualize the intention behind these

Regulations which, it seems to us, is to safeguard the shareholders from adverse

consequences of acquisitions and takeovers as far as the value of the shares is concerned. Not

infrequently, the new management's endeavour is to manipulate the market price of the shares

in a manner calculated to induce the existing shareholders to off load their holdings at a low

price. This is achieved by portraying a false picture of their value. In the background of such

an intention it would fallacious to suggest that the said transaction did not tantamount to an

acquisition.


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In order to dispel doubts regarding the term 'acquisition', the same was subsequently defined

in the Securities and Exchange Board of India (Substantial Acquisition of Shares and

Takeovers) Regulations, 2011. Under Regulation 2 Clause (1) Sub-clause (a)-'acquisition'

means directly or indirectly acquiring or agreeing to acquire shares or voting rights in, or

control over, a Target Company. This definition clarifies that an acquisition takes place the

moment the acquirer decides or agrees to acquire, irrespective of the time when the transfer

stands completed in all respects. The definition explicates that the actual transfer need not be

contemporaneous with the intended transfer and can be in future.

KOSHA INVESTMENTS LTD.

VS.

SECURITIES AND EXCHANGE BOARD OF INDIA AND ORS.


Civil Appeal Nos. 3219 of 2006 and 2132 of 2007


Citation- 2015 (9) SCALE 820

Judges

Vikramajit Sen and Shiva Kirti Singh, JJ.

Facts-

Appellant acquired shares of another company, Snowcem India Ltd. (SIL), from one of the

original promoters of SIL and thus itself became one of the promoters. In the period June


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2016


1999 to August 1999 there was an initial upward movement in the price of shares of SIL and

also substantial increase in the volume of their trade. Appellant faced charges in another

proceeding under SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to

Securities Market) Regulations, 2003 and was also served with a show cause notice for

alleged breach of provisions of Regulation 44 and 45(6) of the Regulations, 1997. The

proposed action was based upon report of investigation showing that Appellant had

consistently bought and sold shares of SIL prior to June 1999 and also after August 1999. It

held 21,32,900 shares of SIL, constituting 20.29 per cent of total paid up capital of SIL and

made additional purchase of shares amounting to 10.81 per cent of the paid up capital of SIL

in violation of Regulation 11 (1) of the Regulations, 1997 as it failed to make the required

public announcement in terms of the Regulations, 1997.

SEBI determined that on 31.03.1999 Appellant held only 21,32,900 shares and not 31,84,228

shares, which was claimed by the Appellant on the ground that it had already pledged its

shares to lenders who had lent money to SIL. The plea of pledge raised by the Appellant was

found without any substance, hence, SEBI concluded that Appellant was already holding

between 15% to 75% shares of SIL and it could acquire additional shares of the company

through creeping acquisition mode, without public announcement only up to 5 per cent of its

paid up capital during the period of 12 months ending on 31.03.2000. However, by acquiring

11,36,700 shares of SIL during June 1999 to August 1999 it acquired shares constituting

more than 5 per cent of the paid up capital of SIL. For making such acquisition, the Appellant

was liable to make public announcement as required by Regulation 11(1) of the Regulations,

1997. The Appellant failed to do so and SEBI, holding it guilty, passed an order directing it to

make the public announcement, payment of interest to shareholders and restrained from

trading in securities. On appeal, the Tribunal accepted SEBI's arguments that even during the

period June 1999 to August 1999 the Appellant had acquired 6,61,800 shares which

constituted 6.29 per cent of the paid up capital of SIL which was beyond the permissible limit

of 5 per cent and hence the requirement of making public announcement in terms of

Regulation 11(1) of the Regulations, 1997 had to be met by the Appellant which the

Appellant failed to do. Hence, the present appeals.


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2016


Issues-

Whether Tribunal erred in accepting that Appellant owned shares above the permissible limit

of five per cent in the company?

Whether Appellant could postpone the time for public announcement on acquisition of voting

rights till purchased securities are actually converted under Regulation 14(2) of the

Regulations, 1997?

Decision-

<Shiva Kirti Singh, J.>

Held, dismissing the appeals

The provision in Regulation 11 of the Regulations, 1997 mandating a public announcement

will kick in at any stage whence the shareholding of the said entity in the target company

would exceed 25 per cent. Under Regulations, 1997 the public announcement should not be

delayed beyond four working days of the agreement or decision to acquire the requisite

number of shares or voting rights. Accepting the plea of the Appellant will mean an acquirer

can keep on violating Regulation 11(1) of the Regulations, 1997 on as many occasions as it

wants and avoid letting the public have the required knowledge through public

announcements by simply making subsequent sale or transfer to another entity so as to reduce

the so-called net acquisition in a financial year to within 5 per cent. The concept of permitting

creeping acquisitions by permitting not more than 5 per cent of the shares or voting rights in a

company limits the period for such acquisition to a financial year ending by 31st March. Such

concept does not dilute the requirement of making a public announcement within the time

mentioned in Regulation 14(1) of the Regulations, 1997 if the acquisition even if only once

made and divested, is of more than 5 per cent of shares or voting rights in the target company.

Even if such acquisition is followed by sale in the same financial year, the liability of making

the public announcement would remain unaffected and shall attract action, as in this case.

In case of acquisition of shares or voting rights the applicable provision is Regulation 14(1)

and not Regulation 14(2) of the Regulations, 1997 which applies only when the acquisition is

of other securities including Global Depository Receipts, American Depository Receipts. It is


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2016


only such securities which require conversion or exercise of option, which is contemplated by

Regulation 14(2) of the Regulations, 1997. No such plea was raised before the SEBI or the

Tribunal and in the present case only Regulation 14(1) of the Regulations, 1997 is applicable

as it covers acquisition of either the shares or the voting rights or both which are the subject

matter of Regulation 11(1) of the Regulations, 1997.

N. NARAYANAN

VS.

ADJUDICATING OFFICER, SEBI


Civil Appeal Nos. 4112-4113 of 2013 (D. No. 201 of 2013)



Judges-

K.S. Panicker Radhakrishnan and Dipak Misra, JJ.

Facts-

Imposition of penalty under Section 15HA of Securities and Exchange Board of India Act,

1992. Securities Appellate Tribunal, upholding order passed by SEBI restraining Appellant

for a period of two years from buying, selling or dealing in securities and order passed by the


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2016


adjudication officer imposing a monetary penalty of 50 lakhs under Section 15HA of SEBI

Act. Hence, this Appeal

Issue-

Whether, Securities Appellate Tribunal was justified in upholding order passed by SEBI?

Decision-

<K.S. Panicker Radhakrishnan, J.>

Held, investigation had revealed that financial results contained in quarterly report filed with

stock exchanges contained inflated figures of company's revenue profits, security deposits

and receivables. Further, manipulation in financial results of company resulted in price rise of

scrip of company and promoters pledged their shares to raise substantial funds from financial

institutions. Thereby, Directors of company had "created artificiality" by projecting inflated

figures of company's revenue, profits, security deposits and receivables. Therefore, conduct

of Appellant and Ors. was, fraudulent and practices they had adopted, relating to securities,

was unfair, which attracted penalty provisions contained in Section 15HA read with 15J of

SEBI Act.

Thus, SEBI had rightly restrained Appellant for a period of two years from date of that order

from buying, selling or dealing with any securities, in any manner, or accessing securities

market, directly or indirectly and from being Director of any listed company and that

adjudicating officer had rightly imposed a penalty of Rs. 50 lakhs under Section 15HA of

SEBI Act - Appeals dismissed.

Ratio Decidendi "Company though a legal entity could not act by itself, it could act only

through its Directors".


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2016


RITESH AGARWAL AND ANR.

VS.






Judges-

S.B. Sinha and L.S. Panta, JJ.

Facts-

Appellants committed fraud on public as well as company board and was debarred from

having access to capital market for a period of 10 years and directed to buy back their shares.

Hence, the Appeal.

Issue-

Whether the Appellants being minor could not be punished? Whether the appellants could not

be held liable as they were not the promoters of the company?

Decision-

<S.B. Sinha, J.>


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2016


Held, as established that two of the appellants were minor, they could not entered into

contract and not held liable. However, other appellants who had made mis-representation and

committed fraud would be penalised for the same. Also, it was established that appellants

were promoters of the company. Appeal allowed to the extent that direction of board not

applicable to minor appellants.

Ratio Decidendi: Appellants who were made mis-representation and committed fraud would

be penalised for the same.

SAHARA INDIA REAL ESTATE CORPORATION LTD. AND ORS.

VS.

SECURITIES AND EXCHANGE BOARD OF INDIA AND ANR.


Civil Appeal Nos. 9813 and 9833 of 2011



Judges:

K.S. Panicker Radhakrishnan and J.S. Khehar, JJ.

Powers and functions of SEBI are dealt with in Chapter IV of the SEBI Act. Section 11 states

that, subject to the provisions of the Act, it shall be the duty of SEBI to protect the interests of

investors in securities and to promote the development of and to regulate the securities

market. SEBI is also duty bound to prohibit fraudulent and unfair trade practices relating to


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2016


securities markets, prohibiting insider trading in securities etc. Section 11A authorizes SEBI

to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money

for issue of securities.

Issue-

Whether, Appellants conduct invited Civil and Criminal liability under various provisions of

Companies Act?

Decision-


Held, it was found that Appellants had not complied with legal requirements of Section 56 of

Act and thus second proviso to Section 56(3) of Act might apply and it was also stated in

Section 56 (6) of Act that liability under General Law had been excluded. Section 62 of Act

cast civil liability for mis-statement in prospectus and Section 63 (1) speak of criminal

liability. As per Section 68 of Act penalty for fraudulently inducing persons to invite, which

also leads to imprisonment and fine - Section 68A of Act prescribed punishment for violation

of what was provided Under Section 68A(1)(a) and (b) with imprisonment for term of five

years. Section 73(3) also speaks of imposition of fine. Thus penal provisions Section 628 of

Companies Act proposed imprisonment and fine for making false statements. Further

furnished false evidence might also attract punishment with imprisonment for term which

might extend to seven years and also fine Under Section 629 of Companies Act. Hence

Appellants conduct invited civil and criminal liability under various provisions like Sections

56(3), 62, 68, 68A, 73(3), 628, 629. Appeal disposed of.


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2016


14. SESSION 19

PUBLIC OFFER OF SECURITIES AND IPOS

SAHARA INDIA REAL ESTATE CORPORATION LTD. AND ORS.

VS.

SECURITIES AND EXCHANGE BOARD OF INDIA AND ANR.


Civil Appeal Nos. 9813 and 9833 of 2011



Judges:

K.S. Panicker Radhakrishnan and J.S. Khehar, JJ.

Issue-

Whether, public companies was legally obliged to file final prospectus under Section 60B(9)

of Act with SEBI?

Whether Section 60B of Act fell under Section 55A of Companies Act?

Whether, Section 67 of Companies Act implied that company's offer of shares or debentures

to fifty or more persons would ipso facto became public issue, subject to certain exceptions

provided therein and scope and ambit of first proviso to Section 67(3) of Act, which was

inserted by Companies (Amendment) Act, 2000?


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2016


Whether, Section 73 of 1956 Act casts an obligation on public company intending to offer its

shares or debentures to public, to apply for listing of its securities on recognized stock

exchange once it invites subscription from fifty or more persons and what legal consequences

would follow if permission under Section 73(1) of 1956 Act was not applied for listing of

securities?

Decision-


Filing of prospectus under Section 60B(9), 55A of Companies Act, 1956.

Held, main part of Section 55A of Companies Act confers jurisdiction on SEBI with regard to

three categories; issue of securities, transfer of securities and non-payment of dividend.

Further explanation did not take away powers conferred on SEBI by other Sections of

Companies Act. At same time matters relating to prospectus, statement in lieu of prospectus,

return of allotment, issue of shares and redemption of irredeemable preference shares be

exercised by Central Government, Tribunal, Company Law Board, Registrars of Companies.

Further Section 60B (9) of 1956 Act clearly indicated that upon closing of offer of securities

final 'prospectus' had to be filed in case of listed company with SEBI and Registrar. Hence

explanation to Section 55A of 1956 Act could never be constructed or interpreted to mean

that SEBI had no power in relation to prospectus and issue of securities by an unlisted public

company. Appeal disposed of.

Public issue under Sections 67(3) of Companies (Amendment) Act, 2000

Held, first proviso to Section 67(3) of Act was inserted by Companies (Amendment) Act,

2000 on date 13th December, 2000 which clearly indicated that nothing contained in Section

67 (3) of Act should apply in case where offer or invitation to subscribe for shares or

debentures was made to fifty persons or more. Thus after 13th

December, 2000 any offer of

securities by public company to fifty persons or more would be treated as public issue under

Companies Act, even if it was of domestic concern or it was proved that shares or debentures

were not available for subscription or purchase by persons other than those receiving offer or

invitation. Therefore if an offer of securities was made to fifty or more persons, it would be


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2016


deemed to be public issue, even if it was of domestic concern or proved that shares or

debentures were not available for subscription or purchase by persons other than those

received offer or invitation. Hence any share or debenture issue beyond forty nine persons

would be public issue attracting all relevant provisions of SEBI Act, Regulations framed

there under Companies Act pertaining to public issue. Appeal disposed of.

Listing of securities under Section 73 of Companies Act, 1956 & Section 67(3) of Companies

(Amendment) Act, 2000

Held, Section 73(1) of Act casts an obligation on every company intending to offer shares or

debentures to public to apply on stock exchange for listing of its securities. Such companies

had no option or choice but to list their securities on recognized stock exchange, once they

invite subscription from over forty nine investors from public. If an unlisted company

expresses its intention by conduct or otherwise to offer its securities to public by issue of a

prospectus, legal obligation to make an application on recognized stock exchange for listing

starts. Obligation to refund amount collected from public with interest was also mandatory as

per Section 73(2) of Act. Further it was found that Appellants had not followed any of those

statutory requirements. On combined reading of proviso to Section 67(3) and Section 73(1) of

1956 Act, it was clear that Appellants had made an offer of OFCDs to fifty persons or more,

consequently requirement to make an application for listing became obligatory leading to

statutory mandate which they did not follow. Thus OFCDs issued by Appellants to public

could not be excluded from purview of listing requirements, any interpretation to contrary

would contravene mandatory requirements contained in Section 73(1) of 1956 Act and

proviso to Section 67(3) of Companies Act, 2000. Therefore Appellant had violated listing

provisions and collected huge amounts from public in disobedience of law, SEBI was

justified in directing refund of amount with interest. Appeal disposed of.


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2016


DISCOVERY WEL. MANGT. SER. P. LTD.

VS.

PADMINI ENGINEERING P. LTD.




Citation- 2015(1)SCALE105

Judges:

Dipak Misra and U.U. Lalit, JJ.

Facts-

Present appeal filed against order of Securities Appellate Tribunal (SAT) whereby it set aside

order of Stock Exchange (SE) declining to grant benefit of de-listing of 4th Respondent-

Company.

Issue-

Whether Company was required to maintain ten per cent benchmark for public shareholding

to remain as listed company?


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2016


Decision-

<Dipak Misra, J.>

Held, as per agreement between Company and SE, level of public shareholding fixed for

continuous listing was 20 percent which was higher limit. On failure of Company to maintain

level of 20 percent, condition for continuous listing would be violated and breached. Public

holding of ten percent would not have satisfied requirement of Rule 19(2). Condition for

continuous listing would not have been followed by Company, if public shareholding had

fallen below 20 percent. Thus, offer of delisting would be successful and would not fail, if

public shareholding fell below 20 percent. Ten percent limit would not apply in view of Rule

19(2) as said Rule recognized terms and conditions laid down by recognized stock exchange

and stipulated that same would be satisfied for Company to claim continuous listing.

SECURITIES AND EXCHANGE BOARD OF INDIA

VS.

AKSHYA INFRASTRUCTURE PVT. LTD.




Citation- [2014]126SCL125(SC)

Judges:

S.S. Nijjar and A.K. Sikri, JJ.


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2016


On 20th October, 2011, the Respondent made a voluntary open offer through a Public

Announcement in major National Newspapers, under Regulation 11 of the Takeover

Regulations wherein the public shareholders of the Target Company were given an

opportunity to exit at an offer price of Rs. 91/- per equity share. This price represents a

premium of 10.3% over the average market closing price for the two weeks preceding the

Public Announcement. The tendering period was scheduled to commence on 1st December,

2011 and conclude on 20th

December, 2011. The consideration for the tendered shares was to

be paid on or before 4th

January, 2012.

However, due to certain events, which have been highlighted by both the parties, the

Respondent by letter dated 29th March, 2012 through M/s. Motilal Oswal Investment

Advisors (P) Ltd., the Managers to the Issue (hereinafter referred to as the "Merchant

Banker"), addressed to SEBI, sought to contend that the open offer in question had become

outdated, thereby outliving its necessity and, therefore, the same ought to be permitted to be

withdrawn. It was also contended that the amount of Rs. 17.46 crores deposited by the

Respondent in an escrow account towards the open offer ought to be allowed to be

withdrawn. The letter emphasizes that the public announcement was in nature of a voluntary

open offer under Regulation 11 of the Takeover Regulations for consolidation of

shareholding of the Promoter Group in the Target Company. The offer price of Rs. 91/- per

equity share of the Target Company was aimed at presenting a commercially reasonable

opportunity to the public shareholders to exit and at the same time it was meant to consolidate

the shareholding of the promoter in the Target Company. It was further stated that due to the

unjustified delay by SEBI in taking a decision as to whether to approve the draft letter of

offer has rendered the entire open offer exercise academic and meaningless. It was claimed

that the transaction envisaged by the Respondent is no longer justifiable on any ground,

including the grounds of economic rationale and commercial reasonableness. The

Respondent sought the withdrawal of open offer made under the public announcement in

terms of Regulation 27 of the Takeover Regulations.

Appellant/SEBI directed Respondent-Company, not to withdraw open offer and further, make

open offer with upward revision in price per share. Securities Appellate Tribunal allowed

Respondent's appeal against alleged directions. Hence, present appeal.

Issue-


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2016


Whether open offer voluntarily for purchase of shares could be permitted to be withdrawn at

time when voluntary open offer had become uneconomical to be performed?

Decision-

<S.S. Nijjar, J.>

Held, Respondent had acquired shares in excess of acquisition limit, not complying with

Regulation 11. Appellant was perfectly justified in taking non-compliance into consideration

whilst considering feasibility of public offer. No doubt there was delay, but such delay was of

no assistance to Respondent. Delay in performance of its duties by SEBI could not be equated

to refusal of statutory approval required from other independent bodies. Perusal of Regulation

made it clear that no public offer whether it was voluntary or triggered by Regulation 11

could be withdrawn. Distinction made by Respondent between voluntary public offer and

triggered public offer was wholly misconceived. Accepting such submission would defeat

very purpose for which Takeover Code had been enacted. Hence, impugned order is set aside

and Appeal is allowed.


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2016


15. SESSION 20

MUTUAL FUNDS, COLLECTIVE INVESTMENT SCHEME, INVESTMENT ADVISOR

AND PORTFOLIO MANAGEMENT REGULATIONS OF SEBI- AN INTRODUCTION

MORGAN STANLEY MUTUAL FUND

VS.

KARTICK DAS

WITH

ARVIND GUPTA

VS.



Civil Appeal Nos. 4584 and 4587 of 1994.



Judges-

Dr. A.S. Anand, M.N. Venkatachaliah and S. Mohan, JJ.


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2016


Facts-

The appellant is a domestic mutual fund registered with Securities and Exchange Board of

India (hereinafter referred to as 'SEBI') under Registration No. MF/005/93/1, dated 5.11.93.

The appellant is managed by a Board of Trustees. Pursuant to the SEBI (Mutual Fund)

Regulations, the investment management company of the appellant, Morgan Stanley Asset

Management India Private Limited was registered with SEBI on 5.11.93. Under such

registration Morgan Stanley Asset Management India Private Limited is constituted as the

asset management company of the appellant. Morgan Stanley Asset Management India

Private Limited is a subsidiary of Morgan Stanley Group Inc. which holds 75% of equity, the

balance being held by Indian shareholders such as Housing Development Finance

Corporation (HDFC), Stock Holding Corporation of India etc. Morgan Stanley Asset

Management India Private Limited was granted certificate of incorporation on 18th October,

1993 by the Registrar of Companies, Bombay. Its Memorandum and Article of Association

have also been approved by the SEBI as per the provisions of the said Regulations.

The draft scheme of the appellant was approved by the Board of Trustees by Circular

Resolution dated 8.11.93. This was forwarded to SEBI for its approval on 10.11.93. The

scheme was duly scrutinised and examined by the SEBI and SEBI gave its approval and

certain amendments were suggested.

Upon receipt of such approval for the scheme, the appellant and the Investment Manager took

necessary steps to begin marketing the scheme by issue of advertisements. All advertisements

and publicity material were approved by SEBI in writing before publication as required by

the Regulations. Pursuant to such approval the appellant commenced advertising the public

issue.

On 18th December, 1993 the advertisements and hoardings were released. One Piyush

Aggarwal filed a suit before the learned Sub-Judge, Tees Hazari Courts, Delhi for injunction

restraining the public issue from being floated by the appellant. On 24th December, 1993 an

interim order was passed. Aggrieved by the same, the appellant moved the High Court in

C.M. (M) No. 543 of 1993. On 3rd January, 1994 the said order passed by the learned Sub

Judge - was stayed. That was subsequently confirmed on 4th January, 1994. One Dr. Arvind

Gupta filed Writ Petition No. 14 of 1994 against SEBI. In effect, he sought to stay the public

issue from being floated. That writ petition was rejected.


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2016


On the same grounds, as were urged in the writ petition, the respondent moved the Calcutta

District Consumer Disputes Redressal Forum seeking to restrain the public issue from being

floated. The principal grounds taken were that the appellant's Offering Circular was not

approved by the SEBI. There are several irregularities in the same. The basis of allotment is

arbitrary, unfair and unjust. The appellant was seeking, to collect money by misleading the

public.

Aggrieved by this order, civil appeal arising out of SLP(C) No. 272 of 1994 has come to be

preferred. Against the dismissal of Writ Petition No. 14 of 1994 by the High Court of Delhi

civil appeal arising out of SLP No. 321 of 1994 has come to be preferred.

Issue-

Whether, the Consumer Protection Forum had jurisdiction to deal with matter?

Decision-

<S. Mohan, J.>

Mutual funds in India are regulated by SEBI pursuant to the Securities & Exchange Board of

India (Mutual Funds) Regulations, 1993. Under the said Regulations, all mutual funds in

India as also the asset management companies and the custodians of the mutual funds assets

are required to be registered with the SEBI. No mutual fund in India can approach the market

with a scheme unless scheme has been fully approved by SEBI which is the sole authority for

granting approval to such funds. The SEBI examines the scheme and suggests modifications,

if any, and allows the scheme to be advertised and published. The appellant is a domestic

mutual fund registered with SEBI. Its registration number is MF/005/93/1 dated 5.11.1993.

Certainly, Clauses 2(iii) & (iv) of the Consumer Protection Act do not arise in this case.

Therefore, what requires to be examined is, whether any unfair trade practice has been

adopted. The expression trade practice as per rules shall have the same meaning as defined

under Section 36(a) of Monoplies and Restrictive Trade Practices Act of, 1969. That again

cannot apply because the company is not trading in shares. The share means a share in the


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capital. The object of issuing the same is for building up capital. To raise capital, means

making arrangements for carrying on the trade. It is not a practice relating to the carrying of

any trade. Creation of share capital without allotment of shares does not bring shares into

existence. Therefore, our answer is that a prospective investor like the respondent or the

association is not a consumer under the Act. it is clear that the question of the appellant

company trading in shares does not arise. In view of our answers, it follows that the

Consumer Protection Forum has no jurisdiction whatsoever.

P.G.F. LIMITED AND ORS.

VS.

UNION OF INDIA (UOI) AND ANR.




Citation- AIR2013SC3702

Judges-

B.S. Chauhan and F.M. Ibrahim Kalifulla, JJ.


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2016


Facts-

Second Respondent by its order, held that business activity of PGF Limited, sale and

development of agricultural land, as well as its joint venture schemes, were all collective

investment schemes and since PGF Limited failed to comply with statutory requirement as

provided under Regulations, directed PGF Limited not to collect any money from investors

nor to launch any new scheme with further direction to refund money collected under

schemes. Hence, this Appeal.

Issue-

Whether, other business activities of PGF limited, namely, sale of agricultural land and sale

and development of agricultural land, would not fall within category of collective investment

schemes as specified under Section 2(ba) read with Section 11AA of SEBI Act?

Decision-

<F.M. Ibrahim Kalifulla, J.>

Held, Section 11AA(2) of Act intended to safeguard interest of investors whenever any

scheme or arrangement was announced by promoters by making thorough study of schemes

and arrangements before registering schemes with SEBI and also later on monitor schemes

and arrangements in order to ensure proper statutory control over such promoters. By no

stretch of imagination, which weighed with Parliament to introduce Section 11AA of Act

could be held to be done with view to affect any particular category of business activity much

less activity of agriculture. Thus, Section 11AA of Act was valid provision, not suffering

from any infirmity, as it did not intrude into specific activities of sale of agricultural land and

its development. Accordingly, conspectus consideration of scheme of development of land

purchased by customers at instance of PGF Limited and promised development under

agreement disclosed that there was wholesale uncertainty in transactions to disadvantage of

investors' concerned. PGF Limited under guise of sale and development of agricultural land

and its multiples offered to develop land by planting plant, trees etc., and thereby customers

were assured of high amount of appreciation in value of land after its development and


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2016


attracted by anticipated appreciation in land value. Scheme of PGF limited was nothing but

return to be acquired by customers after making purchase of land based on development

assured by PGF Limited, parted with their monies in fond hope that promise would be

fulfilled after successful development of bits of land purchased by them. Thus, Section 11AA

of SEBI Act was constitutionally valid. Activity of PGF Limited, namely, sale and

development of agricultural land squarely fell within definition of collective investment

scheme nder Section 2(ba) read along with Section 11AA (ii) of SEBI Act. Hence, order of

Second Respondent was perfectly justified and there was no scope to interfere with same.

Appeal dismissed.

THE CHAIRMAN, SEBI

VS.

SHRIRAM MUTUAL FUND AND ANR.


Civil Appeal Nos. 9523-9524 of 2003



Judges-

AR. Lakshmanan and L.S. Panta, JJ.


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2016


The Securities and Exchange Board of India (hereinafter referred to as 'the SEBI') is the

appellant in the present appeal under Section 15Z of the Securities and Exchange Board of

India Act, 1992. This appeal was filed against the final judgment and order dated 21.08.2003

passed by the Securities Appellate Tribunal, Mumbai (hereinafter referred to as 'the Tribunal')

in appeal No. 50 of 2002 and 51 of 2002.

The Appellant Board, a body corporate, has been established under the Securities and

Exchange Board of India Act, 1992 by the Central Government, inter alia, to protect the

interest of the investors in securities and to promote the development of, and to regulate the

securities market and for matters connected therewith. Shriram Mutual Fund was registered

in the year 1994. It had floated 5 schemes. It conducted business through brokers associated

with its sponsor in excess of the permissible limits prescribed under Regulation 25(7)(a) of

the Regulations, 1996 on 12 occasions. The respondent failed to comply with the terms and

conditions attached to the Certificate of Registration which are statutory in nature, as

prescribed by Regulation 15 (D)(b) of the Securities and Exchange Board of India Act, 1992.

Issue-

Whether once it is conclusively established that the Mutual Fund has violated the terms of the

Certificate of Registration and the statutory Regulations i.e. SEBI (Mutual Funds)

Regulations, 1996 (hereinafter referred to as 'the Regulations") the imposition of penalty

becomes a sine qua non of the violation?

Decision-

<AR. Lakshmananm, J.>

The Appellant Board has been established by the Parliament under the Securities and

Exchange Board of India Act, 1992 to protect the interest of investors in securities and to

promote the development of, and to regulate the securities market and for matter connected

therewith or incidental thereto. The Board was set up to promote orderly and healthy growth

of the securities market and for investors protection SEBI has been monitoring and regulating

the activities of Stock Exchanges, Mutual Funds and Merchant Bankers, etc. to achieve these


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2016


goals. The Capital market has witnessed tremendous growth in recent times, characterized

particularly by the increasing participation of the Public. Investors' confidence in the capital

market can be sustained largely by ensuring investors protection. That it became imperative

to impose monetary penalties also in addition to other penalties in cases of default.

In our considered opinion, penalty is attracted as soon as the contravention of the statutory

obligation as contemplated by the Act and the Regulation is established and hence the

intention of the parties committing such violation becomes wholly irrelevant. A breach of

civil obligation which attracts penalty in the nature of fine under the provisions of the Act and

the Regulations would immediately attract the levy of penalty irrespective of the fact whether

contravention must made by the defaulter with guilty intention or not. We also further held

that unless the language of the statute indicates the need to establish the presence of mens rea,

it is wholly unnecessary to ascertain whether such a violation was intentional or not. On a

careful perusal of Section 15D(b) and Section 15E of the Act, there is nothing which requires

that mens rea must be proved before penalty can be imposed under these provisions. Hence

once the contravention is established then the penalty is to follow.


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16. SESSION 25

JUDICIAL INTERVENTION IN INTERNATIONAL COMMERCIAL ARBITRATION:

IMPLICATIONS AND RECENT DEVELOPMENTS

ALVA ALUMINIUM LTD., BANGKOK

VS.

GABRIEL INDIA LIMITED


Arbitration Petition No. 2 of 2010



Judges:

T.S. Thakur, J.

Facts-

The petitioner-company appears to have had commercial transactions with the respondent for

sometime past. One of the transactions which they appear to have entered into in the course

of their business relationship was contract No. 057/2008 for the sale by the petitioner and

purchase by the respondent of 75 MTs of "Aluminium alloy ingots ADC 12". The present

proceedings, however, do not concern the said contract. These proceedings relate to contract

No. 073/2008 executed on 30th July, 2008 for the sale by the petitioner and the purchase by

the respondent of 150 M Ts of "Aluminium Alloy Ingots AC2B" on the terms and conditions


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2016


stipulated in the said contract. The contract among other terms and conditions stipulated the

price of the goods to be US $ 3490 per MT (CIF) payable by a 100; Letter of Credit (LC).

The petitioner is a joint venture company between the G.P. Group in Thailand and Kliss

Group in India, incorporated under the provisions of the laws of Thailand. The respondent, on

the other hand, is an Indian company incorporated under the provisions of Companies Act,

1956. The disputes sought to be referred for adjudication thus involves international

commercial arbitration within the meaning of Section 11(9) read with Section 2(f) of the Act

aforementioned.

The parties having taken totally contradictory positions, the petitioner informed the

respondent that it had nominated Shri Rahul Narichania as a sole Arbitrator to adjudicate

upon the disputes and that in case they had any objection to his acting as a sole Arbitrator, the

respondent could nominate an Arbitrator on their behalf. Since the respondent stuck to its

stand that there was no valid contract between the parties and consequently there existed no

arbitration agreement for referring the dispute for arbitration, the petitioner was left with no

alternative except to file the present petition seeking appointment of an independent

Arbitrator.

Issues-

Whether this Court is in a petition under Sections 11(5) and 11(9) of the Arbitration and

Conciliation Act, 1996 required to determine the existence of an arbitration agreement

between the parties?

Whether any such agreement has indeed been executed between the parties in the present

case to call for the appointment of an arbitrator for adjudication of the disputes and

differences that have arisen between them?

Decision-

<T.S. Thakur, J.>


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2016


There is a long line of decisions of this Court in which this Court has examined the nature

and the scope of the enquiry and the jurisdiction of the Chief Justice or his designate while

dealing with petitions under Section 11 of the Arbitration and Conciliation Act, 1996.

References to all those decisions is unnecessary for the question that falls for determination

here, stands concluded by two recent decisions of this Court which alone should suffice for

the present.

In National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd. MANU/SC/4056/2008 : 2009 (1)

SCC 267, this Court examined the provisions of Section 11 of the Act and categorized the

issues that may arise for determination in a petition under Section 11 before the Chief Justice

or his designate and the approach to be adopted qua the same. The Court said:

22.1. The issues (first category) which the Chief Justice/his designate will have to

decide are:

(a) Whether the party making the application has approached the appropriate High Court.

(b) Whether there is an arbitration agreement and whether the party who has applied under

Section 11 of the Act, is a party to such an agreement.

22.2. The issues (second category) which the Chief Justice/his designate may choose

to decide (or leave them to the decision of the Arbitral Tribunal) are:

(a) Whether the claim is a dead (long-barred) claim or a live claim.

(b) Whether the parties have concluded the contract/transaction by recording satisfaction of

their mutual rights and obligation or by receiving the final payment without objection.

22.3. The issues (third category) which the Chief Justice/his designate should leave

exclusively to the Arbitral Tribunal are:

(i) Whether a claim made falls within the arbitration Clause (as for example, a matter which

is reserved for final decision of a departmental authority and excepted or excluded from

arbitration).

(ii) Merits or any claim involved in the arbitration.


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2016


The question whether there is an arbitration agreement and whether the party who has applied

under Section 11 of the Act is a party to such an agreement in terms of the above decision

falls in category (1) and has, therefore, to be decided by the Chief Justice or his designate.

The above decision was followed in A.P. Tourism Development Corpn. Ltd. v. Pampa Hotel

Ltd. MANU/SC/0283/2010 : 2010 (5) SCC 425.

It is in the light of above pronouncements, unnecessary to delve any further on this issue. It is

clear that once the existence of the arbitration agreement itself is questioned by any party to

the proceeding initiated under Section 11 of the Act, the same will have to be decided by the

Chief Justice/designate as the case may be. That is because existence of an arbitration

agreement is a jurisdictional fact which will have to be addressed while making an order on a

petition under Section 11 of the Act. The position may be different where arbitration

proceedings are initiated before a nominated arbitral Tribunal but the opposite party appears

to dispute the existence of the arbitration agreement. In any such situation the Arbitral

Tribunal can itself decide the issue in exercise of its powers under Section 16(1) of the Act. It

is quite evident that the question whether or not an arbitration agreement exists between the

parties will have to be answered for it is only if the answer to that question is in the

affirmative that the Chief Justice or his designate can pass an order of reference of the

disputes for adjudication. Question No. (1) is answered accordingly.

The question, therefore, is whether the contract set up by the petitioners can be held non est

for the two reasons indicated in paragraph 4 and 8 extracted above. The defence set up by the

respondent that the information and correspondence provided by the respondent was only

suggestive of "some sort of negotiation" between the parties has not impressed me. The

documents, information and correspondence when taken in their totality especially in the

light of the signed contract document that stipulates the mutual rights and obligations of the

parties do not show that the parties were simply negotiating a contract. The information

provided, the correspondence exchanged and the documents executed are on the contrary

clearly suggestive of the parties having finalized and signed a contract.

In the totality of the circumstances, I have no doubt that a legally valid contract had indeed

come into existence between the parties which contained an arbitration clause for

adjudication of disputes that may arise between them. Question No. (2) is accordingly

answered in the affirmative.


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2016


ANTRIX CORPORATION LTD.

VS.

DEVAS MULTIMEDIA P. LTD.


Arbitration Petition No. 20 of 2011


Citation- 2013(7)SCALE216

Judges:

Altamas Kabir, C.J.I. and S.S. Nijjar, J.

Facts-

M/s. Antrix Corporation Limited, the Petitioner herein, a Government Company incorporated

under the Companies Act, 1956, and engaged in the marketing and sale of products and

services of the Indian Space Research Organization (ISRO), entered into an Agreement with

the Respondent, Devas Multimedia P. Ltd., hereinafter referred to as "Devas" on 28th

January, 2005, for the lease of Space Segment Capacity on ISRO/Antrix S-Band Spacecraft.

Article 19 of the Agreement empowered the Petitioner to terminate the Agreement in certain

contingencies. It also provided that the Agreement and the rights and responsibilities of the

parties thereunder would be subject to and construed in accordance with the laws of India. In

other words, the domestic law would be the governing law of the Agreement.

Article 20 of the Agreement deals specially with arbitration and provides that in the event any


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2016


dispute or difference arises between the parties as to any clause or provision of the

Agreement, or as to the interpretation thereof, or as to any account or valuation, or as to rights

and liabilities, acts, omissions of any party, such disputes would be referred to the senior

management of both the parties to resolve the same within 3 weeks, failing which the matter

would be referred to an Arbitral Tribunal comprising of three Arbitrators. It was provided

that the seat of arbitration would be New Delhi in India. It was also provided that the

arbitration proceedings would be held in accordance with the rules and procedures of the

International Chamber of Commerce (ICC) or UNCITRAL.

Issues-

Whether the petition is maintainable in light of the reliefs claimed and whether the conditions

precedent for the exercise of jurisdiction Under Section 11 of the Act are satisfied or not?

Decision-

<Altamas Kabir, C.J.I.>

However, as indicated hereinbefore, the question with which we are concerned is whether the

Arbitration Agreement contemplates the application of Section 11 of the 1996 Act after the

ICC Rules had been invoked by one of the parties which also appointed its nominee

Arbitrator. Equally important is the question whether Section 11 of the 1996 Act empowers

the Chief Justice to constitute a Tribunal in supersession of the Tribunal already in the stage

of constitution under the ICC Rules, notwithstanding the fact that one of the parties had

proceeded unilaterally in the matter.

As indicated hereinbefore, the question which we are called upon to decide is whether when

one of the parties has invoked the jurisdiction of the International Chamber of Commerce and

pursuant thereto an Arbitrator has already been appointed, the other party to the dispute

would be entitled to proceed in terms of Section 11(6) of the 1996 Act. As it is evident from

the provisions of the act, when any of the parties to an Arbitration Agreement fails to act in

terms thereof, on the application of the other party, the Chief Justice of the High Courts and

the Supreme Court, in different situations, may appoint an Arbitrator.


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2016


Once the Arbitration Agreement had been invoked by Devas and a nominee Arbitrator had

also been appointed by it, the Arbitration Agreement could not have been invoked for a

second time by the Petitioner, which was fully aware of the appointment made by the

Respondent. It would lead to an anomalous state of affairs if the appointment of an Arbitrator

once made, could be questioned in a subsequent proceeding initiated by the other party also

for the appointment of an Arbitrator. In our view, while the Petitioner was certainly entitled

to challenge the appointment of the Arbitrator at the instance of Devas, it could not do so by

way of an independent proceeding Under Section 11(6) of the 1996 Act. While power has

been vested in the Chief Justice to appoint an Arbitrator Under Section 11(6) of the 1996 Act,

such appointment can be questioned Under Section 13 thereof. In a proceeding Under Section

11 of the 1996 Act, the Chief Justice cannot replace one Arbitrator already appointed in

exercise of the Arbitration Agreement.

Sub-section (6) of Section 11 of the 1996 Act, quite categorically provides that where the

parties fail to act in terms of a procedure agreed upon by them, the provisions of Sub-section

(6) may be invoked by any of the parties. Where in terms of the Agreement, the arbitration

clause has already been invoked by one of the parties thereto under the I.C.C. Rules, the

provisions of Sub-section (6) cannot be invoked again, and, in case the other party is

dissatisfied or aggrieved by the appointment of an Arbitrator in terms of the Agreement,

his/its remedy would be by way of a petition Under Section 13, and, thereafter, Under Section

34 of the 1996 Act.

The law is well settled that where an Arbitrator had already been appointed and intimation

thereof had been conveyed to the other party, a separate application for appointment of an

Arbitrator is not maintainable. Once the power has been exercised under the Arbitration

Agreement, there is no power left.


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2016


CAUVERY COFFEE TRADERS, MANGALORE

VS.

HORNOR RESOURCES (INTERN.) COMPANY LTD.


Arbitration Petition Nos. 7 and 8 of 2009 [Under Section 11(5) and 11(9) of the Arbitration

and Conciliation Act, 1996]



Judges:

B.S. Chauhan, J.

Facts-

The arbitration applications under Section 11 & 9 of the Arbitration and Conciliation Act,

1996, hereinafter called the "Act 1996" have been filed for appointment of Arbitrator in an

international arbitration dispute to adjudicate the disputes/differences which have arisen

between the parties.

The applicants are a partnership concern incorporated under the Indian Partnership Act, 1932

and have filed two applications as the dispute raised herein relate to two consignments.

However, for convenience, facts and issues related to Petition No. 7/2009 are being

considered.


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2016


On 24.6.2008, a Purchase Contract bearing No. CCT/SST/027/ 240608 was entered and

executed by and between the applicants and the Respondents wherein the applicants agreed to

sell and the Respondents agreed to purchase Calibrated Lumpy Ore Fines of the approximate

quantity of 40,000/- Wet Metric Tones (hereinafter called as "WMT') (10% more or less at

buyers' option) at the price and on the terms and conditions stipulated in the said agreement.

The agreement provided for the chemical specification/composition of the Ore and for

guaranteed level of Fe i.e. iron content in the contracted goods which could not be less than

63%. In case the iron content was less than 63%, the buyer would have a right to reject the

cargo.

A large quantity of Ore had been supplied to the Respondent which had been accepted and

payments had been made. Pursuant to the purchase contract, the applicants on 6.8.2008

shipped a total consignment of 24,500 Dry MT of Calibrated Lumpy Ore from New

Mangalore Port, India to the port of discharge viz. Rizhao Port, China by vessel named "MV.

FUJIN". The applicants raised a provisional invoice for a sum of US$ 32,13,529.11 and sent

a Certificate of Origin and the Bill of Lading dated 6.8.2008 as issued by the carriers in

respect of the carriage of the goods from Mangalore Port, India to Rizhao Port, China. The

material so supplied had been sent after proper analysis and it had been certified by the

analyst in India that the goods supplied contained more than 63% Fe contents. The said goods

reached at China Port. The delivery of the same was taken by the Respondents and on

chemical analysis, according to them, the iron contents Fe, were found to be 62.74%. The

goods reached the Port of Discharge, and were accepted by the Respondents-buyers who

promised that payment would be made without any delay.

By email dated 7.10.2008 the Respondents stated that the applicants should accept US$ 1.5

million in full and final settlement. Accordingly, an amount of US$ 1.5 million had been

received by them. Subsequent thereto, the applicants had repeatedly been sending reminders

to the Respondents to make good the balance payment under the said purchase contract, but

no payment had been made. As the Respondents failed to make the payment of the balance

amount, the applicants sent a legal notice dated 14.11.2008 to call upon the Respondents to

pay the balance amount under the purchase contract and further provided that, in view of the

arbitration Clause 18 contained in the purchase agreement, they should carry on friendly

negotiations to settle the dispute accrued between the parties. As per the terms of the

purchase agreement, arbitration can be held only in a third country. The applicants suggested


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2016


to have the arbitration proceedings either in Singapore or in Australia. In spite of receiving

the said notice, neither the payment of the balance amount was made, nor the Respondents

came forward for friendly negotiations. Therefore, a further reminder was sent by the

applicants to the Respondents calling upon them to indicate the place of arbitration. As

neither the payment had been made, nor have the respondents agreed for arbitration

proceedings, they have approached this Court by filing these applications.

Issue-

Whether the application filed is maintainable or not?

Decision-

<B.S. Chauhan, J.>

The law on the issue stands crystallised to the effect that, in case, final settlement has been

reached amicably between the parties even by making certain adjustments and without any

misrepresentation or fraud or coercion, then, acceptance of money as full and final

settlement/issuance of receipt or vouchers etc. would conclude the controversy and it is not

open to either of the parties to lay any claim/demand against the other party.

The applicants have not pleaded that there has been any kind of misrepresentation or fraud or

coercion on the part of the Respondents. Nor it is their case that payment was sent by the

Respondents without any settlement/agreement with the applicants, and was a unilateral act

on their part. The applicants reached the final settlement with their eyes open and instructed

their banker to accept the money as proposed by the Respondents. Proposal itself was on the

basis of Clause 5 of the Purchase Contract which provided for Price Adjustment. For a period

of three months after acceptance of the money under the full and final settlement, applicants

did not raise any dispute in respect of the agreement of price adjustment. In such a fact-

situation, the plea that instructions were given by the applicants to the banker erroneously,

being, afterthought is not worth acceptance.


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2016


The transaction stood concluded between the parties, not on account of any unintentional

error, but after extensive and exhaustive bilateral deliberations with a clear intention to bring

about a quietus to the dispute. These negotiations, therefore, are self-explanatory steps of the

intent and conduct of the parties to end the dispute and not to carry it further.

Thus, it is evident that the doctrine of election is based on the rule of estoppel- the principle

that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is

one of the species of estoppels in pais (or equitable estoppel), which is a rule in equity. By

that law, a person may be precluded by his actions or conduct or silence when it is his duty to

speak, from asserting a right which he otherwise would have had.

In the facts and circumstances of the case, as the Respondents resorted to Clause 5 of the

Purchase Agreement dated 28/6/2008, regarding price adjustment and the offer so made by

the Respondents has been accepted by the applicants and agreed to receive a particular sum

offered by the Respondents as a full and final settlement, the dispute comes to an end.

The applicants cannot take a complete somersault and agitate the issue that the offer made by

the Respondents had erroneously been accepted. In view of the above, as no dispute survives,

the applications are dismissed.


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2016


BHARAT ALUMINIUM COMPANY AND ORS. ETC. ETC.

VS.

KAISER ALUMINIUM TECHNICAL SERVICE, INC. AND ORS. ETC. ETC.


Civil Appeal Nos. 7019 of 2005, 6284 of 2004 and 3678 of 2007, Transferred Case (C) No.

35 of 2007, Special Leave Petition (C) Nos. 3589-3590 and 31526-31528 of 2009, 27824 and

27841 of 2011



Judges-

S.H. Kapadia, C.J.I., D.K. Jain, S.S. Nijjar, Ranjana Prakash Desai and J.S. Khehar, JJ.

<S.S. Nijjar, J.>

Applicability of Parts I and II and Section 2(2) of the Abritration Act. Section 2(2) makes

declaration that Part I of Act- to apply to all arbitrations taking place within India. Hence,

Part I would have no application to International Commercial Arbitration held outside India.

Accordingly, in foreign seated international commercial arbitration, no application for interim

relief would be maintainable under Section 9 or any other provision. Similarly, no suit for

interim injunction simplicitor would be maintainable in India. On basis of international

commercial arbitration with seat outside India, law declared herein to apply prospectively to

all arbitration agreements executed hereafter.


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2016


The Arbitration and Conciliation Act, 1996 has accepted the territoriality principle which has

been adopted in the U.N.C.I.T.R.A.L. Model Law. Section 2(2) makes a declaration that Part

I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India.

Accordingly, Part I of the Arbitration Act, 1996 would have no application to International

Commercial Arbitration held outside India. Therefore, such awards would only be subject to

the jurisdiction of the Indian courts when the same are sought to be enforced in India in

accordance with the provisions contained in Part II of the Arbitration Act, 1996. Accordingly,

the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no

overlapping or intermingling of the provisions contained in Part I with the provisions

contained in Part II of the Arbitration Act, 1996.

The provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with

any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign

seated international commercial arbitration, no application for interim relief would be

maintainable under Section 9 or any other provision, as applicability of Part I of the

Arbitration Act, 1996 is limited to all arbitrations which take place in India, Similarly, no suit

for interim injunction simplicitor would be maintainable in India, on the basis of an

international commercial arbitration with a seat outside India.

Foreign award falling under Part II of Act, Indian Courts cannot annul international

commercial award made outside India. The intention of the Legislature is clear that the Court

may refuse to enforce the foreign award on satisfactory proof of any of the grounds

mentioned in Section 48(1), by the party resisting the enforcement of the award. The

provision sets out the defences open to the party to resist enforcement of a foreign award. The

words "suspended or set aside", in Clause (e) of Section 48(1) cannot be interpreted to mean

that, by necessary implication, the foreign award sought to be enforced in India can also be

challenged on merits in Indian Courts. The provision merely recognizes that courts of the two

nations which are competent to annul or suspend an award. It does not ipso facto confer

jurisdiction on such Courts for annulment of an award made outside the country. Such

jurisdiction has to be specifically provided, in the relevant national legislation of the country

in which the Court concerned is located. So far as India is concerned, the Arbitration Act,

1996 does not confer any such jurisdiction on the Indian Courts to annul an international

commercial award made outside India. Such provision exists in Section 34, which is placed in

Part I. Therefore, the applicability of that provision is limited to the awards made in India. If


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the arguments of the counsel for the appellants are accepted, it would entail incorporating the

provision contained in Section 34 of the Arbitration Act, 1996, which is placed in Part I of

the Arbitration Act, 1996 into Part II of the said Act. This is not permissible as the intention

of the Parliament was clearly to confine the powers of the Indian Courts to set aside an award

relating to international commercial arbitrations, which take place in India.

Section 2(7)--Section 2(7) does not in any manner relax territorial principle adopted by Act.

Section 2(7) of Arbitration and Conciliation Act, 1996, defining domestic award does not, in

any manner, relax the territorial principle adopted by Arbitration Act, 1996. It certainly does

not introduce the concept of a delocalized arbitration into the Arbitration Act. 1996. It must

be remembered that Part I of the Arbitration Act, 1996 applies not only to purely domestic

arbitrations, i.e., where none of the parties are in any way "foreign" but also to "international

commercial arbitrations" covered within Section 2(1)(f) held in India. The term "domestic

award" can be used in two senses: one to distinguish it from "international award", and the

other to distinguish it from a "foreign award". It must also be remembered that "foreign

award" may well be a domestic award in the country in which it is rendered. As the whole of

the Arbitration Act, 1996 is designed to give different treatments to the awards made in India

and those made outside India, the distinction is necessarily to be made between the terms

"domestic awards" and "foreign awards". The Scheme of the Arbitration Act, 1996 provides

that Part I shall apply to both "international arbitrations" which take place in India as well as

"domestic arbitrations" which would normally take place in India. This is clear from a

number of provisions contained in the Arbitration Act. 1996 viz. the Preamble of the said

Act; proviso and the Explanation to Section 1(2); Sections 2(1) (f); 11(9), 11(12); 28(1)(a)

and 28(1)(b). All the aforesaid provisions, which incorporate the term "international", deal

with pre-award situation. The term "international award" does not occur in Part I at all.

Therefore, it would appear that the term "domestic award" means an award made in India

whether in a purely domestic context, i.e., domestically rendered award in a domestic

arbitration or in the international context, i.e., domestically rendered award in an international

arbitration, Both the types of awards are liable to be challenged under Section 34 and are

enforceable under Section 36 of the Arbitration Act, 1996. Therefore, it seems clear that the

object of Section 2(7) is to distinguish the domestic award covered under Part I of the

Arbitration Act, 1996 from the "foreign award" covered under Part II of the aforesaid Act;

and not to distinguish the "domestic award" from an "international award" rendered in India.


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2016


In other words, the provision highlights, if anything, a clear distinction between Part I and

Part II as being applicable in completely different fields and with no overlapping provisions.

Articles:

i. International Commercial Arbitration- by Gloria Miccioli.

ii. International Commercial Arbitration- Law and Recent Developments in

India- by Nishith Desai Associates.

iii. The Place of Arbitration in the Conflict of Laws of International Commercial

Arbitration: An Exercise in Arbitration Planning- by Filip De Ly.

iv. UNCITRAL Model Law on International Commercial Arbitration- by United

Nations.


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2016


17. SESSION 26

THE TENSIONS BETWEEN CONFIDENTIALITY AND TRANSPARENCY IN

INTERNATIONAL ARBITRATION

Articles:

i. Confidentiality vs. Transparency in Commercial Arbitration: A False

Contradiction to Overcome

ii. Confidentiality in International Commercial Arbitration: To Whom does the

Duty of Confidentiality extend in Arbitration?- by Klaudia Fabian

iii. The Tensions Between Confidentiality and Transparency in International

Arbitration- by Cindy G. Buys

iv. Transparency and Confidentiality in International Commercial Arbitration: A

Dynamic Equilibrium- by Apoorva Mandhani

v. Transparency in International Arbitration: Any (Concrete) Need to Codify the

Standard?- by Gabriele Ruscalla

vi. Transparency in International Commercial Arbitration- by Catherine A.

Rogers


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2016


18. SESSION 27

ECONOMIC REGULATION OF AIRPORTS

Act / Regulation:

i. The Airports Economic Regulatory Authority of India Act, 2008

ii. Airports Economic Regulatory Authority of India, Notification, 26th

December, 2013, No. AERA/35014/TOB/2009

Articles:

i. Airports Economic Regulatory Authority of India Regulatory Objectives and

Philosophy in Economic Regulation of Airports and Air Navigation Services-

New Delhi: 22nd December, 2009

ii. Airports Economic Regulatory Authority of India Guidelines on Stakeholder

Consultation – Proposal for Modifications– New Delhi: 1st March, 2011

iii. Airports Economic Regulatory Authority of India Economic Regulation of

Services Provided for Cargo Facility, Ground Handling and Supply of Fuel to

the Aircraft- New Delhi: 2nd August,2010

iv. Delhi International Airport Private Limited Response to White Paper on

Regulatory Objectives and Philosophy in Economic Regulation of Airports

and Air Navigation Services

v. Airports Economic Regulatory Authority of India Airports Economic

Regulatory Authority of India (Terms and Conditions for Determination of

Passenger Service Fee at Major Private Airports) Guidelines, 2011- New

Delhi: 24th March, 2011

vi. Observations on White Paper No. 01/ 2009-10 Issued by Airports Economic

Regulatory Authority of India on 22 December 2009- by Airports Council

International- 5 January 2010

vii. Response to Consultation Paper No. 3/ 2009-10 on Regulatory Philosophy and

Approach in Economic- by Airports Council International- 19 March, 2010

viii. Airports Economic Regulatory Authority of India Economic Regulation of

Services Provided by Airport Operators New Delhi: 2nd

February, 2011


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ix. FICCI Comments/ Suggestions on the Draft White Paper on Regulatory

Objectives and Philosophy in Economic Regulations of Airports and Air

Navigation Services

x. CII Comments on AERA White Paper on „Regulatory Objectives and

Philosophy in Economic Regulation of Airports and Air Navigation Services‟.

xi. Comments & Submissions on behalf of the Federation of Indian Airlines

(FIA) in response to White Paper No.01/2009‐10 titled “Regulatory Objectives

& Philosophy in Economic Regulation of Airports & Air Navigation Services”

xii. AAI‟s comments on the White Paper.

xiii. Airports Economic Regulatory Authority of India In the matter of Normative

Approach to Building Blocks in Economic Regulation of Major Airports- 12th

June, 2014.

xiv. IATA‟s comments concerning AERA‟s Consultation paper no. 05/2014-15 (in

the Matter of Normative Approach to building blocks in Economic Regulation

of major Airports).


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2016


19. SESSION 28

PUBLIC PROCUREMENT PROCESSES

Act / Regulation:

i. The Public Procurement Bill, 2012- As Introduced in Lok Sabha- Bill No. 58

of 2012.

ii. The Public Procurement Bill, 2011- Planning Commission, Government of

India: September 2011.

Article:

i. Government Procurement in India- Domestic Regulations & Trade Prospects-

by CUTS.

ii. The Public Procurement Bill: Good Law, Poor Reality- by OECD (2013),

Government at a Glance 2013, OECD.


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2016


20. SESSION 29

DOMAIN NAME DISPUTE RESOLUTION

WIPO Cases:

i. ADMINISTRATIVE PANEL DECISION- Monarch Airlines Limited v.

Richard Nani, Case No. D2012-2484.

Decision- For the foregoing reasons, in accordance with paragraphs 4(i) of the Policy

and 15 of the Rules, the Panel orders that the disputed domain name

<monarchairlineuk.com> be transferred to the Complainant.

ii. ADMINISTRATIVE PANEL DECISION- Twitter, Inc. v. Moniker Privacy

Services/ accueil des solutions inc, Case No. D2013-0062.

Decision- For the foregoing reasons, in accordance with paragraphs 4(i) of the Policy and 15

of the Rules, the Panel orders that the disputed domain name <twitter.org> be transferred to

the Complainant.

iii. ADMINISTRATIVE PANEL DECISION- Philipp Plein v. Whois Privacy

Protection Service, Inc. / Apon Yaka, Case No. D2014-2027.


of the Rules, the Panel orders that the disputed domain name <philipp-plein.org> be

transferred to the Complainant.

iv. ADMINISTRATIVE PANEL DECISION- Six Continents Hotels, Inc. v. Qu

Pan Pan, Case No. D2015-0898.


of the Rules, the Panel orders that the disputed domain name <crowneplazalkhotel.com> be


v. ADMINISTRATIVE PANEL DECISION- Helsinn Healthcare SA v. Crear

Imagen sas, Crear Imagen, Case No. D2015-1101.


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2016



of the Rules, the Panel orders that the disputed domain name <helsinnpharma.com> be


vi. ADMINISTRATIVE PANEL DECISION- Nipro Corporation v. Liu Zhijun,

Case No. DCO2014-0028.


of the Rules, the Panel orders that the disputed domain name <nipro.co> be transferred to the

Complainant.

Articles:

i. A Normative Critique of Private Domain Name Dispute Resolution- Citation

22 J. Marshall J. Computer & Info. L. 625 2003-2004.

ii. Domain Name Dispute Resolution within the Asian Region- by Yeo Yee Ling.

iii. Domain Name Dispute Resolution Service for Generic Top-Level Domains-

Available on website of WIPO.

iv. Rules for Uniform Domain Name Dispute Resolution Policy (the "Rules")-


v. World Intellectual Property Organization Supplemental Rules for Uniform

Domain Name Dispute Resolution Policy (the WIPO "Supplemental Rules")-


vi. WIPO Observations on New gTLD Dispute Resolution Mechanisms-



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2016


21. SESSION 30

FRAND LICENSING DISPUTES

TELEFONAKTIEBOLAGET LM ERICSSON

VS.

BEST IT WORLD (INDIA) PVT. LTD (i-BALL)


I.A. No. 17351/2015 in CS (OS) 2501/2015


MIPR2015(3)1

Judge-

Manmohan Singh, J.

The plaintiff filed the suit for permanent injunction restraining infringement of patents,

damages, rendition of accounts, delivery up etc. against the defendant. The suit as well as

interim application were listed before Court on 21st August, 2015. I heard the interim

application and kept for orders for today. After the arguments addressed by both the parties,

learned counsel appearing on behalf of the defendant sought time to take instructions from his

client as to whether the defendant is willing to sit with the representative of the plaintiff and

discuss the matter about the execution of FRAND agreement.


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2016


When the matter is taken up today at 12:50 pm, learned counsel for the plaintiff has informed

that no communication was received from the defendant for the purpose of discussion of the

matter. Therefore, the order be pronounced. It has been informed by the learned counsel

appearing on behalf of the defendant that the plaintiff has to provide all the details and

documents and satisfy the defendant as to whether these are the standard essential patents and

the defendant is guilty of infringement, if any. In the absence thereof, it would be difficult to

sign either NDA or FRAND Agreements. Counsel for the plaintiff is not agreeable for the

said suggestion mainly on the reason that all the essential information has already been

supplied.

Even the defendant is not agreeable to sign the NDA agreement. Therefore, the defendant is

merely dragging the proceeding. It is not denied by the defendant that in the present case the

plaintiff approached the defendant in November, 2011 and informed them about the factum

of its ownership of portfolio of standard essential patents relating to inter alia 2G and 3G

technology and disclosed its willingness to discuss a licensing arrangement on FRAND

terms, which will be beneficial to both the parties. The plaintiff thereafter asked for a meeting

with the defendant to further discuss and negotiate the license agreement. It is alleged that the

defendant did not take any step towards approaching the plaintiff for seeking a FRAND

license in contravention of findings of United States International Trade Commission in the

matter of Inv. No. 337- TS-868.

Thus, I am of the view that the plaintiff has made out a prima facie case in its favour and

balance of convenience also lies in its favour. If the interim direction/ order is not granted, the

plaintiff would suffer irreparable loss and injury because of the reason that the defendant

would keep on marketing the mobile devices without the FRAND agreement and without

paying any royalty.

This Court felt that the defendant has not taken any step or shown any interest for the purpose

of execution of the FRAND Agreement as on the one hand the defendant is alleging that it is

not infringing the suit patents of the plaintiff and on the other hand the defendant itself has

filed the complaint before the CCI wherein certain admissions of the rights of the plaintiff

have been made.


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JANUARY,

2016


TELEFONAKTIEBOLAGET LM ERICSSON

VS.

MERCURY ELECTRONICS & ANR.


CS (OS) No. 442 of 2013


Citation- 2014AD(Delhi)613

Judge-

S. Muralidhar, J.

In para 21 of the plaint, it is stated that Mercury and Micromax are importing, assembling,

marketing, selling, offering for sale etc., various devices (mobile handsets, tablets etc.) which

are compliant with the aforesaid ETSI standards thereby infringing the Ericsson's patents

without obtaining any licence. In para 22 of the plaint, it is stated that Ericsson commenced

negotiations with Micromax and offered licences on reasonable terms as per Ericsson's

commitment to Fair, Reasonable and Non-discriminatory (FRAND) licence standards. It is

stated that Micromax has, however, avoided paying any licence fee.

In para 26 of the plaint, in a tabular form, the results of the test report as generated by Sasken

Communication Technologies Limited to which the Micromax's mobile models were sent for

testing have been set out. Paras 27 and 28 set out, in detail, which kind of tests were

conducted. It was concluded that the Micromax models infringed the suit patents. Paras 29 to

33 of the plaint set out the correspondence and negotiations which took place between


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2016


Ericsson and Micromax. It is stated that the application is disposed as Micromax was

informed that it infringed the suit patents & was asked to obtain licences under FRAND term.

Articles:

i. Settling FRAND Disputes: Is Mandatory Arbitration a Reasonable and Non-

Discriminatory Alternative?- by Pierre Larouche, Jorge Padilla and Richard

Taffet.

ii. Frand Commitments in SEP Licensing: Anti-Trust Intervention or not?- by

Tan Xiaowen.

iii. Forgetting FRAND: The WIPO Model Submission Agreements- by Eli

Greenbaum.

iv. Patent markets: An opportunity for Technology diffusion and FRAND

Licensing?- by Stephanie chuffart-finsterwald.

v. Evolving Landscape of Patent Remedies in a Changing Marketplace- by

Elizabeth Siew-Kuan NG.

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