Supreme Court Observer Law Reports (SCO.LR)

The Supreme Court held that the Competition Act, 2002 does not mandate a second show-cause notice to an accused person when determining penalties. A single notice at the start of the proceedings is sufficient for the accused persons to respond.

Film distributors accused the Kerala Film Exhibitors Federation (KFEF) and its office bearers for threatening to not screen their movies at member cinema halls if they supplied films to the Crown Theatre. Relying on a report by the Director General, the Competition Commission of India (CCI) held that KFEF was guilty of anti-competitive activities under Section 3(1) read with Section 3(3)(b). It imposed a penalty against the office bearers under Section 48. The Competition Appellate Tribunal (COMPAT) upheld the conviction but relieved the administrators. They held that the office bearers had not been issued a notice with a proposal of the penalty to be paid. The CCI appealed against the COMPAT’s Order at the Supreme Court.

The Supreme Court restored the CCI’s order and set aside the COMPAT’s judgement. It reasoned that the statute did not mandate a two-stage procedure or a second notice detailing the proposed punishment. The initial notice was sufficient, as it forwarded the DG Report and directed them to file replies, providing reasonable opportunity to reply.

The Supreme Court held that once execution of a cheque is admitted, statutory presumptions made to assess a valid cheque under Sections 118 and 139 of the Negotiable Instruments Act, 1881 (NI Act) automatically arise. The burden lies on the accused to rebut them with cogent evidence.

Sanjabij Tari had advanced a friendly loan of ₹6,00,000 to the accused. The accused repaid the amount through a cheque which bounced. Tari initiated proceedings under Section 138 of the NI Act. The Trial Court and Sessions Court found that the cheque was issued in discharge of a legally enforceable debt and convicted the accused. The High Court, exercising revisional jurisdiction, acquitted the accused. It held that Tari’s limited salary showed incapacity to advance such a loan.

The Supreme Court restored the conviction. It observed that the complainant’s financial incapacity was insufficient grounds to quash his claim. The Court further clarified that violation of Section 269SS of the Income Tax Act, 1961, which prohibits acceptance of loans or deposits above ₹20,000 in cash, only invites a penalty under the Act and does not render the loan illegal, void or unenforceable under Section 138 of the NI Act.

The Supreme Court held that States can tax goods from other States only if they tax similar goods produced within their own State in the same way.

In 2007, a Rajasthan Government notification granted a blanket tax exemption to locally manufactured asbestos cement sheets made with fly ash while taxing similar goods that were imported from outside the State and then sold in Rajasthan. The appellant, an importer, challenged this notification on the grounds that it was discriminatory and violated Article 304(a) and Article 301 of the Constitution of India. The High Court found no discrimination between the imported and the local goods.

The Supreme Court quashed the notification for being discriminatory and violative of Article 304(a). The Court found no reason or justification for the distinction made by the Rajasthan government.

The Supreme Court held that there should be a jural relationship between the advocate and the complainant in cases involving disciplinary proceedings. Courts cannot proceed on frivolous complaints of misconduct under Section 35 of the Advocates Act, 1961.

The complainant had alleged misconduct before the Bar Council of Maharashtra and Goa against advocates Rajiv Narula and Geeta Shastri. They argued that by identifying the deponent, the advocates had endorsed the contents of the affidavits making them liable for any falsehoods contained within them. The High Court quashed the disciplinary referrals, finding the complaints baseless. The Bar Council approached the Supreme Court.

The Supreme Court upheld the High Court’s decision. It clarified that Section 35 requires a “reason to believe” misconduct and a valid jural connection between the complainant and the advocate. Further, mere identification of parties or deponents does not constitute misconduct. The Court emphasised that safeguards exist to prevent harassment of advocates through malicious complaints.

The Supreme Court held that under the amended Section 13(8) of the SARFAESI Act, 2002, a borrower’s right to redeem the secured asset is lost upon publication of the auction sale notice and cannot survive until confirmation of sale.

The borrowers had availed loans against the mortgage of their property. When they failed to repay, the loan was classified as a Non-Performing Asset, leading the bank to begin recovery proceedings under the SARFAESI Act. An auction notice was published in January 2021. The appellants took part in the bidding process, paid the full purchase price and were issued a sale certificate in March 2021. Borrowers challenged the auction at the Debts Recovery Tribunal which dismissed their plea. The Madras High Court quashed the sale certificate and permitted redemption by repayment.

Allowing the appeals filed by the auction purchasers, the Supreme Court ruled that under the amended law, a borrower’s right of redemption comes to an end once the sale notice is published. Once the auction purchaser deposits the full consideration and a sale certificate is issued, the purchaser acquires a vested right that cannot be defeated by subsequent payments made by the borrower. It also underlined that High Courts should not step in through writ petitions when the Act already provides a specific remedy.

The Supreme Court clarified when an activity amounts to “manufacture” under Section 3 of the Central Excise Act, 1944, making goods liable for excise duty. The Court highlighted two factors: whether the process produces a distinct product (Transformation Test) and whether the product is marketable (Marketability Test).

M/s Quippo Energy leased imported gas generators called Power Packs. It placed them in steel containers along with locally sourced parts such as radiators and fans to make them fully operational and easier to transport. In 2008, the Assistant Commissioner of Central Excise ruled that this assembly amounted to “manufacture.” Quippo’s appeal was rejected by Commissioner (Appeals) in 2009 and CESTAT, Ahmedabad in 2015. CESTAT confirmed that the process fell under Section 2(f), which includes any steps incidental or essential to producing a manufactured product.

The Supreme Court upheld the decision of CESTAT and the Commissioner (Appeals), noting that the added components were essential parts, not mere accessories. The assembly created a new, distinct, and marketable product, and the company was liable to pay excise duty under Section 3. All appeals were dismissed.

The Supreme Court held that lands given up by owners during consolidation but not set aside for common use (known as Bachat land) do not automatically belong to the Gram Panchayat or the State. Taking over such unutilised land without paying compensation would violate the Second Proviso to Article 31-A(1).

The dispute arose from two laws: the Punjab Village Common Lands (Regulation) Act, 1961 and the East Punjab Holdings (Consolidation and Prevention of Fragmentation) Act, 1948. The 1992 amendment to the 1961 Act allowed lands contributed during consolidation to vest in the Gram Panchayat as common land. Landowners challenged this. In 1995, the High Court struck it down. In 1998, the Supreme Court remanded the case to the High Court for reconsideration under Article 31-A. On reconsideration, the High Court clarified that Bachat land remained with the owners but other lands reserved for common purposes vested with the state.

The Supreme Court upheld the High Court’s approach and held that land genuinely reserved for public purposes can vest in the Panchayat but the 1992 amendment cannot transfer Bachat land. Hence, Bachat land cannot be acquired from owners without compensation, as this would violate the Second Proviso to Article 31-A(1).

The Supreme Court held that a re-trial in narcotics cases cannot be ordered merely to cure procedural lapses in proving electronic evidence. When a certificate validating electronic evidence under Section 65B(4) of the Indian Evidence Act, 1872, is furnished, electronic records are considered admissible.

The case arose from the recovery of 39 kilograms of marijuana during a raid. The Trial Court convicted the appellant under Section 20(b)(ii)(C) of the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act), relying on oral testimony, the video recording of the raid, and the forensic report. The Bombay High Court set aside the conviction and directed a re-trial. It reasoned that the video recording was not narrated by witnesses in court, no transcript was prepared, the Chemical Examiner had not been examined and the representative samples of the seized contraband were not opened before the court.

The Supreme Court found these reasons untenable. It rejected the High Court’s view that admissibility required witnesses to narrate the video contents in their own words. The Court held that under Section 293 of the Code of Criminal Procedure, 1973, the analyst’s report was admissible without the Chemical Examiner’s oral testimony. With the magistrate-certified inventory and sealed samples under Section 52A of the NDPS Act, together with the forensic report, the seizure stood sufficiently proved. The Court said a re-trial is an exceptional course, justified only where there has been no real trial or grave illegality. The criminal appeals were restored before the High Court for fresh adjudication on merits.

The Supreme Court held that as per Order VIII, Rule 6A(1) of the Code of Civil Procedure, 1908 (CPC), a counter-claim filed by a defendant directed solely against co-defendants is not maintainable.

Rajul Manoj Shah instituted a suit in 2012 challenging her sister-in-law’s (Defendant 1) 2011 agreement to sell a portion of their jointly owned property to Defendant 2. After her sister-in-law passed away, a Nazir (court official) was appointed as her representative. In 2021, Defendant 2 applied to amend his written statement to include a counter-claim for specific performance against the Nazir and sought partition of the property. The Trial Court dismissed the counter-claim as non-maintainable against a co-defendant and impermissibly delayed, as issues were framed in 2019. The High Court reversed this, holding that the cause of action arose only after the Nazir’s appointment in 2020.

The Supreme Court set aside the High Court’s decision, affirming that a counter-claim cannot be solely directed against a co-defendant and is typically not permitted after issues have been framed in a suit.

The Supreme Court held that an MLA’s status alone does not justify deviation from the rule of joint trials under Section 223 of the Code of Criminal Procedure, 1973. Preferential segregation violates the equality principle enshrined in Article 14.

Mamman Khan, a sitting Member of the Haryana legislative assembly, was one of the accused persons in the 31 July 2023 communal violence in the Nuh district of the state. The Trial Court directed the police to file a separate charge-sheet against the appellant citing his status as an MLA and the need for expeditious disposal of his case. The High Court upheld segregation. Khan approached the Supreme Court arguing that the offences arose from the same transaction and that joint trials are the rule in such instances

The Supreme Court set aside the Trial Court’s order as affirmed by the High Court. The Court held that while expeditious disposal of cases involving legislators is desirable, it cannot override the procedural safeguards guaranteed under the Code of Criminal Procedure, 1973. The top court remitted the case to the trial Court with a direction to conduct a joint trial of the appellant along with the co-accused.