1. AMBRISH KUMAR SHUKLA & 21 ORS.
H. No. 412, 1st Floor, Sector -6, Bahadurgarh Jhajjar, Haryana – 124 507        ………..Complainant(s)
Versus
1. Ferrous Infrastructure Pvt. Ltd.
Seth Farms, Khasra No. 41,42,44,45, Mehrauli, Gurgaon Road, Ghitorni, New Delhi-110030      ………..opp.party(S)

BEFORE:
Hon’ble Mr. Justice D.K. Jain, President
Hon’ble Dr. B.C. Gupta, Member
Hon’ble Mr. Justice V.K. Jain, Member

For the Complainant :
Mr. Uttam Datt, Advocate
Mr. Tarun Sharma, Advocate

For the Opp.Party : Mr. K.V. Girish Chowdary, Advocate

Dated : 07 Oct 2016

ORDER

Justice V.K. Jain, Member

Vide order dated 24.05.2016, passed in CC No. 97 of 2016, the following issues relating to the interpretation of Section 12(1)(c) of the Consumer Protection Act were referred, by a two members Bench of this Commission, to a larger Bench for its decision:

(i) Whether a complaint under Section 12(1)(c) of the Consumer Protection Act filed on behalf of or for the benefit of only some of the numerous consumers having a common interest or a common grievance is maintainable or it must necessarily be filed on behalf of or for the benefit of all the consumers having a common interest or a common grievance against same person (s);

(ii) Whether a complaint under Section 12(1)(c) of the Consumer Protection Act is maintainable, before this Commission, where the value of the goods or services and compensation, if any, claimed in respect of none of the allottees / purchasers exceeds Rupees one crore.

(iii) Whether a complaint under Section 12(1)(c) of the Consumer Protection Act is maintainable before this Commission, where the value of the goods or services and the compensation claimed in respect of an individual allottee exceeds Rupees one crore in the case of one or more allottees but does not exceed Rupees one crore in respect of other allottees;

(iv) Whether a complaint under Section 12(1)(c) of the Consumer Protection Act is maintainable, in a case of allotment of several flats in a project / building, where the allotments / bookings / purchases are made on different dates and or the agreed cost of the flat and / or the area of the flat is not identical in all the bookings / allotments / purchases.

2. Vide order dated 11.08.2016, passed in First Appeal No. 166 of 2016, First Appeal No. 504 of 2016 and First Appeal No. 505 of 2016, the following issues were referred, by a single Member Bench of this Commission to the larger Bench:

(i) In a situation, where the possession of a housing unit has already been delivered to the complainants and may be, sale deeds etc. also executed, but some deficiencies are pointed out in the construction/ development of the property, whether the pecuniary jurisdiction is to be determined, taking the value of such property as a whole, OR the extent of deficiency alleged is to be considered for the purpose of determining such pecuniary jurisdiction.

(ii) Whether the interest claimed on such value by way of compensation or otherwise, is to be taken into account for determining the pecuniary jurisdiction of a particular consumer forum.

(iii) Whether “the value of the goods or services and compensation, if any, claimed” is to be taken as per the original value of such goods, or service at the time of purchase of such goods or hiring or availing of such service, OR such value is to be taken at the time of filing the claim, in question.

(iv) In complaints proposed to be filed under section 12(1)(c) of the Act with the permission of Consumer Forum, whether the pecuniary jurisdiction is to be determined taking the value of goods or service for individual consumer, OR the aggregate value of the properties of all consumers getting together to file the consumer complaint is to be taken into consideration.

(v) For filing the consumer complaints u/s 12(1)(c), whether a group of cooperative societies could join hands to file a joint complaint?

(vi) Whether the term ‘consumer’ given in section 12(1)(c) includes the term ‘Person’ as defined in section 2(m) of the Act, meaning thereby that groups of firms, societies, association, etc. could join hands to file the joint complaints, u/s 12(1)(c) of the Act.

(vii) Many a time, it is seen that more than one joint complaint are already pending in respect of one particular housing project. There is a view that while applying section 12(1)(c) of the Act, only one of these complaints should be allowed to continue as a lead case, and all other complaints should be dismissed and the parties in these dismissed complaints should be directed to become parties in the lead case. Whether the above view is correct, OR in such cases, all complaints should be clubbed and heard together.

3. In First Appeal No. 644 of 2015, the complainant booked an apartment with respondent no. 1. The allotment was cancelled by the respondent on account of non-payment of the balance sale consideration. Being aggrieved, the complainant approached the concerned District Forum by way of a complaint, seeking restoration of the flat with possession and compensation. The respondent contested the complaint and took a preliminary objection that the District Forum did not possess the requisite pecuniary jurisdiction to entertain the complaint. The District Forum vide its order dated 22.01.2013, noticing that the price of the apartment was Rs.46,02,653/-, held that the said Forum had no pecuniary jurisdiction to entertain the complaint. The appellant then approached the concerned State Commission by way of a fresh Consumer Complaint. The State Commission however, took the view that if the grievance pertains to a deficiency in service, the complainant has to assess the deficiency in the service availed by him and the value of the flat is not to be taken into consideration while deciding whether the said Commission had pecuniary jurisdiction to hear the complaint or not. Noticing that the complainant had claimed Rs.10,00,000/- as compensation, the complaint was dismissed. Being aggrieved, the complainant has approached this Commission by way of the aforesaid appeal.

Vide order dated 11.03.2016, passed in the aforesaid appeal, Bench No.1 of this Commission, noticing a divergence of opinion amongst various Benches of this Commission, on the issue of pecuniary jurisdiction, referred the said issue raised in the aforesaid appeal, to a larger Bench. The aforesaid issue however, is subsumed in issue no. 1 referred to the larger Bench in First Appeal No. 166 of 2016.

4. Section 12(1) of the Consumer Protection Act reads as under:

(1) A complaint in relation to any goods sold or delivered or agreed to be sold or delivered or any service provided or agreed to be provided may be filed with a District Forum by-

(a) the consumer to whom such goods are sold or delivered or agreed to be sold or delivered or such service provided or agreed to be provided;

(b) any recognized consumer association whether the consumer to whom the goods sold or delivered or agreed to be sold or delivered or service provided or agreed to be provided is a member of such association or not;

(c) one or more consumers, where there are numerous consumers having the same interest, with the permission of the District Forum, on behalf of, or for the benefit of, all consumers so interested; or

(d) the Central or the State Government, as the case may be, either in its individual capacity or as a representative of interests of the consumers in general.

5. Section 13(6) of the Consumer Protection Act reads as under:

(6) Where the complainant is a consumer referred to in sub-clause (iv) of clause (b) of sub-section (1) of section 2, the provisions of rule 8 of Order I of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908) shall apply subject to the modification that every reference therein to a suit or decree shall be construed as a reference to a complaint or the order of the District Forum thereon.

Section 2(1)(b) of the Consumer Protection Act reads as under:

(b) “complainant” means—

(i) a consumer; or

(ii) any voluntary consumer association registered under the Companies Act, 1956 (1 of 1956) or under any other law for the time being in force; or

(iii) the Central Government or any State Government; or

(iv) one or more consumers, where there are numerous consumers having the same interest;

(v) in case of death of a consumer, his legal heir or representative;] who or which makes a complaint;

6. Order I of Rule 8 of the Code of Civil Procedure which finds reference in Section 13(6) of the Consumer Protection Act, reads as under:

8. One person may sue or defend on behalf of all in same interest.- (1) Where there are numerous persons having the same interest in one suit,—

(a) one or more of such persons may, with the permission of the court, sue or be sued, or may defend such suit, on behalf of, or for the benefit of, all persons so interested;

(b) the court may direct that one or more of such persons may sue or be sued, or may defend such suit, on behalf of, or for the benefit of, all persons so interested.

(2) The court shall, in every case where a permission or direction is given under sub-rule (1), at the plaintiff’s expense, give notice of the institution of the suit to all persons so interested, either by personal service, or, where, by reason of the number of persons or any other cause, such service is not reasonably practicable, by public advertisement, as the court in each case may direct.

(3) Any person on whose behalf, or for whose benefit, a suit is instituted, or defended, under sub-rule (1), may apply to the court to be made a party to such suit.

(4) No part of the claim in any such suit shall be abandoned under sub-rule (1), and no such suit shall be withdrawn under sub-rule (3) of rule 1 of Order XXIII, and no agreement, compromise or satisfaction shall be recorded in any such suit under rule 3 of that Order, unless the court has given, at the plaintiff’s expenses notice to all persons so interested in the manner specified in sub-rule (2).

(5) Where any person suing or defending in any such suit does not proceed with due diligence in the suit or defence, the court may substitute in his place any other person having the same interest in the suit.

(6) A decree passed in a suit under this rule shall be binding on all persons on whose behalf, or for whose benefit, the suit is instituted, or defended, as the case may be.

7. Section 12(1) (c) of the Consumer Protection Act when read with Order I Rule 8 of the Code of the Civil Procedure will apply if (i) the consumers are numerous (ii) They have the same interest (iii) the necessary permission of the Consumer Forum is obtained and (iv) notice in terms of Sub-rule (2) of Rule 8 of Order I is given. It however, is not necessary that the cause of action available to all the consumers should also be the same. What is required is sameness of the interest and not the same cause of action.

8. The scope and object of the principle embodied in Rule 8 of Order I of Code of Civil Procedure was stated as under by a Four-Members Bench of this Commission in Anil Textorium Pvt. Ltd. Vs. Rajiv Niranjanbhai Mehta, III (1997) CPJ 31 (NC):

“6. …The principle admitted in all Courts / Tribunals/Quasi-Judicial Authorities upon questions affecting the suitor’s person and his liberty and his property is that the rights of no man shall be decided unless he himself is present. Therefore, all persons having an interest in the subject-matter are to be made parties in a suit or other proceedings but the provisions of Order I Rule 8 of the Code of Civil Procedure has carved out an exception. It provides that where a number of persons are similarly interested in a suit one or more of them can with the permission of the Court or on a direction given by the Court, sue or be sued on behalf of themselves and others. The provisions of this rule have been included in the Code in public interest to avoid multiplicity of litigation and to facilitate the decision on questions; in which a large number of persons are interested, without recourse to the ordinary procedure. These provisions are meant for the benefit and protection of the persons who have the same interest as one who has filed the suit. The exception is adopted by the Courts to avoid inconvenience, because if all persons interested are made parties, there would be considerable delay and justice would be hampered.

……It is the existence of a sufficient community of interest among the persons on whose behalf or against whom the suit is instituted that should be the governing factor in deciding as to whether the procedure provided in the representative suit should be adopted or not”.

8. The complainants can be one or more consumers, where there are numerous consumers having the same interest. The interest must be common to them all or they must have a common grievance which they seek to get redressed.

……Where all the consumers jointly interested are made parties to the complaint, it is not a representative complaint in the strict sense of the provisions of Order I Rule 8 and no permission is necessary”.

9. The obtaining of a quasi-judicial permission is an essential condition for binding those consumers other than those actually parities to the complaint. The Consumer FORA have to exercise a judicial discretion in granting permission to a complainant to sue in a representative capacity having regard to the nature of the complaint and the reliefs sought”.

9. In The Chairman, Tamil Nadu Housing Board, Madras Vs. T.N. Ganapathy, Civil Appeal No. 3002 of 1983 decided on 07.02.1990, a number of persons, including the respondent before the Hon’ble Supreme Court, were allotted residential plots by Tamil Nadu Housing Board at a tentative price. After more than ten years, fresh demands were made by the Board, threatening dispossession of the allottees in case of non-payment of the said demand. A suit was then filed by the respondent, who claimed to be representing all the allottees, on the ground that the cases of all of them were identical. The suit was contested, inter-alia on the ground that a suit in a representative capacity under Order 1 Rule 8 of the Code of Civil Procedure was not maintainable. The Trial Court and First Appellate Court upheld the maintainability of the suit but dismissed the same on merit. The High Court however, reversed the said decisions and decreed the suit. Being aggrieved, the Board approached the Hon’ble Supreme Court by way of a Special Leave Petition. On the maintainability of the Suit, it was contended on behalf of the appellant that since the injury complained was in respect of separate demand of money against each of the allottees, giving rise to different causes of action, the said provision was not applicable. It was emphasized that those, who had been served with the additional demand were interested in defeating only the demand individually referable to each of them. It was also contended that each one of the allottees was not interested in what happens to the others and therefore, the allottees should file separate suits. The contention however, did not find favour with the Hon’ble Supreme Court, which inter-alia observed and held as under:

“We do not find any merit in the argument. The provisions of Order 1 of Rule 8 have been included in the Code in the public interest so as to avoid multiplicity of litigation. The condition necessary for application of the provisions is that the persons on whose behalf the suit is being brought must have the same interest. In other words either the interest must be common or they must have a common grievance which they seek to get redressed. In Kodia Goundar vs. Velandi Goundar, ILR 1955 Mad. 339, a Full Bench of the Madras High Court observed that on the plain language of Order 1, Rule 8, the principal requirement to bring a suit within that Rule is the sameness of interest of the numerous person on whose behalf or for whose benefit the suit is instituted. The Court, while considering whether leave under the Rule should be granted or not, should examine whether there is sufficient community of interest to justify the adoption of the procedure provided under the Rule. The object for which this provision is enacted is really to facilitate the decision of questions, in which a large number of persons are interested, without recourse to the ordinary procedure. The provision must, therefore, receive an interpretation which will subserve the object for its enactment. There is no words in the Rule to limit its scope to any particular category of suits or to exclude a suit in regard to a claim for money or for injunction as the present one”.

“It is true that each of the allottees is interested individually in fighting out the demand separately made or going to be made on him and, thus, separate causes of action arise in the case, but, that does not make Order 1, Rule 8 inapplicable. Earlier there was some doubt about the Rule covering such a case which now stands clarified by the Explanation introduced by the CPC (Amendment) Act, 1976, which reads as follows:

Explanation – For the purpose of determining whether the persons who sue or are sued, or defend, have the same interest in one suit, it is not necessary to establish that such persons have the same cause of action as the persons on whose behalf, or for whose benefit, they sue or are sued, or defend the suit, as the case may be.

The objects and reasons for the amendment were stated below:

OBJECTS AND REASONS: Clause 55; Sub-Clause (iv), – Rule 8 of Order 1 deals with representative suits. Under this rule, where there are numerous persons having the same interest in one suit, one or more of them may, with permission of the Court, sue or be sued, on behalf of all of them. The rule has created a doubt as to whether the party representing others should have the same cause of action as the persons represented by him. The rule is being substituted by a new rule and an explanation is being added to clarify that such persons need not have the same cause of action.

There is, therefore, no doubt that the persons who may be represented in a suit under Order 1, Rule 8 need not have the same cause of action. The trial court in the present case was right in permitting the respondent to sue on behalf of all the allottees of Ashok Nagar”.

10. Since by virtue of Section 13(6) of the Consumer Protection Act, the provisions of the Order 1 Rule 8 of CPC apply to the consumer complaints filed by one or more consumers where there are numerous consumers having the same interest, the decision of the Hon’ble Supreme Court in Tamil Nadu Housing Board (supra) would squarely apply, while answering the reference. The purpose of giving a statutory recognition to such a complaint being to avoid the multiplicity of litigation, the effort should be to give an interpretation which would sub serve the said objective, by reducing the increasing inflow of the consumer complaints to the Consumer Forums. The reduction in the number of consumer complaints will be cost effective not only for the consumers but also for the service provider.

11. Reference dated 24.5.2016

Issue No. (i)

As held by the Hon’ble Supreme Court in Tamil Nadu Housing Board (supra), the interest of the persons on whose behalf the claim is brought must be common or they must have a common grievance which they seek to get addressed. The defect or deficiency in the goods purchased, or the services hired or availed of by them should be the same for all the consumers on whose behalf or for whose benefit the complaint is filed. Therefore, the oneness of the interest is akin to a common grievance against the same person. If, for instance, a number of flats or plots in a project are sold by a builder / developer to a number of persons, he fails to deliver possession of the said flats/plots within the time frame promised by him, and a complaint is filed by one or more such persons, either seeking delivery of possession of flats / plots purchased by them and other purchasers in the said project, or refund of the money paid by them and the other purchasers to the developer / builder is sought, the grievance of such persons being common i.e. the failure of the builder / developer to deliver timely possession of the flats/plots sold to them, they would have same interest in the subject matter of the complaint and sufficient community of interest to justify the adoption of the procedure prescribed in Order 1 Rule 8 of the Code of Civil Procedure, provided that the complaint is filed on behalf of or for the benefit of all the persons having a common grievance against the same developer / builder, and identical relief is sought for all such consumers.

The primary object behind permitting a class action such as a complaint under Section 12(1)(c) of the Consumer Protection Act being to facilitate the decision of a consumer dispute in which a large number of consumers are interested, without recourse to each of them filing an individual complaint, it is necessary that such a complaint is filed on behalf of or for the benefit of all the persons having such a community of interest. A complaint on behalf of only some of them therefore will not be maintainable. If for instance, 100 flat buyers / plot buyers in a project have a common grievance against the Builder / Developer and a complaint under Section 12(1)(c) of the Consumer Protection Act is filed on behalf of or for the benefit of say 10 of them, the primary purpose behind permitting a class action will not be achieved, since the remaining 90 aggrieved persons will be compelled either to file individual complaints or to file complaints on behalf of or for the benefit of the different group of purchasers in the same project. This, in our view, could not have been the Legislative intent. The term ‘persons so interested’ and ‘persons having the same interest’ used in Section 12(1)(c) mean, the persons having a common grievance against the same service provider. The use of the words “all consumers so interested’ and “on behalf of or for the benefit of all consumers so interested”, in Section 12(1)(c) leaves no doubt that such a complaint must necessarily be filed on behalf of or for the benefit of all the persons having a common grievance, seeking a common relief and consequently having a community of interest against the same service provider.

Sub rule (2) of Rule 8 of Order I of the Code of Civil Procedure mandates the Court to give notice of the institution of the suit /complaint to all the persons “so interested”, meaning thereby to the persons having the same interest, i.e. a common grievance, on whose behalf or for whose benefit the complaint is instituted. Notice can be either by way of personal service or where personal service is not reasonably practicable, by way of a public advertisement. The aforesaid provision clearly envisages institution of a suit / complaint on behalf or for the benefit of not only those who approach the Court/Forum but also on behalf of or for the benefit of the persons other than the plaintiffs / complainants, but having the same grievance. Had the Legislative intent been to permit such a complaint only on behalf of the persons deciding to approach the Court/ Forum, there could be no occasion for requiring the service of notice in the aforesaid manner, since there can be no question of serving any notice on those who are already before the Court/Forum.

Sub Rule (5) of Rule 8 of Order I enables the Court to substitute the name of any person having same interest in the suit as plaintiff where it finds that the person suing the suit is not proceeding with due diligence in the suit. The aforesaid power given to the Court also indicates that a suit in terms of order 1 Rule 8 of the Code of Civil Procedure commonly termed as a class suit is intended on behalf or for the benefit of all the persons having a common grievance against the same party and seeking the same relief not on behalf of or for the benefit of only some of them.

12. Issue No. (ii) and (iii)

Section 21 of the Consumer Protection Act, to the extent it is relevant provides that this Commission shall have jurisdiction to entertain complaints where the value of the goods or services and compensation, if any, claimed exceeds Rs.1.00 crore. Therefore, what has to be seen, for the purpose of determining the pecuniary jurisdiction, is the value of the goods or services and the amount of the compensation claimed in the complaint. If the aggregate of (i) the value of the goods or services and (ii) the compensation claimed in the complaint exceeds Rs.1.00 crore, this Commission would have pecuniary jurisdiction to entertain the complaint. Similarly, if the aggregate of the value of (i) the goods or services and (ii) compensation, if any, claimed in the complaint exceeds Rs.20.00 lacs but does not exceed Rs.1.00 Crore, the State Commission would have the pecuniary jurisdiction to entertain the complaint. Since a complaint under Section 12(1)(c) of the Consumer Protection Act can be filed only where there are numerous consumers having the same interest and it has to be filed on behalf of or for the benefit of all the consumers so interested i.e. all of the numerous consumers having the same interest, it is the aggregate of the value of the goods purchased or services hired or availed of, by all those numerous consumers and the total compensation, if any, claimed for all those numerous consumers, which would determine the pecuniary jurisdiction of this Commission. If the aggregate of the value of the goods purchased or the services hired or availed of by all the consumers having the same interest and the total compensation, if any, claimed for all of them comes to more than Rs.1.00 crore, the pecuniary jurisdiction would rest with this Commission alone. The value of the goods purchased or the services hired or availed of and the quantum of compensation, if any, claimed in respect of the one individual consumer therefore, would be absolutely irrelevant for the purpose of determining the pecuniary jurisdiction in such a complaint. In fact, this issue is no more res Integra in view of the decision of a Four-Members Bench of this Commission in Public Health Engineering Department Vs. Upbhokta Sanrakshan Samiti I (1992) CPJ 182 (NC). In the above referred case, a complaint was preferred, seeking to recover compensation for alleged negligence on the part of the petitioner which had resulted in a large number of persons getting infected by Jaundice. The names of 46 such persons were mentioned in the complaint but it was alleged that there were thousands of other sufferers who were similarly placed and that complaint was filed on behalf of all of them. The complainant had sought compensation of Rs.20,000/- for every student victim, Rs.10,000/- for every general victim and Rs.1,00,000/- for the legal representatives of those who had died due to Jaundice. The District Forum held that it had no pecuniary jurisdiction to adjudicate upon the complaint. The State Commission took the view that the District Forum has to go by the value as specified for each consumer. Rejecting the view taken by the State Commission, this Commission inter-alia held as under:

“5. In our opinion this proposition is clearly wrong since under the terms of Section 11 of the Act the pecuniary jurisdiction of the District Forum would depend upon the quantum of compensation claimed in the petition. The view expressed by the State Commission is not based on a correct understanding or interpretation of Section 11. On the plain words used in Section 11 of the Act, the aggregate quantum of compensation claimed in the petition will determine the question of jurisdiction and when the complaint is filed in a representative capacity on behalf of several persons, as in the present case, the total amount of compensation claimed by the representative body on behalf of all the persons whom it represents will govern the valuation of the complaint petition for purposes of jurisdiction”.

6. The quantum of compensation claimed in the petition being far in excess of Rs.1.00 lac the District Forum was perfectly right in holding that it had no jurisdiction to adjudicate upon the complaint. The reversal of the said order by the State Commission was contrary to law”.

Therefore, irrespective of the value of the goods purchased or the service hired and availed of by an individual purchaser / allottee and the compensation claimed in respect of an individual purchaser / allottee, this Commission would have the pecuniary jurisdiction to entertain the complaint if the aggregate of the value of the goods purchased or the services hired or availed of by the numerous consumers on whose behalf or for whose benefit the complaint is filed and the total compensation claimed for all of them exceeds Rs.1.00 crore.

Issue No. (iv)

13. As noted earlier, what is required for the applicability of Section 12(1)(c) of the Consumer Protection Act read with Order I Rule 8 of the Code of Civil Procedure is the sameness of the interest i.e. a common grievance of numerous persons which is sought to get redressed through a representative action. Therefore, so long as the grievance of the consumers is common and identical relief is claimed for all of them, the cost, size, area of the flat / plot and the date of booking / allotment / purchase, would be wholly immaterial. For instance, if a builder / developer has sold 100 flats in a project out of which 25 are three-bed room flats, 25 are two-bed room flats and 50 are one-bed room flats and he has failed to deliver timely possession of those flats, all the allottees irrespective of size of their respective flats / plots, the date of their respective purchase and the cost agreed to be paid by them have a common grievance i.e. the failure of the builder/ developer to deliver possession of the flat / plot sold to them and a complaint filed for the benefit of or on behalf of all such consumers and claiming same relief for all of them, would be maintainable under Section 12(1)(c) of the Consumer Protection Act. The relief claimed will be the same / identical if for instance, in a case of failure of the builder to deliver timely possession, refund, or possession or in the alternative refund with or without compensation is claimed for all of them. Different reliefs for one or more of the consumers on whose behalf or for whose benefit the complaint is filed cannot be claimed in such a complaint.

14. Reference order dated 11.8.2016

Issue No. (i)

It is evident from a bare perusal of Sections 21, 17 and 11 of the Consumer Protection Act that it’s the value of the goods or services and the compensation, if any, claimed which determines the pecuniary jurisdiction of the Consumer Forum. The Act does not envisage determination of the pecuniary jurisdiction based upon the cost of removing the deficiencies in the goods purchased or the services to be rendered to the consumer. Therefore, the cost of removing the defects or deficiencies in the goods or the services would have no bearing on the determination of the pecuniary jurisdiction. If the aggregate of the value of the goods purchased or the services hired or availed of by a consumer, when added to the compensation, if any, claimed in the complaint by him, exceeds Rs. 1.00 crore, it is this Commission alone which would have the pecuniary jurisdiction to entertain the complaint. For instance if a person purchases a machine for more than Rs.1.00 crore, a manufacturing defect is found in the machine and the cost of removing the said defect is Rs.10.00 lacs, it is the aggregate of the sale consideration paid by the consumer for the machine and compensation, if any, claimed in the complaint which would determine the pecuniary jurisdiction of the Consumer Forum. Similarly, if for instance, a house is sold for more than Rs.1.00 crore, certain defects are found in the house, and the cost of removing those defects is Rs.5.00 lacs, the complaint would have to be filed before this Commission, the value of the services itself being more than Rs.1.00 crore.

Issue No. (ii)

In Ghaziabad Development Authority Vs. Balbir Singh (2004) 5 SCC 65, the Hon’ble Supreme Court inter-alia observed and held as under:

“However the power to and duty to award compensation does not mean that irrespective of facts of the case compensation can be awarded in all matters at a uniform rate of 18% per annum. As seen above what is being awarded is compensation i.e. recompense for the loss or injury.

…Along with recompensing the loss the Commission / Forum may also compensate for harassment / injury both mental and physical. Similarly, compensation can be given if after allotment is made there has been cancellation of scheme without any justifiable cause.

That compensation cannot be uniform and can best of illustrated by considering case where possession is being directed to be delivered and cases where only monies are directed to be returned. In cases where possession is being directed to be delivered the compensation for harassment will necessarily have to be less because in a way that party is being compensated by increase in the value of the property he is getting. But in cases where monies are being simply returned then the party is suffering a loss inasmuch as he had deposited the money in the hope of getting a flat / plot. He is being deprived of that flat / plot. He has been deprived of the benefit of escalation of the price of that flat / plot. Therefore, the compensation in such cases would necessarily have to be higher”.

The Hon’ble Supreme Court thus recognized that the interest to the flat buyers is paid by way of compensation. In fact, though the Consumer Protection Act, authorises the Consumer Forum to award compensation, no specific powers to award interest has been conferred upon it. Therefore, in view of the provisions contained in Sections 21, 17 and 11 of the Consumer Protection Act, the amount of the interest, which can be paid as compensation, must necessarily be taken into account for determining the pecuniary jurisdiction.

Issue No. (iii)

Conflicting orders have been passed by the Benches of this Commission as to cut off date for determining the value of the goods or the services, as the case may be, in terms of Section 21, 17 and 11 of the Consumer Protection Act. One view is that the value of the goods or services means the consideration agreed to be paid by the consumer for the goods purchased or the services hired and availed of, whereas the other view is that the value of the goods or services as the case may be, for the purpose of determining the pecuniary jurisdiction of the Consumer Forum should be the market value of the goods or services on the date of institution of the consumer complaint. Though, the use of the word “value” in the above referred Sections, tends to suggest that it is the market price of the goods or the services, as the case may be, which when added to the amount of compensation, if any, claimed in the complaint, should determine the pecuniary jurisdiction of the Consumer Forum, on a deeper consideration we are of the view that it is the price of the goods or the services as the case may be agreed to be paid by the consumer which would be relevant for the purpose of determining the pecuniary jurisdiction. If the market price of the goods or the services as the case may be, on the date of institution of the complaint is to determine the pecuniary jurisdiction, the market price being dynamic and ever fluctuating, this would create an unending uncertainty with respect to the Consumer Forum before which the complaint is to be instituted. For instance, if there are 10 flat buyers in the same project, identical consideration is agreed to be paid by them to the service provider, one of them decides to approach the Consumer Forum at a time when the prevailing market value of the flat is more than Rs.1.00 crore, the complaint will have to be instituted before this Commission. If the prevailing market value of the flat at the time when another flat buyer who agreed to pay the same consideration to the service provider decides to approach the Consumer Forum is less than Rs.1.00 crore, he will have to approach the concerned State Commission. Therefore, there will be two separate Forums dealing with the complaints of these two consumers who agreed to pay same price for the flat purchased by them. In one case, the order passed in the consumer complaint would be challenged before the Hon’ble Supreme Court whereas in the other case, it would be challenged before this Commission. Creating such an anomalous situation, in our view, could not have been the legislative intent.

Moreover, if the pecuniary jurisdiction of the Consumer Forum varies with the market price of the goods or services at the time the complaint is instituted; there is a likelihood of the valuation given by the complainant, being seriously challenged by the opposite party. If this happens, the Consumer Forum will first have to determine the market price of the goods or services as the case may be, at the time of institution of the complaint. Such a determination is likely to be a time consuming process, besides being incapable of determination by way of a summary procedure, which the Consumer Forums are adopting. Such an interpretation therefore, is likely to be counterproductive and result in an inordinate delay in the disposal of the consumer complaint. On the other hand, no such difficulty is likely to arise if the sale consideration agreed to be paid by the consumer is taken as the value of the goods or services. In that case, the amount of compensation as claimed in the complaint needs to be added to the agreed consideration and the aggregate of the consideration and the compensation claimed in the complaint would determine the pecuniary jurisdiction of the Consumer Forum.

Issue No. (iv)

In view of the answer to the issues No. (ii) and (iii) of the reference order dated 24.5.2016, it is the aggregate value of the goods purchased or the services hired or availed of by all the consumers on whose behalf or for whose benefit the complaint is filed which, added to the total amount of compensation, if any, claimed for all such consumers determines the pecuniary jurisdiction of the Consumer Forum. The value of the goods purchased or the services hired or availed of by an individual consumer and the compensation claimed in respect of an individual consumer would have no bearing on such determination.

Issue No. (v) and (vi)

It is evident from a bare perusal of Section 12(1)(c) of the Consumer Protection Act that a complaint under the aforesaid provision can be filed only by one or more consumers. The term ‘consumer’ has been defined in Section 2(1)(d) of the Consumer Protection Act to mean any person who buys any goods for a consideration or who hires or avails of any services for a consideration and includes the user other than the purchaser of the goods and beneficiary other than the person hiring or availing of the services for consideration, with the permission of the person purchasing the goods or hiring or availing of the services, as the case may be. Therefore, a Cooperative Society or a group of Cooperative Societies is not entitled to file a complaint under Section 12(1)(c) of the Consumer Protection Act unless the cooperative society itself is a consumer as defined in Section 2(1)(d) of the Consumer Protection Act. Similarly, no group of Firms, Society or Association can file such a complaint unless such group of Firms, Society or Association itself is a consumer as defined in Section 2(1)(d) of the Consumer Protection Act. No person who does not qualify as a consumer in terms of Section 2(1)(d) of the Consumer Protection Act, can be party to a complaint under Section 12(1)(c) of the Act nor can he be amongst the persons on whose behalf or for whose benefit such a complaint is filed. In fact, a person who is not a consumer, as defined in Section 2(1)(d) of the Act, can invoke the jurisdiction of a Consumer Forum, by way of a consumer complaint.

Issue No. (vii)

As noted earlier, a complaint under Section 2(1)(c) of the Consumer Protection Act read with Order I Rule 8 of the Code of Civil Procedure can be filed where there are numerous consumers having the same interest i.e. a common grievance against the same person and the complaint is filed on behalf of or for the benefit of all such numerous consumers, and seeking same relief for all of them. Therefore, the Act does not envisage more than one complaints on behalf of such consumers, in a representative character. The decision in one complaint filed in a representative capacity will bind all the consumers on whose behalf or for whose benefit the complaint is filed, as provided in Order I Rule 8 (6) of the Code of Civil Procedure. Therefore, once a complaint, in a representative capacity is filed under Section 12(1)(c) of the Consumer Protection Act, and the requisite permission for filing such a complaint is given by the Consumer Forum, a second complaint, in a representative capacity under Section 12(1)(c) of the Consumer Protection Act would not be maintainable by or on behalf of consumers having the same interest and seeking the same relief and if filed, is liable to be dismissed with liberty to seek impleadment in the complaint already instituted in a representative capacity with the requisite permission of the Consumer Forum. Since a complaint in a representative capacity can be filed only on behalf of all the consumers having the same interest i.e. a common grievance and seeking the same relief against the same person, an individual complaint expressing such a grievance will not be maintainable and the only recourse available to a consumer having the same grievance is to seek impleadment in the complaint filed in the representative capacity. If such individual complaints are allowed even after the requisite permission in terms of Section 12(1)(c) is granted, that would be in contradiction of Order I Rule 8 (6) of the Code of Civil Procedure which makes an order passed in a suit / complaint filed in a representative capacity binding on all the persons on whose behalf or for whose benefit the suit / complaint is filed.

However, as far as the individual complaints instituted prior to grant of the requisite permission under Section 12(1)(c) of the Consumer Protection Act is concerned, they having been validly instituted, such complainants cannot be compelled to withdraw their individual complaint and become a party to the subsequently instituted complaint filed in a representative capacity. They having already taken recourse to the legal proceedings, the complaint instituted in a representative capacity, will not be deemed to have been instituted on behalf of or for the benefit of such complainants even if their grievance is identical to the grievance expressed in the complaint instituted in a representative character. They having already approached the Consumer Forum for the redressal of their grievance, it would be difficult to say that the complaint filed in a representative character was intended on their behalf or for their benefit as well. In fact, there may be a consumer having an identical grievance, who has already approached the Consumer Forum by way of an individual complaint and whose complaint has already been adjudicated before the requisite permission under Section 12(1)(c) of the Consumer Protection Act is accorded in a complaint filed in a representative capacity. Since, there cannot be more than one adjudication in respect of the same grievance of the same person, it cannot be said that the complaint instituted in a representative capacity was filed on his behalf or for his benefit as well. Therefore, the consumers, who are already before the Consumer Forum when the requisite permission, in terms of Section 12(1)(c) of the Consumer Protection Act is accorded, will be out of the purview of the said complaint. Since it cannot be said that the complaint in the representative capacity was filed on their behalf or for their benefit as well, the order passed in such a complaint will not be binding on them. If however, such persons want to withdraw their pending complaints and join the complaint instituted in the representative capacity, there is no bar on their adopting such a course of action. The decision, of course, would rest with them whether to continue with the individual complaint already instituted by them or to withdraw the said complaint and become party to the complaint filed in a representative capacity.

In one of the written submissions, it is contended that since a complaint in a representative capacity can be filed only on behalf of all the consumer having the same interest, such a complaint will not be maintainable where one or more individual complaints, expressing such a grievance are already pending. We however, are unable to accept the contention. No such restriction finds place in Section 12(1)(c) of the Consumer Protection Act or in Order I Rule 8 of the Code of Civil Procedure. Accepting such a contention would defeat the very purpose of allowing such a suit/complaint since every consumer would be compelled to file an individual complaint leading to multiplicity of proceedings. Such an interpretation would not serve the cause either of the consumer or of the service provider.

15. For the reasons stated hereinabove, the references are answered as under:

Reference dated 24.5.2016

Issue No. (i)

A complaint under Section 12 (1)(c) of the Consumer Protection Act can be filed only on behalf of or for the benefit of all the consumers, having a common interest or a common grievance and seeking the same / identical relief against the same person. Such a complaint however, shall not be deemed to have been filed on behalf of or for the benefit of the consumers who have already filed individual complaints before the requisite permission in terms of Section 12(1)(c) of the Consumer Protection Act is accorded.

Issue No. (ii), (iii) and (iv)

A complaint under Section 12 (1)(c) of the Consumer Protection Act is maintainable before this Commission where the aggregate of the value of the goods purchased or the services hired or availed of by all the consumers on whose behalf or for whose benefit the complaint is instituted and the total compensation, if any, claimed in respect of all such consumers exceeds Rs.1.00 crore. The value of the goods purchased or the services hired and availed of by an individual consumer or the size, or date of booking / allotment / purchase of the flat would be wholly irrelevant in such a complaint where the complaint relates to the sale / allotment of several flats / plots in the same project / building.

Reference dated 11.8.2016

Issue No. (i)

It is the value of the goods or services, as the case may be, and not the value or cost of removing the deficiency in the service which is to be considered for the purpose of determining the pecuniary jurisdiction.

Issue No. (ii)

The interest has to be taken into account for the purpose of determining the pecuniary jurisdiction of a Consumer Forum.

Issue No. (iii)

The consideration paid or agreed to be paid by the consumer at the time of purchasing the goods or hiring or availing of the services, as the case may be, is to be considered, along with the compensation, if any, claimed in the complaint, to determine the pecuniary jurisdiction of a Consumer Forum.

Issue No. (iv)

In a complaint instituted under Section 12(1)(c) of the Consumer Protection Act, the pecuniary jurisdiction is to be determined on the basis of aggregate of the value of the goods purchased or the services hired or availed by all the consumers on whose behalf or for whose benefit the complaint is instituted and the total compensation claimed in respect of such consumers.

Issue No. (v) & (vi)

A complaint under Section 12(1)(c) of the Consumer Protection Act can be instituted only by one or more consumers, as defined in Section 2(1)(d) of the Consumer Protection Act. Therefore, a group of Cooperative societies, Firms, Association or other Society cannot file such a complaint unless such society etc. itself is a consumer as defined in the aforesaid provision.

Issue No. (vii)

More than one complaints under Section 12(1)(c) of the Consumer Protection Act are not maintainable on behalf of or for the benefit of consumers having the same interest i.e. a common grievance and seeking the same / identical against the same person. In case more than one such complaints have been instituted, it is only the complaint instituted first under Section 12(1)(c) of the Consumer Protection Act, with the requisite permission of the Consumer Forum, which can continue and the remaining complaints filed under Section 12(1)(c) of the Consumer Protection Act are liable to be dismissed with liberty to join in the complaint instituted first with the requisite permission of the Consumer Forum.

The individual complaints instituted before grant of the requisite permission under Section 12(1)(c) of the Consumer Protection Act can continue despite grant of the said permission but it would be open to such complainants to withdraw their individual complaints and join as parties to the complaint instituted in a representative character. However, once the requisite permission under Section 12(1)(c) of the Consumer Protection Act is granted, an individual complaint, expressing the same grievance will not be maintainable and the only remedy open to a consumer having the same grievance is to join as a party to the complaint instituted in a representative character.

16. Before parting with the references, we would like to emphasise that considering the binding effect of a decision rendered in a complaint under Section 12(1)(c) of the Consumer Protection Act, on all the consumers, on whose behalf or for whose benefit such a complaint is filed, even if they chose not to join as a party to the complaint, it is necessary to exercise due care and caution while considering such a complaint even at the initial stage and to grant the requisite permission, only where the complaint fulfils all the requisite conditions in terms of Section 12(1)(c) of the Consumer Protection Act read with Order I Rule 8 of the Code of Civil Procedure; as interpreted in this reference. It would also be necessary for the Bench to either give individual notices or an adequate public notice of the institution of the complaint to all the persons on whose behalf or for whose benefit the complaint is instituted. Such a notice should disclose inter-alia (i) the subject matter of the complaint including the particulars of the project if the complaint relates to a housing project / scheme, (ii) the class of persons on whose behalf or for whose benefit the complaint is filed, (iii) the common grievance sought to get redressed through the class action, (iv) the alleged deficiency in the services and (v) the reliefs claimed in the complaint.

It will also be necessary to hear the opposite party, before taking a final view on the grant or otherwise of the permission required in terms of Section 12(1)(c) of the Consumer Protection Act.

17. The Complaint and the Appeals, in which references were made, be listed before the appropriate Benches, for further proceedings, in the light of the answer to the reference.

………………….J
D.K. JAIN
PRESIDENT

………………….
DR. B.C. GUPTA
MEMBER

………………….J
V.K. JAIN
MEMBER

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IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1723 OF 2017
[Arising out of SLP(CRL) No 9549 of 2016]

PARBATBHAI AAHIR @ PARBATBHAI BHIMSINHBHAI KARMUR AND ORS ..Appellants
VERSUS
STATE OF GUJARAT AND ANR. ..Respondents

JUDGMENT

Dr D Y CHANDRACHUD, J
1 Leave granted.

2 By its judgment dated 25 November 2016, the High Court of Gujarat dismissed an application under Section 482 of the Code of Criminal Procedure, 1973. The appellants sought the quashing of a First Information Report registered against them on 18 June 2016 with the City ‘C’ Division Police Station, District Jamnagar, Gujarat for offences punishable under Sections 384, 467, 468, 471, 120-B and 506(2) of the Penal Code. The second respondent is the complainant.

3 In his complaint dated 18 June 2016, the second respondent stated that certain land admeasuring 17 vigha comprised in survey 1408 at Panakhan Gokulnagar in Jamnagar city was his ancestral agricultural land. The land was converted to non-agricultural use on 21 June 1995 and 5 January 2000 pursuant to orders of the District Collector. One hundred and three plots were carved out of the land. Amongst them, plots 45 to 56 admeasuring 32,696 sq.ft. were in the joint names of six brothers and a sister (represented by the complainant). According to the complainant, a broker by the name of Bachhubhai Veljibhai Nanda approached him with Parbatbhai Ahir, the first appellant stating that he desired to purchase the land. On the next day, the first appellant approached the complainant with his partner Hasmukhbhai Patel (the third appellant) to purchase the land. The complainant was requested to provide a photocopy of the lay out plan of the plot, which he did. On the following day the first appellant is alleged to have gone to the house of the complainant with the second and the third appellants at which point in time, parties agreed that the land would be sold at the rate of Rs 4,221 per sq.ft. and a deal was struck for a consideration of Rs.1,13,58,711/- out of which an amount of Rs 11 lakhs was given in cash to the complainant for plot no.56. The complainant’s case is that while the discussion was on, he was requested by the second and the third appellants that since the power of attorney was old and unreadable all the plot holders should give their passport size photographs. Accordingly, a document was reduced to writing by which it was agreed that the sale transaction for plot no.56 would be completed within two months against full payment. According to the complainant, when he demanded the remaining payment for the plot from the second and third appellants, the second appellant provided him seven cheques each in the amount of Rs 6 lakhs in the name of the six brothers (one brother being given two cheques). Thereafter when the complainant followed up for the payment of the remaining amount with the purchasers, the balance was not paid and, on the contrary, the complainant was threatened of a forcible transfer of the land. According to the complainant, when he visited the office of the Sub-registrar about three days before lodging the complaint, it came to his knowledge that a sale deed has been registered not only in respect of the plot in question (which was agreed to be sold) but also in respect of plot nos.45 to 55 on 27 January 2016. It was then that the complainant realised that the purchaser in the sale deed was shown as the fourth appellant, Jayesh Arvindbhai Patel, and the name of the seventh appellant, Jitudan Nankudan Gadhavi, resident of Payalnagar society, Naroda, Ahmedabad was shown as the holder of a power of attorney. The witnesses to the registered sale deed were the fifth appellant, Rabari Hiteshbhai and the sixth appellant, Patel Indravaden Dineshbhai.

4 The complaint came to be lodged on the complainant having realised that the power of attorney in the name of his siblings had been forged. The complainant stated that neither he nor any of his siblings had given a power of attorney in favour of the seventh appellant. According to the complainant, neither the non-judicial stamp dated 25 January 2016 in the amount of Rs 10,30,000/- nor the judicial stamp dated 27 January 2016 has been purchased by him. In fact, according to the complainant, it was the fourth appellant who had purchased the judicial stamp dated 27 January 2016.

5 According to the complaint, plots no.45 to 55 admeasuring 30,005 sq.ft. are valued at Rs 12.50 crores. It has been alleged that a conspiracy was hatched by the appellants and by the other co-accused resulting into the transfer of valuable land belonging to the complainant and his siblings, on the basis of forged documents.

6 The High Court noted that the fourth appellant had moved Special Criminal Application no.4538 of 2016 which had been rejected by the coordinate bench of the High Court on 3 August 2016. While rejecting the earlier application under Section 482, the High Court had observed thus:

“19. Primary details revealed the complaint had led this Court examine the papers of the investigation. The evidence so far collected prima facie reveal the involvement of the petitioner. This Court also could notice that it is a case where under the pretext of buying only a particular Plot No.56 from the complainant and his family members, the power of attorney has been forged usurping nearly 10 other plots which value nearly 11 crores and odd by allegedly conniving with each other, and therefore, the payment of Rs 42 lakhs by the cheques to the complainant in relation to one of the plots also would pale into insignificance. This, by no means, even at a prima facie level, can be said to be a civil dispute, given a colour of criminality. It would be in the interest of both the sides for this Court to either, at this stage not to make a roving inquiry or divulge anything which may affect the ongoing investigation. Suffice it to note that, the petition does not deserved to be entertained an the same stands rejected.”

Before the High Court, the plea for quashing the First Information Report was advanced on the ground that the appellants had amicably settled the dispute with the complainant. The complainant had also filed an affidavit to that effect.

7 On behalf of the prosecution, the Public Prosecutor opposed the application for quashing on two grounds. First – the appellants were absconding and warrants had been issued against them under Section 70 of the Code of Criminal Procedure, 1973. Second, the appellants had criminal antecedents, the details of which are contained in the following chart submitted before the High Court:

The High Court observed that it had been given “a fair idea” about the modus operandi adopted by the appellants for grabbing the land, in the course of which they had opened bogus bank accounts. The High Court held that the case involves extortion, forgery and conspiracy and all the appellants have acted as a team. Hence, in the view of the High Court, it was not in the interest of society at large to accept the settlement and quash the FIR. The High Court held that the charges are of a serious nature and the activities of the appellants render them a potential threat to society. On this ground, the prayer to quash the First Information Report has been rejected.

8 On behalf of the appellants, reliance has been placed on the decisions rendered by this Court in Gian Singh v State of Punjab1 and in Narinder Singh v State of Punjab2 . Learned counsel submitted that the dispute between the complainant and the appellants arose from a transaction for the sale of land. It was urged that the dispute is essentially of a civil nature and since parties have agreed to an amicable settlement, the proper course for the High Court would have been to quash the FIR in exercise of the jurisdiction conferred by Section 482 of the Code of Criminal Procedure, 1973.

9 On the other hand, learned counsel appearing on behalf of the state has supported the judgment of the High Court. Learned counsel emphasised the circumstances which weighed with the High Court, including (i) the seriousness of the allegations; (ii) the conduct of the appellants who were absconding; and (iii) the criminal antecedents of the appellants. Hence, it was urged that the appellants were not entitled to the relief of quashing the FIR merely because they had entered into a settlement with the complainant. 10 Section 482 is prefaced with an overriding provision. The statute saves the inherent power of the High Court, as a superior court, to make such orders as are necessary (i) to prevent an abuse of the process of any court; or (ii) otherwise to secure the ends of justice. In Gian Singh (supra) a bench of three learned Judges of this Court adverted to the body of precedent on the subject and laid down guiding principles which the High Court should consider in determining as to whether to quash an FIR or complaint in the exercise of the inherent jurisdiction. The considerations which must weigh with the High Court are:

“61…the power of the High Court in quashing a criminal proceeding or FIR or complaint in exercise of its inherent jurisdiction is distinct and different from the power given to a criminal court for compounding the offences under Section 320 of the Code. Inherent power is of wide plenitude with no statutory limitation but it has to be exercised in accord with the guideline engrafted in such power viz.: (i) to secure the ends of justice, or (ii) to prevent abuse of the process of any court. In what cases power to quash the criminal proceeding or complaint or FIR may be exercised where the offender and the victim have settled their dispute would depend on the facts and circumstances of each case and no category can be prescribed. However, before exercise of such power, the High Court must have due regard to the nature and gravity of the crime. Heinous and serious offences of mental depravity or offences like murder, rape, dacoity, etc. cannot be fittingly quashed even though the victim or victim’s family and the offender have settled the dispute. Such offences are not private in nature and have a serious impact on society. Similarly, any compromise between the victim and the offender in relation to the offences under special statutes like the Prevention of Corruption Act or the offences committed by public servants while working in that capacity, etc; cannot provide for any basis for quashing criminal proceedings involving such offences. But the criminal cases having overwhelmingly and predominatingly civil flavour stand on a different footing for the purposes of quashing, particularly the offences arising from commercial, financial, mercantile, civil, partnership or such like transactions or the offences arising out of matrimony relating to dowry, etc. or the family disputes where the wrong is basically private or personal in nature and the parties have resolved their entire dispute. In this category of cases, the High Court may quash the criminal proceedings if in its view, because of the compromise between the offender and the victim, the possibility of conviction is remote and bleak and continuation of the criminal case would put the accused to great oppression and prejudice and extreme injustice would be caused to him by not quashing the criminal case despite full and complete settlement and compromise with the victim. In other words, the High Court must consider whether it would be unfair or contrary to the interest of justice to continue with the criminal proceeding or continuation of the criminal proceeding would tantamount to abuse of process of law despite settlement and compromise between the victim and the wrongdoer and whether to secure the ends of justice, it is appropriate that the criminal case is put to an end and if the answer to the above question(s) is in the affirmative, the High Court shall be well within its jurisdiction to quash the criminal proceeding.”

11 In Narinder Singh (supra), Dr Justice A K Sikri, speaking for a bench of two learned Judges of this Court observed that in respect of offences against society, it is the duty of the state to punish the offender. In consequence, deterrence provides a rationale for punishing the offender. Hence, even when there is a settlement, the view of the offender and victim will not prevail since it is in the interest of society that the offender should be punished to deter others from committing a similar crime. On the other hand, there may be offences falling in the category where the correctional objective of criminal law would have to be given more weightage than the theory of deterrence. In such a case, the court may be of the opinion that a settlement between the parties would lead to better relations between them and would resolve a festering private dispute. The court observed that the timing of a settlement is of significance in determining whether the jurisdiction under Section 482 should be exercised:

“29.7…Those cases where the settlement is arrived at immediately after the alleged commission of offence and the matter is still under investigation, the High Court may be liberal in accepting the settlement to quash the criminal proceedings/investigation. It is because of the reason that at this stage the investigation is still on and even the charge-sheet has not been filed. Likewise, those cases where the charge is framed but the evidence is yet to start or the evidence is still at infancy stage, the High Court can show benevolence in exercising its powers favourably, but after prima facie assessment of the circumstances/material mentioned above. On the other hand, where the prosecution evidence is almost complete or after the conclusion of the evidence the matter is at the stage of argument, normally the High Court should refrain from exercising its power under Section 482 of the Code, as in such cases the trial court would be in a position to decide the case finally on merits…”

This Court held, while dealing with an offence under Section 307 of the Penal Code that the following circumstances had weighed with it in quashing the First Information Report:

“33. We have gone through the FIR as well which was recorded on the basis of statement of the complainant/victim. It gives an indication that the complainant was attacked allegedly by the accused persons because of some previous dispute between the parties, though nature of dispute etc. is not stated in detail. However, a very pertinent statement appears on record viz.,
“respectable persons have been trying for a compromise up till now, which could not be finalized”. This becomes an important aspect. It appears that there have been some disputes which led to the aforesaid purported attack by the accused on the complainant. In this context when we find that the elders of the village, including Sarpanch, intervened in the matter and the parties have not only buried their hatchet but have decided to live peacefully in future, this becomes an important consideration. The evidence is yet to be led in the Court. It has not even started. In view of compromise between parties, there is a minimal chance of the witnesses coming forward in support of the prosecution case. Even though nature of injuries can still be established by producing the doctor as witness who conducted medical examination, it may become difficult to prove as to who caused these injuries. The chances of conviction, therefore, appear to be remote. It would, therefore, be unnecessary to drag these proceedings…”

12 In State of Maharashtra v Vikram Anantrai Doshi3 , a bench of two learned Judges of this Court explained the earlier decisions and the principles which must govern in deciding whether a criminal proceeding involving a non-compoundable offence should be quashed. In that case, the respondents were alleged to have obtained Letters of Credit from a bank in favour of fictitious entities. The charge-sheet involved offences under Sections 406, 420, 467, 468, and 471 read with Section 120-B of the Penal Code. Bogus beneficiary companies were alleged to have got them discounted by attaching fabricated bills. Mr Justice Dipak Misra (as the learned Chief Justice then was) emphasised that the case involved an allegation of forgery; hence the court was not dealing with a simple case where “the accused had borrowed money from a bank, to divert it elsewhere”. The court held that the manner in which Letters of Credit were issued and funds were siphoned off had a foundation in criminal law:

“… availing of money from a nationalized bank in the manner, as alleged by the investigating agency, vividly exposits fiscal impurity and, in a way, financial fraud. The modus operandi as narrated in the chargesheet cannot be put in the compartment of an individual or personal wrong. It is a social wrong and it has immense societal impact. It is an accepted principle of handling of finance that whenever there is manipulation and cleverly conceived contrivance to avail of these kind of benefits it cannot be regarded as a case having overwhelmingly and predominatingly of civil character. The ultimate victim is the collective. It creates a hazard in the financial interest of the society. The gravity of the offence creates a dent in the economic spine of the nation.”

The judgment of the High Court quashing the criminal proceedings was hence set aside by this Court.

13 The same principle was followed in Central Bureau of Investigation v Maninder Singh4 by a bench of two learned Judges of this Court. In that case, the High Court had, in the exercise of its inherent power under Section 482 quashed proceedings under Sections 420, 467, 468 and 471 read with Section 120-B of the Penal Code. While allowing the appeal filed by the Central Bureau of Investigation Mr Justice Dipak Misra (as the learned Chief Justice then was) observed that the case involved allegations of forgery of documents to embezzle the funds of the bank. In such a situation, the fact that the dispute had been settled with the bank would not justify a recourse to the power under Section 482:

“…In economic offences Court must not only keep in view that money has been paid to the bank which has been defrauded but also the society at large. It is not a case of simple assault or a theft of a trivial amount; but the offence with which we are concerned is well planned and was committed with a deliberate design with an eye of personal profit regardless of consequence to the society at large. To quash the proceeding merely on the ground that the accused has settled the amount with the bank would be a misplaced sympathy. If the prosecution against the economic offenders are not allowed to continue, the entire community is aggrieved.”

14 In a subsequent decision in State of Tamil Nadu v R Vasanthi Stanley5 , the court rejected the submission that the first respondent was a woman “who was following the command of her husband” and had signed certain documents without being aware of the nature of the fraud which was being perpetrated on the bank. Rejecting the submission, this Court held that:

“… Lack of awareness, knowledge or intent is neither to be considered nor accepted in economic offences. The submission assiduously presented on gender leaves us unimpressed. An offence under the criminal law is an offence and it does not depend upon the gender of an accused. True it is, there are certain provisions in Code of Criminal Procedure relating to exercise of jurisdiction Under Section 437, etc. therein but that altogether pertains to a different sphere. A person committing a murder or getting involved in a financial scam or forgery of documents, cannot claim discharge or acquittal on the ground of her gender as that is neither constitutionally nor statutorily a valid argument. The offence is gender neutral in this case. We say no more on this score…”

“…A grave criminal offence or serious economic offence or for that matter the offence that has the potentiality to create a dent in the financial health of the institutions, is not to be quashed on the ground that there is delay in trial or the principle that when the matter has been settled it should be quashed to avoid the load on the system…”

15 The broad principles which emerge from the precedents on the subject, may be summarised in the following propositions :
(i) Section 482 preserves the inherent powers of the High Court to prevent an abuse of the process of any court or to secure the ends of justice. The provision does not confer new powers. It only recognises and preserves powers which inhere in the High Court;

(ii) The invocation of the jurisdiction of the High Court to quash a First Information Report or a criminal proceeding on the ground that a settlement has been arrived at between the offender and the victim is not the same as the invocation of jurisdiction for the purpose of compounding an offence. While compounding an offence, the power of the court is governed by the provisions of Section 320 of the Code of Criminal Procedure, 1973. The power to quash under Section 482 is attracted even if the offence is non-compoundable.

(iii) In forming an opinion whether a criminal proceeding or complaint should be quashed in exercise of its jurisdiction under Section 482, the High Court must evaluate whether the ends of justice would justify the exercise of the inherent power;

(iv) While the inherent power of the High Court has a wide ambit and plenitude it has to be exercised; (i) to secure the ends of justice or (ii) to prevent an abuse of the process of any court;

(v) The decision as to whether a complaint or First Information Report should be quashed on the ground that the offender and victim have settled the dispute, revolves ultimately on the facts and circumstances of each case and no exhaustive elaboration of principles can be formulated;

(vi) In the exercise of the power under Section 482 and while dealing with a plea that the dispute has been settled, the High Court must have due regard to the nature and gravity of the offence. Heinous and serious offences involving mental depravity or offences such as murder, rape and dacoity cannot appropriately be quashed though the victim or the family of the victim have settled the dispute. Such offences are, truly speaking, not private in nature but have a serious impact upon society. The decision to continue with the trial in such cases is founded on the overriding element of public interest in punishing persons for serious offences;

(vii) As distinguished from serious offences, there may be criminal cases which have an overwhelming or predominant element of a civil dispute. They stand on a distinct footing in so far as the exercise of the inherent power to quash is concerned;

(viii) Criminal cases involving offences which arise from commercial, financial, mercantile, partnership or similar transactions with an essentially civil flavour may in appropriate situations fall for quashing where parties have settled the dispute;

(ix) In such a case, the High Court may quash the criminal proceeding if in view of the compromise between the disputants, the possibility of a conviction is remote and the continuation of a criminal proceeding would cause oppression and prejudice; and

(x) There is yet an exception to the principle set out in propositions (viii) and (ix) above. Economic offences involving the financial and economic well-being of the state have implications which lie beyond the domain of a mere dispute between private disputants. The High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanour. The consequences of the act complained of upon the financial or economic system will weigh in the balance.

16. Bearing in mind the above principles which have been laid down in the decisions of this Court, we are of the view that the High Court was justified in declining to entertain the application for quashing the First Information Report in the exercise of its inherent jurisdiction. The High Court has adverted to two significant circumstances. Each of them has a bearing on whether the exercise of the jurisdiction under Section 482 to quash the FIR would subserve or secure the ends of justice or prevent an abuse of the process of the court. The first is that the appellants were absconding and warrants had been issued against them under Section 70 of the Code of Criminal Procedure, 1973. The second is that the appellants have criminal antecedents, reflected in the chart which has been extracted in the earlier part of this judgment. The High Court adverted to the modus operandi which had been followed by the appellants in grabbing valuable parcels of land and noted that in the past as well, they were alleged to have been connected with such nefarious activities by opening bogus bank accounts. It was in this view of the matter that the High Court observed that in a case involving extortion, forgery and conspiracy where all the appellants were acting as a team, it was not in the interest of society to quash the FIR on the ground that a settlement had been arrived at with the complainant. We agree with the view of the High Court. The present case, as the allegations in the FIR would demonstrate, is not merely one involving a private dispute over a land transaction between two contesting parties. The case involves allegations of extortion, forgery and fabrication of documents, utilization of fabricated documents to effectuate transfers of title before the registering authorities and the deprivation of the complainant of his interest in land on the basis of a fabricated power of attorney. If the allegations in the FIR are construed as they stand, it is evident that they implicate serious offences having a bearing on a vital societal interest in securing the probity of titles to or interest in land. Such offences cannot be construed to be merely private or civil disputes but implicate the societal interest in prosecuting serious crime. In these circumstances, the High Court was eminently justified in declining to quash the FIR which had been registered under Sections 384, 467, 468, 471, 120-B and 506(2) of the Penal Code.

17. We do not, for the above reasons, find any merit in the appeal. The Criminal Appeal shall accordingly stand dismissed.

…………………………………….CJI
[DIPAK MISRA]
………………………………………J
[A M KHANWILKAR]
…………………………………….J
[Dr D Y CHANDRACHUD]

New Delhi;
October 04, 2017

Footnote:
1 (2012) 10 SCC 303
2 (2014) 6 SCC 466
3 (2014) 15 SCC 29
4 (2016) 1 SCC 389
5 (2016)1 SCC 376

The post Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai Karmur and Ors Vs. State of Gujarat and Anr appeared first on B&B Associates LLP.

Advocates who appeared in this case:
For the Petitioner: Mr Shishir Mathur with Mr Kunal Bahri.
For the Respondent: Mr Arun Bhardwaj, CGSC for UOI with Mr Abhishek Pundir.
CORAM:-
HON’BLE MR JUSTICE VIBHU BAKHRU

J U D G M E N T

VIBHU BAKHRU, J

1. The petitioner has filed the present writ petition seeking quashing of the provisional attachment order dated 24.01.2014 (hereafter ‘impugned order’) passed by the Deputy Director, Directorate of Enforcement under section 5 (1) of Prevention of Money Laundering Act, 2002 (hereafter the ‘Act’) whereby the entire basement and ground floor of the property situated at E-14/3, Vasant Vihar, New Delhi belonging to Smt. Alka Rajvansh has been attached considering it as proceeds of crime.

2. The brief facts that are relevant for examining the controversy in the present petition are as under:-

2.1 On 08.05.2009, an FIR was lodged by the CBI on a written complaint made by Shri S.K. Maggu, Deputy Manager of National Agricultural Cooperative Marketing Federation of India (hereafter ‘NAFED’) wherein it was alleged that Mr Homi Rajvansh – the Additional Managing Director of NAFED, had hatched a conspiracy, in connivance with the directors of M/s M.K. Agri International Ltd. (hereafter ‘MKAIL’), for making wrongful gains by executing Memoranda of Understandings (MOUs) with MKAIL on behalf of NAFED for import of raw sugar and selling the same by entering into three High Seas Sale (HSS) Agreements with M/s M.K. International Ltd. (hereafter ‘MIL’), a sister concern of MKAIL, without charging/recovering any cost for the commodity.

2.2 On 16.10.2003, NAFED through Mr Homi Rajvansh entered into an MOU with M/s Earthtech Enterprises Ltd. (EEL) which is a sister concern of MKAIL and run by one of the accused Manish Kant Agarwal for import of petroleum products. On 12.02.2004, an addendum to the above MOU was signed between NAFED and EEL and certain other items were added for purchase. On the request of EEL, vide two letters dated 27.09.2004, NAFED allowed two import orders each containing 38,000/- MT of raw sugar to be imported from M/s Noble Resources SA, Switzerland. The request of EEL for opening two separate Letters Of Credit (LCs) covering the said import orders was also acceded to by NAFED.

2.3 On 30.11.2004, NAFED through Mr Homi Rajvansh entered into a MOU with MKAIL for import of various products. MKAIL is the sister concern of EEL. On the request of MKAIL, NAFED through Mr Homi Rajvansh sold the entire cargo of raw sugar under two LCs to MIL – which is also a sister concern of MKAIL – under the three separate HSS Agreements entered into by NAFED with MIL. MIL, subsequently, sold the raw sugar in the open market. It is alleged that Mr Homi Rajvansh, acting on behalf of NAFED, permitted the sale of raw sugar through the three HSS Agreements without charging the cost of the commodity and, thereby, caused wrongful loss to NAFED and wrongful gain to themselves.

2.4 On 10.02.2005, MIL through its director – Mr M.K. Agarwal issued cheques for an amount aggregating to `1.5 crores in favour of its two holding companies namely, M/s Duoroyale Enterprises Ltd. and M/s Sri Radhey Trading Pvt. Ltd. Subsequently, both the said companies issued two cheques each amounting to `75 lacs in favour of M/s Mahanivesh Oils & Foods Pvt. Ltd., the petitioner company, where Smt. Alka Rajvansh – wife of Mr Homi Rajvansh was a Director.

2.5 On 16.02.2005 and 17.02.2005, M/s Mahanivesh Oils and Foods Pvt. Ltd., issued two cheques of `1,32,00,00/- and `10,81,000/- respectively in favour of M/s Uppal Agencies Pvt. Ltd. for purchase of the ground floor and basement of the property situated at E-14/3, Vasant Vihar, New Delhi (hereafter ‘the said property’).

2.6 It is alleged that Smt. Alka Rajvansh used the funds received from M/s Duoroyale Enterprises Ltd. and M/s Sri Radhey Trading Pvt Ltd. for purchasing the above-mentioned property pursuant to a sale deed dated 18.03.2005 executed by Shri B.K. Uppal in favour of the petitioner company. By the impugned order, the Deputy Director of Directorate of Enforcement has provisionally attached the said property under Section 5(1) of the Act considering it as the ‘proceeds of crime’. A charge sheet dated 30.07.2010 was filed in the court of Chief Metropolitan Magistrate, Delhi wherein Smt. Alka Rajvansh was charged under Sections 120B, 403, 409 and 420 of IPC.

3. The learned counsel for the petitioner contended as under:-

3.1 That Section 5 of the Act requires that a person must have been charged of having committed a scheduled offence for provisionally attaching his property which is considered to be the proceeds of crime. It was contended that the provisions of the Act have been applied retrospectively as Section 420 and 120B of Indian Penal Code for which the petitioner has been charged with were not a part of scheduled offences at the time of commission of the offence in the year 2005 and said provisions were added in Part A of the Schedule by the Prevention of MoneyLaundering (Amendment) Act, 2009 effective from 01.06.2009.

3.2 That the amendment made in 2009 is substantive and is prospective in nature and, therefore, the impugned order is bad in law as provisions of the Act have been applied retrospectively and in violation of the mandate of Article 20(1) of the Constitution of India. Reference was made to Rao Shiv Bahadur Singh and Anr. v. The State of Vindhya Pradesh: AIR 1953 SC 394 and Soni Devrajbhai Babubhai v. State of Gujarat: (1991) 4 SCC 298.

3.3 That there cannot be any question of attachment of the property under Section 8(5) of the Act as the petitioner cannot be prosecuted under the provisions of the Act for the offence of money laundering since the date of commission of the offence is prior to the date when the Act came into force, i.e., 01.07.2005. A conjoint reading of sub-sections (3), (5) and (6) of Section 8 of the Act as in force prevalent at the material time provides that the attachment of property is directly related to the conviction of accused person for any scheduled offence and an order of attachment of property becomes final only after the court comes to the conclusion that the offence of money laundering has been committed.

3.4 That Section 5(1) of the Act, as in force at the material time, provides that the concerned officer must record his ‘reason to believe’ that the accused is likely to conceal, transfer or deal with the proceeds of crime in a manner which may result in frustrating any proceedings relating to the confiscation of such proceeds of crime. It was contended that no such reason had been provided in the impugned order which provisionally attached the said property after more than 9 years from the date of commission of the alleged offence.

4. The learned counsel for the respondent contended as under:-

4.1 That the impugned order is valid and legal and does not violate Article 20(1) of the Constitution of India. Reliance was placed on Ratan Lal v. State of Punjab: AIR 1965 SC 444.

4.2 That the proceedings of attachment of property are independent of the proceedings for the offence of money-laundering or the scheduled offence.

4.3 That any property, if involved in the money laundering offences, would be liable to attachment and confiscation irrespective of whether it remains in the name of the accused persons or other persons. Section 3 of the Act covers all purchases of moveable and immovable property inducting or integrating proceeds of crime.

4.4 That the date of commission of the scheduled offence is not relevant; what is relevant is the date of the offence of money laundering. Reliance was placed on decision of Andhra Pradesh High Court in B. Ramaraju & Ors. v. Union of India: (2011) 164 Comp Cas 149 (AP).

4.5 That the scheduled offences incorporated by the Prevention of Money-Laundering (Amendment) Act, 2009, with effect from 01.06.2009, have a retrospective effect. Reliance was placed on decision of Gujarat High Court in Alive Hospitality and Food Private Limited v. Union of India: Special Civil Application No.4171/2012, decided on 31.07.2013.

4.6 That the impugned order was passed after considering all the material on record and recording the reasons to believe that the said property is the proceeds of crime.

4.7 That the impugned provisional order was confirmed by the Adjudicating Authority by an order dated 21.07.2014. (This was not mentioned during oral submissions but was included in a note filed subsequently).

5. Despite sufficient opportunity, the respondent did not file any counter affidavit to the petition. After the hearings were concluded, a written note on submissions was filed which indicated that the Adjudicating Authority had, subsequent to the impugned order, recorded a finding that the property in question was involved in money laundering. This Court was further informed that the petitioner had preferred an appeal under Section 26 of the Act before the Appellate Tribunal impugning the order of the Adjudicating Authority. However, both the parties requested that the contentions raised be decided on merit.

Conclusion and Reasons

6. It is not disputed that the property sought to be attached under Section 5 of the Act – E-14/3, Vasant Vihar, New Delhi – was purchased on 18.03.2005 i.e. prior to 01.07.2005, that is, prior to the Act coming into force. In the circumstances, the principal controversy to be addressed is whether any proceedings under the Act could lie in respect of the said asset.

7. The Act owes its genesis to the joint initiatives taken by several nations. The international community recognised that money laundering posed a serious threat to the financial systems of countries as well as a threat to their sovereignty and integrity. Having realized the threat of money laundering and its adverse effect, the international community took several initiatives to combat this threat including the following: The United National Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances called for the confiscation of proceeds of crime related to drugs and further measures for preventing money laundering; in 1989, the Basel Statement of Principles provided the framework of policies and procedures to be adhered to by banks for dealing with the issue of money laundering; at a Summit of seven nations held in Paris in July 1989; Financial Action Task Force (FATF) was established to examine the problems of money laundering; the “Political Declaration and Global Programme of Action” adopted by the United Nations General Assembly by its Resolution of 23rd February, 1990 called upon the Member States to develop a mechanism to prevent financial institutions from being used for money laundering and further enact legislations for prevention of money laundering; and in a special session of the United Nations held for ‘Countering World Drug Problem Together’ held in June 1998, a declaration was made with respect to combating and prevention of money laundering.

8. India is also a signatory to some of the aforesaid initiatives. In conformity with the international opinion to take measures for combating money laundering, the Prevention of Money Laundering Bill, 1999 was introduced. This Bill was met with a number of objections at various stages but was subsequently passed leading to the enactment of the Act in 2003. Pursuant to a notification issued by the Central Government, the Act came into force with effect from 1st July, 2005. The statement of objects and reasons appended to the Prevention of Money Laundering Bill indicates that the “objective was to enact a comprehensive legislation inter alia for preventing money laundering and connected activities confiscation of proceeds of crime, setting up of agencies and mechanisms for coordinating measures for combating money-laundering, etc”. It was also indicated that the proposed Act was “an Act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto”.

9. Chapter II of the Act contains provisions relating to the offence of money-laundering. Section 2(p) of the Act defines money-laundering to have the meaning assigned to it in Section 3 of the Act. Section 3 of the Act enacts money-laundering to be an offence. It is relevant to note that Section 3 of the Act was amended by Prevention of Money-Laundering (Amendment) Act, 2012 with effect from 03.01.2013. Prior to the said Amendment, Section 3 of the Act read as under:-

“Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected it as untainted property shall be guilty of offence of money-laundering.”

After the amendment effective from 03.01.2013, the said Section reads as under:-

“Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering”

It is seen from the above that the scope of the offence of money-laundering has been widened by virtue of the Prevention of Money-Laundering (Amendment) Act, 2012. Section 3 of the Act now also takes within its sweep any person who assists or is a party or is involved in any process or activity connected with concealment, possession, acquisition or use of the proceeds of crime.

10. Section 4 provides that the offence of money-laundering shall be punishable with rigorous imprisonment for a term of not less than three years and may extend to seven years and also a fine upto Rupees Five lacs. In cases of proceeds relating to the specified offences, the term can extend upto 10 years.

11. Chapter III of the Act is captioned “Attachment, Adjudication and Confiscation”. Section 5 of the Act provides for the attachment of property involved in money-laundering and as originally enacted and brought in force with effect from the 01.07.2005 reads as under:-

“Attachment of Property involved in Money-laundering- (1) Where the Director or any other officer not below the rank of Deputy Director authorized by the Director for the purposes of the section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that-

a) any person is in possession of any proceeds of crime;
b) such person has been charged of having committed a scheduled offence
c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter,

he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:

Provided that no such order of attachment shall be made unless, in relation to an offence under:

(i) Paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded to a Magistrate under section 173 of the Code Of Criminal Procedure, 1973 (2 of 1974); or

(ii) Paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed for taking cognizance of an offence by the Special Court constituted under sub-section (1) of Section 36 of the Narcotic and Psychotropic Substances Act, 1985 (61 of 1985)

(2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed.

(3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of section 8, whichever is earlier.

(4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.

Explanation —For the purposes of this sub-section “person interested”, in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.

(5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.”

By virtue of Section 3(b) of the Act 21 of 2009, the provisos to sub-section 1 of Section 5 were substituted to read as under:-

“Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:

Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in moneylaundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.”

Section 5(1) of the Act was further amended by Prevention of Money-Laundering (Amendment) Act, 2012. With effect from 03.01.2013 Section 5(1) of the Act reads as under:-

“5.(1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that—

(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter,

he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:

PROVIDED that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:

PROVIDED FURTHER that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the nonattachment of the property is likely to frustrate any proceeding under this Act.”

12. Section 17 of the Act empowers a Director or an Officer not below the rank of Deputy Director to conduct search and seizure operations, if on the basis of information, he has reason to believe that any person

“(i) has committed any act which constitutes moneylaundering, or
(ii) is in possession of any proceeds of crime involved in money laundering, or
(iii) is in possession of any records relating to moneylaundering, or
(iv) is in possession of any property related to crime,”

Similarly, Section 18 empowers an authority so authorized on behalf of the Central Government to search any person who is believed to have secreted about his person or has under his possession, ownership or control, any record or proceeds of crime.

13. By virtue of Section 5(5) of the Act, the concerned officer who provisionally attaches any property under Section 5(1) is required to file a complaint stating the facts of such attachment before the Adjudicating Authority. Similarly, Section 17(4) of the Act and Section 18(10) of the Act also require the officer or the authority which has seized any record or property under Section 17 or 18 of the Act to make an application to the Adjudicating Authority.

14. Section 8 of the Act provides for adjudication of the complaint or the applications made under Section 5(5), 17(4) or 18(10) of the Act. Section 8(1) of the Act provides that where on receipt of complaints or applications as the case may be, the Adjudicating Authority has a reason to believe that any person has committed an offence under Section 3 of the Act or is in possession of proceeds of crime, he may serve a notice to such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which such person has acquired the property which has been attached under Section 5(1) or seized under Section 17 or Section 18 of the Act. Section 8(2) of the Act provides that the Adjudicating Authority shall after considering the reply, if any, to the notice under Section 8(1) of the Act and after hearing the aggrieved person and the director and after taking into account all relevant material, record a finding whether the property (or properties) referred to in the notice issued under Section 8(1) of the Act is (are) involved in money-laundering.

15. In cases where the Adjudicating Authority confirms that the property is involved in money-laundering, he is required to record a finding that the property attached is involved in money-laundering. Such attachment shall continue during the proceedings relating to the offence under the Act before any Court or any other corresponding law or before the competent court outside India. The order of the Adjudicating Authority shall become final after the order of confiscation is passed by the Special Court either under Section 8(5) of the Act where the trial has been concluded or under Section 8(7) of the Act where the trial cannot be conducted. In cases where the property has been attached or seized relates to a crime tried in a country outside India and with whom India has reciprocal arrangement, the order of adjudication shall become final on an order passed under Section 58B of the Act or Section 60(2A) of the Act.

16. In cases where the order of confiscation has been made either under Section 8(5), 8(7), 58B or Section 60(2A) of the Act, the property ordered to be confiscated shall vest with the Central Government free from all encumbrances.

17. It is clear from the above scheme that any provisional attachment under Section 5(1); seizure under Section 17 or 18 of the Act; or the order of attachment by the adjudicating authority under Section 8(2) is founded on the fundamental premise that the properties attached/seized “are involved in money-laundering”.

18. In the present case, the impugned order has been made under Section 5(1) of the Act. A plain reading of Section 5(1) of the Act indicates that where the officer concerned has reason to believe, on the basis of material in his possession that any person: “(a) is in possession of any proceeds of crime; and (b) that such proceeds are likely to be concealed, transferred or dealt with in any manner that may frustrate any proceedings relating to confiscation of such proceeds of crime under this Chapter”, he may make an order for provisional attachment of “such property”. The use of the word ‘such’ clearly indicates that the reference is to the property mentioned in the preceding portion of Section 5(1) of the Act, that is, proceeds of crime.

19. Section 2(u) of the Act defines proceeds of crime and reads as under:-

“proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;”

20. Thus, a conjoint reading of Section 5(1) read with Section 2(u) of the Act clearly indicates that the power to attach is only with respect to the property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence or the value of such property.

21. Thus, plainly, the occurrence of a scheduled offence is the substratal condition for giving rise to any proceeds of crime and consequently, the application of Section 5(1) of the Act. A commission of a scheduled offence is the fundamental pre-condition for any proceeding under the Act as without a scheduled offence being committed, the question of proceeds of crime coming into existence does not arise.

22. In view of the above, the contention that the Act is completely independent of the principal crime (scheduled offence) giving rise to proceeds of crime is unmerited. It is necessary to bear in mind that the substratal subject of the Act is to prevent money-laundering and confiscate the proceeds of crime. In that perspective, there is an inextricable link between the Act and the occurrence of a crime. It cannot be disputed that the offence of money-laundering is a separate offence under section 3 of the Act, which is punishable under Section 4 of the Act. However as stated earlier, the offence of money-laundering relates to the proceeds of crime, the genesis of which is a scheduled offence. In the aforesaid circumstances, before initiation of any proceeding under Section 5 of the Act, it would be necessary for the concerned authorities to identify the scheduled crime. The First Proviso to Section 5 also indicates that no order of attachment shall be made unless in relation to a schedule offence a report has been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973 or a complaint has been filed by a person authorised to investigate the scheduled offence before a Magistrate or Court for taking cognizance of the scheduled offence. Thus, in cases where the scheduled offence is itself negated, the fundamental premise of continuing any proceedings under the Act also vanishes. Such cases where it is conclusively held that a commission of a scheduled offence is not established and such decision has attained finality pose no difficulty; in such cases, the proceedings under the Act would fail.

23. It was contended by Mr Bhardwaj that, in terms of Section 8(5) of the Act, the attachment would continue till the conclusion of a trial of an offence under the Act before the Special Court irrespective of whether the person accused of the scheduled crime has been acquitted. In my view, this contention is also not acceptable. If the crime, which has allegedly resulted in the proceeds attached under the Act, is not established, the basis of the attachment would cease to exist and the question of proceeding further under the Act would not arise. The trial for an offence of money-laundering is also predicated on commission of a scheduled crime and would have to be terminated. It is only in cases where it is found that a scheduled crime has been committed that the question of determining whether an offence of money-laundering is made out would survive. Thus, in cases where the persons accused of a scheduled offence are acquitted, the fundamental premise that any proceeds have been derived or obtained from any activity relating to a scheduled offence by either the persons accused or any other person linked to them would also not hold good and, therefore, any proceeding initiated under the Act would have to be terminated.

24. The next issue to be examined is whether the order of provisional attachment can be issued only in respect of property that is in possession of a person accused of a scheduled offence. In view of the statutory amendment to Section 5 of the Act carried out by virtue of Prevention of Money-Laundering (Amendment) Act, 2012, this controversy does not survive. Prior to the said amendment, the concerned officer could provisionally attach proceeds of crime if he had reasons to believe that, “(a) any person is in possession of any proceeds of crime; (b) such person has been charged of having committed a scheduled offence; and (c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime”. With effect from 01.03.2013, clause (b) has been deleted and it is now no longer necessary that the person who is in possession of the property alleged to be proceeds of crime must also be charged with a scheduled offence. In the circumstances, the order of provisional attachment could be issued against any property in possession or any person even if the said person is not alleged to have committed the scheduled offence.

25. However, such powers are not unbridled and there are several conditions that must be met before any property can be attached or confiscated. First and foremost, it is necessary that the property sought to be attached is one, which the concerned officer has reason to believe is the proceeds of a scheduled crime. Secondly, a provisional attachment under Section 5 is only in aid of adjudication under Section 8(2) of the Act, which may result in the Adjudicating Authority recording a finding that the property concerned is involved in money-laundering; therefore, it is also necessary that an offence of money-laundering is believed to have been committed and the same bears a live link with the property sought to be provisionally attached. Section 5 of the Act does not stand independent of Section 3 of the Act and unless it is believed that an offence of moneylaundering has been committed the question of attaching any property provisionally under Section 5 would not arise.

26. Mr Bhardwaj had referred to the decision of the Gujarat High Court in Alive Hositality and Foods Private Limited (supra) wherein the court had observed that: “On the text and authority of our Constitution while it may perhaps gainfully be contended that conviction for the offence of money-laundering cannot be recorded if the said offence is committed prior to the enforcement of Section 3 of the Act, such a contention cannot be advanced to target proceedings for attachment and confiscation as these fall outside the pale of the prohibitions of the Constitution, in particular Article 20(1)”. However, I am unable to persuade myself to concur with that view principally for the reason that Section 5 is not a standalone provision; it is in aid of adjudication under Section 8 of the Act and final vesting of the attached property with the Central Government under Section 9 of the Act. The Adjudicating Authority is required to return a finding under Section 8(2) of the Act whether the property is attached/seized/frozen. And, by virtue of Section 8(3) of the Act, if the Adjudicating Authority decides that the property is involved in moneylaundering, the attachment, retention and freezing of the property shall continue during the pendency of proceedings relating to the offence under the Act or a corresponding law of any other country with whom India has a bilateral agreement. Thus, it is not possible to envisage provisional attachment of any property in absence of an offence of money-laundering. Consequently, in a given case where the offence of money-laundering cannot be made out as the acts constituting such offence were prior to the Act being brought in force, it would be impermissible for the authorities concerned to attach the property representing the proceeds of crime.

27. The central issue in the present case is not on whether the scheduled offence was committed, but whether the attachment under Section 5 of the Act can be sustained where the principal offence as well as the offence of using its proceeds is alleged to have been committed prior to the Act coming into force.

28. As stated hereinbefore, the scope of the offence of money-laundering was widened by virtue of the Prevention of Money-Laundering (Amendment) Act, 2012 and the rigor of Section 3 of the Act also extends to any person who assists or is a party or is involved in any process or activity connected with concealment, possession, acquisition or use of proceeds of crime. However, the subject of the offence continues to be the proceeds of crime and its involvement in money-laundering. This again draws one to the central controversy in this petition, that is, whether any property of any person could be attached as allegedly involved in moneylaundering prior to the enactment of the Act or acquired as a result of a crime, committed prior to the Act coming into effect.

29. The Act is a penal statute and, therefore, can have no retrospective or retroactive operation. Article 20(1) of the Constitution of India expressly forbids that no person can be convicted of any offence except for the violation of a law in force at the time of the commission of the act charged as an offence. Further, no person can be inflicted a penalty greater than what could have been inflicted under the law at the time when the offence was committed. Clearly, no proceedings under the Act can be initiated or sustained in respect of an offence, which has been committed prior to the Act coming into force. However, the subject matter of the Act is not a scheduled offence but the offence of money-laundering. Strictly speaking, it cannot be contended that the Act has a retrospective operation because it now enacts that laundering of proceeds of crime committed earlier as an offence. In The Queen v. The Inhabitants of St. Mary, Whitechapel (1848) 12 QB 120, the Court pointed out that “The Statute which in its direct operation of prospective cannot be properly be called a retrospective statute because a part of the requisites for that action is drawn from the time antecedent to its passing”. Thus, with effect from 1st June, 2009 laundering proceeds of crime under Section 420 of the IPC is enacted as an offence of money-laundering punishable under Section 4 of the Act. It is important to note that the punishment under Section 4 of the Act is not for commission of a scheduled offence but for laundering proceeds of a scheduled crime. The fact that the scheduled crime may have been committed prior to the Act coming into force would not render the Act a retrospective statute as only the offence of money-laundering committed after the enforcement of the Act can be proceeded against under the Act.

30. The respondent’s contention that the relevant date would be the date of offence of money-laundering and not that of the commission of the scheduled offence is merited and the impugned order cannot be set aside only on the ground that it has been issued in respect of proceeds of a scheduled crime which was allegedly committed prior to 1st July, 2005.

31. The next contention to be considered is whether in the given facts and circumstances, any offence or money-laundering had been made out to warrant an issuance of the impugned order. It is alleged that on 10th February, 2005, MIL through its Director issued cheques aggregating `1.5 crores in favour of its holding companies, namely, M/s Duoroyale Enterprises Ltd. and M/s Shri Radhey Trading Pvt. Ltd. and these companies in turn issued two cheques of `75 lacs each in favour of the petitioner. It is suggested that these amounts were proceeds of crime received by the petitioner as a result of a criminal activity and bulk of these funds were utilized by the petitioner for paying the consideration for acquiring the property in question. It was argued that all actions of integrating the money by purchase of immovable property would fall within the definition of ‘money-laundering’. In this respect it is relevant to note that the sale deed in respect of the property was executed on 18.03.2005. Thus, even if the allegations made by the respondent are assumed to be correct, the proceeds of crime had been used by the petitioner for acquisition of the property much prior to the Act coming into force. The process of activity of utilising the proceeds of crime, if any, thus, stood concluded prior to the Act coming into force. Even if it is assumed that the funds received from M/s Duoroyale Enterprises Ltd. and M/s Shri Radhey Trading Pvt. Ltd. were proceeds of crime and were properties involved in money-laundering, such funds had come into possession of the petitioner prior to the Act coming into force. Thus, funds were already projected as untainted funds unconnected with the crime for which Mr Homi Rajvansh and other persons are accused. The funds had, thus, been laundered at a time when money-laundering was not an offence and proceedings under the Act cannot be initiated.

32. Although, the Respondent has not contended so in clear terms, it appears that the respondents are proceeding on the basis that an offence under Section 3 of the Act is a continuing offence. According to the respondent, the possession of any property linked to a scheduled offense irrespective of when it was acquired would itself constitute the offence of money-laundering. It is important to understand the import of such interpretation. This would mean that a person who has committed a scheduled crime; acquired proceeds therefrom; and thereafter, projected it as untainted money, prior to the Act coming into force, would nonetheless be guilty of the offence of money-laundering only for the reason that he is in possession of some property. This is so because the definition of proceeds of crime also includes the value of any property derived or obtained as a result of criminal activity relating to a scheduled crime. Further any such property – even in the hands of a person not accused of the scheduled crime or offense of money-laundering – would also be subject to the proceedings under the Act. Thus, practically, a person guilty of a scheduled offence who has acquired any benefit in relation to the scheduled offence would in effect also be guilty of the offence of money-laundering immediately on the Act coming into force. If such an interpretation is sought to be provided, the grievance of the petitioner that a penal provision is sought to be given a retrospective operation would be justified and this would clearly offend Article 20(1) of the Constitution of India as an offender of a scheduled crime would now be visited with a greater punitive measure than as could be inflicted at the time when the scheduled offence was committed. Given the wide definition of “proceeds of crime” it would be contended that irrespective of how far back in the past a scheduled offence was committed, the authorities could nonetheless try persons for an offence of money-laundering as well as confiscate the value of the property alleged to have been derived or obtained by criminal activity relating to the scheduled offence. This would be notwithstanding that the proceeds derived from a scheduled offence have undergone significant changes and have been integrated in legitimate economic activity. The properties could also be traced in the hands of persons unconnected with the scheduled offence. There is no indication from the express language of the Act, that the Legislature intended the Act to be retroactive or operative with retrospective effect.

33. The Act was enacted as the international community recognised the threat of money-laundering whereby money generated from illegal activities such as trafficking and drugs etc. was finding its way into the economic system of a country and funding further criminal activity. The expression money-laundering would ordinarily imply the conversion and infusion of tainted money into the main stream of economy as legitimate wealth. According to the respondent, there are three stages to a transaction of money-laundering: The first stage is Placement, where the crimnals place the proceeds of the crime into normal financial system. The second stage is Layering, where money introduced into the normal financial system is layered or spread into various transactions within the financial system so that any link with the origin of the wealth is lost. And, the third stage is Integration, where the benefit or proceeds of crime are available with the criminals as untainted money. There is much merit in this description of money-laundering and this also indicates that, by its nature, the offence of money-laundering has to be constituted by determinate actions and the process or activity of money-laundering is over once the third stage of integration is complete. Thus, unless such acts have been committed after the Act came into force, an offence of money-laundering punishable under Section 4 would not be made out. The 2013 Amendment to Section 3 of the Act by virtue of which the words “process or activity connected with proceeds of crime and projecting it as untainted property” were substituted by the words “any process or activity connected with proceeds of crime including concealment, possession, acquisition or use and projecting or claiming it as untainted property”. The words “concealment, possession, acquisition or use” must be read in the context of the process or activity of money-laundering and this is over once the money is laundered and integrated into the economy. Thus, a person concealing or coming into possession or bringing proceeds of crime to use would have committed the offence of money-laundering when he came into possession or concealed or used the proceeds of crime. For any offence of money-laundering to be alleged, such acts must have been done after the Act was brought in force. The proceeds of crime which had come into possession and projected and claimed as untainted prior to the Act coming into force, would be outside the sweep of the Act.

34. In the circumstances, it cannot be readily accepted that any offence of money-laundering had been committed after the Act coming into force. This Act cannot be read as to empower the authorities to initiate proceedings in respect of money-laundering offences done prior to 01.07.2005 or prior to the related crime being included as a scheduled offence under the Act.

35. Learned counsel for the respondent has contended that Article 20 of the Constitution of India prohibited conviction or sentence under an ex-post facto law but not the trial thereof. He relied on the decision of the Andhra Pradesh High Court in V. Suryanarayhana Prabhakara Gupta and Anr. v. Union of India (UOI): W.P. No. 27898 of 2010, decided on 25.08.2011 (MANU/AP/0518/2011) in support of the aforesaid contention and drew attention of this Court to the following passage.

“From the abovementioned Judgment, the principle that can be deducted is that, Article 20 prohibits only conviction or sentence under an “ex post facto” law and not the trial thereof and such trial cannot “ipso facto” be held to be unconstitutional. In view of this undisputed principle, the resistance offered by the petitioners to the impugned orders, is totally misconceived and unacceptable. The present one is not the stage for securing protection under Article 20 of our Constitution.”

On the strength of the aforesaid view, it was urged that, whereas, the trial in respect of an offence of money-laundering may be continued and the proceeds of crime sought to be believed to be laundered may also be attached but a conviction for an offence of money-laundering committed prior to the enforcement of the Act may not follow.

36. In my view, the aforesaid contention is also without any merit. There is no question of any trial being conducted for an offence for which a conviction cannot, in law, follow. A law which seeks to impose penalty for any act constituting an offence which when done or committed was not an offence would itself fall foul of Article 20(1) of the Constitution of India. In Rao Shiv Bahadur Singh & Another v. State of Vindhya Pradesh (supra) the Supreme Court had unequivocally held that Article 20 of the Constitution of India was not confined to the validity of the law but extended to conviction or the sentence. The Supreme Court drew a distinction between the Sections 9(3) and 10 of Article 1 of the American Constitution which prohibited passing of ex-post facto law and Article 20 of the Indian Constitution. The Court held that the language of Article 20 was much wider and the prohibition under the Article was not confined to passing of validity of the law but extended to conviction or the sentence. The relevant passage from the said decision is extracted below:-

“8. ……..On a careful consideration of the respective articles, one is struck by the marked difference in language used in the Indian and American Constitutions. Sections 9(3) and 10 of Article 1 of the American Constitution merely say that “No ex post facto law shall be passed …” and “No State shall pass ex post facto law …” But in article 20 of the Indian Constitution the language used is in much wider terms, and what is prohibited is the conviction of a person or his subjection to a penalty under ex post facto laws. The prohibition under the article is not confined to the passing or the validity of the law, but extends to the conviction or the sentence and is based on its character as an ex post facto law. The fullest effect must therefore be given to the actual words used in the article. Nor does such a construction of Article 20 result in giving retrospective operation to the fundamental right thereby recognised.”

37. In that case the, the first and the second appellants before the Supreme Court were Minister of Industries and the Secretary to the Government, Commerce and Industries Department respectively of the then United State of Vindhya Pradesh. The prosecution alleged that on 31st October, 1947 Panna Durbar (Panna being a part of the United States of Vindhya Pradesh) had directed Panna Diamond Mining Syndicate to stop the mining work. It is alleged that the appellants entered into a conspiracy at the beginning of February, 1949 to obtain illegal gratification for reviewing the previous order directing stoppage of mining work. The appellants before the Supreme Court were charged with criminal conspiracy for taking illegal gratification by a public servant for doing an official act and also commission of forgery in connection therewith. They were charged under Sections 120-B, 161, 465 and 466 of the Indian Penal Code, as adapted by the Vindhya Pradesh Ordinance 48 of 1948. The appellants were tried by a Special Judge under the Vindhya Pradesh Criminal Law Amendment (Special Court) Ordinance 5 1949 and were acquitted. The State filed an appeal to the Judicial Commissioner which led to the conviction of the appellants. The validity of the convictions and sentences were challenged on the ground of violation of Articles 14 and 20 of the Constitution. The appellants contended that the trial conducted under the Special Procedure prescribed by the aforesaid Ordinance was discriminatory and therefore unconstitutional.

38. The challenge in relation to Article 20 of the Constitution arose as the appellants had been convicted for offences under various Sections of the Indian Penal Code as adapted in the United States of Vindhya Pradesh by Ordinance 48 of 1949 which was passed on 11th September, 1949. The said Ordinance was passed on 11th September, 1949 while the offences were found to have been committed in the month of February, March and April, 1949 – prior to the Ordinance. It is in this context that it was urged that the convictions which were made after the constitution came into force were in respect of an ex post facto law creating offences after the commission of the acts charged as offences and, therefore, were unconstitutional. The Supreme Court observed that the aforesaid contention raised two important questions –“(1) the proper construction of Article 20 of the Constitution and (2) whether the various acts in respect of which the appellants were convicted constituted offences in this area only from the date when Ordinance 48 of 1949 was passed or were already so prior thereto.” In the context of the trial itself having been conducted under a procedure which was different from the procedure as was prevalent at the time of commission of the alleged offences, the Supreme Court observed that:

“what is prohibited under Article 20 is only conviction or sentence under an ex post facto law and not the trial thereof. Such trial under a procedure different from what obtained at the time of the commission of the offence or by a court different from that which had competence at the time cannot ipso facto be held to be unconstitutional. A person accused of the commission of an offence has no fundamental right to trial by a particular court or by a particular procedure, except insofar as any constitutional objection by way of discrimination or the violation of any other fundamental right may be involved.”

39. The Supreme Court next considered the States’s contention that since Vindhya Pradesh Ordinance 48 of 1949 – though enacted on 11th September, 1949 – was made retrospective from 09th August, 1948, the offences for which the appellants were charged were offences under the said ordinance. Thus, the convictions could not be stated to be in respect of a law not in force at the time when the offences were committed. This contention was rejected by the Supreme Court in the following words:-

“This, however, would be to import a somewhat technical meaning into the phrase “law in force” as used in Article 20. “Law in force” referred to therein must be taken to relate not to a law “deemed” to be in force and thus brought into force but the law factually in operation at the time or what may be called the then existing law. Otherwise, it is clear that the whole purpose of Article 20 would be completely defeated in its application even to ex post facto laws passed after the Constitution. Every such ex post facto law can be made retrospective, as it must be, if it is to regulate acts committed before the actual passing of the Act, and it can well be urged that by such retrospective operation it becomes the law in force at the time of the commencement of the Act. It is obvious that such a construction which nullifies Article 20 cannot possibly be adopted. It cannot therefore be doubted that the phrase “law in force” as used in Article 20 must be understood in its natural sense as being the law in fact in existence and in operation at the time of the commission of the offence as distinct from the law “deemed” to have become operative by virtue of the power of legislature to pass retrospective laws. It follows that if the appellants are able to substantiate their contention that the acts charged as offences in this case have become such only by virtue of Ordinance 48 of 1949 which has admittedly been passed subsequent to the commission thereof, then they would be entitled to the benefit of Article 20 of Constitution and to have their convictions set aside. This leads to an examination of the relevant pre-existing law. ”

40. In view of the above, the ratio of the aforesaid decision cannot be read to support the view of the Andhra Pradesh High Court in the passage quoted above.

41. The next aspect that is to be examined is whether the necessary conditions for passing the impugned order under Section 5(1) had been met. As discussed hereinbefore, a concerned officer (a Director or any other officer not below the rank of Deputy Director, so authorised by the Director) may order for provisional attachment of property only where the twin conditions as specified in Section 5(1) are satisfied, namely, the concerned officer has reason to believe, on the basis of material in his possession, that (i) any person is in possession of any proceeds of crime; and (ii) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under Chapter III of the Act. In addition, the concerned officer records the reasons in writing.

42. In the present case, the respondent could not point out any material to counter the petitioner’s contention that there was no material on record, which could possibly lead to a belief that the petitioner is likely to transfer or conceal the property in any manner. As indicated earlier, the concerned officer must have a reason to believe on the basis of material in his possession that the property sought to be attached is likely to be concealed, transferred or dealt with in a manner which may result in frustrating any proceedings for confiscation of their property under the Act.

43. The expression ‘reason to believe’ has been defined under Section 26 of the Indian Penal Code as under:-

“26. “Reason to believe”.–A person is said to have “reason to believe” a thing, if he has sufficient cause to believe that thing but not otherwise.”

Thus, on a plain reading of the aforesaid definition, the Deputy Director, Directorate of Enforcement – the concerned officer who passed the impugned order – would require to have sufficient cause to believe that the property sought to be attached would be transferred or dealt with in a manner which would frustrate proceedings relating to confiscation of such property. Further, the officer was also required to record the reasons for such belief. However, there is nothing in the impugned order, which indicates that the concerned officer had any cause to so believe.

44. The expression ‘reason to believe’ has also been the subject matter of several decisions of the Supreme Court albeit in the context of other laws.

In the case of Aslam Mohd. Merchant v. Competent Authority & Ors: (2008) 14 SCC 186, the Supreme Court considered the meaning of the expression ‘reason to believe’ in the context of Narcotic Drugs and Psychotropic Substances Act, 1985. The Supreme Court referred to its earlier decisions rendered in the context of Section 147 of the Income Tax Act, 1961 where a similar expression has been used to clothe an Assessing Officer with the power to reopen income tax assessments. In Phool Chand Bajrang Lal v. ITO: (1993) 203 ITR 456 (SC), the Supreme Court held as under:

“Since the belief is that of the Income- tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief.”

45. In Income Tax Officer v. Lakhmani Mewal Das: 1976 SCR (3) 956, the Supreme Court explained that powers of Income Tax Officer to reopen an assessment, though wide, are not plenary as the words used are ‘reason to believe’ and not ‘reason to suspect’. The Court held that there should be a “live link or close nexus” between the material before the Income Tax Officer and the formation of his belief that the income had escaped assessment.

46. In the present case, there is no material that could suggest that the property sought to be attached was likely to be dealt with in a manner which would frustrate the confiscation of the property under the Act.

47. In Calcutta Discount Company v. Income Tax Officer: 1961 SCR (2) 241, the Supreme Court held as under:-

“The expression “reason to believe” postulates belief and the existence of reasons for that belief. The belief must be held in good faith: it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the Income Tax Officer: the forum of decision as to the existence of reasons and the belief is not in the mind of the Income Tax Officer. If it be asserted that the Income Tax Officer had reason to believe that income had been under assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable. The expression therefore predicates that the Income Tax Officer holds the belief induced by the existence of reasons for holding such belief. It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief; in other words, the Income Tax Officer must on information at his disposal believe that income has been under-assessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief, be it said, may not be based on mere suspicion: it must be founded upon information”

48. Although, the impugned order records that the concerned officer has reason to believe that the property in question is likely to be concealed, transferred or dealt with in a manner, which may result in frustrating the proceedings relating to confiscation of the said proceeds of crime, there is no reference to any fact or material in the impugned order which could lead to this inference. A mere mechanical recording that the property is likely to be concealed, transferred or dealt with would not meet the requirements of Section 5(1) of the Act. Consequently, the impugned order is likely to be set aside.

49. In view of the above, the petition is allowed and the impugned order is set aside. The writ petition along with pending application stand disposed of. The parties are left to bear their own costs.

VIBHU BAKHRU, J

JANUARY 25, 2016
RK

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IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.652 OF 2012

Union of India …Appellant
Versus
Mohanlal & Anr. …Respondents

JUDGMENT

T.S. THAKUR, J.
1. When this appeal came up for hearing before us on 11th April, 2012, it was contended by learned counsel for the appellant-Union of India that Standing Order No.1 of 1989 dated 13th June, 1989 which prescribes the procedure to be followed for seizure, sampling, safe keeping and disposal of the seized Drugs, Narcotics and Psychotropic substances is being followed throughout the country. It was also contended that Ministry of Finance, Department of Revenue, Government of India, has in terms of a Circular dated 23rd February, 2011 impressed upon the Chief Secretaries and the concerned police heads of the State Governments to ensure that instructions given and the procedure prescribed in the Standing Order aforementioned was strictly adhered to. These submissions notwithstanding, doubts about the procedure being actually followed persisted. Pilferage of the contraband goods and their return to the market place for circulation being a major hazard, this Court appointed Mr. Ajit Kumar Sinha, Senior Advocate, as Amicus Curiae, with a view to making a realistic review of the procedure for search, disposal or destruction of the narcotics and the remedial steps that need to be taken to plug the loopholes, if any.

2. On 3rd July, 2012 this Court after hearing the Amicus Curiae prima facie came to the conclusion that the procedure prescribed for the destruction of the contraband seized in different States was not being followed resulting in a very piquant situation in which accumulation of huge quantities of the seized drugs and narcotics has increased manifold the chances of their pilferage for re-circulation in the market. This Court also noted a report published in the timesofindia.indiatimes.com under the heading “Bathinda’s police stores bursting at seams with seized narcotics” from which it appeared that large quantities of seized drugs had accumulated over the years including opium, poppy husk, charas etc. apart from modern narcotic substances. The report suggested that 39 lakhs sedatives and narcotic tablets, 1.10 lakhs capsules, over 21,000 drug syrups and 1828 sedative injections apart from 8 kgs. of smack and 84 kgs. of ganja were awaiting disposal in Bathinda Police stores alone. The position was, according to Mr. Sinha, no better in other States especially those situate along the international borders. It was argued by the Amicus Curiae that without proper data from the authorities concerned, it was not possible to take stock of the magnitude of the problem no matter challenges posed by rampant drug abuse had acquired alarming proportions affecting the youth, some of whom are driven to commission of crimes on account of deleterious effects of drug abuse.

3. It was in the above backdrop that by an order dated 3rd July, 2012 passed in Criminal Appeal No.652 of 2012 this Court directed collection of information from the police heads of each one of the States through the Chief Secretaries concerned in regard to seizure, storage, disposal and destruction of the seized contraband and judicial supervision over the same. Specific queries were formulated in the order passed by us with a direction to the Chief Secretaries of the States concerned to serve the same upon the Directors General of Police for a report to be forwarded through the Registrars General of the High Courts of the States concerned who were appointed Nodal Officers for that purpose. Registrars General were also asked to independently secure from the District and Sessions Judges concerned in their respective States, answers to the queries specified under the head “Judicial Supervision”. Chiefs of Central Government Agencies viz. Narcotics Control Bureau, Central Bureau of Narcotics, Directorate General of Revenue Intelligence and Commissionerates of Customs & Central Excise including the Indian Coast Guard were directed to issue similar queries to the officers concerned and to submit their respective reports detailing the information required in terms of the orders passed by this Court. The queries raised by this Court were in the following words:

“12.1. Seizure
(i) What narcotic drugs and psychotropic substances (natural and synthetic) have been seized in the last 10 years and in what quantity? Provide yearwise and districtwise details of the seizure made by the relevant authority.
(ii) What are the steps, if any, taken by the seizing authorities to prevent damage, loss and pilferage of the narcotic drugs and psychotropic substances (natural and synthetic) during seizure/transit?
(iii) What are the circulars/notifications/directions/guidelines, if any, issued to competent officers to follow any specific procedure in regard to seizure of contrabands, their storage and destruction? Copies of the same be attached to the report.

12.2. Storage
(i) Is there any specified/notified store for storage of the seized contraband in a State, if so, is the storage space available in each district or taluka?
(ii) If a store/storage space is not available in each district or taluka, where is the contraband sent for storage purposes? Under what conditions is withdrawal of the contraband permissible and whether a court order is obtained for such withdrawal?
(iii) What are the steps taken at the time of storage to determine the nature and quantity of the substance being stored and what are the measures taken to prevent substitution and pilferage from the stores?
(iv) Is there any check stock register maintained at the site of storage and if so, by whom? Is there any periodical check of such register? If so, by whom? Is any record regarding such periodic inspection maintained and in what form?
(v) What is the condition of the storage facilities at present? Is there any shortage of space or any other infrastructure lacking? What steps have been taken or are being taken to remove the deficiencies, if any?
(vi) Have any circulars/notifications/directions/guidelines been issued to competent officers for care and caution to be exercised during storage? If so, a copy of the same be produced.

12.3. Disposal/Destruction
(i) What narcotic drugs and psychotropic substances (natural and synthetic) have been destroyed in the last 10 years and in what quantity? Provide yearwise and districtwise details of the destruction made by the relevant authority. If no destruction has taken place, the reason therefor.
(ii) Who is authorised to apply for permission of the court to destroy the seized contraband? Has there been any failure or dereliction in making such applications? Whether any person having technical knowledge of narcotic drugs and psychotropic substances (natural and synthetic) is associated with the actual process of destruction of the contraband?
(iii) Was any action taken against the person who should have applied for permission to destroy the drugs or should have destroyed and did not do so?
(iv) What are the steps taken at the time of destruction to determine the nature and quantity of the substance being destroyed?
(v) What are the steps taken by competent authorities to prevent damage, loss, pilferage and tampering/substitution of the narcotic drugs and psychotropic substances (natural and synthetic) during transit from point of storage to point of destruction?
(vi) Is there any specified facility for destruction of contraband in the State? If so, a list of such facilities along with location and details of maintenance, conditions and supervisory bodies be provided.
(vii) If a facility is not available, where is the contraband sent for destruction purposes? Under whose supervision and what is the entire procedure thereof?
(viii) Is any record, electronic or otherwise prepared at the site of destruction of the contraband and by whom? Is there any periodical check of such record? What are the ranks/designation of the supervising officers charged with keeping a check on the same?

12.4. Judicial supervision
(i) Is any inspection done by the District and Sessions Judge of the store where the seized drugs are kept? If drugs are lying in the store, has the Sessions Judge taken steps to have them destroyed?
(ii) Is any report of the inspection conducted, submitted to the Administrative Judge of the High Court or the Registry of the High Court? If so, has any action on the subject being taken for timely inspection and destruction of the drugs?
(iii) Are there any pending applications for destruction of drugs in the district concerned, if so, what is the reason for the delay in the disposal of such application?
(iv) What level officers including the judicial officers are associated with the process of destruction?
(v) At what stages are the Magistrates/judicial officers/any other officer of the court associated with seizure/storage/destruction of drugs?
(vi) Are there any rules framed by the Court regarding its supervisory role in enforcement of the NDPS Act as regards seizure/storage/destruction of drugs?
(vii) What is the average time for completion of trial of NDPS matters?”

4. In compliance with the above directions, reports have been submitted by all the States except the States of Arunachal Pradesh, Jammu and Kashmir, Dadar & Nagar Haveli, Lakshadweep, Nagaland and Pondicherry. From a perusal of the reports so received the position that emerges in regard to disposal/destruction of narcotic drugs and psychotropic substance qua each State for the last 10 years may be summarised as under:

DETAILS OF SEIZURE AND DISPOSAL OF DRUGS
(STATEWISE)

1) ANDHRA PRADESH

2. ASSAM
(The Information pertains only to the period of 2010-2012)

3. BIHAR

Note:- No destruction of narcotic drugs and psychotropic substances have taken place at Patna zonal unit.
4. CHHATTISGARH

5. CUSTOMS AND CENTRAL EXCISE

6. CHANDIGARH

7. DELHI
· Delhi has provided two responses. One response has been provided by the NCB, Delhi and the other by the police heads of each of the district.
· The response by NCB, Delhi is as follows :-

· The Response by the police heads are as follows:-

8. DAMAN AND DIU

The UT Daman and Diu has informed the Total quantity by way of a detailed chart:

9. DIRECTORATE OF REVENUE INTELLIGENCE

10. GUJARAT
· The Response of the state is divided into two parts.
· One has been provided by the office of the Ministry of Home Affairs.
· As per the said response the total amount of contraband seized in 10 years are 28340.047 Kg. No division of the type has been provided.
· The total destruction in the last 10 years however is only 132.375 Kg
· The total amount of Contraband still in custody of the authorities is 28207.672 Kgs, i.e. 99.53% of the seized amount.
· The response of the NCB Zonal Unit is as follows:

11. GOA
The UT Chandigarh has informed the Total quantity by way of a detailed chart:

12. HARYANA

13. HIMACHAL PRADESH
The State of Himachal Pradesh has informed the Total quantity by way of a detailed chart:

14. JHARKHAND

15. KERALA

16. KARNATAKA
· The state of Karnataka divided its response in two parts. One is seizure by Police and the Other is seizure by NCB

17. MAHARASHTRA

18. MANIPUR

Note: The Total amount of Ganja seized post 2005 was 25913.225 kgs and the same is still lying with the authorities since the last pretrial disposal in 2005.

19. MADHYA PRADESH
· Madhya Pradesh has divided its response in two parts. One is seizure by Police and the other is seizure by NCB.

20. Ministry of Home Affairs NCB

21. ORISSA
· Orissa has divided its response in two parts. One is seizure by Police and the Other is seizure by Excise Officials.

22. PUNJAB

23. RAJASTHAN

24. SIKKIM

** The State Government of Sikkim has replied that the destruction is done as per the orders of the Trial Court on the conclusion of Trial. However, no details related to disposal has been provided.

25. TAMIL NADU

26. TRIPURA

27. UTTAR PRADESH
· There is huge discrepancy between the Quantity seized and the Quantity destroyed.

28. UTTARAKHAND

29. WEST BENGAL

Note:- West Bengal has stated that it does not have any immediate records available of destruction.

5. In regard to the storage of NDPS substances, the State Governments and the Central Agencies have furnished information which the learned Amicus Curiae has tabulated as under:

Annexure D

6. Similarly, in answer to the query as to the steps taken at the time of storage to determine the nature and the quantity of the substance being stored and measures to prevent substitution and/or pilferage from the stores, the State Governments have sent their replies which too have been summarised by the Amicus Curiae in the following words:

ANNEXURE-F
iii. What are the steps taken at the time of storage to determine the nature and quantity of the substance being store and measures to prevent substitution and pilferage from stores?

7. The reports submitted by the State Governments and the Central Agencies further claim that stock registers maintained at the storage sites are periodically checked by the staff mentioned in the reports. Another question that was asked from the State Governments and the Central Agency relates to the condition of the storage facilities, shortage of storage facilities, if any, and whether any steps have been taken or are being taken to remove the deficiencies. Answers to those queries suggest that no proper storage facilities are available in most of the States. For instance, in Gujarat no special storage facility is available for keeping the contraband, which is, therefore, stored in general muddamal room. In Assam the NBC Guwahati Zonal Unit is said to be running from a rented house and one secured room is earmarked for storage with triple locking system under the supervision of the Superintendent. In Imphal, the store room is overflowing with contraband. Since there is shortage of space, pre-trial disposal process has been initiated to decrease congestion in godowns. Although Mizoram Government claims that there is no lack of storage facility, no information as to any specific storage facility being earmarked for the purpose has been provided. In Tripura the enforcement branch is said to be maintaining the malkhana used for storage of contrabands. In Himachal Pradesh there is no storage facility except an old building used for the purpose, while in Chhattisgarh the storage facility is satisfactory but not sufficient for bulk storage. Similarly, Rajasthan has scarcity of storage facility. Jharkhand has no separate storage facility at all whereas Kerala has satisfactory storage facilities only in some of the districts. In Orissa and Bihar the storage facilities are totally insufficient and unsatisfactory. States of Haryana, Madhya Pradesh, Goa, Daman Diu and Dadar & Nagar Haveli and Andhra Pradesh claim to have no problems with storage facility while Tamil Nadu does not have any separate storage.

8. Directorate of Revenue Intelligence has not provided any information while NCB Zonal Office, Jodhpur has no shortage of space. NCB Zonal Office, Chandigarh has reported insufficiency of space and has started the process for construction of a specified storage facility. Customs and Central Excise Authority has reported that their godown is full and no more space is available.

9. In answer to the question as to who is authorised to apply to the Court to destroy the seized contraband and whether there has been any failure or dereliction in making such applications and whether any person having technical knowledge of narcotic drugs and psychotropic substance (natural and synthetic) is associated with the process of destruction of the contraband, the reply submitted by the State Governments suggest that different persons in different States have been authorised to make such applications to the Courts concerned except in Tripura where no particular person is authorised. In some cases Officer-incharge of the Police Station has been authorised while in others the I.O. is also empowered to apply for permission to destroy the contraband. In answer to the question whether any action has been taken against anyone who should have applied for permission to destroy the narcotics but had not done so, State Governments have all answered in the negative implying thereby that either no dereliction of duty has occurred on the part of any officer competent to apply for destruction or no action has been taken for any such dereliction.

10. Similarly, regarding the steps taken at the time of destruction to determine the nature and quantity of the substance being destroyed, the reports submitted by the State Governments give varying answers. There is no uniformity in the procedure adopted by those associated or in charge of the process of destruction. The reports suggest as if adequate steps are taken to prevent damage, loss, pilferage and tampering/substitution of the narcotic drugs and psychotropic substances from the point of search to the point of destruction but there is no uniformity or standard procedure prescribed or followed in that regard. Having said that we must mention that we are in these proceedings concerned with the following three issues only for the present:

(i) Seizure and sampling of the Narcotic drugs and Psychotropic substances
(ii) their storage and
(iii) their destruction
Seizure and sampling:
11. Section 52-A(1) of the NDPS Act, 1985 empowers the Central Government to prescribe by a notification the procedure to be followed for seizure, storage and disposal of drugs and psychotropic substances. The Central Government have in exercise of that power issued Standing Order No. 1/89 which prescribes the procedure to be followed while conducting seizure of the contraband. Two subsequent standing orders one dated 10.05.2007 and the other dated 16.01.2015 deal with disposal and destruction of seized contraband and do not alter or add to the earlier standing order that prescribes the procedure for conducting seizures. Para 2.2 of the Standing Order 1/89 states that samples must be taken from the seized contrabands on the spot at the time of recovery itself. It reads:

“2.2. All the packages/containers shall be serially numbered and kept in lots for sampling. Samples from the narcotic drugs and psychotropic substances seized, shall be drawn on the spot of recovery, in duplicate, in the presence of search witnesses (Panchas) and the person from whose possession the drug is recovered, and a mention to this effect should invariably be made in the panchnama drawn on the spot.”

Most of the States, however, claim that no samples are drawn at the time of seizure. Directorate of Revenue Intelligence is by far the only agency which claims that samples are drawn at the time of seizure, while Narcotics Control Bureau asserts that it does not do so. There is thus no uniform practice or procedure being followed by the States or the Central agencies in the matter of drawing of samples. This is, therefore, an area that needs to be suitably addressed in the light of the statutory provisions which ought to be strictly observed given the seriousness of the offences under the Act and the punishment prescribed by law in case the same are proved. We propose to deal with the issue no matter briefly in an attempt to remove the confusion that prevails regarding the true position as regards drawing of samples.

12. Section 52A as amended by Act 16 of 2014, deals with disposal of seized drugs and psychotropic substances. It reads:

“Section 52A : Disposal of seized narcotic drugs and psychotropic substances.
(1) The Central Government may, having regard to the hazardous nature of any narcotic drugs or psychotropic substances, their vulnerability to theft, substitution, constraints of proper storage space or any other relevant considerations, by notification published in the Official Gazette, specify such narcotic drugs or psychotropic substances or class of narcotic drugs or class of psychotropic substances which shall, as soon as may be after their seizure, be disposed of by such officer and in such manner as that Government may from time to time, determine after following the procedure hereinafter specified.
(2) Where any narcotic drug or psychotropic substance has been seized and forwarded to the officer-in-charge of the nearest police station or to the officer empowered under section 53, the officer referred to in sub-section (1) shall prepare an inventory of such narcotic drugs or psychotropic substances containing such details relating to their description, quality, quantity, mode of packing, marks, numbers or such other identifying particulars of the narcotic drugs or psychotropic substances or the packing in which they are packed, country of origin and other particulars as the officer referred to in sub-section (1) may consider relevant to the identity of the narcotic drugs or psychotropic substances in any proceedings under this Act and make an application, to any Magistrate for the purpose of-

(a) certifying the correctness of the inventory so prepared; or
(b) taking, in the presence of such Magistrate, photographs of such drugs or substances and certifying such photographs as true; or
(c) allowing to draw representative samples of such drugs or substances, in the presence of such Magistrate and certifying the correctness of any list of samples so drawn.
(3) When an application is made under sub-section
(2), the Magistrate shall, as soon as may be, allow the application.
(4) Notwithstanding anything contained in the Indian Evidence Act, 1872 (1 of 1872) or the Code of Criminal Procedure, 1973 (2 of 1974), every court trying an offence under this Act, shall treat the inventory, the photographs of [narcotic drugs, psychotropic substances, controlled substances or conveyances] and any list of samples drawn under sub-section (2) and certified by the Magistrate, as primary evidence in respect of such offence.]”

13. It is manifest from Section 52A (2)(c) (supra) that upon seizure of the contraband the same has to be forwarded either to the officer in-charge of the nearest police station or to the officer empowered under Section 53 who shall prepare an inventory as stipulated in the said provision and make an application to the Magistrate for purposes of (a) certifying the correctness of the inventory (b) certifying photographs of such drugs or substances taken before the Magistrate as true and (c) to draw representative samples in the presence of the Magistrate and certifying the correctness of the list of samples so drawn. Sub-section (3) of Section 52-A requires that the Magistrate shall as soon as may be allow the application. This implies that no sooner the seizure is effected and the contraband forwarded to the officer in charge of the Police Station or the officer empowered, the officer concerned is in law duty bound to approach the Magistrate for the purposes mentioned above including grant of permission to draw representative samples in his presence, which samples will then be enlisted and the correctness of the list of samples so drawn certified by the Magistrate. In other words, the process of drawing of samples has to be in the presence and under the supervision of the Magistrate and the entire exercise has to be certified by him to be correct. The question of drawing of samples at the time of seizure which, more often than not, takes place in the absence of the Magistrate does not in the above scheme of things arise. This is so especially when according to Section 52-A(4) of the Act, samples drawn and certified by the Magistrate in compliance with sub-section (2) and (3) of Section 52-A above constitute primary evidence for the purpose of the trial. Suffice it to say that there is no provision in the Act that mandates taking of samples at the time of seizure. That is perhaps why none of the States claim to be taking samples at the time of seizure. Be that as it may, a conflict between the statutory provision governing taking of samples and the standing order issued by the Central Government is evident when the two are placed in juxtaposition. There is no gainsaid that such a conflict shall have to be resolved in favour of the statute on first principles of interpretation but the continuance of the statutory notification in its present form is bound to create confusion in the minds of the authorities concerned instead of helping them in the discharge of their duties. The Central Government would, therefore, do well, to re-examine the matter and take suitable steps in the above direction.

14. Mr. Sinha, learned Amicus, argues that if an amendment of the Act stipulating that the samples be taken at the time of seizure is not possible, the least that ought to be done is to make it obligatory for the officer conducting the seizure to apply to the Magistrate for drawing of samples and certification etc. without any loss of time. The officer conducting the seizure is also obliged to report the act of seizure and the making of the application to the superior officer in writing so that there is a certain amount of accountability in the entire exercise, which as at present gets neglected for a variety of reasons. There is in our opinion no manner of doubt that the seizure of the contraband must be followed by an application for drawing of samples and certification as contemplated under the Act. There is equally no doubt that the process of making any such application and resultant sampling and certification cannot be left to the whims of the officers concerned. The scheme of the Act in general and Section 52-A in particular, does not brook any delay in the matter of making of an application or the drawing of samples and certification. While we see no room for prescribing or reading a time frame into the provision, we are of the view that an application for sampling and certification ought to be made without undue delay and the Magistrate on receipt of any such application will be expected to attend to the application and do the needful, within a reasonable period and without any undue delay or procrastination as is mandated by sub-section (3) of Section 52A (supra). We hope and trust that the High Courts will keep a close watch on the performance of the Magistrates in this regard and through the Magistrates on the agencies that are dealing with the menace of drugs which has taken alarming dimensions in this country partly because of the ineffective and lackadaisical enforcement of the laws and procedures and cavalier manner in which the agencies and at times Magistracy in this country addresses a problem of such serious dimensions.

STORAGE:

15. The Narcotic Drugs and Psychotropic Substances Act, 1985 does not make any special provision regulating storage of the contraband substances. All that Section 55 of the Act envisages is that the officer in charge of a Police Station shall take charge of and keep in safe custody the seized article pending orders of the Magistrate concerned. There is no provision nor was any such provision pointed out to us by learned counsel for the parties prescribing the nature of the storage facility to be used for storage of the contraband substances. Even so the importance of adequate storage facilities for safe deposit and storage of the contraband material has been recognised by the Government inasmuch as Standing Order No.1/89 has made specific provisions in regard to the same. Section III of the said Order deals with “Receipt of Drugs in Godowns and Procedure” which inter alia provides that all drugs shall invariably be stored in
“safes and vaults” provided with double locking system and that the agencies of the Central and the State Governments may specifically designate their godowns for storage purposes and such godowns should be selected keeping in view their security angle, juxtaposition to courts etc. We may usefully extract paras 3.2 to 3.9 comprising Section III supra at this stage for ready reference:

“3.2. All drugs invariably be stored in safes and vaults provided with double-locking system. Agencies of the Central and State Governments, may specifically, designate their godowns for storage purposes. The godowns should be selected keeping in view their security angle, juxtaposition to courts etc.

3.3 Such godowns, as a matter of rule, shall be placed under the over-all supervision and charge of a Gazetted Officer of the respective enforcement agency, who shall exercise utmost care, circumspection and personal supervision as far as possible. Each seizing officer shall deposit the drugs fully packed and sealed in the godown within 48 hours of such seizure, with a forwarding memo indicating NDPS Crime No. as per Crime and Prosecution (C & P Register) under the new law, name of the accused, reference of test memo, description of the drugs, total no. of packages/containers etc.

3.4 The seizing officer, after obtaining an acknowledgement for such deposit in the format (Annexure-I), shall hand acknowledged over such to the Investigation Officer of the case along with the case dossiers for further proceedings.

3.5 The officer-in-charge of the godown, before accepting the deposit of drugs, shall ensure that the same are properly packed and sealed. He shall also arrange the packages/containers (case-wise and lotwise) for quick retrieval etc.

3.6 The godown-in-charge is required to maintain a register wherein entries of receipt should be made as per format at Annexure-II.

3.7 It shall be incumbent upon the Inspecting Officers of the various Departments mentioned at Annexure II to make frequent visits to the godowns for ensuring adequate security and safety and for taking measures for timely disposal of drugs. The Inspecting Officers should record their remarks/observations against Col. 15 of the Format at Annexure-II.

3.8 The Heads of the respective enforcement agencies (both Central and State Governments) may prescribe such periodical reports and returns, as they may deem fit, to monitor the safe receipt, deposit, storage, accounting and disposal of seized drugs.

3.9 Since the early disposal of drugs assumes utmost consideration and importance, the enforcement agencies may obtain orders for pre-trial disposal of drugs and other articles (including conveyance, if any) by having recourse to the provisions of sub-section (2) of Section 52A of the Act.”

It is evident from a plain reading of para 3.2 (supra) that storage of all drugs in safes and vaults has been made mandatory and that agencies of the Central and the State Governments have been permitted to designate their godowns for storage purposes. It is also clear that keeping in view the importance of protecting the seized drugs against theft, substitution or pilferage the Central Government has prescribed that such godowns shall be placed under the overall supervision and charge of a gazetted officer of the respective enforcement agencies who shall exercise utmost care, circumspection and personal supervision over the storage facilities. The provision contained in paras 3.5, 3.6, 3.7 and 3.8 also are aimed at ensuring that the godown or storage facility is satisfactory and those in-charge of the same are made accountable for its upkeep and effective management. Subsequent Notification including Notification dated 16th January, 2015 have in no way diluted the above requirement. The result is that there is a statutory framework which governs the storage of drugs and matters relating and incidental thereto. The question is whether the said statutory mechanism has been effectively implemented by the Central Government agencies and by the State Governments. Our answer regretfully is in the negative. It is evident from the responses received from the State and the Central Government agencies that no notified storage facilitygodown has been established for storage of the seized drugs. Even the Narcotics Control Bureau has admitted to using mallkhana of the Courts for storage of the seized drugs in certain cases and in certain circumstances. The Customs and Central Excise Department and DRI have also stated that they have no designated storage facility for storage of contraband. The position in the States is no different. Due to non-availability of any designated godownfacility with adequate vaults and double lock system, the seized contraband is stored in police maalkhana which is a common storage facility for all kinds of goods and weapons seized in connection with all kinds of offences including those specified by the IPC. This is a totally unhappy and unacceptable situation to say the least. It is indeed unfortunate that even after a lapse of 26 years since Standing Order No. 1/89 was issued, the Central Government or its agencies and the State Governments have paid little or no attention to the need for providing adequate storage facilities of the kind stipulated in Standing Order No. 1/89 with the necessary supervisory and other controls prescribed in Section III of the said order. The result is that while Standing Order No. 1/89 very early in point of time recognized the need for providing adequate and effective storage facilities by the States and the Central Government agencies, the failure on the part of the Central Government and the State Governments to provide for such storage has defeated, if not completely negated the very purpose underlying the said notification and the provisions made therein. There is as on date hardly any credible protection against theft, replacement, pilferage and destruction of the seized drugs on account of the wholly unsatisfactory and unscientific method of storage of drugs and psychotropic substances which at times hit the headlines in newspapers on account of what is often described by the agencies as “big catch” worth crores of rupees in the international market. What has defied our understanding is the neglect on the part of the Central Government and its agencies and the State Governments in realizing the importance of the storage facilities and in providing for the same to prevent hazardous and at times lethal substances with great potential to do harm to those who use the same from being replaced, pilfered, stolen or siphoned out on account of very poor supervision, control or invigilation over such storage facilities. The learned amicus has in that view very rightly argued that there is a complete failure on the part of the Central Government and its agencies as also the State Governments in taking adequate steps for providing proper storage facilities with proper system of supervision and control over the drugs that are stored in the same. It was contended by Mr. Sinha, and in our opinion rightly so, that the cumulative effect of the reports submitted by the States and the Central agencies is that only 16% of the contrabands seized between 2002 to 2012 have been actually disposed of. What happened to the remaining 84% of such seizures is anybody’s guess and if it is still lying in the police maalkhana, why has nobody ever bothered to apply for their disposal according to the procedure established by law is hard to fathom. The fact that the States and the Central Government agencies have accepted that no specific register is maintained by the State Police and that general maalkhana register alone is being maintained for the seized drugs shows the neglect of all concerned towards this important aspect and the cavalier manner in which the issue regarding storage of ceased drugs is approached by them. Absence of periodical inspection of the storage facility and the absence of any record suggesting that any inspection has been carried out by any of the officers shows a complete failure bordering criminal negligence by officers who are supposed to be taking action in this regard but have failed to do so.

16. The menace of drugs in this country, as observed earlier has alarming dimensions and proportions. Studies based on conferences and seminars have very often shown that the menace is deep rooted not only because drug lords have the money power and transnational links but also because the enforcement agencies like the Police and at times politicians in power help them in carrying on what is known to be a money spinning and flourishing trade. We only hope that the failure of the Central Government agencies and the State Governments in providing what is the bare minimum in terms of infrastructure required to arrest the growing menace and prevent pilferage and recirculation of drugs back into the market is not on account of any unholy connect between the drug traffickers and the enforcement agencies. We would comfort ourselves by presuming them to be relatable only to apathy and indifference and hope that the system does not get corrupted by continued neglect lest all hopes are lost in the fight against drug menace which are eating into the vitals of our society. It is in that spirit that we deem it necessary to issue appropriate directions to the Central Government agencies and to the States to set up adequate storage facilities with effective supervisory and regulatory controls as prescribed in Notification No. 1/89. Disposal of Drugs :

17. Section 52A as amended provides for disposal of the seized contraband in the manner stipulated by the Government under Clause 1 of that Section. Notification dated 16th January, 2015 has, in supersession of the earlier notification dated 10th May, 2007 not only stipulates that all drugs and psychotropic substances have to be disposed off but also identifies the officers who shall initiate action for disposal and the procedure to be followed for such disposal. Para 4 of the Notification inter alia, provides that officer-in- charge of the Police Station shall within 30 days from the date of receipt of chemical analysis report of drugs, psychotropic substances or controlled substances apply to any Magistrate under Section 52A(2) in terms of Annexure 2 to the said Notification.

18. Sub-para (2) of Para (4) provides that after the Magistrate allows the application under sub-section (3) of Section 52A, the officer mentioned in sub para (1) of Para (4) shall preserve the certified inventory, photographs and samples drawn in the presence of the Magistrate as primary evidence for the case and submit details of seized items to the Chairman of the Drugs Disposal committee for a decision by the Committee on the question of disposal. The officer shall also send a copy of the details along with the items seized to the officer in-charge of the godown. Para (5) of the notification provides for constitution of the Drugs Disposal Committee while para (6) specifies the functions which the Committee shall perform. In para (7) the notification provides for procedure to be followed with regard to disposal of the seized items, while para (8) stipulates the quantity or the value upto which the Drugs Disposal Committee can order disposal of the seized items. In terms of proviso to para (8) if the consignments are larger in quantity or of higher value than those indicated in the table, the Drugs Disposal Committee is required to send its recommendations to the head of the department who shall then order their disposal by a high level Drugs Disposal Committee specially constituted for that purpose. Para (9) prescribes the mode of disposal of the drugs, while para (10) requires the Committee to intimate to the head of the Department the programme of destruction and vest the head of the Department with the power to conduct a surprise check or depute an officer to conduct such checks on destruction operation. Para (11) deals with certificate of destruction while paras (12) and (13) deal with details of sale to be entered into the godown register and communication to be sent to Narcotic Control Bureau.

19. There are two other aspects that need to be noted at this stage. The first is that notification dated 16th January, 2015 does not in terms supersede Standing Order No. 1/89 insofar as the said Standing Order also prescribes the procedure to be followed for disposal of Narcotic Drugs and Psychotropic and controlled Substances and Conveyances. Specific overriding of the earlier Standing Order would have avoided a certain amount of confusion which is evident on account of simultaneous presence of Standing Order No. 1/89 and notification dated 16th January, 2015. For instance in para (1) of Standing Order No. 1/89 only certain narcotic drugs and psychotropic substances enumerated therein could be disposed of while notification dated 16th January, 2015 provides for disposal of all Narcotic Drugs and Psychotropic and controlled Substances and Conveyances. Again in terms of Standing Order No. 1/89 the procedure for making of application was marginally different from the one stipulated in Notification dated 16th January, 2015 not only insofar as the procedure related to the officers who could make the application is concerned but also in relation to the procedure that the DDC would follow while directing disposal. In both the notifications are prescribed the limits upto which the disposal could be directed. In case of excess quantity the disposal under the Standing Order No. 1/89 had to be done in the presence of the head of the Department whereas according to notification of 2015 in the event of excess quantity or value the disposal has to be by a high level Drug Disposal Committee to be constituted by the head of the Department. Again while Standing Order No. 1/89 specifically required the approval of the Court for disposal, notification dated 16th January, 2015 does not stipulate such approval as a specific condition. Be that as it may, to the extent the subsequent notification prescribes a different procedure, we treat the earlier notification/Standing Order No. 1/89 to have been superseded. In order to avoid any confusion arising out of the continued presence of two notifications on the same subject we make it clear that disposal of Narcotic Drugs and Psychotropic and controlled Substances and Conveyances shall be carried out in the following manner till such time the Government prescribes a different procedure for the same:

(1) Cases where the trial is concluded and proceedings in appeal/revision have all concluded finally:

In cases that stood finally concluded at the trial, appeal, revision and further appeals, if any, before 29th May, 1989 the continued storage of drugs and Narcotic Drugs and Psychotropic and controlled Substances and Conveyances is of no consequence not only because of the considerable lapse of time since the conclusion of the proceedings but also because the process of certification and disposal after verification and testing may be an idle formality. We say so because even if upon verification and further testing of the seized contraband in such already concluded cases it is found that the same is either replaced, stolen or pilferaged, it will be difficult if not impossible to fix the responsibility for such theft, replacement or pilferage at this distant point in time. That apart, the storage facility available with the States, in whatever satisfactory or unsatisfactory conditions the same exist, are reported to be over-flowing with seized contraband goods. It would, therefore, be just and proper to direct that the Drugs Disposal Committees of the States and the Central agencies shall take stock of all such seized contrabands and take steps for their disposal without any further verification, testing or sampling whatsoever. The concerned heads of the Department shall personally supervise the process of destruction of drugs so identified for disposal. To the extent the seized Drugs and Narcotic Substances continue to choke the storage facilities and tempt the unscrupulous to indulge in pilferage and theft for sale or circulation in the market, the disposal of the stocks will reduce the hazards that go with their continued storage and availability in the market.

(2) Drugs that are seized after May, 1989 and where the trial and appeal and revision have also been finally disposed of:
In this category of cases while the seizure may have taken place after the introduction of Section 52A in the Statute book the non-disposal of the drugs over a long period of time would also make it difficult to identify individuals who are responsible for pilferage, theft, replacement or such other mischief in connection with such seized contraband. The requirement of para 5.5 of standing order No. 1/89 for such drugs to be disposed of after getting the same tested will also be an exercise in futility and impractical at this distant point in time. Since the trials stand concluded and so also the proceedings in appeal, Revision etc. insistence upon sending the sample from such drugs for testing before the same are disposed of will be a fruitless exercise which can be dispensed with having regard to the totality of the circumstances and the conditions prevalent in the maalkhanas and the so called godowns and storage facilities. The DDCs shall accordingly take stock of all such Narcotic Drugs and Psychotropic and controlled Substances and Conveyances in relation to which the trial of the accused persons has finally concluded and the proceedings have attained finality at all levels in the judicial hierarchy. The DDCs shall then take steps to have such stock also destroyed under the direct supervision of the head of the Department concerned.
(3) cases in which the proceedings are still pending before the Courts at the level of trial court, appellate court or before the Supreme Court:
In such cases the heads of the Department concerned shall ensure that appropriate applications are moved by the officers competent to do so under Notification dated 16th January, 2015 before the Drugs Disposal Committees concerned and steps for disposal of such Narcotic Drugs and Psychotropic and controlled Substances and Conveyances taken without any further loss of time.

20. To sum up we direct as under:
(1) No sooner the seizure of any Narcotic Drugs and Psychotropic and controlled Substances and Conveyances is effected, the same shall be forwarded to the officer in-charge of the nearest police station or to the officer empowered under Section 53 of the Act. The officer concerned shall then approach the Magistrate with an application under Section 52A(ii) of the Act, which shall be allowed by the Magistrate as soon as may be required under Sub-Section 3 of Section 52A, as discussed by us in the body of this judgment under the heading ‘seizure and sampling’. The sampling shall be done under the supervision of the magistrate as discussed in paras 13 and 14 of this order.
(2) The Central Government and its agencies and so also the State Governments shall within six months from today take appropriate steps to set up storage facilities for the exclusive storage of seized Narcotic Drugs and Psychotropic and controlled Substances and Conveyances duly equipped with vaults and double locking system to prevent theft, pilferage or replacement of the seized drugs. The Central Government and the State Governments shall also designate an officer each for their respective storage facility and provide for other steps, measures as stipulated in Standing Order No. 1/89 to ensure proper security against theft, pilferage or replacement of the seized drugs.
(3) The Central Government and the State Governments shall be free to set up a storage facility for each district in the States and depending upon the extent of seizure and store required, one storage facility for more than one districts.
(4) Disposal of the seized drugs currently lying in the police maalkhans and other places used for storage shall be carried out by the DDCs concerned in terms of the directions issued by us in the body of this judgment under the heading ’disposal of drugs’.

21. Keeping in view the importance of the subject we request the Chief Justices of the High Courts concerned to appoint a Committee of Judges on the administrative side to supervise and monitor progress made by the respective States in regard to the compliance with the above directions and wherever necessary, to issue appropriate directions for a speedy action on the administrative and even on the judicial side in public interest wherever considered necessary.

22. List the appeal for final hearing now on an early date.

……………………….……..……J.
(T.S. THAKUR)
………………………….…..……J.
(KURIAN JOSEPH)

New Delhi
January 28, 2016

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 174-175 OF 2016
(Arising out of S.L.P. (Civil) Nos.24809-24810 of 2008)

L. GOWRAMMA (D) BY LR. …APPELLANT
VERSUS
SUNANDA (D) BY LRS. & ANR. …RESPONDENTS

J U D G M E N T

R.F. Nariman, J.

1. Delay condoned in filing the special leave petitions.

2. Leave granted.

3. These appeals raise an interesting question on the true construction of some of the provisions of the Hindu Law Women’s Rights Act, 1933 (Mysore Act No.X of 1933). One Venkatsubbaiah had two sons Mahabalaiah and Thimmappa. After the death of Venkatsubbaiah, the two sons and the wife of Mahabalaiah constituted a joint Hindu family. Mahabalaiah being the elder brother was the Karta of the said family. In the year 1940-1941, Mahabalaiah and Thimmappa partitioned and divided their joint family properties and got possession of their respective shares. Thimmappa died on 9.10.1952, leaving behind him his widow one Gowramma and three daughters. The widow has executed a will on 9.5.1990 bequeathing her share in the joint family property in favour of only one of the three daughters namely the third defendant. The 4th defendant has been joined in the suit inasmuch as the first defendant widow had sold one of the scheduled items of the suit property namely item No.3 to the said 4th defendant during the pendency of the suit.

4. One of the said daughters namely Sunanda filed a suit against defendant No.1 – her mother, defendant Nos. 2 and 3 – her sisters, and defendant No.4 – the purchaser, being O.S. No.46 of 1994. After setting out the relevant facts, the Civil Judge, Senior Division by judgment dated 28.3.2005 framed as many as 12 issues and ultimately decided on application of Section 10(2)(g) of the 1933 Act that the plaintiff would be entitled to a 1/4th share in the scheduled properties and the suit was decreed accordingly.

5. In a first appeal filed by defendant No.1, the first Appellate Court agreed with the conclusions both on facts as well as law with the trial court. Accordingly, the first appeal was dismissed on 5.8.2005.

6. Thereafter, a review petition was filed and by the judgment dated 24.11.2007, the review was dismissed but this time adverting to Section 8(1)(d) of the 1933 Act and decreeing the suit with reference to the said Section. The review also was accordingly dismissed.

7. Shri R.S. Hegde, learned counsel appearing on behalf of the appellant has urged before us that the applicable Section of the 1933 Act is Section 4, and not Sections 8 and 10, and accordingly the succession of a Hindu male dying intestate vests property only in the widow to the exclusion of the daughters and hence the plaintiff’s suit should have been dismissed on this ground.

8. On the other hand, Shri S.N. Bhat, learned counsel, invited our attention to Section 8(1)(d) of the Act and according to him since joint family property passed to Thimmappa who was a single coparcener by survivorship, on partition in 1940- 1941, all the classes of females mentioned in Section 8 would be entitled to a share in the said property which would include not only his widow but also his unmarried daughters.

9. For a proper appreciation of the controversy at hand, we set out the relevant Sections of the Hindu Law Women’s Rights Act, 1933 (Mysore Act No.X of 1933).

“Part I
INHERITANCE

4. Order of succession:-
(1) The succession to a Hindu male dying intestate shall, in the first place, vest in the members of the family of the propositus mentioned below, and in the following order:-
i) the male issue to the third generation ;
ii) the widow ;
iii) daughters ;
iv) daughter’s sons
XXX XXX XXX
8. Certain females entitled to shares at partition-
(1) (a) At a partition of joint family property between a person and his son or sons, his mother, his unmarried daughters and the widows and unmarried daughters of his predeceased undivided sons and brothers who have left no male issue shall be entitled to share with them.
(b) At a partition of joint family property among brothers, their mother, their unmarried sisters and the widows and unmarried daughters of their predeceased undivided brothers who have left no male issue shall be entitled to share with them.
(c) Sub-sections (a) and (b) shall also apply mutatis mutandis to a partition among other coparceners in a joint family.
(d) Where joint family property passes to a single co-parcener by survivorship, it shall so pass subject to the right to shares of the classes of females enumerated in the above sub-sections.
XXX XXX XXX
10. What is “stridhana” –
(1) “Stridhana” means property of every description belonging to a Hindu female, other than property in which she has, by law or under the terms of an instrument, only a limited estate.
(2) “Stridhana” includes :-
XXX XXX XXX XXX
(g) property taken by inheritance by a female from another female and property taken by inheritance by a female from her husband or son, or from a male relative connected by blood except when there is a daughter or daughter’s son of the propositus alive at the time the property is so inherited.
(3) All gifts and payments other than or in addition to, or in excess of, the customary presents of vessels, apparel and other articles of personal use made to a bride or bridegroom in connection with their marriage or to their parents or guardians or other person on their behalf, by the bridegroom, bride or their relatives or friends, shall be the stridhana of the bride.”

10. A cursory reading of Section 8 would reveal that various females mentioned in the Section would be entitled to a share of joint family property in the circumstances mentioned therein. Under Sections 8(1)(a) to 8(1)(c) there has necessarily first to be a partition in the circumstances mentioned in each of the said sub-sections whereas under sub-section (d) what is required is that joint family properties should pass to a single coparcener by survivorship. If this condition of sub-clause (d) is met, then all the women mentioned in sub-clauses (a) to (c) would be entitled to a share therein.

11. Shri Bhat relied upon a judgment delivered by B.P. Singh,J. in Byamma v. Ramdev reported in I.L.R. 1991 KAR 3245. After setting out Section 8 of the 1933 Act, it was held:-

“It is well settled that devolution of joint family property, which come to the hands of a son from his father or grand-father or great-grand-father as unobstructed heritage is governed by the Rule of Survivorship. A male coparcener acquires right to such property by birth. This is different from property that may come to the hands of a coparcener in which he has no right by birth. This is what is known as obstructed heritage, and such property devolve by succession and not by survivorship. Such a distinction is well known in Hindu Law. Therefore, when Section 8(1)(d) of the Mysore Act refers to the properties passing on to a single coparcener by survivorship, it has reference to the ancestral properties which come to his hands upon partition or otherwise.

It is also well settled that if a coparcener dies, his interest devolves upon other coparceners by survivorship. As long as the joint family is in existence, all the coparceners jointly own all the properties. Each coparcener is a full owner of each property owned by the joint family. The effect of partition is severance of status and, as a consequence, each coparcener becomes entitled to separate possession and enjoyment of his share in the joint family properties. Partition by itself does not create a right because the right of a coparcener existed even before partition. It only brings about demarcation of his interest with a right to separate possession and enjoyment. It is therefore, not correct to state that when a coparcener, upon partition, gets his share in the joint family properties, it does not come to him by survivorship. The right which accrues to the coparcener is by operation of the Rule of Survivorship and the partition only demarcates his share in the joint family properties. As observed earlier, unobstructed heritage always devolves by operation of the Rule of Survivorship and there is no exception to this Rule. It has therefore been held that where a father disposes of by a Will, his interest in the joint family properties in favour of his son, the properties in the hands of the son still retain the character of coparcenary property, and not self-acquired property.

I, therefore, hold that the properties to which Chowdappa became entitled, upon partition passed on to him by survivorship. I find no substance in the contention raised on behalf of the respondents that it passed on to him by reason of partition and not by survivorship.

In view of Section 8(1) of the Act, there can be no doubt that a single coparcener such as Chowdappa took the ancestral property, subject to the right to shares of female members of the joint family enumerated in Clauses (a), (b) or (c) of Section 8(1) of the Mysore Act. The plaintiff, being a widow of a pre-deceased son, was entitled to a share equal to one half of the share to which her husband would have been entitled if he were alive [vide Section 8(1) (a) of the Mysore Act]. I therefore hold that the plaintiff is entitled to claim one half of the share which her husband could have claimed if he was alive. In the instant case her husband would have got half share in the properties in a partition between his father and himself in the year 1946 when Chowdappa became a single coparcener. Consequently, she is entitled to 1/4th share in the suit schedule properties.” (at para nos.10, 11, 12 and 17)

12. Unfortunately for Shri Bhat, this Court in Sathyaprema Manjunatha Gowda (Smt) v. Controller of Estate Duty, Karnataka, (1997) 10 SCC 684, has taken a view which is directly contrary to the view of the single Judge of the Karnataka High Court.

13. In Sathyaprema’s case (supra), the question posed was whether in the facts and circumstances of the case the Tribunal was correct in holding that neither the unmarried daughter nor the wife of the deceased had any interest in the joint family property of the deceased while he was alive. This Court stated that the only question for consideration is whether the estate left by the husband and father of the widow and unmarried daughter respectively on partition was obtained by survivorship applying Section 8(1)(d) of the Act.

14. This Court exhaustively discussed the meaning of the expressions “survivor” and “survivorship” and ultimately held:-
“Here, we are concerned with Manjunatha Gowda who had obtained property at a partition with coparceners. Survivorship, therefore, is the living of one of two or more persons after the death of the others having interest to succeed in the property by succession. The shares in the coparcenery property changes with death or birth of other coparceners. However, in the case of survivorship it is not of the same incidence. He received the property at the partition without there being any other coparcener. It is an individual property and, therefore, he did not receive it by survivorship but by virtue of his status being a coparcener of the Hindu Joint Family along with his father and brothers.
Under these circumstances, the conclusion reached by the High Court that since it is by partition, not by survivorship, clause (d) of sub-section (1) of Section 8 does not get attracted, is not (sic) correct. No doubt, the learned counsel relied upon the judgment of this Court in Nagendra Prasad v. Kempananjamma [AIR 1968 SC 209] which was also considered by the High Court in the impugned judgment. This Court therein has explained that the object of Section 8(1)(d) is to give a right to claim a share in the joint family property to all females referred to in clauses (a) to (c) thereof. Merely because partition by one of the coparceners under clauses (a) to (c) is a condition for a class of family members entitled to a share in the property, it does not apply to a case where class of family members entitled under clause 8(1)(d) since it stands altogether on a different footing and, therefore, partition is not a condition precedent for claiming a share by a class of family members enumerated in Section 8(1)(a) of the Act. But that principle has no bearing to the facts in this case for the reason that the property held was not received by survivorship.
Under these circumstances, family members enumerated under Section 8(1)(d) are not entitled to a share in the estate left by the deceased. Thus we do not find any illegality in the view taken by the High Court warranting interference.” (at paragraph nos.13-15)

15. In fact, this follows from a reading of Section 8. Whereas Sections 8(1)(a)(b) and (c) refers to a partition among coparceners in a joint family, sub-section (d) refers to property passing to a single coparcener only by survivorship. In this behalf, in Nagendra Prasad v. Kempananjamma, [1968] 1 SCR 124, this Court by a majority judgment held:-
“This intention can only be given effect to on the basis that clause (d) does not restrict itself to finding out females on the basis of an assumed partition between the last two male coparceners. It is significant that clause (d) gives a right independently of a partition and we do not see why its scope should be restricted by assuming a partition.” (at page No.128).

16. In fact, even the dissenting Judge held:-
“Clause (d) applies to a case when the family property passes by survivorship to a sole surviving coparcener. In such a case there can be no partition, as is the case under clause (a) or (b) or (c). Indeed, the property becomes incapable of partition and but for clause (d) no female relative would have any right to a share. To save such a result clause (d) provides that the rights of the female relatives should not be lost only by reason of the property passing to the sole surviving coparcener. Sub-section 5, furthermore, gives such female relatives as fall under sub-section 1 a right to have their shares separated and thus makes them co-sharers subject to whose rights the sole surviving coparcener takes the property. Therefore, whereas under clauses (a), (b) and (c) the rights fluctuate according to the position of the female relatives in the family when the partition takes place there is no such uncertainty in the case falling under clause (d) as the sole surviving coparcener takes the property subject to the right to shares of female relatives falling under the provisions of clause (a) or (b) or (c). Such is the scheme of Section 8(1).”

17. The dissenting Judge basically dissented on the point that under sub-clause (d), a partition has to be assumed because it is only on such assumption that females on whom a right to share is conferred can be ascertained. It is clear, therefore, that Section 8(1)(d) can have no application to a case where joint family property passes to a single coparcener not by survivorship but by partition.

A recent view of Section 8(1)(d) in Smt. Ramakka and others v. Smt. Thanamma since deceased by LR, P. Srinivas and Others, ILR 2014 Karnataka 1335, has been taken by a Division Bench of the Karnataka High Court. While construing Section 8(1)(d), the Division Bench has held:-

“When the coparcenary property passes to a sole surviving coparcener, provision has been made in clause (d) of Section 8(1). This clause, in protecting the rights of females, had necessarily to give females the right to share in the coparcenary property even if there be no partition at all, because, on passing of property to a sole surviving coparcener, there could not possibly be any partition sought by the male members of the coparcenary body. The right conferred by clause (d) is, therefore, an independent right and not connected with the rights granted to the females under clauses (a), (b) and (c). The females who are to get benefit are all those to whom a right to a share in the joint family property would have accrued if there had been a partition either under clause (a), or clause (b) or clause (c). The language of clause (d) has to be interpreted as laying down that right to shares will vest in all females of the joint Hindu family who would have possibly received the right to a share if at any earlier time there had been partition in the family in any of the three manners laid down in clauses (a), (b) and (c). It is significant that clause (d) gives a right independent of a partition and its scope should not be restricted by assuming a partition.”

This is the correct view of the law on Section 8(1)(d), and we endorse it.

18. There is also another way of looking at the issue raised in the present appeals. A partition of joint family property among brothers is expressly mentioned in Section 8(1)(b). Therefore, upon partition of joint family property between Thimmappa and his older brother, it is only their mother, their unmarried sisters and widows and unmarried daughters of their pre-deceased undivided brothers who have left no male issue who get a share under the Section. Unlike sub-section (a), unmarried daughters of Thimmappa do not get any share at the partition between Thimmappa and his brother.

19. The ground on which the judgments below rested, namely Section 10(1)(g), was not even sought to be supported by Shri Bhat. And for a very good reason. In order that Section 10(1)(g) apply, first and foremost the property referred to is “stridhana” which is defined as property of every description belonging to a Hindu female other than property in which she has by law or under the terms of an instrument only a limited estate. Under Section 10(1)(g) it is only property taken by inheritance by a female from her husband that is included in stridhana. This would not include the unmarried daughters as property taken by inheritance by a female from her father is not included.

20. In this view of the matter, Shri Hegde is right in saying that the succession to a Hindu male dying intestate will vest only in the widow under Section 4(1)(ii) to the exclusion of the daughters who are mentioned in a subsequent clause i.e. clause (iii) by virtue of the expression “in the following order”. This being the case, it is clear that the appeals will have to be allowed and the judgments of the courts below set aside. The suit will stand dismissed as a consequence.

……………………J.
(Kurian Joseph)

……………………J.
(R.F. Nariman)

New Delhi;
January 12, 2016.

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.166 OF 2016
(arising out of S.L.P.(Civil) No.20767 of 2009)

SURAT (HAZIRA) KAMDAR KARMCHARI UNION … APPELLANT(S)
VS.
STATE OF GUJARAT & ORS. … RESPONDENT(S)

J U D G M E N T

Anil R.Dave, J.

1. Leave granted.

2. Upon hearing the learned counsel for the parties, without expressing any opinion on the merits of the case, we think it just and proper to remand the matter to the High Court so as to consider whether the principles of natural justice had been duly followed while passing the order which was challenged before the High Court.

3. The impugned judgment is set aside and the appeal is disposed of as allowed with no order as to costs.

4. Parties shall appear before the High Court on 5th February, 2016 so that the date of further hearing can be fixed.

…………..J.
[ANIL R. DAVE]

………………J.
[SHIVA KIRTI SINGH]

………………J.
[ADARSH KUMAR GOEL]

New Delhi;
11th January, 2016.

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.165 OF 2016
(Arising out of SLP(C)No.36294 of 2015)

HATHIBHAI BULAKHIDAS PVT. LTD. … APPELLANT(S)
VS.
TATA CAPITAL FINANCIAL SERVICES LTD. … RESPONDENT(S)

J U D G M E N T

ANIL R. DAVE, J.

1. Leave granted.

2. Heard the learned counsel for the appellant and the learned counsel appearing on caveat for the respondentplaintiff.

3. Upon hearing the learned counsel for the parties, we modify the impugned order to the effect that the appellant should deposit 50% of the principal amount within eight weeks from today.

5. With the above directions, the appeal is disposed of as partly allowed with no order as to costs.

6. Pending application, if any, stands disposed of.

………………J.
[ANIL R. DAVE]

………………J.
[SHIVA KIRTI SINGH]

………………J.
[ADARSH KUMAR GOEL]

New Delhi;
11th January, 2016.

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition for Special Leave to Appeal (C) No.36294/2015
(Arising out of impugned final judgment and order dated 18/11/2015 in APP No.168/2014 passed by the High Court of Bombay)

HATHIBHAI BULAKHIDAS PVT. LTD. Petitioner(s)
VERSUS
TATA CAPITAL FINANCIAL SERVICES LTD. Respondent(s)

(With appln. for exemption from filing c/c of the impugned judgment)

Date : 11/01/2016 This petition was called on for hearing today.

CORAM :
HON’BLE MR. JUSTICE ANIL R. DAVE
HON’BLE MR. JUSTICE SHIVA KIRTI SINGH
HON’BLE MR. JUSTICE ADARSH KUMAR GOEL

For Petitioner(s)
Mr. Gaurav Agrawal,Adv.
Mr. Aftab Diamondwala,Adv.

For Respondent(s)
Mr. Shyam Divan,Sr.Adv.
Mr. Ashok Paranjape,Adv.
For Mr. Ranjan Kumar,Adv.

UPON hearing the counsel the Court made the following

O R D E R

Leave granted.

The appeal is disposed of as partly allowed with no order as to costs in terms of Non-reportable judgment.

(Sarita Purohit)
Court Master

(Sneh Bala Mehra)
Assistant Registrar

(Signed Non-reportable judgment is placed on the file)

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 272-273 OF 2016
(arising out of S.L.P.(Civil) Nos.17642-17643 of 2014)

GUJARAT WATER SUPPLY & SEWERAGE BOARD … APPELLANT(S)
VS.
JASUBHAI KABHAI HARIJAN ETC. … RESPONDENT(S)

J U D G M E N T

Anil R. Dave, J.

1. Leave granted.

2. In view of the judgement delivered in Jogendrasinhji Vijaysinghji v. State of Gujarat (2015) 9 SCC 1, we set aside the judgment of the Division Bench and restore the Letters Patent Appeal to its original number to be decided on its merits afresh.

3. Parties shall appear before the High Court on 15th February, 2016.

4. In view of the above, the appeals are allowed with no order as to costs.

…………..J.
[ANIL R. DAVE]

………………J.
[ADARSH KUMAR GOEL]

New Delhi;
11th January, 2016.

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.164 OF 2016
(arising out of S.L.P.(Civil) No.25965 of 2009)

ARVIND ANAND HALBE … APPELLANT(S)
VS.
LILAVATI KIRTILAL MEHTA MEDICAL TRUST & ORS. … RESPONDENT(S)

J U D G M E N T

Anil R.Dave, J.

1. Leave granted.

2. Upon hearing the learned counsel for the parties and more particularly, the learned counsel for the appellant, the adverse remarks made by the learned Single Judge against the appellant are hereby expunged.

3. The appeal is disposed of as allowed to the above extent. No order as to costs.

…………..J.
[ANIL R. DAVE]

………………J.
[ADARSH KUMAR GOEL]

New Delhi;
11th January, 2016.

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.163 OF 2016
(Arising out of SLP ( C) No. 15810 of 2015)

TEJALBEN …APPELLANT(S)
VERSUS
MIHIRBHAI BHARATBHAI KOTHARI …RESPONDENT(S)

J U D G M E N T

KURIAN,J.:

Leave granted.

2. This appeal has been filed against the order dated 10.12.2014 passed by the High Court of Gujarat at Ahmedabad in Miscellaneous Civil Application (For Transfer) No.2596 of 2014 whereby the High Court dismissed the transfer application.

3. It is seen that suit for divorce is pending before the Principal Judge, Family Court, Rajkot. The appellant had moved before the High Court of Gujarat at Ahmedabad for transfer of proceedings pending at Rajkot to Jamnagar.

4. It is seen that further proceedings between the parties are pending at Jamnagar. Therefore, we find no reason why the divorce case be not transferred to Jamnagar.

5. The order dated 10.12.2014 is hence, set aside and the transfer of proceedings from Rajkot to Jamnagar, is allowed.

6. The appeal stands disposed of. No costs.

………………..J.
[KURIAN JOSEPH]

…………………..J.
[ROHINTON FALI NARIMAN]

NEW DELHI;
JANUARY 11, 2016.

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