Employer’s Provident Fund contribution over and above the statutory limit

By Avik Biswas, Partner and Ronak Chawla, Associate

Issue

The employer’s voluntary contribution under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (the “EPF Act”) over and above the statutory wage ceiling has always been a contentious issue. To that specific end, the circumstances under which an employer can reduce its contribution to the statutory limit have now received further clarity from our courts.

Provisions under The Employees’ Provident Fund Scheme, 1952 (the “Scheme”)

Paragraph 26A.(2) of the Scheme sets out that every member employed as an employee in a factory or other establishment to which this Scheme applies, is required to contribute to the provident fund established under the Scheme (the “Fund”) and the contribution shall be payable to the Fund in respect of such employee by the employer. Such contribution shall be in accordance with the rate specified in Paragraph 29. In this specific context, Paragraph 29 further states that the contribution payable by the employee under the Scheme, shall be equal to the contribution payable by the employer in respect of such employee and the contribution payable by him may, if he so desires, be an amount exceeding ten per cent or twelve per cent, as the case may be, of his basic wages, dearness allowance and retaining allowance (if any) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above its contribution payable under the EPF Act.

At the very outset, it is important to note that the Ministry of Labour and Employment of the Government of India has raised the statutory wage ceiling from Rupees Six Thousand Five Hundred Only (INR 6,500/-) to Rupees Fifteen Thousand Only (INR 15,000/-) vide notification dated August 22, 2014.

While it is fairly obvious that where the monthly pay of an employee, who is a member of the Scheme, exceeds Rupees Fifteen Thousand Only (INR 15,000/-) the contribution payable by the employer will be limited to the amount payable on a monthly pay of Rupees Fifteen Thousand Only (INR 15,000/-), an employer may however, without any legal obligation, contribute over and above the statutory limit of its contribution payable under the EPF Act. Given that, an important allied aspect is the employer’s liability towards its contribution under the EPF Act with respect to the terms of employment of the employees who are members under the Scheme, especially when the employer was contributing over and above the statutory limit for a period of time.

The Supreme Court case of Marathwada Gramin Bank Karamchari Sanghatana and Another v/s Management of Marathwada Gramin Bank and Ors. (the “Gramin Bank Case”) provides us with an understanding of the extent of the employer’s liability in these circumstances.

Brief facts of the Gramin Bank Case

The Gramin Bank (employer) had obtained permission from the Regional Provident Fund Commissioner to be exempted from complying with the provisions of the Scheme since it had formulated its own scheme to pay provident fund to its employees. Subsequently the said exemption was withdrawn and the Bank was asked to make contributions in accordance with the Scheme. However, the Bank continued to make payments in excess of its statutory liability under the Scheme and the EPF Act. Owing to huge accumulated losses, the Bank issued a notice of change under Section 9A of the Industrial Disputes Act, 1947 expressing its intention to discontinue payment of provident fund in excess of its statutory liability. On reference made by the Central Government to the Central Government Industrial Tribunal (the “Tribunal”), the Tribunal with reference to Section 12 of the EPF Act held that the management cannot reduce, directly or indirectly, the wages of any employee to whom the Scheme applies or the total quantum of benefits in the nature of old age pension gratuity (provident fund) or life insurance to which the employee is entitled under the terms of his employment, express or implied. The Tribunal ruled in favour of the employees and directed that the employees shall continue to draw equal amount of contribution from the employer towards provident fund without any ceiling on their wages.

Contrary view of the Bombay High Court and Supreme Court

The Bombay High Court, after studying Section 12 of the EPF Act, was of the view that the employer would not be permitted from reducing its provident fund contribution, only in the event that doing so would result in the same being contrary to the terms of employment of the employees. In the present case, the terms of employment of the Bank’s employees expressly provided that the provident fund contributions would be in accordance with the EPF Act. There was no provision in the terms of employment which required the employer to make contributions beyond its statutory obligations.

The Supreme Court, on appeal, shared the same view as the Bombay High Court that the Bank was under an obligation to pay provident fund to its employees in accordance with the provisions of statutory Scheme. Further, the Bank could not be compelled to pay the amount in excess of its statutory liability just because the bank had formed its own trust and started paying provident fund in excess of its statutory liability for some time. The employees were entitled to provident fund according to statutory liability of the Bank. The Bank never discontinued its contribution towards provident fund according to the provisions of the statutory Scheme.

The decision of the Gramin Bank Case was also followed in 2014 in the case of Nava Nalanda High School and Another v/s Employees Provident Fund Organisation and Another.

Conclusion

The statutory liability of an employer towards its contribution under the EPF Act and the Scheme will be limited to the amount payable with respect to the statutory wage ceiling [currently Rupees Fifteen Thousand Only (INR 15,000/-)] in cases where the respective employee’s monthly pay exceeds Rupees Fifteen Thousand Only (INR 15,000/-). However, if the employer wishes to contribute over and above the statutory limit it may do so at its own sole discretion. The employer is also at liberty to reduce the contribution to the statutory limits at any point of time as long as the said reduction is not specifically contrary to the terms of employment of the employees.

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Brick and Mortar – Cheer ! Relaxation of FDI rules in the Construction Development Sector

By Anupam Prasad, Partner and Anindita Ganguly, Associate

In India, Foreign Direct Investment (“FDI”) in real estate has been permitted since 2002 and was fully opened in 2005. Subject to certain conditions, FDI in the real estate sector is allowed and encouraged in hotel development, tourism, hospitality, township development, developing commercial real estate, built-up infrastructure, housing and construction projects, resorts, hospitals, educational institutions, recreational facilities, infrastructural projects at the regional and local levels and Special Economic Zones (SEZs).

The Government of India (“GoI”) allowed 100% (hundred percent) FDI in the real estate sector but with strict provisos, including a lock-in period of three years during which the investment could not be repatriated. However, pursuant to the Press Release dated October 29, 2014 (the “Press Release”), issued by the GoI, the rules pertaining to FDI in real estate have been relaxed and this has made it much easier for foreigners to invest in real estate in India.

As per the Press Release, the minimum built area for projects in which foreign investment is allowed will be reduced to 20,000 sq. mts. (twenty thousand square metres) from 50,000 sq. mts. (fifty thousand square metres) and the minimum capital investment by foreign companies has been halved from $ 10,00,000 (ten million dollars) to $ 5,00,000 (five million dollars).These relaxations will result in an increase in mergers and acquisitions and private equity investments. Also, the minimum land requirement for ‘serviced plots’ have been removed, as compared to the earlier requirement of 10 ha (ten hectares).

The revised norms have been announced by the GoI at a time when the share of construction, housing and real estate segment in total FDI had further slipped from 5% (five percent) in 2013 to below 3% (three percent), as of the current fiscal year until August, 2014. The more lenient rules will help faster completion of projects delayed by congestion of funds due to elevated debt levels and boost large scale investment in the sector. They will also encourage the development of smaller projects in areas where the availability of land is limited.

Despite this being a welcome change in the sector as it brings in more capital, the domestic buyers in the country will be negatively affected to an extent because more foreign money in realty means higher property prices. So, affordability faces a downward slope. Along with this, the GoI may permit repatriation of FDI by one non-resident investor to another non-resident investor before the completion of a project. This will lead to repatriation of profits by investors and increase in speculation in the market. Investors might start trading in properties like they do in stock and this in turn will make properties more unaffordable for the middle class.

Having said that, the real estate sector is a very critical sector of the Indian economy. After agriculture, real estate contributes the most to our economy. The main growth thrust is coming due to favourable demographics, increasing purchasing power, existence of customer friendly banks and housing finance companies, professionalism in real estate and favourable reforms initiated by the GoI to attract global investors.

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Indian Copyright Law Regime – Is it in tune with instrumental music?

By Abhyuday Bhotika, Associate

Copyrightable works cover an expanse of items which can be broadly classified under the rubric of inter alia musical work, embracing vocal and instrumental, operas, musicals, bands and orchestras both solos and choruses. India is a signatory to Brene Copyright Convention and Universal Copyright Convention 1952 as revised in 1971 at Paris by virtue of which any copyright registered in a signatory country is deemed to be valid and enforceable in India and vice versa (Saha Kanti Tusar, “Copyright Law in the Changing World”, JIPR Vol. 8, 2003, pp-28).

As per the Indian copyright law regime, “Musical work” means a work consisting of music and includes any graphical notation of such work but does not include any words or any action intended to be sung, spoken or performed with the music. A musical work need not be written down to enjoy copyright protection. Further, “Sound recording” means a recording of sounds from which sounds may be produced regardless of the medium on which such recording is made or the method by which the sounds are produced. A phonogram and a CD-ROM are sound recordings. Therefore, the author in the case of a musical work is the composer and author, and in case of a sound recording, he is a producer. It has been noted by Hon’ble Calcutta High Court that, “there are sounds which create soothing effect on a living creature like vocal music or instrumental music” (Burrabazar Fire Works Dealers vs The Commissioner Of Police AIR 1998 Cal 121).

Following provisions from the Copyrights Act, 1957 has been reproduced for your kind perusal:

Copyright’s Act Section 2 (d) “author” means, – (ii) in relation to a musical work, the composer;

Copyright’s Act Section 2 ( p ) “musical work” means any combination of melody and harmony or either of them, printed, reduced to writing or otherwise graphically produced or reproduced

Copyright’s Act Section 2 (y) “work” means any of the following works, namely:- (i) a literary, dramatic, musical or artistic work;

Copyright’s Act  section 13 states: Works in which copyright subsists:- (1) Subject to the provisions of this section and the other provisions of this Act, copyright shall subsist throughout India in the following classes of works, that is to say-

  • original literary, dramatic, musical and artistic works;

Law relating to instrumental remixes:

Instead of old traditional musical instrumentals like tanpura and tabla, instruments used in a remix are digital drums and synthesizers, and even the voice of a singer is often electronically manipulated. It has been suggested in the United States of America and Australia that remixes may encounter legal issues if a whole or substantial part of the original work is copied or used (Brien O’ Damien and Fitzgerald Brian, “Mashups remixes and copyright law” Internet Law Bulletin, 9 (2) (2006) p. 19) but the Indian Copyright law under Section 52 (1) (j) permits adaptations of the original sound recording in the absence of a license and does not permit making of substantial alterations or omissions unless reasonably necessary for the purposes of adaptation, a standard which has been rigidly interpreted by courts (Super Cassette Industries Limited vs Bathla Cassette Industries Private Limited, 2003 (27) PTC 280 (Del)).

Conclusion:

Indian Copyright law does not endeavor to define the term “instrumental music”. However with reference to Section 2 (p) of the 1957 Act, “musical work” means any combination of melody and harmony or either of them, which implicitly includes instrumental music. Further, section 13 of the 1957 Act, fortifies that copyright can subsist in a musical work. It is pertinent to note here a judicial illustration wherein a court has held in the Burrabazar Fire Works Dealers’ case that there are sounds which create soothing effect on a living creature like vocal music or instrumental music. Therefore, instrumental music is a sub-set of musical work and is included in the ambit of Section 2 (p) of the 1957 Act and thereby is in the domain of copyright protection.

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Dashrath Requires a Second Read; Goodbye, Mr. Lodha!

By Rudrajyoti Nath Ray, Senior Associate

In our post entitled “The Territorial Jurisdiction Conundrum”, we discussed how the Division Bench, in Dashrath, cleverly interpreted the “Harman Approach” and its effect on the “Bhaskaran Ratio”. It was fairly concluded by the SC that the “offence in contemplation of Section 138 of the NI Act was the dishonor of the cheque alone”; and that so far as the commission of the offence itself is concerned the proviso had no role to play. “The territorial jurisdiction conundrum” arose only because Bhaskaran treated the proviso to Section 138 as stipulating the ingredients of the offence.

Recently in Yogendra Pratap Singh v. Savitri Pandey (“Yogendra”), a Full Bench of the SC, while answering under reference, that, “the complaint under Section 138 of the NI Act, filed before the expiry of 15 days of service of notice cannot be treated as a complaint in the eyes of the law and criminal proceedings initiated on such complaint are liable to be quashed” has observed, however, that:

“For completion of an offence Under Section 138 of the NI Act not only the satisfaction of the ingredients of offence set out in the main part of the provision is necessary but it is also imperative that all the three eventualities mentioned in Clauses (a), (b) and (c) of the proviso are satisfied. Mere issuance of a cheque and dishonour thereof would not constitute an offence by itself Under Section138.”

In Yogendra, the question was asked, “can an offence under Section 138 of the NI Act be said to have been committed when the period provided in clause (c) of the proviso has not expired?” Even though Dashrath was a Division Bench – if we accept Dashrath’s reasoning – the answer to that question should have been in the affirmative. But Yogendra instead holds, “if the period prescribed in clause (c) of the proviso to Section 138 has not expired, there is no commission of an offence.”

Dashrath has produced wide spread ramifications in cheque bouncing matters. The outgoing Chief Justice of India may have made a slight inroad for one to question Dashrath in an appropriate case. Surely Hon’ble Chief Justice of India Rajendra Mal Lodha is aware of that eventuality.

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The Evolution of Thika Tenancy

By Rudrajyoti Nath Ray, Senior Associate

In Calcutta and its suburb Howrah, there have existed for many years precarious tenancies popularly known as Thika Tenancies. Under such Tenancy, vacant land was leased by the Landlord to a Tenant with liberty to erect structures thereupon of a temporary nature, which were referred to as “Kutcha Structures”. The structures would be owned by the Tenant of the land and the Tenant was further entitled to grant lease of the structure or portion thereof in favour of sub-Tenants. In this kind of Tenancy, the Tenant of the land was referred to as the ‘Thika Tenant’ and the Sub- Tenant was referred to as ‘Bharatia’. Until 1948, the provisions of the Transfer of Property Act, 1882 governed the right and liabilities of Landlords and their Thika Tenants. On October 26, 1948 the Calcutta Thika Tenancy Ordinance XI of 1948 was promulgated. The Ordinance had only six Sections. Section 2 of the Ordinance defined a Thika Tenant as follows:

“Any person who under the system commonly known as “Thika”, “Thika masik utbandi”, “Thika masik”, “Thika bastu”, or under any other like system held land under another person whether under a written lease or otherwise and was, or but for a special contract would be, liable to pay rent at a monthly or any other periodical rate, for that land to such other person and had erected any structure on such land and was entitled to use it for residential purposes or for manufacturing or business purposes and included the successors in interest of such person.”

Section 3 provided that, no decree or order for the ejectment of a Thika Tenant shall be executed during the continuance in operation of the Ordinance. The object of the Ordinance clearly appeared to be, to give protection to the Thika Tenants and to afford them interim relief by staying execution of certain decrees and orders as mentioned in Section 3, until an appropriate Act was passed by the Legislature in this behalf.

On February 28, 1949, the West Bengal Legislature enacted the Calcutta Thika Tenancy Act (“Act”). Section 2(5) of the Act defined a Thika Tenant in the following terms:

“Any person who under the system commonly known as “Thika”, “Thika masik utbandi”, “Thika masik”, “Thika bastu” or under any other like system holds, whether under a written lease or otherwise, or has been recorded in any record-of-rights as holding, under the title “dakhal basatkar” or other like appellation, land under another person and is, or but for a special contract would be, liable to pay rent, at a monthly or at any other periodical rate, for that land to such other person and has erected any structure on such land for a residential, manufacturing or business purpose and includes the successors-in-interest of such person.”

In order to establish Thika Tenancy, it had to be proved by evidence that the Tenant held the land under the “system” mentioned in the aforesaid Section. It was not enough for the Tenant to merely take a vacant land and then build structures on it – that could not make him ipso facto a Thika Tenant. There is no doubt that the provisions of the Act were intended to serve the purpose of social justice. The Thika Tenancy Act like similar Rent Acts passed in different States was intended to prevent indiscriminate eviction of Tenants and was intended to be a protective statute to safeguard security of possession of Tenants. But the definition of Thika Tenant contained in the Act gave rise to some difficulties and it was discovered that some of the Tenants in Calcutta who were in substance Thika Tenants failed to obtain the protection of the Act owing to some words used in the said definition. The new Law failed to achieve its object for some years as the Courts interpreted the definition of Thika Tenant in the Act in such a manner that speaking generally, no Tenant was able to establish its requirement.

The Governor of West Bengal enacted on October 21, 1952, The Calcutta Thika Tenancy (Amendment) Ordinance, 1952 by which the definition of Thika Tenant was revised and a few other amendments of the Act were made. By Section 2 (5) of this Ordinance, the definition of Thika Tenant in the Calcutta Thika Tenancy Act, 1949 was substituted by a new one:

“Any person who holds, whether under a written lease or otherwise, land under another person, and is but for a special contract would be liable to pay rent, at a monthly or at any other periodical rate, for that land to that another person and has erected any structure on such land for a residential, manufacturing or business purpose and includes the successor in interest of such person, but does not include a person:-

(a) who holds such land under that another person in perpetuity; or

(b) who holds such land under that another person under a registered lease, in which the duration of the lease is expressly stated to be for a period of not less than twelve years; or

(c) who holds such land under that another person and uses or occupies such land as a khatal.”

The effect of this was that a person who, before the Ordinance would not come within the pale of the Act because he could not prove a ‘system’, came within its protection, because of the amendment of the definition of a Thika Tenant. The phrase Thika Tenant within the meaning of the said Act as amended by the Ordinance meant and included a person who was a Thika Tenant, against whom a decree for possession had been passed, but who continued to be in possession. The meaning was necessary if the least working effect was to be given to the Ordinance.

The Ordinance was followed by the Calcutta Thika Tenancy (Amendment) Act of 1953 (“Amendment Act of 1953”) that came into force on March 14, 1953Section 2 of the Act amended the definition of Thika Tenant still further by giving the benefit of the Act to persons who had erected or acquired by purchase or gift any structure on the land for a residential, manufacturing or business purpose:

“Any person who holds, whether under a written lease or otherwise, land under another person and is or but for a special contract would be liable to pay rent, as a monthly or at any other periodical rate, for that land to that another person and has erected or acquired by purchase or gift any structure on such land for a residential, manufacturing or business purpose and includes the successors-in-interest of such persons, but does not include a person:-

(a) who holds such land under that another person in perpetuity; or

(b) who holds such land under that another person under a registered lease, in which the duration of the lease is expressly stated to be for a period of not less than twelve years; or

 (c) who holds such land under that another person and uses or occupies such land as a khatal.”

It was held by the Hon’ble Supreme Court of India (“SC”) that there was nothing in the definition clause that required a Thika Tenant to secure prior permission of the Landlord for erection of structures on the land. However, as regards what kind of structures the Thika Tenant was entitled to erect, it was held that words “any structure” could not be construed to mean a “Pucca Structure” (See, Kshirodamoyee, 63 CWN 565; Monmatha, 63 CWN 824).

After the Amendment Act of 1953 came into force, the position of a Tenant had to be examined in the light of the Act “as it finally emerged” – “taking on a new shape with some added features, some altered features and minus those features which had been omitted” (See, Mahadeolal, AIR 1960 SC 936)

More than a decade after, the Government of West Bengal proposed to further amend the Act with a view to “prevent unfair eviction of Thika Tenants”. The Calcutta Thika Tenancy (Second Amendment) Act, 1969 (“Second Amendment Act of 1969”) came into force on October 30, 1969. The Object and Reasons of the Second Amendment Act of 1969 were stated in the following terms, “It has been considered necessary that by further amendment of the Calcutta Thika Tenancy Act, 1949, the legitimate interests of a Thika Tenant should be properly safeguarded, the grounds on which a Thika Tenant can be ejected should be further restricted and that a Thika Tenant using the land for residential purpose should be given the right to erect Pucca Structure. It is also essential to ensure that the Thika Tenant discharges his obligations to the Bharatias by keeping the huts fit for habitation and by providing essential amenities like water supply, conservancy and sanitary services.” The Second Amendment Act of 1969 thus, gave the right to the Thika Tenant to erect a “Pucca Strcuture” – but in order to do so the permission of the Thika Controller was necessary.

Finally, the Act of 1949 was repealed in 1982 and the new Act, The Calcutta Thika Tenancy  (Acquisition and Regulation) Act, 1981 (“1981 Act/Act of 1981”) came into force with effect from January 18, 1982. The 1981 Act brought about drastic changes in the concept of Thika Tenancy. The superior interest of the Landlord holding under the State stood vested in the State by operation of Law. The land having been vested in the State, the Thika Tenant occupying the land under the Landlord became a Thika Tenant holding the Thika Tenancy directly under the State. Section 2(8) of the 1981 Act defined a Thika Tenant as:

“Any person who occupies, whether under a written lease or otherwise, land under another person, and is or but for a special contract would be liable to pay rent, at a monthly or at any other periodical rate, for that land to that another person and has erected or acquired by purchase or gift any structure on such land for residential, manufacturing or business purpose and includes successors-in-interest of such person.”

As may be noticed in the definition of Thika Tenancy in the 1981 Act, Clauses (a), (b) and (c) of Sub-Section (5) of Section 2 of the 1949 Act were omitted which had the effect of including the said lands described therein within the ambit of Thika Tenancies under the 1981 Act.

The cases of Purushottam Das (79 CWN 852), Jatadhari Daw (1986 1 CHN 21), Lakshmimoni Das (1987 2 CHN 148) & Satyanaryan (2001 3 CHN 641) have been frequently cited for the proposition that the expression “any structure” used in Section 3(8) of the Act of 1981 means a “Kutcha Structure”. The reliance is unfounded. Purushottam Das merely decides that subject to the right of the Landlord to have Pucca Structures demolished, the building of Pucca Structures themselves would not rob a Thika Tenant of his status by reason of the building of such Pucca Structures alone. In Jatadhari Daw, it was contended that the land in dispute had, after promulgation of the 1981 Act, vested in the State of West Bengal and that under the said Act, the appellants were now deemed to be the Tenants of the State. In the facts and circumstances of the case the Act of 1981 was found to have “no application” on grounds of a) there being no relationship of Landlord and Tenant between the concerned parties at the time of commencement of the 1981 Act, b) the land in dispute not being a holding within the meaning of Section 3(3) of the said Act and c) the land in dispute not qualifying as “other lands” within the meaning of Section 5 of the Act of 1981. The judgment offers no propositions to the effect that the expression “any structure” used in Section 3(8) of the 1981 Act means a “Kutcha Strucutre” only. While interpreting “other lands”, Jatadhari Daw held that, “a land held under any Tenancy except a Thika Tenancy will come within the mischief of [Section 5] only when the land is being used or occupied as a khatal and not otherwise.”  In Lakshmimoni Das, a Full Bench, while reconsidering Jatadhari Daw, merely re-affirmed this proposition. “The point of primary importance” decided by the Full Bench was that “other lands” will not mean any and every other land but must have a nexus with the Thika Tenancy or be a khatal where cows and buffalos are kept under a temporary structure even within Metropolitan Limits. Lakshmimoni Das, too, however, offers no propositions to the effect that the expression “any structure” used in Section 3(8) of the 1981 Act means a “Kutcha Structure” only. In contrast, Lakshmimoni Das considers that the 1981 Act has put “onerous duties and unreasonable obligation upon the Thika Tenant…in the matter of construction of Pucca Structures…and it is very difficult to reasonably expect that any Thika Tenant would make any attempt to construct a Pucca Structure…” To the Full Bench it indeed appeared that the Act of 1981 rendered the temporary nature of Thika Tenancy – “extra temporary” – making the position of the Thika Tenant, “worse than ever before”. It must be conceded though that Satyanaryanadvisedly opined” that the words “any structure” occurring in Sub-Section (8) of Section 3 of the 1981 Act includes every structure on the Tenancy and “each such structure must satisfy the condition of being such a structure as is not a Pucca Structure…” In Satyanaryan it was admitted that the Law on this point “has probably not been articulated in clear terms yet” – which exemplifies how the frequent audacious citation of Purushottam Das, Jatadhari Daw & Lakshmimoni Das, all of which preceded Satyanaryan, is not entirely correct. Satyanaryan was decided on June 20, 2001. At that time, an appeal against Lakshmimoni Das was pending at the SC. The decision in Satyanaryan would have certainly proved to be of some assistance to those who opposed the State. However, during the pendency of the Appeal there was first an Amendment of Section 5 of the 1981 Act by the Calcutta Thika Tenancy (Acquistion and Regulation) (Amendment) Act, 1993 (“Amendment Act of 1993”). Later, The West Bengal Thika Tenancy (Acquisition and Regulation) Act, 2001 (“2001 Act/Act of 2001”) was enacted.

The Act of 2001 repealed the said Act of 1981. It was given effect from January 18, 1982, that is, from the same date on which the 1981 Act was brought into force. “It is clear that the main object of the 2001 Act was to extend the acquisition of lands beyond Kolkata and Howrah, in other Municipalities of West Bengal, for development and proper utilization of such lands…” [See, Ramdas Bansal, (2012) 2 SCC 548]

As a result of the Amendment Act of 1993 and the subsequent new Act of 2001, the Appeal against Lakshmimoni Das before the SC was not pursued (and was withdrawn) since the decision ceased to have any effect. Section 2(14) of the 2001 Act defined a Thika Tenant as follows:

“Any person who occupies, whether under a written lease or otherwise, land under another person, and is, or but for a special contract, would be, liable to pay rent at a monthly or any other periodical rate for that land to that another person, and has erected of acquired by purchase or gift any structure on such land for residential, manufacturing or business purpose, and includes the successors-in-interest of such person but excluded any resident of a structure forfeited to the State under sub-Section (2) of Section 6 of this Act irrespective of the status he may have enjoyed earlier.”

Did this new definition indicate that the expression “any structure” included “Pucca Structures” too? The effect of retention of the same expression in a subsequent enactment, in the context of a prior judicial pronouncement, has been considered in Chapa Guha (AIR 1978 Cal 457). However, there is no one correct answer to the aforesaid question. If the amended definition of “Pucca Strcucutres” is anything to go by, however – it must be said that – the concept of a “Pucca Strucutre” underwent a change between 1981 and 2001. If any part of the structure was made of any material of temporary, transient or perishable nature such structure could not be considered as Pucca. In some terms thus, the expression “any structure”, as it was in 1981, did not mean the same in 1993 or in 2001. The box was the same. But it had now different contents.

The above quoted original definition of Thika Tenant stood amended further by the West Bengal Thika Tenancy (Acquisition and Regulation) (Amendment) Act, 2010 (“Amendment Act of 2010”):

“Any person who occupies, whether under a written lease or otherwise, land under another person, and is, or but for a special contract, would be, liable to pay rent at a monthly or any other periodical rate for that land to that another person, and has erected of acquired by purchase or gift any structure including Pucca structure, if any, on such land for residential, manufacturing or business purpose, and includes the successors-in-interest of such person but excluded any resident of a structure forfeited to the State under sub-Section (2) of Section 6 of this Act irrespective of the status he may have enjoyed earlier.”

The expression “Pucca Structure” was included, for the first time, in the definition clause of Section 2(14) of the 2001 Act, by the Amendment Act of 2010. The definition of Thika Tenant, under Section 2(14) of the Act of 2001, as amended by the Amending Act of 2010, was given retrospective effect from January 18, 1982, that is, from the same date on which the 1981 Act was brought into force. Indeed the Amending Act of 2010 is declaratory of the law as it always was and is a Parliamentary Exposition on the 2001 Act since the phraseology of “any structure” in the unamended Section 2(14) was evidently capable of diverse meanings and was rendered ambiguous by judicial interpretation.

The SC is at present, assessing the evolution of Thika Tenancy Laws on its own terms and some of its findings may very well be in variance to the opinions expressed herein. Whatever the decision – the same is sure to have its impact on a fairly large number of matters stemming from West Bengal.

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The Territorial Jurisdiction Conundrum

By Rudrajyoti Nath Ray, Senior Associate

A person, A1, has an account, bearing No. Y, maintained by him with Bank X. A1 has a ‘debt or other liability’ to A2. A1 draws out a cheque to A2 in whole or in partial discharge of his debt or other liability. The money is to be paid by X from Account No. Y. The cheque is presented to X for payment, within the period of the cheque’s validity. The cheque is returned by X unpaid for insufficiency of funds, etc. A2 makes a demand, for the payment of the amount of money inscribed on the cheque, by giving a notice in writing to A1 within 30 days of A2 receiving information from X regarding return of the cheque as unpaid. A1, however, fails to make payment of the said amount of money even though 15 days pass since A1 receives the notice. The above chain of five events: i) the drawal of the cheque by A1, ii) the presentation of the cheque to X, iii) X’s returning of the cheque as unpaid, iv) A2’s giving of a notice to A1 and v) A1’s failure to make the payment within 15 days of receiving the notice – complete A1’s commission of the offence, described under Section 138 of the Negotiable Instruments Act, 1881 (“Act”). That is what K. Bhaskaran [(1999) 7 SCC 510] (“Bhaskaran”) held in 1999. The Hon’ble Supreme Court of India (“SC”) observed that the offence under Section 138 is only complete when the drawer fails to pay the cheque amount within the period of 15 days stipulated under clause (c) of the proviso to Section 138. And since it is difficult to identify where precisely the drawer failed – for the purposes of ascertaining territorial jurisdiction – “if the five different acts were done in five different localities any of the courts exercising jurisdiction in of the five local areas can become the place of trial for the offence under Section 138 of the Act” and the Complainant is at liberty to file a complaint petition at any of those places.

Under the “Bhaskaran Ratio”, if A2’s notice to A1 were to be dispatched from City Z, then irrespective of where else the other four events transpired (even if the four other events all transpired at one place), the relevant court in City Z would have the territorial jurisdiction to hold trial for an offence under Section 138. “The conclusion in Bhaskaran was influenced in large measure by curial compassion towards the unpaid payee/holder”. The unpaid payee/holder was given an unwarranted freedom. The freedom was granted only because Bhaskaran in its root analysis read the proviso to Section 138 “as prescribing the ingredients of the offence”. Hence, the conclusion that the Section 138 offence completes itself only when the drawer fails to pay the cheque amount [clause (c) to the proviso]; hence, the conclusion, that it is difficult to spatially locate the drawer’s failure; and hence, the grant of freedom to the complainant to lodge his complaint at any of the places where the “ingredients of the offence” were committed.

The “Bhaskaran Ratio” led in effect to a “territorial jurisdiction conundrum”. Ten years later, in 2009, in Harman Electronics [(2009) 1 SCC 720] (“Harman”) it was observed that banking institutions holding several cheques from a borrower now send notices from four different places to make the accused borrower traverse across courts and cities: an “absurd and stressful situation” for “apparent transgressors of the law”. Harman was a case “where the complaint under Section 138 was filed in a Delhi Court, only because the statutory notice required to be issued under the proviso to Section 138 was issued from Delhi. If Bhaskaran was correctly decided, Harman should not have interfered with the exercise of jurisdiction by the Delhi Court for issue of a notice was in terms of Bhaskaran, one of the factors that clothed the Court in Delhi to take cognizance and try the case. Harman did not do so.” Harman interfered. Harman held “what would constitute an offence is stated in the main provision”. The proviso appended to Section 138 only imposes certain further conditions, which are required to be fulfilled before cognizance of the offence can be taken. The “Harman Approach” of differentiating between the commission of an offence and its cognizance leading to prosecution has met the approval of a Full Bench recently in Dashrath Rupsingh Rathod vs. State of Maharashtra & Another (“Dashrath”).

In Dashrath the “Harman Approach” and its effect on the “Bhaskaran Ratio” has been cleverly interpreted. It has been clarified that ordinarily, in criminal law, the place where the offence is committed is where the prosecution has to be conducted. “The offence in contemplation of Section 138 of the Act is the dishonour of the cheque alone”, i.e., the return of the cheque by the drawee bank (Bank X) and the “JMFC at the place where this occurs is ordinarily where the Complaint must be filed, entertained and tried.” The “territorial jurisdiction conundrum” arose only because Bhaskaran treated the proviso to Section 138 as stipulating the ingredients of the offence. The proviso does not stipulate any ingredients of the offence. It enables taking cognizance of the offence, prosecuting the offence – but so far as the commission of the offence itself is concerned, the proviso has no role to play. Once that is settled, there are no uncertainties anymore – like the ones Bhaskaran faced while trying to spatially locate the drawer’s failure. It shall not be difficult to identify where the cheque stood dishonoured and there only shall the trial for the offence under Section 138 be conducted. Dashrath, however, has made this proposition of law inapplicable to those cases where, post the summoning and appearance of the alleged accused, the recording of evidence has commenced as envisaged in Section 145(2) of the Act. All other complaints have been ordered to be returned to the complainant for filing in the proper Court. If such complaints are filed/refiled within thirty days of their return, they shall be deemed to have been filed within the time prescribed by law, unless the initial or prior filing was itself time barred.

Readers are invited to read Dashrath in full.

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… And we are back (with more Case Laws)

By Rudrajyoti Nath Ray, Senior Associate

After a long summer holiday we are back again at the Hon’ble Supreme Court of India (“SC”). As we gear up to write more, analyze more and criticize even more – here are two case updates from last week to set the ball rolling.

As per the second proviso to Section 19 of the Consumer Protection Act, 1986, no appeal by a person, who is required to pay any amount in terms of an order of a State Consumer Disputes Redressal Commission (“SCDRC”), shall be entertained by the National Consumer Disputes Redressal Commission (“NCDRC”) unless the appellant-person deposits, in the prescribed manner, fifty percent of the amount or Rupees Thirty Five Thousand, whichever is less. If a SCDRC, therefore, orders a person to pay an amount in the range of Rs. 70,000 and above – an appeal from that order will only be heard by the NCRDRC once the appellant has deposited, in the prescribed manner, Rs. 35,000. In M/s. Shreenath Corporation & Ors. Vs. Consumer Education & Research Society & Ors. [Civil Appeal No. 9052 of 2014 arising out of Special Leave Petition (Civil) No. 21668 of 2012], the SC has held that the aforesaid “pre-deposit condition” has no nexus with any order of stay that the NCDRC may be pleased to issue. That, “entertainment of an appeal and stay of proceedings pursuant to order impugned in the appeal stands at different footings…” And therefore, even after an appellant has deposited the requisite amount, for the hearing of his appeal before the NCDRC, the NCDRC may yet prescribe a condition of depositing a further amount before it grants any stay of the operation of the order of the relevant SCDRC.

In another case, an important proposition as regards the Negotiable Instruments Act, 1881 (“Act”) has been reaffirmed. Three categories of persons can be discerned as brought within the purview of the penal liability, through the legal fiction envisaged in Section 141 of the Act. They are: a) the Company which has committed the alleged offence; b) every person who, at the time the offence was committed, was in charge of, and was responsible to the Company for the conduct of the business of the Company and c) any director, manager, secretary or other officer with whose consent or connivance of or because of whose neglect the Section 138 offences is alleged to have been committed. In Anil Gupta v. Star India Pvt. Ltd. & Anr. [Criminal Appeal No.1364 of 2014 arising out of Special Leave Petition (Criminal) No. 7039 of 2007], the SC has held that in proceedings under Section 138 read with Section 141 of the Act, arraigning of a Company as an accused is imperative, unless there is a legal impediment. Without the Company being a party – proceedings against persons in category (b) or (c) cannot be continued.

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