Where to File Cheque Bounce Cases (Jurisdiction of Court

– To File NI Act Complaint)? 

After 2015 Amendment, it is (only) the place where the Payee-Bank

(Bank in which the Payee Presents the Cheque for ‘Collection’) is situated

(By Saji Koduvath, Advocate, Kottayam)

1. Key Takeaways

•    1. Before the Negotiable Instruments (Amendment) Act, 2015 (Act 26 of 2015), there was no specific legislative commandment in the NI Act, as to territorial jurisdiction of courts for filing a complaint. Therefore, it was taken as the court (or courts) within whose territorial jurisdiction the offence was committed.

•    2. The Supreme Court held inDashrath Rupsingh Rathod v. State of Maharashtra, (2014 (3) KLT 605 (SC) = AIR 2014 SC 3519), that the jurisdiction for filing of complaints was ‘restricted to the location where the cheque was dishonoured, i.e., cheque was returned unpaid by the bank on which it was drawn (or, drawee bank – the Bank that is directed, by the drawer, to pay).

•    3. By the amendment of 2015, the dictum in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014 (3) KLT 605 (SC) = AIR 2014 SC 3519), was overturned – Section 142 has been re-numbered as sub-section (1) and sub-section (2) has been inserted (which specified the territorial jurisdiction of the court).

•    The dictum of the Supreme Court in Dashrath Rupsingh Rathod case has been “legislatively overruled”*^*by an amendment to the Negotiable Instruments Act, in 2015

        • **(as observed in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. (2021 (2) KLT SN 39 (C.No.35) SC = 2021 (2) KLT OnLine 1019 (SC) = (2021) 6 SCC 325) – R.F. Nariman, J.)

•    4. After the 2015 amendment (after inserting sub-section (2) the territorial jurisdiction is limited to the Payee-Bank

•    The amendment stands as under:

•    “(2) The offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction –

•    (a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

•    (b) if the cheque is presented for payment by the payee or holder in due course otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

•    5. Section 142(2)(b) Simplified

•    The words ‘otherwise through an account’ requires explanation.

•    It can be simplified as under:

      •   if the cheque is presented by the payee or holder in due course (directly), in the bank of the drawer, (the proper court is that within whose local jurisdiction) the branch of the drawee bank where the drawer maintains the account, is situated.

•    6. The decision in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014 (3) KLT 605 (SC) =AIR 2014 SC 3519)^#, was “legislatively overruled” by the amendment of 2015.^{# *} It is done within the ‘shortest’ (?) time for ensuring “a fair trial”.

•     #(rendered “keeping in perspective the hardship that … will continue to bear on alleged accused/respondents who may have to travel long distances in conducting their defence”)

•     #*(with the object of addressing “the difficulties faced by the payee or the lender of the money in filing the case under Section 138 of the said Act”, and “it is expected that the proposed amendments to the Negotiable Instruments Act, 1881 would help in ensuring that  a fair trial of cases under Section 138 of the said Act is conducted ….”)

2. Section 142 of the N I Act, after 2015 Amendment, reads as under:.

•    “142. Cognizance of offences.—(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),—

•     no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

•     (b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138:

•     Provided that the cognizance of a complaint may be taken by the court after the prescribed period, if the complainant satisfies the court that he had sufficient cause for not making a complaint within such period.

•     (c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under Section 138.

•     “(2) The offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction,—

•    (a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

•     (b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

•     Explanation — For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account.”

3.   Dashrath Rupsingh Rathod v. State of Maharashtra (2014 (3) KLT 605 (SC) = AIR 2014 SC 3519)

The Supreme Court, in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014 (3) KLT 605 (SC) = AIR 2014 SC 3519), (T.S.Thakur, Vikramajit Sen, C.Nagappan, JJ.) held that the jurisdiction of the court in matters where the cheque is returned unpaid was ‘restricted to the location where the cheque was dishonoured, i.e., cheque was returned unpaid by the bank on which it was drawn’. It observed further as under:-

•    “20. We are quite alive to the magnitude of the impact that the present decision shall have to possibly lakhs of cases pending in various Courts spanning across the country. One approach could be to declare that this judgment will have only prospective pertinence, i.e. applicability to complaints that may be filed after this pronouncement. However, keeping in perspective the hardship that this will continue to bear on alleged accused/respondents who may have to travel long distances in conducting their defence, and also mindful of the legal implications of proceedings being permitted to continue in a Court devoid of jurisdiction, this recourse in entirety does not commend itself to us. Consequent on considerable consideration we think it expedient to direct that only 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 Negotiable Instruments Act, 1881, will proceeding continue at that place. To clarify, regardless of whether evidence has been led before the Magistrate at the pre-summoning stage, either by affidavit or by oral statement, the complaint will be maintainable only at the place where the cheque stands dishonoured. To obviate and eradicate any legal complications, the category of complaint cases where proceedings have gone to the stage of Section 145(2) or beyond shall be deemed to have been transferred by us from the Court ordinarily possessing territorial jurisdiction, as now clarified, to the Court where it is those where the accused/respondent has not been properly served) shall be returned to the complainant for filing in the proper Court, in consonance with our exposition of the law. 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.”

4. Legislative Overruling

In P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. (2021 (2) KLT SN 39 (C.No.35) SC =2021 (2) KLT OnLine 1019 (SC) = (2021) 6 SCC 325) (Rohinton Fali Nariman, B.R. Gavai, JJ.)
it is held as under:

•    “49. In Dashrath Rupsingh Rathod v. State of Maharashtra, (2014 (3) KLT 605 (SC)  = (2014) 9 SCC 129), a three-Judge Bench of this Court answered the question as to whether the territorial jurisdiction for filing of cheque dishonour complaints is restricted to the court within whose territorial jurisdiction the offence is committed, which is the location where the cheque is dishonoured, i.e., returned unpaid by the bank on which it is drawn. This judgment has been legislatively overruledby Section 142(2) of the Negotiable Instruments Act set out hereinabove.”

End Note:

The Prefatory Note of the Bill which lead to Act 26 of 2015 reads as under:

•     “Statement of Objects and Reasons – The Negotiable Instruments Act, 1881 was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. The Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 inserted in the Negotiable Instruments Act, 1881 (hereinafter called the said Act), a new Chapter XVII, comprising Sections 138
to 142 with effect from 1st April, 1989. Section 138 of the said Act provides for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque.

•     2. As Sections 138 to 142 of the said Act were found deficient in dealing with dishonour of cheques, the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, inter alia, amended Sections 138, 141 and 142 and inserted new Sections 143 to 147 in the said Act aimed at speedy disposal of cases relating to dishonour of cheque through their summary trial as well as making them compoundable. Punishment provided under Section 138 too was enhanced from one year to two years. These legislative reforms are aimed at encouraging the usage of cheque and enhancing the credibility of the instrument so that the normal business transactions and settlement of liabilities could be ensured.

•     3. The Supreme Court, in its judgment dated 1st August, 2014, in the case of Dashrath Rupsingh Rathod v. State of Maharashtra ((2014 (3) KLT 605 (SC) = (2014) 9 SCC 129), held that the territorial jurisdiction for dishonour of cheques is restricted tothe court within whose local jurisdiction the offence was committed, which in the present context is where the cheque is dishonoured by the bank on which it is drawn. The Supreme Court has directed that only 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 Negotiable Instruments Act, 1881, will proceeding continue at that place. All other complaints (including those where the accused/respondent has not been properly served) shall be returned to the complainant for filing in the proper court, in consonance with exposition of the law, as determined by the Supreme Court.

•    4. Pursuant to the judgment of the Supreme Court, representations have been made to the Government by various stakeholders, including industry associations and financial institutions, expressing concerns about the wide impact this judgment would have on the business interests as it will offer undue protection to defaulters at the expense of the aggrieved complainant; will give a complete go-by to the practice/concept of ‘Payable at Par cheques’ and would ignore the current realities of cheque clearing with the introduction of CTS (Cheque Truncation System) where cheque clearance happens only through scanned image in electronic form and cheques are not physically required to be presented to the issuing branch (drawee bank branch) but are settled between the service branches of the drawee and payee banks; will give rise to multiplicity of cases covering several cheques drawn on bank(s) at different places; and adhering to it is impracticable for a single window agency with customers spread all over India.

•    5. To address the difficulties faced by the payee or the lender of the money in filing the case under Section 138 of the said Act, because of which, large number of cases are stuck, the jurisdiction for offence under Section 138 has been clearly defined. The Negotiable Instruments (Amendment) Bill, 2015 provides for the following, namely-

•    (i) filing of cases only by a court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for payment, is situated;

•     (ii) stipulating that where a complaint has been filed against the drawer of a cheque in the court having jurisdiction under the new scheme of jurisdiction, all subsequent complaints arising out of Section 138 of the said Act against the same drawer shall be filed before the same court, irrespective of whether those cheques were presented for payment within the territorial jurisdiction of that court;

•     (iii) stipulating that if more than one prosecution is filed against the same drawer of cheques before different courts, upon the said fact having been brought to the notice of the court, the court shall transfer the case to the court having jurisdiction as per the new scheme of jurisdiction; and

•     (iv) amending Explanation I under Section 6 of the said Act relating to the meaning of expression “a cheque in the electronic form”, as the said meaning is found to be deficient because it presumes drawing of a physical cheque, which is not the objective in preparing “a cheque in the electronic form” and inserting a new Explanation III in the said section giving reference of the expressions contained in the Information Technology Act, 2000.

•     6. It is expected that the proposed amendments to the Negotiable Instruments Act, 1881 would help in ensuring that a fair trial of cases under Section 138 of the said Act is conducted keeping in view the interests of the complainant by clarifying the territorial jurisdiction for trying the cases for dishonour of cheques.

•     7. The Bill seeks to achieve the above objects.”

From Cryptocurrency to CBDC ––The Saga of Electronic Cash:
An Analysis in the Indian Context

(By Dr. Raju Narayana Swamy, IAS)

Introduction

Cryptocurrency is an internet-based store of value, which is used and created for much the same purpose as physical currency, yet cryptocurrency has no physical representation in reality – it is created, stored and transacted electronically. It is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units and verify the transfer of assets. Unlike traditional currency and financial instruments, it is not issued by a central bank. Rather anyone can attempt to “mine” it by using computers programmed to guess answers to a computational puzzle. It is thus neither a commodity currency (backed by gold or some other commodity) nor a fiat currency (used by convention as a result of a legal edict). It is fundamentally designed to bypass the established financial system. The objective for circumventing banks’ intermediation finds basis in

(i)   lack of bank’s trustworthiness

(ii)  costs charged by banks and

(iii)  tracking of transactions.

The key characteristics of cryptocurrency are decentralization, anonymity and borderlessness. What makes it remarkable is that it settles the most controversial issue – who owns wealth – without the need for a law enforcement apparatus.

The Financial Action Task Force (FATF) defined a cryptocurrency as “a math based decentralized convertible virtual currency protected by cryptography by relying on public and private keys to transfer value from one person to another and signed cryptographically each time it is transferred.”

Cryptocurrencies work with blockchain technology which ensures its security. Hash rate determines the degree of security of cryptocurrencies – the higher the hash rate, the lesser chance of security breach. With the highest hash rate of any network, bitcoin is considered the most secure cryptocurrency. A user of cryptocurrency chooses a private key, which is kept secret with him and generates a corresponding public key which is shared with the world. Any payments made by the user are made using the private key, but any payment to be received is sent to the public key, known to the world.

The concept of cryptocurrency was first proposed by David Chaum, an American cryptographer, in 1983, as a way of creating electronic cash. Cryptocurrency transfers are instantaneous and borderless and many have been designed so that users can transact in relative anonymity.

The Satoshi Nakamoto Paper

On October 31, 2008 , a person or group going by the name Satoshi Nakamoto posted online a short paper titled “Bitcoin: A Peer -to- Peer Electronic Cash System.” It addressed a straightforward question: Why do online payments have to involve banks, credit card companies and other financial intermediaries ? Why can’t they be like cash payments in the physical world? As bitcoin transactions happened, Nakamoto proposed, they would all be recorded in a ledger that logged exactly which bitcoins were spent and the pseudonymous identity of both the buyer and seller as verified by their signatures.
A universal, easily consultable ledger was essential for the bitcoin system in order to deal with the “double spend problem”. This problem arises because bitcoins are purely pieces of information, yet it is essential that they do not all follow the free, perfect and instant economics of information goods. If bitcoins could be freely, perfectly and instantly copied, forgery would be rampant. Needless to say, a trusted universally accessible online ledger would solve the double spend problem by enabling merchants to verify that a prospective buyer actually has the bitcoins they say they do and that they haven’t been already spent anywhere else.

But the billion dollar question that arose is: Who should be responsible for creating, maintaining and ensuring the integrity of this ledger? It cannot be a bank or credit card company because the whole point of the proposed system is that it could not rely on existing financial institutions or on governments. In fact, it had to operate in a completely decentralized way. By an ingenious combination of mathematics and programming, Nakamoto proposed an online system that would works as follows:-

1.    As each transaction between buyers and sellers happens, it is broadcast throughoutthe system.

2.    Specialized computers called “nodes” periodically collect all the transactions and verify that they are legitimate. The set of good transactions over a period of time is called a “block”.

3.    The nodes are also involved in a competition with each other consisting of trying to find a short numeric summary called a “hash” of the current block.

4.    The winning node broadcasts its just finished block throughout the system. As its reward it is allowed to create and keep for itself a predetermined number of bitcoins.

5.    Other nodes double-check this block.

6.    Once nodes convince themselves that a block is correct and complete, they start putting together the next one and carrying out its proof of work and the entire block creation process starts all over again.

Many readers of Nakamoto’s paper came to believe that the system he described could actually be built and would be valuable.

In May 2010, Laszlo Hanyeez, a programmer living in Florida posted a request on a bitcoin forum to trade 10000 bitcoins in exchange for a couple of pizzas. Four days later, 18 year old Jeremy accepted the offer and purchased the food via the Papa John’s website. This was the first known trade of bitcoin for a physical product and gave the fledgling currency a value of about $.003 per bitcoin as Jeremy paid $ 30 for the pizza.

Skepticism of mainstream economists

Throughout this time, most mainstream economists were skeptical of bitcoin’s potential as a rival to the world’s established currencies. Two of the main functions of any money, they pointed out, were a means of exchange and a store of value. For both these functions, stability of the currency is critical. But the value of the bitcoin fluctuated wildly and this volatility made the digital currency unsuitable as a mainstream means of exchange Apprehension prevails that if one or more private currencies are allowed, that may lead to a parallel currency system in the economy, which may result in “dollarization.” If most people in a country start using cryptocurrencies, the central bank would lose the sole authority to print money – nay lose the significant power to control money supply and liquidity in the market. This in turn would hamper the ability of the bank to ensure macroeconomic stability of the country. Cryptocurrencies do not have an issuer, they are not an instrument of debt or commodities nor do they have any intrinsic value. Thus they can act as currency only in a private environment and not on a national scale.

Worries about cryptocurrencies range from issues of irreversibility and of investor protection to those of national security. On the investor protection front, there are concerns that speculative investments in cryptocurrencies could adversely affect innocent investors. Given the virtual, anonymous and decentralized nature of cryptocurrencies, it is feared that they may circumvent rules concerning Know Your Customer (KYC), Anti Money Laundering etc. As regards national security, there is a concern that cryptocurrency could be used for terror financing. This is because while the original purchase of the currency could be traced, any subsequent transaction is extremely difficult to detect. They have been linked to illicit cyber activity for some time and have become common bartering tools for illicit goods and services on dark marketplaces such as Silk Road, Alphabay and Valhalla. These platforms allow consumers to purchase items such as drugs, weapons, cybercrime-as-a-service, hacking tools, malware, stolen credit card details and compromised usernames and password combinations using bitcoins.

Cryptocurrencies, such as bitcoin and ethereum, are also involved in the facilitation of ransomware attacks, where users are prevented from using their systems until a ransom is paid. It is also worth mentioning here that advanced economies being mature markets may withstand disruptions by cryptocurrencies whereas India may not. However, the proven benefits of cryptocurrencies must also be acknowledged – low cost transactions, transparency, speed, security, cross-border nature, lack of the need for a middle man, investment profits and portfolio diversification.

To summarize, bitcoin shows the potential of completely decentralized communities. By combining cryptography, economics, code and networks, it creates something as fundamental and critical as money. Unlike modern currency which is a creature of law, bitcoin does not require faith in any public institution. The most remarkable thing about it is how it enables a global crowd of people and organizations all acting in their own interest to create something of immense shared value. Needless to say it sparked a wave of innovation and entrepreneurship. But despite ample worldwide enthusiasm, it did not meet with remarkable success. The failure occurred not because of intractable problems with mining or newly discovered vulnerabilities of the cryptocurrency, but for organizational reasons.

Legal nature of cryptocurrencies

The status of cryptocurrency has to be analyzed in the backdrop of the following Acts:

a)   FEMA 1999

b)    The Federal Reserve Bank of India Act 1934 (RBI Act)

c)    The Coinage Act, 1906

d)   Indian Contract Act, 1872

e)   The Payment and Settlement Systems Act, 2007

f)    The Securities Contracts (Regulation) Act, 1956

g)   The Sale of Goods Act, 1930

Moreover, cryptocurrencies may fall under the definition of “computer program” under the Indian Copyright Act of 1957. Needless to say, they can be classified as intangible goods under the Sale of Goods Act of 1930. Again, use and trading thereof needs compliance with principles required under protection of information, especially IT Act of 2000 read with IT (Reasonable Security Practices and Procedures and Sensitive Personal Data and Information) Regulation of 2011.

The legal nature of cryptocurrencies can be explored by comparing them with money and property. Cryptocurrencies possess the positive and normative features of property-being definable, identifiable and capable of being exclusively controlled and transferred. They also share the essential function of money owned by the holder of the private key.  Like bank accounts, the token provides access to some interests to which the owner has a legal entitlement. True, bitcoin has no value in itself as a chain of characters. But for those who recognize the value of cryptocurrencies, the alphanumeric character represents money. It can be used and transferred in exchange for goods, services, fiat currencies and other cryptocurrencies. It provides a claim to others who recognize the function and value of cryptocurrencies. But it is only a claim, an entry or ticket to the game. One must not forget that in Skatteverket v. Hedqvist, the CJEV recognized the use of bitcoin as a means of payment between individuals – as a currency which has no purpose other than a means of payment. Similarly the Court of Southern District of New York in US v. Murgio held that as bitcoin was used as a means of payment for goods and services, it constituted funds or monetary value in law. Needless to say, money and property have no fixed meaning and scope, but are a variable collection of interests established by social convention and State recognition. Money for instance is credit, a social relation, a convention recognized by the State, a two sided balance sheet operation. We should expect the scope of these terms to evolve over time as soon as new uses are discovered or new technologies are applied. Law would then have to adapt to such social realities. No wonder why El Salvador became the first country to recognize bitcoin as a tender.

Some of the cryptocurrency platforms are

1)   Bitcoin (formed in 2008. It is a peer-to-peer electronic cash system based on a PoW (Proof of Work) (which consists of a complex cryptographic math puzzle) consensus mechanism).

2)   Ethereum (launched in July 2015, it is promoted and supported by the Ethereum Foundation, a Swiss non-profit organization).

3)   Ripple (XRP).

4)   Bitcoin Cash (BCH) (Bitcoin developers wanted to raise the block size limit from 1 MB to 8 MB, to reduce transaction fees and improve confirmation times while others had different plans. Because the community could not reach a consensus, the new cryptocurrency Bitcoin Cash was created. Like Bitcoin, Bitcoin Cash makes use of the PoW mechanism, which means that it can be mined.  Anyone who held Bitcoin at the time Bitcoin Cash was created (ie) 1st August 2017 also became owner of the same amount of Bitcoin Cash).

5)    Litecoin (LTC) (Launched in October 2011.It is based on the Scrypt PoW algorithm. Litecoin is often described as the silver to Bitcoin’s gold. It is different from Bitcoin in two ways – first, Litecoin offers a much faster transaction speed than Bitcoin and second, the total supply limit of Litecoin is much higher)

6)   Stellar (XLM).

7)   Monero (XMR).

8)   Dash (based on XII PoW algorithm. What is specific to Dash and makes it different from most other coins is that it has a two -tier network).

9)   NEO.

10)  IOTA (launched in 2016. It is based on what is known as a directed acyclic graph).

Bitcoins have been used as means of exchange to buy online at some of the CD stores or even book tickets.  Many countries have identified cryptocurrencies as a growing threat but responses to this threat have ranged from taking steps to make cryptocurrencies, such as Bitcoin, illegal to taking a “wait and watch” stance. To date, few sustained efforts have been made to regulate Bitcoin or other cryptocurrencies.

However, Chinese banks are prohibited from developing relationships with those using bitcoins or running bitcoin-related businesses.  China has defined bitcoin as a “virtual commodity” that should not be considered or used as a currency. 

In fact, the legality of bitcoins in India was a major question in the year 2014. The Enforcement Directorate (ED) searched and raided a few bitcoin exchanges to see whether they were violating Indian laws or not. ED believed that bitcoins can be used for criminal activities including money laundering, hawala transactions and funding of terrorist activities. Indian Laxmicoin had even sought clarifications from regulatory authorities of India before its launch. Cyber attacks also targeted bitcoin users and bitcoin exchanges in the year 2014. According to some reports, bitcoin website Mt.Gox’s disappeared due to sophisticated cyber attacks and stealing of bitcoins. The Enforcement Directorate also searched Seven Digital Cash LLP offices and websites for selling and buying bitcoins in India.

The Indian Context

RBI issued a circular on 6th April 2018 stating that ‘it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs (virtual currencies) or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/sale of VCs.’ The ban was immediate and gave virtually no time to users and companies to organize their affairs.

Though the circular did not ban cryptocurrencies per se, the effect of the circular was to cut off the use of cryptocurrencies from the normal banking channels. This created a bottleneck for bitcoin companies like Zebpay and Unocoin (which had set up its first ATM in 2018 to enable Indians to buy and sell bitcoins). With the closure of banking channels, these companies resorted to intermediaries. People who hold bitcoins can choose to retain them, but will not be able to convert it into rupees or trade in Indian currency. In the 2018-19 Budget Speech, the Union Finance Minister has said that the Government does not consider cryptocurrencies legal tender.

Internet and Mobile Association of India v. R.B.I.

The circular was challenged before the Supreme Court by way of Writ Petitions. Two main questions were considered by the Court in Internet and Mobile Association of India v.R.B.I.(2020 (2) KLT OnLine 1155 (SC) = 2020 SCC Online SC 275):

1)   Whether the R.B.I. had the power to regulate cryptocurrencies at all?

2)   If RBI indeed had the power, had that power been rightly used so as to ban cryptocurrencies?

As regards the first question, the Court was required to undertake a two-fold exercise: first, the Court was required to examine the extent and nature of RBI’s powers and second, the Court was called upon to determine what the true nature of cryptocurrencies was. As regards the former, an extensive historical review of central banks was undertaken -from considering the establishment of the Bank of England under a royal charter in 1694 to the establishment of the Indian Central Bank by the Imperial Bank of India Act, 1921. After considering the history, the Court examined the functions that RBI was required to perform in modern times and came to the conclusion that one fundamental role was the supervision of monetary policy. As per the preamble of the Reserve Bank of India Act, 1934 (as amended in 2016) the primary objective of monetary policy was to maintain price stability while keeping in mind the objective of growth. The Court also considered other statutory enactments to conclude that RBI had extremely wide powers to operate the currency and credit system of the country, including the sole right to issue bank notes that would constitute legal tender. In fact RBI had a special place in the economic system of the country which even enabled it to exercise functions that were essentially legislative in nature.

As regards the latter – and in particular the petitioners’ contention that they were not ‘money’ as  understood in the legal or social sense – the Court undertook an exhaustive analysis of how various other countries and regulators across the world had treated virtual currencies. The judgement contained a table, showing the different definitions of the term ‘virtual currency’ adopted by regulators around the world. It also considered the definitions of the term adopted in legislation and other statutory instruments in almost thirty jurisdictions.  As a result of the intensive exercise, the Court reached the conclusion that there is unanimity of opinion among all the regulators and the Governments of various countries that though virtual currencies have not acquired the status of a legal tender, they constitute digital representations of value and that they are capable of functioning as a medium of exchange and/or a unit of account and/or a store of value. Hence the Court ruled that it was not possible to accept the contention of the petitioners that virtual currencies are just goods/commodities and can never be regarded as real money.

Thus the Court ruled that RBI did in fact have the power to regulate cryptocurrencies. RBI was not only to be a mute spectator and only determine interest rates. Since by their very nature, virtual currencies had the potential to interfere with those matters that RBI had been tasked to monitor, the Court rejected the first contention of the petitioners that the impugned decision is ultra vires.

But the petitioners had another argument up their sleeve. They argued that the circular was violative of the right to free trade and business guaranteed under Article 19(1)(g) of the Constitution. Access to the banking system was imperative for any business and hence, the petitioners urged, a complete ban on accessing these services imposed an unreasonable restriction on their right to carry on their trade. To decide whether this contention had any merit, the Court relied on the doctrine of proportionality. The Court thus had to examine whether the ban was the best method to deal with the public interest argument raised by RBI or whether regulation without a ban would have been possible or desirable. In doing so, the judgement again referred to how other countries had dealt with the issues raised by virtual currencies. The Court held that “when the consistent stand of RBI is that they have not banned VCs and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft Bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate.” The circular was thus held to be unconstitutional and struck down.

The result of the judgement was to open up the cryptocurrency markets once again. The RBI Governor made statements warning of the dangers of cryptocurrencies. The effect of these statements was that banks kept on dissociating themselves from the crypto markets. Thus even though the ban had been struck down, not much has changed.

Rumours floated that the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 (which sought the probation of all private cryptocurrencies) would be introduced in the Lok Sabha. However the bill was never introduced. Rather than banning the use of cryptocurrency, the Union Budget of 2022 introduced a tax of 30% on the profits earned through the trading of such currencies – a  tacit admission of the legality thereof.

The dangers of speculative investments in cryptocurrencies are as real as they were when the circular was passed. A ban may not be the best option, but failure to regulate is an abdication of responsibility.

The International Scenario

The International Monetary Fund (IMF) recognises that effective policy co-ordination for cryptocurrencies will be required at national and international levels due to their cross-border reach, which increases the potential risks and creates opportunities for regulatory arbitrage. They argue that the initial focus of regulation should focus on the most pressing concerns related to cryptocurrencies - financial integrity, consumer/investor protection, and tax evasion - whilst leaving less immediate risks - financial stability and monetary policy - to later stages. Needless to say, for a regulatory framework tailored to bitcoin and other cryptocurrencies to function effectively, it must be global. This is because it is conceivable that anyone, in any country, could utilise bitcoin for illicit purposes. For example, an Australian individual could purchase bitcoins online and use them to pay an American hacker to carry out a ransomware attack on a third individual, who resides in Russia. If the relevant regulatory framework does not encompass all three jurisdictions and is not consistently implemented within said jurisdictions, the likelihood of successfully punishing those responsible diminishes significantly. Moreover, those misusing bitcoin will simply migrate to regulation-free jurisdictions to acquire and use them unimpeded.

Conclusion

Needless to say, banning cryptocurrencies will sound like banning the internet. Hence the need of the hour is strengthening the Digital Rupee – India’s very own CBDC (Central Bank Digital Currency). There is a fundamental distinction between CBDC and a non- public cryptographic money other than government backing. CBDC will be upheld through permissioned blockchain innovation than permissionless blockchain innovation that is generally utilized through different individual cryptographic forms of money like bitcoin. CBDC holds the promise to become “programmable money” (ie) it could be designed to act in a particular manner in predetermined criteria. This could herald in a new age for public services delivery which at present suffers from systemic issues – inefficiency and corruption, to name a few. When combined with Jan Dhan – Aadhar – Mobile trinity, CBDC can increase financial inclusion and stands to reduce the cost of printing, storage and distribution of money. However, challenges for CBDCs are galore – data breach, counterfeiting and quantum computing being the major ones. The road ahead is that of a sovereign – backed CBDC with high credit standing and stability backed by an infrastructure that is secure from cybersecurity threats especially in the light of emerging technologies including quantum computing. This should be accompanied by a G20 initiative on a global framework for regulating and overseeing cryptocurrencies.

References

1)    Legal status of Cryptocurrency in India: A critical review, Afzalur Rahman M.K, International Journal of Engineering and Technology, 2018.

2)    Internet and Mobile Association of India v. Reserve Bank of India, 2020 (2) KLT OnLine 1155 (SC) = Writ Petition (Civil) No 528 of 2018.

3)    Cryptocurrencies – An Assessment, Keynote address of Deputy Governor, RBI at Indian Banks Association 17th Annual Banking Technology Conference available at https://rbi.org.in/Scripts/BS-Speeches/View.aspx?Id=1196.

4)   Bitcoin for smart trading in smart grid, M.T. Alam, H. Li and A. Patidar, 21st IEEE International Workshop on Local and Metropolitan Area Networks, 2015

5)   The Legal Status of Online Currencies: Are Bitcoins the Future?” R.B.Ollen, Journal of Banking and Finance Law and Practice, 2013

6)   “No, Ripple Isn’t the Next Bitcoin”, M.O.Rcutt, 2018, https://www.technology review.com/s/609958/no-ripple-isnt-the-next-bitcoin/

7)   Bitcoin, its Legal Classification and its Regulatory Framework, T.M.Andjee, J.Bus and Sec L, 2016 http://digitalcommons.law.msu.edu/jbsl

8)   Cryptocurrencies and Blockchain, Legal context and implication for financial crimes, money laundering and tax evasion, Robby Houben, Alexander Snyers, https://www.europarl.europa.eu/crusdata/150761/TAX 3% 20 study % 20 on % 20 cryptocurrencies %20 and % 20 blockchain.pdf

What is in Section 27 Evidence Act ––Recovery or Discovery?

(By Saji Koduvath, Advocate, Kottayam)

•    Should the ‘Object’ Necessarily be ‘Recovered’ (from the Concealed Place) to attract Section 27?

•    Answer – No.

Abstract

•  1. Section 27 says only as to Discovery; Not Recovery.

•  2. Section 27 – Discovery Embraces.

      •  (i) Place from where the Object Produced and

      •  (ii) Knowledge of Accused.

3. No Witnesses needed for Recording Accused’s Statement u/S.27. Contra-Observation is laid down in Boby v. State of Kerala (2023 (1) KLT 543 (SC).

Section 27 of the Evidence Act

Section 27 of the Evidence Act reads-

•  “27. How much of information received from accused may be proved. Provided that, when any fact is deposed to as discovered in consequence of information received from a person accused of any offence, in the custody of a Police Officer, so much of such information, whether it amounts to a confession or not, as relates distinctly to the fact thereby discovered, may be proved.”

Section 27 is Not Artistically Worded

The Privy Council, in Pulukuri Kotayya v. King ­Emperor (AIR 1947 PC 67), the ‘Best Known and Most Authoritative Decision’ in this subject, as shown below, observed that the Section 27 was not artistically worded. It is because of the hard-headedness of the following words in this Section, and they raise the following questions:

• 1. “Any fact is deposed to as discovered” – Who deposed; and where?

• 2.“Fact discovered” – What are the facts embraced (or that may be attracted)?

“Any fact is deposed to as discovered“ Refers to Facts Deposed to by Police
Officer Before the Court (as Disclosed by the Accused)

• In Sunil @ Chunnan v. State of Kerala, 2019-2 Crimes 1, after quoting Section 27, Evd. Act, it was observed as under:

• “Therefore what is substantive evidence is the disclosure statement deposed to by the investigating officer in court and not what he had extracted in the seizure mahazar.”

‘Fact discovered‘ embraces Place of Concealment and Knowledge of Accused

The classic Privy Council verdict, Pulukuri Kotayya v. King ­Emperor (AIR 1947 PC 67), made it clear, as regards the concealment of a knife, as under-

“In their Lordships’ view it is fallacious to treat the “fact discovered” within the section as equivalent to the object produced; the fact discovered embraces the place from which the object is produced and the knowledge of the accused as to this, and the information given must relate distinctly to this fact. Information as to past user, or the past history, of the object produced is not related to its discovery in the setting in which it is discovered. Information supplied by a person in custody that “I will produce a knife concealed in the roof of my house” does not lead to the discovery of a knife; knives were discovered many years ago. It leads to the discovery of the fact that a knife is concealed in the house of the informant to his knowledge; and if the knife is proved to have been used in the commission of the offence, the fact discovered is very relevant. If the statement of the accused contains the words ‘with which I stabbed A’, these words are inadmissible since they do not relate to the discovery of the knife in the house of the informant.”

Pulukuri  Kottaya – Locus Classicus (Best Known and Most Authoritative) Decision

In Ramanand @ Nandlal Bharti v. State of Uttar Pradesh (2022 (5) KLT OnLine 1236 (SC) = AIR 2022 SC 5273), Supreme Court of India pointed out that the scope and ambit of Section 27 of the Evidence Act were illuminatingly stated in Pulukuri  Kottaya v. Emperor that it has become locus classicus on this subject.

Pulukuri Kotayya v. King ­Emperor – Analysed

Pulukuri Kotayya v. King ­Emperor(AIR 1947 PC 67), on analysis, states the following -

•    It is fallacious to treat the “fact discovered” as equivalent to the object produced.

•    The fact discovered embraces the place from which the object is produced
(Note – Not ‘recovered’) and the knowledge of the accused as to this.

•    The information given must relate distinctly to this fact (place from which the object is produced and the knowledge of the accused as to this).

•    Information as to past user, or the past history, of the object produced is not related to its discovery in the setting in which it is discovered.

•    Information supplied by a person in custody that “I will produce a knife concealed in the roof of my house” does not lead to the discovery of a knife; (because) knives were discovered many years ago.

•    (Nevertheless) it leads to the discovery of the fact that a knife is concealed in the house of the informant to his knowledge; and 

•    if the knife is proved (in Court) to have been used in the commission of the
offence, the fact discovered is very relevant.

‘Fact Discovered’ is the “Place to the Knowledge of the Accused”

From Pulukuri Kotayya v. King ­Emperor it is clear –

•    even if the knife was discovered many years ago,

•    if the fact that the knife was concealed in a place (to the knowledge of the accused) is discovered,

•    it is relevant and admissible under Section 27 Evd. Act.

How the “Discovery” under Section 27 Proved?

Section 27 substantially directs-

•    The ‘information‘ (or disclosure) from the accused that led to “discovery” may “be proved”.

How the substantial part be introduced in court is stated in the first portion of Section 27. It says-

•    What is to be proved by Section 27 is the fact deposed by the IO in court; and

•    it must be as to the discovery on ‘information’ (or disclosure) from the accused.

Pulukuri Kotayya v. King ­Emperor, says what are the facts to be deposed by the IO
and what are to be Discovered or Proved under Section 27.

They are-

(a)  place (Place of concealment of object) and

(b)knowledge (knowledge of accused as to concealment).

“Discovery” under Section 27 is to be Proved (primarily) by the Deposition of IO

• ‘Information’ (given by the accused) and the ‘fact’ (of discovery) required under Section 27 are to be proved in a court (primarily) by the deposition of the IO, before the court–

      • (a) as to the information given by the accused to him (IO) and

      • (b) as to discovery of the (i) place, (ii) object and (iii) knowledge of the accused,

• supported by-

      • (1)  disclosure statement of accused (written by IO) and

      • (2)  proof as to two tangible things –

      • (i)   place (by mahazar prepared in presence of witnesses) and

      • (ii)  object (recovery of original object or other proper evidence).

The Object Need Not be Recovered from Concealed place, under Law in India

From Pulukuri Kotayya v. King Emperor (AIR 1947 PC 67), it is clear that the words,

•    “the fact discovered embraces the place from which the object is produced” (as used in Pulukuri Kotayya v. King)

cannot be equated, always, as-

• “the fact discovered embraces the place from which the object is recovered”.

True, in most cases where Section 27 is attracted, the relevant place may be the place from which the object is recovered. Referring Pulukuri Kotayya v. King Emperor
(AIR 1947 PC 67), it is seen observed in State of Himachal Pradesh v. Jeet Singh
(AIR 1999 SC 1293), as under:

•    “It is now well settled that the discovery of fact referred to in Section 27 of the Evidence Act is not the object recovered but the fact embraces the place from which the object is recovered and the knowledge of the accused as to it.”
(quoted in State of Maharashtra v. Bharat Fakira Dhiwar (AIR 2002 SC 16).

But, the proposition that the object (as such) must have been recovered from the place where the accused concealed it is against the law accepted in India. That is, there may be cases where the place of recovery of the object and the place relevant under Section 27 may be different.

It can be demonstrated by an Illustration –

•    An accused buried and hid certain material objects in a place.

•    Somehow or other (say, because of the acts of certain animal) those articles were taken out and placed in a faraway ‘public place’. The investigating officer
‘recovers’ it.

•    After arrest of the accused, thereafter, the accused reveals, to the I.O., the place the material objects were actually concealed by him.

•    The I.O. caused to make a scientific examination. It is proved (discovered) that the material objects were buried in the place, as ‘disclosed’ by the accused.

•    In such a circumstance, the fact discovered (Place, to the Knowledge of the accused) falls under Section 27 (though no material object as such, is “recovered”
from that place).

Pulukuri Kotayya v. King Emperor is Consistently Considered as the Authority

In State of Himachal Pradesh v. Jeet Singh (1999 (2) KLT SN 9 (C.No. 8) SC = AIR 1999 SC 1293), it was pointed out that the principles in Pulukuri Kotayya v. King Emperor
(AIR 1947 PC 67), was followed in-

•    K.Chinnaswamy Reddy v. State of Andhra Pradesh(1962 KLT OnLine 1167 (SC) = AIR 1962 SC 1788),

•    Jaffar Hussain Dastagir v. State of Maharashtra(1969) 2 SCC 872,

•    Earabhadrappa @ Krishnappa v. State of Karnataka,(1983) 2 SCC 330,

•     Shamshul Kanwar v. State of U.P.(1995 (1) KLT OnLine 986 (SC) = (1995) 4 SCC 430).

• State of Rajasthan v. Bhup Singh(1997) 10 SCC 675.

Pulukuri Kotayya v. King Emperor (AIR 1947 PC 67), is the most read and mot valuable decision on Section 27, Evd. Act. It is consistently considered as the authority in this subject, as revealed from the following Apex Court decisions also-

•    Boby v. State of Kerala(2023 (1) KLT 543 (SC).

•    Jafarudheen v. State of Kerala(2022 (3) KLT SN 29 (C.No.19) SC = 2022 (2) KLT OnLine 1025 (SC) = AIR 2022 SC 3627).

•     Venkatesh v. State of Karnataka (SC),2022 April, 19 = 2022 (2) KLT OnLine 1079 (SC).

•     Kusal Topo v. State of Jharkhand(2018 (3) KLT OnLine 3150 (SC) = (2019) 13 SCC 676).

•     Asar Mohammed v. State of U.P.(2018 (4) KLT OnLine 3078 (SC) = AIR 2018 SC 5264),

•    Charandas Swami v. State of Gujarat(2017 (2) KLT OnLine 2057 (SC) = AIR 2017 SC 1761).

•    Vasanth Sampath v. State of Maharashtra (2015) 1 SCC 253),

•     C.Muniappan v. State of T.N. (2010 (4) KLT SN 11 (C.No. 12) SC = AIR 2010 SC 3718).

•    Limbaji v. State of Maharashtra(AIR 2002 SC 491).

Section 27 is an Exception to Section 25 and 26

Section 27 is an exception to the two preceding sections, Sections 25 and 26. They are as to-

•    No confession made to a Police Officer shall be proved as against a person
accused of any offence (Section 25).

•    No confession made by any person whilst he is in the custody of a Police Officer, unless it be made in the immediate presence of a Magistrate, shall be proved as against such person (Section 26).

Section 162 Cr.P.C. is also relevant here. It says as to-

•    No statement made by any person to a Police Officer in the course of an investigation be used for any purpose at any inquiry or trial (except for contradiction under Section 145 Evd. Act).

If “place” already known, and not exclusively in knowledge of Accused, No Section 27 Recovery

It is trite law, as shown in recent decisions of our Apex Court, Subramanya v. State of Karnataka (2022 (5) KLT OnLine 1087 (SC) = AIR 2022 SC 5110), and Boby v. State of Kerala (2023 (1) KLT 543), that Sec.27 would not be attracted if the recovery was from a place which was already known and not exclusively within the knowledge of accused.

“Any object can be ‘concealed’ in places which are open or accessible to others”

In State of Himachal Pradesh v. Jeet Singh (1999 (2) KLT SN 9 (C.No.8) SC = AIR 1999 SC 1293),it is pointed out that it may be possible to hide articles in a place ‘open or accessible to others’. It is said, “For Example, if the article is buried on the main roadside or if it is concealed beneath dry leaves lying on public places or kept hidden in a public office, the article would remain out of the visibility of others in normal circumstances.” (Quoted in -- Ibrahim Musa Chauhan v. State of Maharashtra (2013) 13 SCC 689); Lochan Shrivas v. State of Chhattisgarh (2021 (6) KLT OnLine 1091 (SC) = AIR 2022 SC 252).

Credibility of the Investigating Officer, Important

But, in several cases it is emphasised that the credibility of the evidence of the investigating officer was really important (See  Mohd. Arif @ Ashfaq v. State (NCT) of Delhi, (2011) 13 SCC 621, Himachal Pradesh Administration v. Om Prakash (1971 KLT OnLine 1078 (SC) = AIR 1972 SC 975).

Failure to Record Information of the Accused, Not Fatal

It was pointed out in Suresh Chandra Bahri v. State of Bihar (1994 (2) KLT OnLine 1123 (SC) = AIR 1994 SC 2420), that failure to record the information given by the accused and failure to examine public witnesses, are not fatal to the prosecution.

Exact Statement of the Accused must be deposed by the Police Officer

Courts in India insists (unduly?) that the exact disclosure statement of the accused should be stated by the Police Officer, in the “Recovery Mahazar” and before the court. In Subramanya v. State of Karnataka ((2022 (5) KLT OnLine 1087 (SC) = AIR 2022 SC 5110),
it is observed as under:

“83. The first and the basic infirmity in the evidence of all the aforesaid prosecution witnesses is that none of them have deposed the exact statement said to have been made by the appellant herein which ultimately led to the discovery of a fact relevant under 
Section 27 of the Evidence Act.”

Disclosure Statement under Section 27 Need Not be in Presence of Witnesses

In Praveen Kumar v. State of Karnataka ((2003) 12 SCC 199), our Apex Court held that Section 27 does not lay down that the statement made to a Police Officer should always be in the presence of independent witnesses. It reads-

• “21. Section 27 does not lay down that the statement made to a Police Officer should always be in the presence of independent witnesses. Normally in cases where the evidence led by the prosecution as to a fact depends solely on the Police witnesses, the courts seek corroboration as a matter of caution and not as a matter of rule. Thus it is only a rule of prudence which makes the court to seek corroboration from independent source, in such cases while assessing the evidence of Police. But in cases where the court is satisfied that the evidence of the Police can be independently relied upon then in such cases there is no prohibition in law that the same cannot be accepted without independent corroboration. In the instant case nothing is brought on record to show why evidence of PW-33 I.O. should be disbelieved in regard to the statement made by the accused as per Ex. P-35. Therefore, the argument that statement of the appellant as per Ex.P-35 should be rejected because the same is not made in the presence of independent witness has to be rejected.”

• Also see State of Himachal Pradesh v. Jeet Singh (1999 (2) KLT SN 9 (C.No.8) SC = AIR 1999 SC 1293).

In Nisar Khan @ Guddu v. State of Uttaranchal ((2006) 9 SCC 386), it was held that the discovery statement and the recovery memo need not bear the signature of the accused.

Subramanya v. State –Witnesses needed for Accused’s Information, Only Obiter

Subramanya v. State of Karnataka(2022 (5) KLT OnLine 1087 (SC) = AIR 2022 SC 5110), reads as under:

• “84. If, it is say of the investigating officer that the accused appellant while in custody on his own free will and volition made a statement that he would lead to the place where he had hidden the weapon of offence, the site of burial of the dead body, clothes etc., then the first thing that the investigating officer should have done was to call for two independent witnesses at the police station itself. Once the two independent witnesses would arrive at the police station thereafter in their presence the accused should be asked to make an appropriate statement as he may desire in regard to pointing out the place where he is said to have hidden the weapon of offence etc. When the accused while in custody makes such statement before the two independent witnesses (panch­-witnesses) the exact statement or rather the exact words uttered by the accused should be incorporated in the first part of the panchnama that the investigating officer may draw in accordance with law. This first part of the panchnama for the purpose of Section 27 of the Evidence Act is always drawn at the police station in the presence of the independent witnesses so as to lend credence that a particular statement was made by the accused expressing his willingness on his own free will and volition to point out the place where the weapon of offence or any other article used in the commission of the offence had been hidden. Once the first part of the panchnama is completed thereafter the police party along with the accused and the two independent witnesses (panch­ witnesses) would proceed to the particular place as may be led by the accused. If from that particular place anything like the weapon of offence or blood stained clothes or any other article is discovered then that part of the entire process would form the second part of the panchnama. This is how the law expects the investigating officer to draw the discovery panchnama as contemplated under Section 27 of the Evidence Act. If we read the entire oral evidence of the investigating officer then it is clear that the same is deficient in all the aforesaid relevant aspects of the matter.” (It is quoted and followed by the Apex Court in Boby v. State of Kerala (2023 (1) KLT 543).

Note:In Praveen Kumar v. State of Karnataka ((2003) 12 SCC 199), our Apex Court held that Section 27 does not lay down that the statement made to a Police Officer should always be in the presence of independent witnesses.

In any case, the observation in Subramanya v. State of Karnataka (2022 (5) KLT OnLine 1087 (SC) = AIR 2022 SC 5110) – ‘when the accused while in custody makes such statement before the two independent witnesses (panch-­witnesses)’, is only obiter; in view of the earlier observation in the judgment, which reads as under:

• “The first and the basic infirmity in the evidence of all the aforesaid prosecution witnesses is that none of them have deposed the exact statement said to have been made by the appellant herein which ultimately led to the discovery of a fact relevant under
Section 27 of the Evidence Act.”

Section 27 is a Most Misused Provision

Section 27 is said to be a most misused provision.Of course, it is not a Great Indian Hypocrisy. All who handle matters in Court and Police know it.

Law Commission of India

But, the Law Commission of India has qualified it as a ‘malady’ and recommended in its 152^nd Report (Report On Custodial Crimes), dated 26.8.1994, as under:

• “If information spoken of in Section 27 is not forthcoming voluntarily, the police may have recourse to procuring the same by other means. This is not to say that in every case the information is compelled to be given. But it cannot be gainsaid that the very existence of the Section (in the form in which it appears at present in the Act) creates an impression or an urge to resort to means not desirable or legitimate so that the Section is pressed into service in situations never intended by the legislature. We are convinced that the Section needs an amendment, if not repeal, in order to completely ward off the tendency mentioned above.

• In order to meet the malady two courses are open. Section 27 may be repealed in toto and that is our first reference. But if that course is not acceptable, the minimum that can be done is to revise the Section so as to confine it to make admissible the fact discovered but not the information.

• Therefore, if the milder alternative of merely amending Section 27 (and not its total repeal) is to be adopted, we would recommend that Section 27 may be replaced by the following Section-

• ‘27. Discovery of facts at the instance of the accused – When any relevant fact is deposed to as discovered in consequence of information received from a person accused of any offence, whether or not such person is in the custody of a Police Officer, the fact discovered may be proved, but not the information, whether it amounts to a confession or not’.”

Supreme Court of India

In Geejaganda Somaiah v. State of Karnataka (2007 (2) KLT SN 83 (C.No.109) SC = AIR 2007 SC 1355), our Supreme Court said as follows:

•    “As the Section is alleged to be frequently misused by the police, the courts are required to be vigilant about its application. The court must ensure the credibility of evidence by police because this provision is vulnerable to abuse.”

•    It is quoted in-

      •   Jafarudheen v. State of Kerala(2022 (3) KLT SN 29 (C.No.19) SC = 2022 (2) KLT   OnLine 1025 (SC) = AIR 2022 SC 3627);

      •   Mukesh v. State of Delhi (Nirbhaya Case)(2017 (2) KLT SN 81 (C.No.114) SC =
(2017) 6 SCC 1;

      •   Kusal Toppo v. State of Jharkhand (2018 (3) KLT OnLine 3150 (SC) =
(2019) 13 SCC 676).

Conclusion

Law must be specific and accurate. If not, those who enforce it may be free to handle it according to their speculation and understanding.

It is really disgraceful to continue Section 27 of the Evidence Act, in its present tough-and-rough form, without change, in spite of the observation of the Privy Council, in Pulukuri Kotayya v. King Emperor, as early as in 1947, that it was not artistically worded; and after the resounding recommendation of the Law Commission of India that Section 27 should be re-drafted.

Words of Wisdom

Justice Sanjiv Khanna in Shilpa Sailesh v. Varun Sreenivasan (2023 (3) KLT SN 19 (C.No.9)
SC = 2023 KLT OnLine 1334 (SC), considering the issue regarding the power of Supreme Court under Article 142 to dissolve the marriage on the ground of its irretrievable breakdown observed that,

“In today’s context, two observations, while a court enquires into the charge of cruelty, are of some significance. First, the court should not philosophise on the modalities of married life. Secondly, whether the charge is proved or not cannot be decided by applying the principle of whether a reasonable man situated similarly will behave in a similar manner. What may be cruel to one may not matter to another, and what may not be cruel to an individual under one set of circumstances may be extreme cruelty under another set of circumstances. Cruelty is subjective, that is, it is person, background, and circumstance specific.” 

“The courts must not encourage matrimonial litigation, and prolongation of such litigation is detrimental to both the parties who lose their young age in chasing multiple litigations. Thus, adopting a hyper-technical view can be counter-productive as pendency itself causes pain, suffering and harassment and, consequently, it is the duty of the court to ensure that matrimonial matters are amicably resolved, thereby bringing the agony, affliction, and torment to an end.” 

“The plenary and conscientious power conferred on this Court under Article 142(1) of the Constitution of India, seemingly unhindered, is tempered or bounded by restraint, which must be exercised based on fundamental considerations of general and specific public policy. Fundamental general conditions of public policy refer to the fundamental rights, secularism, federalism, and other basic features of the Constitution of India. Specific public policy should be understood as some express pre-eminent prohibition in any substantive law, and not stipulations and requirements to a particular statutory scheme. It should not contravene a fundamental and non-derogable principle at the core of the statute. Even in the strictest sense, it was never doubted or debated that this Court is empowered under Article 142(1) of the Constitution of India to do ‘complete justice’ without being bound by the relevant provisions of procedure, if it is satisfied that the departure from the said procedure is necessary to do ‘complete justice’ between the parties. Difference between procedural and substantive law in jurisprudential terms is contentious.”

C.J.I. Dr.D.Y.Chandrachud in Sundar @ Sundarrajan v. State by Inspector of Police (2023 KLT OnLine 1293 (SC) considering the question of commutation of death sentence held that sex of the child is not an aggravating circumstance. Disapproving the practice of Courts indulging in furthering the notion  that only a male child furthers family lineage or is able to assist the parents in old age, remarked as under,

“In terms of the aggravating circumstances that were taken note of by this Court in appeal, our attention has been drawn to the following circumstance:

“30. [...] (vii) The choice of kidnapping the particular child for ransom, was well planned and consciously motivated. The parents of the deceased had four children – three daughters and one son. Kidnapping the only male child was to induce maximum fear in the mind of his parents. Purposefully killing the sole male child, has grave repercussions for the parents of the deceased. Agony for parents for the loss of their only male child, who would have carried further the family lineage, and is expected to see them through their old age, is unfathomable. Extreme misery caused to the aggrieved party, certainly adds to the aggravating circumstances.”

We wish to note that the sex of the child cannot be in itself considered as an aggravating circumstance by a constitutional court. The murder of a young child is unquestionably a grievous crime and the young age of such a victim as well as the trauma that it causes for the entire family is in itself, undoubtedly, an aggravating circumstance. In such a circumstance, it does not and should not matter for a constitutional court whether the young child was a male child or a female child. The murder remains equally tragic. Courts should also not indulge in furthering the notion that only a male child furthers family lineage or is able to assist the parents in old age. Such remarks involuntarily further patriarchal value judgements that courts should avoid regardless of the context.”

K.P.Dandapani: Farewell to A Visionary

“A lawyer’s life is no life of cloistered ease to which you dedicate your powers. This is a life that touches your fellow men, of every angle of their being, a life that you must live in the crowd, and yet apart from it, man of the world and philosopher by turns”.    –– Benjamin N. Cardozo

Those who have known an effervescent, distinguished lawyer K.P.Dandapani will vouch that his life meets all of the above. From Bar to Bench and again from Bench to Bar and then as the Advocate General for the State, his life as a lawyer has touched upon people from all walks of life furthering the count of pre-eminence in the society. His sad demise might have left an immediate vacuum in the legal fraternity, however just as wise words never die, the hues of his persona will outlive his memories.

Born to V.K.Padmanabhan and N.K.Narayani in the year 1946, his formal schooling was from St. Albert’s High School and graduation from St. Albert’s College, Ernakulam. His tryst with law begins as he joins the Government Law College, Ernakulam and on being enrolled as a lawyer in the year 1968, it was nothing short of beginning of a new era. After a very brief stint as a junior lawyer under the benevolent guidance of Senior Advocate, late S.Easwara Iyer as reminiscence by K.P.Dandapani himself, in the year 1972 he commenced his independent practice. His wife Adv.Sumathi Dandapani joined him and why not, it added colours to his dream of becoming a successful lawyer.

As perceived by many anything he touched was successful, however, one should not lose sight of the fact that it was nothing but his hard work which had brought all the
accolades. From limited resource to being resourceful, and having no influential back-grounds he had to stand on his own feet, of course a bane to the banal arguments of nepotism. Merit being an acquired asset and as a strong willed person he made his own way.

Apart from being dynamic and energetic he had the added qualities of wit, humour and tact essential for a lawyer. An ardent sports, movie enthusiast he was very much fond of music and gardening. The lawyer’s emblem which is widely in use was the result of his creative stings. His cartoon drawings found place in popular Malayalam daily Malayala Manorama with which he had the longest association both as a legal reporter and legal adviser cum counsel.

K.P.Dandapani’s resolve to attain knowledge and his interest in reading and reporting judgments has occasioned him to be a legal reporter in Kerala Law Times during the period 1980-82. His cordial relations with the publication which started with an acquaintance with the founder editor of Kerala Law Times Adv.M.C.Mathew, continued with the then Chief Editor Siby Mathew and was maintained till the end.

His humanness and ever caring nature made him popular not only among the bar but also in the Bench. He proved his mettle as a skilled organiser and a competent
leader while steering as the President of the Kerala Advocates Association. His major contributions includes the efforts in materialising a Display Board for the lawyers.

His legal acumen and proficiency in law which sprawled over a vast variety of subjects like constitution, civil, criminal, company had finally culminated in his Judgeship in the year 1996. Though he was appointed as Judge of Kerala High Court he relinquished his Judgeship after three months and returned to his true calling - the bar.

Adv K.P. Dandapani along with his wife Adv.Sumathi Dandapani was conferred senior designation in the year 2006. He was the legal advisor and standing counsel of many companies and establishments,including Power Grid Corporation of India Ltd., Leela Group of Companies, NIT Kozhikode, Greater Cochin Development Authority, Thangal Kunju Musaliar College of Engineering, Kollam, Malabar Christian College, Kozhikode, and KITEX Group of Companies.

In 2011, Chief Minister Oommen Chandy (as he was then) appointed Adv.K.P. Dandapanias the Advocate-General for the State of Kerala. During the spell of five years as AG his knowledge of law exemplified in all levels and as the eminent American lawyer W.R. Ruddle quotes “learning begets courage and self-confidence can only be founded on knowledge. This courage is not the courage of a prize fighter, nor of the bully, but is the courage that will tackle every problem or question presented, investigate it, find out the whys and wherefores, the ins and outs, then placing features as well as those that are disagreeable and then stand by your guns.” True to the above words he stood by his guns when there was controversy about the stand he took inMullaperiyar’s case about the water holding capacity of the dam which was perceived to be in apparent conflict with that of the State Government.

One of the remarkable achievements in his legal career spanning over more than five decades would be the Italian Marine’s case (2012) wherein two fisherman was shot dead by the marines of the Italian ship “Enrica Lexie”. The case was seen as having huge international ramifications and there was immense pressure on the UDF Government at that time to engage senior SC lawyers. It was the Chief Minister’s undying faith in his A.G. that the case was entrusted to him and he not only won the case and was also instrumental in securing one crore compensation to the victims’ families.

As reminded by the words of eminent lawyer K.Krishnaswamy Aiyar (Madras High Court) “a sine qua non for success is that you must put forth infinite industry”. Without doubt industrious he was and laborious through each brief and if tested with the words of Lord Atkin “one thing that was essential was the capacity for hard and regular work and that nobody had ever risen in legal profession by doing a few hours work here and there when the mood came upon him”, one could highlight that his life itself resounds the message that “industry is fortune’s right hand”.

With the bugle salute and State honours as he finally lay rest, his mortal remains stay as a study material for the budding medical professionals of the Medical College, Kalamassery. A courageous and conscious decision taken during his lifetime depicts one of the layers of his personality that he beheld. As his saga of greatness continues, may his bereaving family, his beloved wife Senior Adv.Sumathi Dandapani (Kerala High Court), his son Adv. Millu Dandapani (Kerala High Court), his daughter Mittu (Lawyer, Sydney, Australia) and grand-daughter Maneesha (Lawyer) find peace and solace.

                                                                          –– From the Editor’s Desk, KLT