Anz Grindlays Bank Ltd v. Directorate Of Enforcement (2005 (2) KLT 876 (SC) : Is It a Good Law In Prosecuting And Punishing Companies?

(By John Vadassery, Advocate, Ernakulam)

Now, by Supreme Court judgment in the captioned case, companies can be prosecuted even for those offences for which the sentence of imprisonment is a mandatory punishment. A radical departure from the hitherto existing concept, which did not allow to do so. The reason was simple: a company cannot be imprisoned as in the case of a natural person. However, it was always being remained as subject of academic and judicial discussion whether the present law can be applied to the extent to prosecute a company - as artificial person - for all offences, which it is capable of doing. The majority view of the Constitution Bench in this case gives an afirmative answer to the moot question with the aid of "statutory construction". It says that legislative intention is always to prosecute and punish any "person" - both natural & artificial person - for any offence. Where "imprisonment and fine" has been prescribed as sentence for an offence it has to be construed as "imprisonment or fine" and in the case of companies, fine shall be imposed on them by way of punishment in lieu of imprisonment.

Could the judgment make a settled position of law?

The concept of corporate personality got first time recognition in the famous Salomon v. Salomon & Co. Ltd case ((1897) AC 22). The offshoot of this legal recognition was that the companies started to be considered as an effective commercial vehicle for the rapid economic development of the countries. In the present era of W.T.O. regime, the corporate entities not only influences the economic dimensions of societal life but influences the social, political, cultural and religious dimensions of societal life too. The implication is that the impact of the activities of natural person and artificial person on the society getting more convergent. Hence, should natural person as well as artificial person be subjected to same magnitude of punishment for the same offence?

Conventional wisdom always relates offences to individuals. Such a relation is not being adequately recognized in the case of artificial persons. That is why, even if a particular punishment is prescribed for the wrong done by a company, such a prescription seems to have drafted in the same "Psychological Mind Set" which prescribes punishment for individuals. In result, there is no unique provision in Indian penal laws that are exclusively applicable to companies taking into account their separate existence.

Can same magnitude of punishment for the same offence been sured if the penal provisions, originally drafted giving prime concern for natural persons (human beings), applied to artificial person?

Like majority in the case (3-2), the minority also observed that legislative intention is always to prosecute and punish a 'person' for any offence. However, the minority view is that construing "imprisonment and fine" as "imprisonment fine" virtually amounts to rewriting of a penal section. They doubt its uniform application in all situations that may arise. Hence they feel it to have an altogether new set of penal provisions applicable to companies. In support of this fact, they notice the legislations in countries such as France, Australia, Netherlands etc.

The opinion of minority seems more logical and consistent with earlier decision of judiciary ((2003) 11 SCC 405). But the idea is not novel. Besides judiciary, Law Commission had brought the notice of the Legislature for the need of having a different set of penal provisions for companies. But the Legislature remains hesitant to bring changes in law ignoring the identity and relevance assumed by the companies over the years since the days of Salomon. As a corollary to it, now judiciary has been compelled to act upon the issue at hand with the aid of statutory construction. But, does the decision really provide dynamism to law? Can the penal provisions originally drafted for individuals perfectly be twisted to suit to punish offender companies for all offences and in all situations to come? Does the decision further the concept of "equality" as enshrined in Article 14 of the Constitution?

The discussion on the subject is to continue.

Comments on Kerala Buildings (Lease & Rent Control) Act, 1965

(By P. Bhaskaran, Advocate, Guruvayoor)

The Kerala Buildings (Lease & Rent Control) Act 1965 (hereinafter called the said Act) is a beneficial piece of legislation. The said Act is intended to protect the tenants against unreasonable eviction by landlords. The said Act also gives reasonable protection to landlords for getting fair rent and to get back possession of the tenanted premises on the grounds as contained in the said Act.

As the name of the said Act indicates, the same is applicable to the whole of the State of Kerala. Today the State of Kerala consists of several villages. Panchayats, Townships, Municipalities and Corporations etc., and whereas when the said Act was enacted there were mainly villages, Panchayats and few Municipalities, and only two Corporations namely, Trivandrum and Calicut. Many Panchayats, Municipalities and Corporations emerged thereafter basing on increase in population. On account of increased demands for housing in all the areas and changed habits of living occasioned on account of environmental changes, old houses vanished replacing with multistoreyed buildings/high rises. .

Economic conditions of tenants have also undergone changes thereby increasing the capacity of the tenants to pay higher rents basing on the comforts he gets from the tenanted premise/accommodation provided to him by the landlords in multistoreyed buildings/high rises.

When the said Act was enacted by the Legislature in the year 1965, the provisions contained therein were meant to protect the poor tenants. Today the concept of multistoreyed buildings have replaced the old and outdated houses. People from different parts of the State move from villages to towns, besides people from other States and even from overseas countries come and settle in different towns and cities in the State and look for comfortable accommodation according to their pockets. Accordingly it has become necessary to amend the said Act to suit the present day requirements.

The provisions as contained in the said Act is being followed by the Rent Control Courts, Appellate Courts etc. supported and supplemented by the decisions of the High Court and Supreme Court. Admittedly the said Act was enacted about 40 years back. By efflux of time, lot of changes have taken place, warranting amendment or repealing and re-enacting the said Act as was done in other States to compact with the present day needs, but it is pertinent to note that the said Act and the provisions made there under remains the same supplemented by decisions of the High Court and Supreme Court.

It is also pertinent to note that the Courts have its own limitations in interpreting and applying the provisions of the said Act.

As has been observed by the Hon'ble Supreme Court of India ((1987) 4 SCC 1) that "there is no presumption in all cases the tenants are weaker section. By elapse of time the tenants (atleast many of them) doing business in Commercial Buildings taken on rent are far more affluent financially than the owners of the buildings. Though the rent control legislation is stated to be a beneficial one, it must be reasonably just and fair".

The National Housing Policy approved by the Central Government recommended that appropriate amendments in existing laws and regulations be carriedout for creating an enabling atmosphere for housing activities in the Country. A number of expert bodies such as, the Economic Reforms Administration Committee and the National Commission on Urbanisation had recommended reforming the rent legislation in a way that balance the interests of both the landlords and tenants and also that stipulates future construction to meet the growing demands for housing.

On the basis of the various recommendations of the experts and also after a series of consultations with the State Governments, the Ministry of Urban Development, Government of India had prepared a Model Rent Control Legislation and had sent to the States for consideration.

Accordingly, it is necessary particularly in view of the changed circumstances as stated herein above, the said Act needs either amendment or repealing and re-enactment with the object of regulating further the incidence of tenancies and relationship between landlords and tenants.

In S.11 of the said Act dealing with eviction of tenants, provision has been made for issue of notice by the landlord to the tenant in respect of default in payment of rent (See S.11(2)(b)) and for transfer of tenancy or sub-letting the tenanted premises or part thereof to any person without written consent from landlord (see S.11(4)(i)). Several sub-sections under S.11 of the said Act provides other grounds under which the landlord can get the tenant evicted. The said section or any other sections contained in the said Act makes any provision for notice of eviction or a notice of suit determining the tenancy and relinquishing the relationship between the landlord and tenant before filing a petition for eviction of the tenant under any of those grounds. In all fairness, eviction proceedings under any of the grounds ought to be commended following a notice to quit by the landlord to the tenant. As there is no provisions in the said Act for issue of any notice (either mandatory or otherwise) by the landlord to tenant, except under the grounds stated hereinabove, expressing intention of the landlord to evict the tenant and the grounds thereof, the tenant has no opportunity to know the grounds or the case the landlord is going to allege against him, until he is served with a summons along with the copy of the eviction petition from the Rent Control Court.

On the basis of the model rent control legislation many of the States have either amended the existing Act or repealed and re-enacted the Rent Control Act, incorporating the suggestions as contained in the model rent control legislation, which inter alia contains (1) provision for notice before commencement of any proceedings for eviction of the tenant by landlord (2) fixation of fair rent (3) periodical enhancement of the rent and (4) payment of service and maintenance charges etc.

In all fairness, an eviction proceedings under any grounds should follow by a notice to the tenant by the landlord, expressing his intention to evict the tenant and the grounds thereof. The said Act being a beneficial piece of legislation, non-incorporation of the provisions in the said Act for issuance of notice to quit and the grounds thereof prior to commencement of eviction proceedings, is as such amounts to denying the right of the tenant to know the grounds of his eviction.

There are several decisions by the High Court and the Supreme Court relating to notice under S. 106 of Transfer of Property Act, some of which are stated below:

1) (1981) 3 SCC 127 lays down that notice under S.106 of Transfer of Property Act is not necessary, in case of self-contained Rent Act in States.

2) AIR 1976 SC 500 lays down that eviction de hors the grounds in State Rent Act. So notice under S.106 of Transfer of Property Act is necessary.

3) AIR 1979 SC 45 lays down that in view of parallel provisions in the State Act, the notice u/S. 106 of T. P. Act on the landlord has become redundant.

4) 1991 (2) KLT 862 Notice is not mandatory for eviction u/S.11(3) of the said Act.

5) 1997 (2) RCR 716 SC. In this Case landlord sent two notices. Eviction Petition was filed on the basis of the second notice. The Court held that the landlord ignored the first notice and the claim can be allowed.

6) 1994 (2) RCR 236 SC - Non-mentioning of the ground of the eviction in the notice disentitle the landlord's claim.

7) 1972 KLT 223 - It is not a jurisdictional condition to issue notice to quit the building by the tenant. So if the tenant feels that the notice issued to him is insufficient or no notice was issued, it should be raised before the Rent Control Court. It is not possible for the tenant to raise such issue for the first time before the High Court.

8) 1972 KLT 720 - Plea of want of notice contemplated u/S. 106 of T. R Act cannot be raised first time before the Revisional Authority.

9) 1972 KLT 720 - Notice of termination of lease is necessary in the case of the contractual tenancy.

The decisions of the Supreme Court and High Court are based on given facts of particular cases. So to make the Act more friendly between the landlords and tenants and to achieve the objects of the said Act, a notice determining the tenancy and intention of a suit being instituted i.e. filing of eviction petition against the tenant, in case of default of compliance of the requisition as contained in the said notice should be made mandatory.

As has been held in 1990 (1) KLT 104 the procedural provisions of Civil Procedure Code may be made applicable to Rent Control proceedings, in view of the C.P.C. Amendment Act 1999 (amended by C.P.C. Amendment Act of 2002), in the absence of any express provision to the contrary or in the absence of a conflict between the provisions of C.P.C. and the Rent Act and the Rules made thereunder.

The notice is a condition precedent for filing a suit, within the meaning of Order 6 Rule 6 of C.P. Code and should be implied in the pleadings as also in cause of action. For filing a petition under Rent Control Act, such notice should also contain the grounds of eviction and intention of suit.

A valuable right of the tenant to know the grounds of eviction and/or defaults committed by him, if any, which the landlord is going to allege in his eviction petition should be made known to the tenant, prior to commencement of eviction proceedings, otherwise such right is taken away by non-issuance of the notice of eviction.

In fact, if a notice is issued to the tenant by the landlord prior to commencement of eviction proceedings, the tenant gets an opportunity to comply with the demands as contained in the said notice, and upon receipt of the notice the tenant may even quit and vacate the tenanted premises and deliver back possession thereof to the landlord, which will avoid unnecessary litigation between the parties., and of course, such a notice is neither going to delay the proceedings nor takes away any right of the landlord.

Ss.5, 6 and 7 of the said Act deals with (1) determination of fair rent, and (2) enhancement in fair rent etc. Rent Control Courts have been given power to fix fair rent on the basis of property tax or house tax and if there is no property or house tax available for fixing fair rent, the Rent Control Court may consider prevailing tax in the locality for similar accommodation. So the ingredients for fixation of fair rent is only the rates and/or taxes. The said Sections further lays down that once the fair rent is fixed enhancement in rent can be effected only when increase in house tax or property tax as the case may take place or alterations/developments/ improvements etc. are carried out by the landlord to the tenanted property.

It is pertinent to note that where the old and existing rent being paid by the tenants is very low comparing with the present market conditions, no prudent landlord will invest further money for development of the tenanted premises. Obviously the landlords expect reasonable return on his investments and where there is no reasonable return on investments, not only landlords will develop his tenanted property, but others will also hesitate to invest in housing industry. This is the reason for many old houses remaining in the same condition they were lot out, for decades together.

Other States who have adopted Model Rent Legislation, in Cities/towns etc. where the concept of multi-storyed building have come up, the allottees/occupants are made to pay the services/maintenance charges for maintenance of the common areas and common parts provided in the building for common use and enjoyment, besides payment of rates and taxes in respect their units/apartments in proportion to the area occupied. In respect of single /double storyed buildings, where there are more rooms/flats/units etc, there also the tenants/occupants are made liable to pay service maintenance charges and municipal rates and charges proportionately. The aforesaid provisions for payment of service/maintenance charges and rates/taxes are clearly incorporated in the Rent Act as well as Municipal Act, so as to make the same binding on the parties.

The need for accommodation is increasing daily and to attract investment in building industry it is necessary that legal protection be there to the landlords for proper return on investment. The Fair Rent for a year may be fixed on the basis of investment on construction in a particular year in which the building is constructed, instead and in place of the existing system of determination of Fair Rent, because the construction cost varies from year to year and increase in property tax is very meagre and not enough to cover the increase in value of the property.

Fair Rent once fixed may by legislation be automatically enhanced at a fixed rate/percentage periodically, pay 5% after completion of every 5 years, making it obligatory on the part of the tenant to pay increased rent periodically. Provision may also be made in the Act for payment of service/maintenance charges by tenants and also make the landlord liable to maintain the rented houses in habitable condition. In this process, disputes between landlords and tenants will automatically be reduced and the relationship will also remain cordial and healthy.

In the changed circumstances, it is time for the Legislature to consider the following aspects to keep the said Act in parity with Model Rent Control Legislation to maintain cordial landlord-tenant relationships and also to attract investments in house building industry.

1) Whether S.11 of the said Act is to be amended in order that the tenant may know the grounds of his eviction, by a mandatory notice by the landlord to the tenant calling upon the tenant to vacate and hand over vacant possession on the expiry of notice period;

2) Whether Ss.5,6 and 7 of the said Act is to be amended specifying the method of fixation of fair rent;

3) To make provisions for payment of service/maintenance charges and rates/taxes by the tenants in proportion to the area occupied, fixing liability on the landlord for proper maintenance of the house.

4) Whether to repeal the said Act and bring out new legislation to compact with the changed circumstances instead of amending the said Act.

Last but not the least the rights and obligations of the landlords and tenants to be further streamlined so as to maintain harmonious relationships and to secure better returns on investments in Building Industry, which will ultimately reduce the burden on the Rent Control Courts.

Children -- The Neglected Lot?!

(By Sathyashree Priya E, Advocate, Ernakulam)

Currently, the law governing children is the Juvenile Justice ('Care and ProtectionAct), 20001 (Recently amended and brought into force on 1.4.2001). The rationale behind this Act is to treat children under the age of 18 with special care and protection so that even the child offendors are not brought to trial with ordinary criminals or sent to police stations or jails2 (even when such children are in conflict with law). Hence the Legislature in its wisdom has provided for establishment of 'shelter homes'(S.37) and 'special homes’(S.9) even for children who have committed an offence and thus are in 'confict with law'. It is further provided that such children are not even to be termed as 'offendors' but only as 'Children in conflict with law'(S.5(2)). Needless to say children, who are not in conflict with law but are 'neglected' have to be treated even better! They are not to be put together even with children in 'conflict with law' but have to be maintained and well looked after in 'Children's Homes'(S.34) specially created for this purpose.

According to the Juvenile Justice Act 'Children in conflict with law' have to be 'tried' only by a Juvenile Justice Board(S.4) comprising of a Judicial Magistrate of First Class who has special knowledge or training in child psychology or child welfare, two social workers of whom at least one is a women. The basic premise being that children are not to be treated like ordinary criminals and shall not be brought to trial in the regular Magistrate's Court. So also, 'custody' of neglected children have to be decided only by a Child Welfare Committee (S.29) consisting of a Chair Person and four other members of whom at least one shall be a woman and another an expert on matters concerning children. This committee shall have the final authority to dispose of cases for the care, protection, treatment, development and rehabilitation of the children as well as to provide for their basic needs and protection of human rights. One of the salient features of this Act worth mentioning is that any child in need of care and protection may be produced before the committee by the child himself, or through childline or by any social worker or public spirited citizen (S.32). Thus the child, though a 'minor', can present himself/herself before the committee and seek justice!! A child in need of care and protection would include a child who has a parent or guardian and such parent or guardian is unfit or incapacitated to exercise control over the child! (S.2(d)(iv)) Law provides that when a child who is being or is likely to be grossly abused, tortured or exploited for the purpose of sexual abuse or illegal acts can seek relief under the Act by appearing before the Child Welfare Committee (S.2(d)(vi).

Though the Act was passed in the year 2000, it is a shame that even after a lapse of 5 years, till this date neither the Juvenile Justice Board nor the Child Welfare Committee has been constituted in the State of Kerala. The children are a neglected lot. Even presuming that such neglected children constitute 1% of the population of the State of Kerala there could be at least 2000 such neglected children in this State alone. This is only a presumption. Actual figures may even be higher. Fortunately or unfortunately children are not capable of asserting their rights by forming into groups. They are quite vulnerable!

Of what use is a letter of law if it is not followed in spirit!! Similarly the Act provides for establishment of 'Children's Homes' and Shelter Homes' for maintaining neglected children and ‘Special Homes', 'Special schools' for children in conflict with law'. The law goes one step further to provide for observation homes (S.8) to place the under trials (Children in conflict with law) so that proper treatment is meted out to them pursuant to their age. These laws have been passed based on the hypothesis that children are to be given a different treatment from that of hard core criminals and also to reform these young children at an early age in life.

More than two decades back Justice Subramanian Potti has chided this callous, indifferent and thick skinned attitude of the Government in neglecting children (1982 KLT 915). Of course the judgment referred to the provisions of the Children's Act which was then in force. Most of the provisions of this Act have been clubbed together with the Juvenile Justice Act, 1986 and a new Act Juvenile Justice Care and Protection Act, 2000 has been passed. S.60 of the Act specifically provides that

"The competent authority which makes an order for sending a juvenile or the child to a children's home or to special home of placing the juvenile under the care of a fit person or fit institution may make an order requiring the parent or other person liable to maintain the juvenile or the child to contribute to his maintenance, if able to do so, in the prescribed manner according to income".

This is based on the statutory liability that the primary responsibility of taking care of the infants is on that of the Parents. In fact R.72 of the repealed Children's Act went a step ahead and stated that 'If the parent or such other person fails to remit the amount in each month the defaulted amount shall be recoverable under the Revenue Recovery Act as if it is an arrear of revenue and the Court can order for the discharge. The absence of such a rule in the Juvenile Justice Care and Protection Act, 2000 imposes a heavier burden on the State! Several stringent provisions relating to parents found in the Children's Act (now repealed) are conspicuously absent in the Juvenile Justice Care and Protection Act, 2000. For example. Section 41 of the Children's Act prescribes that if a parent or any other person whomsoever, having the actual charge of, or control over a child, assaults, abandons, exposes or wilfully neglects the child or causes or procures him to be assaulted, abandoned, exposed or neglected in a manner likely to cause such child unnecessary mental and physical suffering, shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both. The Juvenile Justice Act focuses more on the victims i.e. the children rather than dealing with the offendors!! Thus it is infact a soft law!

The State as 'Parens Patriae' has to step into the shoes of the parents if the parents fail in their primary responsibility because 'it is the principle that the State must take care of those who cannot take care of themselves, such as minors who lack proper care and custody from their parents. It is a duty, a secondary responsibility and not an imperfect obligation. However, State shall realise the maintenance costs from the parents proportionate to their income.

192 Countries have been parties to the Child Rights Convention3 (excepting the U.S.A. and Somalia). The United States of America, the so called developed nation, imposes capital punishments even on children under 18. Former Attorney General Shri Soli Sorabjee4 strongly condemns this attitude of the U.S. and welcomes the recent U.S. Supreme Court landmark judgment which has declared this practice as unconstitutional. As a result of the judgment death sentences imposed on 72 Juveniles for the Commission of murder are wiped out.

Let us resolve to act in a more civilized manner! Neglecting the needs of children results in regression than Progress! The Government concerned shall positively take steps to establish the Juvenile Justice Board and the Child Welfare Committee at least to show that it cares and is better civilized!!

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Foot Notes

1. An Act to consolidate and amend the law relating to juvenile in conflict with law and children in need of care and protection, by providing for proper care, protection and treatment by catering to their development needs, and by adopting a child-friendly approach in the adjudication and disposition of matters in the best interest of children and for their ultimate rehabilitation through various institutions established under enactment.

2. Formerly the Children's Act was in force which had special provisions for children. Pursuant to this Central Act all the States had framed their Acts and Rules in detail. This Children's Act has been repealed in 1986 when Juvenile Justice Act, 1986 came into force. This Act was further modified and now the Juvenile Justice (Care and Protection) Act, 2000 has been enacted.

3. The General Assembly of the UN has adopted the Convention on the Rights of the Child on the 20th November, 1989. The Government of India has ratified the convention on the 11th December, 1992.

4. In his ‘Soliloquies’ published in the Indian Express dated 13^th March, 2005. He further goes to say in this that “Critics argue that there is striking evidence that criminal gangs in America’s Cities are already employing 15,16,17 year old assassins to commit the gang’s murders in those States that don’t execute juveniles. What is overlooked by the critics is that although all 72 persons on death row for murders they had committed when they were 16 or 17 are spared their lives, they will instead receive the harshest punishment available, namely spending the rest of their lives in prison.

Felicitations to Hon'ble Chief Justice Mr. Justice Rajeev Gupta

With great pleasure, we extend our respectful and cordial felicitations to Hon'ble Chief Justice Mr. Justice Rajeev Gupta, on his appointment as Chief Justice of Kerala High Court.

Chief Justice Rajeev Gupta is a harmonious blend of genius, overflowing goodness and exceptional integrity. He is truly great, of deep erudition and mighty intellect, but with all, Simple as a child, loyal to the Bar, of considerable personal charm of manner inborn and not put on.

With a large store of learning, experience and forensic ability, your Lordship became one of the humble servitors of the temple of justice, where sit enshrined man's eternal quest andeverlasting hope about ten years ago. It could undoubtedly be stated of his Court as was said of Lord Cockburns's Court," a Court where every man felt himself in the presence of a gentleman, whose genial courtesy made all things genial, whose exquisite learning captured all men's love, whose sunbright Justice brightened every cause and sent even him who has lost away content. Your Lordship believed then as now that courtesy begets courtesy and that the high watermark of a gentleman is to extent courtesy to all around.

It is said that a Judge may pass through three stages of development in his career. When his is first appointed the Judge is very anxious that he should do justice in all the cases that come before him. In the second stage, he is quite sure that he is doing only justice and nothing but justice. In the third stage, he does not care whether he is doing justice or not. We are sure Mr. Justice Rajeev Gupta will throughout his tenure of office remain in the first stage itself doing justice without fear or favour, in fear of God and in fear of no man.

The fine qualities exhibited as a Judge, coupled with the long and varied experience will no doubt, stand your Lordship in good stead in the performance of the onerous task bestowed on you. Our very best wishes go to the new Chief Justice. May his new career as Chief Justice be crowned with success.

"Not forgetting those things which are behind

and reaching fourth unto these things

which are before,

He would press towards the mark........."