Illegal transactions, Unenforceable Debts --
 Hari v. Shine Varghese (2025 (4) KLT 608) – A Critique

(By B.Premnath, Advocate, High Court of Kerala, Ernakulam)
Email : advocatinglife1972@gmail.com Mob:9447223004

Introduction

1. The decision in Hari v. Shine Varghese, reported in 2025 (4) KLT 608 = 2025 KLT OnLine 2488, declared that “Debts created by a cash transaction above ₹ 20,000/- in violation of the provisions of the Income Tax Act, 1961 is not a legally enforceable debt, unless there is a valid explanation for the same”.

2. Fortunately, Hon’ble Supreme Court in Sanjabij Tari v. Kishore S.Borcar & Anr. (2025 (5) KLT 569 (SC) = 2025 KLT Online 2982 (SC)) set aside the law declared in Hari v. Shine Varghese (2025 (4) KLT 608 = 2025 KLT OnLine 2488), and held: “Any violation of Section 269SS would not render the transaction unenforceable under Section 138 of the NI Act or rebut the presumptions under Sections 118 and 139 of the NI Act, because such a person, assuming him/her to be the payee/holder in due course is liable to be visited by a penalty only, as prescribed. Consequently, the view that any transaction above ₹20,000/- (Rupees Twenty Thousand) is illegal and therefore does not fall within the definition of ‘legally enforceable debt’ cannot be countenanced”. While holding so, the Supreme Court also took judicial notice of approach of some High Courts and District Courts not giving effect to the presumptions under Sections 118 and 139 of the NI Act and observed that such an approach is not only prolonging the trial but is also contrary to the mandate of the parliament, namely that the drawer and the bank must honour the cheque, otherwise, trust in cheques would be irreparably damaged.

3. Had the law declared in Hari’s case continued to be binding, it would have been the death knell for scores of criminal as well as civil cases. It may be noticed that, notwithstanding the explanation of  ‘debt” to be a “legally enforceable debt” in the Explanation to Section 138of the Negotiable Instruments Act 1881, it goes without saying, that in a civil suit for recovery of the cheque amount, there ought to be proof that it was issued in a legally valid transaction. But then the Civil Court would have been bound by the decision in Hari’s case. Then, instead of finding the legality of the transaction from which the debt arose, based on the provisions of the Indian Contract Act 1872, if the Civil Court relies on the provisions of Section 269SS of the Income Tax Act, 1961 and holds the debt as illegal and not recoverable, it will be a travesty of justice. The decision in Hari is blissfully silent on this aspect.

4. In Hari, the learned Single Judge has not attempted to answer the question what is a “legally enforceable debt,” in terms of the law applicable. Debt” is not defined in the Negotiable Instruments Act. P.Ramanatha Aiyar’s “The Law Lexicon” defines “Debt” as, “in common parlance, a sum of money due from one person to another and it includes not only debts of record or judgment, and debts by specialty, but also obligations arising under simple contract, to a very wide extent, and its popular sense includes all that is due to a man under any form of obligation or promise”. “Liability” as defined in P.Ramanatha Aiyar’s “The Law Lexicon,” “is responsibility; the state of one who is bound in law and justice to do something which may be enforced by action. This liability may arise from contracts, either express or implied, or in consequence of torts committed”. 

5. It is only the debts that arise from the liabilities created by  valid agreements, that are legally enforceable. In the absence of express provisions in the Negotiable Instruments Act to the contrary, the general rules contained in the Indian Contract Act, are applicable to such instruments as the obligation of parties to the Negotiable Instruments are contractual in their nature.

Negotiable Instruments Act, 1881 and Indian Contract Act, 1872

6. Negotiable Instruments Act, 1881 was apparently enacted after the Indian Contract Act, in 1872. “The law relating to negotiable instruments is not the law of one country or of one nation; it is the law of the commercial world in general, for it consists of certain principles of equity and usages of trade which general convenience and common sense of justice had established to regulate the dealings of merchants and marines in all the commercial countries of the civilized world” (Introduction to the Negotiable Instruments Act, 1881, Bhashyam and Adiga, 17th edition). Negotiable Instruments Act is a special enactment, a complete code regarding the manner in which a negotiable instrument is dealt with from its drawing, taking note of the various contingencies arising out of its usage.

7. The definition of “Negotiable Instrument” under Section 13 of the Negotiable Instruments Act shows that a cheque is a promise to pay the amount demanded therein (Purushottam S/o Maniklal Gandhi v. Manohar K.Deshmukh & Anr. (2007(1) Mah LJ 210). The capacity of parties to a cheque, the liabilities of persons to it, and the discharge of such liabilities are regulated mostly by the Rules belonging to the domain of contracts. The legality of transaction, consideration, the enforceability of an agreement, are all governed by the provisions of the Contract Act. Section 23 of the Contract Act enumerates what considerations are lawful and what are unlawful. Under Section 2(d) of the Contract Act, consideration includes past transaction (Devukutty Amma v. Madhusoodanan Nair (1995 (2) KLT 118). Section 25 carves out an exception for the nullity of an agreement without consideration, when it declares that if the agreement is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law, it is valid.

8. Under Section 25(3) of the Contract Act, a debtor can enter into an agreement in writing, to pay the whole or part of a debt which the creditor might have enforced, but for the limitation of a suit in law. A written promise to pay the barred debt is a valid contract (Kotak Mahindra Bank Ltd. v. Kew Precision Parts Pvt.Ltd & Ors. (2022 (4) KLT OnLine 1279 (SC) = (2022) 9 SCC 364). Therefore Section 25(3) of the Contract Act, a promise in the form of a cheque drawn in discharge of a time barred debt or liability becomes enforceable (Dinesh B.Chokshi v. Rahul Vasudeo Bhatt (2013 (2) Mah LJ 130). When a person issues a cheque, he acknowledges his liability to pay. If that is dishonoured on account of insufficiency of funds, such a person shall not be entitled to plead that, at the time of the writing of the cheque, the claim had become barred by limitation and thus he is not liable to be punished under Section 138 of the Negotiable Instruments Act, 1881 (Ramakrishnan v. Parthasarathy (2003 (2) KLT 613).

9.   Section 14 of the Negotiable Instruments Act lays down that “When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated”. Section 26 of the Negotiable Instruments Act mandates that “Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque”. Immediate reference may be made to Section 11 of the Contract Act, which mandates “Every person is competent to contract who is of the age of majority according to the law which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject”.

10. Section 27 of the Negotiable Instruments Act speaks of “Agency,” that “every person capable of binding himself or of being bound as mentioned in Section 26, may so bind himself or be bound by a duly authorized agent acting in his name”. The High Court of Kerala, in Pandalai v. J.C.Alexander (2000 (2) KLT 59), held that the power of attorney of the payee is entitled to issue notice under the proviso (b) to Section 138 of the Negotiable Instruments Act and that the provisions of Section 27 are applicable to civil as well as criminal liabilities under the said Act. The law regarding the appointment and authority of agents are governed by Chapter X of the Contract Act. 

11. Section 28 of the Negotiable Instruments Act is regarding the liability of the agent signing in a cheque. Section 30 of the Act makes the drawer of a bill of exchange or cheque is bound in case of dishonour by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonour has been given to, or received by, the drawer as provided in the Act. Section 35 of the Act makes the liability of indorser to compensate the holder of a negotiable instrument in case of its dishonour, in the absence of a contract to the contrary. Section 37 of the Act points out that the maker, drawer and acceptor of a cheque and other parties thereto are liable as principal debtors and sureties, in the absence of a contract to the contrary. Section 38 of the Act is about the liability of prior party is also liable as a principal debtor in respect of each subsequent party, in the absence of a contract to the contrary. Section 39 of the Act is about the surety ship. Again, the law regarding indemnity and guarantee are governed by Chapter VIII of the Contract Act. Section 43 of the Negotiable Instruments Act lays down the rule of law that a negotiable instrument made, drawn, accepted, indorsed or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. Section 58 of the Act deals with the situation when a Negotiable Instrument has been lost, or has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration, which again has to be determined in terms of the provisions of Contract Act.

12. Section 138 of the Negotiable Instruments Act was not there when the Act came into force in 1881. It was inserted more than a century later, by the Banking, Public financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988), with effect from 1.4.1989. Before Section 138, the only remedy was recovery of the amount covered by the dishonoured cheque, by filing a civil suit. The notice informing the dishonour of cheque for such an action, is mandated under Section 94 of the Act, in Chapter VIII. It only requires that the notice of dishonour must be given within a reasonable time, unlike the provisions of Section 138 of the Act. Because of its penal tenor, when compared to an action in a civil suit for recovery of the cheque amount, the formalities to launch the prosecution under Section 138 and the proof required to fasten the punishment on the offender, is strict and admits of no laxity. “By criminalizing the act of issuing cheques without sufficient funds or for other specified reasons, the law promotes financial discipline, discourages irresponsible practices and allows for a more efficient and timely resolution of disputes compared to the previous pure civil remedy which was found to involve the payee in a long drawn litigation.” (Sanjabij Tari v. Kishore S.Borcar & Anr.) (supra).

13. The Hon’ble Supreme Court, in Ripudaman Singh v. Balkrishna (2019 (1) KLT OnLine 3179 (SC) = (2019) 4 SCC 767), held that an agreement to sell immovable property constitutes enforceable contract between the parties and the cheques issued in pursuance of that agreement qualify as a legally enforceable debt or liability and amenable to prosecution under Section 138 of the Negotiable Instruments Act.  In Indus Airways Private Lmited & Ors. v. Magnum Aviation Private Limited & Anr.(2014 (2) KLT SN 30 (C.No.42) SC = (2014) 12 SCC 539), the SupremeCourt held that cheques issued for advance payment in the facts of that case did not show any existing liability in failed transaction as agreed materials were not supplied and therefore there is no liability under Section 138 of the Act.

14. A payment made as a bribe, being an illegal and immoral transaction, do not constitute a legally enforceable liability (Surinder Singh v. Ramdev (2024 SCC Online P.& H. 12999). Rajan v. Ramesan (2015 (3) KLT 439) was a case where a cheque was issued  for money received for fulfilling an illegal promise. The High Court of Kerala held that such a cheque is for a legally enforceable debt. The said decision did not advert the provisions of the Contract Act. Now it has been doubted by the Supreme Court in the case of KKD Pandyan v. Tamil Selvi (SLP No.4773/25), as per order dated 18.08.2025 and is pending consideration. Dishonour of cheque in a chitty transaction which is not registered under the Kerala Chitties Act, 1975, cannot be characterized as not a legally enforceable debt. It is not hit by the provisions of the Contract Act. There is no provision in the Kerala Chitties Act, 1975, declaring such transaction as void (Nadarajan v.Nadarajan  (1999 (2) KLT 512). Thus a legally enforceable debt has always a valid transaction behind it.

Section 269SS, Income Tax Act, 1961

15. The Income Tax Act, 1961 on the other hand, is for augmenting revenue for the State. It details the incomes which are taxable and provide for collection of tax, exemptions, deductions and penalties for their non-compliance. It acts in a different province altogether. Agreements which leads to the issue of cheques for the liabilities arising from it, cannot be adjudged valid or invalid under the provisions of the Income Tax Act. “Section 269SS of the Income Tax Act does not declare all transactions of loan by cash in excess of ₹20,000/, as invalid, illegal or null and void” (Pushpa Sanchalal Kothari v. Aarti Uttam Chavan  (2020 SCC Online Bom 11659).

16. As per Section 269 SS of the Income Tax Act, 1961, it is the person who accepts cash in excess of ₹ 20,000/- is penalized under Section 271D of the said Act. The object of Section 269SS of the Income Tax Act, 1961 is stated by the Supreme Court in the decision in Asstt.Director of Inspection Investigation v. A.B.Shanthi (2002 (2) KLT OnLine 1007 (SC) = (2002) 6 SCC 259), thus: “The object of introducing Section 269SS is to ensure that a tax payer is not allowed to give false explanation for his unaccounted
money, or if he has given unaccounted money, or if he has given some false explanation for the same”. The Supreme Court then observes that, “to a great extent, the problem will be solved by the impugned provision”.

17. Section 269SS is a deterrent provision. If it is not followed the person accepting the money will be penalized under Section 271D. As per Section 273B of the Income Tax Act, if the person proves that there was a reasonable cause for the failure of the mandate in S.269SS, no penalty can be imposed under S.271D of the Act. But to say that such an amount, if a debt, is not a legally enforceable debt, will be incorrect. It is the person who receives the cash of more than ₹20,000/-, who is liable to repay the said amount, if it is a liability, a debt. He thereafter issues a cheque which is a promise to pay, an agreement. Then can he take resort to Section 269SS and contend that the cheque issued by him, which is dishonoured, will not give rise to an offence under Section 138 of the Negotiable Instruments Act, as it is not issued for a legally enforceable debt? As held in Krishna P.Morajkar v. Joe Ferrao (2013 SCC Online Bom 862), infraction of a provision of Income Tax Act would be a matter between the revenue and the defaulter and advantage cannot be taken by the borrower.

Section 269SS, Income Tax Act, 1961 and Section 138, Negotiable Instruments Act, 1881 – Decisions considered in Hari v. Shine Varghese.

18. In Krishna Janardhan Bhat v. Dattatraya Hegde (2008 (1) KLT 425 (SC)), the interpretation and impact of Section 269SS of the Income Tax Act, on the transactions which lead to dishonoured cheques, was not considered by the Supreme Court. In the said decision, it was held that existence of legally recoverable debt is not a matter of presumption under Section 139 of the Negotiable Instruments Act. A three judges bench of the Supreme Court in Rangappa v. Mohan (2010 (2) KLT 682 (SC)), overruled the decision in Krishna Janardhan Bhat (supra). It was held that the “presumption mandated by the Section 139 of the Negotiable Instruments Act does indeed include the existence of legally enforceable debt or liability. This is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested”.  It was further held that Section 138 of the Negotiable Instruments Act is attracted when a cheque is dishonoured on account of ‘stop payment’ instruction by accused in respect of a post dated cheque, irrespective of insufficiency of funds in account.

19. In Sanjay Mishra v. Kanishka Kapoor @ Nikki & Anr. (2009(4) Mh.LJ 155), held that it cannot be stated that liability to repay unaccounted cash amount is a legally enforceable liability within the meaning of explanation to Section 138 of the Negotiable Instruments Act. The said decision was overruled in Prakash Madhukarrao Desai v. Dattatraya Sheshrao Desai (2023 SCC Online Bom 1708) by a Division Bench of Bombay High Court and declared the law that “a transaction not reflected in the books of account and/or income tax returns of the holder of the cheque in due course can be permitted to be enforced by instituting proceedings under Section 138 of the Act of 1881, in view of the presumption under Section 139 of the Act of 1881, that such cheque was issued by the drawer for the discharge of any debt or other liability, execution of the cheque being admitted. Violation of Section 269 SS and/or Section 271 AAD of the Act of 1961 would not render the transaction unenforceable under Section 138 of the Act of 1881.The decisions in Krishna P.Morajkar (2013 SCC Online Bom 862), Bipin Mathurdas Thakkar (2015 SCC Online Bom 305) and Pushpa Sanchalal Kothari (2020 SCC Online Bom 11659) lay down the correct position and are thus affirmed. The decision inSanjay Mishra, with utmost respect stands overruled”.

20. In paragraph 24 of Hari, the reference order which lead to the decision in Prakash Madhukarrao Desai (supra), is quoted and relied on. The reference order, as quoted in the Division Bench decision of the Bombay High Court, which overruled Sanjay Mishra, (supra), is as follows:- “Whether in case the transaction, is not reflected in the books of account and/or the income tax returns of the holder of the cheque in due course and thus in violation of the provisions of Section 269SS of the Income Tax Act, 1961 whether such a transaction, can be held to be ‘a legally enforceable debt’, and can be permitted to be enforced by institution of proceedings under Section 138 of the Negotiable Instruments Act?”. The reference is answered to the effect that a transaction in violation of S.269SS of the Income Tax Act, is a legally recoverable debt, and it can be enforced under Section 138 of the Negotiable Instruments Act.

21. In Hari, the learned single Judge could not have relied on the reference order. There is no declaration of law in a reference order. Therefore it does not have a precedential value or persuasive force. The observations of the Supreme Court in Dalmia Cements Ltd. v. Galaxy Trades and Agencies (2001 (1) KLT 528 (SC), as quoted in paragraph 26 of Hari, was in a different context altogether, in the background of the facts of that case. In that case, the Supreme Court has not decided anything on “legally enforceable debt” with reference to the provisions of the Income Tax Act. It cannot be of any assistance to tap the ratio that any transaction in violation of the provisions of the Income Tax Act, is not a legally enforceable debt and therefore a prosecution under Section 138 of the Negotiable Instruments Act, will not lie.

22. A single bench of the High Court of Kerala inSugunan v. Thulaseedharan (2015 (2) KLT SN 21 (C.No.30)), held with reference to Section 269 SS of the Income Tax Act, that merely because the amount was more than Rs.20,000/- which was expected to be given by cheque or demand draft by the provisions of the Income Tax Act, by itself will not make the transaction an illegal one. In that decision, the learned Single Judge referred to the case of Bhaskaran v. Mohanan (2009 (2) KLT 897), and rightly held that the said decision does not lay down the proposition that any transaction in violation of that provision will make the transaction itself unenforceable through a Court of Law.

23. In Hari, in paragraph 31, surprisingly, it was held that the decision in Sugunan (supra) is per incuriam as it does not advert to the decision in Rangappa and Krishna Janardhana Bhatt’s cases (supra). The question whether the violation of Section 269 SS of Income Tax Act, 1961 will turn the debt unenforceable under Section 138 of the Negotiable Instruments Act, was not an issue at all and it was not considered in Rangappa and Krishna Janardhana Bhatt (supra). Hence the judgment in Sugunan(supra) is not per incuriam of the said decisions of the Supreme Court.

Per incuriam and judicial propriety

24. Even if the judgment in Sugunan (supra) was per incuriam, it was not permissible to say so. The Supreme Court in State of Bihar v Kalika Kuer alias Kalika Singh & Ors.(2003 (2) KLT SN 72 (C.No. 95) SC = (2003) 5 SCC 448) held: “Easy course of saying that earlier decision was rendered per incuriam is not permissible and the matter will have to be resolved in two ways – either to follow the earlier decision or to refer the matter to a larger Bench to examine the issue, in case it is felt that earlier decision is not correct on merits.”

25. That the learned single Judge in Hari was not in agreement with Sugunan (supra), is apparent. The Supreme Court in Dr.Vijay Laxmi Sadho v. Jagdish (2001 (2) KLT SN 57 (C.No.70) SC = (2001) 2 SCC 247), held: “ As the learned Single Judge was not in agreement with the view expressed in Devilal case, it would have been proper, to maintain judicial discipline, to refer the matter to a larger Bench than to take a different view. We note it with regret and distress that the said course was not followed. It is well settled that if a Bench of coordinate jurisdiction disagrees with another Bench of coordinate jurisdiction whether on the basis of “different arguments” or otherwise, on a question of law, it is appropriate that the matter be referred to a larger Bench for resolution of the issue rather than to leave two conflicting judgements to operate, creating confusion. It is not proper to sacrifice certainty of law. Judicial decorum, no less than legal propriety forms the basis of judicial procedure and it must be respected at all costs.”

Section 138, Negotiable Instruments Act – civil wrong with criminal overtones

26. In R.Vijayan v. Baby (2011 (4) KLT 355 (SC) = (2012) 1 SCC 260), the Supreme Court held that, “a complaint for the offence punishable under Section 138 is in regard to criminal liability for the offence of dishonouring the cheque and not for the recovery of the cheque amount (which strictly speaking, has to be enforced by a Civil Suit)”. The Supreme Court in Kaushalya Devi Massand v. Roopkishore Khore (2011 (2) KLT SN 38 (C.No.52) SC = (2011) 4 SCC 593) held that, the offence under Section 138 of the NegotiableInstruments Act, is almost in the nature of a civil wrong which has been given criminal overtones. Kaushalya Devi (supra) was referred to in a 3 Judge bench decision of the Supreme Court in P.Mohan Raj v. Shah Brothers Ispat (P) Ltd. (2021 (2) KLT SN 39 (C.No.35)SC = 2021 (2) KLT OnLine 1019 (SC) = (2021) 6 SCC 258) and held that “this is the clearest enunciation of a Section 138 proceeding being “civil sheep” in a “criminal wolfs” clothing as it is the interest of the victim that is sought to be protected, the larger interest of the State being subsumed in the victim alone moving a Court in cheque bounce cases.” In this regard, the provisions in Sections 147, 148 and 148A of the Negotiable Instruments Act may also be referred to.

Reserve Bank of India Act, 1934

27. In Hari, the learned single Judge proceeds to decide the case on the premise that the Government of India is aiming for digital India and promoting digital transactions. It may be noted that, Reserve Bank of India Act, 1934, permits bank notes/currency notes to be legal tender, to be used in a transaction. The “Bank” referred to in Section 22 is the “Reserve Bank”, as defined in Section 2(aii). “Bank Note” is defined in Section 2 (aiv) as the bank note issued by the Reserve Bank whether in physical or digital form under Section 22. “Central Board” is defined under Section 2(b) of the Act as the Central Board of Directors of the Bank. Section 22(1) of the Reserve Bank of India Act mandates that the Bank shall have the sole right to issue bank notes in India, and may, for a period which shall be fixed by the Central Government on the recommendation of the Central Board, issue currency notes of the Government of India supplied to it by the Central Government, and the provisions of the Act applicable to bank notes shall, unless a contrary intention appears, apply to all currency notes of Government of India issued either by the Central Government or by the Bank in like manner as if such currency notes were bank notes and references in the Act to bank notes shall construed accordingly.

28. Section 24 of the Act is about the denomination of notes. Section 24(1) details the denomination of bank notes to be issued. Under Section 24(2), the Central Government can direct non-issue/discontinuance of issue of bank notes of such denomination values, on the recommendation of the Central Board. Section 26 of the Act permits every bank note to be legal tender at any place in India in payment or on account for the amount expressed therein, subject to the declaration under Sub Section (2) of Section 26 that such bank notes of any denomination shall cease to be legal tender.

29. As per Section 22A of the Act, nothing contained in Sections 25, 27, 28 and 39 shall apply to the bank notes in digital form by the Bank. Section 25 is the form of bank notes. Section 27 deals with reissue of notes. Section 28 is about the recovery of notes lost, stolen, mutilated or imperfect. Section 39 is about the obligation of the Bank to supply different forms of currency.

30. Therefore, so long as bank notes in physical form does not cease to be legal tender as per the provisions of the Reserve Bank of India Act, 1934, the observation in Hari, that the Government of India is aiming for digital India or promoting digital transactions, cannot be a fiat to do only digital transactions.

Appendage

31. Though the wrong proposition of law in Hari remained only for a few months, the other two instances which I immediately recall, where the wrong declaration of law had its huge impact on the litigant public, are the judgments in Raj v. Rajan (1997 (1) KLT 302) by a learned single Judge of the High Court of Kerala, till it was held to be ‘Obiter’ in the case ofKunjan Panicker v. Christhudas (1997 (2) KLT 539) by a Division Bench after nearly 10 months of its pronouncement and the judgement in Vasudevan v. Lakshmi (2000 (3) KLT 704)
by a learned single judge which was overruled by a Full Bench of the High Court of Kerala after nearly 5 years, in Thomas v. Kunjamma (2005 (4) KLT 286 (F.B.)).

32. In Raj (supra) in the notice under Section 138(b) of the Negotiable Instruments Act, payment was demanded not only of the amount covered by the cheque. It was held that such a notice is vague and insufficient and therefore it cannot be treated as a notice as contemplated by proviso (b) to Section 138 of the Negotiable Instruments Act. In Kunjan Panicker (supra), the Division Bench held that “We would take those observations as ‘Obiter’ being outside the range of controversy in that case. Suffice it to say that a notice of demand in terms of proviso (b) of sub-section (1) of Section 138 of the Negotiable Instruments Act will not be vague, insufficient or bad even if together with the amount due under the dishonoured cheque interest without specifying the amount or the rate and incidental cost had also been claimed.  

33. Now, the Honourable Supreme Court inKaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul (2025 (5) KLT 759 (SC) = 2025 KLT Online 2945 (SC)), after referring to its earlier judgements, held that: “The notice to be issued under proviso (b) to Section 138 of the Act, must mention the same amount for which the cheque was issued. It is mandatory that the demand in the statutory notice has to be the very amount of the cheque. After mentioning the exact cheque amount, the sender of the service may claim in the notice amounts such as charges, notice charges, interest and such other additional amounts, provided the cheque amount is specified to be demanded for payment.”

34. The decision reported in Vasudevan (Supra) was first reported in (2000 (1) KLT 306). Then later, it appeared again in (2000 (3) KLT 704), with the same date of pronouncement of judgment, reported earlier. It is not clear how the signed judgment could be reopened and corrected without orders in a review petition when the Court had become functus officio. There is no indication to that aspect in the judgement reported in 2000 (3) KLT 704. The issue in Vasudevan (2000 (3) KLT 704), was whether after the disposal of the appeal and the merger of the trial Court decree in the decree of the appellate Court, the trial Court is still left with the jurisdiction to amend the plaint. Relying on Tiko & Ors. v. Lachman (1995 Supp. (4) SCC 582), it was held that the trial Court had jurisdiction to pass appropriate orders in  exercise of the powers under Section 152 of the Civil Procedure Code. In fact, a Full Bench of the High Court of Kerala in Kannan v. Narayani [(1980 KLT 9 (F.B.)] had earlier settled the law that it is the appellate Court which passed the appellate decree which has the jurisdiction to exercise the powers under Section 152 of the Civil Procedure Code. The said decision was not noted by the learned Single Judge, in Vasudevan (supra).

35. Another learned Single Judge noticed that the decision in Vasudevan (Supra) was against the Division Bench decision in Kandankandi Puthiya Maliackal Saheeda v. Hemalatha (2002 (3) KLT 301) and thus the correctness of Vasudevan (supra) was doubted and the Full Bench of the High Court of Kerala in Thomas V. Kunjamma (2005 (4) KLT 286 (F.B.)) held that in the decision in Tiko’s (supra), “the Supreme Court only directed the trial Court to consider the question of amendment of the plaint and decree instead of the execution Court and did not consider the question whether the application for amendment should have been made before the Appellate Court or the original Court. We are of the opinion that the earlier Full Bench decision of this Court as well as of the Division Bench cannot be said to be no longer good law”. It was further held that: “While considering an application under Section 152, the real intention of the Court in passing the decree has to be considered. When the decree which has become final is that of the appellate Court, it is not advisable to leave it to the trial Court to decide the real intention of the appellate Court”. The Full Bench went on to hold that a plea for amending the plaint can be considered by the Second Appellate Court, when the Second Appeal was disposed of on merit. In the end, the decision in Vasudevan (Supra) was held to be not good law as it was against the decision in Kannan (Supra) and that of the Division Bench in Saheeda (supra).

36. In my career as a law reporter spanning nearly two decades, time and again I am reminded of Benjamin N.Cardozo, who opined that, the decision making process is one of “search, comparison and a little more. Some judges seldom act beyond that process in any case. Their notion of their duty is to match the colours of the case at hand against the colours of many sample cases spread out upon their desk. The sample nearest in shade supplies the applicable rule. But of course, no system of living law can be evolved by such a process, and no judge of a High Court worthy of his office, views the function of his place so narrowly. If that were all there was to our calling, there would be little of intellectual interest about it. The man who had the best card of index of the cases would also be the wisest judge. It is when the colours do not match, when the references in the index fail, when there is no decisive precedent that the serious business of the judge begins. He must then fashion law for the litigants before him. In fashioning it for them, he will be fashioning it for others”.

Environmental Impact Assessment – The Need and Necessity for Kerala

(By P.B. Sahasranaman, Advocate, High Court of Kerala)
E-mail :sahasram@gmail.com      Mob.: 9446544339

Environment Impact Assessment (EIA) is an assessment of the proposed development activity on the environment. An EIA can anticipate the proposed difficulties to the people that are likely to cause to the general public while executing the project. The EIA can assess the social and community impacts, economic impacts and social impact. The EIA doesn’t just point out the difficulties — it also has to propose mitigation measures (e.g., dust suppression, noise barriers, temporary pedestrian bridges, proper drainage systems, phased construction schedules) and sometimes suggest alternatives (a flyover instead of an underpass, a different alignment, etc.).

When the illegal buildings in Maradu Municipality are directed to be demolished Supreme Court has observed that the expert opinions suggest that the devastating floods faced by Uttarakhand in recent years and Tamil Nadu this year are the immediate result of uncontrolled construction activities on river shores and unscrupulous trespass into the natural path of backwaters.₁

Special protection for Kerala anticipated in 1978

The Kerala Government has anticipated its need for the protection of environment much before the coming into force of the Environment Protection Act, 1986. A executive order was issued on 13.01.1978₂  making it mandatory to get Environmental clearance for all Government projects. All development schemes costing more than ten lakhs should be referred to the Committee on Environmental Planning and Co-ordination for review and assessment of environmental implications to integrate environmental concerns. Their clearance is mandatory for such a project. But that notification is ignored and not implemented.

It was brought to the notice of the Supreme Court when a rainbow model restaurant was constructed on the banks of Periyar River without conducting any EIA. The Supreme Court by its judgment rendered on 2013₃  directed to demolish the said building.

Environmental Clearance for certain projects in India  from 1994

It was on 27.01.1994 the first notification for EIA was mandated for Environmental Clearance (EC) for certain huge projects. The said notification was replaced in 2006₄ prescribing certain procedure in the process for EIA.

Replacing the 1994 notification another notification was issued on 14.09.2006. The number of projects covered is increased to eight activities  which requires prior environmental clearance.

Mining of minerals in less than 5 ha

Mining of minerals in an area of 25 ha and above are covered by the said notification. This has been widened by the Supreme Court in 2012₅ in public interest by issuing a general direction covering all minor mineral quarries which have less than five hectares.  This has increased the work of the Central Government to grant EC. The Government constituted State Level Environment Impact Assessment (SEIAA) delegating the power to grant EC for such minor minerals mining in a lesser area.

The Government again delegated the power to grant EC by constituting District Environment Impact Assessment Agency (DEIAA). They can grant permissions on the basis of District Survey Report (DSR) of such minor minerals. Supreme Court deprecated the practice of granting clearance without such report.₆

A District Survey Report without a proper replenishment study is equally untenable, Supreme Court held. Without a proper study of the existing position of the riverbed and its sustainability for further sand mining, grant of environmental clearances would be detrimental for the ecology.₇

On several occasions the decisions of the SEIAA have been set aside by Courts. The practice of taking decision by the State Environment Assessment Committee (SEAC) and cannot be substituted by a hearing conducted by the SEIAA, the Kerala High Court held.₈

The practice of granting EC without the specific recommendations of the 'SEAC' being on record is incorrect, the Kerala High Court held.₉ In the very same decision the Court also held that Administrator cannot grant EC.

The granting of EC by DEIAA or the District Level Expert Appraisal Committee (DEAC) is found to be illegal.₁₀

No objection certificate under the provisions of Kerala Irrigation and Water Conservation Act, 2003 affects the validity of EC. The non - disclosure of the fact that the lands in question were Forest Lands assigned for agricultural / residential purposes clearly amounts to nondisclosure of material facts, affecting the validity of EC, the Kerala High Court held.₁₁

The Kerala High Court has held in public interest that EC  is mandatory for mining operations of minor minerals after 18.05.2012.₁₂

Kerala High Court has held that if it is found that EC is to be granted for a mining project, the same shall be granted for the life of the project as estimated by the expert appraisal committees concerned.₁₃

But in a batch of writ petitions Kerala High Court declared that the notification granting exemption from public hearing and fixing the validity of EC for life of the mining project is declared it as ultra vires the Environment (Protection) Act, the Environment (Protection) Rules, and also, the EIA notification, 2006 and hence struck down as unconstitutional.₁₄

The requirement of EC necessarily is not on the person but for the property in which the quarrying operations are carried out thereunder Kerala Minor Mineral Concession Rules, 2015.₁₅

Quarrying for minerals is certainly a non-forest activity and therefore, without securing prior permission from the Central Government, such non-forest activity cannot be permitted in the lands declared as Reserve Forest which continue to be categorized so, in the revenue records, Supreme Court held.₁₆

The removal of earth for the construction of building on the ground of lack of Environmental Clearance not proper.₁₇ A quarrying permit is, however, not required in view of sub-rule (2) of R.14 of the Kerala Minor Mineral Concession Rules, 2015, for extraction of ordinary earth in connection with digging of foundation for the building not requiring Environmental Clearance, if the owner of the land obtained a prior valid permit for construction of such building from the Local Self Government authorities concerned.₁₈

For quarrying lease for extracting granite building stones the no objection certificate from Revenue Department cannot be made use of in lieu of environmental clearance.₁₉

Kerala High Court held that the removal of sandbar from the river to obviate impending disaster, pursuant to orders passed under Disaster Management Act, 2005 same cannot be "mining operations" as defined under S.3(d) of Mines and Minerals  (Development and Regulation) Act, 1957.₂₀

What is the distance to be maintained from the residential buildings when quarrying is to be permitted? The National Green Tribunal (NGT) relying upon the report of the Central Pollution Control Board (CPCB) that the CPCB and State PCBs, to follow minimum distance criteria of 200 meters from residential / public buildings when blasting is involved and 100 meters if no blasting is involved, for permitting quarry operations. But, the said order was set aside by the Kerala High Court for the reason that it will amount to violation of the principles of natural justice.₂₁  The said issue was taken before the Supreme Court which reiterated that NGT can pass orders after hearing the parties._2  2    The issue is still pending consideration before the NGT.₂₃

Removal of earth for linear projects  roads, pipelines, etc.

EC is mandated for such projects. But later on the Notification was amended on 28.03.2020₂₄  granting exemption to such extraction or sourcing or borrowing of ordinary earth for linear projects. The NGT interfered with the matter and directed to revisit the said exemption by order dated 28.10.2020.₂₅ The MoEF & CC issued an office memorandum on 08.08.2022₂₆ prescribing Standard Operating Procedure (SOP) for safety and redevelopment. Again SOP was issued on 06.02.2023 ₂₇ by the MoEF & CC while constructing and operation of all Highway projects which are exempted up to 100 km from line of control or boarder. Supreme Court after finding that no safeguards have been provided , such as lying down procedures, the mode and the manner of excavation of quantum. The Court has set aside the said amendment made to grant exemption.₂₈ On the basis of the said judgment clause 6 was added ₂₉  including extraction or sourcing or borrowing of ordinary earth for the linear projects subject to compliance of the conditions set out ,

Educational Instituions

Entry 8 (a) the Schedule mandates for “Building and Construction project” >20000 sq. mtrs. built up area and above. Entry 8 (b) requies EC for “ township and area development project” which are Covering an area > 50 ha and or built up area >1,50,000 sq.mtrs. and more. 

The MoEF attempted to dilute the restrictions as provided in 2006 notification by issuing a notification on 22.12.2014. By the amendment a note was added to the effect that the projects or activities shall not include industrial shed, school, college, hostel for Educational Institutions, but such buildings shall ensure environmental management, solid and liquid waste management, rain water harvesting and may use recycled materials, such as fly ash, bricks, for a period of two months. This was set aside on a technical ground, since the procedural formalities for publication of the notification was not found in consonance with the final notification reasons by the Kerala High Court.₃₀

In the meanwhile the MoEF again amended the EIA notification by issuing two notifications on 14th and 15th November, 2018 ₃₁  by which the area of 20,000 sq.mtr., was increased to 50,000 sq.mtr. for Building or Construction projects or Area Development projects and Townships and from 20,000 sq.mtr. to 1,50,000 sq.mtr. A note was added by for industrial sheds, educational institutions, hospitals and hostels for educational institutions.  Delhi High Court stayed the said amendment by order dated 26.11.2018.₃₂

In the meanwhile the amendment made by way of 15th November, 2018 by adding the note Note 1 in column 5 of Entry 8(a) of the impugned notification, to the projects or activities for industrial shed, school, college and hostel for educational institution does not appear to be in tune with the purpose for which the Environment Protection Act has been enacted and set aside it.₃₃

Mining near the Protected Areas

Supreme Court held that the mining activities within an area of one kilometre from the boundary of the Protected Areas will be hazardous for the wildlife.₃₄  If  a draft notification for proposal is sent by States to MoEF&CC for consideration they are also bound to maintain the distance of one kilometre till it is approved.₃₅

Regularistion of non obtaining of EC not permissible

The granting of exposto clearance was deprecated by the Supreme Court. All the notifications and office memorandums issued for regularising illegal constructions have been struck down. But this will not affect all pending applications.₃₆

Interference with the Kerala Projects

• Silent Valley Hydro-Electric Project-When the Kerala State Electricity Board proposed to construct a Dam, in 1973, across the Kunthipuzha in Silent Valley it was objected to by the environmentalists. The project required 1022 ha of forest area. The Courts refused to interfere. But the Central Government interfered and declared the Silent Valley National Park by Notification No.96731/FSB/80/AD dated the 26th December, 1980.

• Goshree Project - Government of Kerala has formulated a project for the reclamation of 250 ha backwaters for the purpose of raising funds for the construction of bridges to the Vypeen Islands. The issue was taken up before the Kerala High Court. When the NEERI, found that the reclamation is detrimental to coastal ecology the Government of Kerala has reduced the extent of reclamation to 25 hectres and changed the area to be reclaimed.₃₇ Since the project area has been reduced the Court permitted the reclamation. But the fact that the has not obtained any environmental clearance has been cleverly been ignored.

• Athirampally Hydro-electric project. The EIA notification mandates public hearing. The attempt to get it cleared without public hearing was shelved by the Kerala High Court.₃₈  The public hearing was conducted on 06.02.2002. Since the majority of the people have objected to the project the hearing panel unanimously found that the Rapid EIA prepared was incomplete and recommended for comprehensive and participatory EIA. Thereafter the report was prepared and a hearing was conducted. But this time the Report was not published and therefore the public hearing was found to be not meaningful, the Kerala High Court declared.₃₉

• Aranmula Private Airport. The NGT has found that the recommendation of the Environmental Assessment Committee has not considered all the aspects mandated by the EIA Notification. The report does not disclose anything about the impact of the project on the displacement of the people as a result of the present project. It does not even mention the number of houses in the area or population that will be displaced as a result of acquisition of the land for the project and the filling up the wetlands.₄₀

Public participation is emphasized throughout international and national environmental law. A proper EIA supported in the public hearing will make the EIA valid. An EIA which has not considered the apprehensions raised by the public is invalid. The EAC has a duty to provide reasons for accepting or rejecting the objections raised during the public hearing. The failure to provide such reasons indicates a lack of "due application of mind" and can render the EC vulnerable to legal challenge on the grounds of being arbitrary.₄₁

Kerala High Court also held that dispensing with public consultation vitiates the notification and struck it._4  2  

There are several occasions where the EIA prepared has been found to be tailor made to suit the need for the project proponent. In the EIA prepared for Goshree project to show that Vypeen is a thickly populated area the report added the population of Thiruvunkulam Village which is in Tripunithura, a very far away place. Several crops shown being shown as cultivated to show that the people depend on agriculture activities and they need the project. In the rapid EIA prepared for Ahitrampally project a question has arisen as to what will happened to the aquatic resources when the flow of water is stopped during night time, between 10 P.M. and 6 A.M.? The answer given is that there will be pot holes and the fishes will search for it before 10 P.M. and will stay back till 6. A.M. To the question on alteration of elephant corridors, the answer given is that a fly over will be constructed for them. Most of the EIA are cut and paste copies of some other similar documents.

Difficulties faced by the public in Kerala

Kerala State now facing a lot of environmental problems which could have been avoided if a proper environment impact assessment is conducted before the launching of the project.

A well-prepared EIA can and should anticipate the difficulties to people from the underpass construction in the Thrissur-Edappally stretch of NH-544 and the Aroor-Thuravoor elevated highway project, before it is built, and it should also prescribe practical mitigation measures. The EIA doesn’t just point out the difficulties — it also has to propose mitigation measures (e.g., dust suppression, noise barriers, temporary pedestrian bridges, proper drainage systems, phased construction schedules) and sometimes suggest alternatives (a flyover instead of an underpass, a different alignment, etc.

Kerala felt the need for protection environment in 1978. But that spirit is not seen reflected when the state is thriving for development. The well known principle of sustainable development reiterated by the Supreme Court that If an activity is allowed to go ahead, there may be irreparable damage to the environment and if it is stopped, there may be irreparable damage to economic interest. In case of doubt, however, protection of environment would have precedence over the economic interest. Precautionary principle requires anticipatory action to be taken to prevent harm. The harm can be prevented even on a reasonable suspicion. It is not always necessary that there should be direct evidence of harm to the environment.₄₃

Kerala’s environmental future hinges on restoring integrity to the EIA process. It is hightime that the Government of Kerala should wake up from the sleep mode. Development must not come at the cost of ecological destruction. The state’s natural resources are not just assets—they are lifelines. Protecting them is not optional; it is imperative.

Foot Note

1. K.C.Z.M.A  v. State of Kerala (2019 (2) KLT 835 (SC) - Kerala State Coastal Zone Management  Authority) = 2019 (3) KHC 9 =  2019 (7) SCC 248).

2. S.O.944 (E) , dated 15.12.1990.

3. Association for Environment Protection v. State of Kerala (2013 (3) KLT 201 = ILR 2013 (3) Ker.149).

4.  S.O.1533 (E) dated the 14th September, 2006.

5.  Deepak Kumar v. State of Haryana (2012 (1) KLT Suppl.60 (SC) = (2012) 4 SCC 629 = 2012 KHC 4150).

6.  State of Uttar Pradesh & Anr. v. Gaurav Kumar &Ors. (2025 (4) KLT SN 62 (C.No.65) SC = 2025 KHC Online 6454).

7.  Union Territory of J. and K. (Previously State of Jammu and Kashmir) v. Raja Muzaffar Bhat.
2025 KLTOnline 2750 = 2025 KHC Online 6728 = 2025 LiveLaw (SC) 829.

8. Kallarattikkal Granites v. SEIAA (2024 KLT OnLine 2725 = 2024 KHC 1567 = 2024 KHC OnLine 1567).

9.  Calicut Landmark Builders and Developers of India (2024 KHC 202 = 2024 (3) KHC SN 17 = 2024 KHC OnLine 202).

10. Souhrada Charitable Club & Anr. v. Union of India & Ors. (2020 (1) KLT 70 = 2020 KHC 3050).

11. Peter & Ors. v. Union of India & Ors. (2020 (4) KLT 832 = 2020 KHC 582 = AIR 2021 NOC 250).

12. All Kerala River Protection Council v. State (2015(5) KLT 78) = 2015(5) KHC 359.

13.Mathew Abraham T. & Ors. v. SEIAA (2020 (6) KLT 302 = 2020 (6) KHC 596 = 2020 KHC OnLine 812).

14. C.P.Muhammed v. The Geologist (2025 KLT OnLine 2791 = 2025 Ker.63722 = 2025 KHC OnLine 948).

15. AnieBabu  v. State of Kerala & Ors. (2016 (3) KLT 102 = 2016 KHC 646.

16.One Earth One Life v. MoEF (2018 (3) KLT 683 = 2018 (4) KHC 827).

17. District Geologist v.Sivaraman (2020 (1) KLT 375 = 2019 (5) KHC 929 = 2020 (1) KLJ 213).

18.Philip Thomas v. Geologist (2021 (5) KLT 227 = 2021 KHC 555 = 2021 KHC OnLine 555).

19. J. and S.Granites Company v. Director of Mining and Geology (2021 KHC 4405 : 2021 KHC OnLine 4405).

20. Vijayan M. H.v. State of Kerala  (2022 (4) KLT 245 = 2021 (6) KHC 760 : 2021 KHC OnLine 778).

21. Sachu Rajan Eapen v. State of Kerala (2021 (3) KLT OnLine 1171 = 2021 KHC 373 =2021 KHC OnLine 373).

22. State of Kerala v. CPCB. SLP(C) No.13934 of 2021, dated 25.10.2021.

23. M.Haridasan& Ors. v. State of Kerala, O.A.No. 304/2019, NGT Principal Bench

24. S.O. 1224(E), dated 08.08.2022 issued by MoEF.

25. Noble M Paikada v. Union of India. NGTPB O.A.No.190/2020.

26. Office Memorandum No. F.No. 3-70-/2020-IA-III [141127].

27. Office Memorandum No. F.NO.IA-22/40/2022-IA III [E198668].

28.Noble M Paikada v. Union of India [2024]3 S.C.R.1249: 2024 INSC 241.

29. S.O.1223 (E), dated 17.03.2025.

30. W.P.(C) No. 3097 of 2016. Dated 06.03.2024 (2024 (3) KLT 233 = 2024 KLT OnLine 1306.

31. S.O. 5736(E) issued by MoEF&CC.

32. W.P.(C) 12517/2018, Delhi High Court pending as on 7.9.202025.

33. Vanashakthi v. Union of India. 05.08.2025 (2025 KLT OnLine 2662 (SC) = 2025 INSC 961.

34. In Re: T.N.GodavarmanThirumulpad v. Union of India (2023 (3) KLT 144 (SC) = 2023 (3) KHC 407 = 2023 KHC OnLine 6449 = 2023 LiveLaw (SC) 351 : 2023 SCC OnLine SC 504 : 2023 INSC 430.

35. In Re: T.N.GodavarmanThirumulpad v. Union of India (2025 (4) KLT 699 (SC)).

36. Vanashakthi v. Union of India 16.05.2025 (2025 (3) KLT 445 (SC) = 2025 KLT OnLine 1940 (SC) = 2025 INSC 718.

37. Jacob Vadakkancherry v. State of Kerala AIR 1998 Ker.114.

38. Chalakuty Puzha Samrakshna Samithi v. State. O.P.Nos.1774 of 2001, dated 17.10.2001.

39. Athirappally Grama Panchayat v. Union of India. W.P.(C)No.11254 of2005, dated 23-03-2006.

40. Sreeranganathan v. Union of India, CDJ 2014 NGT 070 : 2014 ALL (I) NGT Reporter (1) (SZ). Date:28.05.2014. NGT Southern Zone.

41. W.P.(C) No. 9340/2009. 26.11.2009  Delhi High Court.

42. C.P.Muhammed v. The Geologist. 2025 KER 63722: 2025 KLT OnLine 2791: 2025 KHC OnLine 948: C.Jayachandran (J)].

43. M.C.Mehta v. Union of India (2004 (1) KLT OnLine 1330 (SC) = AIR 2004 SC 4016 = 2004 AIRSCW 4033.

Joint Option for Pension on Higher Wages: Demystified

(By Alex J. Pulimood, Advocate, High Court of Kerala)
E-mail :advalexjp@gmail.com

As such the issue regarding Pension on Higher Wages under the Employees’ Pension Scheme, 1995 has been embroiled in litigation since its inception. The present article aims to breakdown and demystify the issue of exercise of Joint Option for ‘Pension on Higher Wages’in the context of its litigation history.

History

Historically, the Central Government introduced Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 [hereinafter referred to as “EPF Act” or “the Act”] to establish certain social security measures in line with international practices.

Social Security and Social Welfare stand on two footing. While social welfare pertains to the welfare of a worker during the time he is able to serve his employer, Social Security aims to make provisions for the future of a worker, by way of a provident fund or a pension scheme.₁ The inadequacy and limitations of a lump-sum disbursement in the form of provident fund at the time of retirement became evident as early as the 1960s. In December, 1963, the Standing Labour Committee resolved to create a Family Pension Fund by setting apart a portion of the contributions of workers and employers to the two Provident Funds viz. Employees' Provident Fund and the Coal Mines Provident Fund to pay a minimum pension of ₹25/- per month to dependents of members who happened to die prematurely.₂ It was introduced with the aim of providing a succour to the dependant members due to untimely demise of the earning-worker. Ultimately, the Family Pension Scheme was introduced in 1971 vide Employees’ Family Pension Scheme, 1971. The said scheme was eventually replaced with a broader scheme, the Employees’ Pension Scheme, 1995 (hereinafter referred to as “the Scheme”).

Employees’ Pension Scheme

The Scheme, as it was initially propounded was set up by diverting 8.33% of ₹ 5,000/- of Employer’s contribution to establish the Pension Fund. Hence, the fund was not created afresh by statute, but it merely sought to divert a portion of the existing contribution to another fund kept apart specifically to disburse a monthly pension to the members. It may also be apposite to note, that although a pension scheme was introduced, the contribution to the same was limited to a ceiling (At that point of time ₹5,000/-, enhanced   subsequently   to ₹6,500/- then ₹15,000/-), meaning thereby that only a minimal pension was guaranteed to the members on exit.

Introduction of ‘Joint-option for Pension on Higher Wages’

The said limitation was sought to be addressed by insertion of a proviso to Paragraph 11(3) of the Scheme, permitting contribution to the pension fund on the actual salary (instead of contributing on the ceiling) vide Amendment No.GSR.134 dtd. 28.02.1996.₃

"11(3)……………Provided that if at the option of the employer and employee, contribution paid on salary exceeding ₹ 5,000/- per month from the date of commencement of this Scheme or from the date salary exceeds ₹5,000/- whichever is later, and 8.33 per cent share of the employers thereof is remitted into the Pension Fund, pensionable salary shall be based on such higher salary".

The foundation of the myriad litigations stemmed from the introduction of the ‘joint-option’ to contribute to the Pension Fund on the Actual salary in excess of the ceiling and the corresponding stand of the EPFO authorities as regards the existence of a‘cut-off date’ restricting the benefit/ exercise of such option subsequent thereto.

The litigation on the above issues culminate in two landmark decisions of the Supreme Court in R.C.Gupta & Ors. v. Regional Provident Fund Organisation & Ors.₄ and Employees Provident Fund Organisation & Ors. v. Sunil Kumar & Ors.₅

R.C.Gupta’s case

When pensioners exercised option under Paragraph 11(3) the same were rejected by the Provident Fund authorities on the ground that the proviso visualized a cut-off date for exercise of option, namely, the date of commencement of Scheme or from the date the salary exceeded the relevant ceiling amount. The Honourable Supreme Court in R.C.Gupta’s case (supra) held in favour of the member-pensioners on two categorical reasonings namely:-

(1)   A beneficial Scheme, ought not to be allowed to be defeated by reference to a
cut-off date, particularly, in a situation where the employer had deposited on the actual salary.

(2)   Where the deposit of the employer's share was on the actual salary and not the ceiling amount, there was no reason for the Provident Fund Authorities to be aggrieved in any manner. Particularly since, all that the Provident Fund Commissioner is required to do in the case is an adjustment of accounts which in turn would have benefitted some of the employees.

By virtue of the judgment in R.C.Gupta’s case, the artificial cut-off date sought to be imposed was done away with and contribution on actual salary to the Provident Fund was the only prerequisite for determining eligibility for exercise of joint-option as contemplated under Paragraph 11(3) of the Scheme.

Sunil Kumar’s case (Post 2014 amendment)

Further conditions and modifications were brought about to the scheme, on 22nd August 2014 to be effective from 1st September 2014 vide G.S.R.No. 609 (E). Resulting in creation of two classes of litigants namely, those pre-2014 and post-2014. The modification relevant to the scope of the present discussion would be amendment of Paragraph 11(3) and insertion of Paragraph 11(4) to the Scheme.

The Joint option as it stood within Paragraph 11(3) of the Scheme was deleted and Paragraph 11(4)₆  was introduced in the Scheme.

Relevant portions of Para 11(4) :-

(4) The existing members as on the 1st day of September, 2014, who at the option of the employer and employee, had been contributing on salary exceeding six thousand and five hundred rupees per month, may on a fresh option to be exercised jointly by the employer and employee continue to contribute on salary exceeding fifteen thousand rupees per month and the pensionable salary for the existing members who prefer such fresh option shall be based on the higher salary:

***

Provided further that the fresh option shall be exercised by the member within a period of six months from the 1st day of September, 2014:

Provided also if no option is exercised by the member within such period (including the extended period), it shall be deemed that the member has not opted for contribution over wage ceiling and the contributions to the Pension Fund made over the wage ceiling in respect of the member shall be diverted to the Provident Fund account of the member along with interest as declared under the Employees' Provident Funds Scheme from time to time.

A mere perusal of the amended provision as inserted vide Paragraph 11(4) of the scheme would show, that it envisaged the exercise of a further fresh option, to those who had already exercised such option, within six months from 01.09.2014, in order for a member to continue to be entitled to Pension on Higher Wages. Therefore, legality of the fresh requirement of an exercise of such a fresh option and the cut-off date imposed therein were again to be tested before the courts of law. Furthermore, the law as laid down with regard to the ‘cut-off’ date under Paragraph 11(3) as settled in R.C.Gupta’s case was also doubted.₇ The said issues were cumulatively and authoritatively decided vide Sunil Kumar’s judgment on 04.11.2022.

The judgment, inter alia, held that the dual option as contemplated under Paragraph 11(4) was to be merged into one. Thereby permitting even those members who failed to exercise option under erstwhile Paragraph 11(3) to exercise a fresh option under Paragraph 11(4). However, in exercise of its powers under Article 142, the Supreme Court provided a further period of four months for exercise of such option.

As regards the validity of R.C.Gupta’s judgment, the Apex Court held as follows:-

“ ……. (ix) We agree with the view taken by the Division Bench in the case of R.C. Gupta (supra) so far as interpretation of the proviso to paragraph 11(3) (pre­amendment) pension scheme is concerned.”

Presently, subsequent to the culmination of the proceedings, the EPFO authorities have introduced a fresh set of procedures, requirements and standards of verification creating multiple confusions and roadblocks to the enjoyment of benefits by the pensioners/members by way of fresh set of circulars. The same have given rise to fresh set of litigation before various High Courts, fundamentally on the scope of the various circulars juxtaposed with the dictum laid down by the Honourable Supreme Court in R.C.Gupta & Ors.v Regional Provident Fund Organisation & Ors. (supra) andEmployees Provident Fund Organisation & Ors.v. Sunil Kumar & Ors.(supra).

Legalities apart, the members continue to face uncertainty at the implementation of Social Security measures promulgated to ensure assurance, stability and security.

Foot Notes

1. 116^th Report, March 1970 on Employees Provident fund organization pertaining to Ministry of Labour, Employment and Rehabilitation (Department of Labour and Employment).

2.Supra.

3.    Paragraph 11(3) of the Employees’ Pension Scheme, 1995.

4. 2017 (1) KLT OnLine 2222 (SC) = 2018 (4) SCC 809.

5. 2022 (6) KLT 234 (SC) = 2022 SCC Online SC 1521.

6. Paragraph 11(4) of the Employees’ Pension Scheme, 1995

7. https://www.scconline.com/blog/post/2021/08/26/is-there-a-cut-off-date-under-para 11(3)-of-the-employees-pension-scheme-larger-bench-to-decide-read-why-rc-gupta-verdict-needs-to-be-re-visited/

Order 12 Rule 6 of the Code of Civil Procedure :
The Untapped Trump Card for Speedy Justice Delivery

(By Sangeeth Krishna G.S., Advocate, High Court of Kerala)₁

William E Gladstone, the former British statesman and Prime Minister in the late 1800’s, rightly said, “justice delayed is justice denied”.₂ More than two centuries since the saying, justice delivery is often associated with delay. Ironically, delayed delivery of justice has become the rule and prompt delivery of justice an exception. People would react with disbelief, if they were informed that justice will be delivered quickly, and any such story of prompt justice delivery would be discarded as an April Fool joke.

Of course, not all stories are fabricated, even though the number of fake stories is on the rise. But I hope we would be on the same page if I say that nothing illustrates truth like a story, even though the story may lack credibility, just like satire. Consequently, let me narrate a story to convey the intended meaning in its fullest sense.

Imagine you bought a cow to feed unadulterated quality milk to your child. Days turned into months and months turned into years, but the cow failed to produce any milk. Would you be frustrated, would you lose trust in the ability of the cow to provide milk. Whatever your feelings may be, you would be in a state of despair, as you had bought the cow with the most important purpose of providing milk to your child. As the cow miserably failed to provide milk, you would have to incur further expenses and find another source to feed milk to the child. Suppose after a certain point of time, the cow finally starts giving milk. Will this delayed delivery of milk, erase the loss caused to you?

Likewise, litigants approach the court not just for justice, but for speedy justice. It is an indisputable fact that not all litigants have merits in their case, but whether there is merit or not, it would not serve the purpose until the trial starts and judgment is given in a reasonable time. It’s just like an education loan that gets approved only after your child has already completed his education or in the worst case, when your child was not able to secure admission, simply due to the unavailability of funds at your disposal to pay the fees. Justice like financial aid, must not only be adequate, but also timely.

It is a blatant truth that the Indian Judiciary is clogged with an enormous number of cases (approximately 5 crore), which keep piling up year after year. While courts, committees, commission, citizens, everyone discuss this most unfortunate situation, most conversations die young without creating any tangible impact. Year after year we have been changing our weapon to clear off these piled up cases but failed miserably. Further, we have been keeping our ears and eyes sharp to import any weapons from foreign jurisdiction that can reduce the pile up of cases quickly. Ironically, the sad state of affairs is that we failed to notice the solution within our jurisdiction. Yes, I said it correctly, we can take the assistance of the hero from India who resides in the civil procedure code, and it is named as Order 12 Rule 6. This section can be used by the court to form a judgment on admissions and admission need not necessarily be explicit, it can be implied too. Thus, the legal fraternity must focus on using this section which can be a procedural trump card for effective disposal of cases in which admissions have been made in any manner. The interesting thing to be noted here is that, unlike the famous Trump, this Trump card, even though it is not quite famous, will be more beneficial to India, than any other Trump of any kind, especially at the present time frame.

Thus, the above suggestion could help the litigants to escape from emotional, financial, and procedural exhaustion. As Justice V.R.Krishna Iyer once aptly observed, “Delay defeats equity, and justice delayed is justice buried.” Fortunately, the CPC₃ offers a built-in remedy, Order 12 Rule 6, a powerful but neglected weapon for securing early justice. Now let us try to understand the exact wordings mentioned in Order 12 Rule 6 of the CPC, which reads:

“Judgment on admissions-- (1) Where admissions of fact have been made either in the pleading or otherwise, whether orally or in writing, the Court may at any stage of the suit, either on the application of any party or of its own motion and without waiting for the determination of any other question between the parties, make such order or give such judgment as it may think fit, having regard to such admissions.”₄

Thus, the most important aspect of this section is that it empowers the court to pass judgments based on admission, without going to a full-fledged trial and consuming additional time. Now, let us delve into some of the key features of Order 12 Rule 6 of the Code of Civil Procedure:

1.    Wide Scope of Admissions: Includes admissions made in pleadings or “otherwise”, which may be oral or written.

2.    Court’s Own Motion: Judgment can be passed even Suo motu.

3.    At Any Stage: No need to wait for the framing of issues or evidence stage.

Hence, it is crystal clear that the underlying philosophy is that when facts are admitted, further trial is futile, whereby justice is not kept waiting. The Judiciary has expanded and interpreted the scope of this section through various judgments. Consequently, the Courts have expanded the power of our hero to fight the menace of judicial delays. Now, let us explore them, one by one.

In Uttam Singh Duggal & Co. Ltd. v. United Bank of India₅(2000) the bank had admitted liability through correspondence, though not in pleadings. The Court held: “Admissions need not be in pleadings alone. Even statements in correspondence which leave no room for doubt can suffice.” This landmark ruling solidified that external, clear, and unequivocal admissions can form the basis for Order 12 Rule 6 judgments.

Karam Kapahi v. Lal Chand Trust₆(2010) the tenant failed to specifically deny material facts in the written statement. The Supreme Court ruled: “Evasive denials are deemed admissions. This rule prevents parties from dragging trials when the real dispute is non-existent.” This case emphasized that non-specific denials are implied admissions, enabling courts to bypass full trials.

In the case of Karan Kapoor v. Madhuri Kumar₇ the court held that Order 12 Rule 6 serves an important purpose in obtaining speedy justice.The Court recognized the legislative intent behind Rule 6 as a tool to expedite trials where factual controversy is absent. It observed that: “The object of Order XII Rule 6 CPC is to enable the party to obtain a speedy judgment…”

Order 12 Rule 6 offers different benefits for different stakeholders. The million-dollar revelation is that it offers a win-win solution to the litigant, advocates and judiciary. Some strategic importance of Order 12 Rule 6 is:

1. For Litigants

       ----- a. Quick Justice: Skip unnecessary delays.

       ----- b. Lower Costs: Avoid the expenses caused due to prolonged litigation.

2. For the Judiciary

       ----- a. Caseload Management: Free up judicial time and reduce docket congestion.

       ----- b. Efficient Trials: Reserve court hours for complex or contested cases.

       ----- c. Systemic Relief: Contributes toward easing pendency nationwide.

3. For Advocates

       a.  Strategic Litigation Tool: Using Order 12 Rule 6, the advocates can secureearly
    victories where admissions are clear.

       b. Enhanced Client Satisfaction: By delivering faster results, advocates can
     build  client trust and enhance professional credibility.

       c.  Efficient Case Management: Reduce time spent on drawn-out proceedings,
     instead focus on cases requiring deeper litigation.

       d.  Professional Integrity: Uphold the principle of justice by not letting technicalities      
     delay rightful relief.

The deeply saddening state of affairs is that, despite its immense potential, Order 12 Rule 6 remains underused due to:

       ----- *  Lack of Awareness among legal practitioners and litigants.

       ----- *  Judicial reluctance to bypass traditional trial process.

 *  Ambiguity in admissions, as it is not always easy to classify if the admission is clear and unambiguous.

It is an undeniable fact that the mighty weapon Order 12 Rule 6 to effectively annihilate the pendency of cases is underused. Thus, let us look onto some strategies to sharpen the tooth and make it an elixir of judicial delays. Some roadmaps to unlock the potential of Order 12 Rule 6 are:

1.    Judicial Training Modules can be prepared which focus on identifying triable versus admitted issues.

2.    Strategic CPC provisions must be integrated in Law School Curriculum with more importance to sections like Order 12 Rule 6.

3.    The Supreme Court may prepare guidelines to harmonize the interpretation of this section across various High Courts.

4.    AI-Based Case Management tools to auto-flag admission-based cases.

5.    Bar Association Workshops can be conducted to raise awareness campaigns for legal practitioners.

There is a famous saying, the majesty of the law is lost when it kneels to delay.
Order 12 Rule 6 houses this very spirit and hence it can be used to ensure justice is done without delay, in cases where the material facts are admitted. This section is of utmost importance in a country where over 5 crore cases remain pending and the minimum time period for the final adjudication of the case may vary between 5 to 10 years. Thus, this section is not just procedural, it is transformative.

Let us reiterate the principle that justice that is delayed is justice denied. Hence let us work tirelessly to ensure our legal systems serve justice promptly and efficiently. Now is the time to shift from rhetoric to results, hollow words to tangible action, by recognizing Order 12 Rule 6 as a cornerstone for judicial reform. The law already gave us the key. We must only turn it. Thus, the only question that remains now is, are you ready to turn the key and become the torch bearer of speedy justice?

Foot Notes

1. E-mail : sangeethkgs21@gmail.com (https://in.linkedin.com/in/sangeeth-krishna-gs,  Mob.: 9496752399.

2. https://vulj.vu.edu.au/index.php/vulj/article/view/61/1797

3. The Code of Civil Procedure, 1908.

4. https://www.indiacode.nic.in/bitstream/123456789/11087/1/the_code_of_civil procedure%2C_1908.pdf

5.  2000 (2) KLT OnLine 1063 (SC) = (2000) 7 SCC 120.

6. 2010 (2) KLT OnLine 1113 (SC) = (2010) 4 SCC 753.

7. 2022 (4) KLT OnLine 1102 (SC) = (2022) 5 SCC 496.

2025 (4) KLT 608 --Hari P.C. v. Shine Varghese -- A Bolt From The Blue?

(By P Rajan, Advocate, Thalassery)

The Negotiable Instruments Act, 1881 is an age-old legislation which underwent severalamendments in accordance with the circumstances and need to lend credibility to negotiable instrument transactions, resultantly after passage of considerable time, Chapter XVII was added up in 1988 to make return of cheques by banks presented by the holder, punishable with a view to avoid other legal recourses by the drawee or the holder in due course of the negotiable instrument,expecting to inculcate  faith in the efficacy of banking operation. This chapter comprising of several sections which enable to try the drawer of the negotiable instrument, as defined S.6 of the N.I. Act at the earliest as a summons case for early disposal. These provisions for trial and disposal of ‘cheque cases’ came into effect on 01.04.1989. The very purport of the said provisions is to make the drawer liable as the commercial world doing trade and commerce expect and give sanctity to the instrument of credit which could be considered as convertible into money easily given by one to another, to achieve the objectives of the enactment, the law makers thought it appropriate to make particular mode of trial and punishment on failure of the concerned person to discharge his liabilities, needless to say issuance of a cheque by itself creates no cause of action, it arises only after compliance of certain legal formalities by the drawee or the holder of the cheque, as the provisions elaborate.

Later on, pertinent changes are incorporated in the Act in 2018, which provides award of compensation under S.143A, change in terms of punishment, power of the appellate court to direct the appellant (accused) to deposit minimum twenty percent of the fine amount or compensation awarded by the trial court while admitting the appeal (S.148). Timely changes are made to make the prosecution more effective and to end in fruition.

The judgment of the Kerala High Court rendered on 25.07.2025(Supra) has ruled that complaints relating to cheques of amount exceeding Twenty Thousand Rupees (₹20,000/-) cannot be termed as legally enforceable action as S.269 SS of the Income Tax Act 1961 is an express bar because any loan or transfer can only by way of cheque or demand draft, except in certain cases as explained paragraph 34 of the judgment, the dictum laid down by the court is only to be applied prospectively also, considering the plea and evidence in each case. By the introduction of Sec.138 of the NI Act the influx of complaints across the country was so high expecting speedy redressal by the complainants who extended financial support or made cash payments under varying circumstances. No complaint can be imagined under the said provision where the amount is less than twenty thousand rupees coming within the exception of Income Tax Act.

Kerala High Court has recently held that when a bank is amalgamated with another, cheque of the former bank issued after the amalgamation is no cheque coming within the purview of S.138 of N.I.Act resultantly complaint based on such a cheque is not legally  maintainable (2025 (4) KLT 490). Earlier judgments of the High Courts were divergent regarding cause of action, jurisdiction and punishment but by successive amendments and authoritative verdicts of the Supreme Court on important issues relating to prosecutions about the bouncing of cheques almost attained finality. But the Keral High Court’s judgment regarding violation of Income Tax Act provision leaves the complainants who approached the courts in quandary as how they can explain and overcome the ban since cash payments exceed twenty thousand rupees are made.

The Income Tax Act 1961 is routinely amended and it is to be noted that thousands of amendments have been made within thirty or fourty years. To simplify the mammoth tax law by rationalising it as user friendly condensed IT Act 2025 now in force. The number of chapters and sections are considerably slashed and now only 536 Sections are in the statute. The way of taxpayer is hard, the law does not go out of its way to make it easier. S.269 SS of the I T Act came into effect on 30.06.1984 which mandates loan or deposit only by account payee cheque which the court held considering the judgments of the Bombay High Court and Supreme Court to rule that the prosecution in the case at hand is legally unsustainable. His lordship has further held in paragraph 34 which differentiated cases that can be decided without considering the dictum laid down in the judgment.

The term loan is not defined either in the Income Tax Act or in NI Act and the meaning of the expression in common parlance - is a thing that is lent. To circumvent this term shown in the Income Tax Act the drawee who has made cash payment exceeding twenty thousand rupees has to give reasons regarding giving of money not as loan, even in genuine cases which appears to be a herculean effort. To avoid penalty under the Income Tax Act the burden is on the person who made payment to show reasonable cause which also is not an easy job especially when the person is not an income tax payee.

The Income Tax Act and the N.I. Act are central statutes and the hurdle regarding cash payment exceeding twenty thousand rupees in the Income Tax Act is there from 30.06.1984.The N.I.Act is amended in 1988 also. So, it is paradoxical that these two central enactments one contra to the other deprive rather deny persons from getting legal remedy. Apparent conflict between the two laws deserve attention of the law makers as wisdom of the legislature should give focus to this glaring disparity. Likewise an authoritative pronouncement of a larger bench or of the Apex Court is needed as the N.I. Act has not defined the term loan or prevent cash payment above twenty thousand rupees. To sum up, a comprehensive judgment or suitable amendments to the two important enactments can only resolve the legal embargo which arose now.