Time and again, our judiciary has dwelled on the importance of Government acting as an efficient and responsible litigant given that it is the biggest litigator in the country. This is also the mandate of the National Litigation Policy adopted in 2010. Yet, governmental agencies continue with their lackadaisical ways, ignoring even express directions issued by the country’s highest court.

Another such instance came to light recently in a Delhi High Court writ petition filed by Lex Victa on behalf of freshly passed out veterinary and animal husbandry graduates. The students, who had graduated from various private veterinary colleges in Rajasthan, wanted to join post graduate courses and were declared successful in the 20thAll India Entrance Examination conducted by Indian Council of Agricultural Research (“ICAR”). However, they were surprised when they received their counselling letters from ICAR which contained the unprecedented stipulation that in order to be considered for counselling for the post graduate course, the students must also furnish their certificate of registration issued by the Indian Veterinary Council (“IVC”). The students weren’t eligible for registration since their colleges weren’t recognised by IVC in spite of the fact that they were allowed to admit students and were granted affiliation by Rajasthan University of Veterinary and Animal Sciences (“University”) on the basis of IVC’s own recommendation

IVC’s flip flop had affected students from seven colleges: (1) Apollo College of Veterinary Medicine, Jaipur, (2) Mahatma Gandhi Veterinary College, Bharatpur, (3) Arawali Veterinary College, Sikar, (4) BS College of Veterinary Medicine and Research Centre Jhunjhunu, Rajasthan, (5) Sriganganagar Veterinary College, Sriganganagar, (6) MJF College of Veterinary and Animal Sciences, Chomu, Jaipur and (7) MB Veterinary College, Dungarpur, Rajasthan. IVC’s teams had inspected these newly started colleges at different times and originally given favourable reports based on which, the University allowed them to admit students and also granted them affiliation which was extended from year to year. However, it seems IVC wasn’t satisfied during subsequent inspections and refused to recognise the colleges or to recommend their courses to Central Govt. for issue of notification under the Indian Veterinary Council Act, 1984.

In doing so, IVC and Central Govt. completely ignored the directions given by the Hon’ble Supreme Court on 25th July, 2014 in the matter Apollo College of Veterinary Medicine Versus Rajasthan State Veterinary Council & Ors., arising out of SLP (C) No. 35057 of 2011. The Hon’ble Supreme Court had directed the Central Govt. and IVC to either grant recognition to unrecognized veterinary colleges or, if it was not possible to grant recognition, to transfer their students to colleges that were recognised so that they may obtain a recognized degree from a recognised college.

The graduates involved in the present case were still studying when the aforesaid direction was issued. Hence, if the IVC and Central Govt. eventually felt that their colleges could not be recognised, they should have transferred them to recognised colleges. However, they failed to do so, jeopardising the careers of hapless students for no fault of theirs.

In the writ petition filed by Lex Victa on behalf of the veterinary graduates, the impugned requirement of furnishing registration certificate was challenged as arbitrary and illegal and a prayer was made for allowing the petitioners to attend the counselling without registration. Direction was also sought to direct the Central Govt. and ICAR to grant registration to the petitioners, in compliance with the directions of Hon’ble Supreme Court. On 3rd July, 2015 the Hon’ble Delhi High Court was pleased to allow the petitioners to attend counselling without registration. The matter is still pending.

The Order of the Hon’ble Delhi High Court is given below

IN THE HIGH COURT OF DELHI AT NEW DELHI
W.P. (C) 6289-6293/2015 & CM No.11448/2015 (for stay)
IN THE MATTER OF:

Praveen Pilaniya & Ors …Petitioner

Versus
ICAR & Ors. …Respondents

Counsel for petitioner: Mr. Rakesh Kumar, Mr. Aayush Chandra and Mr. Prakhar Bhatnagar, Advs.
Counsel for the respondent: Mr. Rajesh Kumar and Mr. Pradeep Jha, Advs. for R-2.
1. Allowed, subject to all just exceptions.
2. The applications are disposed of. W.P.(C) 6289/2015 & CM No.11448/2015 (for stay), W.P.(C) 6290/2015 & CM No.11450/2015 (for stay), W.P.(C) 6291/2015 & CM No.11452/2015 (for stay), W.P.(C) 6292/2015 & CM No.11454/2015 (for stay) & W.P.(C) 6293/2015 & CM No.11456/2015 (for stay)
3. All the petitions seek direction to the respondent No.1 to allow the petitioners to attend counseling scheduled on 6th July, 2015 for admission to post-graduation courses in Animal Sciences, in colleges affiliated to the respondent No.1 Indian Council of Agricultural Research.
4. Though the petitioners have been invited for counseling but are aggrieved by a condition / requirement therein, of the candidates appearing for counseling being registered with the respondent No.3 Veterinary Council of India.
5. It is the case of the petitioners that they had obtained admission in Bachelor of Veterinary Sciences and Animal Husbandry in colleges recognized by the respondent No.3. However, subsequently the respondent No.3 withdrew the recognition accorded to the said colleges and which dispute was agitated by some of the students in the Supreme Court vide Apollo College of Veterinary Medicine Vs. Rajasthan State Veterinary Council (2015) 2 SCC 291 which recognized the degrees awarded to the students passing out till the year 2011 and directed that the students undergoing course be shifted to some other colleges recognized by the respondent No.3. The petitioners state that the respondent No.3 however failed to implement the said order and as a result whereof they continued to study in the same colleges and ultimately passed out in November / December, 2014 therefrom with the degree of Bachelor of Veterinary Sciences and Animal Husbandry. Being desirous of pursuing the post graduation courses, they appeared in the competitive examination held by the respondent No.1 therefor and cleared the same and have been called for counseling, as aforesaid.
6. It is their case that owing to the aforesaid situation, they are not being registered by the respondent No.3 and hence cannot comply with the condition imposed for participating in counseling and which will result in their being deprived from appearing in the counseling on 6th July, 2015 and resultantly losing the chance of admission to post graduation courses.
7. Only the counsel for the respondent No.2 Union of India appears on advance notice and states that he will have to obtain instructions.
8. None appears for the respondents No.1 &3 who are informed to be not having any nominated counsel also.
9. On enquiry the counsel for petitioners states that the examinations of Bachelor of Veterinary Science and Animal Husbandry which they have cleared and on basis whereof they are claiming admission to post graduation, were conducted by respondent No.1.
10. Issue notice.
11. Notice is accepted by the counsel for the respondent No.2. Notice be served on the respondents No.1 & 3 by all modes including dasti and through electronic mode returnable on 8th July, 2015.
12. In the meanwhile, the petitioners, if have been invited for counseling, are allowed to participate in the counseling scheduled on 6th July, 2015 and on any other date, without being required to produce the registration with the respondent No.3 Veterinary Council of India.
13. Needless to state that the aforesaid participation of the petitioners and the allocation of seats and admission, if any granted to them, shall be without prejudice to the rights and contentions of the parties and shall not create any special equities in favor of the petitioners. Copy of this order be given dasti under the signatures of the Court Master to the counsels.
RAJIV SAHAI ENDLAW, J.
JULY 03, 2015

@ Mahendra Singh, Advocate

The Real Estate (Regulation and Development Bill), 2013 (hereafter “the Bill”) has been introduced in the upper house on August 14, 2013. The Bill has been enacted under entries 6, 7 and 46 of Constitution of India. The Bill is aimed at establishing a regulatory regime for transactions concerning the sale of real estate units by real estate developers and their agents. The Bill does not provide for regulation of construction by developers, which is within the domain of States and Urban Level Bodies such as Union Territories.  Like the spheres of telecom and electricity, the Bill seeks to create a unitary, regulatory and disputes resolution mechanism. The field has hitherto been unregulated. Buyers had to approach civil courts and consumer forums for redress of grievances. A few entrepreneurs formed buyers association and approached the Competition Commission as well. The norms and best practices for purchase and allotments of plots were hitherto left uncodified. For the first time a normative system has been laid down to ensure objectivity, transparency, predictability and certainty in real estate transactions. With the Bill in place, courts/tribunals will be in a better position to dispense justice. Some of the salient features of the Bill include the following:

1. The scope of the Bill is restricted to residential plots and apartments.

2. Under the Bill, a real estate developer has to register its project with a real estate regulatory authority established there-under.

3. The Bill mandates certain disclosures by the promoter. The disclosures concern vital matters concerning the project viz., the lay out plan of the proposed project, the plan of development works to be executed in the project, proposed completion time for the project, number and carpet area of apartments proposed to be sold in the project, names of real estate agents engaged by promoter, a declaration that the promoter has lawful title to the land and the same is free of encumbrances, the names of contractors, architects, etc.

4. The developer is required to upload the above details on the website of the real estate regulatory authority.

5. If a buyer suffers any injury due to falsity of above details, norms for determination of compensation have been specified in the Bill.

6. The Bill penalizes developers and real agents for sale of plots or apartments without registration. If as a result of invalidation of registration of developer, a project is left unfinished the Bill has provisions for involving other agencies and getting the project completed.

7. Seventy percent of the funds realized from allottees are to be deposited by developer into separate account in scheduled bank.

8. The Bill makes giving misleading advertisements a penal offence and visits the same with penalty, the quantum of which is linked to the cost of the project.

However, the Bill has certain short comings as well.  The Bill does not address the concerns of developers for streamlining the large number of regulatory agencies, from which they have to seek approvals. The Bill could have replaced multiple agencies with a single window clearing mechanism.

Some of the regulatory agencies tend to indulge in extortionate corruption and harass developers. The end result of this is escalation in project cost. The consumer ends up paying for official avarice as ultimately the developer is bound to bill the cost of the project (including the extortionate bribes paid to officials) to the customers. This malady has been left for redress to the general law against prevention of corruption, which is beyond the reach of the common man as direct nexus between the customer and the concerned officials is well neigh impossible to establish.

Moreover, the Bill does not have an adjudicating officer from the judicial side. This will constrain the detached approach and outlook required for dispute resolution. Adjudication is a specialized skill requiring training in shifting facts and evidence and discerning the truth. A non-judicial adjudicator appointed for the purpose would lack in the required skill set leading to more expenses by litigants on appeals. Tribunalization of justice is not a good alternative to the court system, which should be institutionally strengthened instead of diluting adjudicatory standards by appointing untrained and unsuitable persons as judges.

Lastly, under the Bill the buyer may have to face penalty of upto 10% of the cost of the plot or flat, if the allottee does not obey directions of the regulator. This is unfair because all that an allottee has to do is to execute certain agreements and make timely payments. The responsibility for delivery of project is within the developer’s scope. The proposed penalty is in addition to the 10% earnest money which may be forfeited by the developer in case the allottee fails to make timely payments. Thus, the total penalty exposure of the allottee may go upto 20%, which is unfair and harsh upon prospective allottees.

@ Rakesh Matwa, Advocate

Employers routinely face legal challenges to service bonds they take from employees. A service bond is an instrument by which an employee binds himself to return a certain amount stipulated in the bond to the company in case he resigns from his job earlier than the stipulated time. An interesting question is how much compensation may be recovered upon such bonds by an employer? Whether entire money under a service bond may be recovered or the court has the discretion to reduce the amount?

The general approach of courts towards service bonds in private employment is rather unsympathetic. They interpret service bonds against the employer as the employee has had limited bargaining power. Another reason for unsympathetic treatment is that the breaching party has paid or undertaken to pay a certain amount in case of breach. This would disincentivize or deter breach. Compensation or restitution and not deterrence, is the object of contract law and hence a service bond is a treated as a penalty.

Since the award of compensation is not penal, the quantum of compensation is to be reasonable based on the actual loss. Remote, or exemplary or penal loss disproportionate to the actual loss is not awarded. If it is not possible to prove the loss, the agreed figure towards loss may be granted if otherwise reasonable. However, if it is possible to prove the loss, only proven loss will be awarded. Since a bond is in the nature of a penalty, only losses as proved will be awarded. Therefore, an employee tendering a service bond incurs the liability to pay only those damages which are proved and reasonable having regard to the facts and circumstances of the case.

@ Rakesh Matwa, Advocate

The illustrious German jurist Savigny propounded the thesis in 19th century that law is like language. It evolves in the society just as habits and customs. The thesis has much to commend itself to understand important juridical pronouncements even in 21st century. The general public sentiment in India seems to be opposed to the general decline of public institutions. On a conspectus of judicial verdicts one can well discern the influence of public sentiment on such verdicts be it in cases under anti-corruption laws or public appointments.

The theoretical influence in the area of public appointments came to light recently. Acquittal in a criminal case, however serious, was good a defence against denial of public employment in India. Once a person had disclosed the fact of his implication in a crime, his flawed acquittal in the case for lack of evidence or owing to serious flaws in conduct of prosecution case or on the basis of compromise for compoundable offences or due to hostility of witnesses at trial due to fear of reprisals, could not be a ground to deny public employment to the applicant.

However, not so after 3rd July, 2013 pronouncement of the Supreme Court in the case of Commissioner of Police versus Mehar Singh reported as 2013 (9) SCALE 444 In this case In this case appellants were accused of serious criminal offences involving attempt to murder and rioting. They were acquitted for lack of evidence as the witnesses turned hostile at the trial. In such cases as per the settled position thus far their flawed acquittal in the criminal case was good for all purposes and they could not be denied appointments to public office because of their criminal antecedents. Not so any longer. The apex court likened public appointments to disciplinary proceedings against employees. In disciplinary proceedings, even if an employee was acquitted in criminal case on the same facts, such acquittal had no bearing on the disciplinary proceedings instituted or pending against such employee. Analogically in cases of public appointments, unless an applicant had been acquitted on merits, he may be lawfully denied public employment in India irrespective of his flawed acquittal in the criminal case for lack of evidence due to compromise or witnesses turning hostile at trial for fear of reprisals. The ruling reminds one of Savigny that growth of law is indeed organic and it sprouts in a particular social environment just as language and local culture. The presence of a ubiquitous media seems to have hastened the process of crystallization of social mores, habits and customs.

@ Rakesh Matwa, Advocate

The Companies Act, 1956 (“Act”) envisages amalgamation of two or more companies by three routes under sections 391 to 394 by High Court sanction, section 395 without High Court (“Court“) sanction and under section 494 in the process of voluntary winding up. Of these three methods, the first method is the most convenient and widespread. Amalgamation under section 395 of the Act is subject to restrictions on the amalgamating company which may not purchase shares in excess of sixty per cent of its paid up share capital and free reserves, or one hundred percent of its free reserves, whichever is more. Amalgamation under section 494 of the Act is sui generis. Set forth below is a broad description of the steps to carry out an amalgamation of two or more non-listed companies under sections 391 to 394 of the Act.

1. The first step is to hold a board meeting of the transferor and transferee companies and obtain in principle approval for the proposed amalgamation. Simultaneously, a due diligence assessment of transferor company’s shares is also approved. Due diligence aims at uncovering information pertaining to the transferor company’s affairs – operational, strategic, technical, environmental, information security, legal, tax, financial, regulatory, etc. Due diligence is within transferee company’s scope of responsibility as the transferor has a vested interest in not disclosing adverse information, which may significantly reduce the valuation of shares. However, transferor company may also carry out due diligence of the transferee to assess the track record of the transferee and its ability to conclude the proposed transfer.

2. Once the transferee has satisfied itself by the due diligence report, the next step is determination of consideration payable by the transferee company to the transferor company, by a chartered accountant by valuation of equity shares of the transferor company by using one or more of the four valuation methods – net asset value, discounted cash flow method, profit earning capacity and market price method for listed companies only. The valuation determines (a) the price per share of transferor company, and (b) the share exchange ratio applicable on exchange or replacement of transferor company’s shares with transferee company’s shares.

3. If the transferee and transferor agree on the consideration as representing a fair price for the proposed transfer, a scheme of arrangement has to be prepared and the same has to be approved by the respective boards along with the valuation report and an explanatory statement giving justification for the proposed amalgamation. At the board meetings, participating companies should authorize a director to sign, file application and accompanying documents in the court, and take all actions incidental and necessary for the purpose. In the scheme, the details of capital structure of transferor and transferee, transferred business, transferred liabilities, and terms and conditions of transfer, etc. are stated.

4. Simultaneously, the transferor company has to apply to financial institutions and debenture trustees and banks for their approval of the amalgamation scheme.

5. The transferor and transferee company file a joint application in the High Court having jurisdiction over the place where registered office of the two companies is located. If registered offices of transferor and transferee companies are located in different states, separate applications are required to be filed in the two Courts with each company being made a party to the other’s application. In the application, the applicant is required to disclose all material facts relating to the company, such as the latest financial position of the company, the latest auditor’s report on the accounts of the company, the pendency of any investigation proceedings in relation to the company, etc.

6. The Court issues a direction for holding meeting of shareholders and creditors of the applicant company chaired by the person nominated by the Court. However, the Court may dispense with the requirement of holding meeting of members and creditors if their individual consent has already been obtained and accompanies the application for amalgamation. The Court also issues directions to the Central Govt. through the concerned Registrar of Companies.

7. Pursuant to the Court direction a 21 day notice is issued to the shareholders and creditors of the transferor company. The notice is accompanied with the proposed scheme of arrangement, and an explanatory note under section 393 of the Companies Act, 1956. The explanatory note gives details of the circumstances that led to the necessity of the proposed amalgamation, the contents of the scheme in brief, etc. The notice of the proposed amalgamation is advertised in English and a local newspaper as per Court’s directions.

8. An affidavit of service of notice and advertisement of the scheme in newspaper is to be filed in the Court by the chairman of the meeting seven days before the date fixed for the meeting.

9. The meeting is to be held as per Court’s directions. Usually different meetings are held for different classes of shareholders – preference or equity, or creditors – secured or unsecured. At the meeting the scheme should be approved by a simple majority (51%) of members or creditors present and voting as the case may be and who should represent at least 3/4^thin value of the paid up share capital and/or 3/4^th in value of total claim of creditors. Voting at the meetings takes place by poll. After this meeting an extraordinary meeting may be held to effect changes in Memorandum of Association if the same does not contain provisions for amalgamation or in the Objects clause if the same does not contain objects similar to those of the transferor company, and consequent changes, if any, under section 31 of the Act, etc.

10. The chairman of the meeting makes a report to the Court on the outcome of the meeting of shareholders and creditors separately. The Court cannot proceed without the required sanction of members and creditors to the scheme.  In case the scheme is approved, the transferee company is to apply to the Reserve Bank of India if share allotment to non-residents is envisaged.

12. Another application is submitted in the Court praying for grant of sanction. The Court fixes a date for hearing and notice thereof is to be advertised in the same newspapers in which notice of the meeting was advertised. The Court hears the applicant and representative of the Central Govt., and any shareholders or creditors. If in view of the Court, the Scheme is just and fair and not prejudicial to transferor company’s members or creditors, it may sanction the scheme. The transferor company will continue in existence till such time as specified in the Court order sanctioning the scheme.

13. To make the sanctioned scheme effective, its certified copy of the sanctioned scheme is filed with the concerned registrar of companies within 14 days of order of the Court excluding the time taken in obtaining the said certified copy. The Court order is liable for stamp duty if provided for in the concerned state stamp duty laws.

@ Rakesh Matwa, Advocate

Registration of documents creating or extinguishing rights in immovable property are given great importance so much that every inch of Indian territory from North to South and East to West falls under the office of a Sub-Registrar appointed by the respective State Government/Union Territory for the purpose of registering documents. The offices of sub-registrars are also being increasingly digitized and made people friendly. A very practical question that people often face is what will be the consequence if a document, say a lease deed, compulsorily registrable, is not registered by the executants. The following rough and ready rules of thumb provide instant guidance on the topical issue.

1. The Registration Act, 1908 mandates that every lease deed of the duration of more than one year is compulsorily registrable.

2. If the lease is not so registered, it will not affect the immovable property comprised in the deed nor will it be accepted as evidence of any transaction affecting leased property. This means that the lease deed would be void in the eyes of law and no court would uphold the rights of the landlord or tenant on the unregistered lease deed.

3. However, this does not mean that the lease is useless in a court of law for all purposes.  It can be used as evidence for a collateral purpose. For instance, if a tenant under an unregistered lease takes a defence that the landlord’s suit is not maintainable because the lease is not registered, the court may look into the terms of the unregistered lease to determine the nature of the tenant’s possession. From the terms of the unregistered lease, the court may conclude that the relation of landlord and tenant indeed subsisted between the parties. In such a case the tenancy would be from month to month, terminable by a written notice of 15 days in case of residential lease and six months in case of a commercial lease. Similarly there is no bar to the unregistered lease being allowed as evidence for any purpose other than to show the existence of a lease.

@ Rakesh Matwa, Advocate