When does a non-speaking dismissal result in an affirmation of the lower Court's decision on merits?

It is quite well-settled that a non-speaking order of the Supreme Court in admitting or dismissing an SLP is not binding precedent – thus, a non-speaking dismissal of an SLP is not an affirmation of the High Court’s view on merits. Is the position different when a Civil Appeal (as opposed to an SLP) is dismissed in a non-speaking order? On principle, a difference may arguably exist – the Court may refuse to hear an SLP filed under Article 136 of the Constitution as a matter of its discretion. However, in deciding a civil appeal (as opposed to a special leave petition), the Court must decide in accordance with the law in force; i.e. on the merits of the case at hand. So the question – what is the value of a non-speaking order dismissing an appeal (as opposed to an SLP). Interestingly, there appears to be a difference among the High Courts on this point!

Consider the case of CIT v. Kwality Biscuits. The decision of the High Court (Kwality Biscuits v. CIT) is reported in [2000] 243 ITR 519 (Kar). The decision of the Supreme Court is reported in [2006] 284 ITR 434 (SC). The reporter indicates that the decision of the Supreme Court is in a Civil Appeal – it is not simply a dismissal of an SLP. The order itself notes that the “appeals” are dismissed. Now, in Snowcem India v. DCIT, [2009] 313 ITR 170 (Bom), the Bombay High Court held that the nomenclature “Civil Appeal” per se means that leave to appeal was granted, and the fact that a civil appeal is dismissed must lead to the conclusion that the judgment of the lower Court has been upheld on merits. The Patna High Court has – after noticing the Bombay judgment – taken a contrary view in Bihar State Forest Development Corporation v. CIT, MANU/BH/0045/2010, judgment dated 18^th January, 2010. Commenting on the decision in Kwality, it was stated that “The Supreme Court dismissed the Department's appeal by a brief, non-speaking order which is indicative of the position that the Supreme Court had declined to go into the merits of the matter and thought it fit to dismiss the appeal In Limine. We are mindful of the position that the order of the Supreme Court does state the nomenclature of Civil Appeal. We are of the view that the same does not in law change the legal position… the order of the Supreme Court that "The appeals are dismissed", does not by itself mean that the Supreme Court has upheld the judgment of the Karnataka High Court in Kwality Biscuits Ltd. (supra) on merits. We do say that the Supreme Court declined to interfere in the matter…”

With respect, the view of the Bombay High Court in Snowcem appears to be the more principled view. Justice Rebello summed up the position thus:

“4. If the Special Leave Petitions had only been dismissed then perhaps it would have been possible to say that there was no merger of the judgment of the Karnataka High Court and that the Supreme Court had refused to grant Special leave to appeal and consequently it was not an order of affirmation. See Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC). However, the order passed by the Supreme Court is "The appeals are dismissed" being Civil Appeal Nos. 1284 and 1285 of 2001. Once the appeals are dismissed then it can be said that the judgment of the Karnataka High Court has been affirmed by the Supreme Court. That would not be the case in the event only Special Leave Petitions had been dismissed in which event it would be said that the Supreme Court chose not to interfere with the judgment of the Karnataka High Court. 5. In such an event the doctrine of merger would not apply. Once the judgment of the Karnataka High Court in Kwality Biscuits Ltd. (supra) has been affirmed by the Supreme Court by dismissing the appeals, in our opinion, the law binding on us would be the judgment in Kwality Biscuits Ltd. (supra).”

IBA Guidelines for Drafting International Arbitration Clauses

The International Bar Association has published a draft of its Guidelines for Drafting International Arbitration clauses. The Guidelines are available at a link on this page. The Kluwer Arbitration Blog has discussed the Guidelines here. The Guidelines provide a good opportunity to review several aspects of arbitration law connected to the interpretation of arbitration clauses. In the few subsequent posts, I hope to analyse the Guidelines in the backdrop of the Indian law on the point.

E*Trade Mauritius: Reaffirming legal form over economic substance

The Authority of Advance Rulings has issued its ruling in the matter of E*Trade Mauritius; and the Ruling essentially follows the decision of the Supreme Court in Azadi Bachao Andolan. The facts before the Authority were that the Applicant was a company incorporated in the Mauritius, and had been issued a Tax Residency Certificate by the Mauritius income tax authorities. The Applicant was a subsidiary of a company incorporated in the United States of America. The Applicant held shares in an Indian company, IL&FS Investsmart Ltd. It transferred its shares in the Indian company to another Mauritius company. Under domestic law, the gains from this transfer (gains arising through the transfer of a capital asset situate in India) would be chargeable under Section 9 of the Income Tax Act. Having a tax residency certificate in Mauritius, the applicant claimed the benefit of Article 13(4) of the Indo-Mauritius DTAA. Under Azadi Bachao, the applicant would clearly be entitled to the benefit of the DTAA; and the gains would be taxable only in the residence country, Mauritius.

The Revenue however contended before the AAR, that “there is scope and sufficient reason to infer that the capital gain from the transaction arises in the hands of the US entity which holds the applicant company. In other words, the beneficial ownership vests with the US company which according to the department has played a crucial role in the entire transaction. Though the legal ownership ostensibly resides with the applicant, the real and beneficial owner of the capital gains is the US Company which controls the applicant and the applicant company is merely a façade made use of by the US holding Company to avoid capital gains tax in India.” According to the Revenue, considering that the ‘real’ beneficiary was the US parent of the Mauritius applicant, the gains must be held to accrue to the US company. Under the relevant provision of the Indo-US treaty, the gains would be taxable in India. Contrary to this argument, the applicant contended that beneficial ownership is irrelevant in the context of Article 13 of the Indo-Mauritius treaty. Strong reliance was placed on Azadi Bachao.

The AAR analysed the decision in Azadi Bachao, and ruled, “…the Supreme Court found no legal taboo against ‘treaty shopping’ … if a resident of a third country, in order to take advantage of the tax reliefs and economic benefits arising from the operation of a Treaty between other countries through a conduit entity set up by it, the legal transactions entered into by that conduit entity cannot be declared invalid. The motive behind setting up such conduit companies and doing business through them in a country having beneficial tax treaty provisions was held to be not material to judge the legality or validity of the transactions.”

The Revenue contended that where the incorporation of a Mauritius entity is merely a device or a sham, the ratio of Azadi cannot be applied. Again, the AAR clarified, once again on the basis of Azadi, that “… the word ‘device’ cannot be used ‘in any sinister sense’ and the design of tax avoidance by itself is not objectionable if it is within the framework of law and not prohibited by law. However, a transaction which is ‘sham’ in the sense that “the documents are not bona fide in order to intend to be acted upon but are only used as a cloak to conceal a different transaction” (per Lord Tomlin in Duke of West Minister) would stand on a different footing ….”

In an earlier post discussing a recent English decision on lifting the corporate veil, Niranjan had stated that ‘sham’ is a legal concept which requires Courts to see what the legal substance of the relationship between the parties is. Courts are, however, not entitled to look at alleged ‘economic realities’ in deciding on the basis of allegations of sham. The AAR has held that the law in India after Azadi is the same, saying that “for acts or documents to be a ‘sham’, the parties thereto must have a common intention that they are not to create the legal rights and obligations which they give the appearance of creating…” Consequently, it was held that the Mauritius treaty would apply and the gains would not be taxable in India. 

While the decision does not contain any broad proposition of law beyond that which was already laid down in Azadi, it is significant for once again emphasizing that the ‘sham’ doctrine is a legal concept and not an economic concept. Further, the AAR has once again foiled the attempts of the Revenue to circumvent the ruling in Azadi by relying on McDowell’s case. Undoubtedly, McDowell’s case was decided by a larger Bench of the Supreme Court – that cannot be reason enough to supersede Azadi, which has elaborated on the true effect of McDowell. As the Bombay High Court had stated in Akshay Textiles, 308 ITR 401, and as once more clarified by the AAR, McDowell as interpreted and understood in Azadi is the law in India.

Van Oord: Links of Interest

Shantanu Naravane has posted on the Delhi High Court judgment in Van Oord (which departed from Samsung on the question of the interpretation of Section 195) on Indian Corporate Law. His post is available here. Another discussion of the case is available here

Recent Income Tax Cases

1. The Authority for Advance Rulings has discussed the law on tax avoidance in detail in E*Trade Mauritius - essentially, the AAR seems to have followed the decision of the Supreme Court in Azadi Bachao Andolan, which has been discussed previously here.

2. The Delhi High Court in Van Oord appears to have differed with the Karnataka High Court's decision in Samsung, which was discussed here.

3. The Supreme Court has clarified in Reliance Petroproducts that Dilip Shroff has not been completely overrule by Dharmendra Textiles. Previous posts on Dharmendra are accessible here.

Agency, Control and Limited Liability

We have discussed issues in relation to lifting of the corporate veil previously on this blog. In this context, the following is a guest post by Krishnaprasad K.V., III Year B.A. LL.B. (Hons.), NLSIU. Krishnaprasad argues that agency is a ground for lifting the veil; and such a ground is available when actual control of a controlling shareholder exists. Potential control is not, however, sufficient to impose liability. Krishnaprasad makes the normative argument that once potential control by the shareholder is established and the creditor is an involuntary creditor, the burden should then be on the controlling shareholder to establish that there was no actual control exercised by him.

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I. Introduction

One of the distinctive features that enable a company to perform its economic role is the fact that its directors are agents of the company and not of its shareholders. However, this ‘separation between ownership and management’ of a company might get blurred in certain cases, for instance, when an individual shareholder owns most of the shares of a company. When such potential control translates to actual control, the separate personality of the company is in fact surpassed and hence liability may be imposed on the shareholder based on the principle of agency [David Powles, “The “See-through” Corporate Veil”, (1977) 40 (3) Modern Law Review 340].

Looking into the question of where liability based on agency fits in, in the context of “lifting the corporate veil”, Prof. Ottolenghi’s categorisation of the modes of lifting the veil into four, namely, ‘peeping behind the veil’, ‘piercing the veil’, ‘extending the veil’ and ‘ignoring the veil’ is of great utility. The liability based on agency relationship within the company can only lead to ‘piercing the veil’ thereby “imposing responsibility on the shareholders for the acts of the company” [S. Ottolenghi, “From peeping behind the corporate veil, to ignoring it completely”, (1990) 53 (3) Modern Law Review 340]. The case being considered presently is not one where either the separate existence of the company is denied or its existence itself is doubted as being a façade or sham; the former of which leads to ‘extending the veil’ and the latter, to ‘ignoring the veil completely’, both of which require a higher burden than agency to be discharged for ‘lifting the veil’. See State of Uttar Pradesh. v. Renusagar Power Co. AIR 1988 SC 1737 and Life Insurance Corporation v. Escorts AIR 1986 SC 1370 for ‘extending the veil’; and Jones v. Lipman [1962] 1 W.L.R. 832 and Gilford Motor Company Ltd v. Horne [1993] Ch. 935 for ‘ignoring the veil’.

This also explains the reasoning in Hashem v. Shayif which in my opinion, does not reject ‘agency’ as a ground for piercing the veil. The case suggests that “the corporate veil can be pierced only if there is some impropriety”. In this case, the claim of the wife was that her “husband and the Company are one and the same.” In other words, the request was to treat the company as a sham/façade i.e. in Prof. Ottolenghi’s words, to ‘ignore the veil’. Hence, while ‘impropriety’ might be a necessary condition to ‘ignore the veil’, this does not reject the proposition that the presence of agency relations is sufficient for ‘piercing the veil’.

II. The Controlling Shareholder

There is considerable scholarly writing in support of the economic efficiency of limited liability. However, most of these reasons are advanced in the context of large public corporations with dispersed shareholders [B. R. Cheffins, “Corporations” in Oxford Handbook of Legal Studies, p. 485]. It is open to investigation whether the rationale for limited liability continues to hold good even when there is one shareholder holding a large enough proportion of the shares of a company so as to exercise control over it (hereinafter referred to as the ‘controlling shareholder’; please note that the term ‘controlling shareholder’ only refers to potential control and not actual control).

One of the arguments in favour of limited liability is that by capping the risk involved, it reduces the shareholders’ costs of monitoring the directors. While this may be true in cases where shareholders hold small proportions of a company’s shares, a controlling shareholder has a lot at stake in the company and hence an incentive to monitor, independent of limited liability. Further, ‘control’ is an additional benefit that the shareholder gets in addition to the returns from investment and it is unlikely that a shareholder will let this benefit go waste.

Limited liability is also often justified by reduction in costs on a shareholder to monitor other shareholders [F. H. Easterbrook et al., “Limited Liability and the Corporation”, (1985) 52 University of Chicago Law Review 89]. This argument does not stand good for controlling shareholders, first, since they already have a considerable stake in the company through shareholding and hence are unlikely to be affected by on the assets of other shareholders in case of unlimited liability and secondly, since the number of other shareholders and hence the costs of monitoring their assets are both likely to be low.

Limited liability also helps investors without the resources to gather information about the corporation make efficient investment decisions. The basis for this argument is that the market prices of shares are reflective of the efficiency of management of the firm. This again does not apply in case of a controlling shareholder since he would be in a position to obtain enough information about the management of the firm without relying on external factors such as market prices of shares [N. A. Mendelson, “A Control-Based Approach to Shareholder Liability for Corporate Torts”, (2002) 102 (5) Columbia Law Review 1206].

III. Involuntary Creditors

As in the case of a controlling shareholder, many of the justifications for limited liability do not apply in cases where involuntary creditors (for instance, victims of torts committed by the company) are involved. The first argument that runs counter to recognition of limited liability in such cases is that of ‘risk allocation’. The distinguishing feature in the case of involuntary creditors is that they do not have the option of agreeing with the shareholders for a mutually acceptable distribution of risks as opposed to the case of voluntary creditors [Michael Carey, “Piercing the Veil When Corporate Subsidiaries Commit Torts” available at SSRN: http://ssrn.com/abstract=1309302]. Hence, enforcing limited liability in cases of involuntary creditors would result in tort victims going uncompensated, that too without options often used by banks and other financial institutions, which is to charge a higher rate of interest on loans to entities with limited liability. Another impact of enforcing limited liability with respect to involuntary creditors is that this would incentivise firms to carry out through subsidiaries, such activities as would put the society at large at risk because of the guarantee that even if a tort claim arises, the potential risk is limited to the extent of the subsidiary’s assets [see Mendelson, cited above]. A related impact would be the lack of incentive for firms to monitor the actions of its directors at least to ensure that they do not incur tortuous or other similar liabilities.

IV. Proving Control

As suggested above, a number of justifications for limited liability no longer hold true either in the presence of a controlling shareholder or when the creditor is an involuntary creditor and a fortiori when both of them co-exist. This is to be seen in light of the fact that proving actual agency, even in the presence of potential control, could be quite difficult for a creditor. Also, the general tendency among courts have been to not pierce the veil even when potential agency is established in the absence of proof of actual control.

In light of the above factors, it is suggested that once potential control by the shareholder is established and the creditor is an involuntary creditor, the burden should then be on the controlling shareholder to establish that there was no actual control exercised by him. This is also justified by the fact that the shareholder, as opposed to the creditor is the “least-cost information gatherer” since he would have better access to data required to prove the absence of control as compared to the creditor [Anthony Kronman, “Mistake, Disclosure, Information and the Law of Contracts”, (1978) 7 Journal of Legal Studies 1].

A plausible counter-argument to the above scheme could be that it attaches more importance to economic efficiency than to the ‘fault’ of the person on whom liability is imposed. But Prof. Laski answers this criticism by suggesting that the basis of vicarious liability itself is not the moral blame attached to the master. It is rather a form of “social insurance” which renders the master liable for the imprudence of his subordinates [Harold J. Laski, “The Basis of Vicarious Liability”, (1916) 26 (2) Yale Law Journal 110]. The economic rationale seems to be that the master is a better risk bearer than the victim, i.e. that a corporation which is in a position to pass on the risk to its customers is in a better position to bear the risk as compared to a tort victim.

V. Conclusion

Many of the justifications for limited liability no longer apply when there is a ‘controlling shareholder’ or when the creditor requesting ‘lifting the veil’ is an involuntary creditor. In the presence of both these factors, there is a strong case for arguing (normatively) that the burden should be put on the shareholder having potential control over the company to show that there was no actual control. While such a system is not based on the ‘fault’ of the controlling shareholder, it will certainly create incentives on shareholders to invest in socially productive monitoring. 

Conflicts between a Fiduciary's Duties

A recent article in the Law Quarterly Review [Matthew Conalgen, Remedial Ramifications of Conflicts Between a Fiduciary’s Duties, (2010) 126 Law Quarterly Review 72] addresses a very interesting question in relation to the remedies for breach of fiduciary duties. The article considers a breach of fiduciary duty in cases where two competing fiduciary duties are involved. Prof. Conalgen begins his analysis by noting three rules governing conflicts between competing fiduciary duties. First, a fiduciary may act only with the prior informed consent of each principal when there is even a potential conflict between the fiduciary duties owed to the two principals. Secondly, even with the existence of such prior informed consent, the fiduciary must cease to act if the potential conflict grows into an actual conflict. Thirdly, a fiduciary cannot act to intentionally or consciously prefer the interests of one principal over those of the other. With this background, the question Prof. Conalgen seeks to address is whether the law ought to recognise a reduction of the fiduciary’s liability on the grounds of any contributory fault of the principal. Common law jurisdictions tend to differ in their answers to this question – New Zealand till recently allowed compensatory fault to be used to reduce damages while Australia did not. Under English law, the position is unsettled. Prof. Conalgen argues against reduction of liability; on the basis of the purposes of the fiduciary doctrine.

Ex Turpi Causa and the 'Public Conscience' test: English law and Indian law

In an earlier post, we had seen a recent decision in K.S. Lincoln summarizing the principles governing the application of the maxim “ex turpi causa non oritur actio” or the “illegality defence”. One of the important consequences of the decision of the House of Lords in Tinsley v. Milligan is that under English law, the test for application of the maxim is whether the action of the plaintiff is based on the illegality. If this test is satisfied, the “larger public interest” will not allow the claim to proceed – if the rule applies, then it applies without exception. To an extent, this is an inflexible requirement for a rule which is based on public policy. Tinsley v. Milligan specifically rejected the test of whether the “public conscience” would be shocked by letting the action proceed. The rationale for this was that Courts may not be able to always correctly balance competing claims of public policy; and may not be able to decide when the public conscience is really affronted or not – an inflexible objective rule was thought to be better.

At least one case suggests that the English principles would not apply in India. One can consider the judgment of the Bombay High Court in Shirish Finance v. M. Sreenivasulu Reddy, 2002 (1) Bom CR 419, where a Division Bench observed, “refusal by Courts to grant relief on the basis of such maxims as ex turpi causa non oritur actio or pari delicto or parlances criminals is based on grounds of public policy and therefore if the same or higher public policy demands in a particular context that relief should be give, then such maxims should not be used any more as a bar, and the courts should not deny relief…” This is almost identical to the “public conscience” test rejected by the House of Lords in Tinsley.

On the other hand, prior the Supreme Court of India has specifically approved of Tinsley v. Milligan. In fact, in Canbank Financial Services v. Custodian has approvingly cited Tinsley v. Milligan after noting that there has been a change in the law on the point introduced by Tinsley. Another Bench of the Supreme Court in BOI Finance v. Custodian, AIR 1997 SC 1952, specifically considered the argument that English decisions on the point should not be applied; but rejected that argument and went on to apply Tinsley v. Milligan. Consequently, there appears to be a case for considering the Bombay High Court as not being good law. But, can these decisions be reconciled – thereby leaving room for the argument that the “public conscience” test applies in India? 

This will be considered in a subsequent post. It is noteworthy though that the application of the “public conscience” test is likely to make a difference in actual cases – the decision in Stone & Rolls v. Moore Stephens discussed here might well have been different if the public conscience test was applied (specifically, the “very thing” argument in that case is rendered much stronger under the public conscience test – the argument is discussed in detail in the judgment in Moore Stephens, available here).

The Place of Reasonableness in Restraint of Trade: Section 27 of the Contract Act

One of the major differences in Indian law and English law on restraint of trade is thought to be the fact that a reasonableness enquiry is not mandated by Indian law. Under Section 27 of the Indian Contract Act, 1872, a plain reading suggests that all restraints of trade are void; it does not say that only unreasonable restraints are void. A recent paper by Shantanu Naravane, available on SSRN, argues through an analysis of the case-law on the point (particularly, Niranjan Shankar Golikari and Krishan Murgai) that a reasonableness enquiry is possible under Indian law as it stands. The abstract says, “In this paper, I challenge the assumption that a reasonableness inquiry finds no place in the Indian law on restraint of trade, on the basis that the supposed statutory departure from common law has been misunderstood, and the Supreme Court decisions on the issue have been misinterpreted. In other words, it is the thesis of this paper that the common law on restraint of trade is not rendered inapplicable by section 27. Given the commercial necessity of incorporating a reasonableness inquiry, and the possibility of doing so even in the current statutory framework, this paper thus argues that reasonableness can and should occupy a central role in the restraint of trade jurisprudence in India…”

The paper is available here.

New Issue: Trade, Law and Development

‘Trade, Law and Development’ has published its latest issue. The issue is available here. One of the articles in the issue is by Mr. Fali Nariman, titled ‘International Arbitration in the 21^st Century: Concepts, Instruments and Techniques’; and is available (in pdf) here.

Retrospective Taxation: Some Further Thoughts

The issue of retrospective amendments has been discussed earlier. In this context, there are some interesting observations in Lohia Machines v. Union of India, AIR 1985 SC 421. The position of law is discussed elaborately by Justice A.N. Sen in his dissenting judgment. In Lohia Machines, the Supreme Court was called upon to answer two questions. The first was whether Rule 19A of the Income-tax Act Rules was valid under Section 80J (as it originally stood). The second question was, if the rule was invalid, whether the retrospective amendment made to Section 80J in order to validate the Rule was in violation of Articles 14 and 19. The majority of the Court held (on the first question) that the Rule was not ultra vires Section 80J as it originally stood. Consequently, according to the majority, “Since, on the view taken by us, Rule 19A did not suffer from any infirmity and was valid in its entirety, Finance Act (No. 2) of 1980 in so far as it amended Section 80J by incorporating Rule 19A in the Section with retrospective effect from 1st April 1972, was merely clarificatory in nature and must accordingly be held to be valid.” In other words, the majority held that as the rule was not invalid qua the original Section, there was no real need to go into the validity of the retrospective amendment which only clarified that the Rule was valid. Thus, the actual issue of the validity of the retrospective amendment to the Section itself was not discussed by the majority. Justice Sen dissented from the majority’s holding on the first question; and hence, he had to discuss in detail the second question on the validity of the retrospective amendment to Section 80J. 

Thus, Justice Sen’s judgment is the dissenting judgment on the first question – on the second question, the issue was not before the majority in view of their first holding. Consequently, the majority cannot be said to have disagreed with Justice Sen’s exposition of the law on the second issue. The majority simply did not offer any opinion on that issue. As such, in relation to the second issue on the validity of the retrospective amendment to the Section itself, Justice Sen’s judgment must be accorded the weight due to any other concurring judgment. The fact that Justice Sen dissented on the first issue cannot take away any of the weight of his opinion on the second issue. In Justice Sen’s words, “The effect of the present amendment by seeking to incorporate the provisions of the rule declared invalid in the section itself is to withdraw with retrospective effect the relief which had been earlier granted by the Parliament in so far as the relief extends to borrowed capital employed in the undertaking and thereby to impose on the assessee a burden of tax which was not there for all these years. As a matter of policy it may be open to the Parliament to withdraw the relief granted to borrowed capital by an amendment with prospective effect consequent on any such amendment. To withdraw with retrospective effect the benefit of. relief unequivocally granted by the section to an assessee who qualified for such relief and was lawfully entitled to enjoy the benefit of such relief and has in fact in many cases enjoyed the benefit for all these years, prior to the present amendment with retrospective effect, cannot, in my opinion, be said to be on any just and valid grounds and cannot be considered to be reasonable. If any fiscal statute grants relief to any assessee and the assessee enjoys the benefit of that relief, as the assessee is legally entitled under the statute, the withdrawal of the relief validly and unequivocally granted and enjoyed by any assessee must necessarily in the absence of proper grounds be held to be unreasonable and arbitrary…”

There may well be a question raised as to whether this effectively amounts to raising a plea of estoppel and/or legitimate expectations against the statute, which (it is generally agreed) is impermissible. A couple of recent decisions may perhaps have weakened the absolute force of that principle as a matter of the reasonableness enquiry under Article 14. Particularly relevant are some observations in Southern Petrochemicals v. Electricity Inspector, (2007) 5 SCC 447, where Justice Sinha held in the context of a challenge to an Act of the legislature, “We may also notice the emerging doctrine in this behalf, viz., Legitimate Expectation of Substantive Benefit. Ordinarily, the said principle would not have any application where the legislature has enacted a statute.” Having said this, however, the Court went on to say, “As, according to us, the legislature in this case allowed the parties to take benefit of their existing rights having regard to the repeal and saving clause contained in Section 20(1) of the 2003 Act, the same would apply.” The Court also specifically used principles of estoppel, justifying that approach “in a case where the right to exemption of tax for a fixed period accrues and the conditions for that exemption have also been fulfilled, the withdrawal of that exemption cannot affect the already accrued right…” This was, importantly, in the context of a statute and not a notification of the executive - the challenge was to an Act.

The observations of Justice Beg (concurring) in Madan Mohan Pathak v. Union of India were specifically approved, and it was held that in Pathak, equitable principles were invoked against the Government. The following statement by Justice Beg was specifically approved, “It is true that, in the instant case, it is a provision of the Act of Parliament and not merely a governmental order whose validity is challenged before us. Nevertheless, we cannot forget that the Act is the result of a proposal made by the Government of the day which, instead of proceeding under Section 11(2) of the Life Insurance Corporation Act, chose to make an Act of Parliament protected by emergency provisions. I think that the prospects held out, the representations made, the conduct of the Government, and equities arising therefrom, may all be taken into consideration for judging whether a particular piece of legislation, initiated by the Government and enacted by Parliament, is reasonable.”

Blog-related Issues

This blog has now had over 200 posts (215 before this one, to be precise) and I am happy to note that the subscriber count for the blog’s feed through email subscriptions has increased over the few months to almost 400. The blog feed is now available on Twitter as lawandlegaldev. I will try and maintain regularity of posts – something that has been lacking till now. In terms of where the blog goes on from here, besides my posts, I will try and get a few practitioners to write occasional guest posts. I hope that this works out in the near future. Furthermore, until now, I have been focussing on private law issues on this blog. That focus shall certainly continue, but I hope to discuss more issues in public law in the coming days than I have till now. Any suggestions regarding the blog may be emailed by readers to me at mihircn(at)gmail(dot)com.

Commercial Disparagement once again?

Previously, I have discussed issues in commercial disparagement in the context of comparative advertising. A recent advertisement by Rin (which specifically refers to a Tide, but states that the claims are backed up by an independent laboratory research) has the potential to re-ignite the controversies on comparative advertising. J. Sai Deepak has posted an analysis of the issues in the backdrop of the advertisement on SpicyIP. His conclusion – one which I completely agree – is, “… the ad does not really disparage Tide, it merely has an element of mischief in it…” The post has a wonderful analysis of comparative advertising in Indian law; and is available here.