State of Karnataka v. State of Meghalaya [(2023) 4 SCC 416]
Supreme Court Upholds Constitutional Validity of State Lotteries Tax Acts In a recent landmark judgment, the Supreme Court of India has upheld the constitutional validity of the Karnataka Tax on Lotteries Act, 2004, and the Kerala Tax on Paper Lotteries Act, 2005. The Court’s ruling reaffirmed the legislative competence of the States of Karnataka and Kerala to pass these Acts under Entry 62 of List II in Schedule 7 of the Indian Constitution. However, the judgment has left some pertinent questions unanswered, which warrant further consideration. The Background: The litigation stemmed from earlier rulings by the High Courts of Karnataka and Kerala, which held that the Karnataka Act and the Kerala Act were unconstitutional. The High Courts found that the respective State Legislatures lacked the legislative competence to enact these Acts. Consequently, the States of Karnataka and Kerala were directed to refund the deposited amounts to the respondent States, namely Nagaland, Sikkim, Arunachal Pradesh, and Meghalaya. To challenge these rulings and seek clarity on the constitutional validity of their Acts, the States of Karnataka and Kerala approached the Supreme Court. The Central Issue:The central issue before the Supreme Court was whether the State Governments’ power to levy tax on lotteries under Entry 62 of List II was rendered ineffective by Parliament’s power to regulate lotteries under Entry 40 of List I. Court’s Analysis: The Supreme Court commenced its analysis by discussing the constitutional scheme pertaining to legislative competence under Article 246 read with Schedule 7 of the Indian Constitution. It emphasized that the entries in the three lists under Schedule 7 delineate the areas of legislative competence for the Union and State Legislatures. When conflicts arise between entries, courts must endeavor to reconcile them using the doctrine of “pith and substance.” The Court relied on various precedents to establish principles of law related to legislative competence. It clarified that taxation is distinct from the power to regulate and control a particular field. In cases of conflict between different entries of Lists I and II, courts must attempt to reconcile them. The doctrine of pith and substance is applied to determine the legislative field in which the impugned legislation falls.Regarding the present case, the Supreme Court observed that Parliament, under Entry 40 of List I, had enacted the Lotteries (Regulation) Act, 1998, to regulate lotteries organized by the Government of India or State Governments. However, it was crucial to note that this Act had no provision regarding taxation, and the power to tax remained with the State Governments under Entry 62 of List II. The Court thus concluded that the Karnataka and Kerala Acts were constitutionally valid as they derived their legislative competence from Entry 62 of List II. It held that the power to tax betting and gambling (including lotteries) continued to vest with the State Governments. Analysis and Conclusion: While the Supreme Court upheld the constitutional validity of the Karnataka and Kerala Acts, there is room for debate regarding the categorization of lotteries as a species within the genus of betting and gambling. The Court could have delved into the suggestions of the Law Commission Report No. 276, which recommended a cohesive national policy on regulating gambling and betting activities.Furthermore, the impact of the Constitution (101st Amendment) Act, 2016, which modified Entry 62 of List II, was not considered in the judgment. This amendment may have significant implications for the States’ power to impose taxes on entertainments and amusements, encompassing betting and gambling activities. In light of the complexities surrounding lotteries, betting, and gambling, there is a pressing need for a comprehensive and unified national policy to address these issues effectively, especially in the context of the digital age.
Tejo Ratna Kongara v. SEBI [(2023) SCC OnLine SAT 138]
Shareholder’s Appeal Dismissed, Cannot Challenge Scheme of Arrangement Before SEBI A recent case before the Securities Appellate Tribunal (SAT) in Mumbai involved a shareholder’s appeal challenging the order of the Securities and Exchange Board of India (SEBI) regarding a scheme of amalgamation/arrangement between Indiabulls Real Estate Limited and Embassy Group Companies. The SAT, comprising Justice Tarun Agarwala and Meera Swarup, ruled that the appellant, who purchased shares from the shareholder, has no locus to file the appeal as he is not an aggrieved person and cannot pursue the same grievance before another forum, namely, SEBI. Indiabulls Real Estate Limited had announced the merger with Embassy One Commercial Property Developments Pvt. Ltd., and later, the merger with NAM Estates Pvt. Ltd. and Embassy One Commercial Property Developments Pvt. Ltd. A draft scheme of arrangement was filed before the stock exchanges for obtaining a no objection certificate, which was forwarded to SEBI. The appellant, who became a shareholder after purchasing shares from a previous shareholder, challenged SEBI’s rejection of the previous shareholder’s representation. The appellant contended that he has the right to continue with the litigation as he stepped into the shoes of the erstwhile complainant. However, the SAT ruled that becoming a shareholder does not automatically transfer the cause of action, and the complaint remains personal to the original shareholder. The Court clarified that SEBI’s role is limited to issuing observation/no objection letters to schemes of arrangement and does not encompass adjudicating on the merits of the scheme. The Court emphasized that a shareholder cannot complain about the scheme of arrangement before SEBI or the Stock Exchange, nor can they make representations or file appeals under Section 15T of the SEBI Act. If a shareholder is aggrieved by the scheme, the appropriate remedy is to object during the shareholders’ consideration or before the National Company Law Tribunal (NCLT) under Section 230(4) of the Companies Act. Furthermore, the doctrine of election applies, meaning that when two remedies are available for the same relief, the aggrieved party must choose one, not both. Therefore, once the shareholder had approached the NCLT, it was not open to the shareholder or the appellant to pursue the same grievance before SEBI. In conclusion, the SAT held that the appellant is not an aggrieved person, and thus, the appeal is not maintainable. The appellant’s attempt to challenge the scheme of arrangement before SEBI was dismissed by the Tribunal, affirming that the proper forum for such grievances is the NCLT.
Hotel Leelaventure Ltd. v. New India Assurance Co. Ltd. (Case 149 of 2008)
National Consumer Disputes Redressal Commission – Hotel Leelaventure’s Insurance Claim Dismissed A significant consumer dispute case came before the National Consumer Disputes Redressal Commission involving Hotel Leelaventure (Leela Hotel) and New India Assurance. Leela Hotel sought compensation for losses suffered during the 2005 Mumbai floods due to the repudiation of their insurance claim under two policies issued by the insurance company. The claim amounted to Rs. 5,98,42,267 for damages caused by unprecedented flash floods, but the Commission dismissed the claim as Leela Hotel failed to prove the inclusion of Leela Galleria in the insured premises as per the policies. Leela Hotel’s claim centered on the damages caused by excessive rains and high tides that resulted in 2.5 feet of water inundation, submerging the basement and causing losses to buildings, plant & machinery, fixtures, fittings, and furniture. The incident was promptly reported to the insurance company, but the final survey report indicated that the damaged stock within the insured premises was covered, while items at Leela Galleria and its basements were not within the scope of ‘insured premises.’ Leela Hotel alleged deficiency in service, contending that the insurer arbitrarily offered a paltry compensation of Rs. 37.57 lakhs despite the hotel paying a premium of around Rs. 22 lakhs and suffering a loss of about Rs. 6 crores. The Commission, however, ruled that Leela Galleria was not covered under the two policies as no endorsement was issued to include it. Moreover, assets/stocks/FFF of Galleria were insured under a separate policy by Oriental Insurance Co. Ltd., indicating that it was not covered under the existing policies. The Commission emphasized that an insurance policy must be interpreted as it is without any additions or interpretations. It also considered the surveyor’s report and noted that the insurer is required to consider the report, although not bound to accept it entirely. The final surveyor’s assessment excluded the loss incurred at Leela Galleria premises, which led to the dismissal of Leela Hotel’s complaint. In conclusion, the National Consumer Disputes Redressal Commission’s ruling in this case highlights the importance of clear policy terms and endorsements. The dismissal of the claim emphasizes the need for consumers to thoroughly understand their insurance policies and ensure that all insured properties are correctly listed to avoid potential disputes in the future.
Tata Power Company Ltd. v. MH Electricity Regulatory Commission [IA No. 732 of 2023 in Appeal No. 369 of 2023]
Electricity Tariff Hike – Appellate Tribunal’s Interim Relief Decision The recent judgment by the Appellate Tribunal for Electricity has sparked considerable attention in the energy sector. In the case of M/s. KK Ropeways Limited (Operational Creditor) versus the Maharashtra Electricity Regulatory Commission (MERC), the Tribunal granted an interim stay on the tariff hike imposed by MERC. The dispute arose when MERC fixed the appellant’s tariff significantly higher than the estimated average cost of supply, raising concerns about its impact on consumers and the overall competitiveness of the Distribution Licensee. The Tribunal’s decision was grounded in the clear violation of Section 61(d) of the Electricity Act, 2003, which prioritizes the larger public interest in electricity tariff determinations. This critical factor played a pivotal role in the Tribunal’s assessment of whether to grant interim relief to the Distribution Licensee. The sharp tariff hike, which amounted to Rs. 1.39/kwh above the estimated cost of supply, had the potential to burden consumers with higher electricity costs, and even drive them to opt for other Distribution Licensees operating in Mumbai. Delving into the legal principles governing the grant or refusal of interlocutory relief, the Tribunal emphasized three core considerations: a prima facie case, the balance of convenience, and the possibility of irreparable injury. The appellant had to satisfy at least two of these conditions conjunctively to be eligible for interim relief. Notably, the Tribunal pointed out that a mere fulfillment of one condition would not suffice to justify the grant of interlocutory relief. The Tribunal’s analysis also highlighted the violation of the merit order principle by MERC, which involved an improper quantum of power procurement from costlier embedded generation and an insufficient utilization of cheaper imported power. Such a procurement strategy not only rendered the Distribution Licensee uncompetitive but also burdened consumers with a far higher tariff than necessary. The Tribunal advised MERC to consider procuring cheaper power from outside Mumbai to ensure a reasonable and economical tariff for consumers. Considering its appellate jurisdiction, the Tribunal firmly asserted its authority to revise and correct the proceedings in a cause already instituted. This empowered the Tribunal to interfere with regulatory commission orders, including MERC. The decision underscored the need for the Commission to dispassionately consider all relevant factors while fixing tariffs, ensuring a fair price for consumers and safeguarding their interests. In conclusion, the Appellate Tribunal’s interim relief decision serves as a significant development in the electricity sector. By staying the tariff schedule for the financial year 2023-24, the Tribunal has provided vital support to the Distribution Licensee’s proposal to procure power from cheaper sources, which not only preserves its competitiveness but also ensures consumer welfare with lower tariffs.
Foreign nationals still behind bars under NDPS
The right to travel is a fundamental right that is a part of personal liberty under Article 21 of the constitution. However, even fundamental rights can be restricted “according to the procedure established by law”.
Undervaluing Goods to Escape Tax Not Allowed Even if E-Way Bill Not Required for Goods Below Rs. 50,000
The Allahabad High Court has ruled that dealers cannot undervalue their goods to evade taxes, even if they claim that an e-way bill is not required for goods below Rs. 50,000. The court’s decision is a significant blow to those who attempt to evade taxes by misrepresenting the value of their goods. The ruling emphasizes the importance of complying with tax regulations and following the procedures set forth in the GST Act of 2017.
Limitation under Section 37 Arbitration & Conciliation Act, 1996
The Arbitration and Conciliation Act, 1996 is a law that governs arbitration and conciliation proceedings in India, and Section 37 of the Act provides for appeals against certain orders. However, there has been confusion regarding the time limit for filing appeals under Section 37, resulting in conflicting judgments by the Supreme Court and High Courts. The issue of limitation has undergone changes from the applicability of the Limitation Act to the coming into force of the Commercial Courts Act, 2015. The Supreme Court has held that the Limitation Act applies to all proceedings under the A&C Act, and has prescribed a limitation period of 120 days for filing appeals under Section 37. However, there are still ambiguities regarding the applicability of this ruling to appeals against orders of the arbitral tribunal and intra-court appeals.