Category Archives: Interpretation

Otherwise

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“The Advanced Law Lexicon defines ‘otherwise’ as: ‘By other like means; contrarily; different from that to which it relates; in a different manner; in another way; in any other way; differently in other respects in different respects; in some other like capacity.’

‘Otherwise’ is defined by the Standard Dictionary as meaning ‘in a different manner, in another way; differently in other respects’; by Webster, ‘in a different manner; in other respects’.

As a general rule, ‘otherwise’ when following an enumeration, should receive an ejusdem generis interpretation (per CLEASBY, B. Monck v. Hilton, 46 LJMC 167, The words ‘or otherwise’, in law, when used as a general phrase following an enumeration of particulars, are commonly interpreted in a restricted sense, as referring to such other matters as a are kindred to the classes before mentioned, (Cent. Dict.)”

Source: R & B Falcon (A) Pty Ltd. v. Commissioner of Income Tax, 2008

Fringe Benefit Tax

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Fringe Benefit Tax was introduced by the Finance Act, 2005 and came into effect on April 1, 2006. As its name suggests, it is levied on fringe benefits which some employees receive.

In the case of R & B Falcon (A) Pty Ltd. v. Commissioner of Income Tax, 2008, a Bench of the Supreme Court comprising Justices S.B. Sinha & V.S. Sirpurkar interpreted Section 115WB of the Income Tax Act, 1961 which deals with the imposition of tax on fringe benefits. It said:

Section 115 WB comprises three sub-sections. Section 115WB (1) contains the interpretation section. It is in two parts. It provides for a direct meaning, as also an expanded meaning. The expanded meaning of the said provision is contained in sub-section (2). Sub-section (1) takes within its sweep any consideration for employment, inter alia, by way of privilege service, facility or amenity directly or indirectly, sub-section (2) thereof expands the said definition stating as to when the fringe benefit would be deemed to have been provided. The expansive meaning of the said term ‘benefits’ by reason of a legal fiction created also brings within its purview, benefits which would be deemed to have been provided by the employer to his employees during the previous year. Indisputably, sub-section (3), which exempts certain ‘benefits’ from the purview of the tax refers to sub-section (1) only. It does not have any application in regard to the matters which have been brought within the purview of the fringe benefit tax by reason of application of the deeming provision.

The taxes to be levied on the fringe benefits provided or deemed to have been provided by an employer to employees during the previous year is at the rate of 30 per cent on the value of such fringe benefits. The object for imposition of the said tax, as is evident from the said circular dated 29.8.2005, is to bring about equity.

The intention of the Parliament was to tax the employer who, on the one hand, deducts the expenditure for the benefit of the employees including entertainment, etc. and on the other when the employees getting the perks are to be taxed, those who get direct or indirect benefits from the expenditures incurred by the employer, no tax is leviable. The tax aims to bring about horizontal equity and not vertical equity.

If fringe benefits are provided for consideration for employment, which is given or provided to the employee by way of an amenity, reimbursement or otherwise; clearly sub-section (1)(a) shall be attracted.

When the expenditure incurred by the employer so as to enable the employee to undertake a journey from his place of residence to the place of work or either reimbursement of the amount of journey or free tickets therefor are provided by him, the same, would come within the purview of the term ‘by way of reimbursement or otherwise’.

The Advanced Law Lexicon defines “otherwise” as: “By other like means; contrarily; different from that to which it relates; in a different manner; in another way; in any other way; differently in other respects in different respects; in some other like capacity.”

The Parliament, in introducing the concept of fringe benefits, was clear in its mind in so for as on the one hand it avoided imposition of double taxation, i.e., tax both on the hands of the employees and employers; on the other, it intended to bring succour to the employers offering some privilege, service, facility or amenity which was otherwise thought to be necessary or expedient. If any other construction is put to sub-sections (1) and (3), the purpose of grant of exemption shall be defeated. If the latter part of sub-section (3) cannot be given any meaning, it will result in an anomaly or absurdity. It is also now a well settled principle of law that the court shall avoid such constructions which would render a part of the statutory provision otiose or meaningless. [See Visitor and Ors. v. K.S. Misra [(2007) 8 SCC 593]; Commissioner of Sales Tax, Delhi and Ors. v. Shri Krishna Engg. Company and Ors. [(2005) 2 SCC 692].

The matters enumerated in Section 115WB (2) are not covered by sub-section (3) thereof, and the amenity in the nature of free or subsidized transport is covered by sub-section (1).

Fringe benefit tax being a tax on expenditure, the only concern of the revenue should be as to whether such expenditure has been made. The place of residence of the employee is immaterial.

It is payable in the year in which the expenditure is incurred irrespective of whether the expenditure is capitalized or not. However, the same expenditure will not be liable to FBT again in the year in which it is amortized and charged to profit.

The provision relating to the computation of the value of the fringe benefits is contained in section 115WC. It is a settled principle of law that where the computation provisions fail, the charging section cannot be effectuated. Therefore, if there is no provision for computing the value of any particular fringe benefit, such fringe benefit, even if it may fall within Section 115WB (1)(a) is not liable to FBT.

(This is an edited excerpt of the judgment.)

Executive Construction

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The basic premise of the interpretation of statutes is that sentia legis should be given effect to. One of the ways in which it is ensured that this is done is by placing great value on the interpretations of the draftsperson of the legislation and of the executive upon its coming into force. Their interpretations can, as a general rule, be considered to be contemporaneous expositions of the law.

A Bench of the Supreme Court comprising Justices S.B. Sinha & V.S. Sirpurkar discussed the rule of executive construction in the case of R & B Falcon (A) Pty Ltd. v. Commissioner of Income Tax, 2008. it said that ‘where a representation is made by the maker of legislation at the time of introduction of the Bill or construction thereupon is put by the executive upon its coming into force, the same carries a great weight’. It went on to say:

“The reason for giving effect to such executive construction is not only same as contemporaneous which would come within the purview of the maxim temporania caste pesto, even in certain situation a representation made by an authority like Minister presenting the Bill before the Parliament may also be found bound thereby.

The House of Lords in the matter of R.V. National Asylum Support Service [(2002) 1 W.L.R.2956] spoke of ‘executive estoppel’. Lord Steyn said, “If exceptionally there is found in the Explanatory Notes a clear assurance by the executive to Parliament about the meaning of a clause, or the circumstances in which a power will or will not be used, that assurance may in principle be admitted against the executive in proceedings in which the executive places a contrary contention before a court.”

A similar interpretation was rendered by Lord Hope of Craighead in Wilson v. First County Trust Ltd., [2004] 1 A.C. 816, wherein it was stated:

“As I understand it [Pepper v. Hart, 1993], it recognized a limited exception to the general rule that resort to ‘Hansard’ was inadmissible. Its purpose is to prevent the Executive seeking to place a meaning on words used in legislation which is different from that which ministers attributed to whose words when promoting the legislation in Parliament.”

In the case of Sedco Forex International Drill. Inc. & Ors. v. Commissioner of Income Tax, Dehradun & Anr. [(2005) 12 SCC 717], the question which arose before the Supreme Court was as to the salary paid to the employees of UK National Services for field breaks outside India would be subjected to tax under Section 9(1)(ii) and explanation appended thereto as inserted in 1983 w.e.f 1.4.1979. Appellant therein entered into agreements which are executed in the United Kingdom with each of the said employees who were residents of the said country. The Supreme Court, upon noticing the explanation appended to Section 9(1)(ii), as regards its retrospective operation, held:

“16. The departmental understanding of the effect of the 1999 Amendment even if it were assumed not to bind the respondents under Section 119 of the Act, nevertheless affords a reasonable construction of it, and there is no reason why we should not adopt it.”

Thus, where there exists a legal exposition of the law by legislators or the executive, the Court will not only follow that exposition itself but also prevent the executive from later refusing to follow it.

Link: R & B Falcon Pty Ltd. v. CIT, 2008

Falsus in Uno, Falsus in Omnibus

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A Bench of the Supreme Court comprising Justice Arijit Pasayat and Justice P. Sathasivam spoke of the application of the maxim ‘falsus in uno falsus in omnibus‘ in India in the case of Dalbir Singh v. State of Haryana, 2008 who was convicted and sentenced to life imprisonment for murdering his uncle, Ram Partap, although all the other persons who were accused of murder along with him were acquitted because there was a dearth of credible evidence against them.

Upholding the conviction against Dalbir Singh, the Court said, “Even if major portion of evidence is found to be deficient, residue is sufficient to prove guilt of an accused, notwithstanding acquittal of large number of other co-accused persons, his conviction can be maintained.”

The Applicability of the Maxim ‘Falsus in Uno Falsus in Omnibus’

The Supreme Court said:

“Falsity of particular material witness or material particular would not ruin it from the beginning to end. The maxim ‘falsus in uno falsus in omnibus’ has no application in India and a witness cannot be branded as liar.

The maxim general acceptance or come to occupy the status of rule of law. It is merely a rule of caution. All that it amounts to is that in such cases testimony may be disregarded, and not that it must be disregarded. The doctrine merely involves the question of weight of evidence which a Court may apply in a given set of circumstances, but it is not what may be called “a mandatory rule of evidence”. (See Nisar Alli v. The State of Uttar Pradesh: AIR 1957 SC 366).

… The doctrine is a dangerous one specially in India for if a whole body of the testimony were to be rejected, because witness was evidently speaking an untruth in some aspect, it is to be feared that administration of criminal justice would come to a dead-stop.

The witnesses just cannot help in giving embroidery to a story, however, true in the main. Therefore, it has to be appraised in each case as to what extent the evidence is worthy of acceptance, and merely because in some respects the Court considers the same to be insufficient for placing reliance on the testimony of a witness, it does not necessarily follow as a matter of law that it must be disregarded in all respects as well. The evidence has to be sifted with care. The aforesaid dictum is not a sound rule for the reason that one hardly comes across a witness whose evidence does not contain a grain of untruth or at any rate exaggeration, embroideries or embellishment. (See Sahrab s/s Belli Nayata and another v. The State of Madhya Pradesh: (1972) 3 SCC 751, and Umar Ahir and others v. The State of Bihar: AIR 1965 SC 277).

As observed by this Court in State of Rajasthan v. Smt. Kalki and another: AIR 1981 SC 1390, normal discrepancies in evidence are those which are due to normal errors of observations, normal errors of memory due to lapse of time, due to mental disposition such as shock and horror at the time of occurrence and these are always there however honest and truthful a witness may be. Material discrepancies are those which are not normal and not expected of a normal person.

Courts have to label the category to which a discrepancy may be cateogrised. While normal discrepancies do not corrode the credibility of a party’s case, material discrepancies do so.”

(This extract has been edited.)

Defining Dowry: Not a Gift to a Baby

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The Dowry Prohibition Act, 1961 says, “Dowry means any property or valuable security given or agreed to be given either directly or indirectly by one party to a marriage to the other party to the marriage; or by the parents of either party to a marriage or by any other person, to either party to the marriage or to any other person, at or before or any time after the marriage, in connection with the marriage of the said parties but does not include dower or mahr in the case of persons to whom the Muslim Personal Law (Shariat) applies. The expression ‘valuable security’ has the same meaning as in section 30 of the Indian Penal Code.”

In yet another case defining what dowry is, the Supreme Court has held that demand for presents to a child do not fall within the ambit of dowry and that mere evidence that a woman has been subjected to harassment does not in itself make out a case of dowry death as defined by Section 304B of the Indian Penal Code which says:

(1) Where the death of a woman is caused by any burns or bodily injury or occurs otherwise than under normal circumstances within seven years of her marriage and it is shown that soon before her death she was subjected to cruelty or harassment by her husband or any relative of her husband for, or in connection with, any demand for dowry, such death shall be called ‘dowry death’, and such husband or relative shall be deemed to have caused her death.
(2) Whoever commits dowry death shall be punished with imprisonment for a term which shall not be less than seven years but which may extend to imprisonment for life.

In this case, a woman named Jagadeshwari committed suicide by setting herself on fire after her husband, Narayanamurthy from Karnataka, and his parents, Kannappa and Shivabhushanamma, demanded a gold ring and silverware for on the occasion of her new-born child’s thread-changing ceremony which was to be held at her parents’ home.

Jagadeshwari’s family could not afford to give the child a ring and so, Narayanamurthy refused to take part in the ceremony.

The marriage of the couple had taken place in 1989 and was harassed by her husband and in laws for not having brought enough dowry right from the time of the wedding till the time of her death — she committed suicide on November 11, 1990.

After her death, both her husband and her in-laws were charged with offences under Sections 498A and 304B of the Indian Penal Code and Sections 3, 4 and 6 of the Dowry Prohibition Act, 1961.

Section 498A of the Indian Penal Code says:

Whoever, being the husband or the relative of the husband of a woman, subjects such woman to cruelty shall be punished with imprisonment for a term which may extend to three years and shall also be liable to fine.
Explanation: For the purposes of this section, ‘cruelty’ means- (a) any wilful conduct which is of such a nature as is likely to drive the woman to commit suicide or to cause grave injury or danger to life, limb or health (whether mental or physical) of the woman; or (b) harassment of the woman where such harassment is with a view to coercing her or any person related to her to meet any unlawful demand for any property or valuable security or is on account of failure by her or any person related to her to meet such demand.

And Sections 3, 4 and 6 of the Dowry Prohibition Act, 1961 deal with the penalties for taking and demanding dowry and say that dowry to be for the benefit of the wife or her heirs.

The father-in-law died while the trial was underway and both the husband and mother-in-law were acquitted by the Trial Court for lack of evidence.

The Karnataka High Court subsequently convicted her husband under Section 304B of the Indian Penal Code on appeal and sentenced him to seven years of rigorous imprisonment. It also convicted him under Section 498A of the Code and fined him 5,000 INR. However, it upheld his acquittal under Sections 3, 4 and 6 of the Dowry Prohibition Act, 1961. Also, it did not find Shivabhushanamma guilty of any offence.

The Supreme Court upheld the acquittal of the mother-in-law also acquitted Narayanamurthy saying that although he had been given silverware at the ceremony, “such gifts are not enveloped within the ambit of dowry”.

Link

Liberal Construction to Beneficial Statutes

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The Supreme Court had this to say on the need to interpret social welfare statutes liberally in the case of Union of India v. Prabhakaran Vijaya Kumar & Ors. decided on May 5, 2008. An extract from the judgment follows:

It is well settled that if the words used in a beneficial or welfare statute are capable of two constructions, the one which is more in consonance with the object of the Act and for the benefit of the person for whom the Act was made should be preferred. In other words, beneficial or welfare statutes should be given a liberal and not literal or strict interpretation vide Alembic Chemical Works Co. Ltd. vs. The Workmen AIR 1961 SC 647( para 7), Jeewanlal Ltd. vs. Appellate Authority AIR 1984 SC 1842 (para 11), Lalappa Lingappa and others vs. Laxmi Vishnu Textile Mills Ltd. AIR 1981 SC 852 (para 13), S. M. Nilajkar vs. Telecom Distt. Manager (2003) 4 SCC 27(para 12) etc.

The Supreme Court quoted the case of Hindustan Lever Ltd. vs. Ashok Vishnu Kate and others 1995(6) SCC 326 (vide para 42) wherein the Court had observed:

“In this connection, we may usefully turn to the decision of this Court in Workmen vs. American Express International Banking Corporation wherein Chinnappa Reddy, J. in para 4 of the Report has made the following observations:

The principles of statutory construction are well settled. Words occurring in statutes of liberal import such as social welfare legislation and human rights’ legislation are not to be put in Procrustean beds or shrunk to Lilliputian dimensions. In construing these legislations the imposture of literal construction must be avoided and the prodigality of its misapplication must be recognized and reduced. Judges ought to be more concerned with the ‘colour’, the ‘content’ and the ‘context’ of such statutes (we have borrowed the words from Lord Wilberforce’s opinion in Prenn v. Simmonds). In the same opinion Lord Wilberforce pointed out that law is not to be left behind in some island of literal interpretation but is to enquire beyond the language, unisolated from the matrix of facts in which they are set; the law is not to be interpreted purely on internal linguistic considerations. In one of the cases cited before us, that is, Surender Kumar Verma v. Central Govt. Industrial Tribunal-cum-Labour Court we had occasion to say:

“Semantic luxuries are misplaced in the interpretation of ‘bread and butter’ statutes. Welfare statutes must, of necessity, receive a broad interpretation. Where legislation is designed to give relief against certain kinds of mischief, the Court is not to make inroads by making etymological excursions.”

Francis Bennion in his Statutory Interpretation Second Edn., has dealt with the Functional Construction Rule in Part XV of his book. The nature of purposive construction is dealt with in Part XX at p. 659 thus:

“A purposive construction of an enactment is one which gives effect to the legislative purpose by-

(a) following the literal meaning of the enactment where that meaning is in accordance with the legislative purpose (in this Code called a purposive-and-literal construction), or

(b) applying a strained meaning where the literal meaning is not in accordance with the legislative purpose (in the Code called a purposive and strained construction).”

At p. 661 of the same book, the author has considered the topic of “Purposive Construction” in contrast with literal construction. The learned author has observed as under:

“Contrast with literal construction – Although the term ‘purposive construction’ is not new, its entry into fashion betokens a swing by the appellate courts away from literal construction. Lord Diplock said in 1975: ‘If one looks back to the actual decisions of the [House of Lords] on questions of statutory construction over the last 30 years one cannot fail to be struck by the evidence of a trend away from the purely literal towards the purposive construction of statutory provisions’. The matter was summed up by
Lord Diplock in this way -

…I am not reluctant to adopt a purposive construction where to apply the literal meaning of the legislative language used would lead to results which would clearly defeat the purposes of the Act. But in doing so the task on which a court of justice is engaged remains one of construction, even where this involves reading into the Act words which are not expressly included in it.”

Source

Compensation by the Railways

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CASE NO.: Appeal (civil) 6898 of 2002
Union of India v. Prabhakaran Vijaya Kumar & Ors.
DATE OF JUDGMENT: 05/05/2008
BENCH: H. K. Sema & Markandey Katju

In an appeal by special leave against a judgment of a Division Bench of the Kerala High Court, the Supreme has held that the Railways are liable to pay compensation where a victim accidentally falls and dies while getting on to a train.

The following is a heavily edited version of the substance of the judgment.

Facts

A claim petition was filed before the Railway Claims Tribunal, Ernakulam Bench (hereinafter referred to as the ‘Tribunal’) by the husband, mother and minor son of one Smt. Abja who died on 23.5.1996 in a train accident at Varkala Railway station. The Claims Tribunal disallowed the claim, but the appeal against the said decision was allowed by the Kerala High Court and compensation of Rs. 2 lacs with interest @ 12% from the date of the petition till the date of payment was granted. Aggrieved, the Union of India appealed against the decision of the Kerala High Court.

There was no dispute that Smt. Abja was a bona fide passenger holding a second class season ticket and an identity card issued by the Southern Railway. As per the forensic report the cause of death was due to multiple injuries due to the accident. The deceased fell on to the railway track and was run over by train No.6349 Parasuram Express.

Law

The Railways Act

Section 2 (29) defines ‘passenger’ to mean a person travelling with a valid pass or ticket.

Section 123(c) defines ‘untoward incident’ to include the accidental falling of any passenger from a train carrying passengers.

Section 124A deals with compensation on account of untoward incidents:
When in the course of working a railway an untoward incident occurs, then whether or not there has been any wrongful act, neglect or default on the part of the railway administration such as would entitle a passenger who has been injured or the dependant of a passenger who has been killed to maintain an action and recover damages in respect thereof, the railway administration shall, notwithstanding anything contained in any other law, be liable to pay compensation to such extent as may be prescribed and to that extent only for loss occasioned by the death of, or injury to, a passenger as a result of such untoward incident:

Provided that no compensation shall be payable under this section by the railway administration if the passenger dies or suffers injury due to:
(a) suicide or attempted suicide by him;
(b) self-inflicted injury;
(c) his own criminal act;
(d) any act committed by him in a state of intoxication or insanity;
(e) any natural cause or disease or medical or surgical treatment unless such treatment becomes necessary due to injury caused by the said untoward incident.

Explanation – For the purposes of this section, “passenger” includes -
(i) a railway servant on duty; and
(ii) a person who has purchased a valid ticket for travelling by a train carrying passengers, on any date or a valid platform ticket and becomes a victim of an untoward incident.

Decision

The Supreme Court said that it was of the opinion that it did not legally make any difference whether the deceased was actually inside the train when she fell down or whether she was only trying to get into the train when she fell down since in either case it amounts to an ‘accidental falling of a passenger from a train carrying passengers’. Hence, it was an ‘untoward incident’ as defined in Section 123(c) of the Railways Act.

Explaining this, the Court said that since the provision for compensation in the Railways Act is a beneficial piece of legislation it should receive a liberal and wider interpretation and not a narrow and technical one.

Giving a restrictive and narrow meaning to the expression would deprive a large number of victims of train accidents (particularly poor and middle class people) from getting compensation under the Railways Act. In other words, a purposive, and not literal, interpretation should be given to the expression.

The accident in which the victim in this case died was clearly covered by the main body of Section 124A of the Railways Act, and not its proviso. If a case comes within the purview of Section 124A it is wholly irrelevant as to who was at fault since the Section lays down strict liability or no fault liability in case of railway accidents.

The theory of strict liability for hazardous activities can be said to have originated from the historic judgment of Blackburn, J. of the British High Court in Rylands v. Fletcher 1866 LRI Ex 265 although it has virtually been repudiated over time.

The Court observed that the repudiation of the principle in Rylands vs. Fletcher is contrary to the modern judicial philosophy of social justice. However, there is now a swing once again in favour of the principle of strict liability.

In India the landmark Constitution Bench decision of the Supreme Court in M.C. Mehta vs. Union of India AIR 1987 SC 1086 has gone much further than Rylands vs. Fletcher in imposing strict liability by saying that strict liability is not subject to any of the exceptions to the rule in Rylands vs. Fletcher.

The decision in M.C. Mehta’s case related to a concern working for private profit. However, the Court said that, in its opinion, the same principle also applies to statutory authorities (like the railways), public corporations or local bodies which may be social utility undertakings not working for private profit.

Strict liability has no element of moral censure. It is because such public bodies benefit the community that it is unfair to leave the result of a non-negligent accident to lie fortuitously on a particular individual rather than to spread it among the community generally.

In various social welfare statutes the principle of strict liability has been provided to give insurance to people against death and injuries, irrespective of fault. Section 124A of the Railways Act 1989 incorporates the principle of strict liability.

However, apart from the principle of strict liability in Section 124A of the Railways Act and other statutes, the Court said that ‘we can and should develop the law of strict liability de hors statutory provisions in view of the Constitution Bench decision of this Court in M.C. Mehta’s case’. Recognising that the Law of Torts is not stagnant but is growing, the Court said that it is necessary to develop new principles for fixing liability in cases like the present one.

The Court went on to say that the submissions that there was no fault or contributory negligence on the part of the Railways was based on a total misconception and hence had to be rejected.

The appeal was dismissed with no order as to costs.