Category Archives: Supreme Court of India

No Arbitrary Punishments to Employees

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A (State) employer cannot award an arbitrary, unfair and unreasonable punishment to an employee ruled a Bench of the Supreme Court comprising Justices S. B. Sinha and Lokeshwar Singh Panta in the case of Man Singh v. State of Haryana & Ors. on May 1, 2008.

Man Singh was serving as Sub-Inspector in Police Department, Rohtak. In July 1996, he was deputed as Incharge of a police party comprising of ASI Sucha Singh, HC Suraj Bhan and HC Vijay Pal for taking two Government vehicles from Chandigarh to Hyderabad (Andhra Pradesh) for repair.

HC Vijay Pal who was driving one of the vehicles purchased 12 bottles of Indian-Made Foreign Liquor at Kota (Rajasthan) and concealed them in the dickey of the car without the knowledge and consent of Man Singh.

On checking of the vehicles by the Excise Staff of Adilabad in the State of Andhra Pradesh, 12 bottles of alcohol were recovered from the luggage boot of the car being driven by HC Vijay Pal, which gave rise to the registration of a case against him for transporting liquor in violation of prohibitory orders of the State Government.

The Superintendent of Police, Sonepat, ordered a departmental inquiry against Man Singh and HC Vijay Pal, charging Man Singh with improper control over his subordinates which amounts to dereliction of duties and for the lapses of indiscipline as Police Officer.

The Inquiry Officer found Man Singh guilty of the charge on the basis of summary of allegations. He was punished with the stoppage of two annual future increments with permanent effect

Vijay Pal was, however, exonerated primarily because he was not convicted in the criminal case filed against him and after exoneration, he was promoted to the higher post, whereas the appeal and the revision filed by Man Singh against the order of punishment were rejected on the technical ground that he did not exercise proper and effective control over HC Vijay Pal at the time of commission of the Excise offence by him in the State of Andhra Pradesh.

The matter ultimately reached the Supreme Court which said that Man Singh’s employers cannot be permitted to resort to selective treatment to Man Singh and HC Vijay Pal.

It is a settled position of law for the benefit of the administrative authorities that any act of the repository of power whether legislative or administrative or quasi-judicial is open to challenge if it is so arbitrary or unreasonable that no fair minded authority could ever have made it.

The concept of equality as enshrined in Article 14 of the Constitution of India embraces the entire realm of State action. It would extend to an individual as well not only when he is discriminated against in the matter of exercise of right, but also in the matter of imposing liability upon him. Equals are to be treated equally even in the matter of executive or administrative action. As a matter of fact, the doctrine of equality is now turned as a synonym of fairness in the concept of justice and stands as the most accepted methodology of a governmental action. The administrative action is to be just on the test of ‘fair play’ and reasonableness.

The principle is the same, namely, that there should be no discrimination between Man Singh and HC Vijay Pal as regards the criteria of punishment of similar nature in departmental proceedings. Man Singh and HC Vijay Pal were both similarly situated, in fact, HC Vijay Pal was the real culprit who, besides departmental proceedings, was an accused in the excise case filed against him by the Excise Staff of Andhra Pradesh for violating the Excise Prohibition Orders operating in the State.

The Supreme Court held that the order of the disciplinary authority imposing punishment upon Man Singh for exhibiting slackness in the discharge of duties during his visit to Hyderabad when HC Vijay Pal was found involved in Excise offence, as also the orders of the appellate and revisional authorities confirming the said order were unfair, arbitrary, unreasonable, unjustified and also against the doctrine of equality.

Man Singh deserved to be treated equally in the matter of departmental punishment initiated against him for the acts of omission and commission vis-à-vis HC Vijay Pal.

Although the Supreme Court said it would, in normal course, have remitted the case to the High Court for a fresh decision to be taken, it exercised its extraordinary jurisdiction under Article 142 of the Constitution of India and decided the case on merits to avoid further delay.

The punishment awarded to Man Singh was set aside.

(This article is an edited extract of the judgment.)

Supreme Court Comes to the Aid of Coop. Societies

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In the case of Indian Bank v. Godhara Nagrik Cooperative Credit Society Ltd. and another, decided on May 16, 2008, a Bench of the Supreme Court comprising Justices S B Sinha and Lokeshwar Singh Panta devised a formula to ensure that genuine cooperative societies are not caused hardship because of a scam.

In this case, some cooperative societies which had deposited certain amounts in cash in fixed deposits of Banks for which Fixed Deposit Receipts (FDRs) were to be issued through some so-called Commission Agents of the Banks on payment of huge commission. This is ordinarily not allowed by the Nationalized Banks.

Applications for grant of loans by various persons were filed before the prescribed authorities of the banks on the basis of the FDRs. Allegedly a large number of officers of the banks were involved in a scam whereby unofficial investments of the said amount were being made.

As and when the FDRs matured, the investors requested the Banks for their encashment. The banks refused to accede thereto stating that the amount under the FDRs had already been paid by way of loans and, thus, no further amount was payable. It was contended that a fraud on the banks has been practiced to which the depositors and the officers of the banks were parties.

The Cooperative Societies filed a writ petition in the High Court. Neither party disputed that Writ Petitions against the banks being `State’ within the meaning of Article 12 of the Constitution of India were maintainable. The Supreme Court also said that a writ petition indisputably would be maintainable even in relation to a matter arising out of contract qua contract.

A Committee was set up to investigate the matter. It was found that principally the officers of the banks were involved in the matter of commission of the alleged fraud on the Banks.

Relying on and/or on the basis of the report of the Committee, the Division Bench of the High Court opined that as the writ petitioners were not parties to the fraud, subject to any other or further orders that may be passed in the criminal case, appellant-banks should be directed to pay the amounts under the FDRs to the depositors.

The core question which arose for consideration in the writ petitions was whether, keeping in view the apprehension in the mind of the Bank that it has been subjected to fraud by its own officers possibly with the connivance of the cooperative societies, it unfair and unreasonable of the Bank to refuse to make payment. The Supreme Court said that the answer to that question prima facie must be rendered in the negative. The next question was: if the cooperative societies were not parties to the fraud, whether even in a matter involving private law, as a trustee of the investors’ money, the Bank may be held to be liable to refund the amount.

Indisputably, whether as a public sector undertakings or otherwise the banks cannot refuse to accede to the just demand of the investors to pay any amount lawfully due to them inter alia on the premise that their officers are guilty of commission of any fraud.

However, it is one thing to say that fraud has been committed by their officers to cause wrongful loss to the bank but it is another thing to say that the banks are constructively liable for the acts of their officers.

Adopting the Alter Ego approach adopted in the theory of corporate liability, the Supreme Court assumed, for the purpose of this case, in theory, not only that the Banks are constructively liable for acts of their employees but also that the Banks are liable to pay the amount under the contract for which the FDRs were issued.

In this case, however, it was unclear if some of the cooperative societies were parties to the fraud.

And so, with regard to this particular case, the court asked, “Could those cooperative societies which had absolutely no role to play in the entire episode should suffer in any manner whatsoever? The cooperative societies/cooperative banks for the purpose of their day-to-day functioning, require the amount which they have invested in FDRs on their maturity. Should they wait till the criminal cases are over? Should they be pushed to institute civil suits? They can indisputably be compensated by grant of interest. What, however, happens if in the meanwhile in the absence of the requisite funds being available to them, they find it difficult to run the day-to-day affairs?”

The Supreme Court issued directions saying:

The Bank being a `State’ within the meaning of Article 12 of the Constitution of India with the assistance of officer(s) of the Central Bureau of Investigation should make all attempts to ascertain as to which of the cooperative societies/cooperative banks are in no way involved with the scam, and subject to such precautions as may be found necessary to be taken, release the amount in their favour.

The quantum of the amount which all the depositors would have otherwise received, in the event their investment in FDRs is found to be genuine, should be informed thereabout. Once the liability of the bank is determined, the bank may invest the said amount in its own account and issue fresh FDRs therefor. Whereas the bank may keep the original FDRs with itself, it may issue the duplicate copies thereof to the eligible cooperative bank. Such an exercise should be completed within a period of four weeks.

In the event, the cooperative society intending to avail loan facilities from the banks for running their business, may approach them which may apart from usual conditions release the same on a further condition that the amount of FDR would remain with them and on that basis, loans may be granted of such amount. The usual precautions in regard thereto may also be taken by the Bank(s).

The Court, however, specifically said that it not intend to lay down any law and that the directions it had given in this case should not be treated to be precedent.

(This article is an edited extract of the judgment.)

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.)

Child’s Welfare of Paramount Importance to Decide Custody

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In the case of Mausami Moitra Ganguli v. Jayant Ganguli, 2008, a Bench of the Supreme Court comprising Justices C K Thakker and D K Jain held that the child’s welfare is the primary factor in deciding in whose custody the child should be placed.

The question in the case was whether the father or the mother should have the custody of an almost ten year old male child. The child’s parents got married on April 18, 1996. On May 28, 1998, a boy, named Satyajeet was born from the wedlock.

However, within a short time, the relationship between the spouses came under strain. The wife, who was employed as a teacher, felt that her husband had misrepresented his occupational status to her, was addicted to alcohol and smoking, had contacts with anti-social elements and had physically abused her.

After moving out of her marital home leaving her son behind, she filed a suit for divorce against respondent which was decreed ex-parte on September 12, 2002. Since no appeal was preferred by the respondent against the said decree, it attained finality.

She then moved a petition on April 5, 2003 under Sections 10 and 25 of the Guardians and Wards Act, 1890 read with the provisions of the Hindu Minority and Guardianship Act, 1956 before the Family Court, Allahabad seeking a declaration in her favour to be the lawful guardian of her minor son, Satyajeet and a direction to the respondent to hand over the custody of the child to her.

The application was hotly contested by her ex-husband and the matter ultimately reached the Supreme Court. In its judgment the Court discussed the principles related to deciding which parent should be granted custody of a child, inter alia, saying:

“The principles of law in relation to the custody of a minor child are well settled. It is trite that while determining the question as to which parent the care and control of a child should be committed, the first and the paramount consideration is the welfare and interest of the child and not the rights of the parents under a statute. Indubitably the provisions of law pertaining to the custody of a child contained in either the Guardians and Wards Act, 1890 (Section 17) or the Hindu Minority and Guardianship Act, 1956 (Section 13) also hold out the welfare of the child as a predominant consideration. In fact, no statute, on the subject, can ignore, eschew or obliterate the vital factor of the welfare of the minor.

The question of welfare of the minor child has again to be considered in the background of the relevant facts and circumstances. Each case has to be decided on its own facts and other decided cases can hardly serve as binding precedents insofar as the factual aspects of the case are concerned. It is, no doubt, true that father is presumed by the statutes to be better suited to look after the welfare of the child, being normally the working member and head of the family, yet in each case the Court has to see primarily to the welfare of the child in determining the question of his or her custody. Better financial resources of either of the parents or their love for the child may be one of the relevant considerations but cannot be the sole determining factor for the custody of the child. It is here that a heavy duty is cast on the Court to exercise its judicial discretion judiciously in the background of all the relevant facts and circumstances, bearing in mind the welfare of the child as the paramount consideration.

In Rosy Jacob Vs. Jacob A. Chakramakkal, (1973) 1 SCC 840, a three-Judge Bench of the Supreme Court in a rather curt language had observed that the children are not mere chattels; nor are they mere play-things for their parents. Absolute right of parents over the destinies and the lives of their children has, in the modern changed social conditions, yielded to the considerations of their welfare as human beings so that they may grow up in a normal balanced manner to be useful members of the society and the guardian court in case of a dispute between the mother and the father, is expected to strike a just and proper balance between the requirements of welfare of the minor children and the rights of their respective parents over them.

In Halsbury’s Laws of England (Fourth Edition, Vol.13), the law pertaining to the custody and maintenance of children has been succinctly stated in the following terms:

’809. Principles as to custody and upbringing of minors. Where in any proceedings before any court, the custody or upbringing of a minor is in question, the court, in deciding that question, must regard the welfare of the minor as the first and paramount consideration, and must not take into consideration whether from any other point of view the claim of the father in respect of such custody or upbringing is superior to that of the mother, or the claim of the mother is superior to that of the father. In relation to the custody or upbringing of a minor, a mother has the same rights and authority as the law allows to a father, and the rights and authority of mother and father are equal and are exercisable by either without the other.’

The stability and security of the child is also an essential ingredient for a full development of child’s talent and personality.”

In this case although the Supreme Court decided that the father should have exclusive custody of the child, it said that visitation rights to the mother deserve to be maintained.

(This is an edited extract of the judgment.)

Dying Declarations

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Dying declarations which are most often seen in cases of dowry death and murder are dealt with in Section 32 (1) of the Indian Evidence Act, 1972. Under this sub-section, the statement of a person who is dead is relevant at a trial if it speaks of the cause of death of that person. Such a statement may even speak of the circumstances in which the person died.

Such a statement is a relevant fact whether or not the person who made it expected to die at the time when he made it.

The provision is applicable to both civil and criminal trials. This is not the case in English law: the corresponding law in England is applicable only to criminal cases.

The statutory provisions which deal with dying declarations do not say anything further. However, over time, there has been built up a large body of case law which deals with exactly how dying declarations are to be treated by courts, how much ‘weight’ should be accorded to them and what should be done if there is more than dying declaration and those declarations conflict with each other.

A dying declaration may be oral. This is, as Justice Thakker put it in the case of Vikas and Ors. v. State of Maharashtra, 2008, “an exception to the general rule reflected in Section 60 of the Indian Evidence Act, 1872 which enacts that oral evidence in all cases must be direct, viz., if it refers to a fact which could be seen, it must be the evidence of a witness who says he saw it; if it refers to a fact which could be heard, it must be the evidence of a witness who says he heard it; if it refers to a fact which could be perceived by any other sense or in any other manner, it must be the evidence of a witness who says he perceived it by that sense or in that manner.”

In the judgment of this case, which was decided by a Bench of the Supreme Court comprising Justices C K Thakker and M Katju, dying declarations were discussed in detail. The judgement, inter alia, said:

The principle underlying admissibility of dying declaration is reflected in the well-known legal maxim: Nemo moriturus praesumitur mentire. A dying man is face to face with his Maker without any motive for telling a lie.

‘Truth,’ said Mathew Arnold, ‘sits upon the lips of a dying man.’

Shakespeare, great writer of the sixteenth century, through one of his characters explained the basic philosophy thus;

‘Have I met hideous death within my view,
Retaining but a quantity of life,
Which bleeds away,
Even as a form of wax,
Resolveth from his figure,
Against the Fire?
What is the world should
Make me now deceive,
Since I must lose the use of all deceit?
Why should I then be false,
Since it is true
That I must die here,
Live hence by truths?’
(King John, Act V, Sect. IV)

The Great poet also said at another place:

‘Where words are scarce,
They are seldom spent in vain;
They breathe the truth,
That breathe their words in pain.’
(Richard II)

Section 32 (1) of the Act has been enacted by the Legislature advisedly as a matter of necessity as an exception to the general rule that hearsay evidence is no evidence and the evidence which cannot be tested by cross-examination of a witness is not admissible in a Court of Law. But the purpose of cross-examination is to test the veracity of the statement made by a witness. The requirement of administering oath and cross-examination of a maker of a statement can be dispensed with considering the situation in which such statement is made, namely, at a time when the person making the statement is almost dying.

A man on the death-bed will not tell lies. Moreover, if the dying declaration is excluded from admissibility of evidence, it may result in miscarriage of justice inasmuch as in a given case, the victim may be the only eye-witness of a serious crime. Exclusion of his statement will leave the Court with no evidence whatsoever and a culprit may go unpunished causing miscarriage of justice.

The question as to admissibility of dying declaration has come up for consideration before Indian as well as foreign courts. In R.V. Woodcock, (1789) 1 Leach 500 : 168 ER 352, Eyre, C.V. proclaimed, ‘The general principle on which this species of evidence is admitted is that they are declarations made in extremity, when the party is at the point of death, and when every hope of this world is gone, when every motive to falsehood is silenced and the mind induced by the most powerful consideration to speak the truth; situation so solemn and so awful is considered by the law as creating an obligation equal to that which is imposed by a positive oath administered in a Court of Justice.’

In India, Khushal Rao v. State of Bombay, 1958 SCR 552 was probably the first leading case decided by the Supreme Court on admissibility of dying declarations and, in its judgment, the Court inter alia said that where a dying declaration is recorded by a competent Magistrate, it would stand on a much higher footing.

Considering the views expressed by different High Courts and also leading commentaries, the Supreme Court summarized the principles thus:

  1. that it cannot be laid down as an absolute rule of law that a dying declaration cannot form the sole basis of conviction unless it is corroborated;
  2. that each case must be determined on its own facts keeping in view the circumstances in which the dying declaration was made;
  3. that it cannot be laid down as a general proposition that a dying declaration is a weaker kind of evidence than other piece of evidence;
  4. that a dying declaration stands on the same footing as another piece of evidence and has to be judged in the light of surrounding circumstances and with reference to the principles governing the weighing of evidence;
  5. that a dying declaration which has been recorded by a competent magistrate in the proper manner, that is to say, in the form of questions and answers, and, as far as practicable, in the words of the maker of the declaration, stands on a much higher footing than a dying declaration which depends upon oral testimony which may suffer from all the infirmities of human memory and human character, and
  6. that in order to test the reliability of a dying declaration, the Court has to keep in view the circumstances like the opportunity of the dying man for observation, for example, whether there was sufficient light if the crime was committed at night; whether the capacity of the man to remember the facts stated had not been impaired at the time he was making the statement, by circumstances beyond his control; that the statement has been consistent throughout if he had several opportunities of making a dying declaration apart from the official record of it; and that the statement had been made at the earliest opportunity and was not the result of tutoring by interested parties.

In Smt. Paniben v. State of Gujarat, (1992) 2 SCC 474, the Supreme Court, referring to earlier case law, summed up principles governing dying declarations as under:

  1. There is neither rule of law nor of prudence that dying declaration cannot be acted upon without corroboration.
  2. If the Court is satisfied that the dying declaration is true and voluntary it can base conviction on it, without corroboration.
  3. This Court has to scrutinise the dying declaration carefully and must ensure that the declaration is not the result of tutoring, prompting or imagination. The deceased had opportunity to observe and identify the assailants and was in a fit state to make the declaration.
  4. Where dying declaration is suspicious it should not be acted upon without corroborative evidence.
  5. Where the deceased was unconscious and could never make any dying declaration the evidence with regard to it is to be rejected.
  6. A dying declaration which suffers from infirmity cannot form the basis of conviction.
  7. Merely because a dying declaration does not contain the details as to the occurrence, it is not to be rejected.
  8. Equally, merely because it is a brief statement, it is not to be discarded. On the contrary, the shortness of the statement itself guarantees truth.
  9. Normally the court in Order to satisfy whether deceased was in a fit mental condition to make the dying declaration look up to the medical opinion. But where the eye witness has said that the deceased was in a fit and conscious state to make this dying declaration, the medical opinion cannot prevail.
  10. Where the prosecution version differs from the version as given in the dying declaration, the said declaration cannot be acted upon.

Recently, in the case of Amol Singh v. State of MP, 2008, a Bench of the Supreme Court held that ‘it is not the plurality of the dying declarations but the reliability thereof that adds weight to the prosecution case. If a dying declaration is found to be voluntary, reliable and made in fit mental condition, it can be relied upon without any corroboration. The statement should be consistent throughout If the deceased had several opportunities of making such dying declarations, that is to say, if there are more than one dying declaration they should be consistent. (See: Kundula Bala Subrahmanyam v. State of A.P. [ (1993) 2 SCC 684]. However, if some inconsistencies are noticed between one dying declaration and the other, the court has to examine the nature of the inconsistencies, namely, whether they arematerial or not. While scruitinizing the contents of various dying declaration, in such a situation, the court has to examine the same in the light of the various surrounding facts and circumstances’.

The Renewal of Insurance Policies

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A bench of the Supreme Court comprising Justices S B Sinha and V S Sirpurkar has ruled that public sector insurance companies, being included in the definition of ‘State’ under Article 12 of the Indian Constitution, cannot refuse medical insurance to persons suffering from pre-existing diseases.

In its judgment of May 16, 2008, in the cases of (1) United India Insurance Company Limited v. Manubhai Dharmasinhbhai Gajera & Ors, (2) New India Assurance Company Limited v. Consumer Education and Research Society & Ors., and (3) United India Insurance Company Limited v. Mukat Lal Duggal & Anr., the Court, among other things, said:

“Whether renewal of a mediclaim policy on payment of the amount of premium would be automatic, is the question involved herein.

The action was brought by private individuals. The writ petition, however, had wider ramification. They not only would affect the writ petitions, but also others who would be similarly situated. Such cases may not be dealt with as individual cases. In appropriate case, such litigation may be regarded as public interest litigation. Even if it not so regarded, the High Court may consider the same to be `Public Law Litigation’

While determining a lis having public law domain, the courts would be entitled to take a broader view. It would not consider it to be case involving contract-qua-contract question only. Even cases involving contracts may be determined by the High Court in exercise of its jurisdiction under Article 226 of the Constitution of India.

In each of these cases, the action on the part of the authorities of the insurance companies was highly arbitrary. Respondents though were not entitled to automatic renewal, but indisputably, they were entitled to be treated fairly.

What was necessary is a pre-existing disease when the cover was inspected for the first time. Only because the insured had started suffering from a disease, the same would not mean that the said disease shall be excluded. If the insured had made some claim in each year, the insurance company should not refuse to renew insurance policies only for that reason.

Renewal of a medi-claim policy subject to just exceptions should ordinarily be made. But the same does not mean that the renewal is automatic. Keeping in view the terms and conditions of the prospectus and the insurance policy, the parties are not required to go into all the formalities. The very fact that the policy contemplates terms for renewal, subject of course to payment of requisite premium, the same cannot be placed at par with a case of first contract.

It is essential that the Regulatory Authority must lay down clear guidelines by way of regulations or otherwise. No doubt, the regulations would be applicable to all the players in the field. The duties and functions of the Regulatory Authority, however, are to see that the service provider must render their services keeping in view the nature thereof. It will be appropriate if the Central Government or the General Insurance Companies also issue requisite circulars.

The appellants in this case being subsidiaries to General Insurance Corporation [and therefore public sector companies] cannot ignore the statutory provisions. They are bound by the directions issued by the Central Government.

We would request the IRDA to consider the matter in depth and undertake a scrutiny of such claims so that in the event it is found that the insurance companies are taking recourse to arbitrary methodologies in the matter of entering into contracts of insurance or renewal thereof, appropriate steps in that behalf may be taken.”

Laws

The basic laws involved in this case were:

The General Insurance Business (Nationalisation) Act, 1972
The Parliament enacted the General Insurance Business (Nationalisation) Act, 1972 to provide for the acquisition and transfer of shares of Insurance Companies and undertakings of other insurers in order to serve better the need of the economy by securing the development of general insurance business in the best interest of the community and to ensure that the operation of the economic system does not result in the concentration of wealth to the common detriment, for the regulation and control of such business and for other matters connected therewith or incidental thereto.

The Insurance Act, 1938
The business activities of the insurance companies are governed by the Insurance Act, 1938. In terms of the provisions of that Act, an authority known as Insurance Regulatory and Development Authority (the Authority) was constituted by the Central Government in exercise of its power conferred upon it by Section 114 (2)(c) of the 1938 Act.

The Insurance Regulatory and Development Authority Act, 1999
The Parliament also enacted the Insurance Regulatory and Development Authority Act, 1999. By the 1999 Act the Parliament inserted Section 24A in the 1972 Act directing cessation of the exclusive privilege of the Corporation and the acquiring companies in relation thereto. In exercise of the powers, the Authority made Regulations known as Insurance Regulatory and Development Authority (Protection of Policyholders’ Interest) Regulations, 2002.

(This post comprises an edited extract of the judgment.)

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.)