Important Supreme Court Judgments on Tax, IBC, PMLA and Criminal law

I. Bharti Cellular Limited v. Assistant Commissioner of Income Tax, Circle 57, Kolkata and Anr.

Civil Appeal No. 7257/2011

‘Distributors/ franchisee’ are different from ‘agents’

Held:

• Bharti Cellular engaging distributors/franchisees to sell pre-paid sim cards, start-up kits and recharge vouchers is not liable to withhold tax u/s 194-H of the Income-tax Act, 1961, which provides for withholding of tax on the commission or brokerage, on the discount price of such items sold to such distributors/ franchisee.

• Distinguishing agency from distributorship, the court observed that agency is a triangular relationship between the principal, agent and third party and stated that following aspects should be taken into consideration while determining agency:

a. Legal power vested with an agent to alter his principal’s legal relationship with a third party and co-relative liability of the principal to have such relationship altered.

b. Exercise of degree of control by the principal over the conduct of activities of the agent and which is less than as exercised by a master on his servant.

c. The task entrusted by the principal to agent should result in a fiduciary relationship.

d. An agent is liable to render accounts to the principal as the business is being done on behalf of the latter.

• Pointing at the essential attributes in case of a distributor, the Court stated:

a. A distributor buys goods on his account and sells them in his territory.

b. Distributor, unlike an agent, is not a communicator or creator of a relationship between the principal and a third party.

c. A distributor has rights akin to a franchisee.

• Considering the detailed facts as well as the agreements between Bharti Cellular and its distributors/ franchisee as also the difference in the above mentioned concepts, the Hon’ble Court held that section 194-H of the Income-tax Act, 1961, is not applicable.

II. Greater NOIDA Industrial Development Authority v. Prabhjit Singh Soni & Anr. Civil Appeal No. 7590-7591/2023

The Adjudicating Authority (NCLT) has the inherent power to recall its order.

Held:

A court or a tribunal has inherent power to recall an order to secure the ends of justice.

• In terms of section 60 of the IBC, the NCLT is the adjudicating authority.

• Rule 11 of the NCLT Rules, 2016, which is in pari materia with section 151 of the CPC, preserves the inherent power of the NCLT.

• Neither the IBC nor the regulations framed thereunder, prohibit the exercise of inherent power.

Statutory Form to be filed in support of the claim is only directory in nature.

Held:

• Once a claim has been submitted with proof it cannot be overlooked merely because

  it is in a different form. The form in which a claim is to be submitted is directory what is necessary is that the claim should have support from proof.

• Not taking on record the claim, due to filing the claim in a wrong form, and incorrectly mentioning the claim amount, materially affects the resolution plan and vitiates the resolution plan.

III. Directorate of Enforcement v. Niraj Tyagi & Ors. Criminal Appeal No. 843 of 2024

High Court cannot grant stay on the investigation in case of cognizable offences in exercise of its jurisdiction u/s 482 of the Code of Criminal Procedure, 1973.

Held:

• Granting of stay by the High Court on the investigation, inter alia, in the ECIR registered by the Directorate of Enforcement is in clear regard disregard of the legal position.

• High Court cannot stay the investigations and restrain the investigating agencies from

  investigating into cognizable offences, particularly when the investigations were at a

  very nascent stage.

• Referring to the judgment in the case of Neeharika Infrastructure Pvt. Ltd. vs. State

  of Maharashtra & Ors., the Court held that the order of the High Court is in teeth of

  the elaborate guidelines issued in the aforementioned judgment, which ought to have

  been followed.

  
  

III. Gurwinder Singh v. State of Punjab & Anr. Criminal Appeal No. 704/2024

‘Jail is rule, bail is exception’ in cases under the Unlawful Activities Prevention Act, 1967.

Held:

On a reading of section 43D(5) and 43D(6) of the UAP Act, deciding a bail application, the Court held:

a. The test for rejecting a bail in the case of UAP Act is, if after hearing the public prosecutor and after perusing the final report or case diary, the court arrives at a conclusion that there are reasonable grounds for believing that the accusations are prima facie true, then bail must be rejected as a ‘rule’.

b. If the said test of prima facie true accusations is not satisfied then the courts would proceed to decide the bail application in accordance with the ‘tripod test’ (flight

risk, influencing witnesses, tampering with evidence).

c. Appellant communicated with another accused on more than 2 dozen occasions.

d. Appellant suggested to other accused to purchase weapons.

e. Appellant is a part of the banned terrorist organization named “Sikh for Justice”.

Mere fact that the Appellant did not receive any funds or nothing incriminating

was recovered from his phone does not absolve him.

f. Mere delay in trial pertaining to grave offences cannot be used as a ground for

bail.

To arrive at the ruling, the Court relied on the 8 point propositions in the case of NIA vs. Zahoor Ahmad Shah Watali, being the (i) Meaning of prima facie true; (ii) Degree of satisfaction at pre-chargesheet, post chargesheet and post charges; (iii) Reasoning, necessary but no detailed evaluation of evidence; (iv) Record a finding on broad probabilities, not based on proof beyond doubt; (v) Duration of limitation under section 43D(5); (vi) Material on record must be analysed as a ‘whole’; no piecemeal analysis; (vii) Contents of documents to be presumed as true; and (viii) Admissibility of documents relied upon by the prosecution cannot be questioned.

V. Kalinga @ Kushal v. State of Karnataka By Police Inspector Hubli Criminal Appeal No. 622 of 2013

Fixing criminal liability on a person should be approached with abundant caution. Cases based on circumstantial evidence should follow the ‘panchsheel’ principles.

Held:

• It is settled law that High Court in exercise of its appellate powers may re-appreciate the entire evidence. However, reversal of an order of acquittal is not to be based on mere existence of a different view, it is essential to arrive at a finding that the order of the Trial Court was perverse or that it did not fully appreciate the evidence on record.

  
  

• Where the Trial Court has comprehensively appreciated the entire evidence and the High Court has reversed the view without any finding of perversity or illegality in the order of the Trial Court the same is incorrect.

  
  

• Where a case is entirely based on circumstantial evidence, margin of error is minimal. The position is settled that in cases based on circumstantial evidence the ‘Panchsheel’ principles are to be followed.

  
  

• The Court further held that minor inconsistencies should not be elevated to the status of a reasonable doubt inasmuch as a reasonable doubt is essentially a serious doubt. A reasonable doubt is one which renders the possibility of guilt as highly doubtful.