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Madras High Court affirms: Protection of Moratorium under section 14 of I&B Code is extended only to Corporate Debtor and not to the persons involved in its affairs vis-à-vis. the proceedings under section 138 of the Negotiable Instruments Act, 1881

The Accused No. 3 being the Managing Director of the Accused No. 1 Company filed a Petition before the Hon’ble Madras High Court under section 482 of Cr.P.C. for quashing of the Criminal Complaint filed inter alia against him by the Respondent being the Complainant therein, for an offence under section 138 of the Negotiable Instruments Act, 1881 (“NI Act”).

A cheque was issued by the Accused No. 2 on behalf of the Accused Company as part payment towards the goods supplied by the Complainant. Upon presentation of the said cheque, the same was returned with an endorsement “Account Blocked”. In view thereof, a statutory notice under section 138 of the NI Act was issued by the Respondent/Complainant to the Accused and subsequently, a Complaint was filed in respect thereof.

Admittedly, two of the financial creditors of the Accused Company had also initiated proceedings before the NCLT, wherein an order of admission was passed, and the moratorium had come into effect.

The Petitioner/Accused contended that the cheque was issued after the management of the Accused Company had been taken over by the Interim Resolution Professional. Therefore, the Petitioner/Accused was not in charge of the management/business of the Accused Company and was in no way connected with the Accused Company and the Complaint against him was liable to be quashed.

Further to considering of the above submissions, the Hon’ble Bench also discussed inter alia the decisions given in the cases of M/s Indorama Synthetics (I) Ltd. vs. State of Maharashtra and Anr., M/s. Nag Leathers Pvt. Ltd. vs J.L. Sobhana, Jik Industries Ltd. & Ors. vs. Amarlal v. Jumani & Anr. etc. and held that the issue as to whether by operation of provisions of I&B Code, the criminal prosecution under section 138 r/w 141 of the NI Act, r/w section 200 of Cr. P.C. can be terminated was not something that had not been dealt and decided before. In fact, in view of the judgement of the Hon’ble Supreme Court in P. Mohanraj vs. M/s. Shah Brothers Ispat Pvt. Ltd., wherein it was held that section 138 r/w 141 proceeding against the Corporate Debtor is covered by section 14(1) (a) of I&B Code, however, the moratorium order would not cover the persons other than the Corporate Debtor; it is clear that in respect of the persons other that the Corporate Debtor viz. the Director or the Managing Director, as the case may be, Section 14 of I&B Code would not apply to the proceedings under section 138 NI Act.

In view thereof, the Hon’ble Madras High Court did not find it appropriate to intervene in and/or quash the trial proceedings against the Accused persons associated with the Corporate Debtor. In view thereof, the plea of the Petitioner/Accused was negated by the Hon’ble High Court.

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Guidelines On Capturing Consumer Location On UPI Applications

The National Payments Corporation of India (“NPCI“) vide its operating circular dated July 5, 2022 (“Circular“) has issued fresh guidelines in relation to collection and usage of geo-tagging data by Unified Payments Interface (“UPI“) applications and third-party service providers. The Circular is issued in addition to the existing customer data collection guidelines of NPCI in respect to UPI transactions and will come into effect from December 1, 2022. The Circular prescribes the following:​

1. Location and geographic details can only be collected by UPI apps with the customer’s consent and the same cannot be made a mandatory requirement.​

2. The customer should be permitted to revoke the consent granted and the UPI apps shall continue to provide its services even when the customer chooses to revoke the consent earlier granted for sharing the location/geographical details.​

3. Where a customer gives consent to collect location or geographic details, the same must be correctly passed to UPI, failing which shall attract strong action from NPCI.​

4. If the customer has not given consent to share any location or geographic details, no UPI apps shall deny/disable its UPI service.​

5. These guidelines shall only apply to domestic UPI transactions and where the customer (payer) is a person or individual who is initiating the transaction.​

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Cyber Defamation In India

Ever wondered if you could be in trouble because of your opinion, feedback, review, statement, comment and/or post on any social media platform viz. LinkedIn, Facebook, Youtube, etc. By trouble, we mean posting malicious content that can harm the reputation of a person including an entity. This is known and termed as ‘Defamation’, which is an offence under the laws of India and worldwide. The race between technology and law can be termed as a ‘hare and tortoise’ race. As technology gallops, the law tries to keep pace. Publishing of defamatory material against any person in cyberspace or with the help of computers or the Internet tantamount to ‘Cyber Defamation’. The damage done on the internet is so widespread, inexhaustive and beyond geographical boundaries, that makes it difficult to assess the amount of pecuniary harm done to a person.  

Reputation is an integral and important part of the ‘dignity of an individual’ and the right to reputation is inherent amongst the rights guaranteed by Article 21 of the Constitution of India. Defamation in India is both a Civil and a Criminal offence. The remedy for civil defamation is covered under the law of torts and the person defamed can move court to claim damages in the form of monetary compensation from the accused. The remedy under Criminal Law lies under sections 499 and 500 of the Indian penal code, 1860 (“IPC”) whereby person found guilty can be imprisoned for a period of 2 years or punished with fine or both.

Defamation defined under the Indian Law:

Section 499 of the IPC defines defamation as words spoken or written, or signs or visible representations made or published with an intention of damaging the reputation of a person or a group of persons. Defamation may be bifurcated into two, Libel: A defamatory statement made in a writing and Slander: A defamatory statement made orally.

A defamatory statement made does not amount to commission of offence unless it is published and does not fall within one of the exceptions under section 499. However, this does not mean it has to be in print. Further, the imputation made must be with an intent to harm the reputation of a person in the eyes of others and to lower his/her moral and or intellectual character.

Cyber Defamation

The content in the form of audio, video or written text in the digital space i.e. the internet which tends to damage the reputation of a person/s constitutes online/cyber defamation. The provisions and definitions viz. device, computer network, computer resource, computer system and intermediary etc. under the Information Technology Act, 2000 (“Act”) are significant to appreciate and understand the concept of cyber defamation and its legal consequences.

Liability in such cases:

The liability in a case of cyber defamation is primarily that of the author/’originator’ (as defined under the Act) of the defamatory content and in certain circumstances, of the ‘intermediary’ (defined under the Act) which includes telecom service providers, network service providers, internet service providers, search engines, etc.

Section 79 of the Act provides protection and exemption to the intermediary from being liable for any third-party information, data or communication link made available or hosted by him. However, such protection cannot be availed and the intermediary may become liable in the circumstances that i) it has conspired or abetted or aided or induced in the commission of the unlawful act and/or ii) upon receiving actual knowledge, about the unlawful act, the intermediary fails to expeditiously remove or disable access to such material without vitiating the evidence in any manner.

The Hon’ble Supreme Court in the case of Shreya Singhal vs. Union of India[1] held that the intermediaries would be liable if they do not remove the content on being notified by the agency of the government or court and are not under an obligation to remove the defamatory material on mere intimation by the person defamed. This is for the reason that it would be very difficult for intermediaries like Google, Facebook, etc. to act when millions of requests are made to them and the intermediary is made to judge as to which of such requests are legitimate and which are not.

Until the year 2015, under section 66A of the Act a person could be held liable for circulating through computer resource or device any offensive material, which he knew to be false with the object of harming someone’s reputation or for criminal intimidation. However, in the supra case of Shreya Singhal, the Supreme Court held the section as invalid and struck it down for being ambiguous and open-ended, thereby posing threat and going beyond the “reasonable restrictions” to the freedom of speech and expression. The bench observed that, “Something may be grossly offensive and may annoy or be inconvenient to somebody without at all affecting his reputation”.

Relevant Decisions:

In the case of M/s Spentex Industries Ltd. & Anr. vs. Pulak Chowdhary[2], the Plaintiff had filed for a mandatory and prohibitory injunction along with recovery of damages for loss of reputation and business due to the defamatory emails sent by the Defendant to the International Finance Corporation, World Bank, & Ors. The case was filed in the year 2006 and was concluded in 2019 wherein the Hon’ble Delhi District Court observed that the impugned emails tended to lower the image of the company and its Managing Director in the eyes of the employees of the company and were therefore defamatory. The High Court thus passed an order and decree restraining the Defendant from making false and defamatory statements by any means and further awarded 1/10th of the cost to the Plaintiffs along with the cost of the suit to be borne by the Defendant.

The Hon’ble Delhi High Court in its recent decision in Swami Ramdev & Anr. v. Facebook Inc. & Ors.[3], passed an order to remove all defamatory content posted online against yoga guru ‘Baba Ramdev’, without any territorial limit, stating that if the content is uploaded from India or such content is located in India on a computer resource then the Courts in India should have international jurisdiction to pass worldwide injunctions. The Court opined that for an injunction order to be effective, the removal and disablement had to be complete in respect of the cause over which the Court has jurisdiction. It cannot be limited or partial in nature.

At present Facebook, has filed an appeal[4] against the said order before the division bench of the Hon’ble Delhi High Court, inter alia contending that global take down order is against national sovereignty and international comity, as it interferes with defamation laws of other countries. The same is pending before the Hon’ble Division Bench.

Remedy against Cyber Defamation:

As an immediate step one can register a complaint directly with the social media platform where the offence has been committed. Such platforms usually provide for a mode of making complaint in respect of activities against their privacy policies and community guidelines, on their platform. It is preferable that such an activity is reported at the earliest enabling the intermediary to take immediate steps for blocking such activity and dissemination of the same.

Register a cyber-crime FIR and in case of no access to cyber cell, a first information report (“FIR”) at the local police station. In case the same is not accepted, one can approach the Commissioner or Judicial Magistrate under sections 154 & 156 of Criminal Procedure Code, 1973 (“Cr.P.C.”), respectively.

In the present times of spoofing of identity, impersonation and anonymity maintained through fake and/or private profiles online, the biggest challenge faced in the digital space is identifying the person against whom the action should be initiated for defamation. The appropriate steps in such a case are two-fold, first, to initiate the proceeding for tracing the identity under section 200 of Cr.P.C. accompanied by an application under section 202 of Cr.P.C. with a request to court to direct the police to conduct inquiry to trace the identity of a person by locating the IP address or collecting the other relevant evidence from Internet, and thereafter, initiate the proceeding for criminal or civil defamation against the said person.

The first priority for the aggrieved party in such cases is to get the defamatory content removed from the Internet which is possible only through the order of the court. Therefore, recourse to civil remedy can be taken by filing a Suit against such offender/author/originator of the content along with the concerned intermediaries, and seek injunction against dissemination and broadcast of such content online at the interim stage and further, seek perpetual injunction if the content is found defamatory along with compensation for damages suffered due to the same, subject to proving it before the court of law.

Challenges in Seeking Remedy:

As discussed above spoofing of identity and anonymity online is the biggest challenge faced in the digital space. Another big challenge is to collect and preserve the digital evidence and to prove its authenticity. The compliance of conditions of section 65 B of the Indian Evidence Act, 1872 and getting the forensic examination done is necessary to prove the case beyond doubt which may incur time and cost of the aggrieved person. This makes the remedy in case of online defamation difficult and complicated. These remedies may not be effective and sufficient as by the time it could be enforced, the defamatory material in the form of audio, video or text would have achieved the desired impact of the offender(s). Further, the victim may only be able to make out a prima facie case of defamation, however, may not be able to produce all the evidence related to the source of the publication including the details of the publisher to be able to make him/her a party to the proceeding, since the same would require court’s order in this regard.  

Conclusion

In the present tech-savvy world, since most of the population has access to internet and social media, the indiscriminate use of the same for voicing their opinions and views often impinges upon the right(s) of another person. Thus, the effortless transfer of data and information over the internet has made it a critical hot-spot for defamation. Although, there are laws in place prohibiting such activity by people online, however, most people are not aware of the same or are too negligent to realize whether such content is defamatory or not. There is a dire need of a system which educates and makes people aware of the consequences of their indiscriminate actions. Further, the intermediaries have a responsibility to respect the integrity of all persons equally on its platform without the need for court’s order in this regard and without prioritizing their revenue and profits derived from engagement on such controversial content. Appropriate laws and their implementation against such users, is necessary to avoid repetition and frequency of such incidents in the future.


  • [1] AIR 2015 SC 1523
  • [2] Hon’ble Addl. District Judge, Dwarka Courts, New Delhi, Judgement dated 01.05.2019, CS No. 219/18
  • [3] 263 (2019) DLT 689
  • [4] Hon’ble High Court of Delhi, New Delhi, FAO(OS) 212/2019
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Spouse Has Children From Previous Marriage Is No Ground For Denial Of Maternity Benefit- Supreme Court 

The Supreme Court in the case of Devika Singh v. CAT (C.A. No 5308 of 2022) recently held that existence of spouse’s biological children from his prior marriage would not impinge upon the statutory entitlement for grant of maternity leave.  Moreover, the Court in its judgment made observations with respect to persons to whom maternity benefits shall not be denied due to absence of the traditional concept of ‘family’ The Court observed that-​

1. The purpose behind maternity leave and other facilitative measures extended to women are to ensure that they are remain a part of the work force and are not compelled to leave their workplace.​

2. Child birth has to be construed in the context of employment as a natural incident of life and hence, the provisions for maternity leave must be construed in that perspective and be provided to employees. ​

3. The concept of ‘family’ in law and society has undergone a change form the traditional idea that a family consists of a single, unchanging unit with a mother and a father (who remain constant over time) and their children. The Court observed that atypical manifestations of the family unit such as single parent household or unmarried partnerships or queer relationships are equally deserving of protection and benefits under the social welfare legislation shall be provided for. Moreover, the legislation shall not be interpreted to a woman’s disadvantage who undertakes the role of motherhood in ways that may not find a place in the popular imagination.  ​

4. The right to reproduction and child rearing as an important facet of a person’s right to privacy, dignity and bodily integrity under Article 21. Moreover, Article 42 and Article 15 enjoins the State to make provisions for securing just and humane conditions of work and for maternity relief. ​

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Service Charge Imposed by Restaurants 

Service Charge can be defined as the fee collected by the service provider for the services and facilities that are being provided by  them. Service charge is usually charged in the tertiary sector of the economy such as in restaurants, tourism, banking, etc. ​

Take on Service Charge:

As per the ‘Guidelines to prevent unfair trade practices and protection of consumer interest with regard to levy of service charge in hotels and restaurants’ (“Guidelines”) issues by the Central Consumer protection Authority in 2022 stated that a component of service is inherent in provision of food and beverages ordered by a consumer. The charge without express consent of the consumer would amount to unfair trade practice under the Consumer Protection Act, 2019.​

The Guidelines provided that a tip paid by the consumer towards hospitality received by him, is a separate transaction entered into at the customer’s discretion between the consumer and the staff. The decision of paying a tip is after the consumer has had his meal and is at a position to assess the quality of the service provided to him, hence, there is no implied consent of the consumer to pay for the service when he enters the restaurant.  Therefore, the Guidelines stated that the service charge is voluntary in nature.​

Latest Position:

The Guideline settles the issue on service charge stating that no hotel/restaurant shall add service charge automatically or by default in the bill and shall not impose service charge on the consumer under any other name as well. Further, the Guideline states that the hotels/restaurants shall inform that the charge is voluntary in nature. ​

The Guideline states that no restriction on entry or provision of services based on collection of service charge shall be imposed on consumers.​

Hence, by the clarification on the position of the service charge the bargaining power of the consumers has been restored back.​

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The Test of an Unwary Consumer with Imperfect Recollection- ‘Carlsberg’ Trademark Dispute

The Plaintiff in the matter of Carlsberg Breweries A/S Vs. Tensberg Breweries Industries Pvt. Ltd.& Ors. [CS (COMM) 646/2022] sought an ad-interim injunction against the Defendant, claiming it to having adopted a deceptively similar mark- Tensberg. While the Defendant accused Carlsberg of misrepresentation and argued that they had been marketing their products since 2018, so the Plaintiff had prior knowledge of the same, and further, there were several other marks in the market with the suffix “berg”. Thus, with different prefixes, the marks could not be considered to be deceptively similar.​

The Hon’ble Delhi High Court noted that prima facie, marks of both the parties appeared to be similar, both visually and phonetically. Further, there was no doubt regarding the Plaintiff being a prior adopter of its mark and a registered proprietor of the mark “Carlsberg”, while the Defendant had no registration for its alleged mark Tensberg.​

The Court held that delay in prosecution of a claim of infringement, cannot be a ground to allow such infringement to continue. The Court further opined that the use of not only a similar mark, but also a similar get-up (Trade dress) of the product, which included the shape of the bottle, a similar crown mark, and the color combinations of the marks on both – the beer bottle and can, indicated the intent of the Defendants to ride upon the reputation and goodwill of the Plaintiff company, thereby, causing confusion and deception in the minds of unwary consumers. ​

Thus, the Court in this case while granting injunction, applied the test of an unwary consumer with imperfect recollection, and remarked that beer bottles and cans are bought in a casual manner, and not with minute scrutiny. The two marks and their trade dress, prima facie appear to be deceptively similar and are likely to deceive and cause confusion. ​

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Trial Courts & Appellate Courts Can Exercise Full Discretion for Awarding Concurrent Sentencing Under Section 31 of the Criminal Procedure Code, 1973: Apex Court

CONCURRENT PUNISHMENT: When the Accused serves all the sentences in respect of two or more offences at the same time.​

CONSECUTIVE PUNISHMENT: When the Accused has to finish serving the sentence for one offence before it starts to serve the sentence for any other offence.

The Hon’ble Supreme Court in its latest decision in the matter of Malkeet Singh Gill v/s The State of Chhattisgarh, affirmed and upheld the following settled principles of criminal jurisprudence:​

  • The High Court in a criminal revision against a conviction sentenced by the lower court(s) is not supposed to exercise the jurisdiction same as that of the Appellate Court, since the scope of interference in revision is extremely narrow. The High Court while exercising its revisional jurisdiction cannot sit as a regular Court of appeal and can only deal with the impugned point of law before it.​
  • Further, while upholding the decision of the High Court which affirmed the conviction sentence of the Trial and the Appellate Court against the Appellant, however, directing the same to be run concurrently instead of consecutively, the Apex Court held that Section 31 of Cr.P.C. provides for full discretion to the lower courts for passing orders for concurrent punishment in case of conviction for two or more offences. ​
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Criminal Law Can’t Be Used For ‘Recovery Of Money’ Unless Offence of Cheating/Criminal Breach Of Trust is Established: Karnataka High Court​

The Karnataka High Court in the recent case of Amit Garg Vs. State of Karnataka held that the criminal law cannot be set into motion for recovery of money paid under a contract, unless the offence of cheating or even criminal breach of trust is established.​

The Petitioner therein had approached the High Court seeking to quash the FIR registered against him by one Mr. Neeraj Kukreja, the Director of M/s Pegasi Spirits Pvt. Ltd., for allegedly supplying the inferior quality of N 95 Masks.​

The Petitioner contended that the entire issue was in the realm of the contract and there was no cheating or dishonest intention at the inception on the part of the Petitioner.​

The Complainant refuted the submissions of the Petitioner by submitting that though the dispute was in the realm of the contract, the dishonest intention of the Petitioner to cheat was right there from the inception, that is when the supply was made, and therefore, the entire consignment could not be put to use due to its poor quality. ​

The bench relying on Section 415 of Indian Penal Code,1860 held, “In the case at hand, finding of poor quality of masks was at a later point in time. This cannot amount to cheating or deception at the inception of the contract since they were supplied after supplying samples. If the complainant could not wait for the samples to be checked by the appropriate laboratories, the offence of cheating cannot be laid against the petitioner.” Hence the application was thereby disposed of. 

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Additional Defendants Cannot Be Impleaded By The Defendants In A Suit Without The Wish Of The Plaintiff

The division bench of the Hon’ble Supreme Court of Hon’ble Justices M. R, Shah and Krishna Murari, passed a judgment on September 16, 2022, in the matter of Sudhamayee Pattnaik and Ors. vs. Bibhu Prasad Sahoo and Ors. [Civil Appeal No. 6370 Of 2022], reiterating the position of the law with respect to Order 1 Rule 10 of the Civil Procedure Code, 1908, which provides for the procedure of adding Defendants to an existing suit. 

The division bench held that no Defendant can file an application to implead additional Defendants against the Plaintiff’s wishes as the position of law is well settled that regards the Plaintiff as dominus litus. The only exception to this rule would be if the Court suo motu directs to join any other person not party to the suit for effective decree and/or for proper adjudication as per Order 1 Rule 10 CPC.

The bench also held that non-impleadment of Defendants would be at the risk of the Plaintiff. For instance, as per the facts of this matter, the Defendants had filed a counter-claim for declaration of their right, title and interest over the suit property in question and permanent injunction against the Palintiffs, and in case the counter-claim is allowed, as the Plaintiffs are opposing to implead the subsequent purchasers as party Defendants, thereafter it will not be open for the Plaintiffs to contend that no decree in the counter-claim be passed in absence of the subsequent purchasers.

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NCLAT resolves whether the advance paid of the Operational Debt to the Operational Creditor before commencement of its CIRP can be adjusted towards the supplies made to the Corporate Debtor during the CIRP of the Operational Creditor?

  • In the peculiar facts of the case of Ravi Kumar Tomar v. Newgen Speciality Plastics Ltd., the Appellant being the Ex-Director of the Corporate Debtor/Respondent No. 2 (M/s Royal Polyurethane (India) Pvt. Ltd.) filed an appeal against the order of admission passed by NCLT, New Delhi Bench, in the Petition filed under Section 9 of the I&B Code by M/s Newgen Speciality Plastic Ltd. (Operational Creditor/Respondent No. 1).
  • The Corporate Debtor had placed a purchase order for supply of goods for a sum of Rs. 4,67,98,086/- and paid an advance sum of Rs. 29,51,011/- Allegedly the Operational Creditor supplied the said goods and issued various invoices in respect thereof. The Corporate Debtor accepted the invoices and made part payments and no dispute was raised about the same. Post-delivery of the last order, the Corporate Debtor defaulted payment towards the same and therefore the Operational Creditor issued a notice under section 8 of the I&B Code calling upon the Corporate Debtor to pay a sum of Rs. 27,15,669/-.The Appellant in its reply objected to the said claim for the reason that an advance payment of Rs. 29,51,011/- was made to the Operational Creditor and the goods worth Rs. 27,15,699.11/- only, were supplied by the Operational Creditor under the invoices. Therefore, after adjusting the advance amount of Rs. 29,51,011/- against the invoice of Rs. 27,15,699.11, the Operational Creditor was liable to refund Rs. 2,35,341.89/- but instead of the same, the Operational Creditor sent the said notice alleging outstanding debt of Rs. 27,15,669/- against the Corporate Debtor.
  • Admittedly, before all the goods under the purchase order could have been supplied by the Operational Creditor, the CIRP proceedings were initiated against the Operational Creditor in a separate proceeding. According to the Appellant the advance payment made by the Corporate Debtor to the Operational Creditor for the supply of goods under the same purchase order could not be invalidated by mere initiation of CIRP against the Operational Creditor.

  • In view of the above facts and circumstances, the Hon’ble Appellate Tribunal observed and held that post initiation of CIRP against the Operational Creditor, the supplies made by it were for creation of liquidity in order to run the Company and the same couldn’t be adjusted with the advance given before the initiation of CIRP against it since that would be transfer of the asset of the Corporate Debtor on account of an antecedent debt to a creditor (Respondent No. 2/Operational Creditor) which shall be a preferential transaction, that has been frowned upon by the NCLAT in the case of Binani Industries Ltd. Vs. Bank of Baroda & Anr. Moreover, once the moratorium kicks in it does not allow to recover any amount from the Corporate Debtor, nor the Corporate Debtor can appropriate any amount towards its own dues. In view thereof, the Appeal of the Appellant in respect of the Corporate Debtor (Respondent No. 2) was dismissed.