Power of High Court to Waive off any need to Surrender for filing Revision

Vivek Rai & Anr. v. High Court of Jharkhand

Facts: 

Petitioners have been convicted under Section 498-A of the IPC and Sections 3 and 4 of the Dowry Prohibition Act. Appeal against the conviction was dismissed. The petitioners filed a revision petition before the High Court but the same was not registered on account of impugned Rule 159 of the Jharkhand High Court as failed to surrender to custody.

Rule 159 of the High Court of Jharkand Rules, 2001 reads:

““In the case of revision under Sections 397 and 401 of the Code of Criminal Procedure, 1973 arising out of conviction and sentence of imprisonment, the petitioner shall state whether the petition shall be accompanied by a certified copy of the relevant order. If he has not surrendered the petition shall be accompanied by an application seeking leave to surrender within a specified period. On sufficient cause if shown, the Bench may grant such time and on such conditions as it thinks and proper. No such revision shall be posted for admission unless the petitioner has surrendered to custody in the concerned Court (emphasis).”

The petition has been filed under Article 32 of the Constitution of India seeking to declare Rule 159 as violative of Articles 14 and 21 of the Constitution and provisions of Sections 397 and 401 of the Code of Criminal Procedure, 1973. Earlier the Division Bench of the Jharkhand High Court has upheld the validity of the Rule and the special leave petition was dismissed by the Court against the said judgment.

Issues:

• Whether the requirement for surrendering to custody as a condition precedent for registration of the Revision petition is violative of Sections 397 and 401 of CrPC?
• Whether the failure to mention the power of the High court to order exemption from such surrender makes it legally infirm?

Brief Answer:

•  No. The rules are in consonance with the CrPC provisions.
• No. Failure to mention does not take away the inherent power of the High Court and the same has to be assumed in the impugned rule.

Court’s reasoning:

•  It is an established practise that a revision against Conviction and sentence is filed after an appeal is dismissed and the convicted person is taken into custody in court itself. According to the Court, the object of the Rule is to ensure that a person who has been convicted by two courts obeys the law and does not abscond. They therefore hold that the provision is not arbitrary in nature and is merely a procedure to regulate the procedure of the Court. The Apex Court relied on Judgments including the Nanavati case[1] wherein the an identical provision of Order XXI Rule 5 of the Supreme Court Rules was challenged and held to be valid.  The Apex Court in that case had opined that the rule reflected the pre-existing practise of the Supreme Court and the High Courts. The provision read:

“When the petitioner has been sentenced to a term of imprisonment, the petition shall state whether the petitioner has surrendered. Unless the court otherwise orders, the petition shall not be posted for hearing until the petitioner has surrendered to his sentence”

     Supreme Court Rules also contain a similar provision in Order XXI Rule 6. 

•      Mere exclusion of the exemption power does not affect the inherent power of the Court to order such a remedy. The Court stated the High Court is not helpless in such situations even though the Rule does not specify that it can grant exemption in certain cases. They hold that such an exception as also found in the Supreme Court Rules has to be read into the High Court Rules.

Analysis:

While the reasoning of the Court in the first issue is logical and is supported by appropriate case laws, the second issue has been dealt with in a single with broad statements. The challenge was to a specific Rule of the High Court which had been created in 2001 to the exclusion of such an exemption which is clearly provided in other High Court Rules as well as the Supreme Court. In such a scenario, it can be argued that the later in time creation had deliberately tried to negate any such usage. Although one might argue that the High Court under its inherent power[2] can consider the grant of such remedy, the question in this case was limited to the infirmity of the specific Rule of the High Court. The Rule did not include such a power and should have been considered in opposition to the current regime.

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[1] KM Nanavati v. State of Bombay, (1961) 1 SCR 297.

[2] Section 482, Code of Criminal Procedure, 1973. 

Freedom to Practice Religious Beliefs vis-a-vis Polygamy as not an Integral Part of Muslim Faith

Khursheed Ahmad Khan v. State of U.P. and Ors.

A. Facts of the Case and the Impugned Provision

The appellant was removed from service for proved misconduct of contracting another marriage during existence of the first marriage, without the permission of the Government, which was termed to be a violation of Rule 29(1) of the U.P. Government Servant Conduct Rules, 1956.

B. Appellant’s Contention

Firstly, it was contended that by the appellant that he had duly divorced his first wife, before performing the second marriage. It was appellant’s case that he committed a mistake of not getting the name of his first wife corrected in the service book. The appellant further filed an affidavit of his first wife that the divorce had in fact been taken place in the year 1999 before his second marriage in the year 2005.

Secondly, the appellant has raised the question of validity of the impugned Conduct Rules as being violative of Article 25 of the Constitution.

C. Relevant Provision

Article 25. Freedom of conscience and free profession, practice and propagation of religion. - (1) Subject to public order, morality and health and to the other provisions of this Part, all persons are equally entitled to freedom of conscience and the right freely to profess, practise and propagate religion,

(2) Nothing in this article shall affect the operation of any existing law or prevent the State from making any law –

(a) regulating or restricting any economic, financial, political or other secular activity which may be associated with religious practice;

(b) providing for social welfare and reform or the throwing open of Hindu religious institutions of a public character to all classes and sections of Hindus.

D. Court’s Decision

On the first issue, the Court while rejecting the submission of the appellant, placed its reliance on the statement made by the appellant in enquiry proceedings initiated by the National Human Rights Commission that both his wives were living comfortably with him [i]; on the counter affidavit filed by the first wife denying any divorce having taken place [ii]; the appellant’s service record still mentioning the first wife as the wife [iii] and absence of any intimation in any form on

record that the appellant had divorced the first wife [iv]. With respect to the submission of the first wife’s affidavit, the Court placed its reliance on the statement of the first wife that the appellant took her signatures on blank papers and manipulated the affidavit which was relied upon in support of his writ petition.

On the second issue, the Court again reiterated the decades long jurisprudence where the Court has held that what is protected under Articles 25 and 26 is the religious practice forming integral and essential part of the religion. So, those practices that are merely religious or sanctioned by the religion, but are not mandated to be compulsorily practiced, are within the sphere of valid legislation.[1]

The Court relied on the judgment in the case of Javed v. State of Haryana,[2] where the Court had dealt with the challenge made to certain provisions of the Haryana Panchayati Raj Act 1994 that had disqualified a person from being a Sarpanch (amongst other offices) or continue as such if such person has more than 2 living children. One of the submissions was that the personal law of Muslims permits performance of marriages with 4 women, obviously for the purpose of procreating children and any restriction thereon would be violative of right to freedom of religion enshrined in Article 25 of the Constitution.

The Court firstly, held that Article 25 protects an essential and integral part of practice of a religion. Then, it proceeded by holding that Article 25 protects the religious faith and not a practice which may run counter to public order, health or morality. Referring to the judgment in Sarla Mudgal and Ors. v. UOI,[3] where it had noted that in the United States of America the practice of polygamy is held to be injurious to ‘public morals’. Then, the Court proceeded to decide whether polygamy is an integral part of the religion, which it found to be not in negative.[4]

E. Conclusion

The judgment is congruent to its jurisprudence on Article 25. The “community exception” under Article 25 (2) (b) has been a subject matter of debate, where the Courts have been forced to sit harmonize the freedom to practice religious belief of a person vis-à-vis the need for a social reform and indeed, the latter essentially leads to a judgment that is often hurting one particular set of people (maybe strict book followers or maybe fundamentalists). However, in my opinion the approach of the Supreme Court has always maintained a modicum of certainty while deciding such issues and acceptably balances both the ends of the considerations under Article 25.

In fact, in the case of State of Bombay v. Narasu Appa Mali,[5] the constitutional validity of the Bombay Prevention of Hindu Bigamous Marriages Act 1946 was challenged on the ground of violation of Article 14, 15 and 25 of the Constitution. The Court found it difficult to accept the proposition that polygamy is an integral part of Hindu religion though Hindu religions recognizes the necessity of a son for religious efficacy and spiritual salvation. The Court in categorical terms, while rejecting the challenge, stated:

“The right of the State of legislate on questions relating to marriage cannot be disputed. Marriage is undoubtedly a social institution an institution in which the State is vitally interested…If, therefore, the State of Bombay compels Hindus to become monogamists, it is a measure of social reform, and if it is a measure of social reform then the State is empowered to legislate with regard to social reform under Article 25(2)(b) notwithstanding the fact that it may interfere with the right of a citizen freely to profess, practise and propagate religion.”

These observations coupled with the non- protection given to the non- essential part of a religion under Article 25, in effect justify the reasoning of the Court in the present case.

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[1] See decisions in Dr. M. Ismail Faruqui and Ors. v. Union of India and Ors., AIR 1995 SC 605; Mohd. Hanif Quareshi and Ors. v. The State of Bihar, [1959] 1 SCR 629; The State of Bombay v. Narasu Appa Mali, AIR 1952 Bom 84; Badruddin v. Aisha Begam 1957 ALJ 300, the Allahabad High Court.

[2] (2003) 8 SCC 369.

[3]  1995 CriLJ 2926.

[4] (2003) 8 SCC 369, ¶ 44.

[5] AIR 1952 Bom 84.

Update: SEBI ( PROHIBITION OF INSIDER TRADING) REGULATIONS, 2015- A Welcome Change?

Exercising its power under various provisions of the SEBI Act, 1992 the Securities Exchange Board has come up with SEBI (Prohibition of Insider Trading) Regulations, 2015. These regulations will come into force on 120^th day of publication in the official Gazette.

This post aims to analyze these regulations from the perspective of amendments to the existing regulations and the novel concepts introduced under the new regulations.

Following are the major changes which are aimed by the new Regulations in regulating the Insider Trading framework in India:

v  Applicability of the Regulations

Under regulation 3(1) of the 2015 regulations the charge of insider trading has been extended to securities listed and proposed to be listed on stock exchanges. This is an expansion from the 1992 Regulations where-under the same regulation was applicable only with respect to companies that were listed. The probable reason for such a change is to bring within its purview those securities which will be amenable to price discovery through market interplay.[1]

v  Notes to interpretation

Every provision under the 2015 Regulations is accompanied with specific notes setting out the legislative intent for which that provision has been formulated. This reflects the substance over form approach, these notes will aid in capturing the spirit of the legislation and how the regulatory is likely to look at its enforcement.

v  Definitional Changes

1.      Under the new regulations the definition of ‘Insider’ has been simplified to mean a person who is a connected person and those in possession of ‘Unpublished price sensitive Information’.[2]

2.      The definition of ‘Connected person’ has now been given a broader meaning even including the public servants and holders of statutory offices who are can be reasonably expected to have access to UPSI. The immediate relatives of the connected persons are also considered as connected persons unless they can prove that they didn’t have access to the UPSI.[3]

3.      Under regulation 2(n) of the 2015 Regulations, the criteria for what constitutes ‘unpublished price sensitive information’ would be whether the information is ‘generally available’ or not.

4.       Under 2(n) of 2015 only the definition of ‘unpublished price sensitive information’ has been extended to both a company and securities whereas it was limited to only companies in the previous regulations.

v  Rebuttable Presumption

It is clarified that the presumption against persons deemed to be ‘connected’ is rebuttable under the Regulation 4(2). This provision is akin to the presumption that exists against various persons having a common objective or purpose of acquisition i.e. persons acting in concert under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011.

v  Prohibition on Insider Trading

Under the 2015 regulations multiple restrictions have been placed i.e.

 (i) Prohibition on communication of unpublished price sensitive information[4];

(ii) Procurement of unpublished price sensitive information,[5] and

(iii) Trading in securities when in possession of unpublished price sensitive information.[6]

It has to be noted that the 1992 Regulations prohibited ‘dealing’ in securities when in possession of unpublished price sensitive information, amongst others; the expression ‘dealing’ has been replaced with ‘trading’ in securities in 2015 . Under the new Regulations, the definition of ‘trading’ has been kept wide to curb activities which are not strictly buying, selling or subscribing such as a pledging etc.

v  Exclusions

The 2015 Regulations provide for certain exclusions where the charge of insider trading will not get attracted, namely:-

Ø  In the conduct of due diligences: Communication and procurement of information in connection with transactions involving PIPE, mergers and acquisitions, subject to certain conditions;[7]

Ø  For off-market transactions between promoters who are in possession of the same information, and are making a conscious and informed decision;[8]

Ø  In case of non-individual insiders:--

The individuals who were in possession of such unpublished price sensitive information were different from the individuals taking trading decisions and such decision-making individuals were not in possession of such unpublished price sensitive information when they took the decision to trade;[9]

Ø  When the trade was executed in the absence of any leakage of information, thereby recognising the concept of ‘chinese walls’ in large organisations;

Ø  When trades executed in pursuance of trading plans.

v  Disclosure Obligations

The disclosure obligations under the Regulations have been limited to ‘insiders’ and are as follows:

Initial disclosures of trades to be made by only the promoters, key managerial personnel, directors internally;[10]

Continual disclosures to be made by every promoter, employee or director in case value of trade exceed monetary threshold of ten lakh rupees over a calendar quarter; company to accordingly notify stock exchanges within 2 trading days;[11]

Earlier disclosure requirement for persons holding more than 5% shares or voting rights or in case of any further change in their shareholding or voting rights has been done away with.

The disclosures of trading in securities shall also include trading in derivatives of securities if permitted under law (to be noted that section 194 of the Companies Act, 2013 prohibits Director or KMP from entering into forward dealings etc.)

v  Trading Plans

It is a novel concept to India, provisions on ‘trading plans’ have been introduced whereby every insider is entitled to execute trades in pursuance of pre-determined trading plan in accordance with the Regulations.[12]

v  What is Trading plan

It is basically introduced with the aim to have transparent frame for trading in securities by those insiders who are having unpublished price sensitive information through the year. The insider would be required to submit trading plan in advance to the compliance officer for his approval. The compliance officer is also empowered to take additional undertakings from the insiders for approval of the trading plan. It shall be submitted for a minimum period of 12 months. Trading can only commence only after 6 months from public disclosure of plan. Compliance officer will  approve the plan. The trading plan once approved shall be irrevocable and the insider shall mandatorily have to implement the plan, without being entitled to either deviate from it or to execute any trade in the securities outside the scope of the trading plan.(Except in few case like where insider is in possession of price sensitive information at the time of formulation of the plan and such information has not become generally available at the time of the commencement of implementation)

v  Compliance Officer

Qualification criteria have been set for a compliance officer who shall report to the board of directors of the company or the head of the organization, as the case may be.

The compliance officer’s role in monitoring and approving a trading plan has been made important. Enhanced role for the compliance officer who would need to police, monitor and regulate trading by employees and connected persons. Regulation 5(3)

v  Penalties

No separate penalties have been prescribed under the Regulations. Reference is made however to the penalty provisions under the SEBI Act, 1992 which shall apply. As per the Act, insider trading is publishable with a penalty of INR 250,000,000 (Rupees Two Hundred Fifty Million Only) or 3 times the profit made out of insider trading, whichever is higher.

v  ANALYSIS

Ø  While some of the Regulations have been enacted at par with the international practices to bring more clarity (substance over form approach), some of the Regulations are more onerous and testing for the corporate to implement at initial stage.

Ø   The Regulations are precisely more clear in some aspects say as on what to be construed as price sensitive information by defining specifically “generally available information” separately.

Ø  The landmark deviation in new Regulations in context to the 1992 regulation is right of defense by the insider to rebut the charges of insider trading.

Ø  The Regulations though establish all together a new set of governance by legislating these Regulations in all-inclusive way covering disclosures of trading by KMP/Directors/promoters as well as employees on crossing the threshold of Rs. 10 lakh in value.  Regulation 7(2)(a).

Ø   On the other hand, some Regulations have been left for open ended for discussion requiring clarity such as whether the stock options granted to employees can be exercised by employee during closure of trading window.

Ø  Another ambiguity in the Regulations relates to the requirement of disclosure of trades in securities by directors, promoters as well as employees on crossing the threshold of Rs. 10 lakhs in value, which seems to be too much arduous for the companies. It would have been more rational to have the requirement of continual disclosure limited to KMP/directors/promoters on threshold at higher value say Rs. 15 or 20 lakh.

Ø  At the same time it has to be kept in mind that these regulations have not been enforced as of now and will only come into force on the 120^th day of its publication in the Gazette which suggests there is still time to correct the ambiguities before it finally comes into force.

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[1] Insider Trading Norms Revisited: An Analysis of the N.K. Sodhi Committee Report, Nishith Desai Associates.

[2] Regulation 2(g), SEBI (Prohibition of Insider Trading) Regulations, 2015.

[3] Regulation 2(d), SEBI (Prohibition of Insider Trading) Regulations, 2015.

[4] Regulation 3(1), SEBI ( Prohibition of Insider Trading) Regulations, 2015.

[5] Regulation 3(2), SEBI ( Prohibition of Insider Trading) Regulations, 2015.

[6] Regulation 4, SEBI ( Prohibition of Insider Trading) Regulations, 2015.

[7] Regulation 3(3) (i), SEBI (Prohibition of Insider Trading) Regulations, 2015.

[8] Regulation 4(1) (i), SEBI ( Prohibition of Insider Trading) Regulations, 2015.

[9] Regulation 4(2) (a), SEBI ( Prohibition of Insider Trading) Regulations, 2015        

[10] Regulation 7(1) (a), SEBI (Prohibition of Insider Trading) Regulations, 2015.

[11] Regulation 7(2) (a), SEBI (Prohibition of Insider Trading) Regulations, 2015.

[12] Regulation 5(1), SEBI (Prohibition of Insider Trading) Regulations, 2015.