Lottery under GST to counterfeit note case, here are key court orders

A weekly selection of key court orders

SC frowns on interim orders in NPAs

The Supreme Court has disapproved of some high courts continuing to entertain matters arising from the Securitisation (Sarfaesi) Act and granting interim orders in favour of non-performing assets. In an order passed in the case, ICICI Bank vs Umakanta, the court reminded the high courts of its view since the 1997 judgment in the Dwarikesh Sugar Industries case, which was restated in January in the case of Bank of Travancore. According to the Supreme Court, the Securitisation Act is a complete code and there is a remedy provided for aggrieved persons, which is to move the debt recovery tribunal. In view of that, the high courts are barred from entertaining writ petitions in the matter. In view of the repeated failure of the high courts to follow the established principle, the apex court reiterated that ignoring its decisions would amount to judicial impropriety. “Whimsical orders” by subordinate courts, including high courts, ignoring the settled law is “judicial adventurism”, which called for strong deprecation, the Supreme Court said. 

Urban authorities must pay tax

An urban improvement trust cannot claim exemption from income tax, the Supreme Court stated while allowing the appeal case, Income Tax Officer vs Urban Improve Trust. The batch of appeals came from Rajasthan, where the high court had ruled that trusts were exempted from tax under Section 10(20A) of the Income Tax Act. The high court felt that trusts were carrying out statutory functions for the benefit of the state government. They were, therefore, included in the definition of local authority as well as municipal committee and exempted from tax. The Supreme Court stated that they might have been getting tax benefit earlier, but after the Finance Act, 2002, they can no longer claim the benefit. Earlier, housing boards and other bodies set up for the purpose of planning, development or improvement of cities, towns and villages were exempt from paying income tax. But after 2002, the relevant provision was deleted and the exemption was withdrawn. Therefore, the income of state housing boards and development authorities would be taxable, the judgment clarified.

Try cheque cases, IPC offences separately

A complaint of dishonour of cheque under the Negotiable Instruments Act cannot be clubbed with offences of cheating and other offences in the Indian Penal Code and tried together, the Delhi High Court stated in its judgment in the case, SD Infosys vs State. In this case, there were four cheque bounce complaints against the accused firm. There was another complaint that was inquired into by the Economic Offences Wing and a charge sheet was filed in it. All of them came before the same metropolitan magistrate.  The accused persons moved an application before the magistrate to hear all the cases together as the facts were common. He rejected the prayer. The high court dismissed the appeal stating that though the facts in the cheque case are relevant to the penal code trial, the offences in the cases are different and the procedure is also different. Therefore, they cannot be tried together.

Lottery comes under GST laws

The Calcutta High Court has ruled that lottery can be taxed under the Central Goods and Services Tax Act and the State GST Act, dismissing a writ petition that argued it was not included in the definition of goods. The petition contended that the definition of goods included actionable claims and excluded money and securities. The Constitution also was cited to show that goods should have the characteristics of material, commodities and articles. The West Bengal government submitted that according to the Constitution, all types of movable properties, whether tangible or intangible, are goods. The high court ruled that a lottery is an 'actionable claim' and goods or moveable property. Consequently, lottery can be taxed under GST laws. The 17th GST Council meeting, attended by the states, also had approved of the rates in respect of lottery. The judgment in the petition, Teesta Distributors vs Union of India, therefore, stated that it was within the domain of the council to decide the rate of tax. 

Main test in passing off suit

The behaviour of “an unwary purchaser with imperfect recollection” is the yardstick for deciding a passing off action. It cannot be presumed that the rival products are bought only by sophisticated persons with discernible minds, the Calcutta High Court said while passing an injunction order in favour of La Opala RG Ltd and against Cello Plast in a trademark suit. La Opala is a reputed manufacturer of opal ware since the 1980S. It alleged that the rival company in insulated thermo-ware was trying to enter the opal ware market by imitating the trade dress in four items of manufacture. Cello denied the charge. However, the court granted an injunction in three goods. Regarding some products, the judgment stated that “the shape, configuration, surface pattern of the materials on which the motif and artistic work are imprinted are identical and deceptively similar to that of La Opala… their brand is being used dishonestly and passed off as if the said mark is that of La Opala.” Cello's newly launched plates have the potential to confuse the consumer; hence there is a prima facie case of infringement of the trademark.

Counterfeit note case quashed 

A woman from Mumbai who deposited currency notes in a cooperative bank during the demonetisation frenzy two years ago got into trouble because five notes in a bundle of Rs 40,000 were found to be counterfeit. She was charged under Section 489B of the Indian Penal Code, which could lead to life imprisonment. Three notes of Rs 1000 and two of Rs 500 were found to be fake. A charge-sheet was filed and the trial was to take place before a sessions judge. She got anticipatory bail and then moved the Bombay High Court through a writ petition to quash the prosecution. The woman claimed she was unaware the five notes were counterfeit. The notes were sent to Nashik Press for examination. It reported that they were “high-quality counterfeit notes” which could not be detected by ordinary examination. The high court, using its extraordinary powers in this case, Sanskriti vs State of Maharashtra, quashed her prosecution. The prosecution could not prove that she had reason to believe that they were counterfeit. Mere possession of fake notes without knowingly intending to use them would not be an offence, the judgment said.