by LFIAdmin | Sep 3, 2023 | Uncategorized
By Sandip N. Vimadalal, Advocate & Solicitor and assisted by Ritabh Singh, Articled Clerk
sandipvimadalal@yahoo.com| Sept 3, 2023
INTRODUCTION
1. There is lot of ambiguity and unawareness in the minds of tax and legal practitioners and parties involved, about the applicability of Goods and Service Tax (“GST”) in respect of transactions relating to tenanted premises (residential and non-residential) under the provisions of The Central Goods and Service Tax Act, 2017 (“the Act”) and the Notifications, Circulars etc. issued under the Act.
2. Generally, transactions with respect to tenanted premises are:-
(i) Surrender of tenancy rights by the tenant to the landlords, whereby the tenant surrendering the tenancy rights receives the consideration.
(ii) Transfer of tenancy rights by the outgoing tenant in favour of the incoming tenant with the consent of the landlord, wherein the incoming tenant is paying consideration to the outgoing tenant as also to the landlord.
(iii) Creation of fresh tenancy in respect of the premises by the landlord in favour of the tenant against payment of premium/consideration.
The above transactions take place by execution and registration of certain writings such as Surrender Deed, Deed of Transfer of Tenancy Rights, Agreement for Tenancy etc.
RELEVANT LAW
3. It is necessary to examine certain provisions of the Act as also Notifications/Circulars issued under the Act.
(A) Section 7 of the Act defines “Supply” as follows:-
“7(1) For the purposes of this Act, the expression “supply”
includes–
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) ………………….; and
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.”
(B) Item 2 of Schedule II of the Act prescribes “tenancy” as “supply of services” which is as follows:
“2. Land and Building
(a) any lease, tenancy, easement, license to occupy land is a supply of services;
(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services”.
Thus, any lease, tenancy, easement, license to occupy land or building is a supply of services.
(C)(i) Central Board of Indirect Taxes and Customs (“CBIC”) has clarified that transfer of tenancy rights against the consideration in the form of tenancy premium is a supply of service liable to GST as the same is in form of lease or renting of immovable property which is declared to be a service under item 2 of Schedule II the Act. It is further clarified that though transfer of tenancy rights is subject to stamp duty and registration charges, however, it would not preclude the transaction from the scope of “supply” and from payment of GST. Thus, it cannot be treated as sale of land or building in terms of item 5 of Schedule III of the Act.
(ii) The last three lines of para 5 of the said clarification [1] makes specific reference that “As regards services provided by outgoing tenant by way of surrendering the tenancy rights against consideration in the form of a portion of tenancy premium is liable to GST”.
(D)(i) Entry at SL No. 12 of Notification No. 12/2017 – Central Tax (Rate) dated 28th June, 2017 [2] issued by Government of India, Ministry of Finance (Department of Revenue) reads as under:-
(ii) Thus, the services as referred above are exempted.
ANALYSIS
4. The activity of transfer of tenancy right or creation of tenancy right (which also includes lease, tenancy, easement and license) against consideration in the form of tenancy premium is a supply of service liable to GST.
5. The surrender of tenancy rights where landlord pays premium to the tenant for giving up the right to use/occupy the premises is considered as giving up of right in the property which may attract GST. However, it can be well argued that surrender of tenancy rights does not fall within the scope of the expression “Supply” referred in Section 7(1)(a) of the Act.
6. The term “residential dwelling” in terms of the normal trade parlance, as per which it is a residential accommodation, but does not include hotel, motel, inn, guest house, camp-site, lodge, house boat, or like places meant for temporary stay. Therefore it could be inferred that a residential dwelling is a residential accommodation meant for permanent or longer stay and does not include guest house, lodge or like places [3].
7. The service by way of renting of residential dwelling for use as residence is exempt except where the residence dwelling is rented to a registered person. The registered person is a supplier having an aggregate taxable supply of goods or services exceeding Rs. 20 lakhs [4]. The effect of explanation to Entry at SL No. 12 is as under:-
(a) “A” has rented residential dwelling to “B” who is an unregistered person under the Act. This transaction is exempted from GST.
(b) “A” has rented a residential dwelling to “B”, who is a registered person. If the registered person is an individual and can show that the residential unit is taken in his personal capacity for use as his own residence and the payment for the rent is made on his own account, it can be contended that such transaction is exempted from applicability of GST, for e.g.
(c) “A” has rented residential dwelling to M/s. XYZ, a proprietary firm of “B” and which firm is a registered person. This is transaction is not exempted from GST.
(d) However, in the event “A” has rented residential dwelling to “B” (who is also the proprietor of M/s. XYZ, a registered entity) but such renting is on the personal capacity of “B” for his own residence and not that of his proprietary concern, such renting is exempted from GST provided nothing on account of the proprietary firm is being undertaken from such residential dwelling.
8. The services provided by outgoing tenant by way of surrendering the tenancy rights against consideration (either to the landlord or to the incoming tenant or to both), irrespective whether it is residential or non-residential, may be liable to GST.
9. (i) It can also be contended that the person letting out the premises to students for residential use (hostel) will not fall within the meaning of “services by way of renting of residential dwelling for use as residence” contemplated under SL No. 12 of Service exemption notification dated 28th June, 2017 [5].
(ii) Under entry at SL No. 13 as referred in the said Notification No. 12/2017, renting of certain premises by charitable or religious trust as referred therein below the prescribed limit are exempted from GST.
10. The supply of services referred in item Nos. (4), (5) and (8) above shall be liable to GST PROVIDED the same is by a person in the course or furtherance of business.
FURTHERENCE OF BUSINESS
11. (i) Section 2 (17) of the Act defines “business” as under:-
“(17) “business” includes –
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a)” [6];
(ii) The GST shall be applicable on the “supply” of services provided the same are “in the course or furtherance of business”.
(iii) If the supply of services is not directly or incidentally in the course of furtherance of business, it will not attract GST.
(iv) In the case of M/s. Panacea Biotech Ltd. Vs. Commissioner of Trade and Taxes [7] it has been observed by the Hon’ble Delhi High Court that “But the selling of used cars cannot by any stretch of the imagination be characterized as “ancillary” or incidental to the business of a pharmaceutical company. It is not shown that the cars were of a special character e.g. air conditioned vehicles especially designed to store and ferry pharmacy products”. It was further observed “However, the assesse never held them for the purpose of sale and purchase but for using them. After their use, having regard to lapse of time, and their wear and tear, the assesse decided to replace them. These cars were then sold. Their sales in a sense are twice removed from the business of the Assesse. They can not be call “incidental” or “ancillary” to the manufacture and sale of pharmaceutical products, which the assesse is engaged in.”
(v) CBIC has by its press release dated 13-07-2017 stated that “Even though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course or furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se”.
(vi) The isolated transactions of tenancy (such as surrender of tenancy, transfer of tenancy) by the supplier who is not in the business of buying and selling of tenancy rights (irrespective of whether it is residential or non-residential) may not be considered as in the course or furtherance of business and should not attract GST. This is an arguable issue which depends on the facts and circumstances of each case.
(vii) If the owner/landlord (“supplier”) has let out many premises in the building to various parties, it may be considered in the course or furtherance of business.
(viii) If the owner buys one or more properties and in turn lets it out, the transaction may be considered in the course or furtherance of business.
(ix) The tenant who is not engaged in the business of acquiring and transferring/surrendering tenancy rights, surrendering the tenancy rights may not be termed as “in the course of business” of the tenant.
VALUE TO BE ADOPTED
12. (a) An important issue arose before the Authority for Advance Ruling, GST [8] wherein the Applicant [9] brought up the issue of “Whether the Value to be adopted (for payment of GST/Central Tax) is the guidance value (i.e. Ready Reckoner Value) or sale consideration, particularly when guidance value fixed by the local authority is more than sale value”. It has been interalia observed and ruled by the Authority as under:-
(i) As per Section 15(1) of the Act the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both, including the non-monetary consideration, if any, where the supplier and the recipient of the supply are not related and the price is sole consideration for supply.
(ii) From the above, it is clear that the Act contemplates to treat the transaction value as the value of supply unless the same is rejected and the value determined as per Section 15 of the Act. It does not contemplate to consider a guidance value prescribed under another legislation to be deemed to be the value of the supply, unless the transaction value itself is disputed and found not acceptable under Section 15 of the Act. In the latter case, the determination of the value of such supply shall be made as per the provisions of Section 15 of the Act.
(b) Explanation under Section 15 of the Act describes the related persons.
(c) Thus, the value of Supply of Goods or Services shall be on the transaction value (and not the guidance value or ready reckoner value) PROVIDED the recipients of the supply are not related and the price is the sole consideration for supply.
CONCLUSION
(i) As discussed above, certain transactions in respect of residential tenanted premises are exempted from applicability of GST and certain transactions are not.
(ii) The provisions in respect of commercial tenanted premises need careful application of mind considering the facts and circumstances of the transaction to conclude if GST is applicable on the same or not.
(iii) Lastly, GST is applicable on the transaction value mentioned in the instrument and not on the guidance value unless the parties are related persons.
[1] vide Circular No. 44/18/2018-CGST dated 02-05-2018
[2] read with Circular No. 44/18/2018 – CGST dated 2nd May, 2018; Notification Nos. 04 and 05 of 2022 CT (Rate) dated 13th July, 2022; and Notification No. 15/2022 CT (Rate)
[3] as observed by the Authority for advance ruling in KAR ADRG 25/2023 dated 13-07-2023
[4] Ref: Section 2(94), Section 22 to 25 of the Act
[5] as also observed and held by The Authority for Advance Ruling, GST in the case of Srisai Luxurious Stay LLP (No. KAR.ADRG 25/2023 dated 13th July 2023)
[6] Sub-sections (a) and (b) of Section 17 of the Act are almost similar to the definition of “business” under Delhi Sales Tax Act, 1975
[7] WP (C) No. 4717/2011 & CM No. 9555/2011
[8] under KAR ADRG 09/2022 dated 14-03-2022
[9] M/s. Pankaj Enterprises
THE VIEWS OF THE AUTHOR UNDER THIS ARTICLE ARE PERSONAL AND ARE NOT IN THE FORM OF AN OPINION
by LFIAdmin | Aug 29, 2023 | Uncategorized
By Dhruti Kapadia, Counsel, Solicitor, AOR and Certified Mediator
kapadiadhruti@gmail.com| Aug 30, 2023
INTRODUCTION
Mediators while mediating often encounter racial, cultural and other forms of diversity in their mediating sessions. The essential key points which one must understand, especially mediators, is that during their mediating sessions, they must keep in mind the identity of the parties involved and from which cultural backgrounds they come from.
Human beings tend to evolve based on culture around them and the same is a complex subject to understand and explicate. Culture itself is interconnected with the psychology and personality of an individual. There often are certain cultural differences between the parties involved in mediation sessions which lead to unfavourable results. It is vital for mediators to accept such challenges and inculcate additional skills to assist the parties involved to reach a point where they can freely express themselves, for which a mediator must understand the values and beliefs of the parties involved.
IMPORTANT INGREDIENTS OF A SUCCESSFUL MEDIATION
(A) Sense of awareness
It is important to understand that mediation can never be culture free. It is essential that at the inception of the mediation session, the background, cultural beliefs, values and the mind-set of both the parties should be studied and analysed by the mediator based on which relevant and essential strategies should be made for the mediation sessions. What would and would not be a relevant and appropriate question to ask the parties is to be pre-determined by the mediator as both parties are under the influence of culture, which plays a sociological role in their mind.
(B) Communication Styles
Communication style as a whole would imply an express verbal and non-verbal behaviour flowed out during the sessions of mediation. There are sometimes certain difficulties in direct communication due to the cross culture language barrier. It, thus, becomes essential to cut the gap out and to bring the parties closer by having them understand what the other side is stating. For this purpose, it would be necessary for the mediator to either be a good interpreter or bring one along with him/her, or to have an additional facilitator who would be able to communicate directly with the parties. This would ensure smooth communication between all parties during the sessions of mediation. Unless there is free, fearless and open communication between all parties, the mediation usually fails.
Another core issue having paramount importance which arises during mediation and is expected while conducting mediation sessions is that of parties apologizing to each other. Irrespective of the country or region the parties belong to or how they have been cultured, tendering a heartfelt apology will repair certain grievances faced by either party and will made the mediation session more constructive. The important element of an apology is how sincere the party is with their apology and with the same sincerity, how can the apology be delivered in a most cultured way and in a way that the other party would really feel that the apologizing party has admitted, regretted and has guilted up for the wrong they have committed. In some cases, tendering an apology also satisfies the ego of the other party. The party being apologized to must feel the genuineness of the apology tendered. The very first step is to acknowledge the mistake, to accept it and to express remorse for it, which only requires words like “I am sorry for…..” or “I apologise for…..”.
It is imperative to note how an apology is made. The worst way in which one could ever apologise is by tendering an apology in an impersonal way, without any affection and by just putting an email to apologise. This usually does not work.
In global disputes, different countries and the citizens thereof have their own method and practice on how an apology is made and how it is accepted. These concepts must be borne in mind and practicing mediators must conduct their mediation sessions for resolving disputes after understanding such differences so that neither party gets offended. Both parties must attempt to understand how the entire session is conducted and must bear in mind the traditions and the cultures they belong to and also how they would be expecting each other’s apology. All parties should also bear in mind that no mediation really succeeds without tendering an apology and that the same plays an important role in the success of a mediation session.
CONCLUSION
Apology, in short, is a moral process because it touches the core existence of what is right and wrong and it further confirms that a norm of right behaviour has been broken which is why an apology is necessitated. It is morally and moreover culturally engraved that the person who tenders his apology also then exposes himself to consequences of his wrongful act.
Culture cannot be separated from a mediation session at any point of time because it is deeply and psychologically engraved in every human mind. The social impact and encouragement of maintaining relationships could be a useful and the conclusive point of any mediation session as, in the end if the disputes between the parties get resolved, then every party walks home a winner.
by LFIAdmin | Feb 27, 2023 | Home
By Ritabh Singh, 4th Year Law Student, Government Law College, Mumbai,
ritabhsingh44@gmail.com | February 28, 2023
INTRODUCTION
Technology has been evolving ever since the invention of bows and arrows. The 18th century marked the beginning of the industrial revolution, an indelible period where machines took over human jobs requiring repetitive physical labour. In the 21st century, we are witnessing Artificial Intelligence (AI) take over jobs which require complex mental labour. From self-driving cars [1] to automated financial investments [2], AI programs are automating activities which have always required human intelligence to now perform these activities with greater efficiency and precision.
In the technology-shy profession of law, AI programs are being used to automate repetitive tasks which do not require a lawyer’s professional skill. Some believe that these programs will take away the practice of legal professionals, to which an opinion is provided in this article.
WHAT IS “AI” AND HOW DOES IT WORK
Artificial Intelligence can be described as technologies developed by using algorithms which are capable of performing intelligent activities by themselves. Intelligence is understood as the ability to learn, understand, reason and perform activities. When artificially, or by the use of technology, intelligent systems are developed which can perform complex activities, such systems are known as AI programs [3].
Contrary to fictional representation, AI programs do not possess human-like thinking or cognitive abilities and instead perform functions by using computational mechanisms. The most common way in which an AI program works is by providing the system with cosmic amounts of data, and then by using heuristics, the system detects patterns in the data and uses the knowledge, rules and information which have been encoded by programmers in the system, to execute its functions. Sometimes, the system is not even provided with any data. It is simply developed by using algorithms and has specific rules which it follows to function. Unlike humans, many AI programs do not even understand the meaning of the data it is provided with, yet by using patterns and rules, these systems function more efficiently than humans [4]. As time passes, such systems also learn how to function better by interpreting feedback, consuming more data and learning more patterns. This self-learning process is also a technology implanted in many AI programs, known as Machine Learning.
Different AI programs exist for specific purposes, and thus these programs are trained in a certain manner to achieve the objective of automation. Automation refers to the process in which AI programs perform activities automatically without the intervention of humans.
None of the existing AI programs are Strong AI programs, i.e, which implement human-like conscious thinking to function [5]. Strong AI programs are technologies which are in development.
CURRENT APPLICATION OF LEGAL AI PROGRAMS USED WORLDWIDE
a) Kira systems: This advanced legal AI program uses machine learning to identify, extract and analyse text in a given contract or document. It facilitates due diligence and can create a summary of documents. It is used for reviewing contracts and other documents [6].
b) Lex Machina: Lex Machina is used for predicting the behaviour of the judge, opposing law firms, lawyers and parties. It allows the user to then accordingly strategize and analyse the case [7].
c) Luminance: It is a document review legal AI program which uses machine learning and deep learning to maintain client records, generate and review contracts, and highlight key points and abnormalities in a contract [8].
Various other legal AI programs exist which facilitate legal research, legal opinion, drafting, pursuing litigation, and more. All these systems are available online and can be used after paying a nominal fee. The result of using such systems is that all repetitive work which required minimum professional intervention is now completed at a faster rate, thereby saving the creative energies of advocates.
FUTURE OF AI PROGRAMS IN THE LEGAL PROFESSION
On the non-litigation side of the legal profession, OpenAI’s ChatGPT has the potential to make legal practice redundant in certain areas. ChatGPT is an online chatbot (a form of AI) which has been fed tremendous amounts of data and functions on machine learning [9]. This chatbot provides precise and relevant legal advice, and can also draft various legal documents such as a Special Power of Attorney, Partnership Deed, etc. While the chatbot provides a disclaimer to not rely on its legal opinion and its drafts, the chatbot’s answers are extremely reliable and its drafts are fit for use. Moreover, the chatbot is easy to interact with, provides answers immediately and is available 24×7. The visible drawback is that this technology takes a lot of time and effort to train, and also its data has not been updated after 2021. In the profession of law, lawyers constantly update themselves with amendments and landmark judgements. Updating the chatbot’s data continuously will become very expensive and time-consuming. Another drawback is that the chatbot answers in a guessing language, which cannot be trusted by someone in need of legal help. However, even in its current state, it is a tool which can widely be used for legal advice and drafts, and the future potential it has in the legal profession is unquestionable.
In the litigation side of the legal profession, an American company called ‘DoNotPay’ had made headlines in early January of 2023 when it made public its plan to deploy a ‘robot lawyer’ in court to defend an accused in an alleged traffic violation case [10]. This ‘robot lawyer’ in actuality is a legal AI application which is accessible from a mobile phone or a desktop. The application would have heard the arguments in court and via a Bluetooth earpiece would have instructed the defendant accordingly. The trial which was to happen sometime in late February 2023 stands postponed as the state prosecution threatened the CEO of ‘DoNotPay’ with jail time for trying to conduct such an experiment in a court of law. The effectiveness of such legal AI applications cannot be confirmed as of now. However, it is possible that developing and using such AI applications can be of great use to an arguing counsel as well as a client. In India, an arguing counsel is not usually well-versed in the facts of a case, and he or she relies on a junior for the same. Using such a program instead of a junior can be extremely effective since the program can be fed with the facts of the case along with all the relevant statutes and judgements, which will directly help an arguing counsel. The program, being capable of legal reasoning, can further build upon the ongoing proceedings in a court to make strategic arguments, which can be referred to by an arguing counsel. Where clients require quality legal aid which they cannot afford, using such a program can provide massive help. The drawback here is that such a program does not perform well in activities which require critical reasoning and intuition. In a scenario where such skills are required, the program will not be of great help.
CERTAIN DRAWBACKS OF AI PROGRAMS
AI programs are not perfect and do give rise to significant problems, the first being that of ethics. There are numerous ethical questions which are raised against the use of AI programs, and an important one is using AI programs for deception and manipulation. The incredible ability of AI programs to create evidence from absolutely nothing can cause serious damage to the legal system. These programs can create ‘actual’ signatures on contracts along with ‘real’ audio and video clips of any relevant party to a case, which can frustrate the justice delivery process. Detecting the real evidence from the fake one is nearly impossible, and can be known only after it has been accepted by the user of such AI programs [11].
Secondly, following data patterns results in AI bias wherein the AI program learns to exhibit bias against a particular group. To illustrate, if in the data provided to an AI program, members of Group ‘A’ indulge in crime more than members of Group ‘B’, then the AI program will develop a bias against members of Group ‘A’ and will be more likely to tag them as criminals. This makes the AI program unreliable. As witnessed in the functioning of ‘judge-bots’, which are AI programs developed for judging criminals and helping a judge decide a particular case, the judge-bots handed over greater punishments for members of a group it had developed a bias against [12].
Lastly, it is not clear as to who will be held liable for mistakes committed by legal AI programs. Where a serious fraud or crime has been committed by the AI program, even if it is not intentional, there exists confusion about who should be held culpable – law firms, lawyers, clients or the developer of the AI program. No real punishment can be given to the AI program as it is not a conscious being.
CONCLUSION
To put everything in perspective, no, AI-powered robots will not take away the practice of lawyers in the next 20-30 years. However, repetitive and mundane tasks that a lawyer performs will certainly be automated. These tasks will be done at an unimaginably faster rate by legal AI programs and will give an incredible competitive edge against those who continue the manual performance of mechanical tasks. The takeaway is that those lawyers who employ AI programs will automate unnecessary tasks and will be able to use their time on more intellectual and complex issues, which will increase their value. Many top law firms which have begun employing legal AI programs have either laid off their juniors to reduce their costs or have their juniors perform more complex tasks which the AI program cannot perform. It becomes imperative for lawyers to take on more intellectual tasks and increase their competency to stay relevant. Lawyers will also have to educate themselves on AI technologies and must learn to use legal AI programs for their benefit and the benefit of their firms and clients.
It is uncertain what the later future will be, but the next 20-30 years of the legal profession will certainly be dominated by those who take advantage of legal AI programs and leverage it against those who don’t. The past has taught us that technological advancements always happen very quickly, but adopting these technological advancements is a dragged-out process. These advancements can’t be stopped; they can only be embraced to achieve greater success. In the oversaturated and strangely overworked profession of law, an investment in legal AI programs will provide great returns in both, the long and short run.
[1] RP ; Self-driving cars : Mike Daily & Others
[2] RP ; Research and Policy briefs – World Bank Chile Centre and Malaysia Hub
[3] RP ; Arrived at by: Legal definition of AI – Jonas Schuett, Goethe University Frankfurt
[4] RP ; Journal of Artificial Intelligence Research
[5] IBM ; Strong AI
[6] kirasystems.com
[7] lexmacina.com
[8] Lumninance.com
[9] OpenAI ; ChatGPT 3.5 – openai.com
[10] usatoday – AI ‘robot lawyer’ to take on speeding tickets in court
[11] Learn.g2 ; AI ethics are a concern
[12] AIMultipe ; Bias in AI
by LFIAdmin | Feb 4, 2023 | Home
By Heena Thalesar, Advocate
heenathalesar2233@gmail.com | February 2, 2023
There is a lot of confusion amongst lawyers and public in general “whether one can gift an immovable property reserving life interest for himself/herself?”
Many people would like to gift their residential premises to their children during their life time to avoid future unpleasantness amongst family members, however, at the same time they wish to safeguard themselves by retaining their life interest and the possession of the residential premises during the time they are alive.
Chapter VII of the Transfer of Property Act, 1882 (“the Act”) (Sections 122 to 129) deals with gifts generally and interalia provides for the mode of making gifts, which are as under:
(i) Section 122 of the Act defines “gift” as a transfer of certain existing movable or immovable property made voluntarily and without consideration by one person called the Donor to another called the Donee and accepted by or on behalf of the Donee.
(ii) Section 123 of the Act regulates the mode of making a gift and inter alia, provides that a gift of immovable property must be effected by (a) a registered instrument signed by or on behalf of the Donor and (b) attested by at least two witnesses. In the case of movable property, transfer either by a registered instrument signed as aforesaid or by delivery is valid.
(iii) Sections 124 to 129 deals with gifts of existing and future property, gift made to several persons of whom one does not accept, suspension and revocation of a gift, and onerous gifts including effect of non-acceptance by the Donee of any obligation arising thereunder.
The Hon’ble Supreme Court in Naramadaben Maganlal Thakker v. Pranjivandas Maganlal Thakker and Ors (MANU/SC/1045/1997: (1997) 2 SCC 255), inter alia, held that the execution of a registered gift deed and acceptance of the gift with delivery of the property together makes the gift complete. Thereafter, the Donor is divested of his title and the Donee becomes the absolute owner of the property. It was observed and held that since the Donor had executed a conditional gift deed and retained the possession and enjoyment of the property during lifetime, the Gift had become ineffective.
The Hon’ble Supreme Court in its another decision in K. Balakrishnan v. K. Kamalam and Ors. MANU/SC/1071/2003: (2004) 1 SCC 581 after recording the reasons inter alia held that “The High Court was, therefore, apparently wrong in coming to the conclusion that the gift-deed was ineffectual merely because the Donor had reserved to herself the possession and enjoyment of the property gifted.” However, Judgment of Narmadaben Maganlal Thakker was not discussed in this case.
In view of the apparent conflict between two above referred decisions, the above issues were referred to the larger bench in the matter of (Renikuntle Rajamma V/s. K. Sarwanamma – reported in AIR 2014 SC 2906) before the Hon’ble Supreme Court of India. While deciding the reference, the Hon’ble Supreme Court inter alia, observed and held that:-
(i) Careful reading of Section 123 of the Act which leaves no manner of doubt that a gift of immovable property can be made by a registered instrument signed by or on behalf of the Donor and attested by at least two witnesses and if the same is accepted by or on behalf of the Donee. A conjoint reading of Sections 122 and 123 of the Act makes it abundantly clear that “transfer of possession” of the property covered by the registered instrument of the gift duly signed by the Donor and attested as required is not a sine qua non for the making of a valid gift under the provisions of Transfer of Property Act, 1882. Judicial pronouncements as to be the true and correct interpretation of Section 123 of the Act have for a fairly long period held that Section 123 of the Act supersedes the rule of Hindu Law (ref: full bench Judgment of the High Court of Allahabad in Lallu Singh v. Gar Narain&Ors – AIR 1922 All. 467) if there was any making of delivery of possession an essential condition for the completion of a valid gift.
(ii) Section 123 of the Act makes transfer by a registered instrument mandatory. This is evident from the use of the words “transfer must be effected” used by the Parliament in so far as immovable property is concerned. In contradiction to that requirement the second part of Section 123 of the Act dealing with gifts of movable property, simply requires that gift of movable property may be effected either by a registered instrument signed as aforesaid or “by delivery”. The difference in the two provisions lies in the fact that in so far as the transfer of movable property by way of gift is concerned the same can be effected by a registered instrument or by delivery. Such transfer in the case of immovable property no doubt requires a registered instrument but the provision does not make delivery of possession of the immovable property gifted as an additional requirement for the gift to be valid and effective. If the intention of the legislature was to make delivery of possession of the property gifted also as a condition precedent for a valid gift, the provision could and indeed would have specifically said so. Absence of any such requirement can only lead us to the conclusion that delivery of possession is not an essential prerequisite for the making of a valid gift in the case of immovable property.
(iii) There is indeed no provision in law that ownership in property cannot be gifted without transfer of possession of such property. As noticed earlier, Section 123 of the Act does not make the delivery of possession of the gifted property essential for validity of a gift.
(iv) What is retained is only the right to use the property during the lifetime of the Donor which does not in any way affect the transfer of ownership in favour of the Donee by the Donor.
The effect of the above Judgment of the Hon’ble Supreme Court is that a gift of an immovable property merely on the ground that the Donor has reserved a life interest (or possession) cannot vitiate the gift provided other requirements of Section 123 of the Act are met with.
ADDITIONAL OVERRIDING PROVISIONS FOR SENIOR CITIZENS
The Maintenance and Welfare of Parents and Senior Citizens Act, 2007 (“2007 Act”) provides for effective provisions for Maintenance and Welfare of Parents and Senior citizens.
Section 3 of 2007 Act has overriding effect. It says that 2007 Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than 2007 Act or in any instrument having effect by virtue of any enactment other than 2007 Act.
Section 23 of 2007 Act provides that where any senior citizen who, after the commencement of 2007 Act has transferred by way of gift or otherwise his property subject to the condition that the transferee (Donee) shall provide the basic amenities and basic physical needs to the transferor (Donor) and such transferee refuses or fails to provide such amenities and physical needs, the said transfer of property shall be deemed to have been done either by fraud or coercion or under undue influence and shall at the option of the transferor (Donor) be declared void by the tribunal.
The effect of the above referred provisions of 2007 Act is as under:-
(a) the senior citizen (who has attained the age of 60 years or above) can, after the commencement of 2007 Act i.e. from 29th December, 2007, gift the immovable property subject to the conditions referred in section 23 of 2007 Act; and
(b) 2007 Act has overriding effect over all other Acts and therefore, such conditions imposed while gifting the immovable property shall be considered as valid.
by LFIAdmin | Feb 4, 2023 | Home
By Ritabh Singh, 4th Year Law Student, Government Law College, Mumbai,
ritabhsingh44@gmail.com | February 02, 2023
THE COLLEGIUM SYSTEM AND THE ROLE OF THE COLLEGIUM
The recent battle of words between the executive and the judiciary finds its genesis in the ever controversial topic, i.e, the collegium system.
The Chief Justice of India (CJI), along with the four senior most puisne judges of the Hon’ble Supreme Court of India, form the collegium, and this body carries out the administrative function of recommending judges for appointment to the Supreme Court and the High Courts in India, and transfer of judges of the latter.
Only the collegium can initiate the process of appointment and transfer of judges and it recommends the names of suitable individuals for the appointment or transfer to the Council of Ministers. The collegium independently initiates this process as and when required.
The collegium only takes decisions of appointment and transfer for the constitutional courts, i.e, the Supreme Court and the High Courts. Judges of the District Courts are appointed by the Governor of the State in consultancy with the High Court of the State [1].
It is imperative to note that this system to appoint and transfer judges to the constitutional courts is not mentioned in any provision of law and has come into existence on account of past judgements of the Apex Court.
ROLE OF COUNCIL OF MINISTERS AND THE PRESIDENT OF INDIA
The names for appointment and transfer are recommended by the collegium to the Council of Ministers, who then aid and advise the President on the final appointment or transfer [2] of judges. The President is bound to exercise this function in accordance with the advice given by the Council of Ministers. Judges are then appointed or transferred by the President under his hand and seal [3]. The collegium does not directly recommend names to the President. In a scenario where the made recommendation is not accepted by the Council of Ministers, the recommendation is sent back to the collegium for reconsideration. However, if the same names are recommended again by the collegium, the Council of Minsters is bound to accept those recommendations and to advise the President to appoint or transfer the judges accordingly.
CONSTITUENT ASSEMBLY DEBATES ON APPOINTMENT
In the pre-constitution era, judges were appointed at the absolute discretion of the Crown [4], subject only to criteria of eligibility. Judges also held office till the Crown’s pleasure [5]. The age limit for retirement of judges was introduced in The Government of India Act, 1935 [6]. During the drafting of our constitution, it was agreed by the Constituent Assembly that appointment must not be left to the executive, which is why a mandatory obligation to consult the CJI was put in place. Several recommendations for the appointment and transfer of judges were made such as constituting a board of members to appoint judges; to subject confirmation of appointment by two-third votes of Parliament; to consult Council of States for appointment. The debates, which lasted a week, resulted in the enactment of Article 124 of our constitution [7], and a consultative process for appointment and transfer originated between the executive and the judiciary.
THE THREE JUDGES CASE
After our Constitution came into force, judges were appointed by the President as per the advice of the Council of Ministers, however, subsequent to the consultation with the CJI, who was the senior most judge of the Supreme Court. Primacy in appointment, per se, did not vest in any functionary as decisions on appointment and transfer were taken after following a consultative process. The CJI did not enjoy the power to appoint or transfer judges, the President only appointed or transferred judges on advice of the Council of Ministers, and the Council of Ministers consulted and concurred with the CJI on appointment and transfer of judges. However, in 1973, Justice A. N. Ray [8] was made the CJI after superseding 3 senior judges. In 1977 again, Justice Khanna was superseded [9] due to the scathing remarks he made against the government [10] of the day. Prior to these 2 supplants, Prime Minister Nehru in the year 1964 appointed Justice Gajendragadkar as the CJI, superseding Justice Imam, the reason being that Justice Imam was suffering from a serious illness [11]. However, this was done after proper consultation took place between the Council of Ministers and the CJI.
As the consultative process broke down in 1973 and 1977, questions on primacy in appointment and transfer of judges arose, and the same was first decided in S. P. Gupta v. Union of India [12] (also known as the First Judges Case). Justice Bhagwati, in the case, held –
“The Chief Justice of India, the Chief Justices of the High Courts and such other Judges of the High Courts and of the Supreme Court as the Central Government may deem it necessary to consult, are merely constitutional functionaries having a consultative role, and the power of appointment resides solely and exclusively in the Central Government…
It would therefore be open to the Central Government to override the opinion given by the constitutional functionaries required to be consulted and to arrive at its own decision in regard to the appointment of the judge in the High Court or the Supreme Court…. Even if the opinion given by all the constitutional functionaries consulted by it is identical, the Central Government is not bound to act in accordance with such opinion…”
Thus, primacy rested in the opinion of the executive as held in the above mentioned case. It was held in the First Judges Case that since the executive is accountable to the public, primacy in appointment and transfer must be with the executive. Concurrence with the opinion of the CJI was held not to be a pre-requisite in appointment or transfer of judges by the Council of Ministers. The question of primacy and concurrence was re-visited in SCARA v. Union of India [13] (also known as the Second Judges Case) wherein the Supreme Court overruled the judgement of the First Judges Case.
The Court held that the provision for consultation with the CJI was introduced since it was realized that the CJI is best equipped to assess the worth of the candidate and his or her suitability for appointment as a judge. While the appointment must be a result of a participatory consultative process, in the event where there is an impasse due to disagreement between constitutional functionaries, the opinion of judiciary, which is symbolized in the opinion of the CJI, has primacy. Since personal traits of members are best known by the CJI, opinion of the CJI will not only have primacy, but will be determinative in the process of appointment and transfer. It was also held that the senior most judge of the Supreme Court shall be appointed as the CJI.
The Court held that the notion of the judiciary not being accountable to the public is a myth and has no real basis. In actual practice, the CJI and the Chief Justices of High Courts are held accountable for proper functioning of their courts and appointments made to their courts, not only by the public but even by the Bar. In response to the argument that provisions of the Constitution must be restricted to the interpretation which the framers intended, the court held that the current issue was not foreseen and therefore, was not discussed by the framers of the Constitution. The term ‘consultation’ in Article 124 of the Constitution was held to be understood as ‘concurrence’, meaning that the Council of Ministers are bound to concur with the opinion of the CJI in matters of appointment and transfer of judges. The Court went on to accept formation of a collegium, as the same was held more credible, and this collegium consisted of the CJI and the two senior most puisne judges of the Supreme Court. The primary function of this collegium would be to recommend names of suitable individuals for appointment and transfer in the constitutional courts to the executive. The executive had the option of refusing such recommendations after providing reasons to the collegium. However, if the same name was recommended again by the collegium, then the executive would be bound to accept such recommendation and appoint or transfer the individual.
In the Special Reference by the President, in exercise of authority granted by the Constitution of India, in 1998 [14] (also known as the Third Judges Case), the Supreme Court increased the number of senior most puisne judges in the collegium from two to four. It was a judgement which furthered the decision laid down in the Second Judges Case.
THE NATIONAL JUDICIAL APPOINTMENT COMMISSION
The National Judicial Appointment Commission (NJAC) Act was passed in 2014 which sought to introduce a body consisting of the CJI, two senior most puisne judges of the Supreme Court, the Law Minister and two eminent individuals (appointed by the CJI, Prime Minister and the Leader of Opposition), which would appoint and transfer judges in the constitutional courts. It sought to abolish the collegium system and to bring in transparency in the process of appointment and transfer of judges.
The Supreme Court held the NJAC Act as unconstitutional in 2015 [15]. The basis on which the Court held the Act as unconstitutional was the judgement passed in the Second Judges Case. The Court further held that the Act interfered with the independence of the Judiciary and would give primacy in appointment and transfer of judges to the political parties of the country. Since then, the Supreme Court has invited suggestions to improve the collegium system, and in 2017, the collegium publically uploaded its recommendations for appointment and transfer, along with reasons for the same. Recently, the collegium has even publically provided rebuttals to the objections raised by the executive, as seen in the appointment of Advocate Saurabh Kripal and Advocate Somasekhar Sundaresan, among others. However, arguments for right to reputation emerged, which remains imperative to consider.
CONCLUSION
The problems associated with the collegium system that had come to light was the cavalier attitude shown towards nepotistic elements and the total enigma surrounding the rationale behind appointments and transfers. It is unconscionable to have certain individuals exercising unfettered power. The consultative process must be followed to ensure cohesive constitutional functionaries. Independence of Judiciary is indeed of paramount importance, but the very purpose of democracy is defeated if only certain individuals exercise unalterable and uncheck power, as the collegium is accused of exercising.
On the other hand, political parties transcending in the domain of judiciary will end up corrupting the entire institution, and justice will remain unattainable. As said by Dr. B. R. Ambedkar, absolutism of any kind would result in a stunted growth of the nation. Keeping this in mind, there should be constructive communication between the executive and the judiciary, instead of the bickering of words which the nation has been a witness to.
[1] Article 233(1), Constitution of India
[2] Article 74(1), Constitution of India
[3] Appointment of judges in Supreme Court and High Court: Article 124(2) and 217(1) respectively; Transfer of judges of the High Court: Article 222(1)
[4] Section 101, Government of India Act, 1919
[5] Section 102, Government of India Act, 1919
[6] Section 200 for the Federal Court, Section 220 for the High Courts
[7] In the debates of the constituent assembly, appointment of judges is under Article 103
[8] Appointed as the 14th CJI, 1 day after the decision in Kesavananda Bharati case was delivered
[9] By Justice M H Beg, who became the 15th CJI
[10] In ADM Jabalpur v Shivakant Shukla, 1976 AIR 1207
[11] Supreme Court Observer
[12] AIR 1982 SC 149, 1981 Sup (1) SCC 87, 1982 2 SCR 365
[13] Supreme Court Advocates-on-Record Association v. Union of India, 1993 (WP/1303/1987)
[14] SR 1/1998 Re: Appointment and transfer of judges
[15] Supreme Court Advocates-on-Record Association v. Union of India, 2015 (WP/13/15)
