14 January 2025 - Legal Updates

1. Article 21 Doesn’t Discriminate between Good Person or Bad Person, History-Sheeter Held Entitled to Compensation for Illegal Detention

Case Title: R. Eswaran vs. The Government of Tamil Nadu and Others

Judgment Delivered on : 7th January, 2025

Coram: Hon'ble Mr. Justice N. Anand Venkatesh 

The Madras High Court recently made important observation relating to Article 21 of the Constitution of Indian and explained that the Article does not distinguish between the nature or character of ‘person’ while safeguarding life and liberty of the person. 

Factual Matrix of the case in brief

• The court was hearing a petition submitted by R Eswaran (the petitioner), who sought compensation of ₹10 lakh for his unlawful detention. The petitioner had been detained under the Tamil Nadu Preventive Detention Act following an order from the Dindigul District Collector on November 23, 2021.
• The Advisory Board, in an order dated December 30, 2021, determined that there was insufficient justification for the petitioner’s detention and recommended revoking the detention order. However, the revocation was not officially issued until March 14, 2022, and the petitioner was subsequently released on March 17, 2022.
• Thus, claiming that the detention from December 30 to March 17 was not backed by law, the petitioner moved the court for detention.
• The State (Respondent), in contrast, argued that while the advisory board provided its opinion on December 30, the completion of the process required additional time. The Additional Advocate General contended that there was no illegal detention involved. He stressed on the fact that the petitioner had 25 prior cases against him and, as a history-sheeter, he was not eligible for any compensation.

Opinion held by the High Court

• The High Court noted that the fundamental right under Article 21 of the Constitution refers to the term “person” without differentiating between a “good person” and a “bad person.” The court stated that no law could stipulate that only an exemplary individual could receive compensation. 
• According to the Court, the position taken by the respondents [state] was entirely untenable and infringed upon the fundamental rights granted to individuals under Article 21 of the Constitution of India.
• The High Court was not convinced by the State’s arguments and determined that the detention was indeed illegal. It remarked that any form of detention must adhere to the fundamental right guaranteed under Article 21 of the Constitution and character of the person detained is not relevant in making detention legal or illegal.
• Based on the above observation the Court concluded that the petitioner was illegally detained and was therefore, entitled to compensation and directed the State Government to pay Rs. 50,000 compensation to a petitioner.

Court Must Adhere to Basic Principles of CPC When Deciding Petition Under Section 9 of the Arbitration Act

Case Title: Tuf Metallurgical Private Limited vs. Bst Hk Limited and Others

Date of Judgment: 3rd January, 2025

Coram: Hon'ble Mr. Justice Ninala Jayasurya and Hon'ble Mr. Justice Nayapathy Vijay

A division bench of the Andhra Pradesh High Court in its ruling stressed on the balance between the Arbitration Act and the Code of Civil Procedure (CPC) in adjudicating petitions under Section 9. The bench highlighted that while the court must adhere to fundamental CPC principles, it retains the discretion to grant interim relief without being strictly bound by procedural rules. 

Brief Factual Background of the Case

• On December 19, 2023, the respondent and the appellant entered into a contract in which the appellant agreed to supply iron ore of a specified quality.
• A dispute arose when the iron ore delivered was found to differ from the agreed-upon quality. The respondent issued a formal notice after receiving no response to several emails sent regarding the issue.
• Although the appellant intended to resolve the matter amicably, no payment was made, and the dispute remained unsettled. Consequently, the respondent filed a petition under Section 9 of the Arbitration Act, seeking to attach the iron ore stored at Vizag Port to secure the value of the award.
• The Single Judge granted the application and ordered the attachment of the property.

Contentions Raised by the Parties

• The appellant argued that it is a reputable company with assets totaling approximately ₹91 crores as of March 31, 2023, and that the attached property constitutes a trading commodity essential to its operations. They contended that the attachment order issued by the learned Single Judge has severely impacted their business.
• In response, the respondent countered that while the company’s value is reported to be around ₹91 crores as of March 31, 2023, the appellant lacks fixed assets. They asserted that the only realizable asset is the attached property, and if the appeal is granted, Respondent No. 1 would be unable to recover the claimed amount due to the absence of any immovable assets belonging to the appellant company.

Observations Made by the High Court

• The question before the court was whether the Single Judge’s order of attachment warranted interference.
• The Andhra Pradesh High Court stated that when addressing a petition under Section 9 of the Arbitration Act, the court must consider the fundamental principles of the CPC. However, the court’s authority to grant relief is not limited by every procedural requirement outlined in the CPC. In exercising its power to provide interim relief under Section 9 of the Arbitration Act, the court is not strictly obligated to follow the CPC provisions.

Precedents Cited

• The High Court followed the precedent in the case of Essar House Private Limited vs. Arcellor Mittal Nippon Steel India Limited (2022), where the Supreme Court stated that when considering a petition under Section 9 of the Arbitration Act, the court must adhere to the fundamental principles of the CPC. However, the court’s authority to grant relief is not restricted by every procedural requirement outlined in the CPC. In exercising its powers to provide interim relief under Section 9, the court is not strictly bound by CPC provisions. If a strong prima facie case is established and the balance of convenience favors granting interim relief, the court should not deny relief solely due to technicalities related to the absence of specific averments for attachment before judgment as per Order 38 Rule 5 of the CPC.
• The Court also observed that in Sanghi Industries Limited (2022), the Supreme Court took a different stance, stating that unless the pre-conditions outlined in Order 38 Rule 5 of the CPC are met, including specific allegations supported by credible evidence and a prima facie case demonstrating that the appellant is likely to undermine the decree or award, an interim order under Section 9 of the Arbitration Act may not be granted
• The court further noted that the power of attachment under Order 38 Rule 5 of the CPC was clarified in Raman Tech. & Process Engg. Co. vs. Solanki Traders (2008), where it was described as a drastic and extraordinary power that should be exercised sparingly and strictly in accordance with the Rule. It added that given the serious nature of the attachment power, it would be quite inappropriate to suggest that such authority can be exercised independently of the pleadings simply because Section 9 of the Arbitration Act allows the civil court to issue orders that are “just and convenient.”
• The High Court also cited the decision in Adhunik Steels Ltd. vs. Orissa Manganese and Minerals (P) Ltd. (2007), where the Supreme Court stated that “the issuance of an interim prohibitory or mandatory injunction is governed by established rules, and it is hard to believe that the legislature intended for Section 9 of the Act to create provisions that deviate from the accepted principles governing interim injunctions.

Verdict of the Court

• Applying the aforementioned principles to the present case, the court noted that once the first requirement for granting an interim order of attachment—pleadings—has been met, the next step is to verify whether the proper procedures have been followed prior to ordering the attachment.
• The High Court highlighted that Order 38 Rule 5 of the CPC requires that a notice be issued to the defendant to provide security within a specified timeframe. This may involve either furnishing security in a specified amount, producing and placing the property or its equivalent value at the court's disposal when required, or appearing to explain why security should not be provided.
• Additionally, the court observed that Order 38 Rule 5 does not prohibit the court from issuing an ex parte order of attachment if it believes such action is necessary to prevent the defendant from disposing of the property in the meantime. Following the attachment, the defendant has the opportunity to appear before the court and argue for its removal.
• The court expressed that although the appellant claimed that the company's net worth is ₹91 crores and insisted it is not a fly-by-night operation, no physical assets or alternative security were presented either before the learned Single Judge or this court. The assertion by Respondent No. 1 in paragraph 26(b) of their application—that the appellant possesses no assets other than the attached iron ore—appears to have merit.
• Ultimately, the court concluded that “in light of the absence of any alternative asset provided by the appellant and considering that it has received 96% of the contract value, this court believes that interim protection should be granted to Respondent No. 1 (a company based in Hong Kong) to ensure that any arbitral award in favor of Respondent No. 1 remains realisable.”

3. Alimony Should Reflect Spousal Status; Wife’s Limited Financial Needs Are Not Sufficient to Limit Amount

Case Title: X vs. Y, F.A.T 178 of 2024 IA No: CAN 2 of 2024

Judgment Dated: 13th January 2025

Coram: Hon'ble Mr. Justice Sabyasachi Bhattacharya and Hon'ble Mr. Justice Uday Kumar 

The Calcutta High Court delivered a significant ruling regarding alimony, emphasising that the amount granted must reflect the actual status and needs of both spouses. The court asserted that a spouse’s financial circumstances should not limit the alimony awarded, particularly when one party possesses greater financial resources.

This decision arose from a case where the wife sought ₹1 lakh per month in alimony, despite her modest income. The court’s ruling reinforces the principle that alimony should be commensurate with the financial capacity of the higher-earning spouse, ensuring that the needs of both parties are adequately considered in maintenance decisions.

Arguments by the Parties 

• The respondent/wife filed a plea in the appeal seeking alimony of ₹1 lakh per month.
• The counsel for the respondent/wife argued that in a pending Civil Revisional Application, the husband provided personal information through an affidavit of assets, admitting his monthly income to be ₹11,85,730.
• The husband’s current claim of a monthly income of ₹3 lakh, along with a variable bonus of ₹2,73,000, was characterized as a gross understatement of his actual earnings.
• The respondent/wife contended that she has substantiated her financial needs through her application and other pleadings, and since she has no independent income, she is entitled to at least ₹1 lakh per month in alimony.
• The senior counsel for the appellant/husband opposed the application, stating that the husband's disclosed monthly salary is ₹3 lakh, with a bonus that is an ad hoc payment based on projected business performance.
• The counsel argued that the fluctuating nature of the monthly bonus cannot serve as a reliable basis for determining the husband's income.
• The husband’s counsel pointed out various loans and EMIs he is responsible for, highlighting substantial expenses incurred.
• The husband’s senior counsel noted that the wife received a monthly amount of ₹10,909 from January 21, 2024, to November 2, 2024, and her total medical expenses for 2024 were approximately ₹65,686.
• Despite these figures, the wife claimed her monthly medical expenses were ₹55,000, which was deemed implausible.
• It was argued that if the wife’s average withdrawal was ₹10,909 per month over eleven months, it is unclear why she requires such a large alimony amount of ₹1 lakh per month.

Decision of the High Court

• The Calcutta High Court has ruled that alimony sought and awarded to a spouse must align with the actual status and needs of both parties. The court emphasised that a wife’s limited financial situation cannot be used as a reason to reduce the amount of alimony granted.
• The Court was of view that considering the monthly income disclosed by the husband, the amount claimed by the wife is less than one-fifth of his salary. The issue at hand is not merely the wife’s actual daily needs but rather her perceived requirements, which should account for both her daily sustenance and other necessities that reflect the status of both spouses.
• Even when taking into account the husband’s status and professional qualifications, a monthly alimony of ₹1 lakh is relatively modest. Furthermore, it is illogical to argue that because the wife currently receives ₹10,909 per month—at least between January and November 2024—her needs should be limited to that amount. A person with limited financial means may indeed be forced to withdraw only small amounts from their restricted resources; however, this does not imply that her necessities, particularly in relation to her husband’s status, should be confined to that figure.
• The court noted that while the husband’s income had previously been acknowledged, it was unclear how his monthly earnings could have decreased from ₹11,85,730 to ₹3 lakh, along with a monthly bonus of ₹2,73,000 over time.
• The court asserted that the remuneration of a professional with the stature and qualifications of the appellant/husband, specifically a Cost and Management Accountant, should not decline unless there is a specific and clearly stated reason for such a reduction.
• Regarding alimony, the court held that it is a well-established guideline that the monthly alimony awarded to the wife typically ranges from one-fifth to one-third of the husband’s net income. Consequently, the plea was resolved, and the wife was awarded alimony of ₹1 lakh per month.