2. • When consequence of nullification on failure
to comply with a prescribed requirement is
provided by the statute itself, there can be no
manner of doubt that such statutory
requirement must be interpreted as
mandatory.
3. Rajsekhar Gogoi v. State of Assam and Ors.
AIR 2001 SC 2313
• Dispute – relating to settlement of country liquor
shop in favour of Respondent No. 4
• Provision – Assam Excise Rules, 1945 (Rules 206
and 223)
• Rule 206 – (1) Save with the special sanction of
the State Government all country shops will be
settled under the tender system.
• (2) The tenders must be in such form and contain
such particulars as may be prescribed by the
State Government. Tenders not containing all the
particulars shall be liable to be rejected.
…
4. • Rule 223 (2): In making settlement to any person
preference shall always be given to the educated
unemployed youths or to co-operatives and co-
operative firms formed by such educated
unemployed youth. Preference shall also be
given to the person belonging to the more
backward community of the other Backward
classes
• Note. - The term "educated unemployed youth"
as mentioned in sub- rule (2) of Rule 223 means a
person not exceeding 35 years of age who has
passed the H.S.L.C. or its equivalent examination
and is without any employment
5. • October 1998 – tender notice issued for
settlement of shop
Appellant, Respondent No.4 and another
person filed applications under Rule 206
• 28th December, 1998 – Respondent No. 4’s
application accepted
– Challenged by Appellant and another
unsuccessful tenderer (appeal filed before Board
of Revenue)
6. Contentions raised by Appellant
• 1st Contention - Respondent No. 4 could not
be treated as an educated unemployed youth
within the meaning of that expression in Rule
223 (2).
– respondent No. 4 had appeared in the
examination in June 1998 but had failed.
Thereafter, she appeared as a non-collegiate
student in March 1999. It was contended that this
shows that respondent No. 4 was pursuing her
studies and, therefore, could not be regarded as
falling under the category of 'educated
unemployed'
7. • 2nd Contention - in the application which was
filed the financial particulars had not been given
by the said respondent.
• appeal allowed by Board of Revenue – Held that
provisions of Rule 206 were mandatory
• Writ petition filed challenging Board’s decision
– Dismissed by single Judge
• Letters Patent Appeal filed by Respondent No.4
• Successful
• Held that Board’s decision that Rule 206 was
mandatory was an error apparent on the face of the
record (i.e. Rule 206 is not mandatory)
8. Supreme Court
• tender notice, clause 10 states as follows :
"The tenderer for settlement of shop is required to
give full information regarding his financial capacity in
the tender, such information must include the details of
soundness of finance, cash in hand, bank balance,
security and assets etc. Such information shall be
verified by the Deputy Commissioner/any other
authorised person before settlement of shop to the
tenderer:“
• This clearly shows that it was imperative for a tenderer
to furnish full information as required so that the same
could be verified by the Deputy Commissioner or any
other authorised person 'before settlement of shop to
the tenderer' (emphasis added); In the present case,
such opportunity was clearly denied to the authorities
when respondent No. 4 had not furnished the requisite
particulars along with her tender.
9. • “We are, therefore, of the opinion that as the tender
itself of respondent No. 4 was liable to be rejected
because of lack of particulars as stated hereinabove,
no further question arises…”
• Rule 206 whether mandatory ?
• “…We do not agree with the observations of the High
Court that Rule 206 is not mandatory The language of
the said Rule is clear and unambiguous. It not only
says that the tenders must be in their required Form
but also stipulates the consequence of non-
compliance thereto, the consequence being that the
tenders not containing all the particulars 'shall be
liable to be rejected’ ”
10. • Tenders must be in their required form
• Rule stipulates the consequence of non-
compliance thereto
– Rule 206 is mandatory in nature
11. Haryana Urban Development Authority v.
B.K. Sood
(2006) 1 SCC 164
• Provision – Section 24-A, Consumer
Protection Act, 1986
• Appeal against an order of NCDRC
• Respondent’s claim was barred by limitation
u/s. 24-A
12. • 24A. Limitation period.—(1) The District Forum, the
State Commission or the National Commission shall
not admit a complaint unless it is filed within two
years from the date on which the cause of action has
arisen.
• (2) Notwithstanding anything contained in sub-section
(1), a complaint may be entertained after the period
specified in sub-section (1), if the complainant
satisfies the District Forum, the State Commission or
the National Commission, as the case may be, that he
had sufficient cause for not filing the complaint within
such period: Provided that no such complaint shall be
entertained unless the National Commission, the State
Commission or the District Forum, as the case may be,
records its reasons for condoning such delay.
13. • “Section 24-A of the Consumer Protection Act, 1986
(referred to as the Act hereafter) expressly cast a duty on the
Commission admitting a complaint, to dismiss a complaint
unless the complainant satisfies the District Forum, the State
Commission or the National Commission, as the case may be,
that the complainant had sufficient cause for not filing the
complaint within the period of two years from the date on
which the cause of action had arisen.
The Section debars any fora set up under Act, admitting a
complaint unless the complaint is filed within two years
from the date on which the cause of action has arisen…
There was not even any prayer by the respondent in his
complaint for condoning the delay. Therefore, the claim of
the respondent on the basis of the allegations contained in
the complaint, was clearly barred by limitation as the two
year period prescribed by Section 24A of the Act had expired
much before the complaint was admitted by the State
14. Jagan Nath v. Jaswant Singh
AIR 1954 SC 210
• Appeal by Special Leave
• Provision – Section 82, The Representation of the People
Act, 1951
• Section 82 – Parties of the petition – A petitioner shall join
as respondents to his petition –
(a) where, the petitioner, in addition to claiming
declaration that the election of all or any of the returned
candidates is void, claims a further declaration that he
himself or any other candidate has been duly elected, all
the contesting candidates, other than the petitioner, and
where no such further declaration is claimed, all the
returned candidates; and
(b) any other candidate against whom allegations of
any corrupt practice are made in the petition
15. • Whether compliance with Section 82 is mandatory?
• Sections 85 and 90 dealt with the consequence of non-
compliance with certain provisions
• ... “section 85 provides that if the provisions of sections
81, 83 or 117 are not complied with, the Election
Commission shall dismiss the petition.”
• “Section 90 prescribes the procedure to be followed by the
tribunal. Sub-section (2) of section 90 is in these terms :-
• "Subject to the provisions of this Act and of any rules made
thereunder, every election petition shall be tried by the
tribunal, as nearly as may be, in accordance with the
procedure applicable under the Code of Civil Procedure,
1908, to the trial of suits."
• Sub-section (4) provides that notwithstanding anything
contained in section 85, the tribunal may dismiss an
election petition which does not comply with the
provisions of sections 81, 83 or 117.
16. • ... “It is significant that both the Election
Commission and the tribunal have been given
powers in express terms to dismiss an
election petition which does not comply with
the requirements of sections 81, 83 or 117,
but no such powers are given to dismiss a
petition in limine which does not comply
with the provisions of section 82.”
Court concluded:
• non-compliance with the provisions
of section 82 is not fatal to the petition.
17. • “There is ample authority for the view that this is
merely a directory provision and non-joinder of
any party is not a fatal defect and a decree can
be passed so far as the parties actually on record
are concerned unless the party omitted is a
necessary party in the sense that in his absence
no relief could be given at all even as regards
parties actually on record. There is no valid
reason for treating the word "shall" in section
82 in a manner different from the same word
used in Order XXXIV, rule 1, Civil Procedure Code.
It is one of the rules of construction that a
provision like this is not mandatory unless non-
18. • “...From the circumstance that section 82 does
not find a place in the provisions of section
85 the conclusion follows that the directions
contained in section 82 were not considered to
be of such a character as to involve the dismissal
of a petition in limine and that the matter was
such as could be dealt with by the tribunal under
the provisions of the Code of Civil Procedure
specifically made applicable to the trial of
election petitions.”
• It is therefore clear that the provisions of the law
relating to the impleading of parties are not
necessarily fatal and can be cured
19. K. Kamaraja Nadar v. Kunju Thewar
AIR 1958 SC 687
• Provisions interpreted – Sections 82 and 117,
Representation of the People Act, 1951
• Section 82 - Parties of the petition – A petitioner shall join
as respondents to his petition –
(a) where, the petitioner, in addition to claiming
declaration that the election of all or any of the returned
candidates is void, claims a further declaration that he
himself or any other candidate has been duly elected, all
the contesting candidates, other than the petitioner, and
where no such further declaration is claimed, all the
returned candidates; and
(b) any other candidate against whom allegations of
any corrupt practice are made in the petition
20. • Section 117 – Security for costs – (1) At the
time of presenting an election petition, the
petitioner shall deposit in the High Court in
accordance with the rules of the High Court a
sum of one thousand rupees (*now Two
Thousand) as security for the costs of the
petition.
21. • Part V – Conduct of Elections
Chapter I – Nomination of candidates
Section 30 – Appointment of dates for nominations
etc. – As soon as the notification calling upon a
constituency to elect a member to elect a member or
members is issued, the Election Commission shall, by
notification in the Official Gazette appoint –
(a) the last date for making nominations...
(b) the date for the scrutiny of nominations...
(c) the last date for withdrawal of candidatures...
(d) the date or dates on which a poll shall, if necessary,
be taken...
(e) the date before which the election shall be completed
22. Brief Facts
– 7 candidates duly nominated for election in the
constituency
– 4 candidates had withdrawn their candidature by the
last date for such withdrawal
– 3 candidates left (Appellant, 2nd respondent and one
Sundararaja Pillai)
– List of contesting candidates published u/s. 38 (i.e.
Candidates who were included in the list of validly
nominated candidates and who have not withdrawn
their candidature within the said period)
– One candidate (Sundararaja Pillai) out of the three
retired from the contest u/s. 55A (2)
– Appellant and 2nd respondent remained
23. • After the appellant was declared duly elected,
the first respondent who was an elector in the
said constituency filed an election petition,
being election Petition No. 147 of 1957,
impleading the appellant and the 2nd
respondent as party respondents to that
petition and prayed that the election of the
appellant from Sathur Constituency be
declared void and further that the 2nd
respondent be declared duly elected.
24. Contention
• Pillai, who was a validly nominated candidate
but retired/withdrew subsequently was not
impleaded as a party (issue of non-joinder)
25. Court’s view
• If the provisions of section 82 which prescribes who shall be joined
as respondents to the petition are not complied with, the Election
Commission is enjoined under section 85 of the Act to dismiss the
petition and similar are the consequences of non-compliance with
the provisions of section 117 relating to deposit of security of
costs.
• If the Election Commission however does not do so and accepts
the petition, it has to cause a copy of the petition to be published in
the official gazette and a copy thereof to be served by post on each
of the respondents and then refer the petition to an election
tribunal for trial.
• Section 90(3) similarly enjoins the Election Tribunal to dismiss an
election petition which does not comply with the provisions
of section 82 or section 117 notwithstanding that it has not been
dismissed by the Election Commission under section 85.
• Section 90(3) is mandatory and the Election Tribunal is bound to
dismiss such a petition if an application is made before it for the
purpose.
26. • Section 117 - provision relating to the deposit
of security for the costs of the petition.
• When a petitioner presents an election
petition to the Election Commission
under section 81 he is to enclose with the
petition a Government Treasury receipt
showing that a deposit of one thousand
rupees has been made by him either in a
Government Treasury or in the Reserve Bank
of India in favour of the Secretary to the
Election Commission as security for the costs
of the petition.
27. Question
• whether the words "in favour of the Secretary
to the Election Commission" are mandatory
in character so that if the deposit has not
been made in favour of the Secretary to the
Election Commission as therein specified the
deposit even though made in a Government
Treasury or in the Reserve Bank of India and
as security for the costs of the petition would
be invalid and of no avail.
28. • If, for instance, the petitioner made the deposit
either in a Government Treasury or in the
Reserve Bank of India in favour of the Election
Commission itself and obtained a Government
Treasury receipt in regard to the same, could it
be contended that in spite of such a deposit
having been made, the said Government Treasury
receipt was not in conformity with the
requirements of section 117 and the petitioner
could be said not to have complied with the
requirements of that section so as to involve a
dismissal of his petition under Section
85 or section 90(3) ?
29. Court’s view
• It would be absurd to imagine that a deposit
made either in a Government Treasury or in the
Reserve Bank of India in favour of the Election
Commission itself would not be sufficient
compliance with the provisions of section
117 and would involve a dismissal of the
petition under section 85 or section 90(3).
• The above illustration is sufficient to demonstrate
that the words "in favour of the Secretary to the
election commission" used in section 117 are
directory and not mandatory in their character.
30. Baru Ram v. Smt. Parsanni and Anr.
AIR 1959 SC 93
• Provision interpreted – Section 33(5), R.P. Act, 1951
• Section 33 – Presentation of nomination paper and
requirements for a valid nomination –
(5) Where the candidate is an elector of a different
constituency, a copy of the electoral roll of that
constituency or of the relevant part thereof or a
certified copy of the relevant entries in such roll shall,
unless it has been filed alongwith the nomination
paper, be produced before the returning officer at the
time of scrutiny
31. • Whether Section 33(5) is mandatory in nature?
• Consequence of non-compliance laid down in
Sec. 36(2)(b)
• Sec. 36 – Scrutiny of nomination
(2) The returning officer shall then examine the
nomination papers and shall decide all
objections which may be made to any
nomination, and may, either on such objection or
on his own motion, after such summary inquiry, if
any, as he thinks necessary, reject any
nomination on any of the following grounds:
(b) – that there has been a failure to comply with
any of the provisions of Section 33 or Section 34;
32. • this is a case where the statute requires the
candidate to produce the prescribed
evidence and provides a penalty for his
failure to do so. In such a case it is difficult to
appreciate the relevance or validity of the
argument that the requirement of s. 33(5) is
not mandatory but is directory, because the
statute itself has made it clear that the failure
to comply with the said requirement leads to
the rejection of the nomination paper.
33. • “Whenever the statute requires a particular
act to be done in a particular manner and also
lays down that failure to comply with the said
requirement leads to a specific consequence it
would be difficult to accept the argument that
the failure to comply with the said
requirement should lead to any other
consequence.”
34. • There is no doubt that the essential object of the scrutiny of
nomination papers is that the returning officer should be satisfied
that the candidate who is not an elector in the constituency in
question is in fact an elector of a different constituency.
• The satisfaction of the returning officer is thus the matter of
substance in these proceedings; and if the statute provides the
mode in which the returning officer has to be satisfied by the
candidate it is that mode which the candidate must adopt.
• In the present case Jai Bhagawan failed to produce any of the
copies prescribed and the returning officer was naturally not
satisfied that Jai Bhagawan was an elector of' a different
constituency. If that in substance was the result of Jai Bhagawan's
failure to produce the relevant copy the consequence prescribed
by s. 36(2)(b) must inevitably follow.
• It is only if the returning officer had been satisfied that Jai
Bhagawan was an elector of a different constituency that his
nomination papers could have been accepted as valid. It is well-
settled that the statutory requirements of election law have to be
strictly observed.
35. Ponnala Lakshmaiah v. Kommuri Pratap Reddy
(2012) 7 SCC 788
• Provision interpreted – Section 83(1) proviso
• Section 83 – Contents of petition - (1) An election
petition—
• (a) shall contain a concise statement of the material facts
on which the petitioner relies;
• (b) shall set forth full particulars of any corrupt practice
that the petitioner alleges including as full a statement as
possible of the names of the parties alleged to have
committed such corrupt practice and the date and place of
the commission of each such practice; and
• (c) shall be signed by the petitioner and verified in the
manner laid down in the Code of Civil Procedure, 1908 (5 of
1908) for the verification of pleadings
36. • Proviso – Provided that where the petitioner
alleges any corrupt practice, the petition shall
also be accompanied by an affidavit in the
prescribed form in support of the allegation of
such corrupt practice and the particulars
thereof
37. • It was “…argued that the election petition was liable
to be dismissed also on the ground that the same was
not accompanied by an affidavit which the election
petitioner was obliged to file in terms of proviso
to Section 83 (1) of the Act. He urged that the use of
the word ‘shall’ in the proviso made it mandatory for
the petitioner to support the averments in the
election petition with an affidavit in Form 25
prescribed under Rule 94 (A) of the Conduct of Election
Rules, 1961.
• Inasmuch as an affidavit had not been filed in the
prescribed format, the election petition, argued Mr.
Rao, was no election petition in the eye of law and
was, therefore, liable to be dismissed in limine.”
38. • Conduct of Elections Rules, 1961 (Statutory Rules and Order) [FORM 25
(See rule 94A)
Affidavit
I, ........................,the petitioner in the accompanying election petition calling in question the
election of Shri/Shrimati.............(respondent No............in the said petition) make solemn
affirmation/oath and say—
(a) that the statements made in paragraphs.......................of the accompanying election petition about
the commission of the corrupt practice of*...................and the particulars of such corrupt practice
mentioned in paragraphs.................of the same petition and in paragraphs.....................of the
Schedule annexed thereto are true to my knowledge;
(b) that the statements made in paragraphs....................of the said petition about the commission of
the corrupt practice of*.........................and the particulars of such corrupt practice given in
paragraphs..........................of the said petition and in paragraphs.......................................of the
Schedule annexed thereto are true to my information;
(c)
(d)
etc.
Signature of deponent. Solemnly
affirmed/sworn by Shri/Shrimati.............at.....this.............day of...............….19 .
Before me,
Magistrate of the first class/Notary/ Commissioner of Oaths.]
39. • Section 86 – Trial of Election Petitions –
(1) The High Court shall dismiss an election
petition which does not comply with the
provisions of Section 81 or Section 82 or
Section 117
...
40. Whether proviso to Section 83(1) is mandatory
in nature?
• Question whether non-compliance of the proviso
to Section 83 (1) of the Act is fatal to the election
petition is no longer res-integra in the light of a
three-Judge Bench decision of this Court in Sardar
Harcharan Singh Brar v. Sukh Darshan Singh & Ors.
(2004) 11 SCC 196.
• In that case a plea based on a defective affidavit was
raised before the High Court resulting in the
dismissal of the election petition. In appeal against
the said order, this Court held that non-compliance
with the proviso to Section 83 of the Act did not
attract an order of dismissal of an election petition
in terms of Section 86 thereof.
41. • Section 86 of the Act does not provide for
dismissal of an election petition on the
ground that the same does not comply with
the provisions of Section 83 of the Act. It
sanctions dismissal of an election petition for
non-compliance of Sections 81, 82 and 117 of
the Act only.
• Such being the position, the defect if any in
the verification of the affidavit filed in
support of the petition was not fatal, no
matter the proviso to Section 83(1) was
couched in a mandatory form.
42. Manilal Mohanlal Shah v. Sardar Sayed Ahmed
Sayed Mahmad AIR 1954 SC 349
Provisions interpreted –
Order XXI Rules 84 and 85
Order XXI Rule 72
Order XXI Rule 84 – (1) On every sale of immovable
property the person declared to be the
purchaser shall pay immediately after such
declaration a deposit of twenty-five per cent on
the amount of his purchase-money to the officer
or other person conducting the sale, and in
default of such deposit, the property shall
forthwith be re-sold
43. • (2) Where the decree-holder is the purchaser
and is entitled to set off the purchase-money
under Rule 72, the Court may dispense with
the requirements of this rule
Rule 85 – The full amount of purchase-money
payable shall be paid by the purchaser into
Court before the Court closes on the fifteenth
day from the sale of the property:
Provided that, in calculating the amount to be so
paid into Court, the purchaser shall have the
advantage of any set-off to which he may be
entitled under Rule 72
44. • Rule 86 – In default of payment within the
period mentioned in the last preceding rule,
the deposit may, if the Court thinks fit, after
defraying the expenses of the sale, be
forfeited to the Government, and the
property shall be re-sold, and the defaulting
purchaser shall forfeit all claim to the
property or to any part of the sum for which it
may subsequently be sold
45. Whether the failure to make the deposit under
Order XXI, rules 84 and 85, is only a material
irregularity in the sale which can only be set
aside under rule 90 or whether it is wholly
void? (Whether the rules are mandatory?)
• “The moment a person is declared to be the
purchaser, he is bound to deposit 25 per cent.
of the purchase-money unless he happens to
be the decree-holder, in which case the Court
may not require him to do so (Rule 84).”
46. • “The provision regarding the deposit of 25 per cent.
by the purchaser other than the decree-holder is
mandatory as the language of the rule suggests.
• The full amount of the purchase-money must be paid
within fifteen days from the date of the sale but the
decree-holder is entitled to the advantage of a set-off.
• The provision for payment is,. however, mandatory...
(Rule 85).
• If the payment is not made within the period of
fifteen days, the Court has the discretion to forfeit the
deposit, and there the discretion ends
• but the obligation of the Court to re-sell the property
is imperative. A further consequence of non-payment
is that the defaulting purchaser forfeits all claim to the
property (Rule 86).”
47. • Order XXI Rule 72
• Rule 72 (1) – No holder of a decree in
execution of which property is sold shall,
without the express permission of the Court,
bid for or purchase the property.
• (3) Where a decree-holder purchases, by
himself or through another person, without
such permission, the Court may, if it thinks fit,
on the application of the judgment-debtor or
any other person whose interests are affected
by the sale, by order set aside the sale; ...
49. • “A decree-holder cannot purchase property at
the Court- auction in execution of his own
decree without the express permission of the
Court and that when he does so with such
permission, he is entitled to a set-off, but if he
does so without such permission, then the
Court has a discretion to set aside the sale
upon the application by the judgment-debtor,
or any other 'person whose interests are
affected by the sale (Rule.72). As a matter of
pure construction this provision is obviously
directory and not mandatory”
50. Dr. H.S. Rikhy v. The New Delhi Municipal
Committee AIR 1962 SC 554
• The Committee built in 1945 what is known as the Central
Municipal Market Lodi Colony. This Market has 32 shops, with
residential flats on 28 of them.
• In April 1945, the Committee, in pursuance of a resolution passed
by it, invited tenders from intending bidders for those shops and
premises. On receipt of tenders, the highest bidders were allotted
various shops on rents varying from Rs. 135-8-0 to Rs. 520 per
mensem.
• The allottees occupied the shops and the premises in accordance
with the allotments made by the Committee and continued to pay
the respective amounts, which may be characterised as rents, (one
of the controversies in the case – i.e. was the amount paid actually
‘rent’ within the meaning of the Act)
• Towards the end of 1952, 30 of the occupants filed applications
under s. 8 of the Act praying for the fixation of standard rent in
respect of the premises in their respective occupation.
51. • The Committee raised a preliminary objection
to the maintainability of the aforesaid
applications on the ground that there was no
relationship of landlord and tenant between
the applicants and the Committee, within the
meaning of the Act.
• Issue framed - Whether the relationship of
tenant and landlord exists between the
parties?
52. • In our opinion, the Act applies only to that
species of 'letting' by which there relationship of
land-lord and tenant is created, that is to say, by
which an interest in the property-, however
limited in duration, is created.
• Having held that the Act applies to 'letting' which
creates an interest in immovable' property we
have to determine the question whether in these
cases there was a contract creating such a
relationship
• Section 18, contains the authorisation in favour
of the committee to enter into contracts and to
transfer property belonging to it. This power is
subject to the other provisions of the Act.
53. • Section 18. - Incorporation of Committee:-
Every committee shall be a body corporate by
the name of the municipal committee of its
municipality; and shall have perpetual
succession and a common seal, with power to
acquire and hold property, both movable and
immovable, and subject to the provisions of
this Act, or of any rules made thereunder to
transfer any property held by it to contract
and to do all other things necessary for the
purposes of its constitution; and may sue and
be sued in its corporate name
54. • Section 47 - Mode of executing contracts and transfer
of property. - (1) Every contract made by or on behalf
of the committee of any municipality,… shall be in
writing, and must be signed by two members, of
whom the President or a Vice President shall be one,
and countersigned by the Secretary…
(2) Every transfer of immovable property belonging to
any committee must be made by an instrument in
writing, executed by the President or Vice President…
(3) No contract or transfer of the description
mentioned in this section executed otherwise than in
confirmity with the provisions of this section shall be
binding on this committee.
55. Whether Section 47(3) is mandatory in nature?
• “Now in order that the transfer of the property
in question should be binding on the Committee,
it was essential that it should have been made
by an instrument in writing executed by the
President or the Vice-President and at least two
other members of the Committee, and the
execution by them should have been attested by
the Secretary.
• If these conditions are not fulfilled, the contract
of transfer shall not be binding on the
Committee.
56. • But it has been contended on behalf of the appellants that
the noncompliance with the provisions aforesaid of Sec. 47,
quoted above, would not render the contract of transfer of
property void but only voidable. In other words, where the
actings of the parties have given effect to the transactions,
as in the instant cases by delivery of possession of the
property by the Committee and payment of the rent 'by"
the appellants, the absence of formalities would not render
the transactions of no legal effect
• But it has to be noted that it was not contended on behalf
of appellants that the provisions of Sec. 47(3) of the
Municipal Act, are not mandatory and are merely
directory..
• Such an argument was not 'and could not have been
advanced, because it is settled Law that the provisions of a
Statute in those peremptory terms could not but be
construed as mandatory.”
57. When the statute does not expressly provide for
nullification but imposes some other penalty
When the statute does not expressly provide for
nullification as a consequence of the non-compliance
of the statutory injunction but imposes expressly
some other penalty, it is a question of construction in
each given case whether the Legislature intended to
lay down an absolute prohibition or merely to make
the offending person liable for penalty.
• Consequence of non-compliance – not nullification.
Some other penalty
Legislative intention to be ascertained by looking at the
respective cases concerned
58. Bank of India Finance Ltd. v. Custodian
• Violation of certain confidential unpublished
directions, issued by the Reserve Bank of India
under Section 36(1)(a) and (b) of the Banking
Companies Act which were known to the Banks
but not to others, prohibiting Banks from
entering into certain transactions was held not to
affect the validity of the transactions but to
make only to make the Banks liable for penalty
under Section 46 of the Act.
(Bank of India Finance Ltd. v. Custodian AIR 1997 SC
1952)
59. • Infringements of the instructions issued by
the Reserve Bank of India under Banking
Regulations Act by the Banks
• Such directions were confidential and
between RBI and the Banks
• Customers of the Banks had no knowledge
about such directions
• These infringements do not invalidate such
contracts entered into between the banks and
it's customer
60. • The non-compliance of the directions issued
by the Reserve Bank may result in
prosecution/or levy of penalty under section
46, but it cannot result in invalidation of any
contract by the bank with the third party.
• If the contention of the Custodian is accepted
it will result in invalidation of agreements by
the banks, even where the third parties may
not be aware of the direction which are being
violated.
61. • To give an example
• if the Reserve Bank by confidential circulars fixes
the limit in excess of which the banks cannot
give any loan but, without informing the third
party, the bank while exceeding it's limit gives a
loan which is then utilised by the bank's
customer.
• It will be inequitable and improper to hold that
as the directions of the Reserve Bank had not
been complied with by the bank, the grant of
loan cannot be regarded as valid and, as a
consequence thereof, the customer must return
the amount received even though he may have
utilised the same in his business.
62. Temporaneous or Transient Nullity
Passmore v. Morland and Ors., (1999) All ER
1005
Inntrepreneur Pub Company (2nd Defendant)
63. • Lease having a term of 20 years between Mr.
Passmore and Inntrepreneur Pub Company
• One of the covenants of the lease:
“Subject to the provisions of this Schedule the
lessee shall purchase from the Company or
its Nominees and from no other person, firm
or company all such Specified Beers as he
shall require for sale in the Premises...”
64. Question
• whether a beer supply agreement which, as
between the original parties, was prohibited
by Article 85(1) and so automatically void
under the provisions of Article 85(2), may,
nevertheless, be enforced by an assignee from
one party in circumstances in which, if an
agreement in identical terms had been
entered into between the assignee and the
other party at the time of the assignment,
that agreement would not have been
prohibited?
65. • Morland, which was a small regional brewer,
acquired from Inntrepreneur the legal and
beneficial interest in a few of the latter’s tied
houses including “The Rose and Crown”.
• It thereby became Mr. Passmore’s landlord.
• In effect, it took over the lease entered into
between Mr. Passmore and Inntrepreneur.
66. • At the time when the tenancy was granted in
1992 Inntrepreneur Pub Company was the
owner of some 4,500 on-licenced premises.
Those properties were let on terms which
included a tie which was in the same, or
substantially the same, form as that in the
plaintiff's tenancy.
67. • Article 85 (1). The following shall be deemed
to be incompatible with the Common Market
and shall hereby be prohibited: any
agreements between enterprises, any
decisions by associations of enterprises and
any concerted practices which are likely to
affect trade between the Member States and
which have as their object or result the
prevention, restriction or distortion of
competition within the Common Market…
• (2) Any agreements or decisions prohibited
pursuant to this Article shall be null and void.
68. • Article 81 is concerned with certain intended
or actual economic effects arising out of the
operation of agreements and concerted
practices...
• It only prohibits agreements and concerted
practices which have a particular offensive
economic objective or effect.
• No agreement or clause in an agreement is
per se invalid. It has to be looked at in the
factual environment in which it is operating or
intended to be operated.
69. • In order to determine whether an agreement
has a prohibited effect, it is necessary and
relevant to look at and weigh up all relevant
economic facts including matters such as the
size of the parties to the agreement, before it
could be said that a breach has occurred.
• The result of this is that a contract in one
trader’s hands may offend against the Article
but the same contract in another’s may not.
70. • On a proper construction of Article 85 it has been held
that agreements are prohibited when and while they
are incompatible with competition in the common
market and not otherwise and that nullity imposed by
Article 85(2) has a temporaneous or transient effect.
• An agreement can move into and out of illegality, so
too it can move into and out of nullity
• So, if as a result of change of circumstances the
prohibition no longer applies as between parties to
the agreement, then the agreement between them
ceases to be void.
