Sc india


Published on

Published in: Education
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Sc india

  1. 1. CONTENTSHistory 3Introduction 4Jurisdiction 7Judicial Independence of 8SCEmergency and the 10Government of IndiaCase Study : Vodafone tax 12dispute
  2. 2. 2012Mukesh PatelSchool ofTechnologyManagementandEngineeringRohit Mehta324MC-2MBA(TECH.)MECHANICAL[THE SUPREME COURT OFINDIA]
  3. 3. HISTORY The Supreme Court of India came into existence on 26th January, 1950 and is located on Tilak Marg, New Delhi. The Supreme Court of India functioned from the Parliament House till it moved to the present building. It has a 27.6 metre high dome and a spacious colonnaded verandah. For a peek inside, you‘ll have to obtain a visitor‘s pass from the front office. On the 28th of January, 1950, two days after India became a Sovereign Democratic Republic, the Supreme Court came into being. The inauguration took place in the Chamber of Princes in the Parliament building which also housed Indias Parliament, consisting of the Council ofStates and the House of the People. It was here, in this Chamber of Princes that the Federal Courtof India had sat for 12 years between 1937 and 1950. This was to be the home of the SupremeCourt for years that were to follow until the Supreme Court acquired its own present premises.The inaugural proceedings were simple but impressive. They began at 9.45 a.m. when the Judgesof the Federal Court - Chief Justice Harilal J.Kania and Justices Saiyid Fazl Ali, M. PatanjaliSastri, Mehr Chand Mahajan, Bijan Kumar Mukherjee and S.R.Das - took their seats. Inattendance were the Chief Justices of the High Courts of Allahabad, Bombay, Madras, Orissa,Assam, Nagpur, Punjab, Saurashtra, Patiala and the East Punjab States Union, Mysore,Hyderabad, Madhya Bharat and Travancore-Cochin. Along with the Attorney General for India,M.C. Setalvad were present the Advocate Generals of Bombay, Madras, Uttar Pradesh, Bihar,East Punjab, Orissa, Mysore, Hyderabad and Madhya Bharat. Present too, were Prime Minister,other Ministers, Ambassadors and diplomatic representatives of foreign States, a large number ofSenior and other Advocates of the Court and other distinguished visitors.Taking care to ensure that the Rules of the Supreme Court were published and the names of allthe Advocates and agents of the Federal Court were brought on the rolls of the Supreme Court,the inaugural proceedings were over and put under part of the record of the Supreme Court.After its inauguration on January 28, 1950, the Supreme Court commenced its sittings in a partof the Parliament House. The Court moved into the present building in 1958. The building isshaped to project the image of scales of justice. The Central Wing of the building is the CentreBeam of the Scales. In 1979, two New Wings - the East Wing and the West Wing - were addedto the complex. In all there are 15 Court Rooms in the various wings of the building. The ChiefJustices Court is the largest of the Courts located in the Centre of the Central Wing.The original Constitution of 1950 envisaged a Supreme Court with a Chief Justice and 7 Judges -leaving it to Parliament to increase this number. In the early years, all the Judges of the Supreme
  4. 4. Court sat together to hear the cases presented before them. As the work of the Court increasedand arrears of cases began to cumulate, Parliament increased the number of Judges from 8 in1950 to 11 in 1956, 14 in 1960, 18 in 1978 and 26 in 1986. As the number of the Judges hasincreased, they sit in smaller Benches of two and three - coming together in larger Benches of 5and more only when required to do so or to settle a difference of opinion or controversy.INTRODUCTIONThe Supreme Court of India comprises the Chief Justice and 30 other Judges appointed by thePresident of India. Supreme Court Judges retire upon attaining the age of 65 years. In order to beappointed as a Judge of the Supreme Court, a person must be a citizen of India and must havebeen, for at least five years, a Judge of a High Court or of two or more such Courts in succession,or an Advocate of a High Court or of two or more such Courts in succession for at least 10 yearsor he must be, in the opinion of the President, a distinguished jurist. Provisions exist for theappointment of a Judge of a High Court as an Ad-hoc Judge of the Supreme Court and for retiredJudges of the Supreme Court or High Courts to sit and act as Judges of that Court.The Constitution seeks to ensure the independence of Supreme Court Judges in various ways. AJudge of the Supreme Court cannot be removed from office except by an order of the Presidentpassed after an address in each House of Parliament supported by a majority of the totalmembership of that House and by a majority of not less than two-thirds of members present andvoting, and presented to the President in the same Session for such removal on the ground ofproved misbehavior or incapacity. A person who has been a Judge of the Supreme Court isdebarred from practicing in any court of law or before any other authority in India.The proceedings of the Supreme Court are conducted in English only. Supreme Court Rules,1966 are framed under Article 145 of the Constitution to regulate the practice and procedure ofthe Supreme Court.Size of the courtAs originally enacted, the Constitution of India provided for a Supreme Court with a ChiefJustice and seven lower-ranking Judges—leaving it to Indian Parliament to increase this number.In the early years, a full bench of the Supreme Court sat together to hear the cases presentedbefore them. As the work of the Court increased and cases began to accumulate, Parliamentincreased the number of Judges from the original eight in 1950 to eleven in 1956, fourteen in1960, eighteen in 1978, twenty-six in 1986 and thirty one in 2008. As the number of the Judgeshas increased, they have sat in smaller Benches of two or three (referred to as a DivisionBench)—coming together in larger Benches of five or more (referred to as a ConstitutionalBench) only when required to settle fundamental questions of law. Any bench may refer the caseunder consideration up to a larger bench if the need to do so arises.Eligibility The person must be a citizen of India Judge of a High Court or of two or more such Courts in succession for at least five years, or
  5. 5.  An Advocate of a High Court or of two or more such Courts in succession for at least ten years, or The person must be, in the opinion of the President, a distinguished jurist.A Judge of a High Court or retired Judge of the Supreme Court or High Courts may be appointedas an ad-hoc Judge of the Supreme Court.AppointmentAll Judges of Supreme Court are appointed by the President of India. However, the Presidentmust appoint judges in consultation with the Supreme Court, and appointments are generallymade on the basis of seniority and not political preference.TenureSupreme Court Judges retire at the age of 65. A judge of Supreme Court can be removed fromoffice only through the process of impeachment.SalaryArticle 125 of Indian Constitution leaves it to the Indian Parliament to determine the salary, otherallowances, leave of absence, pension, etc. However, the parliament can not alter any of theseprivileges and rights to the judges disadvantage after his appointment.Court demographicsThe Supreme Court has always maintained a wide regional representation. It also has had a goodshare of Judges belonging to religious and ethnic minorities. The first woman to be appointed tothe Supreme Court was Justice Fatima Beevi in 1987. She was later followed by Justices SujataManohar, Ruma Pal and Gyan Sudha Mishra. Justice Ranjana Desai, who was elevated from theBombay High Court is the most recent woman judge in the Supreme Court, so that for the firsttime there were two women (Mishra and Desai) simultaneously in the Supreme Court.In 2000 Justice K. G. Balakrishnan became the first judge from the dalit community. In 2007 healso became the first dalit Chief Justice of India. However after retirement a petition-seekingvigilance probe into the allegations of "amassment of wealth disproportionate to their sources ofincome" by Balakrishnans family members was filed before the Income Tax Vigilance and Anti-Corruption Bureau. The income tax department confirmed recently that at least three of hisrelatives had held a large amount of black money.JURISDICTIONThe Supreme Court has original, appellate and advisory jurisdiction under Articles 32, 131–144of the Constitution.Original jurisdictionThe court has exclusive original jurisdiction over any dispute between the Government ofIndia and one or more States or between the Government of India and any State or States on oneside and one or more States on the other or between two or more States, if and insofar as thedispute involves any question (whether of law or of fact) on which the existence or extent of alegal right depends. In addition, Article 32 of the Constitution grants an extensive originaljurisdiction to the Supreme Court in regard to enforcement of Fundamental Rights. It is
  6. 6. empowered to issue directions, orders or writs, including writs in the nature of habeascorpus, mandamus, prohibition, quo warranto and certiorari to enforce themAppellate jurisdictionThe appellate jurisdiction of the Supreme Court can be invoked by a certificate granted by theHigh Court concerned under Articles 132(1), 133(1) or 134 of the Constitution in respect of anyjudgment, decree or final order of a High Court in both civil and criminal cases, involvingsubstantial questions of law as to the interpretation of the Constitution. The Supreme Court canalso grant special leave under article 136(1) to appeal from a judgment or order of any non-military Indian court. Parliament has the power to enlarge the appellate jurisdiction of theSupreme Court and has exercised this power in case of criminal appeals by enacting the SupremeCourt (Enlargement of Criminal Appellate Jurisdiction) Act, 1970.Appeals also lie to the Supreme Court in civil matters if the High Court concerned certifies: (a)that the case involves a substantial question of law of general importance, and (b) that, in theopinion of the High Court, the said question needs to be decided by the Supreme Court.In criminal cases, an appeal lies to the Supreme Court if the High Court (a) has on appealreversed an order of acquittal of an accused person and sentenced him to death or toimprisonment for life or for a period of not less than 10 years, or (b) has withdrawn for trialbefore itself any case from any Court subordinate to its authority and has in such trial convictedthe accused and sentenced him to death or to imprisonment for life or for a period of not lessthan 10 years, or (c) certified that the case is a fit one for appeal to the Supreme Court.Parliament is authorized to confer on the Supreme Court any further powers to entertain and hearAdvisory jurisdictionThe Supreme Court has special advisory jurisdiction in matters which may specifically bereferred to it by the President of India under Article 143 of the Constitution. There are provisionsfor reference or appeal to this Court under Article 317(1) of the Constitution, Section 257 of theIncome Tax Act, 1961, Section 7(2) of the Monopolies and Restrictive Trade Practices Act,1969, Section 130-A of the Customs Act, 1962, Section 35-H of the Central Excises and SaltAct, 1944 and Section 82C of the Gold (Control) Act, 1968. Appeals also lie to the SupremeCourt under the Representation of the People Act, 1951, Monopolies and Restrictive TradePractices Act, 1969, Advocates Act, 1961, Contempt of Courts Act, 1971, Customs Act, 1962,Central Excises and Salt Act, 1944, Enlargement of Criminal Appellate Jurisdiction Act, 1970,Trial of Offences Relating to Transactions in Securities Act, 1992, Terrorist and DisruptiveActivities (Prevention) Act, 1987 and Consumer Protection Act, 1986. Election Petitions underPart III of the Presidential and Vice Presidential Elections Act, 1952 are also filed directly in theSupreme Court.The Constitution of India under Article 145 empowers the supreme court to frame its own rulesfor regulating the practice and procedure of the Court as and when required (with the approval ofthe President). Accordingly, "Supreme Court Rules, 1950" were framed. They were replaced bythe present rules called as "Supreme Court Rules, 1966"Case selectionOral arguments
  7. 7. DecisionReporting and citationJUDICIAL INDEPENDENCE OF SCThe Constitution seeks to ensure the independence of Supreme Court Judges in various ways.Judges are generally appointed on the basis of seniority and not on political preference. A Judgeof the Supreme Court cannot be removed from office except by an order of the President passedafter an address in each House of Parliament supported by a majority of the total membership ofthat House and by a majority of not less than two-thirds of members present and voting, andpresented to the President in the same Session for such removal on the ground of provedmisbehavior or incapacity. The salary and allowances of a judge of the Supreme Court cannot bereduced after appointment. A person who has been a Judge of the Supreme Court is debarredfrom practicing in any court of law or before any other authority in India.Power to review its own judgmentsUnder Order XL of the Supreme Court Rules, the Supreme Court may review its judgment ororder but no application for review is to be entertained in a civil proceeding except on thegrounds mentioned in Order XLVII, Rule 1 of the Code of Civil Procedure and in a criminalproceeding except on the ground of an error apparent on the face of the record.Powers to punish contemptUnder Articles 129 and 142 of the Constitution the Supreme Court has been vested with power topunish anyone for contempt of any law court in India including itself. The Supreme Courtperformed an unprecedented action when it directed a sitting Minister of the state ofMaharashtra, Swaroop Singh Naik, to be jailed for 1 month on a charge of contempt of court on12 May 2006. This was the first time that a serving Minister was ever jailed.Jammu and KashmirWith reference to the State of Jammu and Kashmir (J&K) it would be relevant to note that, J&Khas for various historical reasons a special status vis-a-vis the other states of India. Article 370 ofthe Constitution of India carves out certain exceptions for J&K. The Constitution of India is notfully applicable to the state of J&K. This is the effect of Article 370. The Constitution of India isapplicable to the state of J&K with various modifications and exceptions. These are provided forin the Constitution (Application to Jammu and Kashmir) Order, 1954. Also, Jammu andKashmir, unlike the other Indian states, also has its own Constitution. Although the Constitutionof India is applicable to Jammu and Kashmir with numerous modifications, the Constitution(Application to Jammu and Kashmir) Order, 1954 makes Article 141 applicable to the state ofJ&K and hence law declared by Supreme Court is equally applicable to all courts of J&Kincluding the High Court.Landmark judgments: Judiciary-Legislature confrontationsLand reform (early confrontation)After some of the courts overturned state laws redistributing land from zamindar (landlord)estates on the grounds that the laws violated the zamindars fundamental rights, the Parliament ofIndia passed the First Amendment to the Constitution in 1951 followed by the Fourth
  8. 8. Amendment in 1955 to protect its authority to implement land redistribution. The Supreme Courtcountered these amendments in 1967 when it ruled in Golaknath v. State of Punjab thatParliament did not have the power to abrogate fundamental rights, including the provisions onprivate property.Other laws deemed unconstitutional On 1 February 1970, the Supreme Court invalidated the government-sponsored Bank Nationalization Bill that had been passed by Parliament in August 1969. The Supreme Court also rejected as unconstitutional a presidential order of 7 September 1970 that abolished the titles, privileges, and privy purses of the former rulers of Indias old princely states.Response from Parliament In reaction to the decisions of the Supreme Court, in 1971 the Parliament of India passed an amendment empowering itself to amend any provision of the constitution, including the fundamental rights. The Parliament of India passed the 25th Amendment, making legislative decisions concerning proper land compensation non-justifiable. The Parliament of India passed an amendment to the Constitution of India, which added a constitutional article abolishing princely privileges and privy purses.Counter-response from the Supreme CourtThe Court ruled that the basic structure of the constitution cannot be altered for convenience. On24 April 1973, the Supreme Court responded to the parliamentary offensive by ruling inKesavananda Bharati v. The State of Kerala that although these amendments were constitutional,the court still reserved for itself the discretion to reject any constitutional amendments passed byParliament by declaring that the amendments cannot change the constitutions "basic structure", adecision piloted through by Chief Justice Sikri.EMERGENCY AND THE GOVERNMNET IN INDIAThe independence of judiciary was severely curtailed on account of powerful centralgovernment] during the Indian Emergency (1975-1977) of Indira Gandhi. The constitutionalrights of imprisoned persons were restricted under Preventive detention laws passed by theparliament. In the case of Shiva Kant Shukla Additional District Magistrate of Jabalpur v. ShivKant Shukla, popularly known as the Habeas Corpus case, a bench of five senior most judges ofSupreme Court ruled in favour of states right for unrestricted powers of detention duringemergency. Justices A.N. Ray, P. N. Bhagwati, Y. V. Chandrachud, and M.H. Beg, stated in themajority decision:
  9. 9. (Under the declaration of emergency) no person has any locus to move any writ petition under Art. 226 before a High Court for habeas corpus or any other writ or order or direction to challenge the legality of an order of detention.The only dissenting opinion was from Justice H. R. Khanna, who stated: Detention without trial is an anathema to all those who love personal liberty... A dissent is an appeal to the brooding spirit of the law, to the intelligence of a future day, when a later decision may possibly correct the error into which the dissenting Judge believes the court to have been betrayed. It is believed that before delivering his dissenting opinion, Justice Khanna had mentioned to his sister: I have prepared my judgment, which is going to cost me the Chief Justice- ship of India." When the central Government is to recommend one of Supreme Court Judges for the post of Chief Justice in January 1977, Justice Khanna was superseded despite being the most senior judge at the time and thereby Government broke the convention of appointing only the senior most judge to the position of Chief Justice of India. In fact, it was felt that the other judges may have gone along for this very reason. Justice Khanna remains a legendary figure among the legal fraternity in India for this decision. The New York Times, wrote of this opinion: "The submission of an independent judiciary to absolutist government is virtually the last step in the destruction of a democratic society; and the Indian Supreme Courts decision appears close to utter surrender." During the emergency period, the government also passed the 39th amendment, which sought to limit judicial review for the election of the Prime Minister; only a body constituted by Parliament could review this election. The court tamely agreed with this curtailment (1975), despite the earlier Keshavanand decision. Subsequently, the parliament, with most opposition members in jail during the emergency, passed the 42nd Amendment which prevented any court from reviewing any amendment to the constitution with the exception of procedural issues concerning ratification. A few years after the emergency, however, the Supreme court rejected the absoluteness of the 42nd amendment and reaffirmed its power of judicial review in the Minerva Mills case (1980). As a final act during the emergency, in what Justice V. R. Krishna Iyer has called "a stab on the independence of the High Court judges were moved helter-skelter across the country, in concurrence with Chief Justice Beg. Post-1980: An assertive Supreme Court Fortunately for Indian jurisprudence, the "brooding spirit of the law" referred to by Justice Khanna was to correct the excesses of the emergency soon enough. After Indira Gandhi lost elections in 1977, the new government of Morarji Desai, and especially law minister Shanti Bhushan (who had earlier argued for the detenues in the Habeas Corpus case), introduced a number of amendments making it more difficult to declare and sustain an emergency, and reinstated much of the power to the Supreme
  10. 10. Court. It is said that the Basic Structure doctrine, created in Kesavananda, was strengthened in Indira Gandhis case and set in stone in Minerva Mills. The Supreme Courts creative and expansive interpretations of Article 21 (Life and Personal Liberty), primarily after the Emergency period, have given rise to a new jurisprudence of public interest litigation that has vigorously promoted many important economic and social rights (constitutionally protected but not enforceable) including, but not restricted to, the rights to free education, livelihood, a clean environment, food and many others. Civil and political rights (traditionally protected in the Fundamental Rights chapter of the Indian Constitution) have also been expanded and more fiercely protected. These new interpretations have opened the avenue for litigation on a number of important issues. It is interesting to note that the pioneer of the expanded interpretation of Article 21, Chief Justice P N Bhagwati, was also one of the judges who heard the ADM Jabalpur case, and held that the Right to Life could not be claimed in Emergency.A CASE SUMMARYExecutive Summary of “Vodafone” case pronounced by Supreme Court of IndiaVodafone wins the tax case: Supreme Court pronounces a landmark judgment and emphasizesthe need for certainty in tax policy. The Supreme Court of India (SC) pronounced its muchawaited decision in the controversial Vodafone tax dispute. Whilst deciding the USD 2 billiontax dispute in favour of Vodafone, the SC has laid down important principles with respect tooffshore transfer of shares having underlying interest in India and principles to be considered inapplying the general anti avoidance rules. This alert seeks to provide a summary of thepronouncement in the SC.Vodafone International Holdings BV (―Vodafone―) entered into a Share Purchase Agreement(―SPA‖) with Hutchison Telecommunications International Limited (―HTIL‖),Cayman Islandsfor purchasing the singular equity share of CGP Investment(Holdings) Ltd (―CGP‖), a Caymanbased wholly owned subsidiary of HTIL. CGP in turn, directly and indirectly, ownedapproximately 67 percent of the share capital of Vodafone Essar Limited (―VEL"), an Indianentity. The acquisition resulted in Vodafone acquiring control over CGP and its subsidiaries,including VEL. The Revenue authorities issued a notice to Vodafone, treating it as an assessee-in-default for failure to withhold taxes on gains arising to HTIL on the transfer of shares of CGP.The Revenue authorities held that the gains were taxable in India as there was transfer of acontrolling stake / business situated in India.Judgment of the High CourtFollowing the writ petition filed by Vodafone in 2010, the Bombay High Court (HC) analyzedthe transaction documents, the filings made with regulatory authorities and the various publicannouncements made by Vodafone and HTIL in detail and came to the conclusion that thebusiness understanding of the parties was to transfer the controlling interest in VEL – which had
  11. 11. significant nexus with India. The situs of the capital asset was held to be a crucial jurisdictionalcondition that must be fulfilled in order to attract chargeability of income arising from thetransfer of a capital asset. It was held that while transfer of a share of CGP per se could not betaxed in India due to lack of situs in India, intrinsic to the transaction were transfer of otherrights and entitlements - such ‗bundle of rights‘ also constituted ‗capital assets‘. It was held thattransfer of such rights as were found to have nexus with India could be taxed in India and theconsideration should be appropriately allocated over the various rights transferred in thetransaction.In relation to applicability of section 195 of the Income Tax Act, 1961 (‗Act‘), which providesfor tax withholding, it was held that once the nexus with India is shown to exist, withholding taxobligation would arise including on a non resident.Arguments before the SCThe senior legal counsel for Vodafone argued that the provisions of section 9, that defines thescope of income taxable in India, should be construed strictly to deem income to accrue and arisein India only when the capital asset is situated in India.The situs of a share was then argued to be at the place where the company was registered ieCayman Islands and not the place where the economic interests lie and the manner in which theshare is valued were not relevant. It was further contended that in the absence of ―look-through‖provisions in section 9, the substance of the transaction could not be questioned. On the otherhand, the Revenue argued that section 9 should be given the widest possible interpretation andshould be interpreted purposively. It was urged that by looking at the terms of the SPA and otherdocument filed with regulatory authorities and the time to time press releases issued byVodafone and HTIL, the intention of the parties was clearly to transfer the controlling interest inVEL, which was situated in India.On the question of reliance on the SC judgment in the case of Azadi Bachao Andolan,apreceding landmark decision on tax planning involving tax treaties, Vodafone argued that formof the transaction should be respected and that the corporate veil could be lifted only in the caseof a fraud. On the other hand, the Revenue argued that the SC decision in Azadi BachaoAndolan should be revisited in light of the previous distinguishing decision in the case ofMcDowell. Heavy reliance was also placed on the Ramsay principle enunciated by the UKCourts which allows application of the ―substance over form‖ approach.With regard to the requirement to withhold tax, it was contended by Vodafone that it should betriggered only if there is a presence in India whereas the Revenue argued that the term ―anyperson‖ should also include a ―foreign company‖. It was further argued that Vodafone had apresence in India on account of its shareholding and joint venture with another Indian telecomcompany.
  12. 12. Judgment of the SCThe three member bench of the SC, headed by Chief Justice Kapadia delivered its verdict infavour of Vodafone setting aside the judgment of the Bombay High Court. The Bench stated thata ―look-at‖ approach needs to be adopted for the transaction, rather than a ―look through‖approach in interpreting the relevant tax provisions. The Bench held that investment structureshad to be respected and it was to be determined whether an investment was made forparticipation in the entity or whether it was a pre-ordained transaction aimed at avoidance oftaxes.The Bench also examined the need to review the decision of the SC in Azadi BachaoAndolanand concluded that there seemed to be no reason to refer the decision for reconsideration by alarger Bench.The SC also stated that genuine strategic tax planning could not be ruled against. The CGPstructure was in place since 1998, and it could not be said that this was a preordained transaction.Further, it could not be said that CGP had no role to play, since apart from holding shares, it alsoassisted in smooth foundation of the entire structure.This was not a sham transaction, or a transaction aimed at avoidance of tax. With respect tosplitting of the consideration amongst different assets and rights, the SC held that merely becausecertain values were indicated in correspondence between parties, did not mean that parties haveagreed to bifurcate values amongst different assets and rights. The Vodafone deal was aconsolidated transaction and each right and asset could not be dissected in order to apply section9 of the Act.The CGP share was located outside India and therefore India had no jurisdiction to tax the same.Thus, the withholding tax provisions would not be triggered in the current case. Similarly,section 163 of the Act, which provides for taxation on a representative assessee basis, also couldnot be invoked. The subject matter of the transaction was the share of CGP share and India hadno right of jurisdiction to tax such a transaction. Chief Justice Kapadia concluded his speakingorder by forcefully stating that certainty is integral part of the rule of law, especially in matters oftax policy. Limitation on benefits and ―look through‖ provisions are matters of policy, and theGovernment needs to play its role to avoid conflicting interpretations. Investors need to knowwhere they stand and this would also help the tax administration.This judgment will help address several contentious issues including those with respect to scopeand sanctity of tax planning, applicability of anti avoidance rules, taxation of overseas
  13. 13. transactions, issues regarding situs of shares, and applicability of withholding tax provisions incase of non residents not having a presence in India.REFERENCES