deposit before the DRAT as a pre-condition under sec.18 DRAT -vs- secured assets / goods bailed = deposit before the DRAT as a pre-condition for considering the appeal on merits in terms of Section 18 of the Act, is not a secured asset. The partial deposit before the DRAT as a pre-condition for considering the appeal on merits in terms of Section 18 of the Act, is not a secured asset. It is not a secured debt either, since the borrower or the aggrieved person has not created any security interest on such pre- deposit in favour of the secured creditor. If that be so, on disposal of the appeal, either on merits or on withdrawal, or on being rendered infructuous, in case, the appellant makes a prayer for refund of the pre- deposit, the same has to be allowed and the pre-deposit has to be returned to the appellant, unless the Appellate Tribunal, on the request of the secured creditor but with the consent of the depositors, had already appropriated the pre-deposit towards the liability of the borrower, or with the consent, had adjusted the amount towards the dues, or if there be any attachment on the pre-deposit in any proceedings under Section 13(10) of the Act read with Rule 11 of The Security Interest (Enforcement) Rules, 2002, or if there be any attachment in any other proceedings known to law.= “171. General lien of bankers, factors, wharfingers, attorneys and policy- brokers.—Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.” Section 171 of The Indian Contract Act, 1872 provides for retention of the goods bailed to the bank by way of security for the general balance of account. The pre-deposit made by a borrower for the purpose of entertaining the appeal under Section 18 of the Act is not with the bank but with the Tribunal. It is not a bailment with the bank as provided under Section 148 of The Indian Contract Act, 1872. Conceptually, it should be an argument available to the depositor, since the goods bailed are to be returned or otherwise disposed of, after the purpose is accomplished as per the directions of the bailor. In the case before us, the first respondent had in fact sought withdrawal of the appeal, since the appellant had already proceeded against the secured assets by the time the appeal came up for consideration on merits. There is neither any order of appropriation during the pendency of the appeal nor any attachment on the pre-deposit. Therefore, the deposit made by the first respondent is liable to be returned to the first respondent. Though for different reasons as well, we endorse the view taken by the High Court. Thus, there is no merit in the appeal. It is accordingly dismissed. We make it clear that the dismissal of the appeal is without prejudice to the liberty available to the appellant to take appropriate steps under Section 13(10) of the SARFAESI Act read with Rule 11 of the Security Interest (Enforcement) Rules, 2002.

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION



                        CIVIL APPEAL NO. 4379 OF 2016
                   (Arising out of SLP (C) No. 13861/2015)


AXIS BANK                               ...  APPELLANT (S)

                                   VERSUS

SBS ORGANICS PRIVATE LIMITED AND
ANOTHER                                                ... RESPONDENT (S)


                           J  U  D  G  M  E  N  T

KURIAN, J.:

Leave granted.

An appeal under Section 18  of  The  Securitisation  and  Reconstruction  of
Financial  Assets  and  Enforcement   of   Security   Interest   Act,   2002
(hereinafter referred  to  as  ‘SARFAESI  Act’)  before  the  Debt  Recovery
Appellate Tribunal (hereinafter referred to as ‘DRAT’)  can  be  entertained
only if the borrower deposits fifty per cent of the amount in terms  of  the
order passed by the Debt  Recovery  Tribunal  (hereinafter  referred  to  as
‘DRT’) under Section 17 of the Act or fifty per cent of the amount due  from
the borrower as claimed by the secured  creditor,  whichever  is  less.  The
Appellate Tribunal may reduce the amount to twenty five per  cent.  What  is
the fate of such deposit on the disposal  of  the  appeal  is  the  question
arising for consideration in this case.
Being a pure legal issue, it may not be necessary for us  to  refer  to  the
factual position in detail. The  first  respondent,  being  a  borrower  and
aggrieved by the steps taken by the secured creditor,  filed  Securitisation
Application No. 152 of 2010 before the Debt  Recovery  Tribunal,  Ahmedabad.
Though, initially an interim relief was granted, the  same  was  vacated  by
order dated 20.01.2011. Therefore,  the  first  respondent  moved  the  Debt
Recovery Appellate Tribunal, Mumbai under Section 18 of  the  SARFAESI  Act.
In terms of the proviso under  Section  18,  the  first  respondent  made  a
deposit of Rs.50 lakhs before the Appellate Tribunal.  During  the  pendency
of the appeal before the DRAT, Securitisation Application itself came to  be
finally disposed of before the Debt Recovery Tribunal at Ahmedabad,  setting
aside the sale. Realising that the appeal did not  survive  thereafter,  the
first respondent sought permission to withdraw the same and also for  refund
of the deposit of Rs. 50 lakhs. Permission was granted, however,  making  it
subject to the disposal of the  appeal.  As  the  appeal  itself  was  being
withdrawn,  the  first  respondent  moved  the  High  Court  of  Gujarat  at
Ahmedabad by way of Writ Petition (Special Civil Application), aggrieved  by
the observation that the withdrawal would be subject to the  result  of  the
appeal. The same was disposed of by order dated 05.03.2015  by  the  learned
Single Judge, setting aside the said  condition  and  permitting  the  first
respondent herein to withdraw the  amount  unconditionally.  Aggrieved,  the
appellant-Bank filed an intra-Court appeal. That  appeal  was  dismissed  by
order dated 01.04.2015 by a Division Bench, and  thus  aggrieved,  the  Bank
has come up in appeal before this Court.
Heard learned Senior Counsel Shri C. U. Singh appearing for  the  appellant-
Bank and learned Counsel Vipul Jai appearing for the respondents.
The learned Senior Counsel appearing for  the  appellant-Bank  submits  that
the first respondent has no right to get back the deposit made by  it  as  a
pre-condition for entertaining the appeal. The said amount  has  to  be  set
off against the dues of  the  first  respondent,  which  has  actually  been
quantified and for which, Section 13 recovery steps have been permitted.  It
is submitted that the appellant-Bank  has  to  secure  the  entire  debt  by
proceeding against the secured assets, and therefore, the deposit is  liable
to be appropriated by the Bank. Reference is also made to Section 13(10)  of
the SARFAESI Act and Rule 11 of The Security Interest  (Enforcement)  Rules,
2002, which read as follows:

“13(10) Where dues of the secured creditor are not fully satisfied with  the
sale proceeds of the secured  assets,  the  secured  creditor  may  file  an
application in the form and  manner  as  may  be  prescribed  to  the  Debts
Recovery Tribunal having jurisdiction or a competent court, as the case  may
be, for recovery of the balance amount from the borrower.”


“11.  Procedure  for  Recovery  of  shortfall  of  secured  debt.-  (1)   An
application for recovery of balance amount by any secured creditor  pursuant
to sub-section (10) of section 13 of the  Act  shall  be  presented  to  the
Debts Recovery Tribunal in the form annexed as Appendix VI  to  these  rules
by the authorised officer or  his  agent  or  by  a  duly  authorised  legal
practitioner, to the Registrar of the Bench within  whose  jurisdiction  his
case falls or shall be sent by registered post addressed  to  the  Registrar
of Debts Recovery Tribunal.
(2) The provisions of the Debts Recovery Tribunal  (Procedure)  Rules,  1993
made under Recovery of Debts Due to Banks and  Financial  Institutions  Act,
1993 (51 of 1993), shall mutatis mutandis apply to any application filed  by
under sub-rule (1).
(3) An application under sub-rule (1)  shall  be  accompanied  with  fee  as
provided in rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993.”

Learned Senior Counsel further submits that the  Bank  has  a  lien  on  the
amount under Section 171 of The Indian Contract Act, 1872. The  decision  of
the High Court of Gujarat in Babu  Ganesh  Singh  Deepnarayan  v.  Union  of
India and another[1], which has been followed by the Division Bench  in  the
impugned judgment, does not reflect the true legal position, it  is  further
submitted.
Babu Ganesh (supra) was a case involving a challenge on  the  vires  of  the
second proviso under Section 18 of the SARFAESI Act, on the  mandatory  pre-
deposit. While upholding the  provision,  at  paragraphs-5  and  6,  it  was
observed that, in case the appeal is dismissed, the  amounts  deposited  for
entertaining the appeal would be refunded. To quote:
“5. Right of appeal is a creature of the  statute.  Legislature  can  impose
conditions under which it is to be exercised. Without a statutory  provision
creating such a right, a person aggrieved  is  not  entitled  to  prefer  an
appeal. Legislature while granting right of  appeal  can  impose  conditions
which it thinks reasonable. Such conditions merely regulate the exercise  of
right of appeal so that the same is not abused by a recalcitrant party,  and
there is no difficulty in the enforcement of the order appealed  against  in
case the appeal is ultimately dismissed. Imposition of such a  condition  is
essential, so that frivolous appeals would not be filed. Ultimately  if  the
appeal is dismissed, the aggrieved party  can  always  seek  refund  of  the
amount deposited and therefore, he is not in any way aggrieved. Further  the
Third Proviso to Section 18 (1) of the Securitization Act also  enables  the
Appellate Tribunal, for the reasons to be recorded in  writing,  reduce  the
amount to not less than 25% of the debt referred to in the  Second  Proviso.
We are not prepared to accept the contention that conditions imposed in  the
second and third proviso to Section 18(1)  of  the  Securitization  Act  are
onerous in nature so as to make the right of  appeal  illusory.  Delhi  High
Court in R.V. Saxena's case (supra)  also  upheld  the  validity  of  Second
Proviso to Section 18(1) of the  Securitization  Act  with  which  we  fully
concur.
6. We have also not come across any provision in the Statute,  enabling  the
secured creditor to adjust  or  appropriate  the  amount  deposited  by  the
borrower to prefer an appeal under Section 18(1) of the  Act.  On  dismissal
of the appeal the amount deposited as a pre-condition for filing the  appeal
will be refunded to the appellant and therefore, he is  no  way  prejudiced.
We therefore, find no merit in the contention raised by the petitioner  that
the second proviso  to  Section  18(1)  of  the  Act  is  discriminatory  or
violative of Article 14 of the Constitution of India. Petitions  lack  merit
and the same are dismissed.”

At this juncture, it may  be  necessary  to  refer  to  the  scheme  of  the
SARFAESI Act. The Act was intended to facilitate easy  and  faster  recovery
of  loans  advanced  by  banks  and  financial  institutions.  The  ordinary
recovery mechanism contemplated in The Code of  Civil  Procedure,  1908  was
not considered sufficient. Thus, the Recovery of  Debts  Due  to  Banks  and
Financial Institutions Act, 1993 was introduced for a special  and  speedier
mechanism for the recovery. Almost a decade of experience  proved  that  the
recovery process was not achieving  the  intended  objects  and  hence,  the
SARFAESI Act to regulate  securitisation  and  reconstruction  of  financial
assets  and  enforcement  of  security  interest  was   enacted.   The   Act
incorporates a system whereby direct action for  recovery  of  secured  debt
may be initiated against the secured assets of a borrower after the debt  is
declared to be a non performing asset (NPA).

“Borrower” is defined under Section 2(1)(f), which reads as follows:
“2(1)(f)    "borrower" means any  person  who  has  been  granted  financial
assistance by any bank  or  financial  institution  or  who  has  given  any
guarantee or created any mortgage or pledge as security  for  the  financial
assistance granted by any bank  or  financial  institution  and  includes  a
person who becomes borrower of a securitisation  company  or  reconstruction
company consequent upon acquisition by it of any rights or interest  of  any
bank or financial institution in relation to such financial assistance;”

“Secured Asset”, under Section 2(1)(zc), is defined as:

“2(1)(zc)   “secured  asset”  means  the  property  on  which  the  security
interest is created”

“Section 2(1)(zd) provides  for  definition  of  “secured  creditor”,  which
reads as follows:
“2(1)(zd)   "secured creditor" means any bank or  financial  institution  or
any consortium or group of banks or financial institutions and includes—

(i)   debenture trustee appointed by any bank or financial institution; or
(ii)  securitisation company or reconstruction company,  whether  acting  as
such  or  managing  a  trust  set  up  by  such  securitisation  company  or
reconstruction company for the  securitisation  or  reconstruction,  as  the
case may be; or any other trustee holding securities on behalf of a bank  or
financial institution, in whose favour security interest is created for  due
repayment by any borrower of any financial assistance;”

Section 2(1)(ze) defines “secured debt” to mean “a debt which is secured  by
any security interest”.
“Security interest” is defined under Section 2(1)(zf):
“(zf) "security interest" means  right,  title  and  interest  of  any  kind
whatsoever upon property, created in favour  of  any  secured  creditor  and
includes any mortgage, charge, hypothecation, assignment  other  than  those
specified in section 31;”

The mechanism for  enforcement  of  security  interest  is      contemplated
under Section 13 of the Act. Sub- Sections  (1),  (2),(3),(3A)  and  (4)  of
Section 13 are relevant for the purposes of the present case and   they  are
extracted below:

“13. Enforcement of security interest
(1) Notwithstanding anything contained in section 69 or section 69A  of  the
Transfer of Property Act, 1882 (4 of 1882), any  security  interest  created
in favour of any secured creditor may be enforced, without the  intervention
of court or tribunal, by such creditor in accordance with the provisions  of
this Act.
(2) Where any borrower, who is under  a  liability  to  a  secured  creditor
under a security agreement, makes any default in repayment of  secured  debt
or any installment thereof, and his account  in  respect  of  such  debt  is
classified by the  secured  creditor  as  non-performing  asset,  then,  the
secured creditor may require the borrower by notice in writing to  discharge
in full his liabilities to the secured creditor within sixty days  from  the
date of notice failing which the  secured  creditor  shall  be  entitled  to
exercise all or any of the rights under sub-section (4).
(3) The notice referred to in sub-section (2)  shall  give  details  of  the
amount payable by the  borrower  and  the  secured  assets  intended  to  be
enforced by the secured creditor in the  event  of  non-payment  of  secured
debts by the borrower.
(3A) If, on receipt of the notice under sub-section (2), the borrower  makes
any representation or raises  any  objection,  the  secured  creditor  shall
consider such representation or objection and if the secured creditor  comes
to the conclusion that such representation or objection  is  not  acceptable
or tenable, he  shall  communicate  within  one  week  of  receipt  of  such
representation  or  objection  the  reasons  for   non-acceptance   of   the
representation or objection to the borrower:
Provided that the reasons so  communicated  or  the  likely  action  of  the
secured creditor at the stage of communication of reasons shall  not  confer
any right upon the borrower to prefer an application to the  Debts  Recovery
Tribunal under section 17 or the Court of District Judge under section 17A.
(4) In case the borrower fails to discharge his  liability  in  full  within
the period specified in sub-section  (2),  the  secured  creditor  may  take
recourse to one or more of the following measures  to  recover  his  secured
debt, namely:--
(a)   take possession of the secured assets of the  borrower  including  the
right to transfer by way of lease, assignment  or  sale  for  realising  the
secured asset;
(b)   take over the management of the business  of  the  borrower  including
the right to transfer by way of lease, assignment or sale for realising  the
secured asset:

Provided that the right to transfer by way  of  lease,  assignment  or  sale
shall be exercised only where the substantial part of the  business  of  the
borrower is held as security for the debt.

Provided further that where the management of whole of the business or  part
of the business is severable, the  secured  creditor  shall  take  over  the
management of such business of  the  borrower  which  is  relatable  to  the
security for the debt.

(c)   appoint any person (hereafter referred to as the manager),  to  manage
the secured assets the possession of  which  has  been  taken  over  by  the
secured creditor;
(d)   require at any time by notice in writing, any person who has  acquired
any of the secured assets from the borrower and from whom any money  is  due
or may become due to the borrower, to pay the secured creditor, so  much  of
the money as is sufficient to pay the secured debt.”

A conspectus of the aforesaid provisions shows that under the scheme of  the
SARFAESI Act,  a  secured  creditor  is  entitled  to  proceed  against  the
borrower for the purpose of recovering his secured  debt  by  taking  action
against the secured assets, in case the  borrower  fails  to  discharge  his
liability in full within the period specified in  the  notice  issued  under
Section 13(2) of the Act. It is the mandate of  Section  13(3)  of  the  Act
that the notice issued under Section 13(2) should  contain  details  of  the
amount payable by the borrower and also the secured assets  intended  to  be
enforced by the secured creditor in the event of non-payment of the dues  as
per Section 13(2) notice. Thus, the secured creditor is entitled to  proceed
only against the secured  assets  mentioned  in  the  notice  under  Section
13(2). However, in terms of Section 13(11) of the Act, the secured  creditor
is also free to proceed first against the guarantors  or  sell  the  pledged
assets. To quote:
“13(11) Without prejudice to the rights conferred on  the  secured  creditor
under or by this section, the secured creditor shall be entitled to  proceed
against the guarantors or sell the pledged assets without first  taking  any
of the measures specified  in  clauses(a)  to  (d)  of  sub-section  (4)  in
relation to the secured assets under this Act.”

Section 17 of the Act provides for a right to appeal to the DRT  in  respect
of the grievances on the  measures  taken  by  the  secured  creditor  under
Section 13 of the Act. To quote for easy reference, Section 17 of the Act:

“17. Right to appeal.-(1) Any person (including borrower), aggrieved by  any
of the measures referred to in sub-section (4) of section 13  taken  by  the
secured creditor or his authorised officer under this Chapter, may  make  an
application alongwith such fee, as may be prescribed to the  Debts  Recovery
Tribunal having jurisdiction in the matter within forty-five days  from  the
date on which such measure had been taken:
Provided that different fees may be prescribed for  making  the  application
by the borrower and the person other than the borrower.
Explanation: For the removal of doubts,  it  is  hereby  declared  that  the
communication of the reasons to the borrower by  the  secured  creditor  for
not having accepted his representation or objection or the likely action  of
the secured creditor at  the  stage  of  communication  of  reasons  to  the
borrower shall not entitle  the  person  (including  borrower)  to  make  an
application to the Debts Recovery Tribunal under sub-section (1).
(2) The Debts Recovery Tribunal shall consider whether any of  the  measures
referred to in sub-section (4) of section 13 taken by the  secured  creditor
for enforcement of security are in accordance with the  provisions  of  this
Act and the rules made thereunder.
(3)  If,  the  Debts  Recovery  Tribunal,  after  examining  the  facts  and
circumstances of the case and evidence produced by  the  parties,  comes  to
the conclusion that any of the measures referred to in  sub-section  (4)  of
section 13, taken by the secured creditor are not  in  accordance  with  the
provisions  of  this  Act  and  the  rules  made  thereunder,  and   require
restoration  of  the  management  of  the  business  to  the   borrower   or
restoration of possession of the secured assets to the borrower, it  may  by
order, declare the recourse to any one or more measures referred to in  sub-
section (4) of section 13 taken by the  secured  creditors  as  invalid  and
restore the possession of the secured assets to the borrower or restore  the
management of the business to the borrower, as the case  may  be,  and  pass
such order as it may consider appropriate and necessary in relation  to  any
of the recourse taken by the  secured  creditor  under  sub-section  (4)  of
section 13.
(4) If, the Debts  Recovery  Tribunal  declares  the  recourse  taken  by  a
secured creditor under sub-section (4) of section 13, is in accordance  with
the  provisions  of  this  Act  and  the  rules   made   thereunder,   then,
notwithstanding anything contained in any other law for the  time  being  in
force, the secured creditor shall be entitled to take  recourse  to  one  or
more of the measures specified  under  sub-section  (4)  of  section  13  to
recover his secured debt.
(5) Any application made under sub-section (1) shall be dealt  with  by  the
Debts Recovery Tribunal as expeditiously as possible and disposed of  within
sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from  time  to  time,  extend
the said period for reasons to be recorded in  writing,  so,  however,  that
the total period of pendency of the application with the
Debts Recovery Tribunal, shall not exceed  four  months  from  the  date  of
making of such application made under sub-section (1).
(6) If the application is not disposed of by  the  Debts  Recovery  Tribunal
within the period of four months as specified in sub-section (5), any  party
to the application  may  make  an  application,  in  such  form  as  may  be
prescribed, to the Appellate  Tribunal  for  directing  the  Debts  Recovery
Tribunal for expeditious disposal of  the  application  pending  before  the
Debts  Recovery  Tribunal  and  the  Appellate   Tribunal   may,   on   such
application,  make  an  order  for  expeditious  disposal  of  the   pending
application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this  Act,  the  Debts  Recovery  Tribunal
shall, as far as may be, dispose of the application in accordance  with  the
provisions of the Recovery of Debts Due to Banks and Financial  Institutions
Act, 1993 and the rules made thereunder.”

Though Section 17 of the Act is titled as a ‘Right to appeal’,  the  liberty
granted to the aggrieved person is to make an application  to  the  DRT  and
the parties are at a liberty to  lead  evidence  before  the  tribunal.  And
thus, it is actually a trial  before  the  DRT  on  the  grievances  of  the
aggrieved persons in the respect  of  the  measures  taken  by  the  secured
creditor for recovery of dues of the  borrower  in  proceeding  against  the
secured assets.(See Mardia Chemicals v. Union of India[2])
The actual appeal is contemplated under Section 18 of the SARFAESI Act.  The
provision reads as follows:

“18. Appeal to Appellate Tribunal.-(1) Any person aggrieved,  by  any  order
made by the Debts Recovery Tribunal under section 17, may prefer  an  appeal
alongwith such fee, as may be prescribed to the  Appellate  Tribunal  within
thirty days from the  date  of  receipt  of  the  order  of  Debts  Recovery
Tribunal:
Provided that different fees may be prescribed for filing an appeal  by  the
borrower or by the person other than the borrower:
Provided further that no appeal shall be  entertained  unless  the  borrower
has deposited with the Appellate Tribunal fifty per cent of  the  amount  of
debt due from him, as claimed by the secured creditors or determined by  the
Debts Recovery Tribunal, whichever is less:
Provided also that the  Appellate  Tribunal  may,  for  the  reasons  to  be
recorded in writing, reduce the amount to  not  less  than  twenty-five  per
cent. of debt referred to in the second proviso.
(2) Save as otherwise provided in this Act, the  Appellate  Tribunal  shall,
as far as may be, dispose of the appeal in accordance  with  the  provisions
of the Recovery of Debts Due to Banks and Financial Institutions  Act,  1993
(51 of 1993) and rules made thereunder.”

Any person aggrieved by the order  of  the  DRT  under  Section  17  of  the
SARFAESI Act, is entitled to prefer an appeal along with the prescribed  fee
within the permitted period of 30 days. For ‘preferring’ an  appeal,  a  fee
is prescribed, whereas for the  Tribunal  to  ‘entertain’  the  appeal,  the
aggrieved person has to make a deposit of fifty per cent of  the  amount  of
debt due from him as claimed by the secured creditors or determined  by  the
DRT, whichever is less. This amount can, at the discretion of the  Tribunal,
in appropriate cases, for recorded reasons, be reduced to twenty-  five  per
cent of the debt.
This Court,  in  Lakshmi  Rattan  Enginerring  Works  Limited  v.  Assistant
Commissioner Sales Tax, Kanpur and Another[3], had the occasion to  consider
the meaning of the expression  ‘entertain’  in  the  context  of  a  similar
provision in the Uttar Pradesh Sales Tax Act,1948 where it was held that  in
such  context,  the  expression   has   the   meaning   of   “admitting   to
consideration”. The relevant discussion is available at paragraphs -  9  and
10:

“9. The  word  'entertain'  is  explained  by  a  Divisional  Bench  of  the
Allahabad High Court as denoting the point of time at which  an  application
to set aside the sale is heard by the court. The expression 'entertain',  it
is stated, does not mean the same thing as the filing of the application  or
admission of the application by the court. A similar view  was  again  taken
in Dhoom Chand Jain v. Chamanlal Gupta & Anr. AIR 1962 All.  543,  in  which
the learned Chief Justice Desai  and  Mr.  Justice  Dwivedi  gave  the  same
meaning to the expression 'entertain'. It is observed  by  Dwivedi  J.  that
the word 'entertain' in its application  bears  the  meaning  'admitting  to
consideration'. and therefore when  the  court  cannot  refuse  to  take  an
application which is  backed  by  deposit  or  security,  it  cannot  refuse
judicially to consider it. In a single bench  decision  of  the  same  court
reported in Bawan Ram & Anr. v. Kuni Beharilal A.I.R. 1961 All. 42,  one  of
us (Bhargava, J.) had to consider the same rule. There the deposit  had  not
been made within the period  of  limitation  and  the  question  had  arisen
whether the court could entertain the application or  not.  It  was  decided
that the application could not be entertained because proviso  (b)  debarred
the  court  from  entertaining  an  objection  unless  the  requirement   of
depositing the amount or furnishing security was complied  with  within  the
time prescribed. In that case of the word  'entertain'  is  not  interpreted
but it is held that the court cannot proceed to consider the application  in
the absence of deposit made within  the  time  allowed  by  law.  This  case
turned on the fact that the deposit was made out of  time.  In  yet  another
case of the Allahabad High Court reported in Haji Rahim Bux & Sons and  Ors.
v. Firm Samiullah & Sons A.I.R. 1963 All. 326, a division  bench  consisting
of Chief Justice Desai and Mr. Justice S. D. Singh interpreted the words  of
O. 21, r. 90, by saying that the word 'entertain'  meant  not  'receive'  or
'accept' but proceed to consider on merits' or 'adjudicate upon'.


10. In our opinion these cases  have  taken  a  correct  view  of  the  word
'entertain'  which  according   to   dictionary   also   means   'admit   to
consideration'. It would therefore appear that the direction  to  the  court
in the proviso to s. 9 is that the court  shall  not  proceed  to  admit  to
consideration an appeal which is not accompanied by  satisfactory  proof  of
the payment of the admitted tax. This will be when the case is taken  up  by
the court for the first  time.  In  the  decision  on  which  the  Assistant
Commissioner relied, the learned Chief Justice (Desai C.J.) holds  that  the
words 'accompanied by' showed that something tangible had to  accompany  the
memorandum of appeal. If the memorandum of appeal had to be  accompanied  by
satisfactory proof, it had  to  be  in  the  shape  of  something  tangible,
because no intangible thing can accompany a document like the memorandum  of
appeal. In our opinion, making 'an appeal' the equivalent of the  memorandum
of appeal is not sound. Even under O. 41 of the  Code  of  Civil  Procedure,
the expression "appeal" and "memorandum of appeal" are used to distinct  two
distinct things. In Wharton's Law Lexicon, the word "appeal" is  defined  as
the judicial examination of the decision by a higher Court of  the  decision
of  an  inferior  court.  The  appeal  is  the  judicial  examination;   the
memorandum of appeal contains the grounds on which the judicial  examination
is invited. For purposes of limitation and for purposes of the rules of  the
Court it is required that a written memorandum of  appeal  shall  be  filed.
When the proviso speaks of the entertainment of the appeal,  it  means  that
the appeal such as was filed will not be admitted  to  consideration  unless
there is satisfactory proof available  of  the  making  of  the  deposit  of
admitted tax.”



  We are also conscious of the fact that such a pre-condition is present  in
several statutes while providing for statutory appeals, like The  Income-Tax
Act, 1961, The Central Excise Act, 1944, The Consumer Protection Act,  1986,
The Motor Vehicles Act, 1988,  etc.  However,  unlike  those  statutes,  the
purpose of the SARFAESI Act is  different,  it  is  meant  only  for  speedy
recovery of the dues, and  the  scheme  under  Section  13(4)  of  the  Act,
permits the secured creditor to proceed only against the secured assets.  Of
course, the secured creditor is free to proceed against the  guarantors  and
the pledged assets,  notwithstanding  the  steps  under  Section  13(4)  and
without first exhausting the recovery as against secured assets referred  to
in the notice under Section 13(2). But such guarantor, if aggrieved, is  not
entitled to approach DRT under Section 17. That right is restricted only  to
persons aggrieved by steps  under  Section  13(4)  proceeding  for  recovery
against the secured assets.
The Appeal under Section 18 of the  Act  is  permissible  only  against  the
order passed by the DRT under Section 17 of the Act. Under Section  17,  the
scope of enquiry is limited to the steps taken under Section  13(4)  against
the secured assets. The partial deposit before the DRAT as  a  pre-condition
for considering the appeal on merits in terms of Section 18 of the  Act,  is
not a secured asset. It is not a secured debt either, since the borrower  or
the aggrieved person has not created any  security  interest  on  such  pre-
deposit in favour of the secured creditor. If that be  so,  on  disposal  of
the appeal, either  on  merits  or  on  withdrawal,  or  on  being  rendered
infructuous, in case, the appellant makes a prayer for refund  of  the  pre-
deposit, the same has to be allowed and the pre-deposit has to  be  returned
to the appellant, unless the Appellate  Tribunal,  on  the  request  of  the
secured creditor but  with  the  consent  of  the  depositors,  had  already
appropriated the pre-deposit towards the liability of the borrower, or  with
the consent, had adjusted the amount towards the dues, or if  there  be  any
attachment on the pre-deposit in any proceedings  under  Section  13(10)  of
the Act read with Rule 11 of  The  Security  Interest  (Enforcement)  Rules,
2002, or if there be any attachment in any other proceedings known to law.
We are also unable to agree with the contention that the Bank has a lien  on
the pre-deposit made under Section 18  of  the  SARFAESI  Act  in  terms  of
Section 171 of The Indian Contract Act, 1872.  Section  171  of  The  Indian
Contract Act, 1872 on general lien, is in a different context:

“171. General lien of bankers, factors, wharfingers, attorneys  and  policy-
brokers.—Bankers, factors,  wharfingers,  attorneys  of  a  High  Court  and
policy-brokers may, in the absence of a contract to the contrary, retain  as
a security for a general balance of account, any goods bailed to  them;  but
no other persons have a right to retain, as a  security  for  such  balance,
goods bailed to them, unless there is an express contract to that effect.”


Section 171 of The Indian Contract Act, 1872 provides for retention  of  the
goods bailed to the bank by way of  security  for  the  general  balance  of
account. The pre-deposit made by a borrower for the purpose of  entertaining
the appeal under Section 18 of the Act is not with the  bank  but  with  the
Tribunal. It is not a bailment with the bank as provided under  Section  148
of The Indian Contract Act, 1872.  Conceptually, it should  be  an  argument
available to the depositor, since the goods bailed are  to  be  returned  or
otherwise disposed  of,  after  the  purpose  is  accomplished  as  per  the
directions of the bailor.
In the case before us, the first respondent had in  fact  sought  withdrawal
of the appeal,  since  the  appellant  had  already  proceeded  against  the
secured assets by the time the appeal came up for consideration  on  merits.
There is neither any order of  appropriation  during  the  pendency  of  the
appeal nor any attachment on the pre-deposit. Therefore,  the  deposit  made
by the first respondent is liable to be returned to the first respondent.
Though for different reasons as well, we endorse the view taken by the  High
Court. Thus, there is no merit in the appeal. It is accordingly dismissed.
We make it clear that the dismissal of the appeal is  without  prejudice  to
the liberty available to the  appellant  to  take  appropriate  steps  under
Section 13(10) of the SARFAESI  Act  read  with  Rule  11  of  the  Security
Interest (Enforcement)   Rules, 2002.
There shall be no order as to costs.


                                  ........................................J.
                                                             (KURIAN JOSEPH)



                                                        ......………………………………J.
                                                     (ROHINTON FALI NARIMAN)
New Delhi;
April 22, 2016.
-----------------------
[1]    AIR 2009 Guj. 98
[2]    (2004) 4 SCC 311
[3]    AIR 1968 SC 488


-----------------------
                                                                  REPORTABLE





-----------------------
22

Licence Agreement between the appellant and the respondent dated 22.2.1993 which provided for settlement of disputes by way of arbitration in accordance with the Rules of the Dutch Arbitration Institute = the prayer was for a direction to the appellant to execute the deed of transfer and assignment of Patent Nos. 2143/MUM/2008 and 2144/MUM/2008 in favour of the respondent in terms of the draft deed in Annexure P6, which was dated 4.4.2012.= Annexure P6 which was dated 4.4.2012 was the ultimate transfer deed which the appellant was obliged to execute= it must be held that there was no occasion for the respondent to have any grievance in regard to the execution of the transfer deed as directed in paragraph 7 of the PFA of the Arbitral Tribunal dated 23.12.2011. The failure on the part of the learned Judge in having noted the fact that the transfer deed dated 4.4.2012 was as per the re-draft forwarded by the respondent themselves which was duly executed and sent back by the appellant by 9.4.2012 and the original by 12.4.2012 unfortunately resulted in the passing of the impugned order. In the light of the said patent illegality in the impugned order, the same is liable to be set aside.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                    CIVIL APPEAL NOS. 4359-4360  OF  2016
                [arising out of SLP(C) Nos.3134-3135 of 2015]

M/S. SHINHAN APEX CORPORATION             …APPELLANT

                                   VERSUS

M/S. EURO APEX B.V.                 …RESPONDENT




                         J   U  D  G   M   E   N   T


Fakkir Mohamed Ibrahim Kalifulla, J.

Leave granted.

These appeals are directed against the order dated  29.9.2014  in  Execution
Application No.643 of 2013 in Award dated 23.12.2011  with  Chamber  Summons
No.832 of 2014.

To briefly note the  facts,  there  was  a  Licence  Agreement  between  the
appellant and the respondent dated 22.2.1993 which provided  for  settlement
of disputes by way of arbitration in accordance with the Rules of the  Dutch
Arbitration Institute. The said agreement was sought to be terminated  by  a
notice by the respondent on 12.3.2007. The termination was  to  take  effect
from  23.02.2008.  The  dispute  went  before  the  Arbitral  Tribunal.   On
11.6.2008, the appellant filed an application  for  registration  of  Patent
Nos.10-0865115 and 100909490 in the United States as well as  in  India.  In
the arbitral proceedings, a Partial Final Award (for short, PFA) came to  be
passed by the Arbitral Trinunal on 23.12.2011. We  are  presently  concerned
with the Indian Patents in which the appellant's rights  and  interest  were
involved, namely, Patent Nos. 2143/MUM/2008 and 2144/MUM/2008. The  relevant
part of the award (viz) paragraphs 7 and 9, of the PFA reads as under:-

“7. Respondent  to,  within  30  days  following  the  notification  of  the
arbitration award,  unconditionally  and  irrevocably,  fully  transfer  all
rights and interests of Indian Patent No.2143/MUM/2008 and 2144/MUM/2008  to
Claimant, or a company designated by Claimant, and sign/execute and  submit,
at the first request of Claimant, and within 3 days following such  request,
all the documents that  are  required  to  effect  such  patent  rights  and
interests transfer in accordance with the requirements of the Indian  Patent
Act and applicable Indian laws; and to simultaneously provide copies of  all
the relevant correspondence relating to such transfer  to  the  attorney  of
Claimant by fax and registered post (fax: +31-20-6513001, HIL  International
Lawyers & Advisers, PO Box 22678, 1100 DD Amsterdam, the Netherlands);

8.          xxx        xxx        xxx

9. Respondent to pay a direct enforcement penalty  in  the  amount  of  Euro
50,000 for each case in which Respondent infringes the arbitral  orders  sub
7 and 8 above, and Euro 5,000 for each day the infringement continues;”



The Award dated 23.12.2011 was communicated to the parties by  the  Arbitral
Tribunal on 27.12.2011.  Therefore, the period  of  thirty  days,  fixed  in
paragraph 7, was to start from 27.12.2011.

Closely followed  by  that,  the  respondent  forwarded  its  request  dated
19.1.2012 in the form of a  letter  communicated  by  the  Advocate  of  the
respondent to the appellant  by  enclosing  the  required  documents  to  be
executed by the appellant for the purpose of transfer of  the  patents.   In
the opening paragraph of the draft transfer deed a  reference  was  made  to
PFA rendered on 23.12.2011 of CASE NAI  3625,  in  order  to  ascertain  the
obligation of the appellant to execute the transfer of the  patents.  It  is
not in dispute that subsequent to the said letter dated  19.1.2012  and  the
enclosures, discussions were held between January and March, 2012 among  the
advocates of the appellant and the respondent to finalize the draft deed  of
transfer.

Thereafter, again at the instance of the respondent through a  communication
dated 3.4.2012 of the respondent's lawyers addressed to the appellant a  re-
draft of the deed of transfer was enclosed, which  was  dated  4.4.2012.  In
the opening part  of  the  said  Deed,  the  reference  to  PFA,  which  was
mentioned in  the  earlier  draft  transfer  deed,  was  omitted.  In  other
respects, the draft remained the same which contained  a  clause  under  the
caption 'Consideration' to the effect, “Pursuant to the above,  the  Parties
agree that the consideration for the sale and transfer  of  the  patent  and
the patent rights shall be US$ 1 (United  States  Dollar  One),  receipt  of
which is hereby acknowledged”.

That apart, in clause 5.5 of the re-draft it was mentioned that  arbitration
of the dispute arising out of or in  connection  with  the  deed  should  be
initially settled under the Rules  of  Singapore  International  Arbitration
Centre by a Sole Arbitrator appointed in accordance with the said Rules  and
the proceedings should be in English and the seat of arbitration  should  be
Singapore. Insofar as the said clause was concerned, the same was  different
than the one which was contained in the earlier  draft,  as  per  which  the
arbitration was  to  be  carried  out  with  the  Rules  and  provisions  by
Netherlands Arbitration Institute  and  the  venue  of  the  arbitration  as
Hague, The Netherlands and governing law was also mentioned as the  laws  in
force  in  the  Netherlands  and  the  Courts   at   Netherlands   to   have
jurisdiction. In the draft dated 4.4.2012 the governing law was  to  be  the
laws in force in India.

The appellant received the re-draft by way of  e-mail  on  3.4.2012  with  a
direction to the appellant to sign the document, get  it  legalized  by  the
Indian Embassy in Seoul and dispatch the same to  the  respondent's  lawyers
in Amsterdam.  The appellant executed the deed of  transfer  dated  4.4.2012
and thereby transferred all its rights and interests in the  Indian  Patents
in favour of the respondent. The  appellant's  lawyers  sent  an  electronic
copy of  the  said  document  to  the  respondent  duly  notarized  with  an
assurance that the original would be promptly couriered  to  the  respondent
upon confirmation.  In response to the same, the lawyers of  the  respondent
in their e-mail dated 11.4.2012 intimated that the  signature  part  of  the
deed was correctly executed by the appellant and also  wanted  the  original
deed to be sent by courier to their Amsterdam Office for carrying out  other
additional formalities for effecting  the  transfer.  Simultaneously,  their
lawyers also  on  the  same  day  informed  the  respondent  confirming  the
forwarding of the transfer deed for effecting the  transfer  of  the  patent
applications duly signed by the appellant.  The original document  was  also
forwarded to the lawyers of the respondent on 12.4.2012.

However, it appears that the respondent had its own issue with  its  lawyers
as regards the draft as well as the final deed executed by the appellant  in
favour of the respondent which came to light when  the  present  proceedings
before the High  Court  was  launched  by  the  respondent.   The  same  was
reflected  in  the  communication   dated   12.4.2012   addressed   by   the
representative of the respondent  to  its  lawyers.   Thereafter,  the  next
communication was dated 3.12.2012 by the respondent's  lawyer  addressed  by
way of an e-mail to the appellant's lawyer suggesting that  the  transaction
can be by way of trade sale of the appellant's business. On  behalf  of  the
appellant, its lawyer sent a reply  dated  11.12.2012  taking  the  definite
stand that after the execution of  the  transfer  deed  dated  4.4.2012  the
requirement of the obligation to be fulfilled  by  the  appellant  was  duly
complied with as per the  PFA  dated  23.12.2011.   Thereafter,  by  another
communication dated 15.3.2013, the respondent's lawyers sent a fresh  e-mail
to the appellant's lawyers informing that fresh steps  are  required  to  be
taken to arrive at a final settlement of  disputes.   The  said  e-mail  was
also replied on behalf of the appellant on 20.3.2013 wherein the  respondent
was reminded as to  the  confirmation  of  the  steps  taken  based  on  the
transfer deed executed by them.  For the first time, on 8.6.2013, by way  of
e-mail at the instance of the respondent's lawyers  it  was  intimated  that
respondent was not willing to accept the transfer of  Indian  Patents  based
on the language used in the draft deed as  signed  by  the  appellant.   The
said e-mail was also duly replied on behalf of the  appellant  on  15.6.2013
pointing out that the deed was executed as per the draft  forwarded  to  the
respondent by their lawyers and consequently the appellant was  not  in  any
way liable for either any delay or for the terms contained in  the  transfer
deed.

It was in the above-stated background the present  application  came  to  be
filed by the respondent on 8.7.2013 before the High Court of Bombay for  the
enforcement of paragraph 7 of the PFA dated  23.12.2011.   By  the  impugned
order, the learned Single Judge held that there was  a  material  alteration
in the draft deed forwarded by the respondent  to  the  appellant  when  the
final deed was executed in the deed dated  4.4.2012  and  consequently,  the
appellant is bound to execute a transfer  deed  of  assignment  as  per  the
draft sent by the award holder, namely, the  respondent  as  was  originally
forwarded to the appellant.

With that view, the learned Judge directed  the  appellant  to  execute  the
deed  of  transfer  and  assignment  of  Patent   Nos.   2143/MUM/2008   and
2144/MUM/2008 in favour of the award holder in terms of Annexure P6  to  the
Execution Application incorporating therein the  complete  recital  'B'  and
the Arbitration Clause 5.5 showing the  future  arbitration  in  Netherlands
within two weeks from the date of the  order.   Aggrieved  by  the  impugned
order, the appellant is before us.

We heard Mr. K.V. Vishwanathan, learned senior  counsel  appearing  for  the
appellant and  Mr.  Manoj  K.  Singh,  learned  counsel  appearing  for  the
respondent.

Having drawn our attention to  the  above  factual  details  which  emanated
after the passing of PFA dated 23.12.2011, Mr. Vishwanathan, learned  senior
counsel, contended that  when  the  application  was  initially  moved,  the
respondent failed to bring to the notice of the Court  about  the  extensive
correspondence which took place between 19.1.2012 and 15.6.2013, that  after
the appellant in its Chamber Summons brought to the notice of the Court  the
relevant information,  namely,  the  re-draft  sent  by  the  respondent  on
3.4.2012 which contained the variation  in  para  'B'  as  between  the  one
contained in the earlier draft of 19.1.2012 and  3.4.2012  as  well  as  the
arbitration clause and the governing law contained  in  paragraphs  5.5  and
5.6, the respondent for the first time in their rejoinder referred to  those
documents.  The learned  senior  counsel  pointed  out  that  learned  Judge
completely omitted to take note of such relevant factors  and  proceeded  to
hold as though the draft sent by  the  respondent  on  19.1.2012  alone  was
material and that the changes found in the final deed dated 4.4.2012 was  at
the instance of the appellant which unfortunately led to the passing of  the
impugned order.

In reply, Mr. Singh, learned counsel appearing for the respondent,  was  not
able to controvert the factual position, namely, that the first  request  of
the respondent after the PFA dated  23.12.2011  was  19.1.2012,  that  along
with the said communication the draft deed of transfer  to  be  executed  by
the appellant was forwarded to it, that after detailed  discussions  between
January and March, 2012, the re-draft was forwarded  by  the  respondent  on
3.4.2012 wherein the reference to  PFA  in  the  opening  paragraph  of  the
earlier draft was omitted and that the paragraphs relating to  consideration
was specified apart from the change  about  the  venue  and  the  applicable
Rules  of  the  Arbitral  Tribunal  was  noted  as  Singapore   instead   of
Netherlands  and  the  governing  law  applicable  was  also  changed   from
Netherlands to India.  Learned counsel was also not able to  controvert  any
of the other subsequent correspondence exchanged between the  appellant  and
the respondent between 11.4.2012 and 15.6.2013.

Having regard to the said development which had taken place  after  the  PFA
dated 23.12.2011 which discloses that  the  appellant  did  not  commit  any
default in complying with the direction of the said  Award  and,  therefore,
the present direction of the learned Judge in the impugned order was  wholly
unwarranted.  If the respondent failed to act based on  the  final  transfer
deed executed by the appellant on 4.4.4012,  which  was  in  tune  with  the
draft forwarded by the respondent themselves, the  appellant  cannot  be  in
any way blamed for the misfeasance committed by the respondent.

In  the  above-stated  background,  when  we  consider  the  prayer  of  the
respondent as claimed in the application, the prayer was for a direction  to
the appellant to execute the deed of transfer and assignment of Patent  Nos.
2143/MUM/2008 and 2144/MUM/2008 in favour of the respondent in terms of  the
draft deed in Annexure P6, which was dated 4.4.2012.  In  fact  the  learned
Judge,  as rightly pointed out by Mr. Vishwanathan, learned  senior  counsel
for  the  appellant,  completely  missed  to  note   that   based   on   the
correspondence exchanged between the respondent and  the  appellant  between
19.1.2012 and  3.4.2012  Annexure  P6  which  was  dated  4.4.2012  was  the
ultimate transfer deed which the appellant was obliged to execute, that  the
appellant duly executed the said document by signing the  same  on  4.4.2012
and forwarded to the respondent's lawyers on 9.4.2012 and the due  execution
of which was also confirmed on behalf of the respondent by their lawyers  on
11.4.2012.  A further confirmation was made by the respondent's  counsel  to
the respondent themselves  on  the  same  day,  i.e.  11.4.2012  as  to  the
execution of the transfer deed dated 4.4.2012.  The original documents  were
also forwarded by the appellant  on  12.4.2012.  After  the  above  referred
sequence of events as regards Annexure P6 dated 4.4.2012 are noted, it  must
be held that the direction contained in  paragraph  7  of  the  PFA  of  the
Arbitral Tribunal was duly carried out by the appellant based on  the  first
request of the respondent themselves as made on 19.1.2012  and  as  per  the
modified request dated 3.4.2012. If that was  the  real  fact  situation  in
regard to the execution of the transfer deed, which was  completely  omitted
to be noted by the learned Single Judge, it must be held that there  was  no
occasion for  the  respondent  to  have  any  grievance  in  regard  to  the
execution of the transfer deed as directed in paragraph 7 of the PFA of  the
Arbitral Tribunal dated 23.12.2011. The failure on the part of  the  learned
Judge in having noted the fact that the transfer deed dated 4.4.2012 was  as
per the re-draft forwarded by  the  respondent  themselves  which  was  duly
executed and sent back by the appellant by  9.4.2012  and  the  original  by
12.4.2012 unfortunately resulted in the passing of the  impugned  order.  In
the light of the said patent illegality in the impugned order, the  same  is
liable to be set aside.

In the said circumstances, the impugned order of the  learned  Judge  cannot
be sustained, the same is set aside and the appeals stand allowed.



                                          ................................J.
                                          [Fakkir Mohamed Ibrahim Kalifulla]


                                          ................................J.
                                                                [S.A. Bobde]
New Delhi;
April 22, 2016

Visvesvraya Technological University (VTU) has been constituted under the Visveswaraiah Technological University Act, 1994 (for short “VTU Act”) = Section 10 (23c) (iiiab) of the Act.= For the Assessment Years 2004-2005 to 2009-2010 notices under Section 148 of the Income Tax Act, 1961 (for short “the Act”) were issued to the appellant – University – Assessee. Eventually returns were filed for the Assessment Years in question declaring 'Nil' income and claiming exemption under Section 10(23C)(iiiab) of the Act. The aforesaid claim of exemption was negatived by the Assessing Officer who proceeded to make the assessments. The same view has been taken by all the Authorities under the Act and also by the High Court in the order under challenge in the present proceedings. from the year 1999 to 2010 the appellant University had generated a surplus of about Rs.500 crores. There is no doubt that the huge surplus has been collected/accumulated by realizing fees under different heads in consonance with the powers vested in the University under Section 23 of the VTU Act. The difference between the fees collected and the actual expenditure incurred for the purposes for which fees were collected is significant. In fact the expenditure incurred represents only a minuscule part of the fees collected. No remission, rebate or concession in the amount of fees charged under the different heads for the next Academic Year(s) had been granted to the students. The surplus generated is far in excess of what has been held by this Court to be permissible (6 to 15%) in Islamic Academy of Education and another vs. State of Karnataka and others[4] though the percentage of surplus in Islamic Academy of Education (supra) was in the context of the determination of the reasonable fees to be charged by private educational bodies. The appellant University is neither directly nor even substantially financed by the Government so as to be entitled to exemption from payment of tax under the Act.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                     CIVIL APPEAL NOS. 4361-4366 OF 2016
              (Arising out of S.L.P. (C) Nos.5354-5359 of 2014)

VISVESVARAYA TECHNOLOGICAL
UNIVERSITY                                        ...APPELLANT

                            VERSUS

ASSISTANT COMMISSIONER OF
INCOME TAX                                     ...RESPONDENT


                               J U D G M E N T

RANJAN GOGOI, J.


1.    Leave granted.

2.     The  appellant  –  University,  namely,   Visvesvraya   Technological
University (VTU) has been constituted under the Visveswaraiah  Technological
University Act,  1994  (for  short  “VTU  Act”).   It  discharges  functions
earlier performed by the Department of Technical  Education,  Government  of
Karnataka.   The  University  exercises  control  over  all  Government  and
Private Engineering Colleges within Karnataka.
3.    For the Assessment Years 2004-2005 to 2009-2010 notices under  Section
148 of the Income Tax Act, 1961 (for short “the Act”)  were  issued  to  the
appellant – University – Assessee.  Eventually returns were  filed  for  the
Assessment Years in question declaring 'Nil' income and  claiming  exemption
under Section 10(23C)(iiiab) of the Act. The aforesaid  claim  of  exemption
was  negatived  by  the  Assessing  Officer  who  proceeded  to   make   the
assessments.  The same view has been taken by all the Authorities under  the
Act and also by the High Court in the order under challenge in  the  present
proceedings.

4.    The question, therefore, that arises in the  present  appeals  is  the
entitlement of the appellant –  University  –  Assessee  to  exemption  from
payment of tax under the provisions of Section  10(23C)(iiiab)  of  the  Act
which is in the following terms:
      “10.  Incomes not included in total income. -
            In computing the total income of a previous year of any  person,
any income falling  within  any  of  the  following  clauses  shall  not  be
included-
            (23C)      any income received by any person on behalf of-
            (iiiab)     any  university  or  other  educational  institution
existing solely for educational purposes and not  for  purposes  of  profit,
and which is wholly or substantially financed by the Government”


5.    The entitlement for exemption under Section 10(23C)(iiiab) is  subject
to two conditions.  Firstly the educational institution  or  the  university
must be solely for the purpose of education and without any  profit  motive.
Secondly, it must be wholly or substantially  financed  by  the  government.
Both conditions will have to be satisfied before exemption  can  be  granted
under the aforesaid provision of the Act.

6.    The relevant principles of law which will govern the first issue  i.e.
whether an educational institution or a university, as may be,  exists  only
for educational purpose and not  for  profit  are  no  longer  res  integra,
having been dealt with by a long line of decisions of this Court which  have
been elaborately noticed  and  extracted  in  a  recent  pronouncement  i.e.
Queen's  Educational  Society  vs.  Commissioner  of  Income   Tax[1].   The
principles that emanate from the views expressed by this Court are  set  out
in paragraph 11 in Queen's Educational Society (supra), which are  extracted
below:
“11.  Thus, the law common to  Section  10(23C)  (iiiad)  and  (vi)  may  be
summed up as follows:

(1)   Where an educational institution carries on the activity of  education
primarily for educating persons, the fact that it makes a surplus  does  not
lead to the conclusion that  it  ceases  to  exist  solely  for  educational
purposes and becomes an institution for the purpose of making profit.


(2)   The  predominant  object  test  must  be  applied  –  the  purpose  of
education should not be submerged by a profit making motive.

(3) A distinction must be drawn between the  making  of  a  surplus  and  an
institution being carried on “for profit”. No inference arises  that  merely
because imparting  education results in  making  a  profit,  it  becomes  an
activity for profit.

(4)   If after meeting expenditure, a surplus arises incidentally  from  the
activity carried on by the educational institution, it will not be cease  to
be one existing solely for educational purposes.

(5)  The ultimate test is whether on an overall view of the  matter  in  the
concerned assessment year the  object  is  to  make  profit  as  opposed  to
educating persons.”



7.    To the above principles, one further test as  laid  down  in  CIT  vs.
Surat Art Silk Cloth Manufacturers' Assn.[2]  and  culled  out  in  American
Hotel and Lodging Association Educational Institute  vs.  Central  Board  of
Direct Taxes and Others [3] may be added which is as follows:
“In order to ascertain whether the institute is carried on with  the  object
of making profit or not it is  the  duty  of  the  prescribed  authority  to
ascertain whether the balance of income is applied  wholly  and  exclusively
to the objects for which the applicant is established.”  (Paragraph 37)

      The above principle has been specifically reiterated in  paragraph  19
of the decision in Queen's Educational  Society  (supra)  in  the  following
terms:
“The final conclusion that if a surplus is made by  an  educational  society
and ploughed back to construct its own premises would fall  out  of  Section
10(23-C) is to ignore the language of the section and to  ignore  the  tests
laid down in Surat Art  Silk  Cloth  case  [CIT  v.  Surat  Art  Silk  Cloth
Manufacturers' Assn.(1980) 2 SCC 31], Aditanar  case  [Aditanar  Educational
Institution v. CIT [(1997) 3 SCC 346]  and American  Hotel  &  Lodging  case
[American Hotel & Lodging Assn. Educational Institute  v.  CBDT  [(2008)  10
SCC 509].  It is clear that when a surplus is ploughed back for  educational
purposes,  the  educational  institution  exists  solely   for   educational
purposes and not for purposes of profit.”

8.    In the present case, we find that during a short period  of  a  decade
i.e. from the year 1999 to 2010 the appellant  University  had  generated  a
surplus of about Rs.500 crores.  There is no doubt  that  the  huge  surplus
has been collected/accumulated by realizing fees under  different  heads  in
consonance with the powers vested in the University under Section 23 of  the
VTU  Act.  The  difference  between  the  fees  collected  and  the   actual
expenditure incurred for the purposes  for  which  fees  were  collected  is
significant. In fact the expenditure incurred represents  only  a  minuscule
part of the fees collected.  No  remission,  rebate  or  concession  in  the
amount of fees charged under the  different  heads  for  the  next  Academic
Year(s) had been granted to the students.  The surplus generated is  far  in
excess of what has been held by this Court to be permissible (6 to  15%)  in
Islamic Academy  of  Education  and  another  vs.  State  of  Karnataka  and
others[4] though the percentage of surplus in Islamic Academy  of  Education
(supra) was in the context of the determination of the  reasonable  fees  to
be charged by private educational bodies.

9.    As against the above, the amount of direct grant from  the  Government
has been meagre, details of which are being noticed separately  later  in  a
different context.  The University nevertheless has grown and the number  of
private engineering colleges affiliated to it had increased  from  about  64
to presently about 194.  The  infrastructure  of  the  University  has  also
increased offering educational avenues to an increasing number  of  students
in different and varied subjects. Materials  have  been  brought  on  record
before the High Court as well as before  this  Court  to  show  the  several
number of work orders/tenders issued by the  University  for  infrastructure
expansion. It is emphatically contended by  the  appellant  in  the  written
submissions filed that between 1994 and 2009  the  University  had  actually
spent about Rs.504 crores on infrastructure and  the  available  surplus  in
the year 2010 which was in the range of Rs.440 crores was also  intended  to
be applied for different infrastructural work, details of  which  have  also
been brought on record.  However,  the  said  amount  was  attached  by  the
Revenue pursuant to the demands raised in terms  of  the  assessments  made.
Even  in  a  situation  where  direct  government  grants  have   not   been
forthcoming and allocation against permissible heads like salary,  etc.  had
not been  made  the  University  has  thrived  and  prospered.   There  can,
however, be no manner of doubt that the surplus accumulated over  the  years
has been ploughed back for  educational  purposes.   In  such  a  situation,
following the consistent principles laid down  by  this  Court  referred  to
earlier and specifically what has been  said  in  paragraph  19  in  Queen's
Educational Society (supra), extracted above,  it  must  be  held  that  the
first requirement of Section  10(23C)(iiiab),  namely,  that  the  appellant
University exists “solely for educational purposes and not for  purposes  of
profit” is satisfied. The exemption granted in  respect  of  the  University
under Section 80G of the Act, qua the donations made to it  also  cannot  be
ignored in view of an inbuilt recognition in such exemption with  regard  to
the charitable nature of the institution i.e. the appellant University.
10.   The above would require the Court to go into the further  question  as
to whether the appellant University is wholly or substantially  financed  by
the Government which is  an  additional  requirement  for  claiming  benefit
under Section 10(23C)(iiiab)  of  the  Act.   It  is  not  in  dispute  that
grants/direct financing by the Government during  the  six  (06)  Assessment
Years in question i.e. 2004-2005 to 2009-2010 had never exceeded 1%  of  the
total  receipts  of  the  appellant  -  University-  Assessee.   In  such  a
situation, the argument advanced is that fees of all kinds collected  within
the four corners of the provisions of Section 23 of  the  VTU  Act  must  be
taken to be receipts from sources of finance  provided  by  the  Government.
Such receipts, it is urged, are from sources  statutorily  prescribed.   The
rates of such fees are fixed by the Fee Committee of the  University  or  by
authorized Government Agencies (in cases of Common Entrance  Test).  It  is,
therefore, contended that such receipts must be understood to be funds  made
available by the Government as contemplated by the provisions of Section  10
(23c) (iiiab) of the Act.

11.   Universities and Educational Institutions entitled to exemption  under
the Act have been categorized under three  different  heads,  namely,  those
covered by Section 10(23C)(iiiab); Section  10(23C)(iiiad)  and  10(23C)(vi)
of  the  Act.  The  requirement  of  the  University  or   the   educational
institution existing “solely for educational purposes and not  for  purposes
of profit” is  the  consistent  requirement  under  Section  10(23C)(iiiab),
10(23C)(iiiad) and 10(23C)(vi).  However, in cases of  Universities  covered
by Section 10(23C)(iiiab) funding must be wholly  or  substantially  by  the
Government  whereas  in   cases   of   universities   covered   by   Section
10(23C)(iiiad) the aggregate annual receipts should not  exceed  the  amount
as may be prescribed. Universities covered by Section 10(23C)(vi) are  those
other than mentioned in sub-clause (iiiab) or sub-clause (iiiad)  and  which
are required to be specifically approved by the prescribed authority.

12.   Having regard to the  text  and  the  context  of  the  provisions  of
Section 10 (23c) (iiiab), 10 (23c) (iiiad) and 10  (23c)  (vi)  it  will  be
reasonable to reach a conclusion that while Section 10 (23c)  (iiiab)  deals
with Government Universities, Section 10  (23c)  (iiiad)  deals  with  small
Universities having an annual “turnover” of less than Rupees One  Crore  (as
prescribed by Rule 2 (BC) of the Income Tax Rules). On a  similar  note,  it
is possible to read Section  10  (23c)  (vi)  to  be  dealing  with  Private
Universities whose gross receipts exceeds Rupees One Crore. Receipts by  way
of fee collection of different kinds continue to a major  source  of  income
for all Universities including Private Universities. Levy and collection  of
fees  is  invariably  an  exercise  under  the  provisions  of  the  Statute
constituting the University.  In such a situation, if collection of fees  is
to be understood to  be  amounting  to  funding  by  the  Government  merely
because collection of such fees  is  empowered  by  the  Statute,  all  such
receipts by way of  fees  may  become  eligible  to  claim  exemption  under
Section 10 (23c) (iiiab).   Such a result which would virtually  render  the
provisions of the other two Sub-sections nugatory cannot  be  understood  to
have been intended by the Legislature and must, therefore, be avoided.

13.   It will, therefore, be more appropriate to hold  that  funds  received
from the Government contemplated under Section  10(23c)(iiiab)  of  the  Act
must be direct grants/contributions from governmental sources and  not  fees
collected under the statute. The view of the  Delhi  High  Court  in  Mother
Diary Fruit & Vegetable Private Limited vs. Hatim Ali &  Anr.[5]  which  had
been brought to the notice of the Court has to be understood in the  context
of the definition of 'public authority' as specified in Section  2(h)(d)(ii)
of the Right to Information Act, 2005 which is in the following terms:
(h)   “public authority” means any authority or body or institution of self-
government established or constituted,-
(a) ..................
(b) ..................
….....................
(d)   by notification issued or order made by  the  appropriate  Government,
and includes any
(i)   ….........
(ii)   non-Government  Organization  substantially  financed,  directly   or
indirectly by funds provided by the appropriate Government.”


14.   Reliance has been  placed  on  the  judgment  of  the  High  Court  of
Karnataka in Commissioner of Income-tax, Bangalore vs. Indian  Institute  of
Management[6], particularly, the view expressed that the expression  “wholly
or substantially  financed  by  the  Government'  as  appearing  in  Section
10(23C) cannot be confined to annual grants and must include  the  value  of
the land made available by the Government. In  the  present  case  the  High
Court in paragraph 53 of the impugned judgment has  recorded  that  even  if
the value of the land allotted to the University (114 acres) is  taken  into
account the total funding of the  University  by  the  Government  would  be
around 4% - 5% of its total receipt.  That apart what was held by  the  High
Court in the above case, while repelling the contention of the Revenue  that
the exemption under Section 10(23c) (iiiab) of  the  Act  for  a  particular
assessment year must be judged in the context of receipt  of  annual  grants
from the Government in that particular  year,  is  that  apart  from  annual
grants the  value  of  the  land  made  available;  the  investment  by  the
Government in the  buildings  and  other  infrastructure  and  the  expenses
incurred in running  the  institution  must  all  be  taken  together  while
deciding whether the institution is wholly or substantially financed by  the
Government.  The situation  before us, on facts,  is  different  leading  to
the irresistible conclusion that the appellant University does  not  satisfy
the second requirement spelt out by Section 10 (23c)  (iiiab)  of  the  Act.
The  appellant  University  is  neither  directly  nor  even   substantially
financed by the Government so as to be entitled to  exemption  from  payment
of tax under the Act.

15.   For the aforesaid reasons, we do not find the  present  to  be  a  fit
case for interference. The  appeals,  consequently,  are  dismissed  however
without any order as to costs.

                                                 ………………..................,J.
                                                              (RANJAN GOGOI)



                                                 ………………..................,J.
                                                          (PRAFULLA C. PANT)
NEW DELHI
April 22, 2016.
-----------------------
[1]    (2015) 8 SCC 47
[2]    (1980) 2 SCC 31
[3]    (2008)10 SCC 509
[4]    (2003) 6 SCC 697 (paragraph 156)
[5]    [(2015) 217 DLT 470]
[6]    (2014) 49 Taxmann.com 136 (Karnataka)

Having regard to the said development which had taken place after the PFA dated 23.12.2011 which discloses that the appellant did not commit any default in complying with the direction of the said Award and, therefore, the present direction of the learned Judge in the impugned order was wholly unwarranted. If the respondent failed to act based on the final transfer deed executed by the appellant on 4.4.4012, which was in tune with the draft forwarded by the respondent themselves, the appellant cannot be in any way blamed for the misfeasance committed by the respondent. when we consider the prayer of the respondent as claimed in the application, the prayer was for a direction to the appellant to execute the deed of transfer and assignment of Patent Nos. 2143/MUM/2008 and 2144/MUM/2008 in favour of the respondent in terms of the draft deed in Annexure P6, which was dated 4.4.2012. In fact the learned Judge, as rightly pointed out by Mr. Vishwanathan, learned senior counsel for the appellant, completely missed to note that based on the correspondence exchanged between the respondent and the appellant between 19.1.2012 and 3.4.2012 Annexure P6 which was dated 4.4.2012 was the ultimate transfer deed which the appellant was obliged to execute, that the appellant duly executed the said document by signing the same on 4.4.2012 and forwarded to the respondent's lawyers on 9.4.2012 and the due execution of which was also confirmed on behalf of the respondent by their lawyers on 11.4.2012. A further confirmation was made by the respondent's counsel to the respondent themselves on the same day, i.e. 11.4.2012 as to the execution of the transfer deed dated 4.4.2012. The original documents were also forwarded by the appellant on 12.4.2012. After the above referred sequence of events as regards Annexure P6 dated 4.4.2012 are noted, it must be held that the direction contained in paragraph 7 of the PFA of the Arbitral Tribunal was duly carried out by the appellant based on the first request of the respondent themselves as made on 19.1.2012 and as per the modified request dated 3.4.2012. If that was the real fact situation in regard to the execution of the transfer deed, which was completely omitted to be noted by the learned Single Judge, it must be held that there was no occasion for the respondent to have any grievance in regard to the execution of the transfer deed as directed in paragraph 7 of the PFA of the Arbitral Tribunal dated 23.12.2011. The failure on the part of the learned Judge in having noted the fact that the transfer deed dated 4.4.2012 was as per the re-draft forwarded by the respondent themselves which was duly executed and sent back by the appellant by 9.4.2012 and the original by 12.4.2012 unfortunately resulted in the passing of the impugned order. In the light of the said patent illegality in the impugned order, the same is liable to be set aside.In the said circumstances, the impugned order of the learned Judge cannot be sustained, the same is set aside and the appeals stand allowed.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                    CIVIL APPEAL NOS. 4359-4360  OF  2016
                [arising out of SLP(C) Nos.3134-3135 of 2015]

M/S. SHINHAN APEX CORPORATION             …APPELLANT

                                   VERSUS

M/S. EURO APEX B.V.                 …RESPONDENT




                         J   U  D  G   M   E   N   T


Fakkir Mohamed Ibrahim Kalifulla, J.

Leave granted.

These appeals are directed against the order dated  29.9.2014  in  Execution
Application No.643 of 2013 in Award dated 23.12.2011  with  Chamber  Summons
No.832 of 2014.

To briefly note the  facts,  there  was  a  Licence  Agreement  between  the
appellant and the respondent dated 22.2.1993 which provided  for  settlement
of disputes by way of arbitration in accordance with the Rules of the  Dutch
Arbitration Institute. The said agreement was sought to be terminated  by  a
notice by the respondent on 12.3.2007. The termination was  to  take  effect
from  23.02.2008.  The  dispute  went  before  the  Arbitral  Tribunal.   On
11.6.2008, the appellant filed an application  for  registration  of  Patent
Nos.10-0865115 and 100909490 in the United States as well as  in  India.  In
the arbitral proceedings, a Partial Final Award (for short, PFA) came to  be
passed by the Arbitral Trinunal on 23.12.2011. We  are  presently  concerned
with the Indian Patents in which the appellant's rights  and  interest  were
involved, namely, Patent Nos. 2143/MUM/2008 and 2144/MUM/2008. The  relevant
part of the award (viz) paragraphs 7 and 9, of the PFA reads as under:-

“7. Respondent  to,  within  30  days  following  the  notification  of  the
arbitration award,  unconditionally  and  irrevocably,  fully  transfer  all
rights and interests of Indian Patent No.2143/MUM/2008 and 2144/MUM/2008  to
Claimant, or a company designated by Claimant, and sign/execute and  submit,
at the first request of Claimant, and within 3 days following such  request,
all the documents that  are  required  to  effect  such  patent  rights  and
interests transfer in accordance with the requirements of the Indian  Patent
Act and applicable Indian laws; and to simultaneously provide copies of  all
the relevant correspondence relating to such transfer  to  the  attorney  of
Claimant by fax and registered post (fax: +31-20-6513001, HIL  International
Lawyers & Advisers, PO Box 22678, 1100 DD Amsterdam, the Netherlands);

8.          xxx        xxx        xxx

9. Respondent to pay a direct enforcement penalty  in  the  amount  of  Euro
50,000 for each case in which Respondent infringes the arbitral  orders  sub
7 and 8 above, and Euro 5,000 for each day the infringement continues;”



The Award dated 23.12.2011 was communicated to the parties by  the  Arbitral
Tribunal on 27.12.2011.  Therefore, the period  of  thirty  days,  fixed  in
paragraph 7, was to start from 27.12.2011.

Closely followed  by  that,  the  respondent  forwarded  its  request  dated
19.1.2012 in the form of a  letter  communicated  by  the  Advocate  of  the
respondent to the appellant  by  enclosing  the  required  documents  to  be
executed by the appellant for the purpose of transfer of  the  patents.   In
the opening paragraph of the draft transfer deed a  reference  was  made  to
PFA rendered on 23.12.2011 of CASE NAI  3625,  in  order  to  ascertain  the
obligation of the appellant to execute the transfer of the  patents.  It  is
not in dispute that subsequent to the said letter dated  19.1.2012  and  the
enclosures, discussions were held between January and March, 2012 among  the
advocates of the appellant and the respondent to finalize the draft deed  of
transfer.

Thereafter, again at the instance of the respondent through a  communication
dated 3.4.2012 of the respondent's lawyers addressed to the appellant a  re-
draft of the deed of transfer was enclosed, which  was  dated  4.4.2012.  In
the opening part  of  the  said  Deed,  the  reference  to  PFA,  which  was
mentioned in  the  earlier  draft  transfer  deed,  was  omitted.  In  other
respects, the draft remained the same which contained  a  clause  under  the
caption 'Consideration' to the effect, “Pursuant to the above,  the  Parties
agree that the consideration for the sale and transfer  of  the  patent  and
the patent rights shall be US$ 1 (United  States  Dollar  One),  receipt  of
which is hereby acknowledged”.

That apart, in clause 5.5 of the re-draft it was mentioned that  arbitration
of the dispute arising out of or in  connection  with  the  deed  should  be
initially settled under the Rules  of  Singapore  International  Arbitration
Centre by a Sole Arbitrator appointed in accordance with the said Rules  and
the proceedings should be in English and the seat of arbitration  should  be
Singapore. Insofar as the said clause was concerned, the same was  different
than the one which was contained in the earlier  draft,  as  per  which  the
arbitration was  to  be  carried  out  with  the  Rules  and  provisions  by
Netherlands Arbitration Institute  and  the  venue  of  the  arbitration  as
Hague, The Netherlands and governing law was also mentioned as the  laws  in
force  in  the  Netherlands  and  the  Courts   at   Netherlands   to   have
jurisdiction. In the draft dated 4.4.2012 the governing law was  to  be  the
laws in force in India.

The appellant received the re-draft by way of  e-mail  on  3.4.2012  with  a
direction to the appellant to sign the document, get  it  legalized  by  the
Indian Embassy in Seoul and dispatch the same to  the  respondent's  lawyers
in Amsterdam.  The appellant executed the deed of  transfer  dated  4.4.2012
and thereby transferred all its rights and interests in the  Indian  Patents
in favour of the respondent. The  appellant's  lawyers  sent  an  electronic
copy of  the  said  document  to  the  respondent  duly  notarized  with  an
assurance that the original would be promptly couriered  to  the  respondent
upon confirmation.  In response to the same, the lawyers of  the  respondent
in their e-mail dated 11.4.2012 intimated that the  signature  part  of  the
deed was correctly executed by the appellant and also  wanted  the  original
deed to be sent by courier to their Amsterdam Office for carrying out  other
additional formalities for effecting  the  transfer.  Simultaneously,  their
lawyers also  on  the  same  day  informed  the  respondent  confirming  the
forwarding of the transfer deed for effecting the  transfer  of  the  patent
applications duly signed by the appellant.  The original document  was  also
forwarded to the lawyers of the respondent on 12.4.2012.

However, it appears that the respondent had its own issue with  its  lawyers
as regards the draft as well as the final deed executed by the appellant  in
favour of the respondent which came to light when  the  present  proceedings
before the High  Court  was  launched  by  the  respondent.   The  same  was
reflected  in  the  communication   dated   12.4.2012   addressed   by   the
representative of the respondent  to  its  lawyers.   Thereafter,  the  next
communication was dated 3.12.2012 by the respondent's  lawyer  addressed  by
way of an e-mail to the appellant's lawyer suggesting that  the  transaction
can be by way of trade sale of the appellant's business. On  behalf  of  the
appellant, its lawyer sent a reply  dated  11.12.2012  taking  the  definite
stand that after the execution of  the  transfer  deed  dated  4.4.2012  the
requirement of the obligation to be fulfilled  by  the  appellant  was  duly
complied with as per the  PFA  dated  23.12.2011.   Thereafter,  by  another
communication dated 15.3.2013, the respondent's lawyers sent a fresh  e-mail
to the appellant's lawyers informing that fresh steps  are  required  to  be
taken to arrive at a final settlement of  disputes.   The  said  e-mail  was
also replied on behalf of the appellant on 20.3.2013 wherein the  respondent
was reminded as to  the  confirmation  of  the  steps  taken  based  on  the
transfer deed executed by them.  For the first time, on 8.6.2013, by way  of
e-mail at the instance of the respondent's lawyers  it  was  intimated  that
respondent was not willing to accept the transfer of  Indian  Patents  based
on the language used in the draft deed as  signed  by  the  appellant.   The
said e-mail was also duly replied on behalf of the  appellant  on  15.6.2013
pointing out that the deed was executed as per the draft  forwarded  to  the
respondent by their lawyers and consequently the appellant was  not  in  any
way liable for either any delay or for the terms contained in  the  transfer
deed.

It was in the above-stated background the present  application  came  to  be
filed by the respondent on 8.7.2013 before the High Court of Bombay for  the
enforcement of paragraph 7 of the PFA dated  23.12.2011.   By  the  impugned
order, the learned Single Judge held that there was  a  material  alteration
in the draft deed forwarded by the respondent  to  the  appellant  when  the
final deed was executed in the deed dated  4.4.2012  and  consequently,  the
appellant is bound to execute a transfer  deed  of  assignment  as  per  the
draft sent by the award holder, namely, the  respondent  as  was  originally
forwarded to the appellant.

With that view, the learned Judge directed  the  appellant  to  execute  the
deed  of  transfer  and  assignment  of  Patent   Nos.   2143/MUM/2008   and
2144/MUM/2008 in favour of the award holder in terms of Annexure P6  to  the
Execution Application incorporating therein the  complete  recital  'B'  and
the Arbitration Clause 5.5 showing the  future  arbitration  in  Netherlands
within two weeks from the date of the  order.   Aggrieved  by  the  impugned
order, the appellant is before us.

We heard Mr. K.V. Vishwanathan, learned senior  counsel  appearing  for  the
appellant and  Mr.  Manoj  K.  Singh,  learned  counsel  appearing  for  the
respondent.

Having drawn our attention to  the  above  factual  details  which  emanated
after the passing of PFA dated 23.12.2011, Mr. Vishwanathan, learned  senior
counsel, contended that  when  the  application  was  initially  moved,  the
respondent failed to bring to the notice of the Court  about  the  extensive
correspondence which took place between 19.1.2012 and 15.6.2013, that  after
the appellant in its Chamber Summons brought to the notice of the Court  the
relevant information,  namely,  the  re-draft  sent  by  the  respondent  on
3.4.2012 which contained the variation  in  para  'B'  as  between  the  one
contained in the earlier draft of 19.1.2012 and  3.4.2012  as  well  as  the
arbitration clause and the governing law contained  in  paragraphs  5.5  and
5.6, the respondent for the first time in their rejoinder referred to  those
documents.  The learned  senior  counsel  pointed  out  that  learned  Judge
completely omitted to take note of such relevant factors  and  proceeded  to
hold as though the draft sent by  the  respondent  on  19.1.2012  alone  was
material and that the changes found in the final deed dated 4.4.2012 was  at
the instance of the appellant which unfortunately led to the passing of  the
impugned order.

In reply, Mr. Singh, learned counsel appearing for the respondent,  was  not
able to controvert the factual position, namely, that the first  request  of
the respondent after the PFA dated  23.12.2011  was  19.1.2012,  that  along
with the said communication the draft deed of transfer  to  be  executed  by
the appellant was forwarded to it, that after detailed  discussions  between
January and March, 2012, the re-draft was forwarded  by  the  respondent  on
3.4.2012 wherein the reference to  PFA  in  the  opening  paragraph  of  the
earlier draft was omitted and that the paragraphs relating to  consideration
was specified apart from the change  about  the  venue  and  the  applicable
Rules  of  the  Arbitral  Tribunal  was  noted  as  Singapore   instead   of
Netherlands  and  the  governing  law  applicable  was  also  changed   from
Netherlands to India.  Learned counsel was also not able to  controvert  any
of the other subsequent correspondence exchanged between the  appellant  and
the respondent between 11.4.2012 and 15.6.2013.

Having regard to the said development which had taken place  after  the  PFA
dated 23.12.2011 which discloses that  the  appellant  did  not  commit  any
default in complying with the direction of the said  Award  and,  therefore,
the present direction of the learned Judge in the impugned order was  wholly
unwarranted.  If the respondent failed to act based on  the  final  transfer
deed executed by the appellant on 4.4.4012,  which  was  in  tune  with  the
draft forwarded by the respondent themselves, the  appellant  cannot  be  in
any way blamed for the misfeasance committed by the respondent.

In  the  above-stated  background,  when  we  consider  the  prayer  of  the
respondent as claimed in the application, the prayer was for a direction  to
the appellant to execute the deed of transfer and assignment of Patent  Nos.
2143/MUM/2008 and 2144/MUM/2008 in favour of the respondent in terms of  the
draft deed in Annexure P6, which was dated 4.4.2012.  In  fact  the  learned
Judge,  as rightly pointed out by Mr. Vishwanathan, learned  senior  counsel
for  the  appellant,  completely  missed  to  note   that   based   on   the
correspondence exchanged between the respondent and  the  appellant  between
19.1.2012 and  3.4.2012  Annexure  P6  which  was  dated  4.4.2012  was  the
ultimate transfer deed which the appellant was obliged to execute, that  the
appellant duly executed the said document by signing the  same  on  4.4.2012
and forwarded to the respondent's lawyers on 9.4.2012 and the due  execution
of which was also confirmed on behalf of the respondent by their lawyers  on
11.4.2012.  A further confirmation was made by the respondent's  counsel  to
the respondent themselves  on  the  same  day,  i.e.  11.4.2012  as  to  the
execution of the transfer deed dated 4.4.2012.  The original documents  were
also forwarded by the appellant  on  12.4.2012.  After  the  above  referred
sequence of events as regards Annexure P6 dated 4.4.2012 are noted, it  must
be held that the direction contained in  paragraph  7  of  the  PFA  of  the
Arbitral Tribunal was duly carried out by the appellant based on  the  first
request of the respondent themselves as made on 19.1.2012  and  as  per  the
modified request dated 3.4.2012. If that was  the  real  fact  situation  in
regard to the execution of the transfer deed, which was  completely  omitted
to be noted by the learned Single Judge, it must be held that there  was  no
occasion for  the  respondent  to  have  any  grievance  in  regard  to  the
execution of the transfer deed as directed in paragraph 7 of the PFA of  the
Arbitral Tribunal dated 23.12.2011. The failure on the part of  the  learned
Judge in having noted the fact that the transfer deed dated 4.4.2012 was  as
per the re-draft forwarded by  the  respondent  themselves  which  was  duly
executed and sent back by the appellant by  9.4.2012  and  the  original  by
12.4.2012 unfortunately resulted in the passing of the  impugned  order.  In
the light of the said patent illegality in the impugned order, the  same  is
liable to be set aside.

In the said circumstances, the impugned order of the  learned  Judge  cannot
be sustained, the same is set aside and the appeals stand allowed.



                                          ................................J.
                                          [Fakkir Mohamed Ibrahim Kalifulla]


                                          ................................J.
                                                                [S.A. Bobde]
New Delhi;
April 22, 2016