The Chartered Accountant

DECEMBER 2008 1004 THE CHARTERED ACCOUNTANT
LEGAL UPDATE
Money Laundering
Section 1 of the Prevention of Money Laundering Act, 2002 — Constitutional validity of
Constitutional validity of the Act
Pareena Swarup v. Union of India (Supreme Court) 30 September, 2008
The Appellant filed a writ petition contending that the
provisions of the Act are so provided that there may
not be independent judiciary to decide the cases under
the Act but the Members and the Chairperson are to
be selected by the Selection Committee headed by the
Revenue Secretary. The Constitutional guarantee of a
free and independent judiciary and the constitutional
scheme of separation of powers can be easily and seriously
undermined, if the legislatures were to divest
the regular Courts of their jurisdiction in all matters,
entrust the same to the newly created Tribunals. The
Respondent placed on record that the suggested actions
have been completed by amending the Rules.
The Court observed that it is necessary that the Court
may draw a line which the executive may not cross
in their misguided desire to take over bit by bit and
judicial functions and powers of the State exercised
by the duly constituted Courts. While creating new
avenue of judicial forums, it is the duty of the Government
to see that they are not in breach of basic
constitutional scheme of separation of powers and
independence of the judicial function. We agree with
the apprehension of the petitioner that the provisions
of Prevention of the Money Laundering Act are so
provided that there may not be independent judiciary
to decide the cases under the Act but the Members
and the Chairperson to be selected by the Selection
Committee headed by Revenue Secretary. Further, as
the amended/proposed provisions are in tune with the
scheme of the Constitution as well as the principles
laid down by this Court, the same is approved and the
respondent-Union of India is directed to implement
the above provisions.
The writ petition was disposed of.
MRTP
Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969 — Unfair Trade Practice
Section 36A does not apply in a situation where goods are not sold at all
Philips Medical Systems (Cleveland) Inc. v. Indian MRI Diagnostic and Research Limited and Another (Supreme
Court), 29 September, 2008
The appellant is a company based in USA engaged
in the business of manufacturing and selling of various
medical diagnostic equipment. Respondent No.
1 wanted to purchase a Whole Body CT Scanner and
held negotiations for the same with the appellant. The
First Offer lapsed without being accepted on the expiry
of 90 days as import licence was not forwarded by
respondent No. 1 within the validity period. A Second
Quotation was accepted by respondent No. 1, which
was duly endorsed by respondent No. 2. The Letter
of Credit (L/C) had been opened for a sum quoted
in the first offer instead of the agreed price through
the second offer. Respondent No. 2 refused to amend
the L/C and wanted the appellant to falsify the shipping
documents. The L/C was never encashed by
the appellant and was returned to respondent No. 1.
Respondent Nos. 1 & 2 filed a complaint before the
MRTP Commission. MRTP Commission allowed the
complaint and has held the appellant guilty of unfair
trade practice and directed to pay compensation.
The Supreme Court held that Section 36A does not
apply in a situation where goods are not sold at all. It
only applies where goods are sold. Section 36A was
really meant to protect consumers against defective
goods or goods sold which do not have features or
qualities which they were represented to have. Since
the appellant did not sell the CT scanner at all to the
respondent, Section 36A is not attracted at all.
Per Altamas Kabir, J. :
However, there may be situations where a promise to
supply a particular good, which the supplier knew that
he was in no position to supply, with a motive of promoting
of some other model, as has happened in the
instant case, could occur. In such a case a customer
may be forced to obtain the same material from some
other party and suffer losses in the process. Therfore,
even without actual sale of goods, such an act on the
part of the supplier could also amount to ‘unfair trade
practice’ and Section 36-A cannot in absolute terms
be said not to apply to a situation where goods may
not have been sold at all. In fact, such a situation may
also be covered even by the provisions of Sub-clause
(ii) or (vi) of sub-section (1) of Section 36-A.
The appeal was allowed.