Common Bond July - 2013

VANDE MATHARAM

VVVVVol. 32 No. 4 Tol. 32 No. 4 Tol. 32 No. 4 Tol. 32 No. 4 Tol. 32 No. 4 Total 12 Potal 12 Potal 12 Potal 12 Potal 12 Pages ages ages ages ages BANGAL BANGAL BANGAL BANGAL BANGALORE ORE ORE ORE ORE Single Copy Rs. 3/- July - 2013 Single Copy Rs. 3/- July - 2013 Single Copy Rs. 3/- July - 2013 Single Copy Rs. 3/- July - 2013 Single Copy Rs. 3/- July - 2013

EditorialEditorialEditorialEditorialEditorial

COALGATE – CAUGHT IN THE WEB

e saw an eventful year 2012 marred by variousscams, poor governance, price rise and

irrelevancy of mango people. Before the dust onaccount of 2G spectrum scam settled down a moreserious scam on the allotment of coal blocks to vestedinterests as exposed by Comptroller and AuditorGeneral of India (CAG) has shocked the entire nation.It was reported that the Prime Minister who washandling the coal ministry portfolio had providedlicense to many interested parties in an irregular andarbitrary manner selling 142 coal blocks against theprescribed norms, causing a loss of `̀̀̀̀ 1,86,000/-Cores to the ex-chequer. The Prime Minister insteadof taking corrective steps and action against thosewho involved in the irregularity has made virtue ofhis own silence.

When many scams have been unearthed by CAG,including Coalgate, the government musterdcourage of attacking the authority of CAG, whoaccording to them is only a reporting agency not aninvestigating authority forgetting that CAG is aconstitutional authority. At every such revelation thegovernment known for their zero administrativecapacity and tolerance maintained that there is zeroloss.

The scandal that has enveloped the government asa consequence of this shameful episode will not goaway with a mere clarification. Though the

government had tried to put up a brave face and justifytheir action, the Apex Court on a petition had cancelledmany such licenses.

According to CAG, competitive bidding could havebeen adopted through administrative instruction. TheHon’ble Supreme Court on a Presidential referencehas given their opinion that auction should be thepreferred method for distribution of natural resourcesthough not the only one. Court also held that alldecisions and action of the government were open tobeing questioned by the court for the constitutionalvalidity. Central Vigilance Commission in the meantimehad asked the CBI to take up the investigation of theirregularity in the coal allocation which is now beinginvestigated by a special investigation team beingmonitored by the Apex Court.

GOVERNMENT CAUGHT ON THE WRONG FOOT

When the CBI is probing into the irregularity inallocation of coal blocks under the supervision of ApexCourt, the government was caught on a wrong footwhen the CBI allowed the investigation report vettedby the Union Law Minister, bureaucrats from PMO andCoal Ministry, the very officers whose decisions werebeing probed. According to Supreme Court, CBI’s actof sharing report with the ministry and the concernedpeople has shaken the entire investigation process andwanted to liberate the agency from political influence

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WORK IS WORSHIP, DO YOUR DUTY

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and interference. Accordingly the Supreme Courtasked the government to come out with proposal ofenacting a law to ensure the CBI’s autonomy. Onmany occasions the Apex Court had given guidelinesfor restoring institutional autonomy andprofessionalism for the premier investigating agency,especially in the case of Vineet Narains case 15years ago. The Apex Court has already expressed theirconcern on the impartiality, credibility andindependence of the institution. But all are caught inthe trap. Police and CBI really need to be freed fromthe political class that is clinging onto illegitimateprivilege whether at centre or at state level.

Vetting of investigation report prepared by the CBI,caused so much amusement to Supreme Court,besides earning strictures, as by vetting, theGovernment had shaken the very foundation of theindependent investigation. However the Union LawMinister tried to defend the action of the LawDepartment that he is within his right to meet CBIDirector and see the reports. The Law Minister thoughtthat he represents the sovereign government andhence directed CBI to alter the substance of the report.It is reported that all those who are involved in thescam were given chance to correct the report. But theargument could have gone well in its generality notin the present context wherein the governmentthemselves are in the dock in respect of coal allocationinvolving corrupt practice that cost the ex cheque incrores of rupees. It was the overzealousness on thepart of the Law Minister to protect the Prime Ministerthat landed him in a difficult situation and made himto quit. Though it was observed by the Supreme Courtthat the Law Minister had no business in looking atthe report Minister misarbly tried to defend himselfstating that the Supreme Court had not passed anyorder against himself nor against CBI.

However the minster was ridiculed by a former CBIdirector who said that inspite of being a lawyer theminister did not know that he cannot interfere in thematter when the investigation is against variousofficers in the ministry. In this process the law minister

has already violated the oath of secrecy and he hasbecome law unto themselves. The apex court had alsoasked the authorities to show any law which authorisea minister to probe a status report for submissionbefore a court of law.

Government had their own apprehension whetherthey can afford to impart independent investigatingauthority to CBI. Followed by Supreme Court, the CAGalso proposed to have constitutional status for theCentral Investigating Authority. One of the contentiousissues of Lokpal Bill was the delinking of CBI from thegovernment clutches which is presently being misusedby the ruling party against their opponents’. This issuehad made the government dilly –dally with the passingof the bill.

If the government wanted to come out from thepresent crisis they should think afresh about how tomake CBI genuinely autonomous especially in thecontext of the present issue with the court.

If a minister sells spectrum or coal, the civil societyencroaches the agricultural land, water ways, lakesor forest to create building or township are all violationof public resources for private gains. Swift politicalsomer saults has been the order of the day puttingeveryone on tender hooks disregarding the future ofthe country. There are several reasons attributed toerosion of administrative system that includepoliticalised and compromised bureaucrats,weakened monitoring system and decline in moralvalue. A weak leadership causes indiscipline andcorruption among the cadre. Capacity of the leadersstarted stagnating or even deteriorated despiteperiodic rhetoric who tried to survive on psychophancy.When India is the world’s third largest deposit holderof coal, also ends up being the world’s second largestcoal importer. It should be the policy of the centralgovernment that the benefit of India’s large stock ofcoal reserve a sovereign property should be enjoyedby the nation and its people not by speculationinvestors, politicians and their relatives.

SELF HELP IS BEST HELP

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K.R. KAMATHRE-ELECTED IBA CHAIRMAN

Punjab National Bank, Chairman and ManagingDirector, Shri. K.R. Kamath is now re-elected asChairman of Indian Banks’ Association for 2013-14.

COM.M.HARSHAVARDHAN MADABHUSHI,GENERAL SECRETARY, ABOA NOMINATED AS OFFICER – DIRECTOR

ON THE BOARD OF STATE BANK OF HYDERABAD

We have pleasure in advising thatCom. M.Harshavardhan Madabhushi, GeneralSecretary of Associate Banks’ Officers’ Association,and also ABOA Unit - State Bank of Hyderabad ouraffiliate has been nominated as Officer - Director onthe Board of State Bank of Hyderabad for a periodof three years from 18th June, 2013; the date of

notification. The text of relative notification isfurnished overleaf.

“Common BondCommon BondCommon BondCommon BondCommon Bond” congratulates Com.M.Harshavardhan Madabhushi, on his induction intothe Board of State Bank of Hyderabad and wish himall the best in his new assignment.

UFBU MEETING WITH IBA

Text of UFBU Circular No. 9

IBA’s Negotiating Committee headed by Shri.T.M. Bhasinmet the United Forum of Bank Unions today at IBA officein Mumbai.

2. In today’s meeting, we demanded that there shouldbe a time bound programme to complete thenegotiations without much delay to arrive at the wagerevision settlement at the earliest. IBA also agreed withour views and informed that the same can be workedout by mutual discussions. Today we also demanded thatthe wage revision should be effective from 1st November2012 and that the new pay scale should be constructedby merging the DA at 4876 points i.e. the DA applicableto July- September, 2012 quarter. We also insisted thatthe IBA should make their offer on the percentage ofwage load acceptable to them. For this, the IBA informedus that they would consult the higher authorities in theGovernment and inform us in the next round ofdiscussions. The IBA suggested that the pay scales couldbe constructed by merging the DA applicable upto 2009.

We did not agree to this proposal. These issues will bediscussed further.

3. In today’s meeting the IBA also explained their issueslike introduction of Cost to Company, Performancerelated wage, restricting the wage revision, increasedmobility to award staff, rationalisation of Special Pay etc.While expressing our reservations and viewpoints, wesuggested that these issues can be reverted duringsubsequent discussions.

4. From the UFBU we also submitted that in the proposedwage revision, the hike in wage load should be exclusiveof the cost on pension and other superannuationbenefits and also the cost of hospitalisation expensesreimbursement. The IBA informed that this would bekept in mind by them. The IBA informed that they willshortly inform us the date for the next round ofnegotiations. Further developments will be informed indue course.

“Common BondCommon BondCommon BondCommon BondCommon Bond” congratulates, Shri. K.R. Kamath,for having re-elected as Chairman of IBA and wishhim success for all his future endeavors.

AppointmentsAppointmentsAppointmentsAppointmentsAppointments

OrganisationalOrganisationalOrganisationalOrganisationalOrganisationalIssuesIssuesIssuesIssuesIssues

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BE TRUTHFUL, BE FEARLESS

n February 22, 2013, the Reserve Bank of India(RBI) issued guidelines on “licensing of New

Banks in the Private Sector”. Indian companies andothers can now seek licenses to set up new banks.Incidentally, the United States does not allow corporategroups to set up banks, although this is permitted inthe United Kingdom, Germany and France. This articlereviews the perceived advantages and downside risksof allowing Indian companies to set up new banks.

The primary motivation for allowing companies tosponsor new banks has to be to promote lending andcompetition. It is generally agreed that lending iscurrently constrained because existing banks are shortof capital and their risk appetite is low due to theeconomic slowdown. Therefore, it is unclear why lendingwould be enhanced if companies use retained earningsor access funds from capital markets to sponsor newbanks. If the argument is that Indian firms are in abetter position than banks to assess local risks, corporatecapital could instead be invested directly in freshprojects. Further, if the new corporate group ownedbanks are expected to boost lending by unlockingadditional savings because they can convene depositorsof their ability to assume longer –term project risks,they could do the same as companies.

At an international level, the US and European centralbanks are continuing to keep interest rates low andmonetary liquidity levels high by buying governmentand other fixed income securities. Now that Japan,too, has embarked on a concerted drive to meet higherinflation targets, there should be enough capital sloshingaround for Indian entities to borrow from foreignsources. A counter –argument is that there are a numberof reasons, including perceived exchange rate andcreditworthiness risks, that make it difficult for Indianfirms, particularly small –and medium –sizedenterprises, to access longer –term foreign capital. Thebottom line is that for long-term lending to increase inIndia, we need credible projects in tandem withcreditworthy borrowers.

Consequently, it is likely that companies are seeking toset up banks on the expectation that the return on shorter–term capital on a risk –adjusted basis, will be higher inthe banking sector. This motivation could be colouredwith the temptation to engage in camouflaged lendingto related companies and it would be extremely difficultfor regulators to disentangle and identify such lending.

Foreign banks operating in India prefer to open branchesrather than set up subsidiaries. The RBI is going slow onallowing foreign banks to set up new branches, as it isevaluating the benefits and costs of branches versussubsidiaries. Foreign banks rated double –A and higher,which are currently not present in India, may seeklicences if the RBI allows a larger number of branchesto them based on stiffer credit rating and capitalrequirements. That is, capital inflows could be encouragedthrough new foreign banks setting up business in Indiaeven as the RBI resolves the overall subsidiary –versusadditional branches issue.

Insolvent public and private banks have been repeatedlybailed out by taxpayers in the past. Effectively, theimplicit government guarantee for the too-systematically–important –to- fail banks is equivalent to an Americanput option with no expiry date. Bank management ownsthis valuable put option for free, which gives them theright to sell bank equity in times of stress at prices muchhigher than what markets would provide. The December2010 issue of the Bank of England’s Financial StabilityReport pegged the value of this government guaranteefor UK banks, in 2009, at 107 Billion. The same putoption was subsequently valued by the Bank of Englandat 30-120 billion. Bloomberg, the financial news andanalytics service, estimates the value of this put optionfor all US banks at 80 billon per annum.

At the time of the financial sector meltdown in2007-08, there was an exodus of deposits from privateto public sector banks in India. It is apparent thatdepositors value the government’s implicit back –stopsupport for banks and ascribe a higher value to it forpublic as compared to private banks. Irrespective of the

CORPORATE GROUP – RUN BANKS: RISK OF LICENSING

OArticlesArticlesArticlesArticlesArticles

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SUCCESS COMES ONLY TO THOSE, WHO DARE AND ACT

difference in value of the put option between publicand private banks, the government guarantee for banksis probably an explanatory factor for Indian companiesseeking to sponsor new banks.

The discussion on private versus publicly owned banksusually does not focus on banks sponsored by companiesas a subcategory of private banks. For instance, an Inter–American Development Bank (IADB) paper of February2005 prepared for a conference on public banks wastitled “State – Owned: Banks: Do they Promoteor Depress Financial Development and EconomicGrowth ?”. This paper concluded that private banks tendto be more profitable than public sector banks. Further,public banks may not allocate credit “optimallyoptimallyoptimallyoptimallyoptimally”.However, according to this IADB paper, it is not clearthat government ownership of banks retards financialdevelopment or economic growth. The paper alsosuggests that publicly owned bank can play an importantcountercyclical lending role in times of stress. The higherprofitability of private banks looks less impressive ifadjusted for risk over several economic cycles.

More recently, an April 2013 World Bank policy paperby Cesar Calderon and Klaus Schaeck titled “BankBailouts, Competition, and the Disparate Effects forBorrower and Depositor Welfare” analyses how “blanket

guarantees, liquidity support, recapitalizations andnationalizations during crises affect competition”. A keyfinding of this paper is that such interventions do notreduce competition. This conclusion cannot bemeaningful till records about discussions betweengovernments and central banks, which led to taxpayersupport after 2007, are declassified.

In what could be called black humour, the lead item inthe Finance and Economics section of The Economistdated May 4, 2013, is titled “Why have so few bankersgone to jail for their part in the crisis?”. Clearly, it isdifficult to prove criminal conduct as distinct from willful breach of fiduciary responsibility. It is surprising thatdespite the evidence of 2007-08 and other failures ofprivate banks, there is continuing faith that private banksare inherently less prone to wrongdoing than publiclyowned banks. Recent Indian press reports seem toindicate that three large private sector banks have beenidentified by the RBI as having engaged in the mischiefhighlighted by Cobrapost.

To sum up, at this time the opportunity cost and risks oflicensing new corporate group-run banks in India seemto outweigh the intended higher lending competitionand efficiency benefits.

SourceSourceSourceSourceSource: Business Standard: Business Standard: Business Standard: Business Standard: Business Standard

" olitical science is that part of social sciencewhich deals with the foundation of the state

and principle of government"according to politicalanalyst. Political science has emerged as an importantsocial science with the main objective of forgingrelations among individuals and to build relationsbetween individuals on the one side, and on the other,the society and the state.

When yesterdays politics is to-days history, thecurrent politics will become tomorrow’s history.Country has seen many political turmoil includingcorruption in the recent times which will be recordedin the history. Politics without principle wasconsidered as a sin by Gandhiji. According to him

POLITICS OF POLITICAL SCIENCEPOLITICS OF POLITICAL SCIENCEPOLITICS OF POLITICAL SCIENCEPOLITICS OF POLITICAL SCIENCEPOLITICS OF POLITICAL SCIENCE

there are seven sins in life such as politics withoutprinciple, wealth without work, pleasure withoutconscience, knowledge without character, commercewithout morality, science without humanity andworship without renunciation of ego.

Politics was once considered as a sacred religion,when politicians were leading an honest life withausterity. Gandhiji had the foresight of seeing theway the political party under whose banner thecountry faught the movement, is going down againstthe principle and hence advised to disband the party.The current political situation prevailing in thecountry looks like that we are slipping back tomedieval age. Society is getting metamorphosed with

P

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NEVER BEND BEFORE THE INSOLENT MIGHT

the ill-gotten wealth generated by politicians.

British statesmen of 19th Century, BenjaminDisraeli called Tory, the political party of England ahypocrisy which observation is opt for the currentpolitical scenario in the country. Considering thehypocrisy hidden in the political system, GeorgeWashington, the first President of US had sworn thathe would govern without a political party, knowingfully well that representatives of the people are verymuch part of a democratic system. But during hislife term U.S. had two party system emulated fromBritish administration and become second biggestdemocracy in the world after India. When two partysystem was not prevalent in the unified Soviet Unionduring the period of Mikhail Gorbachev, the thenSoviet leader urged Soviet press and intellectuals tofulfill the role of opposition in exposing corruption.

Politics being a lucrative business, 20th Century sawmushrooming of political parties in India at variousregional levels mainly on caste basis. Election wasfought on caste, religion and money basis whenlocal leaders started exploiting the sentiments of thepeople. Of late regional parties have become coalitionpartners at national level as marriage of convenience.They started dictating terms and deciding the destinyof the country, consequent to which the main rulingparty is unable to implement many reforms that arerequired in the national interest. When the partiesrule on a slender majority, bargaining or betrayal hasbecome part of Indian politics. Parties are abandoningcoalition discipline for free floating to move towardsany shore to switchover their alliance for theiradvantage. Hypocracy and expediency have alwaysbeen a hall mark of political parties in India.

It looked like that India is being ruled by a group ofpeople under the illusion of ‘Divine Right Theory’forgetting that the country belongs to its more then1210 million people. With the growth of populationunemployment is also on the increase that led to aconsiderable percentage of unemployed youthentering in to politics, while certain others joining

the religious groups and certain others in to terroristgroups or other banned organizations. Maintaininga political party is a costly affair as no cadre willwork for gratis. Apart from normal electionexpenditure a party needs additional fund for theircampaign which comes in the form of corruption.Every party survives on institutional donation andcorporate contributions unlike members’contributions earlier. Currencies are also coming inthe form of garlands for the leaders. It is only naturalthat while giving donation any donor will also expectsome consideration especially from the ruling party.In Indian license raj it is corruption rather than meritsof an application decides things. The parties collectmoney in black and bleach it in white, as no politicalparty in India is willing to accept camping moneythrough formal channel. It is a sad state of affairsthat in India democracy is being funded by theproceeds of corruption. Corruption is not an isolatedissue confined to India alone, it is an internationalphenomenon.

Since the election is the epicenter of corruption, theCentral Election Commission (CEC) had been askingthe government to amend the Representation of thePeoples Act to bring the election expenditure ofpolitical parties under the Central governmentcontrol. It is necessary that funding must becometransparent and institutionalized. EC alsorecommended barring those who are involved incriminal cases from contesting elections and askingthe government to give the power to compel allregistered political parties to publish their balancesheet in the website. Though a constitutionalauthority, the hands of CEC are tied up. Even theydo not have the power to de-recognize a politicalparty who violate the rule of law. Government is yetto make up their mind in this regard as it is thoselaw breakers, have to pass the bill.

Civil servants are every much part of ouradministrative system. Though the cardinal principlesof civil servants are the professional anonymity ,integrity, neutrality, they are slowly withering due to

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political interference. Civil servants are made totoe the line of politicians much against theirconscience. Though it is the function of therepresentatives of the people to make law,beurocracy to implement and enforce, the judiciaryto evaluate and adjudicate, mostly in practice theypoke their nose every where and spoil the wholesystem. Very rarely we find the civil servants whogo by law, resist the dictum of their masters, fearingvictimization with the weapon of transfers.

It is the practice of political philosophers, ministers,economists or policy makers to issues statementson productivity, poverty and economic growth etc.,In this connection it is worth recalling the statementsof J.M. Keynes, the noted British Economist of 20thcentury. According to him the idea of economistsand political philosophers –both when they are rightand when they are wrong – are more powerful thanis commonly understood. Indeed the world is ruledby little else. Practical men who believe themselvesto quitely exempt from any intellectual influencesare usually, slaves of some defunct economist orPolitician.

When policy makers struggle to find solution thisquote is very appropriate , because none of thetheories are working to day. Many statements inthe past by the economists, ministers and policymakers on the cut off figures of APL and BPLfamilies, consequent to which planning commissionhad to distance itself from an affidavit filed in theSupreme Court setting ̀̀̀̀̀ 32 per day as poverty linein urban centers and ̀̀̀̀̀ 26/- in rural centers Similarlyvarious statements on economic growth, G.D.P,

inflation rate etc are also based on the said theorygiving cut off date or figurers beyond one’s imagination.Comptroller and Auditor General of India (CAG) hadexposed many scams in the recent times. Thegovernment and political masters had made allattempts to ridicule and reduce the Federal auditor tobeing a mere accountant with no role in the auditingpolicy for which they have earned the wrath of theApex Court who had confirmed the constitutionalresponsibility of CAG.

The demand for Lokpal bill to eradicate corrupt fromthe society is hanging fire for the past four decades .It is now being revived through mass uprising underthe banner of “India Against Corruption” led by AnnaHazare. Though the government had promised aneffective Lokpal Bill for the last two years afterapproval by the Loksabha it was sent to a Joint SelectCommittee to vet. The spontaneous protest andoutpouring of people as witnessed in recent times inthe country took the administration by surprise. Aheadof the coming general elections, government nowproposes to pass the Lokpal Bill with certainamendments. One of the contentious issues is givingautonomy to CBI and appointment of CBI Directorwhich the government is still reluctant to reconsider.It is alleged that the government has been using CBIagainst their political opponents. Seeing the way eachpolitical party is behaving, it is clear that politicalparties cannot play a prominent role in shaping thedestiny of the country unless the Representation ofPeople’s Act is amended in the interest of the country.The political science needs to be analyzed andunderstood properly by the political parties.

TAX DEDUCTION ON PURCHASE OF IMMOVABLE PROPERTY

recent amendment relating to tax deductionat source (TDS) on transfer of immovable

property has become effective from 1 June 2013.Since this requirement applies to all transactionsof transfer of immovable property of `̀̀̀̀ 50 lac ormore, it would require compliance by and affect alarge number of purchasers of such property,including individuals not carrying on business, who

are normally not required to deduct TDS.

This new provision requires TDS to be deducted at1% of the price being paid by the purchaser of animmovable property, irrespective of the quantum ofcapital gains. If the seller does not have a PermanentAccount Number (PAN), the rate of TDS would be20%. The property may be in the nature of land,

ATaxationaxationaxationaxationaxation

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NATION FIRST, ORGANISATION NEXT, INDIVIDUAL LAST

buildings or flats. However, the deduction does notapply to purchase of agricultural land which is notlocated within municipal limits or within the specifieddistance from municipal limits.

Tax has to be deducted either at the time of credit orpayment of consideration, whichever is earlier.Normally, in most cases of individuals purchasingimmovable property, the question of credit ofconsideration in the books of account should notarise, as there would be no books of accountmaintained for such transactions. Therefore,effectively TDS would be deducted from theconsideration being paid to the seller and have tobe paid separately to the government by thepurchaser.

Such tax would have to be deducted irrespective ofwho the seller is, whether a builder or a flat ownermaking a subsequent sale. However, where the selleris an non-resident, these provisions would not apply,and the earlier TDS provisions applicable topurchase of property from non-residents wouldcontinue to be applicable.

This provision would only apply to payments beingmade on or after 1 June 2013, and would not applyto payments made for the same property prior to 1June 2013, when the relevant law was not in force.However, for the purposes of computation of thelimit of ̀̀̀̀̀ 50 lakh, the total considerations, whetherpaid before 1 June 2013 or sub subsequently, wouldhave to be considered. Therefore, for a propertyagreed to be purchased for Rs.75 lakh, if paymentsof `̀̀̀̀ 30 lakh have been made before 1 June 2013,even if the payments being made after 1 June 2013are less than `̀̀̀̀ 50 lakh, TDS would have to bededucted from the payments of `̀̀̀̀ 30 lakh as andwhen such payments are made. Fortunately, theapplicability of TDS is only to the actualconsideration specified in the transfer documentsand is not on the basis of a national fair market value,such as a stamp duty valuation, even though suchvaluation may be higher. The consideration would

include various incidental payments required to bemade to the seller, such as legal fees, contributiontowards shares, payment for parking spaces.However, stamp duty required to be borne by thepurchaser would not be regarded as payments beingmade to the selle as consideration, and wouldtherefore not be subject to TDS.

What is the position regarding joint purchasers orjoint sellers? Is the limit of ̀̀̀̀̀ 50 lakh to be seen vis-a vis payment made by each purchaser to each seller,or is it a composite limit of the total price of theproperty? From the language of the law, it seemsthat the limit would have to be seen vis-a vis paymentbeing made by each purchaser to each seller, thoughthe matter is slightly debatable, particularly as theonline form has questions to be answered as towhether there is more than one transferee as wellas whether there is more than one transferor andthe total value of consideration. In the absence ofclarity, to err on the safer side, it may be advisableto deduct TDS wherever the consideration under asingle agreement exceeds Rs.50 lakh, irrespectiveof the number of transferors or transferees.

Fortunately, the purchaser deducting such TDS isnot required to comply with the cumbersome TDSprocedural requirements applicable to other TDSdeductors, such as obtaining a Tax DeductionAccount Number, filing a TDS return, issuing a TDScertificate, etc. All that she is required to do is fill ina form online (www.tin-nsdl.com) , and either makean e-payment of the tax or physically make thepayment in a bank branch. The seller would get creditfor the TDS on the basis of his PAN, which is requiredto be mentioned in the form. One practical difficultywhich will arise in situation when the purchase ofproperty will be financed through a loan from a bankor a housing finance company. In such cases, to theextent of the loan amount, the bank or financecompany would directly make the payment to theseller, and not route the payment through thepurchaser, who is the borrower.

DUTY FIRST, RIGHT NEXT

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Even in such cases, the bank is merely dischargingthe obligation of the purchaser who is responsiblefor making payment of the purchase price, and thepurchaser is therefore required to deduct TDS inrespect of such amount as well. The purchaserwould therefore have to request the bank/financecompany to pay the seller the loan amount net ofTDS, the purchaser would then pay the TDS to thegovernment, and claim reimbursement of the TDSfrom the bank/finance company. Of course,explaining this procedure to the bank/financecompany and convincing them is a tall task itself

particularly as these provisions are new.

There are many more issues which arise in respectof these provisions, particularly as to theirapplicability to development agreements where theconsideration is in kind, or where the considerationis in the form of a revenue share of sale proceeds. Itis only over a period of time that these issues willhopefully be clarified either by judicial decisions orby clarifications issues by the Central Board of DirectTaxes.

Source: Mint 13.6.13Source: Mint 13.6.13Source: Mint 13.6.13Source: Mint 13.6.13Source: Mint 13.6.13

2013-II-LLJ-411 (P&H)IN THE HIGH COURT OF PUNJAB AND HARYANA

Present:Hon ‘ble Mr. Justice Satish Kumar Mittal and Hon ‘ble Mr. Justice Inderjit

SinghL.P.A. No. 448 0f [2010 (O&M)

11 th October, 2012State Bank of Patiala.......... Appellant

VersusPresiding Officer, Central Govt. Industry Tribunal-cum-Labour Court-I,

Chandigarh and Another ................... ‘Respondents

JUDGMENTJUDGMENTJUDGMENTJUDGMENTJUDGMENT

MrMrMrMrMr.SA.SA.SA.SA.SATISHKTISHKTISHKTISHKTISHKUMAR MITTUMAR MITTUMAR MITTUMAR MITTUMAR MITTAL,J.AL,J.AL,J.AL,J.AL,J.: The State Bank ofPatiala has filed this Letters Patent Appeal challengingthe judgment dated 4.11.2009 passed by the learnedsingle Judge, whereby the writ petition (C.W.P.No.21600 of2008) filed by the appellant-Bankchallenging the award of the Labour Court modifyingthe punishment of dismissal of the workman from

service to stoppage of five increments with cumulativeeffect, has been dismissed.

2. In this case, the respondent-workman was appointedin the appellant-Bank as a Peon in the year 1973. In theyear 1984 he was promoted as Record Keeper/GodownKeeper and posted at Miller Ganj Branch, Ludhianawhere in the year 1987 he was charge-sheeted on theallegations that he had unauthorizedly delivered the

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LLLLLegal Vegal Vegal Vegal Vegal Verdicterdicterdicterdicterdict

mployment and Laboumployment and Laboumployment and Laboumployment and Laboumployment and Labour Law - Dismissal-Industrial Disputes Ar Law - Dismissal-Industrial Disputes Ar Law - Dismissal-Industrial Disputes Ar Law - Dismissal-Industrial Disputes Ar Law - Dismissal-Industrial Disputes Act (14 of 1947), Section II-A - Wct (14 of 1947), Section II-A - Wct (14 of 1947), Section II-A - Wct (14 of 1947), Section II-A - Wct (14 of 1947), Section II-A - Workmenorkmenorkmenorkmenorkmendismissed on account of misconduct and misappropriation of fund Labour Court held that dismissal notdismissed on account of misconduct and misappropriation of fund Labour Court held that dismissal notdismissed on account of misconduct and misappropriation of fund Labour Court held that dismissal notdismissed on account of misconduct and misappropriation of fund Labour Court held that dismissal notdismissed on account of misconduct and misappropriation of fund Labour Court held that dismissal not

justified - Punishment modified from dismissal to stoppage of five increments - Reinstatement ordered withjustified - Punishment modified from dismissal to stoppage of five increments - Reinstatement ordered withjustified - Punishment modified from dismissal to stoppage of five increments - Reinstatement ordered withjustified - Punishment modified from dismissal to stoppage of five increments - Reinstatement ordered withjustified - Punishment modified from dismissal to stoppage of five increments - Reinstatement ordered withfull back wages -full back wages -full back wages -full back wages -full back wages -Whether Labour Court is justified in modifying punishment imposed on workman - Held, evenWhether Labour Court is justified in modifying punishment imposed on workman - Held, evenWhether Labour Court is justified in modifying punishment imposed on workman - Held, evenWhether Labour Court is justified in modifying punishment imposed on workman - Held, evenWhether Labour Court is justified in modifying punishment imposed on workman - Held, evendomestic enquirdomestic enquirdomestic enquirdomestic enquirdomestic enquiry was held to be fair and valid which does not justify order of dismissal - Section II-A confersy was held to be fair and valid which does not justify order of dismissal - Section II-A confersy was held to be fair and valid which does not justify order of dismissal - Section II-A confersy was held to be fair and valid which does not justify order of dismissal - Section II-A confersy was held to be fair and valid which does not justify order of dismissal - Section II-A conferspower on Labour Court to evaluate severity of misconduct Labour Court from evidence on record held thatpower on Labour Court to evaluate severity of misconduct Labour Court from evidence on record held thatpower on Labour Court to evaluate severity of misconduct Labour Court from evidence on record held thatpower on Labour Court to evaluate severity of misconduct Labour Court from evidence on record held thatpower on Labour Court to evaluate severity of misconduct Labour Court from evidence on record held thatpunishment of dismissal too severe for act of misconduct - Labour court committed no illegality while modifyingpunishment of dismissal too severe for act of misconduct - Labour court committed no illegality while modifyingpunishment of dismissal too severe for act of misconduct - Labour court committed no illegality while modifyingpunishment of dismissal too severe for act of misconduct - Labour court committed no illegality while modifyingpunishment of dismissal too severe for act of misconduct - Labour court committed no illegality while modifyingorder of punishment - Single judge rightly upheld order of Labour Court -order of punishment - Single judge rightly upheld order of Labour Court -order of punishment - Single judge rightly upheld order of Labour Court -order of punishment - Single judge rightly upheld order of Labour Court -order of punishment - Single judge rightly upheld order of Labour Court - Appeal dismissed. Appeal dismissed. Appeal dismissed. Appeal dismissed. Appeal dismissed.

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stocks to the borrowers, which were pledged with theappellant-Bank as a security in cash credit limit, inviolation of the instructions of the Bank, and in order toconceal the unauthorized delivery of the stocks to thefirms, certain stocks of paperlhoard of inferior qualitywere kept in the godowns, which were actually notpledged with the bank.

3. The respondent-workman replied to the charge-sheetshowing his ignorance about the illegalities beingcommitted by the borrowing firm. However, the EnquiryOfficer found him guilty of the charges. On the basis ofthe enquiry report, after issuing show cause notice, theworkman was dismissed from service vide orderdated24.8.1988 (AnnexureP3). The appeal preferredby him was dismissed vide order dated 10.4.1989(Annexure P4). Thereafter, the workman raised anindustrial dispute by issuing the demand notice and thematter was referred to the Labour Court for itsadjudication.

4. The Labour Court after considering the evidence ledby the parties came to the conclusion that a fair andproper enquiry was conducted by the management.However, after going through the entire evidence ledbefore it and the finding recorded by the Enquiry Officer,it was found that there is no evidence on the record toestablish that the workman had removed the stocks incollusion with the borrowing firm or with intent to gainsomething in removing the stocks. It has also been foundthat the workman had not embezzled or misappropriatedany, amount of the Bank or caused any financial loss toit. Rather it was observed that all the witnesses of thebank had stated very good about the integrity, behaviour,attitude and sincerity of the workman. While taking intoconsideration all these factors, the Labour Court cameto the conclusion that the punishment of dismissal ofthe respondent workman from service was not justifiedin the facts and circumstances of the case and wasdisproportionate to the alleged misconduct of theworkman. After coming to the said conclusion, theLabour Court vide order dated 14.8.2008 (AnnexureP5) converted the punishment of dismissal of theworkman from service into stoppage of five increments

with cumulative effect and ordered his reinstatementwith full back wages in exercise of its powers vestedunder Section l l-A of the Industrial Disputes Act, 1947(hereinafter referred to as ‘the Act’).

5. The learned single Judge affirmed the award of theLabour Court and held that in the facts andCircumstances of the case, the Labour Court was fullyjustified to award lesser punishment in exercise of thediscretion under Section l l-A of the Act.

6. In this appeal, learned counsel for the appellantargued that when the Labour Court itself found that afair and proper enquiry was conducted by themanagement in which the workman was given fullopportunity to defend his case, it was not justified tomodify the punishment of dismissal into stoppage offive increments with cumulative effect and orderingreinstatement of the workman in service with full backwages. According to the learned counsel, therespondent-workman was working in the financialinstitution and if the financial institution has lost theconfidence in the workman, then the Labour Court wasnot required to interfere in the I order of punishmentawarded by the management. Learned counsel furthercontended that it is not the amount of moneymisappropriated that becomes a primary factor forawarding punishment. On the contrary, it is the loss ofconfidence which is the primary factor to be taken intoconsideration. When a person is found guilty ofmisappropriating the funds, there is nothing wrong inthe management losing confidence and faith in such aperson and awarding the punishment of dismissal fromservice. In support of his contention, learned counselreferred to the decisions of the Hon’ble Supreme Courtin U.PU.PU.PU.PU.P. State R. State R. State R. State R. State Road Toad Toad Toad Toad Transport Corporation vransport Corporation vransport Corporation vransport Corporation vransport Corporation v. Vinod. Vinod. Vinod. Vinod. VinodKumarKumarKumarKumarKumar, (2008) 1 SCC; 115 and Divisional Controller, (2008) 1 SCC; 115 and Divisional Controller, (2008) 1 SCC; 115 and Divisional Controller, (2008) 1 SCC; 115 and Divisional Controller, (2008) 1 SCC; 115 and Divisional Controller,,,,,NE.K.R.TNE.K.R.TNE.K.R.TNE.K.R.TNE.K.R.T.C. v.C. v.C. v.C. v.C. v. H Amaresh,. H Amaresh,. H Amaresh,. H Amaresh,. H Amaresh, AIR 2006 SC 2730.

7. On the other hand, learned counsel for the workmanargued that dismissal is the ultimate and most drasticdisciplinary action. Before upholding such punishment,the Labour Court has to consider whether in thebackground of the circumstances that transpired the

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misconduct committed by the concerned workman is sograve as to justify the extreme penalty of dismissal fromservice. The learned counsel further argued that in thepresent case the Labour Court after taking intoconsideration the facts and circumstances of the casehas rightly come to the conclusion that the managementwas not justified to impose the extreme penalty whichwas found to be gross disproportionate to the allegedmisconduct. The learned counsel argued that it is nowwell settled that the right of the employer to inflictpunishment of discharge or dismissal is not unfetteredand the Labour Court has been invested with discretionunder Section l l-A of the Act to award lesser punishmentif the same is- found to be disproportionate to the allegedmisconduct. According to the learned counsel, in thepresent case the said discretion has rightly beenexercised by the Labour Court which has been upheldby the learned single Judge. Therefore, no interferenceis required in the impugned orders.

8. After hearing the arguments of the learned counselfor the parties and going through the impugned orders,we do not find any merit in this appeal. In the presentcase from the evidence on the record, the Labour Courthas come to the conclusion that the respondent-workmandid not make any embezzlement, misappropriation ofany amount or tampering with the record of the Bank. Ithas also been found that due to the alleged misconductno financial loss was caused to the appellant-Bank. Onlyit was found that he was negligent in discharge of hisduties. Regarding loss of faith, it was observed that allthe witnesses of the bank had stated very good aboutthe honesty, integrity and behaviour of the workman.While taking into consideration all these factors, theLabour Court came to the conclusion that the punishmentawarded by the management to the workman dismissinghim from service was grossly disproportionate to thecommitted misconduct. Hence, in the facts andcircumstances of the case, the appellant Bank was notjustified to impose such punishment. In these facts, whileexercising power under Section l l-A of the Act, the LabourCourt converted the said punishment into lesserpunishment of stoppage of five increments withcumulative effect. The aforesaid two judgments reliedupon by the learned counsel for the appellant are not

applicable in the facts and circumstances of the case.In both the judgments the workman was found guiltyof misappropriation of funds of the employer, and inview of the said fact it was held that there was nothingwrong in the employer losing confidence or faith insuch a person and awarding a punishment of dismissal.But in the present case no such finding has beenrecorded by the Labour Court. The argument of thelearned counsel for the appellant that in case thedomestic enquiry was found to be fair and proper inwhich the alleged misconduct was proved against theworkman, the Labour Court was not justified to interferein the order of punishment, cannot be accepted. In ourview, the decision on the preliminary issue that thedomestic enquiry was properly and fairly held and wasvalid, does not mean that the order of dismissal ordischarge is justified. Such finding does not excludethe Labour Court from going into the merits of thecase. It is always open to the Labour Court, in exerciseof its discretion under Section ll-A of the Act, to gointo the question of quantum of punishment in thebackground of the case. If in the facts andcircumstances of the case, the Labour Court comes tothe conclusion that the punishment awarded is grosslydisproportionate to the committed misconduct, it hasthe power to alter the punishment and award lesserpunishment under Section ll-A of the Act. It is afundamental principle of justice that the punishmentshould commensurate with the guilt. In FFFFFirestone Tirestone Tirestone Tirestone Tirestone Tyreyreyreyreyre& R& R& R& R& Rubber Co (1) Pvt. Ltd. vubber Co (1) Pvt. Ltd. vubber Co (1) Pvt. Ltd. vubber Co (1) Pvt. Ltd. vubber Co (1) Pvt. Ltd. v. Their W. Their W. Their W. Their W. Their Workmen,orkmen,orkmen,orkmen,orkmen, AIR1973 SC 1227, it was held by the Hon ‘ble SupremeCourt that before promulgation of Section II-A, it wasconsidered the prerogative of the employer to inflictthe punishment on the delinquent workman which wasbeyond the jurisdiction of the industrial adjudication tointerfere. However, after promulgation of this Section,an industrial adjudicator has the power to substitute itsown measure of punishment for the managerialprerogative not only where the punishment is shockinglydisproportionate to the act of misconduct but evenwhere it is satisfied that the punishment of dischargeor dismissal is not commensurate with the act ofmisconduct committed by the workman. Even wherethe Labour Court/Industrial Tribunal is satisfied that theact of misconduct alleged against the workman is

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proved and a penalty has to be imposed, it has to examine,in the facts and circumstances of the case, as to whetherthe extreme penalty of dismissal or discharge is justifiedor not. If the Labour Court comes to the conclusion thatthe punishment is disproportionate or excessive to theact of misconduct committed by the workman, it has thepower to vary the punishment and impose a lesserpunishment which it may deem just and fair in the factsand circumstances of the case. While awarding lesserpunishment the Labour Court has also been empoweredunder Section 11-A of the Act to direct reinstatement ofthe workman.

9. In this case, the Labour Court keeping in view thefacts and circumstances of the case had recorded a findingthat the punishment given by the disciplinary authoritywas shockingly disproportionate to the committedmisconduct which is merely a procedural mistake onaccount of negligent act committed by the respondent-workman. On the basis of this misconduct, it could not besaid that the appellant-bank has lost faith and confidencein the workman, particularly when all the witnesses ofthe appellant-bank had categorically stated very goodabout the integrity, behaviour and attitude of therespondent-workman. Section ll-A of the Act confers

power on the Labour Court to evaluate the severity ofmisconduct and to assess whether the punishmentimposed by the employer is commensurate with the gravityof misconduct. Thus, the Labour Court, while exercisingthe said power, found the punishment of dismissal toosevere for the act of misconduct committed by therespondent-workman and substituted the punishment ofdismissal to stoppage of five increments with cumulativeeffect. The learned single Judge has rightly held thatwhile commuting the punishment of dismissal intostoppage of five increments with cumulative effect, fiveyears of the service of the workman are practicallyeffaced for as his increments and the ultimate terminalbenefits that could have accrued to him during the saidperiod had been stopped. Thus, in our opinion, keepingin view the facts and circumstances of the case, theLabour Court has committed no illegality while modifyingthe order of punishment and ordering reinstatement ofthe workman and the said order has rightly been upheldby the learned single Judge.

10. In view of the above, this appeal is dismissed.

Appeal dismissed.Appeal dismissed.Appeal dismissed.Appeal dismissed.Appeal dismissed.