Daily News Analysis : 1 May, 2019

Madras HC curbs L­G role in Puducherry

·         The Madras High Court has ruled that the Lieutenant­-Governor (L­G) of Puducherry could not interfere with the day­-to-­day administration of the Union Territory when an elected government was in place.

·         Authoring a 150 ­page judgement, Justice R. Mahadevan said: “The Central government as well as the Administrator [the term used in the Constitution to refer to the L­G] should be true to the concept of democratic principles. Otherwise, the constitutional scheme of the country of being democratic and republic would be defeated.”

·         The judge made it clear that government secretaries were bound to take instructions from the Ministers and the Council of Ministers, headed by the Chief Minister

·         The Madras High Court pointed out the significant differences in the powers conferred on the legislatures of Puducherry and Delhi under Articles 239A and 239AA of the Constitution.

·         The Judge said though Article 239AA imposes several restrictions on the legislature of Delhi, no such restrictions had been imposed explicitly in the case of Puducherry under Article 239A. The above Article symbolises the supremacy of the Legislature above the Administrator in case of the Union Territory of Puducherry.

·         Referring to the provisions of the Government of Union Territories Act, 1963, the Judge said Section 44 of the Act states that there shall be a Council of Ministers in each Union Territory to aid and advice the Administrator who shall act in his/her discretion only in so far as any special responsibilities were concerned. However, the Act does not specify the ‘special responsibilities’ in relation to which the L­G could apply his/her discretion.

NSEL ­FTIL merger: SC sets aside govt.’s decision

·         The Supreme Court declared the government’s amalgamation of the over ₹5,600 crore scam­hit National Spot Exchange Ltd. (NSEL) with Financial Technologies India Ltd. (FTIL), now known as 63 Moons Technologies Ltd., as a violation of both the Constitution and the Companies Act.

·         A Bench of Justices Rohinton Nariman and Vineet Saran held that the Centre’s amalgamation order of February 12, 2016 was ultra vires Section 396 of the Companies Act and contrary to Article 14 (right to equality) of the Constitution.

·         Section 396 of the Companies Act, 1956, deals with compulsory amalgamation of companies by a Central Government order when it becomes essential in the public interest.

·         The judgement held that there was complete non­ application of mind by the authority assessing compensation to the rights and interests of the shareholders and creditors of FTIL under Section 396(3) of the Companies Act”.

·         The Court held that the assessment order did not provide any compensation to either the shareholders or creditors of FTIL for the economic loss caused by the amalgamation is breach of Section 396(3), which is an important condition precedent to the passing of the final amalgamation order.