• Law & Order

Advocating Attachment of Women’s Property

Written by Anushka Mehul Shah [i] and Gaurang Mansinghka [ii]

[i] Second Year of the 3-year L.L.B, Government Law College, Mumbai

[ii] Fourth Year of B.L.S-L.L.B, Government Law College, Mumbai




Disclaimer: Please note that the views expressed below represent the opinions of the article's author. The following does not necessarily represent the views of Law & Order.




Introduction

The recent order passed by the Securities Appellate Tribunal, Mumbai[1] (the “SAT”) clarified, reiterated, and enforced an eminent aspect of the Hindu Law stating: Streedhan is the absolute property of a woman. This was ground for justification of the attachment of Streedhan, in the course of recovery proceedings for default in the issue of redeemable preference shares of a company.[2] Streedhan is derived from the words ‘Stree’ meaning a woman, and ‘Dhana’ meaning property.


Thus, Streedhan in a literal sense means in the wealth of a woman, moveable or immovable, received during maidenhood, subsistence of marriage or after.

It is acquired by a Hindu female, by means of, inheritance, partition, in lieu of maintenance, gifts, her own skill, purchase, prescription, or in any other manner. In Pratibha Rani v. Suraj Kumar[3], the Supreme Court enlisted the following to constitute Streedhan: Gifts made – before the nuptial fire, or at the bridal procession, by the father-in-law, mother-in-law, father, mother or brother of the bride. Prior to the Hindu Succession Act, 1956, the property of a woman was classified into (1) her absolute property (Streedhan); and (2) property of which she was a limited owner (woman’s estate). However, Section 14 of the Hindu Succession Act, 1956 introduced a sweeping innovation, whereby full and heritable capacity is conferred on a female in respect of all property acquired by her[4]. Thus, in the light of Hindu Law on Streedhan, and keeping in mind the facts of the case and contentions of both parties, this case note aims to provide an in-depth analysis of the judgment, as well as, the justification for SAT’s pronouncement.

Facts

The litigation in the matter stems from the fact that Ravikiran Realty India Ltd. issued redeemable preference shares, via private placement process, to more than 49 persons, resulting in violation of company law stipulations, which prescribes issuance of shares via the public route, in case of issuance to 50 persons or more. Subsequently, the Securities Exchange Board of India (the “SEBI”) deemed this transaction to be a public issue, and in its order dated March 1, 2016,[5] it directed the company and its directors to refund along with interest, the money collected from the investors. Failure on part of the company to comply with the above led to the initiation of recovery proceedings.

Delving deeper into matters, an ex-parte ad-interim order dated August 8, 2014[6] and a confirmatory order dated March 1, 2016[7] was passed by the Whole Time Member (the “WTM”), directing the appellants to refund, within a stipulated period, the amount collected by the issuance of preference shares. These orders were challenged by the appellants in Appeal No. 213 of 2016, [8], and subsequently dismissed on the ground of appellants’ willingness to comply with the confirmatory order of the WTM. However, pursuant to this direction and acceptance, the appellants failed to submit a concrete refund proposal to the SEBI. On SEBI’s intimation directing them to do so, they filed another Appeal No. 409 of 2016, [9] which was subsequently dismissed on January 6, 2017, on the ground of non-compliance of submission of the refund proposal. On further delay and failure to submit the above proposal, the Recovery Certificate and Attachment Order were issued. It is also pertinent to note that the Recovery Certificate and Attachment Order were also challenged via a writ petition, before the Calcutta High Court, but eventually were dismissed as withdrawn.

The appeal in question was filed by three appellants, namely, the company (“Appellant 1”), its director Mr. Kaushik Chatterjee (“Appellant 2”) and ex-director, Manisha Chatterjee (“Appellant 3”), in order to challenge the attachment of directors’ bank accounts, attached via Recovery Certificate and Attachment Order issued by the Recovery Officer, as a consequence of initiation of recovery proceedings for a sum of INR 13.1 million. During the pendency of the appeal, the appeals of the Appellant 1 and 2 were dismissed as withdrawn vide an order dated June 14, 2019[10], and hence, the current pronouncement primarily deals with the appeal of Manisha Chatterjee, i.e. Appellant 3, with respect to the attachment of her bank locker which contains jewelry received by her as Streedhan and the Recovery Officer’s rejection of her representation, during the pendency of the appeal.

Issues

In the light of the above facts, it is pertinent to note the following points in law, which crop up on basis of Appellant 3’s appeal, and required necessary adjudication:

i. Assuming the contents in the locker qualified as Streedhan, can a woman’s Streedhan be attached on account of her default, in this case, by virtue of having been a director of a company?

ii. Whether the defense, claiming no connection with the affairs of the company on account of being a director for a “short period” only, can relieve Appellant 3 from the burden of discharging the liability pursuant to the order of the WTM?

iii. The relevance of the submission stage with respect to submissions of the title deeds to initiate the refund process.

Judgment

It was contended by Appellant 3 that her bank locker contained Streedhan in the form of jewellery, which could not be attached for the purpose of recovery of dues, on account of her default as a director. This contention was supported by citing a judgment passed by the Delhi High Court in Sushila Devi v. Commissioner of Income Tax- XII[11]. Rejecting this contention, the SAT stated that qualification of jewelry as Streedhan was a matter of fact to be proved before the Recovery Officer and therefore SAT was not authorized to adjudicate upon it. It also went on to distinguish the facts in the Sushila Devi case[12], where recovery was being made against the defaulter husband, for which property of the wife was attached for such recovery. However, in the present case, the wife herself was the defaulter, in her capacity as a director of Appellant 1, and the recovery was made against her by attachment of her own property, which in the eyes of law, is a perfectly appropriate remedy. Therefore, the SAT deduced that the ratio laid down in Sushila Devi was not applicable in the present scenario.


Moreover, the SAT in its judgment relied on the Supreme Court’s decision in the Pratibha Rani case[13] wherein it was held that Streedhan is the absolute property of a Hindu married woman and she can use it at her discretion.

In the event that the Streedhan is in the custody of her husband or in-laws, they are deemed to hold such property as trustees and are bound to return it to her, as and when demanded. Hence, this argument raised by Appellant 3 was rejected on grounds of sheer misconception. However, the SAT did go on to clarify that the assets of Appellant 3 would only be utilized in the event the assets of the company proved to be insufficient to repay the amount due.

Another defense raised by Appellant 3 was that the liability of the company’s affairs could not be imposed on her, given that she was the director of the company for only a short period of time. The SAT rejected the contention, stating that this delayed contention should have been raised at the stage of filing the appeal against the order of the WTM. In spite of this argument being raised at the filing stage, Appellant 3 eventually consented to comply with the order passed by the WTM. Therefore, the said order of the WTM had attained finality, resulting in Appellant 3 being jointly and severally liable for refund of the money. Conclusively, Appellant 3 could not be absolved of the responsibility to pay the amount in question by way of reopening of the WTM’s order.

The third line of defense adopted by Appellant 3 was that the representation made by her during the pendency of the appeal before the SAT, was wrongly rejected by the Recovery Officer without assigning any convincing reasons and that the order of attachment should be lifted as the company and its directors had furnished the title deeds of land and other properties, the value of which was more than the value sought to be recovered. The SAT observed that since a concrete refund proposal or title deeds of the company property were not submitted at the directed time, the attachment order/ certificate dated March 13, 2018, stood justified. However, the SAT went on to clarify that the eventual delayed submission of the title deeds had resulted in the appointment of an administrator under the SEBI (Appointment of the Administrator and Procedure for Refunding to the Investors) Regulations, 2018. [14] Pursuant to it, the property was valued and a draft auction notice had been placed, for the amount to be realized via the sale of properties at the auction. Therefore, SAT rejected the Appellant 3’s contentions and held that there wasn’t any manifest error in the aforesaid certificate and Attachment Order issued by the Recovery Officer under Section 28A of the SEBI Act[15], read with Section 222 of the Income Tax Act[16] nor in the order of the Recovery Officer dated June 6, 2019.

Analysis

A consultation paper on ‘Reform of Family Law’, [17] discussing the treatment of Streedhan in case of a marriage between minors, was released by the Law Commission of India in 2018. It laid down that the bride’s Streedhan remains in possession of her father-in-law and husband, who are mere trustees till she attains the age of majority. This treatment of family members as trustees in the Dowry Prohibition Act, 1961,[18] is indispensable to prevent the denial of access to Streedhan once the bride attains the majority. The consultation paper also emphasizes and reiterates that Streedhan is the absolute property of a woman with right of disposal at her discretion, and cannot form part of the coparcenary property. In the case of such marriages, which are a bitter reality in India, the ruling in the Pratibha Rani case[19] becomes even more significant as it safeguards women’s rights with respect to Streedhan.

In the case at hand, the eminent question: ‘Who is in default?’ is what is required to be addressed, from an asset protection perspective.


If the defaulter is anyone other than the Hindu female, the ruling in the Sushila Devi case shall apply, and as a result,

the woman’s Streedhan will not be liable to be attached for repayment of debts, even in cases where the Streedhan had been bequeathed to her.

However, if the woman herself is in default, there is no bar on utilizing her Streedhan for repayment, resulting in the application of the ratio laid down in the Pratibha Rani case.

The question of the right of a woman over her property was first tested in Nathubhai Bhailal v. Javher Raiji and Ors.[20] wherein it was observed that a woman is capable of acquiring and holding property in her own right and her power over it is absolute. Subsequently, the ruling in the Pratibha Rani case, was affirmed by the Supreme Court in Balkrishna Ramchandara Kadam v. Sangeeta Balkrishna Kadam[21] and Rashmi Kumar v. Mahesh Kumar Bhada. [22]

Streedhan being a concept privy to Hindu Law, there also exists a similar concept, namely, Mahr or dower under Muslim Law[23], which lays down that the woman has absolute right over her property and can utilize it at her discretion. Mahr, inter alia, includes an amount agreed to be paid to the wife at the time of her marriage or at any time thereafter, and includes all properties given to her at such time, by her relatives or friends, or the husband, or husband’s relatives or friends. Further, a similar provision can also be found in the Married Women’s Property Act, 1882 of the United Kingdom, wherein it is provided that a married woman is capable of disposing by will, any real or personal property as her separate property in the same manner as if she were a feme sole, without the intervention of any trustee. Additionally, the property of a woman married after the commencement of this Act, as well as, any property acquired by her after the commencement of this Act, irrespective of her marriage before its commencement, shall be held by the woman as a feme sole. [24] The Bombay High Court in Govindji Khimji v. Lakmidas Nathubhoy[25] has held that in India the Streedhan of a married woman is, as regards her power over it, analogous to the separate property of a married woman in England, and there is no reason why it should not be similarly dealt with, so as to give effect to her contracts.

The judgement in consonance with Section 42 of the Companies Act, 2013, which directs the company to refund the money raised in violation of the law. Section 42 provides that if a company makes an offer or accepts monies in contravention of this section, the company, its promoters and directors shall be liable for a penalty to the extent of the amount raised through the private placement or two crore rupees, whichever is lower, and the company shall also refund all monies with interest as specified in Section 142(6) to subscribers within a period of thirty days of the order imposing the penalty. [26] The assets of the directors have also been attached as per Section 28A of the SEBI Act, due to failure of submission of a concrete plan for repayment of the money raised. [27]

Thus it can be safely deduced that due process of law has been followed by the adjudicating authorities at every stage, without any room for contravention.

Conclusion

The SAT’s ruling is indeed a laudable one as it eliminates an easy escape route for defaulting women directors, when it comes to attachment of their personal assets. It correctly reiterates that Streedhan is the absolute property of a woman, in line with the decisions rendered by other courts, but at the same time, does not meddle with the other fundamentals of Streedhan. It vividly states that there is no bar against the use of Streedhan for repayments of debts owed by the woman, on account of her own default. Moreover, this order reinstates assurance of a fair judiciary, and simultaneously reimposes the faith of the public in the decision making process, by rightly rejecting defenses which would unnecessarily prolong the justice delivery mechanism.


[1] Ravikiran Realty India Ltd. & Ors. v. The Securities Exchange Board of India & Ors., Misc. Application No. 382 & 90 of 2019 with Appeal No. 231 of 2018 (Securities Appellate Tribunal 2020). [2] Redeemable preference shares are those shares which are repaid after the expiry of a stipulated period or after giving due notice.

[3]Pratibha Rani v. Suraj Kumar, 1985 (2) SCC 70. [4] Hindu Succession Act, 1956, Section 14, Act No. 30 of 1956, Acts of Parliament, 1956 (India). [5] WTM/PS/173/ERO/IMD/MAR/2016 (Securities and Exchange Board of India 2016). [6] WTM/SR/ERO/48/08/2014 (Securities and Exchange Board of India 2014). [7] WTM/PS/173/ERO/IMD/MAR/2016 (Securities and Exchange Board of India 2016). [8] Ravikiran Realty India Ltd. & Ors. v. The Securities Exchange Board of India, Misc. Application No. 157 of 2016 with Appeal No. 213 of 2016 (Securities Appellate Tribunal 2016). [9] Ravikiran Realty India Ltd. & Ors. v. The Securities Exchange Board of India, Appeal No. 409 of 2016 (Securities Appellate Tribunal 2017). [10] Ravikiran Realty India Ltd. & Ors. v. The Securities Exchange Board of India, Misc. Application No. 72 of 2019 and Misc. Application 90 of 2019 and Appeal No. 231 of 2018 (Securities Appellate Tribunal 2017). [11] Sushila Devi v. Commissioner of Income Tax- XII, [234 (2016) DLT 253]. [12] Ibid [13] Pratibha Rani v. Suraj Kumar, 1985 (2) SCC 70. [14] SEBI (Appointment of the Administrator and Procedure for Refunding to Investors) Regulations, 2018, Regulation 4, 2018 (India). [15] Securities and Exchange Board of India Act, 1992, Section 28A, Act No. 15 of 1992, Acts of Parliament, 1992 (India). [16] Income Tax Act, 1961, Section 222, Act No. 43 of 1961, Acts of Parliament, 1961 (India). [17] Law Commission of India, Reform of Family Law, August 31, 2018. [18] The Dowry Prohibition Act, 1961, Section 6, Act No. 28 of 1961, Acts of Parliament, 1961 (India). [19] Pratibha Rani v. Suraj Kumar, 1985 (2) SCC 70. [20] Nathubhai Bhailal v. Javher Raiji and Ors., (1876) 1 Bom 121. [21] Balkrishna Ramchandara Kadam v. Sangeeta Balkrishna Kadam, AIR 1997 SC 3562. [22] Rashmi Kumar v. Mahesh Kumar Bhada, (1997) 2 SCC 397. [23] Muslim Women (Protection of Rights on Divorce) Act, 1986, Section 3, Act No. 25 of 1986, Acts of Parliament, 1986 (India). [24] Married Women’s Property Act, 1882, Section 1, 1882 Chapter 75, legislation.gov.uk, 1882 (United Kingdom). [25] Govind Khimji v. Lakmidas Nathubhoy, MANU/MH/0004/1879. [26] Companies Act, 2013, Section 42, Act No. 18 of 2013, Acts of Parliament, 2013 (India). [27] Securities and Exchange Board of India Act, 1992, Section 28A, Act No. 15 of 1992, Acts of Parliament, 1992 (India). Bibliography.

1. Ravikiran Realty India Ltd. & Ors. v. The Securities Exchange Board of India & Ors., Misc. Application No. 382 & 90 of 2019 with Appeal No. 231 of 2018 (Securities Appellate Tribunal 2020).

2. Pratibha Rani v. Suraj Kumar, 1985 (2) SCC 70.

3. Hindu Succession Act, 1956, Section 14, Act No. 30 of 1956, Acts of Parliament, 1956 (India).

4. WTM/PS/173/ERO/IMD/MAR/2016 (Securities and Exchange Board of India 2016).

5. WTM/SR/ERO/48/08/2014 (Securities and Exchange Board of India 2014).

6. WTM/PS/173/ERO/IMD/MAR/2016 (Securities and Exchange Board of India 2016).

7. Ravikiran Realty India Ltd. & Ors. v. The Securities Exchange Board of India, Misc. Application No. 157 of 2016 with Appeal No. 213 of 2016 (Securities Appellate Tribunal 2016).

8. Ravikiran Realty India Ltd. & Ors. v. The Securities Exchange Board of India, Appeal No. 409 of 2016 (Securities Appellate Tribunal 2017).

9. Ravikiran Realty India Ltd. & Ors. v. The Securities Exchange Board of India, Misc. Application No. 72 of 2019 and Misc. Application 90 of 2019 and Appeal No. 231 of 2018 (Securities Appellate Tribunal 2017).

10. Sushila Devi v. Commissioner of Income Tax- XII, [234 (2016) DLT 253].

11. SEBI (Appointment of the Administrator and Procedure for Refunding to Investors) Regulations, 2018, Regulation 4, 2018 (India).

12. Securities and Exchange Board of India Act, 1992, Section 28A, Act No. 15 of 1992, Acts of Parliament, 1992 (India).

13. Income Tax Act, 1961, Section 222, Act No. 43 of 1961, Acts of Parliament, 1961 (India).

14. Law Commission of India, Reform of Family Law, August 31, 2018.

15. The Dowry Prohibition Act, 1961, Section 6, Act No. 28 of 1961, Acts of Parliament, 1961 (India).

16. Nathubhai Bhailal v. Javher Raiji and Ors., (1876) 1 Bom 121.

17. Balkrishna Ramchandara Kadam v. Sangeeta Balkrishna Kadam, AIR 1997 SC 3562.

18. Rashmi Kumar v. Mahesh Kumar Bhada, (1997) 2 SCC 397.

19. Muslim Women (Protection of Rights on Divorce) Act, 1986, Section 3, Act No. 25 of 1986, Acts of Parliament, 1986 (India).

20. Married Women’s Property Act, 1882, Section 1, 1882 Chapter 75, legislation.gov.uk, 1882 (United Kingdom).

21. Govind Khimji v. Lakmidas Nathubhoy, MANU/MH/0004/1879.

22. Companies Act, 2013, Section 42, Act No. 18 of 2013, Acts of Parliament, 2013 (India).

23. Securities and Exchange Board of India Act, 1992, Section 28A, Act No. 15 of 1992, Acts of Parliament, 1992 (India).


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