List of Current Affairs

Source:  Allahabad High Court 

Why in News? 

Recently, the bench of Justice Salil Kumar Rai and Justice Sandeep Jain   held that the Juvenile Justice Act, 2015, overrides all other laws in cases involving children in conflict with the law, emphasizing that such minors cannot be detained or prosecuted under general criminal laws. 

• The Allahabad High Court held this in the matter of Pawan Kumar (Corpus) And Another v. State Of Uttar Pradesh And 4 Others  (2025). 

What was the Background of Pawan Kumar (Corpus) And Another v. State Of Uttar Pradesh (2025) ? 

• On April 1, 2017, Case Crime No. 0195 of 2017 was registered under Section 302 of the Indian Penal Code at Police Station Tharwai, District Allahabad. The case involved allegations that Petitioner No. 1, along with his mother and elder brother, had beaten to death his eldest brother. This constituted a heinous offense as defined under the Juvenile Justice (Care and Protection of Children) Act, 2015, which classifies offenses punishable with a minimum of seven years imprisonment as heinous. 
• Petitioner No. 1, along with the other accused persons, was arrested by the police on April 2, 2017, and detained in Naini Central Jail, Prayagraj. The charge-sheet in the case was filed on May 21, 2017. Subsequently, the Chief Judicial Magistrate, Allahabad, through an order dated July 5, 2017, committed the case for trial to the Sessions Court. The trial has been pending before the Additional Sessions Judge/Special Judge (M.P./MLA), Prayagraj. 
• Charges in the case were framed by the trial court on November 17, 2017. During the trial proceedings, Petitioner No. 1 claimed that he had studied till Class V in Primary School, Bhogatpur, Police Station Tharwai, District Prayagraj, and that his date of birth was December 13, 2002. Notably, this claim of being a juvenile at the time of the offense was not raised when he was initially produced before the Magistrate after apprehension, but was raised for the first time before the trial court after charges had been framed. 
• To verify the claim made by Petitioner No. 1, the trial court summoned the Principal of the school. The Principal appeared before the trial court and produced the scholar register, which recorded the date of birth of Petitioner No. 1 as December 13, 2002. Based on this record, the date of birth indicated that Petitioner No. 1 was 14 years, 3 months, and 19 days old on the date the alleged offense was committed on April 1, 2017. 
• Through a letter dated July 18, 2024, the trial court forwarded the matter to the Juvenile Justice Board (Board), Khuldabad, Prayagraj, for appropriate orders. It is pertinent to note that no formal order was passed by the trial court determining the age of Petitioner No. 1 or examining the evidentiary value of the entries in the scholar register or the veracity of the Principal's statement. 
• The Board, after considering the scholar register and recording the statement of the Principal, held that on the date the offense was committed, Petitioner No. 1 was 14 years, 3 months, and 19 days old. Consequently, through an order dated May 15, 2025, the Board declared Petitioner No. 1 to be a juvenile on the date the offense was committed. A copy of this order was forwarded to the trial court and to the Superintendent, District Jail Naini, District Prayagraj. 
• Despite the Board's order dated May 15, 2025 declaring him a juvenile, Petitioner No. 1 continued to remain in detention in Naini Central Jail, Prayagraj. No other case was registered against him apart from the one mentioned above. At the time of filing the present petition, Petitioner No. 1 had been in custody for approximately eight years since his arrest in April 2017. 
• Consequently, Petitioner No. 2 filed the present Habeas Corpus Writ Petition seeking the release of Petitioner No. 1 from Naini Central Jail, pleading that his detention was illegal and violated his fundamental rights under Article 21 of the Constitution of India, particularly in light of Section 18 of the Juvenile Justice Act, 2015, which provides that a juvenile can remain in custody for a maximum period of three years. 

 What were the Court’s Observations? 

• The Court held that in a habeas corpus petition, the legality of a detention order can be examined to determine whether it suffers from lack of jurisdiction, is absolutely illegal, or has been passed mechanically, and relying on Manubhai Ratilal Patel and Kanu Sanyal, observed that it is the present detention which must be examined, with a writ being issued even where initial detention was legal but present detention was found to be illegal. 
• The Court held that the Juvenile Justice Act, 2015 has an overriding effect over any other law in all matters concerning children in conflict with law, especially regarding apprehension, detention, prosecution, penalty, or imprisonment, and that no waiver of a child's rights is permissible, with any non-exercise of a fundamental right not amounting to waiver. 
• The Court made a clear distinction that when a claim of being a child is raised before a Court, it is the Court that must determine the age under Section 9(2) and (3) of the Act, 2015, and the Board has power to determine age only in cases under Sections 9(1) and 10(1) where the child is directly produced before it. 
• The Court found that the trial court had mechanically remitted the matter to the Board through a letter without determining the age as required under Section 9(2), and consequently declared that the order dated May 15, 2025, passed by the Board was without jurisdiction, a nullity, and conferred no right on Petitioner No. 1. 
• The Court examined Section 10 of the Act, 2015 and held that in no case can a child alleged to be in conflict with law be placed in a police lockup or lodged in jail, even during inquiry regarding age determination, and such person must be placed in a "place of safety" under Section 9(4) if protective custody is required during inquiry. 
• The Court held that while the initial detention may not have been illegal as no claim of juvenility was raised when first produced before the Magistrate, the detention in jail became illegal after the claim of being a child was raised before the trial court, and consequently the present detention in Naini Central Jail was illegal, warranting issuance of a writ of habeas corpus for release. 
• The Court rejected the contention that Petitioner No. 1 was entitled to seek bail under ordinary criminal statute, holding that if he was a child in conflict with law, he could not be put on trial before criminal courts and would be entitled to bail only under Section 12 of the Act, 2015 before the Board, and since he had not been produced before the Board, only the trial court was empowered to decide whether he was entitled to be kept in preventive custody in a place of safety during the pendency of age determination inquiry. 

Does the Juvenile Justice Act, 2015 Override All Other Laws in Matters Concerning Children in Conflict with the Law? 

• The Juvenile Justice (Care and Protection of Children) Act, 2015 contains a non-obstante clause in Section 1(4) giving it overriding effect over all other laws in matters concerning children in conflict with law, including apprehension, detention, prosecution, and imprisonment. 
• A "child" is defined as a person below eighteen years (Section 2(12)), and a "child in conflict with law" means a child who has not completed eighteen years on the date of commission of an offense (Section 2(13)). "Heinous offenses" are those punishable with minimum seven years imprisonment (Section 2(33)), while a "place of safety" is any institution other than a police lockup or jail where a child can be kept during inquiry (Section 2(46)). 
• Section 3(ix) prohibits any waiver of children's rights. Section 6(1) mandates that persons apprehended for offenses committed when below eighteen years shall be treated as children during inquiry. 
• Section 9(2) requires courts to determine age when a claim of juvenility is raised before them, not the Board. Section 9(4) provides for placement in a place of safety during age determination inquiry. 
• Section 10(1) categorically prohibits placing a child alleged to be in conflict with law in police lockup or jail. Section 12 provides for bail before the Board. Section 18(1) limits custody to maximum three years. 
• Article 21 of the Constitution guarantees right to life and personal liberty. Section 302 IPC punishes murder with death or life imprisonment. 

 Cases Referred  

• Manubhai Ratilal Patel Through Ushaben v. State of Gujarat & Others (2013)  
  • The Supreme Court held that in a habeas corpus petition, the legality of a detention order can be examined to ascertain whether it suffers from lack of jurisdiction, is absolutely illegal, or has been passed in a wholly mechanical manner, and if any such vice is found, a writ of habeas corpus directing release would be issued. 
  • The Supreme Court observed that any infirmity in the detention at the initial stage cannot invalidate the subsequent detention, and the subsequent detention has to be judged on its own merits. 
• Kanu Sanyal v. District Magistrate, Darjeeling & Others (1974)  
  • The Supreme Court held that in habeas corpus proceedings, the earliest date with reference to which the legality of detention may be examined is the date on which the application for habeas corpus is made to the Court. 
  • The Court observed that it is the legality of the present detention which is to be examined in a habeas corpus petition, not the merits of detention prior to filing of the petition.

Source: Supreme Court  

Why in News? 

Recently, the bench of Justices JB Pardiwala and KV Viswanathan has held that holders of Cumulative Redeemable Preference Shares (CRPS) are investors and not financial creditors under the Insolvency and Bankruptcy Code (IBC), ruling that non-redemption of such shares does not constitute a “default. 

• The Supreme Court held this in the matter of EPC Constructions India Limited VERSUS M/s Matix Fertilizers And Chemicals Limited(2025). 

What was the Background of  EPC Constructions India Limited VERSUS M/s Matix Fertilizers And Chemicals Limited (2025)? 

• EPC Constructions India Limited (EPCC), formerly Essar Projects India Limited, entered into an engineering and construction contract with Matix Fertilizers and Chemicals Limited (Matix) on 11th December 2009. The contract was for establishing a fertilizer complex for Ammonia and Urea production at Panagarh Industrial Park, West Bengal. Two subsequent supply contracts were executed in 2010 for Indian and non-Indian origin plant and equipment. 
• Under these contracts, ₹572.72 crores became due and payable by Matix to EPCC. On 27th July 2015, Matix requested EPCC to convert outstanding amounts up to ₹400 crores into preference shares. Matix informed that due to project delays, it required additional funding of ₹1,210 crores. Its lenders had withheld disbursements and would extend additional credit facilities only if Matix achieved a Debt-Equity Ratio of 2:1 through equity infusion. 
• EPCC's board noted that Matix lacked liquidity to repay dues or complete the project. Without additional funding, recovery prospects looked dim. On 30th July 2015, EPCC's board approved conversion of dues into 8% Cumulative Redeemable Preference Shares (CRPS). On 26th August 2015, Matix allotted 25 crore CRPS of ₹10 each, totalling ₹250 crores, redeemable at par at the end of 3 years with 8% cumulative annual dividend. 
• CIRP was initiated against EPCC on 20th April 2018. On 24th August 2018, Matix claimed to have adjusted the CRPS liability of ₹310 crores against its own claims. On 27th October 2018, EPCC's Resolution Professional issued a demand notice to Matix for ₹632.71 crores (₹310 crores for CRPS maturity and ₹322.71 crores for outstanding receivables). Matix disputed the demand on 7th December 2018. 
• EPCC filed a Section 7 petition under IBC against Matix for non-payment of ₹310 crores upon CRPS maturity. EPCC argued that CRPS constituted financial debt. The NCLT dismissed the application on 29th August 2023, holding that preference shares cannot be redeemed unless the company has profits available for dividend or proceeds from fresh equity. Non-redemption does not convert preference shareholders into creditors. The NCLAT dismissed the appeal on 9th April 2025, confirming that when preferential shares were allotted, the earlier outstanding amount stood extinguished and became share capital. 

 What were the Court’s Observations? 

• The Supreme Court observed that it is well settled that preference shares are part of share capital and amounts paid on them are not loans. Dividends are paid only when the company earns profit; otherwise it would amount to illegal return of capital. Preference shareholders cannot sue for money due on shares and cannot claim return of share money except in winding-up. An unredeemed preference shareholder does not become a creditor. 
• Section 55 of the Companies Act stipulates that preference shares shall be redeemed only out of profits available for dividends or proceeds of fresh share issue. Admittedly, the CRPS had not become due and payable since Matix had not made profits and had no reserves or proceeds from fresh equity. Therefore, no default occurred under Section 3(12) of the IBC. Even though the three-year redemption period expired, EPCC continued to be a preference shareholder, not a creditor. 
• The Court rejected arguments about unveiling underlying intent to show borrowing arrangements. EPCC's board resolution clearly showed a conscious decision to accept CRPS, knowing there would be no outflow of funds and only receivables would be converted. The conversion enabled Matix to show equity infusion for achieving the required debt-equity ratio. The earlier outstanding amount stood extinguished upon CRPS issuance, transforming the relationship to that of preference shareholder. 
• The Court held that entries in account books are not determinative of transaction nature. Though accounting standards may treat redeemable preference shares as financial liability, this cannot override the legal character of the relationship as reflected in executed documents. The IBC has its own prerequisites which must be fulfilled. 
• Section 5(8) of IBC requires disbursal against consideration for time value of money. Significantly, Section 5(8)(c) mentions bonds, debentures, loan stock but omits preference shares. The omission is significant. Paid-up money on shares being share capital does not constitute debt. For Section 5(8)(f) regarding commercial effect of borrowing, it must first be a debt. Paid-up amounts towards shares lack the character of debt. 
• Applying the real nature of the transaction, the Court concluded that EPCC, being a preference shareholder, is not a creditor. An application under Section 7 IBC was not maintainable. The appeal was dismissed. 

What is Cumulative Preferred Stock ? 

Definition 

Cumulative Preferred Stock (Cumulative Preference Shares) is a type of preference share carrying cumulative dividend rights. If dividends are not paid in any year due to insufficient profits, the unpaid dividends accumulate and must be paid to cumulative preference shareholders before any dividend distribution to equity shareholders in subsequent years. 

Key Characteristics 

• Cumulative preference shares form part of the company's share capital, not debt capital. Holders enjoy preferential rights in dividend payment and capital repayment during winding up. Unpaid dividends accumulate year after year and carry forward. 
•  All accumulated dividends must be cleared before equity dividend distribution. When redeemable (CRPS), they must be redeemed within the stipulated period, subject to availability of profits or fresh equity proceeds. 

Legal Provisions 

Companies Act, 2013 

• Section 43 defines preference share capital as part of issued share capital carrying preferential rights for dividend payment and capital repayment in winding up. 
• Section 55(1) mandates all preference shares must be redeemable. Section 55(2) stipulates redemption within twenty years (exceeding twenty years for infrastructure projects). Critically, shares can only be redeemed from distributable profits or proceeds from fresh equity issue. Shares must be fully paid before redemption. 
• Section 123 establishes dividends can only be paid from distributable profits, not from capital. 
• Section 47(2) grants limited voting rights to preference shareholders, with extended rights if dividends remain unpaid for two years or more. 

Insolvency and Bankruptcy Code, 2016 

Section 5(8) defines financial debt but notably omits preference shares. This omission is legally significant, indicating preference shares do not constitute financial debt. 

Legal Position 

The Supreme Court established that preference shareholders are investors, not creditors. Even unredeemed preference shareholders cannot claim creditor status or initiate insolvency proceedings under Section 7 of IBC. Non-redemption due to absence of profits does not constitute "default" under IBC. When debt converts into preference shares, the original debt stands extinguished and transforms into share capital.