Arbitration – Award of Damages – Jurisdiction of Court under Section 30 of Arbitration Act – Award Set Aside – The appellant, a lottery agent for the State of Sikkim, was awarded Rs. 37.75 crores in damages by an Arbitrator after the State terminated the agreement due to defaults – The District Judge upheld the award, but the Sikkim High Court’s Division Bench differed in opinion – On appeal, the Supreme Court examined whether the Arbitrator had acted within the bounds of law – Held: The Arbitrator awarded damages on speculative and irrational grounds despite the appellant's repeated breaches – Award suffered from legal misconduct and errors of law apparent on the face of the record – The Supreme Court exercised powers under Articles 136 and 142 to set aside the award in favour of the appellant and also rejected the State’s counter-claim in equity – Appeals disposed with no monetary relief to either party [Paras 1-24].

Arbitral Award – Misconduct and Error Apparent – Sections 30, 16, and 19 of Arbitration Act, 1940 – Award Set Aside – Arbitrator’s award of Rs. 37.75 crores in favour of appellant held unsustainable – Award based on hypothetical calculations, disregard of evidence, and incorrect application of law – Held: Arbitrator committed legal misconduct and acted irrationally, rendering award liable to be set aside [Paras 15-22].

Waiver and Breach of Contract – Sections 54 & 73 of the Contract Act – No Entitlement to Damages – Appellant repeatedly failed to deposit prize money and agency fees – Arbitrator wrongly presumed waiver by the State – Held: A party in default cannot seek damages or specific performance; waiver must be conscious and cannot be inferred from mere continuation of business – Contract rightly terminated by the State [Paras 17-21].

Interpretation of High Court Procedure – CPC Section 98 and Sikkim High Court Rules – Validity of Reference to Third Judge – Division Bench having only two judges differed and referred matter to third judge – Appellant challenged maintainability under Section 98(2) CPC – Held: Reference valid as per Rules 149 & 150 of Sikkim High Court Rules in force at the time – Administrative or procedural objections cannot override judicial reference [Paras 4-9].

Supreme Court’s Power under Articles 136 and 142 – Equitable Relief – Though State’s counter-claim partly upheld by Arbitrator, Supreme Court declined to grant any relief in favour of State considering mutual lapses and factual complexities – Held: In exercise of Article 142, Court rejected both claim and counter-claim and disposed of the matter to do complete justice [Paras 23-24].

Decision – Award of Rs. 37.75 Crores Set Aside – Counter-claim of Rs. 4.61 Crores Rejected – No Costs – Supreme Court modified High Court judgment – Award set aside as illegal and speculative – State’s counter-claim also rejected on equitable considerations – Appeals finally disposed of with parties bearing their own costs [Para 24].

Criminal Law – Sect. 376 of the IPC – Appeal Against Acquittal - Rape of Minor – Credibility of Victim – Conviction Restored – The prosecutrix, aged about 5½ years, was subjected to rape by the accused, a known family member – Her statement was found consistent, trustworthy and corroborated by medical and forensic evidence – Trial court convicted the accused – High Court erred in reversing conviction based on minor discrepancies and irrelevant grounds – Supreme Court held that testimony of a child victim, if credible and corroborated, is sufficient for conviction – Conviction and sentence restored [Paras 1–8, 17–19].

Delay in FIR – Explained Satisfactorily – Not Fatal – High Court treated two-day delay in lodging FIR as fatal – Supreme Court held delay was reasonably explained – Victim's mother, a widow, first attempted to resolve issue within family due to close relation of accused – Delay justified and not a ground to discard otherwise trustworthy prosecution case [Paras 9, 12].

Discrepancies in Location of Offence – Minor and Inconsequential – High Court relied on inconsistency between FIR and testimony regarding exact spot of rape – Supreme Court held that the lintel and room were adjacent and minor variation immaterial – Prosecution version found reliable and unaffected by such trivial discrepancies [Para 13].

Non-Examination of Other Children – No Adverse Inference – The High Court erred in drawing adverse inference from non-examination of child witnesses present during incident – Court held they were from family of in-laws and unlikely to testify against accused – Conviction can be based on sole testimony of prosecutrix if natural and credible – Medical evidence and presence of sperm corroborated the victim’s account [Para 14].

Plea of Mental Illness – No Defence – Section 84 IPC – Accused claimed he was suffering from schizophrenia – However, no evidence showed he was of unsound mind at the time of the offence – No plea or proof of insanity under Section 84 IPC made out – High Court’s reliance on schizophrenia diagnosis irrelevant – Accused found mentally fit to stand trial [Paras 10, 16].

Judicial Sensitivity – Role of Courts in Rape Cases – Supreme Court reiterated duty of courts to handle rape cases with utmost sensitivity – Emphasised broader probabilities and cautioned against discarding reliable testimony for minor contradictions – Held: High Court's approach contrary to established legal principles and unsustainable [Para 17].

Decision – Appeal Allowed – High Court Judgment Set Aside – Conviction Restored – Supreme Court allowed the State’s appeal, restored Sessions Court conviction and sentence under Section 376 IPC – Directed accused to surrender and undergo imprisonment [Paras 18–19].

Criminal Law – Murder - Death Penalty – Brutality of Crime – Sentence Upheld – The appellant brutally murdered four members of a family, including a minor child, and attempted to destroy evidence – The crime was premeditated, diabolical, and executed with extreme cruelty – Held: The case falls within the “rarest of rare” category – Death sentence confirmed – No mitigating circumstances found to outweigh the gravity of the offence [Paras 1–6, 27–31].

Mitigating Factors – Youth Not Sufficient for Leniency – Appellant claimed to be a minor at the time of offence – Trial court and High Court held him to be above 20 years – No credible documentary evidence produced to prove minority – Supreme Court held that mere claim of youthfulness without medical or documentary support cannot dilute punishment – Observed: Youth alone not a mitigating factor in face of heinous crime [Paras 8–13, 28].

Right to be Heard on Sentence – Section 235(2) CrPC – Procedural Compliance – Appellant challenged death sentence on ground that trial court failed to hear him properly under Section 235(2) – Supreme Court examined and found that appellant was heard before sentencing – Moreover, lack of any new facts or material from accused’s side meant no prejudice caused – No interference warranted on that ground [Paras 14–17].

Principles for Sentencing – Rarest of Rare Doctrine – Reaffirmed – Supreme Court reiterated that where collective conscience of society is shocked, and the crime exhibits extreme depravity, the only sentence that satisfies the justice system is death – In this case, murder of a child and calculated planning justified the harshest penalty [Paras 26–31].

Decision – Appeal Dismissed – Death Sentence Confirmed – Held: No error found in trial or sentence – Appellant failed to show any mitigating circumstance or procedural violation that warrants interference – Appeal dismissed and conviction and sentence upheld [Paras 31–32].

Criminal Law - Review of Criminal Order – Section 362 CrPC – High Court Cannot Review Final Order – The High Court initially dismissed the respondent’s petition under Section 482 CrPC, finding proper sanction and a prima facie case – Subsequently, the same judge passed another order reversing the earlier one on a clarification petition – Held: The second order was impermissible and amounted to review – Section 362 prohibits any such review except for clerical or arithmetical errors – The second order was without jurisdiction and liable to be set aside [Paras 4–7].

Sanction to Prosecute – Section 122 of Kerala Panchayat Raj Act – Not Applicable to Retired Officers – The respondent had retired from service when cognizance was taken – Held: Sanction under Section 122 is required only when the accused continues to hold office as President, Executive Authority or member of Panchayat – Since respondent was retired, no sanction was required – This view is supported by precedent under Prevention of Corruption Act and Section 197 CrPC where similar language was used [Paras 8–12].

Applicability of Sanction – Section 19 of Prevention of Corruption Act and Section 197 CrPC – Comparative Analysis – Held: Under Section 19 of the PC Act, no sanction is needed once the public servant has retired – In contrast, Section 197 CrPC was amended to include past public servants – Section 122 of Kerala Panchayat Act does not have such inclusion, hence does not protect retired officials [Paras 10–12].

Decision – Appeal Allowed – High Court’s Impugned Order Set Aside – Held: The High Court acted without jurisdiction in reversing its own final order – Further, respondent not entitled to benefit of protection under Section 122 as he had retired – Appeal allowed and criminal proceedings revived [Para 13].

Criminal Law – Communal Riot – Murder of Police Officers – Conviction Upheld – Two accused convicted for the murder of a Deputy Commissioner of Police and his security guard during a 1984 communal riot – Appellant Nasim identified by eyewitness as striking the deceased with an iron rod – Appellant Lokeman Shah convicted solely on a confession made to a Magistrate – Supreme Court upheld both convictions – Held: Evidence against Nasim and the confession of Lokeman Shah were sufficient to sustain conviction under Section 302 read with Section 149 of IPC – Appeals against conviction dismissed [Paras 1–9, 10–14, 24].

Confession – Voluntariness – Statement to Magistrate under Section 164 CrPC – Admissible – Lokeman Shah’s confession was found to be voluntary and properly recorded by a Magistrate with legal safeguards – Mere custodial death of another co-accused (Idris) held not sufficient to raise doubt on voluntariness – No evidence of torture or coercion – Held: In the absence of evidence suggesting involuntariness, the confession was rightly accepted by lower courts [Paras 11–14].

Common Object – Section 149 IPC – Inference from Conduct and Circumstances – Lokeman Shah did not explicitly admit common object to kill but participated actively and was aware of the assembly’s violent purpose – Held: Courts are empowered to infer common object based on conduct, presence, and participation – Once an accused joins an unlawful assembly with knowledge of its purpose, vicarious liability under Section 149 applies [Paras 15–23].

Standard of Proof – Evidence Act – Section 3 – Reasonable Inference Permissible – The court reiterated that proof means a level of probability that a prudent person would rely on – Held: In drawing conclusions under Section 149, a confession can be used to infer participation in common object when supported by surrounding circumstances [Paras 17–19].

Sentencing – Death Penalty – Not Rarest of Rare – Modified to Life Imprisonment – The trial court awarded death sentence to both accused – High Court confirmed death sentence for Nasim and reduced Lokeman Shah’s to life – Supreme Court held that, though the crime was brutal, it was committed in the heat of communal violence – No prior enmity or personal motive – Held: Case not falling in rarest of rare category – Sentence of death on Nasim altered to life imprisonment – Appeals dismissed with modified sentence [Paras 25–26].

Criminal Law – Murder - Section 302, Section 326, Section 498A of the IPC - Dying Declaration – Sole Basis for Conviction – Mental State of Declarant Crucial – The conviction of the appellant was based solely on the dying declaration recorded by the Magistrate – The deceased was alleged to be suffering from mental illness and had been under treatment – Held: The mental fitness of the deceased at the time of making the statement was not established – Certificate of doctor only confirmed physical fitness, not mental condition – Possibility of suicide not ruled out – Conviction set aside on benefit of doubt [Paras 1, 4, 5, 10, 11].

Admissibility of Dying Declaration – Section 32(1) Evidence Act – Principles Reiterated – Dying declarations are exceptions to hearsay rule and can form the sole basis of conviction if found reliable – However, such declarations must be scrutinised closely, especially when made by persons allegedly suffering from mental illness – Court must ensure voluntariness, truthfulness, and absence of tutoring or imagination – In this case, inconsistencies and lack of mental health verification rendered declaration unreliable [Paras 6–8, 11].

Burden of Proof – Reasonable Doubt – Prosecution’s Duty – Though the accused need only raise a probable defence, the prosecution must establish guilt beyond reasonable doubt – Held: The evidence failed to eliminate doubt regarding the cause of death being homicidal – Trial court and High Court erred in not appreciating these deficiencies – Appellant entitled to acquittal on this ground [Paras 10, 11].

Decision – Appeal Allowed – Conviction and Sentence Set Aside – Appellant Acquitted – Held: The prosecution failed to prove the case beyond reasonable doubt – The dying declaration was not free from doubt and could not form sole basis of conviction – Appellant acquitted and directed to be released unless required in another case [Para 12].

Default Bail – Indefeasible Right – Section 167(2) CrPC – Right Not Defeated by Subsequent Charge Sheet – Where the accused filed an application for bail after the expiry of 60 days and before the charge sheet was filed – Held: The right to statutory bail arises the moment the accused applies for bail and offers to furnish it – Later filing of the charge sheet does not defeat this right – High Court erred in denying bail based on charge sheet filed after bail application [Paras 6, 14].

Interpretation of “Availed Of” – Meaning Clarified – Filing of Application is Sufficient – The expression “availed of” as used in Sanjay Dutt’s case means filing a bail application along with readiness to furnish bail – It does not mean actual release – Accused need not suffer for court’s delay or prosecution's tactics [Paras 6, 14].

Conflict with Earlier Decisions – Sanjay Dutt Clarified – The Supreme Court clarified that the expression “availed of” should not be interpreted narrowly – Two-Judge Bench in State of M.P. v. Rustam held to be incorrect – Indefeasible right cannot be extinguished merely due to delayed decision or strategic filing of charge sheet [Paras 14, 30].

Constitutional Protection – Article 21 – Bail Right Linked to Liberty – Continued custody after expiry of prescribed period without charge sheet violates Article 21 – Magistrate has no jurisdiction to remand accused beyond the maximum period if bail is sought and no charge sheet is filed [Paras 14, 34].

Decision – Appeal Allowed – High Court Judgment Set Aside – Accused entitled to bail as he had filed application and expressed willingness to furnish bail before charge sheet was filed – Magistrate directed to release the accused on appropriate terms – Magistrate free to proceed under Section 209 CrPC and bail cancellation provisions, if warranted.

Constitutional Law - Constitutional Validity Of State Rules Regulating Medicinal Preparations Containing Alcohol – Excise Regulation – Medicinal Preparations with Alcohol – Legislative Competence of State – Challenge Rejected – High Court struck down Rajasthan Rules treating Ayurvedic drugs with over 20% proof alcohol as liquor – Held: Supreme Court disapproved High Court’s approach – Legislative field not occupied by Centre as Excise regulation falls under Entry 8 of State List – State law not shown to be repugnant to Central statutes – Appeal allowed [Paras 4–9, 15–17].

Occupied Field – Doctrine Not Attracted – Entry 8 List II vs. Entries in List I & III – The High Court erred in applying ‘occupied field’ doctrine – Held: That principle applies only when both Centre and State legislate under the Concurrent List – Regulation of intoxicating liquors is exclusively within State List Entry 8 – Reliance on Synthetics and Chemicals Ltd. misplaced – Doctrine of pith and substance supports State competence [Paras 8–9].

Judicial Discipline – Binding Precedents Ignored – High Court Criticized – High Court failed to consider binding decisions including Southern Pharmaceuticals, McDowell & Co. – Held: Lower courts cannot disregard Supreme Court precedent based on their perception of correctness – Judicial discipline requires faithful application of binding law [Paras 9–11].

Mootness – Matter Rendered Academic – No Live Dispute – Respondents no longer manufacture impugned products after 1995 – Central notification now prohibits high-alcohol Ayurvedic medicines – Held: No decision needed on constitutional issues – High Court’s decision set aside as a matter of law, not merits [Paras 13–15].

Decision: Appeal allowed – Judgment of the Rajasthan High Court set aside – No adjudication on constitutional validity due to academic nature of issue – However, respondents and similarly situated persons protected from prosecution for actions during the period when High Court judgment was operative [Para 16].

Constitutional Validity - Excise Regulation – Medicinal Preparations Containing Alcohol – State Competence Upheld – Notifications issued by the State of Rajasthan declaring medicinal and toilet preparations containing more than 20% proof alcohol as “liquor” challenged on grounds of legislative incompetence and violation of Article 19(1)(g) – Rajasthan High Court held such rules ultra vires – Supreme Court found that the High Court misinterpreted constitutional entries – Held: State legislatures are competent under Entry 8 List II to regulate intoxicating liquors even if in medicinal form – Rajasthan High Court’s view contrary to settled doctrine of pith and substance and not consistent with McDowell's case [Paras 7, 12].

Doctrine of Occupied Field – Entry 8 List II – Central Laws Do Not Override State Powers – Held: Power of State under Entry 8 List II is not affected by central legislations under List I or List III – The concept of repugnancy applies only to concurrent subjects – Rajasthan ISP Rules not invalid merely because Central laws exist on drugs – Field regarding intoxicating liquors remains with the State [Paras 7, 11, 12].

Regulatory Scope – Overlap Between Central and State Laws Permissible – Held: Even if some overlap exists between the Drugs and Cosmetics Act and State Excise laws, the State can legislate under Entry 8 List II provided its dominant purpose falls within its competence – Such incidental encroachments do not invalidate State action [Paras 7, 9].

Effect of Subsequent Events – Issue Rendered Academic – No Relief Granted – Held: Since manufacture of medicines with high alcohol content has ceased and no prosecution or tax demand raised, matter rendered academic – No need to decide constitutional question finally – Judgment of Rajasthan High Court nonetheless set aside [Paras 13, 15].

Protective Relief – No Prosecution for Past Acts – Held: Since the Rajasthan High Court judgment was holding the field, no person shall be prosecuted for any act or omission under the impugned rules or notifications during that period [Para 14].