JUDICIAL UPDATE

CA. Pramod Lingden, CA. Lingden is a Member of ICAN.He can be reached at: ca.pramodlingden@gmail.com

Case-I: Contribution Based Social Security Act, 2074

Supreme Court Decision Date: 2082/04/28

Supreme Court Case No.: 081-WO-1545

Parties: Asha Budha, Dang et al.  (Applicants) v. Social Security Fund, Kathmandu et al. (Respondents)

No Enforcement of 60-Year Age and 180-Month Contribution Provisions

Abstract:

• Since the employing organization of the petitioners itself is no longer in existence and their employment has already been lost, it is not observed that there exists a situation where they can regularly deposit amounts into the Social Security Fund. Therefore, the provision contained in Section 22(1) of the Social Security Scheme Operation Procedure, 2075, which states that “to receive retirement benefit, the contributor shall have completed 60 years of age and contributed for at least 180 months,” does not appear to be applicable in the case of these petitioners.
• SSF shall pay to the petitioners the contribution amounts collected out of their remuneration, the additional amount contributed by the employer, and the amounts of benefits received therefrom.

Background

A writ application was filed before the Supreme Court invoking its extraordinary jurisdiction under Articles 46 and 133 of the Constitution of Nepal, read together with Rule 32 of the Supreme Court Rules, 2074 on 20 Ashadh 2082.

The petitioners were engaged in various projects operated under USAID and were contributors to the Social Security Fund in accordance with the Contribution Based Social Security Act, 2074. During their employment, contributions were regularly deducted from their remuneration, and additional contributions were deposited by their employer into the Fund. However, after the closure of the respective USAID-funded projects, their employment was terminated, and they were no longer in a position to continue contributing to the Fund.

The dispute arose when the respondent Social Security Fund enforced the provisions of Rules 19, 20, and 22(1) of the Social Security Scheme Operation Procedure, 2075 (Second Amendment). These provisions require contributors to attain 60 years of age and to have contributed for a minimum of 180 months in order to qualify for pension benefits. Based on this requirement, the SSF refused to release to the petitioners the amounts collected from their salaries, the additional employer contributions, and the accrued benefits.

Consequently, the petitioners filed a writ application to the Supreme Court, requesting quashing of the denial decisions, communications, and actions of the SSF that prevented them from receiving their deposited contributions. They sought a court order to the SSF directing immediate payment of the amounts collected from their remuneration, employer contributions, and accrued benefits.

 

Arguments of the Parties

Petitioners

• Rules 19, 20, and 22(1) of the Social Security Scheme Operation Procedure, 2075 are in contradiction with Articles 18 and 25 of the Constitution of Nepal and Section 57 of the Contribution-Based Social Security Act, 2074.
• Unable to continue contribution is not voluntary but resulted from the closure of the employing organizations, leading to termination of employment.
• Imposing the requirement of 180 months of contribution and mandatory age of 60 years upon contributors who were involuntarily deprived of employment is unreasonable, unjust, and contrary to the principles of fairness. So, denial to refund of the contributed amounts and benefits despite circumstances beyond the control result in violation of the legitimate financial rights.

 

Respondent (Social Security Fund)

• Rule 22(1) of the Social Security Scheme Operation Procedure, 2075 (Second Amendment) mandates that only contributors who complete 60 years of age and contribute for at least 180 months are entitled to receive pension or retirement benefits.
• As the petitioners do not fulfill the statutory threshold, the payment of benefits cannot be made until the required age and period of contribution is met.

Supreme Court Judgment

The Supreme Court issued a writ of mandamus in the name of the respondent Social Security Fund, Kathmandu, to arrange payment to the petitioners of the amount collected out of their remuneration, the additional amount deposited by the employer, and the amounts of benefits received therefrom. The court held that that since the employing organization of the petitioners itself is no longer in existence and their employment has already been lost, it is not seen that there exists a situation where they can regularly deposit amounts into the Fund. Therefore, the provision contained in Section 22(1) of the Social Security Scheme Operation Procedure, 2075 (Second Amendment), which states that “to receive retirement benefit, the contributor shall have completed 60 years of age and contributed for at least 180 months,” does not appear to be applicable in the case of these petitioners.

It is observed that the petitioners have not failed to deposit contribution amounts into the Fund due to their own reason, but rather a situation has arisen where, due to loss of employment, they are unable to regularly deposit amounts in the Fund. Therefore, it does not appear just to say that the petitioners should not receive the contribution amount that has been deposited in the Fund on their behalf.

Case-II: Banking Offence and Punishment Act, 2064

Supreme Court Decision Date: 2082/05/03

Supreme Court Case No.: 075-RB-0946

Parties: Government of Nepal (Appellant) v. Panchasheel Food Pvt Ltd, Lalitpur et al. (Defendants)

Forgery of Loan Documents and Corresponding Punishment

Abstract:

• Where there are multiple offenders for a single offence, each offender shall pay a fine proportionate to the extent of their individual culpability.
• Multiple punishments for the same act violate principles of justice.
• Bank is not legally bound to disburse the loan solely on the basis of a valuator’s report. In case the valuation appears suspicious, the Bank has the authority to request a re-valuation. Furthermore, merely participating in the valuation process does not establish criminal liability.

Background:

On 2069/06/15, Global IME Bank Limited received an application for a loan from Panchasheel Food Pvt. Ltd., requesting NPR 5,000,000 as working capital and NPR 3,000,000 as a performance bank guarantee. The application was supported by collateral documentation asserting ownership of land located in Dhulikhel Municipality, Ward No. 2, Kavrepalanchok District, Plot No. 1488, Area 1-0-0-0, registered in the name of Bhoj Bahadur Budhathoki, a director of the company. Following the submission, the Bank disbursed NPR 4,500,000 as working capital and issued a bank guarantee of NPR 2,250,000 to Nyatapol International Trading Pvt Ltd.

However, subsequent inspections and investigations revealed discrepancies between the land represented in the documents and the actual location. The Bank later discovered, through its verification process and official correspondence with the Kavrepalanchok Survey Office, that the trace map and blueprint of the land submitted as collateral were forged. The documents did not match the official records and contained signatures not attributable to any authorized personnel of the Survey Office, indicating intentional falsification. The property valuation report was prepared by H.N. Engineering Consultancy Pvt Ltd. On-site inspection reports confirmed that land Plot No. 1488 was not adjacent to the Araniko Highway as disclosed in the documents furnished by the borrower and valuator. Also, the land allegedly mortgaged as collateral included properties belonging to other owners.

 

Therefore, the bank filed a complaint to the police office requesting investigation and legal action against the directors of Panchasheel Food Pvt. Ltd., Bhoj Bahadur Budhathoki and Ravibhakta Saiju, for submitting falsified documents to obtain loans and bank guarantees, causing financial loss to the Bank. Investigations established that the total financial loss suffered by the Bank was NPR 8,670,537.81, encompassing both the principal and accrued interest. Examination of on-site inspections confirmed that the actual location and extent of Plot No. 1488 differed materially from the documentation submitted to the Bank. Therefore, a case was filed before the High Court Patan against the directors of the borrower company (Bhoj Bahadur Budhathoki and Ravibhakta Saiju) and the mortgaged property valuator.

Defendant Ravibhakta Saiju contended that he participated in board resolutions and signed loan documents but was unaware that the documents submitted were forged. He acknowledged responsibility for repayment but denied intent to defraud. Similarly, Bhoj Bahadur Budhathoki admitted that the documents were provided to the Bank by another individual, Agni Chaulagai, and he initially was unaware of their falsity, but nevertheless participated in the loan process. The valuator emphasized that his role as a valuation engineer was limited to assessing documents provided by the Bank and that he reported discrepancies upon discovery.

The appellant argued that the defendants acted dishonestly, intentionally misrepresenting the land’s value to obtain financial benefits. Documentary evidence, inspection reports, and field verification demonstrated that the submitted trace maps and blueprints did not match official records and misrepresented the actual location and dimensions of the land. Therefore, they have deliberately participated in the submission and signing of forged documents and property valuation report, causing the Bank to suffer financial loss of NPR 8,670,537.81.

In respect of defendants Bhoj Bahadur Budhathoki and Ravibhakta Saiju, the High Court Patan, by its judgment dated 2075/09/17 B.S., held that they are liable under Section 15(2)(c) of the Banking Offence & Punishment Act, 2064, to pay proportionally NPR 8,670,537.81 as restitution, assigning NPR 4,335,268.91 to each of them, together with a fine equivalent to the said amount NPR 8,670,537.81 from each of them and imprisonment for a term of 2 years. In regard to the other defendant (property valuator), the Court held that the allegation of the Government of Nepal could not be established.

Therefore, the appellant being dissatisfied with such decisions of the High Court Patan appealed to the Supreme Court.

Arguments of the Parties in the Supreme Court:

Appellant:

• Appellant argued that the defendants (borrowers and valuator) deliberately misrepresented the land and submitted forged documentation to obtain loans and guarantees, causing the Bank to suffer financial loss of NPR 8,670,537.81.

• It is established that the collateral valuation had been done on the basis of a forged land document. Even though, the defendant valuator was acquitted by the High Court Patan.
• Also, the High Court Patan failed to charge additional punishment, particularly in respect of defendants Bhoj Bahadur Budhathoki and Ravibhakta Saiju, concerning the offence under Section 7(b) and corresponding punishment under Section 15(3) of the Banking Offence & Punishment Act, 2064. Therefore, the judgment of the High Court Patan is defective to that extent.

Defendants:

• Bhoj Bahadur Budhathoki contended that the documents were supplied by a third party and that he was initially unaware of falsification. Ravibhakta Saiju argued that he acted in good faith and only signed documents without knowledge of forgery. However, they were found liable for restitution under Section 15(2)(c) of the Banking Offence & Punishment Act, 2064. In addition to collect proportionate amount of restitution from the 2 defendants, the High Court Patan imposed them to pay each a fine equivalent to the loss NPR 8,670,537.81, thereby imposing, in total, a fine amounting to double the loss instead of charging fine proportionately as the restitution.
• The valuator argued that he had the duty to value the land on the basis of the trace map and blueprint provided by the Bank, and that he did not have the authority to verify those documents. On these grounds, since he had not exercised any authority not vested in him, he could not be subjected to punishment and, therefore, the judgment of the High Court Patan acquitting him from the charge should be upheld.

Supreme Court Judgment:

The Supreme Court upheld the High Court Patan’s decision partially making following judgments:

1. Regarding the quantum of fine to be imposed on the convicted defendants Ravibhakta Saiju and Bhoj Bahadur Budhathoki, it is noted that Section 18(3) of the Criminal Offence (Sentencing and Execution) Act, 2074 provides that, in determining a fine, the amount should be assessed on the basis of the loss sustained. Furthermore, Section 21 of the Act provides that, where there are multiple offenders for a single offence, each offender shall pay a fine proportionate to the extent of their individual culpability. In the present case, the total financial loss to the bank has been established at NPR 8,670,537.81. The High Court Patan has held that defendants are each liable to pay NPR 4,335,268.91 to the Bank as restitution. Given their equal criminal liability, each of the defendants shall be liable to pay NPR 4,335,268.91 as fine, representing half of the total amount. Hence, the decision of the High Court Patan’s judgment to charge fine of NPR 8,670,537.81 from each of them is modified.
2. While Section 15(3) of the Banking Offence & Punishment Act, 2064 prescribes punishment for Section 7(b) offences, those acts under Section 7(b) and Section 14 arose from a single transaction, making additional punishment unnecessary. Multiple punishments for the same offence violate principles of justice. Punishment under Section 15(3) of the Act is unnecessary if Section 15(2)(c) already applies. Consequently, the High Court correctly imposed punishment under Section 15(2)(c) only, without Section 15(3), avoiding double punishment.
3. There is no evidence to establish the involvement of defendant valuator in the preparation or facilitation of forged documents. The record shows that the valuator was not a borrower from the Bank and that there is no evidence of a criminal nexus between him and the other defendants to facilitate misuse of the loan. As a valuator, the defendant’s role was limited to preparing the valuation report. The Bank is not legally bound to disburse the loan solely on the basis of a valuator’s report. In case the valuation appears suspicious, the Bank has the authority to request a re-valuation. Furthermore, merely participating in the valuation process on behalf of a company does not establish criminal liability. Accordingly, there is no reason to interfere with the decision of the High Court Patan acquitting him from the charge.