Case BriefsSupreme Court

Supreme Court:  The Division Bench comprising Ajay Rastogi and Bela M. Trivedi, JJ., reversed the impugned judgment of the Madras High Court and held that when the delay in appointment is attributable to the State, it would not deprive the employees of their right to become the member of the Pension Scheme, 1978 merely on the ground that the Scheme was not applicable to their year of appointment, particularly when other candidates who participated in the common process of selection were availing the same.

The Court remarked,

“The premise on which the High Court has proceeded is not sustainable for the reason that the appellants along with other applicants had participated in the self-same selection process pursuant to advertisement dated 9th September 2001”

Background

The undisputed facts of the instant case were that 53 vacancies for Assistant   Public   Prosecutor   Grade-II were advertised by the Tamil Nadu Public Service Commission in the year 2001.   After undertaking the process for selection, 51 persons, including those who were lower in order of merit to the appellants, were appointed by the Government by order dated 24-09-2002.

Pertinently, the names of the appellants were withheld for want of further verification.   The   Commission on verification granted clearance to both the appellants and intimated the same to the State Government on 03-09-2002 (much before the appointments were made on 24-09-2002).   Despite all the formalities being completed, without any reasonable cause or justification, the State Government had withheld the appointments of the appellants, and finally, both the appellants were appointed on 23-08-2005 and 23-04-2004 respectively.

Meanwhile, vide notification dated 06-08-2003, an amendment was made under the Tamil Nadu Pension Rules, 1978. Pursuant to which the State Government introduced a new Contributory Pension Scheme applicable to the Government employees who were recruited on or after 01-04-2003.

Issue Involved

The grievance of the appellants was that their names were cleared by the Commission much earlier than the date of appointment of the other 51 candidates by the order dated 24-10-2002, but the State Government failed to include their names while appointments of other selected candidates, including those who were lower in order of merit.

Therefore, the appellants contended that their names were withheld for two-three years by the State without any reasonable cause/justification, and the delay in appointments could not be attributable to them in any manner. The appellants argued that because of their later appointments, the Government had denied them the benefits of the Scheme, 1978 which was applicable to the employees appointed on or before 01-04-2003.

Analysis and Findings

The Court observed that when those who are lower in order of merit to the appellants were appointed and no justification had been tendered by the State as to why the names of the appellants were withheld for two-three years, the delay in making appointments could not be held to be attributable to the appellants in any manner.

Hence, the Court found that in the given circumstances, when all other candidates who had participated along with the appellants were appointed on 24-09-2002 including those who were lower in the order of merit, there was no reason for withholding the names of the appellants. The Court held,

“Merely because they were appointed at a later point of time, would not deprive them of claiming to become a member of Tamil Nadu Pension Rules, 1978, which is applicable to the employees who were appointed on or before 1st April, 2003.”

In light of the above, the Court set aside the finding recorded by the High Court. The State was directed to treat the appellants to be a member of the Tamil Nadu Pension Rules, 1978 for all practical purposes and benefits as members of the Rules, 1978 to which the appellants were entitled, including retiral benefits.  [P. Ranjitharaj  v. State of Tamil Nadu,  2022 SCC OnLine SC 508, decided on 25-04-2022]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Delhi High Court: Asha Menon, J., held that if no offence is attributed to the company, its Directors and other persons responsible for the conduct of its business cannot be saddled with any liability.

The petitioner had filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the respondent. It was stated that, the commercial space owned by the petitioner had been let out upon terms and conditions in the Rent Agreement.

The above-said rent agreement was executed between the petitioner and the respondent’s company. Further, in March-April, 2013 the respondent was alleged to have issued five cheques duly signed by the Managing Director to discharge the company’s liability to pay the rent.

The above-said cheques were bounced; hence the complaint was filed.

Analysis and Decision

High Court observed that the Company upon which the primary liability rests and a person who is sought to be made vicariously liable for an offence of which the principal accused is a company, would need to have a role to play in relation to the incriminating act.

Section 141 of the N.I. Act operates only when the offence under Section 138 of the N.I. Act is committed by a company.

Further, Court stated that the Company being the primary accused must be found to have committed an offence. Thereafter, through the legal fiction created by Section 141 of the N.I. Act, the Directors and other persons responsible for the conduct of its business also become vicarious liable.

In the present matter, all the averments were against the respondent, who was described as Managing Director.

There was no pleading which suggested that the Company had committed any offence.

When no offence is attributable to the Company, it is not possible to attach liability on the Managing Director by the deeming provisions of Section 141 of the N.I. Act.

Bench added that, amendments of simple technical infirmities alone can be allowed but not the filing of a fresh complaint with improved pleadings in the garb of the amendment.

Hence, in view of the above discussion, Court denied grant permission to amend the complaint.

Therefore, the petition was dismissed. [Hari Shamsher Kaushik v. Jasbir Singh, 2022 SCC OnLine Del 1379, decided on 9-5-2022]


Advocates before the Court:

For the Petitioner: Mahesh K. Mehta, Advocate

For the Respondent: None

Case BriefsHigh Courts

Karnataka High Court: P. S. Dinesh Kumar, J., disposed of the petitions and upheld the State Government’s power and prerogative to impose conditions while considering the applications for grant of authorization.

The facts of the case are such that the distribution of essential commodities in the State was initially controlled and governed under the provisions of The Essential Commodities Act, 1966 and The  Karnataka Essential Commodities Licensing Order, 1986.   On November 11, 1992, the State Government, in super cession of the Control Order of 1986, introduced the Karnataka Essential Commodities Public Distribution System (Control) Order, 1992 to govern the distribution of essential commodities. On June 10, 2016, the State Government issued a notification giving effect to KEC PDS System (Control) Order 2016. Rule 13 of the Order 2016 in the years 2017, 2020 and 2021 simultaneously.

The resultant effect of Notification dated January 16, 2021 is, in case of death of an authorized dealer before attaining the age of 65 years, the authorization can be transferred to his spouse who is aged less than 65 years or unemployed son or unmarried daughter aged more than 18 years or widowed daughter aged more than 18 years. Such transferees must have passed 10th standard or equivalent qualification as on the date of the death of the authorised dealer. Petitioners have challenged the amendment brought to Rule 13 on May 20, 2017 and also prayed for a declaration that Rule 7 as redundant in view of the Notification dated January 16, 2021. In substance, petitioners’ grievance is with regard to educational qualification of ‘pass in 10th Standard’ and the period of renewal limited to 3 years.

Counsel for petitioner Mr. Sharath S Gowda submitted that that distribution of commodities is an essential and integral part in the daily lives of citizen. Though the authorization is given to one member in the family, he is assisted by other members of the family and therefore the entire family depends on the authorization for their livelihood. Therefore the condition of ‘pass in 10th Standard’ is unsustainable in law. It was also argued that the maximum period of validity of fresh authorization being limited to five years is also arbitrary.

Counsel for respondents Mr. Dhyan Chinnappa submitted that pass in 10th Standard is necessary because the person holding authorization is required to have minimum knowledge in the measurements and Bank transactions. He further submitted that the period of five years is more than sufficient for any family losing its bread winner to revive itself. The State Government has now issued ‘Control Order 2021′ and the same has not been challenged by the petitioners. Therefore, petitioners’ cases will be considered on the basis of the Notification in force as on the date of death of authorization holder.

The Court observed that it is well settled that in the case of compassionate appointments employer is entitled to frame policies and therefore the State Government is entitled to frame policies in the case of commodity distributions also.  As recorded hereinabove, the State Government have throughout maintained the condition of pass in ‘10th Standard’ consistently. There has been change with regard to the maximum period of authorization. Initially it was three years, increased to five years and presently ten years.  Thus there has been consistent improvement in the period of authorization. There is one another additional aspect which the State Government have included in the amendment brought on January 16, 2021 namely that the applicant should have ‘no other source of income’. Thus the applicants who shall be governed by  the Notification dated June 10, 2016, the amended notifications dated May 20, 2017 and March 17, 2020 can be considered under one category, because in all these three Notifications there is condition with regard to source of income. The condition of ‘pass in 10th Standard’ is a reasonable condition.

The Court further observed that a person who deals with commodity distribution is required to have basic knowledge in arithmetic, Banking and liaison with public offices. The other conditions with regard to age are also a matter of policy and the same is just and appropriate. Moreover, condition of ‘pass in 10th Standard’ cannot be found fault with.

The Court stated In respect of the petitioners whose applications fall for consideration in any of these three Notifications, the condition of five years is contrary to the progressive and subsequent view taken by the State Government in 2021 Notification extending it to 10 years. Further, it cannot be lost sight of the fact that this Court has granted orders in large number of writ petitions to consider the cases of petitioners without reference to restriction on age and pass in 10th Standard.

Hence, several applicants similarly situated as the petitioners herein, have taken the benefit of interim orders passed by this Court for consideration of their cases without reference to restriction of age and SSLC qualification.  Therefore, if these writ petitions are dismissed without any observations, it would result in two set of applicants namely the one successful on the strength of several orders in various writ petitions and the other, deprived of consideration of their applications.

The Court thus held it is  desirable for the State Government to consider the cases of  these writ petitioners, without reference to the restriction of  ‘age’ and ‘pass in 10th Standard’ which shall be in parity  with various orders passed by this Court in several writ  petitions. [Manmohankumar VC v. State of Karnataka, WP No. 13559 of 2020, decided on 23-12-2021]


Arunima Bose, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: The bench of L. Nageswara Rao and Hima Kohli, JJ has held that the formulae for fixing the percentage of reservation for the SC and ST candidates and for determining the percentage of seats to be reserved for OBC candidates under the second proviso of Section 3 of the Central Educational Institutions (Reservation in Admission) Act, 2006, ought to be gathered from the same source and any other interpretation would lead to uncertainty.

Factual Background

The Court was hearing the appeal from the judgment of the Manipal High Court wherein it was held that after the amendment of the Central Educational Institutions (Reservation in Admission) Act, 2006 , in the year 2012, on introduction of the Central Educational Institutions (Reservation in Admission) Amendment Act, 2012 , Manipur University is required to follow the reservation norms of 2% for the candidates belonging to Scheduled Caste, 31% for the Scheduled Tribes and 17% for the Other Backward Classes for purposes of admission in the University.

The candidates belonging to the SC category and had applied for admission in various Post Graduate courses, had questioned the purported reduction of the quota for SC category candidates from 15%, as prescribed in Section 3 of the Reservation Act to 2% and filed a writ petition in the High Court of Manipur. It was contended that the Amendment Act was legislated to ensure that reservation for SC and ST candidates as prescribed in Section 3 of the Parent Act, should not be reduced from the benchmark of 15% and 7.5% respectively. Rather, the Amendment Act contemplates that the percentage of reservation for SC and ST candidates earmarked in Section 3 of the Parent Act could be increased even to the detriment of the earmarked percentage of reservation for OBC candidates, to ensure that the overall limit of 50% reservation for SC and ST candidates taken collectively, is not disturbed in any manner.

Analysis

Observing that once the two provisos were inserted in Section 3 of the Parent Act by virtue of the Amendment Act, the general norms of reservation as laid down in Clauses (i), (ii) and (iii) of Section 3 of the Parent Act had to be restricted in terms of the said provisos, the Supreme Court gave the following explanation:

While the first proviso deals with “State seats”, if any, in a CEI situated in tribal areas referred to in the Sixth Schedule to the Constitution, the second proviso addresses a situation where there are no State seats in a CEI and the seats reserved for the SC/ST candidates exceeds the percentage specified under Clauses (i) and (ii) of Section 3 (viz., 15% seats for SCs plus 7.5% for STs, totalling to 22.5% seats) or if the combined seats reserved for the SC and ST candidates exceeds the sum total of the percentage as specified under Clauses (i) and (ii).

Two riders have also been dovetailed in the second proviso to Section 3, namely Clauses (a) and (b).

    • Clause (a) of the second proviso, contemplates a situation where seats referred to in the second proviso are less than 50% of the annual permitted strength on the date immediately preceding the date of commencement of the Amendment Act.
    • Clause (b) provides for a situation where such seats are over 50% of the annual permitted strength on the date immediately preceding the date of commencement of the Amendment Act.

In a situation contemplated in Clause (a) of the second proviso, a restriction has been imposed on the total percentage of seats required to be reserved for OBC candidates under Section 3(iii) of the Parent Act by limiting them to the balance seats available after factoring in the combined percentage of seats specified in Clauses (i) and (ii) of Section 3 of the Parent Act, falling short of 50% of the annual permitted strength.

But in circumstances contemplated in Clause (b), the Act recognizes the fact that no seats need be reserved for the OBC candidates under Clause (iii) of Section 3 of the Parent Act. However, this is subject to the condition that the extent of reservation of seats for SC and ST candidates shall not be reduced when it comes to CEIs established in “Specified north eastern region”.

“This goes to demonstrate that the underlying intent of the Amendment Act was to secure a particular percentage of seats through reservation for a set of candidates and leave some space for capping of seats for OBC candidates, depending on the circumstances contemplated in Clauses (a) and (b) of the second proviso to the amended Section 3.”

The Court, hence, held that the reference point of the period for determining the reservation quota for OBC candidates must be the same as that of the SC and ST candidates for the simple reason that for working out the reservation quota for OBC candidates would necessarily require one to find out in the first instance, as to what would be the difference between 50% of the annual permitted strength and the combined existing percentage for the SC and ST candidates, as obtained on the date immediately preceding the date of commencement of the Reservation Act.

It was observed that,

“Both the issues are so interlaced that to determine the percentage of reservation for OBC candidates, one would have to undertake an exercise of determining the percentage of seats to be reserved for SC and ST candidates, all within the four corners of the second proviso inserted in Section 3 of the Parent Act. Any other interpretation sought to be assigned to the second proviso to Section 3 inserted post-amendment, would make the proviso itself unworkable and redundant and is, therefore, impermissible.”

The Court made clear that the general rules of reservation have been encapsulated in Clauses (i), (ii) and (iii) of Section 3 of the Parent Act. But when it comes to CEIs established in States falling under the definition of “Specified north eastern region”, categorized in Section 2(ia) introduced by the Amendment Act, the two new provisos appended to Section 3 would govern the norms of reservation which prescribes a different criteria, vis-à-vis the main provision and would apply irrespective of whether they are situated in areas covered by the Sixth Schedule to the Constitution or not.

[Shri Kshetrimayum Maheshkumar Singh v. Manipal University, 2022 SCC OnLine SC 12, decided on 05.01.2022]


*Judgment by: Justice Hima Kohli


Counsels

For appellant: Advocate Punam Kumari

For Respondents: Advocates Ashutosh Dubey, Shivendra Dwivedi

Case BriefsSupreme Court

Supreme Court: Clearing the air over the applicability of a new or modified Compassionate Appointment Scheme that comes into force after the death of the employee, the bench of Hemant Gupta and V. Ramasubramanian*, JJ the interpretation as to the applicability of a modified Scheme should depend only upon a determinate and fixed criteria such as the date of death and not an indeterminate and variable factor such as the date of consideration of the application of the dependant.

Factual Background

The sister of the respondent died as an unmarried female Government servant on 8.12.2010.

The appointment on compassionate grounds in the State of Karnataka is governed by a set of Rules known as Karnataka Civil Services (Appointment on Compassionate grounds) Rules, 1996, issued in exercise of the powers conferred by Section 3(1) read with Section 8 of the Karnataka State Civil Services Act, 1978.

The Rules as they stood, on the date on which the sister of the respondent died in harness, did not include an unmarried brother, within the definition of the expression “dependant of a deceased Government servant” under Rule 2(1)(a) of the said Rules  vis¬a-vis  a deceased female unmarried Government servant.

It was only by way of way of a draft notification on 20.06.2012 that an unmarried brother of a deceased female unmarried Government servant was included within the definition. The final notification was issued on 11.07.2012.

While the competent authority rejected the respondent’s claim for compassionate appointment, the Karnataka State Administrative Tribunal allowed the application on the ground that the amendment   made to the Rules on 20.06.2012 would apply retrospectively covering the case of the respondent, though his sister died in harness on 8.12.2010. The said order was affirmed by the High Court.

Analysis

The Court analysed various judgments where the applicability of a new or modified Scheme that comes into force after the death of the employee was interpreted. It noticed that in cases where the benefit under the existing Scheme was taken away or substituted with a lesser benefit, the Supreme Court directed the application of the new Scheme. But in cases where the benefits under an existing Scheme were enlarged by a modified Scheme after the death of the employee, the Court applied only the Scheme that was in force on the date of death of the employee. This was fundamentally due to the fact that compassionate appointment was always considered to be an exception to the normal method of recruitment and perhaps looked down upon with lesser compassion for the individual and greater concern for the rule of law.

“Though there is a conflict as to whether the Scheme in force on the date of death of the employee would apply or the Scheme in force on the date of consideration of the application of appointment on compassionate grounds would apply, there is certainly no conflict about the underlying concern reflected in the above decisions. Wherever the modified Schemes diluted the existing benefits, this Court applied those benefits, but wherever the modified Scheme granted larger benefits, the old Scheme was made applicable.”

The Court noticed that the conflict of opinion in all the cases revolved around two dates, namely,

  1. date of death of the employee; and
  2. date of consideration of the application of the dependant.

Out of these two dates, only one, namely, the date of death alone is a fixed factor that does not change. The next date namely the date of consideration of the claim, is something that depends upon many variables such as the date of filing of application, the date of attaining of majority of the claimant and the date on which the file is put up to the competent authority.

“There is no principle of statutory interpretation which permits a decision on the applicability of a rule, to be based upon an indeterminate or variable factor.”

To put things not perspective, the Court explained by way of a hypothetical case where 2 Government servants die in harness on January 01, 2020.

“Let us assume that the dependants of these 2 deceased   Government servants make applications for appointment on 2 different dates say 29.05.2020 and 02.06.2020 and a modified Scheme comes into force on June 01, 2020. If the date of consideration of the claim is taken to be the criteria for determining whether the modified Scheme applies or not, it will lead to two different results, one in respect of the person who made the application before June 1, 2020 and another in respect of the person who applied after June 01, 2020.”

Hence, if two employees die on the same date and the dependants of those employees apply on two different dates, one before the modified Scheme comes into force and another thereafter, they will come in for differential treatment if the date of application and the date of consideration of the same are taken to be the deciding factor.

“A rule of interpretation which produces different results, depending upon what the individuals do or do not do, is inconceivable.”

It was, hence, held that the interpretation as to the applicability of a modified Scheme should depend only upon a determinate and fixed criteria such as the date of death and not an indeterminate and variable factor.

Ruling

Since, in the case at hand, the employee had died on 8.12.2010 and the amendment to the Rules was proposed by way of a draft notification on 20.06.2012, the Court noticed that merely because the application for appointment was taken up for consideration after the issue of the amendment, the respondent could not have sought the benefit of the amendment.

[Secretary to Govt. Department of Education (Primary) v. Bheemesh, 2021 SCC OnLine SC 1264, decided on 16.12.2021]


Counsels

For appellants: Advocate V. N. Raghupathy

For respondent: Senior Advocate Jayanth Muthraj


*Judgment by: Justice V. Ramasubramanian

Know Thy Judge | Justice V. Ramasubramanian

Case BriefsSupreme Court

Supreme Court: Stating that readiness and willingness are necessary for the purpose of passing a decree of specific performance, Division Bench of M.R. Shah and A.S. Bopanna, JJ., expressed that,

Straightaway to rely upon the affidavit without amending the plaint and the pleadings is wholly impermissible under the law.

Factual Background

Plaintiff and the defendant entered into a sale agreement wherein the defendant agreed to sell the same for a sale consideration of Rs 16.20 lakhs to the plaintiff. A part sale consideration of Rs 3,60,001 was paid at the time of execution of the agreement to sell.

Amongst the number of conditions stipulated in the agreement to sell, one of the conditions was that the defendant as original owner was required to evict the tenants from the property in question thereafter to execute the sale deed on receipt of the full sale consideration.

In view of the above condition, plaintiff sent a legal notice to defendant asking to evict the tenants from the property in question and to execute the sale deed on receipt of balance sale consideration vide a notice.

Plaintiff approached the Trial Court for specific performance of the contract.

Plaintiff’s case was that he was ready and willing to perform his part of the contract, but the defendant did not evict the tenants and come forward to execute the sale deed.

Trial Court held that the plaintiff was not willing to get the sale deed executed as it is, and, therefore, held the issue of willingness against the plaintiff. Court also added that the defendant failed to prove that tenants had vacated the suit property as claimed, however, the Trial Court held on willingness against the plaintiff by observing that the plaintiff had not shown the willingness to purchase the property with the tenants.

In an appeal filed before the High Court under Section 96 read with Order XLI by the impugned judgment and order, High Court allowed the said appeal and quashed and set aside the decree passed by the Trial Court dismissing the suit and consequently had decreed the suit for specific performance.

On being aggrieved and dissatisfied with the decisions of the lower courts, defendant approached this Court.

Analysis, Law and Decision

Supreme Court noted the non-compliance of the Order XLI Rule 31 CPC passed by the High Court Order.

High Court disposed of the appeal preferred under Order XLI CPC read with Section 96 in a most casual and perfunctory manner. Court neither re-appreciated the entire evidence on record nor had given any specific findings on the issues which were even raised before the Trial Court.

In Court’s opinion, High Court failed to exercise the jurisdiction vested in it as a First Appellate Court. Hence, High Court’s decision was unsustainable.

As per the case of the original plaintiff, the defendant was required to evict the tenants and hand over the physical and vacant possession at the time of execution of the sale deed on payment of full sale consideration.

Procedure adopted by the High Court relying upon the affidavit in a First Appeal by which virtually without submitting any application for amendment of plaint under Order VI Rule 17 CPC, High Court as a First Appellate Court had taken on record the affidavit and as such relied upon the same, but the said procedure is untenable and unknown to law.

It was also observed that, there were no pleadings in the plaint that he was ready and willing to purchase the property and get the sale deed executed of the property with tenants and the specific pleadings were to hand over the peaceful and vacant possession after getting the tenants evicted and to execute the sale deed.

Bench also opined that the plaintiff was never ready and willing to purchase the property and/or get the sale deed executed of the property with tenants.

It was for the first time before the High Court in the affidavit filed before the High Court and subsequently when the learned Trial Court held the issue of willingness against the plaintiff, the plaintiff came out with a case that he is ready and willing to purchase the property with tenants. 

Further, the Court held that once it is found on appreciation of evidence that there was no willingness on the part of the plaintiff, the plaintiff was not entitled to the decree of specific performance.

Therefore, Trial Court’s decision was upheld.

Submission on behalf of the plaintiff that, in the agreement, a duty was cast upon the defendant to evict the tenants and to handover the vacant and peaceful possession, which the defendant failed and, therefore, in such a situation, not to pass a decree for specific performance in favour of the plaintiff would be giving a premium to the defendant despite he having failed to perform his part of the contract.

Defendant not refunding the amount of part sale consideration with 18% interest as ordered by the Trial Court cannot be a ground to confirm impugned judgment and order passed by the High Court.

The Court directed the appellant to refund the amount of Rs 3,60,001 with 18% interest from the date of agreement till the date of realization. [K. Karuppuraj v. M. Ganesan, 2021 SCC OnLine SC 857, decided on 4-10-2021]

Kenya High Court
Case BriefsForeign Courts

High Court of Kenya: While deliberating upon constitutional petitions challenging the Building Bridges Initiative (hereinafter BBI) and the resulting controversial Constitution of Kenya Amendment Bill, 2020; the 5 Judge Bench of Joel M. Ngugi, G.V. Odunga, Ngaah Jairus, E.C. Mwita and Mumbua T. Matheka, JJ., held the following –

  • The Doctrine Basic Structure is applicable in Kenya and it limits the power to amend the Basic Structure of the Constitution and eternity clauses.
  • The Court also held that the Basic Structure of the Constitution and eternity clauses can only be amended through the Primary Constituent Power which must include four sequential processes namely: civic education; public participation and collation of views; Constituent Assembly debate; and ultimately, referendum.
  • The Kenyan President does not have authority under the Constitution to initiate changes to the Constitution, and that a constitutional amendment can only be initiated by Parliament through a Parliamentary initiative or through a Popular Initiative as enshrined in the Kenyan Constitution.
  • It was also held that civil Court proceedings can be instituted against the President or a person performing the functions of the office of President during their tenure of office in respect of anything done or not done contrary to the Constitution.

Background:

Post the Presidential Elections in 2017, elected President Mr. Uhuru Kenyatta started an initiative “towards united Kenya” and appointed the Building Bridges to Unity Advisory Taskforce comprising of 14 committee members and 2 joint secretaries in May 2018. The key mandate of the BBI Taskforce was to come up with recommendations and proposals “for building a lasting unity in the country”. The BBI Taskforce came up with an interim report in November, 2019. On 3rd January 2020, the President appointed the Steering Committee on the Implementation of the Building Bridges to a United Kenya Taskforce Report. The Committee recommended certain administrative, policy, statutory or constitutional changes. Despite some controversy as to how exactly the Report of the BBI Steering Committee (after it was handed over to the President), became the Constitution of Kenya Amendment Bill, 2020 (herein after, “The Constitution of Kenya Amendment Bill”). There was no dispute that the BBI Secretariat then put in motion the process to collect signatures in support of the Popular Initiative associated with the Constitution of Kenya Amendment Bill. Thereafter, the BBI Secretariat submitted the signatures to the Independent Electoral and Boundaries Commission (IEBC), for verification and submittal to the County Assemblies and Parliament for approval.

Contentions:

Both the petitioners and the respondents relied heavily on the landmark Indian case on Basic Structure Doctrine- Kesavananda Bharti v. State of Kerala, (1973) 4 SCC 225.

Applying the Basic Structure Doctrine to the proposed Constitution of Kenya Amendment Bill, the petitioners argued that the Bill proposes to discard the doctrine of separation of powers and checks and balances first, by threatening to reverse the Presidential system of government, by threatening amend Chapter 9 of the Constitution on the executive, which goes against the decisions and reasoning of the makers on the Constitution. Regarding the Basic Structure doctrine, the petitioners contended that the Doctrine imputes logical limits to the power of amendment. They stated that the Doctrine exists to protect the essential characteristics of the Constitution; the power to amend the Basic Structure is limited because to so amend would be to destroy the essential character of the Constitution. The Petitioners drew their primary authority for this argument from the comparative Indian case of Kesavananda Bharati.

Meanwhile the respondents attributed the origin of the Doctrine of Basic Structure to Kesavananda Bharti case. The Basic Structure Doctrine articulated in the Kesavananda Case is not applicable in Kenya because of our different circumstances. They argue that, unlike in India, the amendment authority in the Constitution does not rest with Parliament alone since the people of Kenya have the final say through a referendum. They submitted that the Doctrines of Basic Structure; unamendability and eternity clauses do not apply in Kenya. They faulted the Petitioners for mixing up the concepts of Basic Structure Doctrine, the Concept of Unamendability and Eternal clause, which they contended must be distinguished. The respondents further argued that the Basic Structure Doctrine lacks universal acceptance.

Observations: 

‘Anxiously’ perusing the contentions, the Bench observed that, “Kenyan Constitution was one in which Kenyans bequeathed themselves in spite of, and, at times, against the Political and other elites. Kenyans, therefore, were keen to ensure that their bequest to themselves would not be abrogated through either incompatible interpretation, technical subterfuge, or by the power of amendment unleashed by stealth”. The Court noted that a holistic reading of the Constitution, its history and the context of the making of the Constitution; the Basic Structure of the Constitution consists of the foundational structure of the Constitution as provided in the Preamble; the eighteen chapters; and the six schedules of the Constitution. This structure outlines the system of government Kenyans chose – including the design of the Judiciary; Parliament; the Executive; the Independent Commissions and Offices; and the devolved system of government. It also includes the specific substantive areas Kenyans thought were important enough to pronounce themselves through constitutional entrenchment. Read as a whole, these chapters, schedules and the Preamble form the fundamental core structure, values and principles of the Constitution. This core thus, cannot be amended without recalling the Primary Constituent Power of the people. “We can discern this doctrinal illumination by correctly interpreting both the history of Constitution-making and the structure of the Constitution Kenyans made for themselves. At every step of the way, Kenyans were clear that they wanted a Constitution in which the ordinary mwananchi, Wanjiku, took centre-stage in debating and designing”.

With the aforementioned observations, the Court declared that the Steering Committee on the Implementation of the Building Bridges to a United Kenya Taskforce Report established by the President is unconstitutional. The Court also declared that the entire BBI process culminating with the launch of the Constitution of Kenya Amendment Bill, 2020 was done unconstitutionally and in usurpation of the People’s exercise of Sovereign Power and that the President contravened Chapter 6 of the Constitution and Art. 73(1)(a)(i), by initiating and promoting a constitutional change process contrary to the provisions of the Constitution on amendment of the Constitution.

[David Ndii v. Attorney General, PETITION NO. E282 of 2020, decided on 13.05.2021]


Sucheta Sarkar, Editorial Assistant has put this report together 

 

 

 

 

Op EdsOP. ED.

I. INTRODUCTION

The 2019 Amendment Act[1] marks India’s shift towards institutional arbitration. Like previous amendments to the Arbitration and Conciliation Act, 1996[2] (hereinafter “ACA”) one of the objectives of the latest amendment is to make India an arbitration-friendly jurisdiction. This is one of those objectives which the previous amendments have failed to achieve.

As per the latest amendment, the authority to appoint an arbitrator under Section 11 now vests with the arbitral institution. The amendment however does not comment on the ‘Scope of Intervention’ while appointing the arbitrator. Through this article, an attempt has been made to figure out what ‘Scope of Intervention’ would be in tune with the institutional arbitration regime in India.

Section 11 has been one of the most debated subject-matters in Indian arbitration regime and has undergone changes in both the 2015 and 2019 Amendment Acts. This article shall talk about the circumstances leading to these amendments to determine what legislature, judiciary or arbitral institutions need to learn from the past and avoid with regard to Section 11 which would impede the progress of institutional arbitration in India.

II. ARBITRATION AND CONCILIATION ACT, 1996

The legislature wanted to make the arbitration landscape in India more responsive to contemporary requirements. To bring the arbitration law in tune with the prevailing scenario of international arbitration, the 1996 Act was introduced which sought to:

(i) reduce the judicial interference in the arbitral process; and

(ii) expedite disposal of cases

1. Interpretation of Section 11 prior to 2015 Amendment

The Supreme Court in National Insurance Co. Ltd. v. Boghara Polyfab[3] relied on SBP & Co. v. Patel Engineering[4] and categorised the issues which can or cannot be decided by the court concerned while appointing the arbitrator under Section 11:

22.1. The issues (first category) which Chief Justice/his designate will have to decide are:

(a) Whether the party making the application has approached the appropriate High Court?

 (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement?

 22.2. The issues (second category) which the Chief Justice/his designate may choose to decide are:

(a) Whether the claim is a dead (long barred) claim or a live claim?

 (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection?

22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral tribunal are:

(a) Whether a claim falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration)?

 (b) Merits of any claim involved in the arbitration.”

2. ­Thwarting the objectives of the Act

The Court in the aforementioned rulings expanded the scope of Section 11 and appeared to have gone against the intention of the legislature and objectives of the Act. Patel Engineering[5] and National Insurance[6] gave the court concerned power to not only determine the existence of the arbitration agreement but also the power to decide the preliminary issues (second category). Thus, the Court’s role no longer remained that of a ‘facilitator’ resulting in increased court intervention in the arbitral process and the Court’s increased involvement essentially means slow disposal of cases.

The two aforementioned judgments conferred finality in light of sub-section (7) on the issues decided by the Court. Consequently, if a court would decide the existence of the arbitration agreement between the parties, the tribunal will have no power to decide that issue. It might have been the intention of the court to save the tribunal’s time, and preventing it from deciding on the same issue again. However, the decision to confer the power on courts to decide preliminary or jurisdictional issues goes against the express wordings of Section 16 of the Act which recognises the Kompetenz-Kompetenz principle.

III. THE 2015 AMENDMENT ACT

In the wake of the Court’s expanded scope of intervention, the Law Commission of India in its 246th Report[7] suggested amendments to the Act. It sought to introduce Section 11(6-A), the discussion regarding which in the said Report is as follows:

Section 11(6-A) of the amendment contemplates a two-step process to be adopted by a judicial authority when considering an application seeking the reference of a pending action to arbitration. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void (i.e. invalid). If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void.”

                                                                                                   (emphasis supplied)

However, Section 11(6-A) as per the 2015 Amendment clarified that the Court’s role under sub-sections (4), (5) or (6) of Section 11 is to “confine to the examination of the existence of an arbitration agreement”. Evidently, the section does not include prima facie “examination of validity” in contrast to the Law Commission’s suggestion that “once the prima facie conclusion is that the agreement does not exist or if it is determined that agreement is null and void, such determination is conclusive”.

The 2015 Amendment Act’s Statement of Objects and Reasons reiterated how interpretation of the provisions has caused delay in arbitral proceedings and encroachment upon the tribunal’s powers. Thus, the intention behind the amendment is to remedy the situation by introducing sections to minimise court intervention and enable swift disposal of cases in user-friendly manner.

We will now look if the interpretation provided by the Courts to Section 11(6-A) was consistent with the 2015 Amendment’s objectives.

1. Scope of Examination under Section 11 post 2015 Amendment

In Duro Felguera, S.A. v. Gangavaram Port Limited,[8] two-Judge Bench of the Supreme Court provided literal interpretation to Section 11(6-A) to confine examination to the existence of an arbitration agreement and enumerated the factors to decide on the existence of such an agreement. The Court stated:

From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only into one aspect – the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple – it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.”

However, in United India Insurance v. Hyundai Engg. & Construction Co. Ltd.,[9] the Court while relying on Duro Felguera[10] came up with a different reasoning and held:

Suffice it to say that appointment of arbitrator is a judicial power and is not mere an administrative function leaving some degree of judicial intervention; when it comes to the question to examine the existence of a prima facie arbitration agreement, it is always necessary to ensure that the dispute resolution process does not become unnecessarily protracted.”

The Court then in Mayavati Trading v. Pradyuat Deb Burman[11] overruled the judgment in United India Insurance[12]  stating that the judgment does not lay down the correct law and reaffirmed that “Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment of Duro Felguera[13].” Further, all the other preliminary objections/questions are to be dealt with by the tribunal.[14]

 2.‘Dual Test’ by the Delhi High Court

In both Jindal Stainless Ltd. v. Damco India Pvt. Ltd.[15] and Ritika Diwan v. Supertech Ltd.,[16] the Delhi High Court reached the same conclusion that “the role of the Courts while considering an application under Section 11 is now confined to examining the existence of the arbitration agreement.”

However, post Ritika Diwan[17], the Delhi High Court has provided a different interpretation to Section 11(6) in the judgments of Unique Reality Pvt. Ltd. v. RC Infra Developers [18]; Pave Infrastructure Pvt. Ltd. v. WAPCOS Ltd.[19] and Devi Fatehpuria v. Jugal Kishore Shyam Prakash and Co.[20]

In these aforestated three judgments post Ritika Diwan[21], the Delhi High Court has held that the Court has to examine the “existence” and “validity” of an arbitration agreement while deciding on a petition under Section 11(6).

Insofar as the Supreme Court’s interpretation of Section 11 or the ‘Dual Test’ applied by the Delhi High Court is concerned, what remains relevant to note is the inconsistency in judicial precedents. On one hand, the Supreme Court  tends to deviate from ‘only examining the existence of an arbitration agreement’ and on the other Delhi  High Court continues apply the dual test of ‘existence’ and ‘validity’ despite the clarification provided by the Supreme Court  in Mayavati Trading[22].

3.Continued judicial intervention

The following judgments shall demonstrate that judicial intervention continued and the courts seem to have remained oblivious of the Kompetenz-Kompetenz principle:

3.1. Supreme Court Judgments

In both, Oriental Insurance Company Ltd. v. Narbheram Power and Steel Private Ltd.[23] and United India Insurance[24]  the Supreme Court other than identifying the existence of the arbitration agreement, examined whether the conditions stipulated in the contract to give effect to the arbitration agreement have been fulfilled.

In Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.,[25] the Supreme Court was of the opinion that an application under Section 11 could be decided only if the arbitration clause or the contract containing the arbitration clause is sufficiently stamped. In light of sub-section (6-A) one could argue that examining the existence of an arbitration agreement does not include examining whether such agreement is sufficiently stamped.

3.2. Delhi High Court Judgments

In NCC Ltd. v. Indian Oil Corporation Ltd.,[26] it was stated that apart from examining the existence of an arbitration agreement, the Court’s power of examination under Section    11(6-A) extends to “correlating the dispute between the parties with the arbitration agreement between the parties”.

In Brightstar Telecommunications v. Iworld Digital Solutions Pvt. Ltd.,[27] the Court took a very similar stance and stated that examination under Section 11(6-A) extends to “relating the existence of arbitration agreement to the disputes, which the parties had anticipated that would arise in connection with and/or in relation to the transactions that they had undertaken.”

In Western Constructions v. Eden Buildcon,[28] the Court went to examine “whether the disputes between the parties fall within the ambit of arbitration clause” and thereby did not refer the parties to arbitration.

In Prime Market Reach Pvt. Ltd. v. Supreme Advertising Ltd.,[29] the Court having examined the validity of the arbitration agreement in detail (as per requirements of Section 7), found it to be invalid and hence, refused to refer the parties to arbitration.

 4. Aftermath of the 2015 Amendment

Two circumstances arose in the aftermath of this amendment:

(i) Courts’ Interpretation of Section 11 of the Act was not consistent.

(ii) Judicial interference in the arbitral process continued as the courts seem to have ignored the Tribunal’s power to rule on its own jurisdiction.

Consequently, the 2015 Amendment failed to achieve its objectives of minimal judicial intervention and user-friendly speedy disposal of cases. India still remains to be seen as an arbitration- unfriendly jurisdiction.

 IV. REFLECTING ON THE ROLE OF THE LEGISLATURE AND THE COURT

The Supreme Court in Vidya Drolia v. Durga Trading Corpn. [30] noted:

“It will be seen that though the 246th Law Commission Report[31] speaks not only of “existence” but also of an arbitration clause being null and void, this has not translated itself into the language of Section 11(6-A).”

It can be argued that despite the legislature’s noble intentions, Section 11(6-A) has not been drafted with clarity or that the provision is not as elaborative as suggested by the Law Commission’s  246th Report or that the provision as suggested by the Law Commission was more in tune with objectives of the amendment.

However, it remains of quintessential importance to discuss the role of the courts when faced with a situation where a defect appears in the provision or that provision has not been drafted with clarity or seems to be going against the intention of the legislature.

Lord Denning once said that in the event when a defect emerges, a Judge should not simply fold his hands and blame the draftsman but must also consider the social conditions and give force and life to the intention of the Legislature. Lord Denning in Seaford Court Estates Ltd. v. Asher[32] said:

A Judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the Judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a Judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give force and life to the intention of the legislature.”

In a similar vein, the Supreme Court in Collector of Customs v. Digvijaya Singhji Spinning & Weaving Mills[33] resorted to the principle of harmonious construction of the statues and said:

“…where an alternative construction is open, that alternative should be chosen which is consistent with the smooth working of the system which the statute purports to regulate.”

While the 1996 Act or the 2015 Amendment Act might not have been perfectly drafted Act, the Courts did not succeed either in their role to provide an interpretation to  Section 11 which is best suited to give impetus to the intention of the legislature.

V. THE 2019 AMENDMENT ACT

Wary of India’s reputation as arbitration-unfriendly jurisdiction, the Ministry of Law and Justice set up a High Level Committee (HLC) under the Chairmanship of retired Justice of the Supreme Court, Jusice B.N. Srikrishna to suggest measures required for making India a hub of international and domestic arbitrations.

Based on its terms of reference which involved studying the functioning of arbitral institutions and examining the effectiveness of arbitration mechanisms, the Committee was tasked with:

(a) suggesting measures to encourage Institutional Arbitration in India;

 (b) recommending amendments to the ACA and other laws to encourage international commercial arbitration;

(c) devising an action plan for implementation of the law to encourage speedy arbitrations.”

 Based on the recommendations of the Report submitted by the High Level Committee, Parliament introduced the 2019 Amendment Act. The amendments contained in the Act which are pertinent to our discussion are as follows:

(a) The establishment and incorporation of an independent & autonomous body, namely, the “Arbitration Council of India”;

(b) An amendment to Section 11 of the Act i.e. “Appointment of Arbitrators”.

Through the amendment, sub-sections (6-A) and (7) have been repealed. Since the amendment focused on strengthening institutional arbitration in India, under the amended Section 11(6) of the ACA the appointment of arbitrators shall be done by the arbitral institution:

“…the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be.

The amendment did not provide clarification on:

(i) What shall be the scope of examination of by the arbitral institution while entertaining an application for appointment of arbitrator?

(ii) Whether the orders passed by the Tribunal shall be amenable to challenge?

Detailed rules are required to be framed regarding these unaddressed issues in the amendment. These open questions pose a serious threat to the step of encouraging institutional arbitration in India. The legislature must clarify the scope of examination and intervention by the arbitral institutions to ensure that the institutions do not interfere with the tribunal’s power.

Earlier, we observed the how confusion regarding the scope of examination under Section 11 led to inconsistency in judicial precedents and increased judicial interference with the arbitral process. While the legislature’s amendment is a step forward to reduce the court interference with arbitral process, the expanded scope of examination by the arbitral institution could still be oblivious of the Kompetenz-Kompetenz principle.

It is crucial to learn from the past and avoid the situations which arose earlier. It is highly important that the scope of examination while appointing the arbitrator must be such which is best suited to strengthen institutional arbitration and improve India’s reputation as an arbitration friendly jurisdiction.

1. Approach of the global institutions

The HLC in its Report referred to the QMUL Survey[34] which had stated that the International Chamber of Commerce Court (ICC Court), the London Court of International Arbitration (LCIA), the Hong Kong International Arbitration Centre (HKIAC), the Singapore International Arbitration Centre (SIAC) and the Arbitration Institute of the Stockholm Chambers of Commerce (SCC) are the five most preferred arbitral institutions worldwide.

To find out the best-suited approach while entertaining an application under Section 11, we will compare the approach or the scope of examination undertaken by these five most preferred arbitral institutions while appointing an arbitrator or registering a case. Apart from these institutions, we shall also see the approach of ICSID which could be guiding factor for BIT arbitrations.

1.1. ICC Arbitration Rules[35]

Article 6. Effect of the Arbitration Agreement.—

(1)-(3)                            *             *                   *

(4) In all cases referred to the Court under Article 6(3)…The arbitration shall proceed if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist.

                                       *                *                  *

  1. In all matters decided by the Court under Article 6(4), any decision as to the jurisdiction of the arbitral tribunal, except as to parties or claims with respect to which the Court decides that the arbitration cannot proceed, shall then be taken by the arbitral tribunal itself.”

1.2.  HKIAC Arbitration Rules[36]

Article 11 – HKIAC’s Prima Facie Power to Proceed

11.1 The arbitration shall proceed if and to the extent that HKIAC is satisfied, prima facie, that an arbitration agreement under these Procedures may exist. Any question as to the jurisdiction of the arbitral tribunal shall be decided by the arbitral tribunal once constituted.

11.2  HKIAC’s decision pursuant to Article 11.1 is without prejudice to the admissibility or merits of any party’s pleas.”

1.3.      LCIA Arbitration Rules[37]

Article 23. Jurisdiction and Authority

23.1 The Arbitral Tribunal shall have the power to rule upon its own jurisdiction and authority, including any objection to the initial or continuing existence, validity, effectiveness or scope of the Arbitration Agreement.

1.4.      SIAC Arbitration Rules, 2016[38]

Article 28. Jurisdiction of the Tribunal

28.1  If any party objects to the existence or validity of the arbitration agreement or to the competence of SIAC…the Court shall decide if it is prima facie satisfied that the arbitration shall proceed. The arbitration shall be terminated if the Court is not so satisfied. Any decision by the Registrar or the Court that the arbitration shall proceed is without prejudice to the power of the Tribunal to rule on its own jurisdiction.

28.2  The Tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence, validity or scope of the arbitration agreement. An arbitration agreement which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.”

Identical Clauses are present in Article 25 of SIAC Investment Rules, 2017.

1.5.      SCC Arbitration Rules[39]

Article 11. Decisions by the Board

The Board takes decisions as provided under these Rules, including deciding:

(i)  whether the SCC manifestly lacks jurisdiction over the dispute pursuant to Article 12 (i);

                     *                     *                 *

Article 12. Dismissal

The Board shall dismiss a case, in whole or in part, if:

(i)  the SCC manifestly lacks jurisdiction over the dispute;…

1.6.      ICSID Convention[40]

Section 1 Request for Arbitration

Article 36

(1)-(2)     *          *        *

(3) The Secretary-General shall register the request unless he finds, on the basis of the information contained in the request, that the dispute is manifestly outside the jurisdiction of the Centre. He shall forth-with notify the parties of registration or refusal to register.

           *      *        *

Section 3   Powers and Functions of the Tribunal

Article 41

(1) The Tribunal shall be the judge of its own competence.

(2) Any objection by a party to the dispute that that dispute is not within the jurisdiction of the Centre, or for other reasons is not within the competence of the Tribunal, shall be considered by the Tribunal which shall determine whether to deal with it as a preliminary question or to join it to the merits of the dispute.

2. Similar Approach by global institutions

The ‘scope of examination’ that all of these institutions undertake has two similar facets:

(i) Acknowledgement of the tribunal’s power (Kompetenz-Kompetenz) as all of the aforementioned institutions have given the tribunals the power to rule on their own jurisdiction; and

(ii) Checking whether the institution manifestly lacks jurisdiction or in other words prima facie examination of whether the arbitration should proceed.

 VI.CONCLUSION

The approach followed by these institutions is not entirely new to the Indian arbitration regime. In fact, the scope of examination under Section 11as suggested by 246th Law Commission Report was similar to the approach followed by these institutions while registering or deciding whether arbitral process should move forward. The suggested amendment of Section 11 in 246th Report involved examining whether prima facie arbitration agreement exists – If prima facie no agreement exists, arbitration shall not move forward and if the agreement prima facie exists, the arbitration shall move forward and the tribunal shall have the power to rule on its jurisdiction including the arbitration agreement. This approach while dealing with an application for appointment of an arbitrator is consistent with the intention of the legislature to reduce

Firstly, refusing to appoint an arbitrator if the arbitral institution is not prima facie satisfied that an arbitration agreement exists is plausible conclusion. Certainly, prima facie satisfaction by the appointing authority indicates a lower threshold of scrutiny, lower than what the tribunal would require to satisfy itself of the existence of a valid arbitration agreement when it rules on its jurisdiction. Therefore, it is most plausible to conclude that an arbitration agreement which fails to pass the scrutiny of the lower threshold should not be expected to pass the higher threshold required by the tribunal.

The prima facie satisfaction can be said to be similar to the examination under the English Arbitration Act for appointment of an arbitrator which requires that the court would see if there is “good arguable case” that the tribunal had jurisdiction to hear the issue.[41]

Secondly, the prima facie satisfaction is more consistent with Kompetenz-Kompetenz principle as it gives the tribunal the power to rule on its jurisdiction even when the arbitration agreement has passed the initial lower threshold.

Lastly, the prima facie test would lead to speedy disposal of cases and result in weeding-out the cases which have failed to pass this lower threshold test ultimately saving the tribunal’s time.


* 4th Year, BALLB. (Hons.), Maharashtra National Law University, Nagpur.

[1] Arbitration and Conciliation (Amendment) Act, 2019

[2] Arbitration and Conciliation Act, 1996

[3](2009) 1 SCC 267

[4](2005) 8 SCC 618

[5] (2005) 8 SCC 618

[6] (2009) 1 SCC 267

[7] Law Commission of India, 246th Report on Amendments to the Arbitration and Conciliation Act, 1996

(August 2014)

[8] (2017) 9 SCC 729

[9] (2018) 17 SCC 607

[10] (2017) 9 SCC 729

[11](2019) 8 SCC 714

[12] (2018) 17 SCC 607

[13] (2017) 9 SCC 729

[14] Uttrakhand Kalyan Nigam v. Northern Coal Field Ltd., (2020) 2 SCC 455

[15]2016 SCC OnLine Del 6368

[16]2019 SCC OnLine Del 11255

[17] Ibid

[18]Arb. Petition No. 432 of 2019

[19]Arb. Petition No. 574 of 2019

[20]Arb. Petition No. 339 of 2019

[21] 2019 SCC OnLine Del 11255

[22] (2019) 8 SCC 714

[23](2018) 6 SCC 534

[24] (2018) 17 SCC 607

[25] (2019) 9 SCC 209

[26]2019 SCC OnLine Del 6964

[27]2018 SCC OnLine Del 13071

[28]2019 SCC OnLine Del 11465

[29]Arb. Petition No. 434 of 2019, decided on 17-12-2019.

[30]2019 SCC Online SC 358

[31] 246th Report  on Amendments to the Arbitration and Conciliation Act, 1996

[32][1949] 2 KB 481

[33]1961 AIR 1549

[34] ‘2015 International Arbitration Survey: Improvements and Innovations in International Arbitration’, Queen Mary University of London and White & Case LLP (2015), available at http://www.arbitration.qmul.ac.uk/docs/164761.pdf.

[35] Rules of Arbitration of the International Chamber of Commerce

[36] HKIAC, Procedures for Administration of Arbitration under the UNCITRAL Arbitration Rules

[37] London Court of International Arbitration Rules

[38]Singapore International Arbitration Centre Rules, 2016

[39]Arbitration  Rules  of  the  Arbitration  Institute  of  the  Stockholm  Chamber  of  Commerce, 2017

[40] Convention  on  the  Settlement  of  Investment  Disputes  between  States  and  Nationals  of  Other States

[41]Silver Dry Bulk Co. Ltd. v. Homer Hulbert Maritime Co. Ltd., [2017] EWHC 44 (Comm).

Case BriefsSupreme Court

Supreme Court: The 2-judge bench of AM Khanwilkar and Dinesh Maheshwari, JJ has held that for application of a subsequent legislation retrospectively it is necessary to show that the previous legislation had any omission or ambiguity or it was intended to explain an earlier act. In absence of the above ingredients, a legislation cannot be regarded as having retrospective effect.

BACKGROUND

The Court was hearing an appeal from a CESTAT order whereby the customs duty levied upon the appellant on the sale of cut flowers within the Domestic Tariff Area had been confirmed by the Tribunal.

Appellant is a 100% Export Oriented Unit (EOU) engaged in production of cut flowers and flower buds of all kinds, suitable for bouquets and for ornamental purposes. The 100% EOU is required to export all articles produced by it. As a consequence whereof, it is exempted from payment of customs duty on the imported inputs used during production of the exported articles, vide Notification No. 126/94­ Cus dated 3.6.19944. Under the said notification, exemption on levy of customs duty had been extended even to the inputs used in production of articles sold in domestic market, in accordance with the Export­Import (EXIM) Policy and subject to other conditions specified by the Development Commissioner. Further, a subsequent Notification was issued which carried out amendments and substituting the charging clause of the inputs used in case of non­excisable goods.

It was contended that amendment notification being retrospective in its application. Relying upon the CBEC Circular, the appellant contended that the Government intended to apply the notification retrospectively as it was brought in to address an anomaly, which existed vis a vis central excise notifications.

RULING

Rejecting the claim of the appellant, the Court noticed that the Circular discusses the mechanism in force before the amendment, the reason for bringing in the change and the changes brought in. The circular does not mention that the earlier methodology in force was deficient or devoid of clarity in any manner. It rather says that the same was being disadvantageous to the EOU units as compared to the DTA units due to the difference in charging rates in the respective circulars.

It was further noticed that that the subsequent notification posits of carrying out amendments  and  substituting the charging clause of the inputs used in case of non­-excisable goods. The language employed in the notification does not offer any guidance on whether the amendments as made were to apply prospectively or retrospectively.

“It is a settled proposition of law that all laws are deemed to apply prospectively unless either expressly specified to apply retrospectively or intended to have been done so by the legislature. The latter would be a case of necessary implication and it cannot be inferred lightly.”

The Court explained that the amendment was brought in to establish parity with the excise notifications and to vindicate the disadvantage that earlier regime was causing to EOU units.

“Merely because an anomaly has been addressed, it cannot be passed off as an error having been rectified. Unless shown otherwise, it has to be seen as a conscious change in the dispensation, particularly concerning the fiscal subject matters.”

The Court said that to call the amendment notification clarificatory or curative in nature, it would require that there had been an error/mistake/omission in the previous notification which is merely sought to be explained.

“To understand if the Government brought in the amendment notification to clarify that the articles were to be charged at the rate of duty provided for inputs and not for the final articles, it would be necessary to analyse the position prior to the amendment and to see if duty on inputs chargeable at the rate of final articles was an error that crept in.”

It was, hence, held that the said provision was not an error that crept in but was intentionally introduced by the Government to determine the charging rate, as discussed above. That being the position prior to amendment, the amendment brought in cannot be said to be clarificatory in nature.

[L.R. Brothers Indo Flora Ltd v. Commissioner of Central Excise, 2020 SCC OnLine SC 705, decided on 01.09.2020]

Legislation UpdatesNotifications

Amendments to Schedule VII of Companies Act, 2013

In exercise of the powers conferred by sub-section (1) of Section 467 of the Companies Act, 2013, Central Government made following amendments to Schedule VII of the Companies Act, 2013, namely:

For item (ix) in Schedule VII, following items and entries shall be susbstituted:

(ix) Contribution to incubators funded by Central Government or State Government or any agency or Public Sector Undertaking of Central Government or State Government, and contributions to public funded Universities, Indian Institute of Technology (IITs), National Laboratories and Autonomous Bodies (established under the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence Research and Development Organisation (DRDO), Department of Science and Technology (DST), Ministry of Electronics and Information Technology engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs);”


Ministry of Corporate Affairs

[Notification dt. 11-10-2019]

Legislation UpdatesRules & Regulations

All ministries/ departments/ offices are requested to bring the below-mentioned amendments to the notice of all administrative authorities under their control.

Amendment in Central Civil Services (Conduct) Rules, 1964

Before Amendment

After Amendment
Sub-rule (3) of Rule 13

 

In any other case, a Government servant shall not accept any gift without the sanction of the government, if the value exceeds-

 

i.            Rupees one thousand five hundred in the case of government servants holding any Group ‘A’ or Group ‘B’ post; and

ii.            Rupees five hundred in the case of government servant holding any Group ‘C’ or Group ‘D’ posts.

Sub-rule (3) of Rule 13

 

In any other case, a Government servant shall not accept any gift without the sanction of the government, if the value exceeds-

 

i.            Rupees five thousand in the case of government servants holding any Group ‘A’ or Group ‘B’ post; and

ii.            Rupees two hundred in the case of government servant holding any Group ‘C’ or Group ‘D’ posts

Sub-rule (4) of Rule 13

 

Notwithstanding anything contained in sub-rule(2) and (3), a Government servant, being a member of India delegation or otherwise, may receive and retain gifts from foreign dignitaries, if the market value of gifts received on one occasion does not exceed rupees one thousand. In all other cases, the acceptance and retention of such gift shall be regulated by the instructions issued by the government in this regard from time to time.

 

Sub-rule (4) of Rule 13

Notwithstanding anything contained in sub-rule(2) and (3), a Government servant, being a member of India delegation or otherwise, may receive and retain gifts from foreign dignitaries in accordance with the provisions of The Foreign Contribution (Acceptance or Retention of Gifts or Presentation) Rules, 2012, as amended from time to time.


Ministry of Personnel, Public Grievances and Pension

[Dated: 06-08-2019]

Legislation UpdatesRules & Regulations

G.S.R. 360(E)—In exercise of the powers conferred by Sections 6, 8 and 25 of the Environment (Protection) Act, 1986 (29 of 1986) read with sub-rule (4) of Rule 5 of the Environment (Protection) Rules, 1986, the Central Government, after having dispensed with the requirement of notice under clause (a) of sub-rule (3) of Rule 5 of the said rule in public interest, hereby makes the following rules further to amend the Bio-Medical Waste Management Rules, 2016, namely:—

1. (1) These rules may be called the Bio-Medical Waste Management (Second Amendment) Rules, 2019.

    (2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Bio-Medical Waste Management Rules, 2016 (hereinafter referred to as the said rules), in Rule 4, in clause (d), the following Explanation shall be inserted, namely:-

“Explanation.- For removal of doubts, it is hereby clarified that the expression “Chlorinated plastic bags” shall not include urine bags, effluent bags, abdominal bags and chest drainage bags.”.

3. In Schedule III to the said rules, against serial number 3, in column (3), in item (viii), for the brackets and letters
“(viii)”, the brackets and letters “(vii)” shall be substituted.


[Notification dt. 10-05-2019]

Ministry of Environment, Forest and Climate Change

Legislation UpdatesRules & Regulations

No. SEBI/LAD-NRO/GN/2019/14.—In exercise of the powers conferred by Section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Securities and Exchange Board of India hereby, makes the following regulations to further amend the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993, namely,–

1. These regulations may be called the Securities and Exchange Board of India (Debenture Trustees) (Amendment) Regulations, 2019.

2. They shall come into force on the date of their publication in the Official Gazette.

3. In the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993, –
(1) in Regulation 7A,-
(i) after the words “net worth of” and before the words “crore rupees”, the word “two” shall be substituted with the
word “ten”;

(ii) following proviso shall be inserted, namely:-

 “Provided that a debenture trustee holding certificate of registration as on the date of commencement of the Securities and Exchange Board of India (Debenture Trustees) (Amendment) Regulations, 2019 shall fulfil the net worth requirements within three years from the date of such commencement.”

(2) in Regulation 15, in sub-regulation (2), after clause (b), following provisos shall be inserted, –

“Provided that a debenture trustee may seek the consent of debenture holders through e-voting, wherever applicable;

Provided further that the requirement to convene a meeting of all debenture holders in case of a default in payment obligation by the issuer, shall not be applicable in case of debentures issued by way of public issue.”


[Notification dt. 07-05-2019]

Securities Exchange Board of India

Legislation UpdatesRules & Regulations

G.S.R. 210(E)— In exercise of the powers conferred by clause (da) and clause (f) of sub-section (2) of Section 29 of the Securities and Exchange Board of India Act, 1992, (15 of 1992), the Central Government hereby makes the following rules further to amend the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, namely:-

1. Short title and commencement— (1) These rules may be called the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Amendment Rules, 2019.

                   (2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as “the said rules”), in the opening para, for the words, brackets, figures and letter “clause (da) of sub-section (2) of Section 29”, the words, brackets, figures and letter “clause (da) and clause (f) of sub-section (2) of Section 29” shall be substituted.

3. In the said Rules, in Rule 1, in sub-rule (1), the words “by Adjudicating Officer” shall be omitted.

4. In the said rules, in Rule 2, in clause (c), for the word, figures and letter “Section 15-I”, the words, brackets, figures and letters “sub-section (4A) of Section 11 or sub-section (2) of Section 11B or Section 15-I of the Act” shall be substituted.

5. In the said Rules, in Rule 4, –

(i) in sub-rule (1), after figures and letter “15E,” at both the places where it occurs, the figures and letters “15EA, 15EB,” shall be inserted;

(ii) for the words “adjudicating officer”, wherever they occur, the words “the Board or the adjudicating officer” shall be substituted.

6. In the said Rules, in Rule 5, –

(i) for the words “adjudicating officer”, wherever they occur, the words “the Board or the adjudicating officer” shall be substituted;

(ii) for the word and figures “Section 15-I”, wherever they occur, the words, brackets, figures and letters, “sub-section (4A) of Section 11 or sub-section (2) of Section 11B or Section 15-I of the Act” shall be substituted.

(iii) after sub-rule (4), the following sub-rule shall be inserted, namely:-

“(5) The Board or the adjudicating officer who has passed an order, may rectify any error apparent on the face of record on such order, either on its own motion or where such error is brought to his notice by the affected person within a period of fifteen days from the date of such order.”

Explanation: For the purpose of this rule, “error apparent on the face of record” shall mean any typographical errors that creep in inadvertently into the order and includes such other errors that do not require a long drawn out reasoning process to ascertain such a mistake.”

7. In the said rules, in Rule 6, for the words “adjudicating officer”, the words “the Board or the adjudicating officer” shall be substituted.

[F. No. 5/05/FM/2017]

Ministry of Finance

Legislation UpdatesRules & Regulations

G.S.R.209(E)—Whereas a draft of certain rules to amend the Rights of Persons with Disabilities Rules, 2017 was published as required by sub-sections (1) and (2) of section 100 of the Rights of Persons with Disabilities Act, 2016 (49 of 2016) in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (i) vide number G.S.R. 1053(E), dated the 22nd October, 2018 inviting objections and suggestions from all persons likely to be affected thereby, before the expiry of thirty days from the day on which the copies of the Official Gazette containing the said notification was made available to the public;

And whereas the copies of the Official Gazette in which the said notification was published were made available to the public on the 23rd October, 2018;

And whereas the objections and suggestions received from the public were considered by the Central Government;

Now, therefore, in exercise of powers conferred by sub-sections (1) and (2) of Section 100 of the Rights of Persons with Disabilities Act, 2016 (49 of 2016), the Central Government hereby makes the following rules, to amend the Rights of Persons with Disabilities Rules, 2017, namely:-

1. Short title and extent- (1) These rules may be called the Rights of Persons with Disabilities (Amendment) Rules, 2019.
                              (2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Rights of Persons with Disabilities Rules, 2017, after Chapter V, the following Chapter shall be inserted, namely:-

“CHAPTER VA

14A. (1) The State Governments or Union Territory Administrations shall notify the authority to whom a person with benchmark disability can apply for the high support requirement as per sub-section (1) of Section 38 of the Act.

(2) Only the persons with benchmark disabilities having permanent certificate of disability shall be eligible for applying for high support requirement.

(3) The State Governments shall constitute Assessment Board at the District level or Division level based on the number of persons with benchmark disabilities comprising the following:-

(a) District Chief Medical Officer or Civil Surgeon or Medical Superintendent…………………………….Chairperson;

(b) District Social Welfare Officer……………………Member;

(c) Five rehabilitation specialists [Physical Medicine and Rehabilitation or Orthopaedic specialist, ENT specialist, Ophthalmologist, General Physician (if the applicant is 18 years or above) or Pediatrician (if the applicant is less than 18 years), Psychiatrist]…………Members;

(d) Occupational therapist or speech therapist or Clinical Psychologist or Physiotherapist (as per requirement)…………… Member;

(e) Any other expert as the Chairperson deems appropriate……….Member.

(4) The authority notified under sub-rule (1) shall refer every case to the Assessment Board for assessment of applicant’s high support requirement.

(5) The Assessment Board shall invite the applicant of high support requirements for assessment and may, if necessary, seek clinical assessment.


Please Refer the link for detailed notification: NOTIFICATION

[ F. No. 16-16/2017-DD-III]

Ministry of Social Justice and Empowerment


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Case BriefsSupreme Court

Supreme Court: The Bench of Abhay Manohar Sapre and Indu Malhotra, JJ has held that pendency of any writ petition by itself does not affect the constitutionality of a Statute. It said:

“It is only when the Court declares a Statute as being ultra vires the provisions of the Constitution then the question may arise to consider its effect on the rights of the parties and that would always depend upon the declaration rendered by the Court and the directions given in that case.”

Background of the case:

“Keeping in view the amendment made in the definition of Section 2(e), which as stated above was not brought to the notice of the Bench, this issue was not considered though had relevance for   deciding the question involved in the appeal. It is for this reason, we prima facie find error in the judgment and, therefore, are inclined to stay the operation of our judgment.”

What Court said in Ahmadabad Pvt. Primary Teachers Association verdict:

“The legislature was alive to various kinds of definitions of the word “employee” contained in various previous labour enactments when the Act was passed in 1972. If it intended to cover in the definition of “employee” all kinds of employees, it could have as well used such wide language as is contained in Section 2(f) of the Employees’ Provident Funds Act, 1952 which defines “employee” to mean “any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment …”. Non-use of such wide language in the definition of “employee” in Section 2(e) of the Act of 1972 reinforces our conclusion that teachers are clearly not covered in the definition.”

Ruling:

Hence, after noticing that though the definition was amended in 2009 by Act No.47 of 2009, yet the same was given retrospective effect from 03.04.1997 so as to bring the amended definition on Statute Book, from 03.04.1997, the Court held that the effect of the amendment made in the Payment of Gratuity Act vide Amending Act No. 47 of 2009 on 31.12.2009 was two­fold.

  • the law laid down by this Court in the case of Ahmadabad Pvt. Primary Teachers Association was no longer applicable against the teachers, as if not rendered, and
  • the teachers were held entitled to claim the amount of gratuity under the Payment of Gratuity Act from their employer with effect from 03.04.1997.

When the counsel for the Institution argued that the constitutional validity of Amending Act No. 47 of 2009 was under challenge in this Court in a writ petition, which is pending, the Court rejected the argument and said that pendency of any writ petition by itself does not affect the constitutionality of a Statute.

[Birla Institute of Technology v. State of Jharkhand, 2019 SCC OnLine SC 340, decided on 07.03..2019]

Cabinet DecisionsLegislation Updates

The Union Cabinet, chaired by the Prime Minister Narendra Modi has approved promulgation of an Ordinance to amend the definition of “person”, as defined in sub-section (v) of Section 2 of the Special Economic Zones Act, 2005 (28 of2005) to include a trust, to enable the setting up of a unit in a Special Economic Zone by a trust, as also to provide flexibility to the Central Government to include in this definition of a person, any entity that the Central Government may notify from time to time.

Impact:

The present provision of the SEZs Act, 2005 do not permit ‘trusts’ to set up units in SEZs. The amendment will enable a trust to be considered for grant of permission to set up a unit in SEZs. The amendment will also provide flexibility to the Central Government to include in this definition of a person, any entity that the Central Government may notify from time to time. This will facilitate investments in Special Economic Zones.

[Press Release dt. 28-02-2019]

Cabinet

Reserve Bank of India
Legislation UpdatesRules & Regulations

G.S.R. 160(E)—In exercise of the powers conferred by Section 9 and clause (e) of sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India makes the following amendments to the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015 [Notification No. FEMA 10(R)/2015-RB dated January 21, 2016], namely:—

1. Short Title and Commencement:—
(i) These regulations may be called the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Amendment) Regulations, 2019.
(ii) They shall come into force from the date of their publication in the Official Gazette.

2. Amendment to Regulation 4:
In Regulation 4, the existing sub-regulation (G)(2), shall be substituted as follows:—
“(2) An authorized dealer in India may, subject to the directions as may be issued by the Reserve Bank, allow ship-manning / crew managing agencies in India and re-insurance and composite insurance brokers registered with IRDA to open and maintain non-interest bearing foreign currency accounts in India for the purpose of undertaking transactions in the ordinary course of their business.”

[No. FEMA 10(R)(2)/2019-RB]

[Notification dt. 27-02-2019]

Reserve Bank of India

Foreign LegislationLegislation Updates

S.O. 955(E)—The Hon’ble NGT, Principal Bench, New Delhi by its Order dated 13.08.2018 in Original Application No. 489/2014 has directed the Ministry to regulate the wood-based charcoal industries also by amending the Wood-Based Industries (Establishment and Regulation) Guidelines, 2016. In compliance with the orders of the Hon’ble NGT, the Guidelines are amended as under in order to regulate wood-based charcoal industries also:

1. The entry under Para 2(i) (h) of the Guidelines is substituted with the following: ‘Wood-Based Industry’ means any industry which processes wood as its raw material (Saw mills/veneer/plywood or any other form such as sandal, Katha wood, charcoal etc.).

2. The following entry is inserted after Para 2(i) (h):

(i) ‘Charcoal’ means a form of carbon derived from incomplete combustion of wood derived from a tree.

3. The following entry is inserted after Para 8 (iii):-

(iv) All wood-based industries will follow all environmental and other regulations prescribed by the State Pollution Control Board, Central Pollution Control Board and Ministry of Environment, Forest and Climate Change as applicable to these industries under the Environment (Protection) Act, 1986 and other Central and State Acts.

[Dated: 22-02-2019]

Ministry of Environment, Forest and Climate Change

Legislation UpdatesStatutes/Bills/Ordinances

The Indian Medical Council (Amendment) Second Ordinance, 2019 has been promulgated to give continued effect to the work already done by the Board of Governors (BOG) as per the provisions of earlier Ordinance. This Ordinance, inter alia, enables the Board of Governors appointed in supersession of the Medical Council of India (MCI) to continue to exercise the powers of MCI for a period of two years or till the Council is reconstituted, whichever is earlier so as to ensure transparency, accountability and quality in the governance of medical education in the country.

  • The Indian Medical Council (Amendment) Ordinance, 2019 was promulgated on January 12, 2019. It repeals and replaces the Indian Medical Council (Amendment) Ordinance, 2018 promulgated on September 26, 2018.  The Ordinance amends the Indian Medical Council Act, 1956 which sets up the Medical Council of India (MCI) which regulates medical education and practice.  Note that the Indian Medical Council (Amendment) Bill 2018 (to replace the 2018 Ordinance) was passed by Lok Sabha on December 31, 2018, and is currently pending in Rajya Sabha.
  • Supersession of the MCI: The 1956 Act provides for supersession of the MCI and its reconstitution within a period of three years. The Ordinance amends this provision to provide for the supersession of the MCI for a period of one year.  In the interim period, the central government will constitute a Board of Governors, which will exercise the powers of the MCI.
  • The Act provides for the Board of Governors to consist of up to seven members including persons of eminence in medical education, appointed by the central government. The Ordinance amends this provision to increase the strength of the Board from seven members to 12 members. Further, it allows for persons with proven administrative capacity an experience to be selected in the Board.  The Ordinance provides for the Board of Governors to be assisted by a Secretary-General appointed by the central government.

[Source: PIB & PRS]

Ministry of Law and Justice