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


Image Credits: mygov.in

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

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

Foreign LegislationLegislation Updates

An Act further to amend the Divorce Act, 1869, the Dissolution of Muslim Marriages Act, 1939, the Special Marriage Act, 1954, the Hindu Marriage Act, 1955 and the Hindu Adoptions and Maintenance Act, 1956.

BE it enacted by Parliament in the Seventieth Year of the Republic of India as follows:—

CHAPTER I
PRELIMINARY

1. (1) This Act may be called the Personal Laws (Amendment) Act, 2019.
(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

CHAPTER II
AMENDMENT TO THE DIVORCE ACT, 1869

2. In the Divorce Act, 1869, in Section 10, in sub-section (1), clause (iv) shall be omitted.

CHAPTER III
AMENDMENT TO THE DISSOLUTION OF MUSLIM MARRIAGES ACT, 1939

3. In the Dissolution of Muslim Marriages Act, 1939, in Section 2, in ground (vi), the words “leprosy or” shall be omitted.

CHAPTER IV
AMENDMENT TO THE SPECIAL MARRIAGE ACT, 1954

4. In the Special Marriage Act, 1954, in Section 27, in sub-section (1), clause (g) shall be omitted.

CHAPTER V
AMENDMENT TO THE HINDU MARRIAGE ACT, 1955

5. In the Hindu Marriage Act, 1955, in Section 13, in sub-section (1), clause (iv) shall be omitted.

CHAPTER VI
AMENDMENT TO THE HINDU ADOPTIONS AND MAINTENANCE ACT, 1956

6. In the Hindu Adoptions and Maintenance Act, 1956 in Section 18, in sub-section (2), clause (c) shall be omitted.

[Dated: 21-02-2019]

Ministry of Law and Justice

Legislation UpdatesRules & Regulations

G.S.R. 108(E)— In exercise of the powers conferred by sub-section (1), read with clauses (i), (j), (jj), (jjj) and (k) of sub-section (2) of Section 73 of the Prevention of Money-laundering Act, 2002 (15 of 2003), the Central Government hereby makes the following rules further to amend the Prevention of Money- laundering (Maintenance of Records) Rules, 2005, namely:—

1. (1) These rules may be called the Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2019.

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

2. In the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (hereinafter referred to as the said rules), in rule 2, in sub-rule (1),-

  1. (i)  for clause (aaa), the following clause shall be substituted, namely:-‘(aaa) “Aadhaar number” shall have the meaning assigned to it in clause (a) of Section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016);’
  2. (ii)  clauses (aac) and (aad) shall be omitted;
  3. (iii)  in clause (d),

    1. (a)  after the words “driving licence,”, the words “proof of possession of Aadhaar number” shall be inserted;
    2. (b)  after the third proviso, the following proviso shall be inserted, namely:-“Provided also that where the client submits his proof of possession of Aadhaar number as an officially valid document, he may submit it in such form as are issued by the Unique Identification Authority of India;”Please refer the link for detailed notification: NOTIFICATION

Ministry of Finance

[F. No. P.12011/24/2017-ES Cell-DoR]

Case BriefsSupreme Court

Supreme Court: Rule 24(i-eeee) of the Haryana Liquor License Rules 1970 that provides for a single L-1BF license for the entire State to deal in imported foreign liquor, bottled outside India and imported into the country in a bottled, has been struck down by a 2:1 majority verdict by the 3-judge bench of Ranjan Gogoi, CJ, Navin Sinha and KM Joseph, JJ.

It was argued before the Court that the creation of a monopoly by the State in favour of a private entity, to trade in liquor, is contrary to Article 19(6) of the Constitution of India. Also, the single monopolistic L-1BF license was discriminatory and violative of Article 14 of the Constitution in so far as no such requirement was stipulated for wholesale trade in Indian made foreign liquor or country liquor in the State. There was no rational or reasonable classification for this distinction between licensees, having any rationale or nexus with any object to be achieved.

The State on the other hand argued that the aim and object of the amendment was to increase revenue, curb pilferage, control illicit trade in the State of Indian made foreign liquor and bottled in original bottled foreign liquor. The Financial Commissioner was competent under Section 59(a) read with Section 13 to amend Rule 24 by incorporation of Rule 24 (i-eeee) providing for a single L-1BF license for the entire State, as the competence of the State for issuance of license under Section 58(2)(e) was limited to a local area only.

Majority verdict by Sinha, J for himself and CJ Gogoi:

Sinha, J, writing down the majority verdict for himself and CJ Gogoi, held that the Financial Commissioner was not competent to amend the Rules under Section 59 of the Punjab Excise Act, 1914 with regard to grant of number of licences for the entire state, and which power was exclusive to the State Government under Section 6 read with Section 13(a) and 58(2)(e) of the Act as the nature of powers conferred on the Financial Commissioner under Section 59 of the Act, make it manifest that it is but a regulatory power available only after a license is granted to the licensee for a local area, to ensure supply, storage, sale or otherwise that the conditions of the license are adhered to and necessary directions can also be given for the purpose.

It was held that the amendment notified by the Excise Commissioner as a delegate of the Financial Commissioner was per se ultra vires the powers of the latter under Section 6 and 13(a) read with Section 58(2)(e) of the Act.

“To hold that the power of Financial Commissioner under Section 59(a) of the Act to regulate sale of liquor, and that sale could be regulated through grant of licence, the Financial Commissioner was vested with the power to determine the number of licences, to our mind is not only unreasonable but also unsustainable. Such an interpretation amounts to reading words into the statute which the legislature itself never intended. … While the State Government would have the power to determine the number of licences and to issue licence for a local area only, the Excise Commissioner would have a superior power to determine the number of licences and issue licences for the entire State.”

Rule 24(i-eeee) as amended by the Financial Commissioner in exercise of powers under Section 59(a) of the Act was hence, struck down for being ultra vires the powers of the Financial Commissioner under the Act.

Dissenting Opinion by Joseph, J:

Noticing that in Section 59, legislature has also empowered the financial Commissioner to make rules inter alia to regulate the manufacture, supply, storage or sale or any intoxicant, Joseph, J said:

“In regard to rule making power, undoubtedly, the legislature has specifically conferred rule making power qua the number of licences in any local area upon the State. Unless it can be reasoned that the powers to regulate sale of liquor within the meaning of Section 59 which is undoubtedly placed on the shoulders of the financial Commissioner would not include the power to make rules in regard to the number of licences for the State as a whole, the argument of the appellant must fail.”

He further emphasised on the connotation of the word ‘regulate’ and said:

“having regard to the connotation of the word ‘regulate’ it would include power to control the sale of liquor under the Act. Control of sale is possible by providing for licences as it is through licencing that the authority can provide for conditions under which the sale could be best controlled. If the power to regulate include the power to stipulate licences it undoubtedly also would include power to provide for number of licences qua the State as a whole a matter which I have reasoned does not fall under Section 58(2)(e) of the Act.”

[International Spirits and Wines Association of India v. State of Haryana, 2019 SCC OnLine SC 183, decided on 12.02.2019]

Foreign LegislationLegislation Updates

In order to comprehensively review the implementation, assess the impact on the ground and to examine the challenges faced in the implementation of Waqf Properties Lease Rules (WPLRs), 2014 (notified on 5.6.2014 and modified on 26.8.2015), a Committee headed by Justice (Retd) Zaki Ullah Khan, of Allahabad High Court was constituted by the Ministry of Minority Affairs on 7th March, 2018.

As per Waqf Management System of India (WAMSI) online portal, 5,76,457 waqf properties are registered with Waqf Boards. As per information received from Central Waqf Council, 24,831 cases pertaining to waqf properties are pending in different courts.

Justice Zaki Ullah Khan Committee, in its report submitted on 17.1.2019, has made several recommendations which inter-alia include  enhancement of competitive bids limit for lease of  waqf property  from Rs 1000 to Rs 3000 per month;  reduction in reserve price per square feet for lease of waqf property from 2% per annum to 1% per annum for hospitals, educational institutions and social sectors and from 2.5% per annum to 1.5% per annum for commercial activities; reduction in  security deposit payable on  tenancy periods; increase in lease tenure period in case of shops  from 5 years to 10 years and so on.

[Source: PIB]

Ministry of Minority Affairs


Picture Credits: allgov.com

Legislation UpdatesNotifications

G.S.R. 63(E).— In exercise of the powers conferred by Section 164 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government hereby makes the following rules further to amend the Central Goods and Services Tax Rules, 2017, namely:-

1. (1) These rules may be called the Central Goods and Services Tax (Amendment) Rules, 2019.
(2) Save as otherwise provided in these rules, they shall come into force on the first day of February, 2019.

2. In the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the said rules), in Chapter-II, in the heading, for the words “Composition Rules”, the words, “Composition Levy” shall be substituted.

3. In the said rules, in Rule 7, in the Table, against serial number (3), in column (3), for the word “goods”, the words, “goods and services” shall be substituted.

4. In the said rules, in Rule 8, in sub-rule (1),–

   (a) the first proviso shall be omitted;
(b) in the second proviso, for the words “Provided further”, the word “Provided” shall be substituted.

5. In the said rules, for Rule 11, the following rule shall be substituted, namely:-

   “11 Separate registration for multiple places of business within a State or a Union territory- (1) Any person having multiple places of business within a State or a Union territory, requiring a separate registration for any such place of business under sub-section (2) of section 25 shall be granted separate registration in respect of each such place of business subject to the following conditions, namely:-

     (a) such person has more than one place of business as defined in clause (85) of Section 2;
(b) such person shall not pay tax under Section 10 for any of his places of business if he is paying tax under Section 9 for any other place of business;
(c) all separately registered places of business of such person shall pay tax under the Act on supply of goods or services or both made to another registered place of business of such person and issue a tax invoice or a bill of supply, as the case may be, for such supply.

Explanation – For the purposes of clause (b), it is hereby clarified that where any place of business of a registered person that has been granted a separate registration becomes ineligible to pay tax under Section 10, all other registered places of business of the said person shall become ineligible to pay tax under the said section.

(2) A registered person opting to obtain separate registration for a place of business shall submit a separate application in FORM GST REG-01 in respect of such place of business.

(3) The provisions of Rule 9 and Rule 10 relating to the verification and the grant of registration shall, mutatis mutandis, apply to an application submitted under this rule”.

6. In the said rules, after Rule 21, the following rule shall be inserted, namely:-

“Rule 21 A. Suspension of registration– (1) Where a registered person has applied for cancellation of registration under Rule 20, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule 22.

(2) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under Section 29 or under Rule 21, he may, after affording the said person a reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under Rule 22.

(3) A registered person, whose registration has been suspended under sub-rule (1) or sub-rule (2), shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under Section 39.

(4) The suspension of registration under sub-rule (1) or sub-rule (2) shall be deemed to be revoked upon completion of the proceedings by the proper officer under Rule 22 and such revocation shall be effective from the date on which the suspension had come into effect.”

Follow the link for the detailed notification: Notification

[F. No. 20/06/16/2018-GST (Pt. II)]

Business NewsNews

In a significant boost to the dwindling textile sector, the Union Ministry of Textiles has introduced Amended Technology Upgradation Funds Scheme (ATUFS) for wider financial and operational benefits for players in the entire value chain. New scheme allows cooperative banks to lend to units for tech upgrade, LLP firms can also benefit; synthetic textiles to get a leg up. Introduced first in 1999 to replace age-old technology with brand new ones for improving operational efficiency of textiles units, the TUFS was revised and upgraded time and again to incorporate new players and encourage them bring in new investments in the sector. Industry sources estimate billions of rupees of new investment post TUFS introduction. The ATUFS allows co-operative banks to lend to textile units for technology upgradation under this scheme. The ATUFS, which is set to benefit the synthetic textile sector immensely, has also been extended to limited liability partnership (LLP) firms. The scheme will also benefit domestic textile units. The Ministry of Textiles had launched ATUFS in place of the erstwhile Technology Upgradation Fund Scheme (TUFS) in 2016 for a period of 7 years ending March 2022. The financial and operational parameters and implementation mechanism for ATUS were notified in February 2016. The government provides credit-linked subsidy under the scheme. Interestingly, the scheme was fraught with difficulties that were brought to the notice of the government. Keeping in view the hardships faced by the industry in getting benefits under the scheme and the demands raised by various stakeholders for streamlining it, the Ministry of Textiles for the first time allowed textile units to take advantage of this scheme in addition to other benefits availed from the state governments. Under the new scheme, applicants who had applied for the unique identification number (UID) under revised and restructured technology upgradation fund scheme (RRTUFS) before 12-01-2016 but to whom UIDs could not be issued for non-availability of funds, will be given a one-time opportunity to apply for subsidy under ATUFS. The revised specification of technology for the machinery for all the eligible segments would be prescribed annually in advance by the technical advisory and monitoring committee (TAMC).

The revised guidelines allow Textile Commissioner to constitute a Technical Committee which will assist the TAMC to prepare an indicative list of manufacturers of machinery. This Committee will meet on monthly basis to update the list of machineries and manufacturers. Most importantly, accessories, attachments, sample machines and spares procured from other manufacturers enlisted in the indicative list will also be eligible for subsidy up to a value of 20 % of basic cost of machinery. Except in the case of merger, acquisition, amalgamation or takeover of an entity, the plant and machinery bought with subsidy under TUFS shall not be disposed of before 10 years of the date of purchase without prior approval of the Textile Commissioner.

[Source: Business Standard]