Case BriefsTribunals/Commissions/Regulatory Bodies

Delhi State Consumer Disputes Redressal Commission (DSCDRC): Coram of Dr Justice Sangita Dhingra Sehgal (President) and Anil Srivastava (Member)ordered the builder to refund the money deposited by the complainant, as a consequence of not being able to deliver the possession of flat on time. However, it was held that the builder was not liable to refund the EMI amount paid by the complainant towards loan sanctioned in favour of the complainant.

 Present consumer complaint was filed under Section 17 of the Consumer Protection Act, 1986 against OP 1 and OP 2.

Complainant had applied for booking of a flat in the OP 1’s project and was allotted a flat for the total sale consideration which was agreed at Rs 44,99,387.

Complainant and OP 1 entered into a Flat Buyers Agreement. It was stated in the agreement that the possession of the flat was to be delivered within 18 months from execution of the agreement along with a grace period of 6 months. Though, OP 1 failed to adhere to the stipulated time for delivery of possession and hence the complainant had to withdraw from the project.

Further, OP 1 informed the complainant regarding the deduction. Adding to this, it was submitted that the service tax paid on the entire transaction would also be forfeited.

Complainant got served a legal notice dated 03-10-2015, upon the OP 1 and sought refund of the amount deducted along with compensation for mental agony and harassment.

Alleging deficiency of service and unfair trade practice on the part of OP 1, the complainant approached this commission.

Analysis, Law and Decision

Territorial and Pecuniary Jurisdiction

Whether this commission has the jurisdiction to adjudicate the present complaint?

Coram on perusal of Section 17 of the Consumer Protection Act lead the Commission to the conclusion that it shall have the pecuniary jurisdiction in cases where the total claim including the compensation is more than twenty lakhs and less than One Crore. Moreover, clause 17(2) of the Act provides the extent of territorial jurisdiction, wherein it has been provided that the state commission shall have the jurisdiction to entertain cases where OP 1 at the time of the institution of the complaint, actually and voluntarily resides or carries on business or has a branch office or personally works for gain or the cause of action arose.

Hence, the commission has pecuniary jurisdiction in the present matter.

To strengthen the above finding, Coram relied on the Rohit Srivastava v. Paramount Villas (P) Ltd., 2017 SCC OnLine NCDRC 1198.

Further, the Coram stated that relying on the above case, this Commission has both territorial and pecuniary jurisdiction.

Deficiency of Service 

The stated expression of Deficiency of Service was dealt with by the Supreme Court in Arifur Rahman Khan v. DLF Southern Homes (P) Ltd., (2020) 16 SCC 512.

In Commission’s opinion, OP 1 was deficient in providing its services to the complainant since it had failed to handover the possession of the flat within the stipulated time period and the complainant was entitled to the refund of the money deposited to OP1.

OP 1’s deduction was not justified as the complainant had sought cancellation of the booking of the flat on account of deficient services provided by OP 1, hence the complainant was entitled to refund of the amount forfeited.

However, the Complainant was not entitled to receive an amount of Rs 6,33,289/- since this amount was paid as EMIs towards the loan sanctioned in favour of the Complainant. The OP 1 has no obligation to pay the EMI amount, since there exists no express agreement pertaining to the payment of EMIs to be done by the OP 1. [Kapila Narula v. Logix City Developers (P) Ltd., Complaint No. 149 of 2016, decided on 16-08-2021]


Advocates before the Court:

Ms. Suchita Sharma, Counsel for the Complainant.

Ms. Arushi Pathak, Counsel for the Opposite Party.

Case BriefsHigh Courts

Jammu & Kashmir and Ladakh High Court: Tashi Rabstan, J., while addressing the syllogistic issue of ‘venue and ‘seat’ of arbitration dismissed the appeal challenging the dismissal order of District Court refusing to entertain a petition under Section 9 of Arbitration and Conciliation Act, 1996. The Bench opined that,

Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts.

The instant appeal had been preferred by the petitioner under Section 37 of the Act, 1996 against the order of the Additional District Judge, whereby the court below without touching the merits of the case dismissed the petition of appellant filed under Section 9 of the Act on the ground that it lacked jurisdiction to adjudicate upon the matter. The petitioner-appellant was seeking to grant temporary prohibitory injunction restraining the respondents from appointing a new Master Franchisee of DRS-Kids for the UT of J&K in place of petitioner-appellant as well as from interfering in petitioner’s functioning as Master Franchisee of DRS-Kids for whole of erstwhile State of J&K.

Background

The facts-in-brief were that an agreement of franchisee dated 06-12-2007 was entered into between the petitioner and the DRS Vidya Samiti, a society, whereby, the appellant agreed to be appointed as franchisee of the DRS Vidya Samiti to establish and operate pre-school under the brand name “DRS Kids” within 3 kms radius of Trikuta Nagar, Jammu. Thereafter, the petitioner-appellant was appointed as the Master Franchisee by DRS Education Pvt. Ltd. vide contract dated 13-12-2008 vesting in petitioner the rights to identify potential areas for establishing new DRS Kids pre-schools within the whole erstwhile State of J&K. As per the agreement, the life of the master franchisee was fixed for 10 years from the date of agreement which was extendable for a further period on mutually agreed terms and conditions.

The petitioner-appellant submitted that on realizing that the appellant was able to open up 14 franchisee schools in Jammu alone, respondent 2 turned greedy and started devising ways to oust the appellant from the aforesaid agreement by replacing her. In anticipation of that, the appellant secured an interim relief from the court of Additional Munsiff, Jammu in suit titled Supinder Kour v. MDN Edify Education Pvt. Ltd., whereby the respondents were restrained from advertising, admitting children/students, opening and operating a pre-school in six km area from the border of Trikuta Nagar, Jammu. The suit was subsequently withdrawn by the appellant pursuant to a compromise arrived at between the parties.

The petitioner-appellant argued that the dismissal of the application under Section 9 of the Act on the point of jurisdiction was not sustainable as the Master Franchisee Agreement was executed in Jammu; the appellant’s area to act as Master Franchisee was in Jammu; the franchisee schools were operating in Jammu; the dispute with respect to the Master Franchisee agreement arose in Jammu; the post-dispute reconciliation proceedings/meetings were conducted in Jammu; the earlier litigation between the parties was in Jammu Court; the cause of action accrued to the appellant at Jammu and the subject-matter situate within the jurisdiction of the principal Civil Court of original jurisdiction.

It was further argued by the petitioner-appellant that section 20 of the Act classifies two places viz., ‘seat of arbitration’ and ‘venue of arbitration’, whereas the arbitration clause only refers the venue of arbitration to be at Hyderabad. She, thus, argued that where only the venue had been specified and seat of arbitration not determined, it is indisputably the cause of action/subject matter which would determine the jurisdiction of the courts as referred to in section 9 of the Act. Therefore, it was argued that the respondents could not oust the jurisdiction of the courts at Jammu with respect to cause of action and the situation of the subject matter.

Analysis and Opinion

In terms of Clause-27 of the agreement dated 06-12-2007, any dispute or differences arising out of or in connection with this agreement shall be finally settled in arbitration proceedings to be conducted at Hyderabad in accordance with the Arbitration and Conciliation Act, 1996. Further, in the said clause it had been specifically provided that the Courts at Hyderabad in Andhra Pradesh shall have exclusive jurisdiction under this agreement.  Similarly, Clause 13 of Master Franchise Agreement dated 13-12-2008 stated the following:

“13. GOVERNING LAW AND DISPUTE RESOLUTION

13.1 This agreement is made under and shall be governed by and construed for all purposes in accordance with the laws of India and subject to arbitration. However, the courts at Hyderabad shall have exclusive jurisdiction.

13.2 Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity hereof, shall be settled by arbitration in accordance with the Arbitration and Conciliation Act, 1996 (or any statutory amendment thereof) as in force as at that date before a sole arbitrator appointed by the Franchisor. The venue of arbitration shall be Hyderabad.”

Civil Appeal No.5850/2019 decided on 25.07.2019 (supra):

Reliance was placed by the Court on the similarly placed decision of the Supreme Court in Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., wherein appellant challenged the jurisdiction of the Madras High Court on the ground that the parties had agreed that Seat of arbitration be Bhubaneswar and therefore, only the Orissa High Court has exclusive jurisdiction to appoint the arbitrator. The Madras High Court vide impugned order appointed a former judge of the Madras High Court as the sole arbitrator by holding that mere designation of “Seat” by parties does not oust the jurisdiction of other courts other than at the Seat of arbitration. The High Court held that in absence of any express clause excluding jurisdiction of other courts, both the Madras High Court and the Orissa High Court will have jurisdiction over the arbitration proceedings. Resolving the dispute, the Supreme Court held that,

“Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the “venue” of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts…

When the parties have agreed to have the “venue” of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only Orissa High Court will have the jurisdiction to entertain the petition filed under Section 11(6) of the Act, the impugned order is liable to be set aside.”

In the view of the above, the Bench opined that perusal of Clause-27 of the agreement and clauses 13.1 and 13.2 of Master Franchise Agreement specifically provided that the courts at Hyderabad shall have exclusive jurisdiction for all purposes in accordance with the laws of India and subject to arbitration, which belied the claim of the petitioner-appellant that the court’s jurisdiction had not been determined in the agreement. Not only this, but the arbitration clause also referred the venue of arbitration proceedings to be at Hyderabad.

Verdict

Thus, opining that the decision of Supreme Court clearly clinches the issue, the Bench held that the impugned order did not require any interference. Accordingly, the appeal was dismissed.[Supinder Kour v. MDN Edify Education Pvt. Ltd., 2021 SCC OnLine J&K 594, decided on 20-08-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance by:

For the Appellant: Sr. Advocate Vikram Sharma with Advocate Sachin Dev Singh

For the Respondents: Advocate Rajesh Ranjan

Case BriefsSupreme Court

Supreme Court: The Division Bench of Dr Dhananjaya Y Chandrachud and M R Shah, JJ., observed that,

Jurisdiction of the Adjudicating Authority and the Appellate Authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom.

Under the Indian Insolvency regime, it appears that a conscious choice has been made by the legislature to not confer any independent equity-based jurisdiction on the Adjudicating Authority other than the statutory requirements laid down under Section 30 (2) of the IBC.

The Appeal

 Present appeal arose under Section 62 of the Insolvency and Bankruptcy Code against the decision of the National Company Law Appellate Tribunal. Reliance Infratel Limited (RIL) was the corporate debtor and appellants the operational creditors.

NCLAT had upheld the decision of NCLT wherein it had approved the resolution plan formulated in the course of the insolvency resolution process of the Corporate Debtor.

Analysis, Law and Decision

Valuation of Preference Shares

The first aspect was in relation to the inclusion of realisable value from sale of preference shares held by Reliance Bhutan Limited, in Reliance Realty Limited, in determining the liquidation value of the Corporate Debtor. Earlier, it was clarified that under IBC and its regulations, the RP appointed two registered valuers to carry out the valuation of the Corporate Debtor and to determine the liquidation value and fair value.

Appellants submission that the realizable value from the preference shares was excluded from the liquidation value of the Corporate Debtor had been rebutted by a specific clarification contained in the Monitoring Committee’s affidavit.

Further, it was added that the realisable value for the Corporate Debtor on account of any proceeds realised from the preference shares held by its subsidiary (Reliance Bhutan Limited), is included in the determination of the liquidation value of the Corporate Debtor.

Hence, value of preference shares not being included in calculating the liquidation value of Corporate Debtor was factually incorrect.

Liquidation Value – To remain nil?

On this aspect, it had been clarified that the liquidation value due to the unsecured operational creditors would remain nil in all scenarios, including if the corpus of Rs 800 crores was separately considered.

Further, it was added that even if the liquidation value of the realizable value of preference shares were to be considered in isolation for distribution amongst all the operational creditors, in terms of the priority contained in Section 53 (1) of the Code, the liquidation value due to the appellants would still remain at nil.

Impact of Exclusion 

Order of NCLT in Doha Bank proceedings

It was stated that, the exclusion of certain financial debts and hence, the exclusion of certain financial creditors from the CoC, pursuant to the order of the NCLT in the Doha Bank proceedings, has no practical implication since the resolution plan continues to be approved with a 100 per cent majority even after their exclusion.

Jurisdiction to approve a Resolution Plan 

NCLT is within its jurisdiction in approving a resolution plan which accords with the IBC, there is no equity-based jurisdiction with the NCLT, under the provisions of the IBC.

Adding to the above, it was expressed that the jurisdiction which had been conferred upon the Adjudicating Authority in regard to the approval of a resolution plan was statutorily structured by Section 31 (1).

The jurisdiction is limited to determining whether the requirements which are specified in Section 30 (2) have been fulfilled. This is a jurisdiction which is statutorily defined, recognised and conferred, and hence cannot be equated with jurisdiction in equity, that operates independently of the provisions of the statute.

Ambit of the Adjudicating Authority is to determine whether the amount that is payable to the operational creditors under the resolution plan is consistent with the norms provided stipulated in clause (b) of sub-clause (2) of Section 30.

Hence, the statute indicated that once the requirements of Section 30(2)(b) are fulfilled, the distribution in accordance with its provisions is to be treated as fair and equitable to the operational creditors.

Appellants challenged the treatments of operational creditors on the ground that it had not been fair and equitable.

It was added that as long as the payment under the resolution plan is fair and equitable amongst the operational creditors as a class, it satisfies the requirements of Section 30(2)(b).

Nature of the jurisdiction exercised by the Adjudicating Authority, while approving a resolution plan under Section 31, had been interpreted in the decision of a 2-Judge Bench in K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150.

Elaborating the above discussion, Supreme Court stated that the submission that there had been a failure to maximise the value of the assets was not substantiated by any concrete material before the Court, apart from the reference to the preference shares which had already been clarified earlier in this judgment.

It must be borne in mind that the jurisdiction of the Adjudicating Authority is circumscribed by the terms of the provisions conferring the jurisdiction.

 “…jurisdiction of the Adjudicating Authority and the Appellate Authority cannot extend into entering upon the merits of a business decision made by a requisite majority of the CoC in its commercial wisdom. Nor is there a residual equity-based jurisdiction in the Adjudicating Authority or the Appellate Authority to interfere in this decision, so long as it is otherwise in conformity with the provisions of the IBC and the Regulations under the enactment.”

 In Court’s opinion, IBC is a complete code in itself.

IBC defines what is fair and equitable treatment by constituting a comprehensive framework within which the actors partake in the insolvency process. The process envisaged by the IBC is a direct representation of certain economic goals of the Indian economy. 

Therefore, once the requirements of the IBC have been fulfilled, the Adjudicating Authority and the Appellate Authority are duty bound to abide by the discipline of the statutory provisions.

“…neither the Adjudicating Authority nor the Appellate Authority have an unchartered jurisdiction in equity.”

Conclusion

 In the present matter, the resolution plan had been duly approved by a requisite majority of the CoC in conformity with Section 30(4).

  • Whether or not some of the financial creditors were required to be excluded from the CoC is of no consequence, once the plan is approved by a 100 per cent voting share of the CoC.
  • Jurisdiction of the Adjudicating Authority was confined by the provisions of Section 31(1) to determining whether the requirements of Section 30(2) have been fulfilled in the plan as approved by the CoC. once the requirements of the statute have been duly fulfilled, the decisions of the Adjudicating Authority and the Appellate Authority are in conformity with law.

In view of the above discussion, appeal was dismissed. [Pratap Technocrats (P) Ltd. v. Monitoring Committee of Reliance Infratel Ltd.,  2021 SCC OnLine SC 569, decided on 10-08-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal (NCLT): The Coram of Justice Abni Ranjan Kumar Sinha,(Judicial Member), and L.N. Gupta, (Technical Member) while exercising their jurisdiction, terminated the CIR process of the Corporate Debtor with immediate effect.

In the instant case, Om Logistics Ltd., Operational Creditor, had filed an application for initiation of CIR Process against the Ryder India Pvt. Ltd., Corporate Debtor and the Adjudicating Authority had initiated the CIR Process against the Corporate Debtor and had appointed Mr. Bikram Singh Gusain IP, as the Interim Resolution Professional (IRP). It was alleged that the CIR Process so initiated, was not for the resolution of Insolvency. Instead, the Operational Creditor had used for recovery and got the CIR process started with malicious intent for a purpose other than the resolution of insolvency of the Corporate Debtor, not permissible under the IBC 2016.

The Tribunal was of the view that the IRP for dissolution of the Corporate Debtor ‘cannot be accepted since the Liquidation is a pre-requisite to the Dissolution’ and in the present case, no order of Liquidation has been passed due to absence of any such proposal and non-functioning of the CoC.

The Tribunal was thus of the opinion that,

“After hearing submissions of the Applicant/IRP, perusing his averments and documents placed on record, this Bench is of the view that the prayer made by the IRP for dissolution of the Corporate Debtor cannot be accepted since the Liquidation is a pre-requisite to the Dissolution and in the present case, no order of Liquidation has been passed due to absence of any such proposal and non-functioning of the CoC”.

The Coram further held that

“by exercising our jurisdiction under Section 60(5) of IBC 2016 along with inherent power under Rule 11 of the NCLT Rules, 2016, we hereby terminate the CIR process of the Corporate Debtor with immediate effect and release the Corporate Debtor from the rigors of the CIRP and moratorium”.[Om Logistics Limited v Ryder India Pvt. Ltd. IA. 2038/ND/2020, decided on 29-07-2021]


Advocates before the Tribunal:

For the Applicant: Mr. Vinod Chaurasiya, Advocate for IRP

Case BriefsSupreme Court

Supreme Court: The Division Bench of R.F. Nariman and B.R. Gavai, JJ., while addressing a significant and interesting question of law expressed that,

“If one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha”

Interesting Question of Law

Whether the power of a Court under Section 34 of the Arbitration and Conciliation Act, 1996 to ‘set aside’ an award of an arbitrator would include the power to modify such an award?

Madras High Court decision 

A Division Bench of the Madras High Court had disposed of a large number of appeals filed under Section 37 of the said Act laying down as a matter of law that, at least insofar as arbitral awards made under the National Highways Act, 1956, Section 34 of the Arbitration Act must be so read as to permit modification of an arbitral award made under the National Highways Act so as to enhance compensation awarded by an Arbitrator.

Factual Matrix

The crux of the matter was that the above-stated appeals concerned notifications issued under the provisions of National Highways Act and awards passed. The said notifications were of the year 2009 onwards and the awards made were based on the ‘guideline value’ of the lands in question and not on the basis of sale deeds of similar lands.

It was stated that the competent authority had granted abysmally low amounts.

In Section 34 petitions that were filed before the District and Sessions Judge, the said amounts were enhanced to Rs 645 per sq. meter and the award of the Collector was therefore modified by the District Court in exercise of jurisdiction under Section 34 of the Arbitration Act.

Further, in the appeal filed to Division Bench, the above-stated modification was upheld, with there being a remand order to fix compensation for certain trees and crops.

Analysis, Law and Decision

Section 34 of the Arbitration Act

Bench noted that far from Section 34 being in the nature of an appellate provision, it provides only for setting aside awards on very limited grounds, such grounds being contained in sub-sections (2) and (3) of Section 34.

It is the opinion of the arbitral tribunal which counts in order to eliminate the grounds for setting aside the award, which may be indicated by the court hearing the Section 34 application.

Further, the Court stated that Section 34 is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985 under which no power to modify an award is given to a court hearing a challenge to an award.

Old v. New

Elaborating more, Bench added that by way of contrast, under Sections 15 and 16 of the Arbitration Act, 1940, the court is given the power to modify or correct an award in the circumstances mentioned in Section 15, apart from a power to remit the award under Section 16.

Thus, under the scheme of the old Act, an award may be remitted, modified or otherwise set aside given the grounds contained in Section 30 of the 1940 Act, which are broader than the grounds contained in Section 34 of the 1996 Act.

In Supreme Court’s decision of MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, it was decided that Section 34 proceeding does not contain any challenge on the merits of the award.

Adding to the above, Court stated that the point raised in the appeals stands concluded in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

Delhi High Court’s decision in Cybernetics Network (P) Ltd. v. Bisquare Technologies (P) Ltd., 2012 SCC OnLine Del 1155 is also instructive.

Court’s opinion

Hence, in Court’s opinion, there cannot be a doubt that Section 24 of the Arbitration Act, 1996 cannot be held to include within it a power to modify an award.

McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 was followed in Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328. Also, in Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies Pvt. Ltd., 2021 SCC OnLine SC 157, a recent judgment of this Court also followed McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 stating that there is no power to modify an arbitral award under Section 34 as:

(f) In law, where the Court sets aside the award passed by the majority members of the tribunal, the underlying disputes would require to be decided afresh in an appropriate proceeding.

Under Section 34 of the Arbitration Act, the Court may either dismiss the objections filed, and uphold the award, or set aside the award if the grounds contained in sub-sections (2) and (2A) are made out. There is no power to modify an arbitral award.

Judicial Trend

Therefore, in view of the above discussed, it can be stated that this question has now been settled finally by at least 3 decisions of the Supreme Court.

To state that the judicial trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award would be to ignore the previous law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the UNCITRAL Model Law on International Commercial Arbitration, 1985.

Coming to the submission in support of the impugned judgment that the fact that the Central Government appoints an arbitrator and the arbitration would therefore not be consensual, resulting in a government servant rubber-stamping an award which then cannot be challenged on its merits, cannot possibly lead to the conclusion that, therefore, a challenge on merits must be provided driving a coach and four through Section 34 of the Arbitration Act, 1996. The impugned judgment is also incorrect on this score.

Lastly, the Supreme Court stated that if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be done.

Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996.

In several cases, the NHAI has not filed appeals even in matters which are similar i.e., arising from the same Section 3A Notification, as a result of which certain landowners have got away with enhanced compensation given to them by the District Court. Also, we cannot shut our eyes to the fact the arbitrator has awarded compensation on a completely perverse basis i.e., by taking into account ‘guideline value’ which is relevant only for stamp duty purposes, and not taking into account sale deeds which would have reflected the proper market value of the land.

Differential Compensation

The Court noted that in several cases, the NHAI has not filed appeals even in matters which are similar i.e., arising from the same Section 3A Notification, as a result of which certain landowners have got away with enhanced compensation given to them by the District Court. Also, the arbitrator has awarded compensation on a completely perverse basis i.e., by taking into account ‘guideline value’ which is relevant only for stamp duty purposes, and not taking into account sale deeds that would have reflected the proper market value of the land.

The Court was of the opinion that the said differential compensation cannot be awarded on the ground that a different public purpose is sought to be achieved. Also, the legislature cannot say that, however laudable the public purpose and however important it is to expedite the process of land acquisition, differential compensation is to be paid depending upon the public purpose involved or the statute involved.

Illustration

Take the case of a single owner of land who has two parcels of land adjacent to each other. One parcel of land abuts the national highway, whereas the other parcel of land is at some distance from the national highway. Can it be said that the land which abuts the national highway, and which is acquired under the National Highways Act, will yield a compensation much lesser than the adjacent land which is acquired under the Land Acquisition Act only because in the former case, an award is by a government servant which cannot be challenged on merits, as opposed to an award made under Part III of the Land Acquisition Act by the reference Court with two appeals in which the merits of the award can be gone into? There can be no doubt that discrimination would be writ large in such cases.

However, since the NH Amendment Act, 1997 had not been challenged before the Court, it refrained from saying anything more. It was said that in the facts and circumstances of the case interference under Article 136 was not called for.[National Highways v. M. Hakeem,  2021 SCC OnLine SC 473, decided on 20-07-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal (ITAT): A two-Member Bench of Pramod Kumar, Vice President and Amarjit Singh, Judicial Member, referred a seminal question to be decided by a larger Bench of three or more Members of the Income Tax Appellate Tribunal (“ITAT”). The two-Member Bench dubbed it as:

“[A] macro issue that touches upon the tax liability of virtually every company which has residents of a tax treaty partner jurisdiction as shareholders, and has substantial revenue implications.”

The present appeal (filed by the Income Tax Department) and cross-objection (filed by the assessee) called into question the correctness of the order passed by the Commissioner of Income Tax (Appeals) in the matter of assessment under Section 143(3) of the Income Tax Act, 1961, for the assessment year 2016-17.  One of the issues raised in the present matter (by way of one of the grounds taken by the assessee in cross-objection) was that:

“The Assessing Officer be directed to compute the tax payable by the assessee under Section 115-O of the Income Tax Act, 1961 at the rate prescribed in the Double Taxation Avoidance Agreement between India and France in respect of dividend paid by the assessee to the non-resident shareholders i.e., Total Marketing Services and Total Holdings Asie, a tax resident of France.”

Material Facts and Assessee’s Contention

The assessee company has some non-resident tax holders fiscally domiciled in France. The assessee has paid dividend distribution tax under Section 115-O of the Income Tax Act. The short case of the assessee is that since the shareholders of the assessee company are entitled to the benefits of the India France Double Taxation Avoidance Agreement (“Indo French Tax Treaty”), the dividend distribution tax paid by the assessee, which is nothing but a tax on dividend income of the shareholders, cannot exceed the rate at which, under the Indo French Tax Treaty, such dividends can be taxed in the hands of the non-resident shareholders in question

Preliminary Objections by Income Tax Department

The appellant−Income Tax Department raised various preliminary objections to the cross-objection filed by the respondent−assessee, which were rejected by the ITAT. The first objection was that the cross-objection filed by the assessee was time-barred. Perusing the material on record, the ITAT was satisfied that the memorandum of cross-objection was filed within the time limit.

Another objection was about the assessee’s claim of treaty protection. It was contended that the claim so far as the rate of dividend distribution tax is concerned, was never raised before any of the authorities below, and no fresh issue can be raised by way of a cross-objection filed under Section 253(4) of the Income Tax Act. Negating this, the ITAT opined that there is a legal parity in the appeal and the cross-objection inasmuch as the issues which can be raised in an appeal can also be raised in a cross-objection. There cannot be any justification in restricting the scope of issues which can be raised in a cross-objection. Whatever issues, therefore, can be raised by way of an appeal are the issues that can be raised by way of a cross-objection.

Reference to Larger Bench

On the main issue (as noted above), the assessee contended that the matter is covered by the decisions of other Coordinate Benches. The assessee submitted that following the principles of consistency, the issue does not require a reference to Special Bench. The ITAT was urged to follow the Coordinate Benches and remit the matter to the file of the Assessing Officer for reconsideration in the light of the same.

For rejecting this submission, the ITAT found force in the Supreme Court decision in Union of India v. Paras Laminates (P) Ltd., (1990) 4 SCC 453. It was observed by ITAT that the assessee’s submission that the ITAT President cannot constitute a Special Bench in the absence of conflict of opinions by the Division Benches is incorrect and untenable in law. Of course, it is for the President to take a considered call on whether or not it is a fit case for constitution of a Special Bench, but, in the event of his holding the view that it is indeed a fit case to constitute a Special Bench, he is not denuded of the powers to do so on account of lack of conflict in the views of the Division Benches.

Thereafter, the ITAT set out its reasons for doubting the correctness of the decisions of the Coordinate Benches, on the dividend distribution tax rate being restricted by the treaty provision dealing with taxation of dividends in the hands of the shareholders (i.e. Article 11 of the Indo French Tax Treaty, as in the present case):

  • The payment of dividend distribution tax under Section 115-O does not discharge the tax liability of the shareholders. It is a liability of the company and discharged by the company. Whatever be the conceptual foundation of such a tax, it is not a tax paid by, or on behalf of, the shareholder. Therefore, dividend distribution tax cannot be treated as a tax on behalf of the recipient of dividends, i.e. the shareholders.
  • Under the scheme of the tax treaties, no tax credits are envisaged in the hands of the shareholders in respect of dividend distribution tax paid by the company in which shares are held. The dividend distribution tax thus cannot be equated with a tax paid by, or on behalf of, a shareholder in receipt of such a dividend. In fact, the payment of dividend distribution tax does not, in any manner, prejudice the foreign shareholder, and any reduction in the dividend distribution tax does not, in any manner, act to the benefit of the foreign shareholder resident in the treaty partner jurisdiction. This taxability is wholly tax-neutral vis-à-vis foreign resident shareholder and the treaty protection, when given in respect of dividend distribution tax, can only benefit the domestic company concerned. The treaty protection thus sought goes well beyond the purpose of the tax treaties.
  • It is to stretch things a bit too far to say that even when tax burden is shifted from a resident of the tax treaty partner jurisdiction to resident of another jurisdiction, the tax burden on another person, who is not eligible for tax treaty benefits anyway, will nevertheless be subjected to the same level of tax treaty protection. . Such a proposition does not even find mention in any tax treaty literature, and therefore the present decision, extending the tax treaty protection to the company paying dividends, in respect of dividend tax distribution tax, appears to be a solitary decision of its kind.
  • Wherever the Contracting States to a tax treaty intended to extend the treaty protection to the dividend distribution tax, it has been so specifically provided in the tax treaty itself. In the absence of such a provision, it cannot be inferred as such.
  • A tax treaty protects taxation of income in the hands of residents of the treaty partner jurisdictions in the other treaty partner jurisdiction. Therefore, in order to seek treaty protection of an income in India under the Indo French Tax Treaty, the person seeking such treaty protection has to be a resident of France. The expression ‘resident’ is defined, under Article 4(1) of the Indo French Tax Treaty, as “any person who, under the laws of that Contracting State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature”. Obviously, the company incorporated in India, i.e. the assessee in the present case, cannot seek treaty protection in India ─ except for the purpose of, in deserving cases, where the cases are covered by the nationality non-discrimination under Article 26(1), deductibility non-discrimination under Article 26(4), and ownership non-discrimination under Article 24(5). as, for example, Article 26(5) specifically extends the scope of tax treaty protection to the “enterprises of one of the Contracting States, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State”. The same is the position with respect of the other non-discrimination provisions. No such extension of the scope of treaty protection is envisaged, or demonstrated, in the present case. When the taxes are paid by the resident of India, in respect of its own liability in India, such taxation in India, cannot be protected or influenced by a tax treaty provision, unless a specific provision exists in the related tax treaty enabling extension of the treaty protection.
  • Taxation is a sovereign power of the State ─ collection and imposition of taxes are sovereign functions. Double Taxation Avoidance Agreement is in the nature of self-imposed limitations of a State’s inherent right to tax, and these DTAAs divide tax sources, taxable objects amongst themselves. Inherent in the self-imposed restrictions imposed by the DTAA is the fact that outside of the limitations imposed by the DTAA, the State is free to levy taxes as per its own policy choices. The dividend distribution tax, not being a tax paid by or on behalf of a resident of treaty partner jurisdiction, cannot thus be curtailed by a tax treaty provision.

For all these reasons independently, as also taken together, the ITAT was of the considered view that it is a fit case for the constitution of a Special Bench, consisting of three or more Members, so that all the aspects relating to this issue can be considered in a holistic and comprehensive manner. The question which may be referred for the consideration of Special Bench consisting of three or more Members, subject to the approval of, and modifications by, the ITAT President, is as follows:

“Whether the protection granted by the tax treaties, under Section 90 of the Income Tax Act, 1961, in respect of taxation of dividend in the source jurisdiction, can be extended, even in the absence of a specific treaty provision to that effect, to the dividend distribution tax under Section 115-O in the hands of a domestic company?”

The Registry was directed to place the matter before the ITAT President for appropriate orders. [CIT v. Total Oil (India) (P) Ltd.,  2021 SCC OnLine ITAT 367, dated 23-6-2021]

Op EdsOP. ED.

Introduction

Dr B.R. Ambedkar while presenting the Indian Constitution, 1950[1], in the Constituent Assembly, said that every generation is a nation of its own.  It is this perennial change in generational thought that demands the law to be adaptive[2]. With the rapid advancement upon the advent of the internet has allowed us to possess goods or services with a click of a button. Now more than ever before, we need the law to clearly state guidelines to allow the smooth functioning of e-commerce transactions. The purpose of the law should be to present solutions to resolve the probability of miscommunication, that could arise, because of the barrier caused by physical distance.

The term “e-commerce” is a common abbreviation used for “electronic commerce”. It includes carrying out business activities electronically, rather than abiding by the conventional method of physical shopping. With different stages involved in online shopping, it is realistic to say that in case of a dispute it will be extremely difficult to decide which court will have a jurisdiction in the matter, due to the multifaceted jurisdictional nature of such transactions. Sections 15-20 of the Code of Civil Procedure, 19082 (hereinafter “CPC”) deals with different types of jurisdiction and the “place of suing”. In simple terms, it specifies the venue of a particular case that is triable before a court.3 Jurisdiction is of three types – pecuniary, territorial, and subject-matter jurisdiction. To exercise territorial jurisdiction more effectively, the law segregates products that can be purchased into two categories – immovable properties and movable properties. Immovable as the word suggests means a property that cannot be moved from one place to another because it is fixed to the ground. Sections 16-18 of CPC deals with such properties, and the law applied is simple since the jurisdiction of a court, in case of immovable property, lies where the property is located.4 However, it should be noted that in cases of a parties only wanting to have benefit on property, different rules are applied.

This article aims to focus on the second category at hand, which is movable property. Through this piece, I shall explore the various statutory templates that are followed by courts in adjudicating jurisdictional disputes involving moveable property, particularly in the field of e-commerce matters. Subsequently, I shall analyse the impact of foreign judgments on cross-border jurisdictions followed by a brief examination of alternative mechanisms that can be utilised to resolve such disputes.

The term “movable property” is defined as property which can be transferred from one place to another. Sections 19 and 20 of the CPC lays down the law according to which courts shall have jurisdiction in cases concerning movable properties. The two places where the law provides for a jurisdiction to file for the suit depends on:

(a) the person who is aggrieved files a case that is where the cause of action happens; and

(b) where the defendant/perpetrator of the grievance carried on his business that is where the breach took place.5

The concept of “exclusive jurisdiction contracts” complicates the concept of place of suing in case of movable property. In such cases, it should be kept in mind that the contract exists between the company and the customer and that the manufacturers are not involved in case of any dispute.

The establishment of the e-commerce market has given birth to companies like Amazon, Nykaa, etc. – which have become popular, not just regionally, but throughout the world. Such online business companies insert exclusive jurisdiction clauses into their contracts which instructs that only courts, of a specific place/State/region, shall have the jurisdiction to settle potential disputes. This is in accordance with Official Trustee v. Sachindra Nath Chatterjee6 where the Supreme Court observed that before a court can be held to have jurisdiction to decide a particular matter, it must not merely have the jurisdiction to try the suit brought before it. It must also have the authority to pass the order sought for. Hence, there is no scope to create a new jurisdiction that does not exist at the first place.7

Tests to decide jurisdiction in e-commerce matters

As it has already been established, with the advent of e-commerce transactions, there is plenty of scope for confusion regarding the jurisdiction of courts. This varies with the nature of good in question, as well as place where the suit is filed. In India, civil matters intertwined with aspects of e-commerce are traditionally governed by Sections 15-19 of the CPC. At times, the issue(s) gets intermingled with complications due to the nature of business, wherein a specific territory cannot be ascertained to settle a jurisdictional dispute.

It is pertinent to mention that this legal vacuum has not gone unrecognised by the courts. To fill this gap in the current absence of a decisive law, courts have employed several tests to determine jurisdiction in e-commerce matters. One such test is the purposeful availment test as given by a 2011 US Supreme Court decision8 and affirmed by a 2009 Delhi High Court judgment of Banyan Tree Holding (P) Ltd. v. A. Murali Krishna Reddy9, and further explained via another 2017 Delhi High Court judgment of Impresario Entertainment & Hospitality (P) Ltd. v. S&D Hospitality10. The US Supreme Court laid down the interpretation of the purposeful availment test. The Court held that this test could be understood as the placing of goods into the stream of commerce, by the defendant, with the expectation that they will be purchased by consumers within the forum of the State. They further elucidated this concept by explaining that this, however, did not amend the rule of personam jurisdiction11. It was merely an observation that a defendant may then be subjected to a certain jurisdiction without ever entering the certain forum. The real test was associated with the defendant’s “intentionality” and whether their activities were intended to submit to the power of that sovereign.12

The Banyan Tree case, as decided by the Delhi High Court, expounded on this further considering e-commerce disputes. They deliberated on the issue of mere accessibility versus purposeful usage and held that:

…to establish jurisdiction in cases where the defendant does not reside/carry on business in the forum state but the website in question is “universally accessible”, the plaintiff will have to show that the defendant purposefully availed the jurisdiction of the forum court.13

In other words what was required to establish jurisdiction was the defendant’s intention to engage in a commercial transaction specifically at a forum state. In the Impresario Entertainment case14, the High Court further clarified this position by differentiating between the purposeful availment test from the purposeful avoidance test. The Court explained that to decide jurisdiction, it was not enough for the defendant to show that he had avoided the forum state but rather essential for the plaintiff to prove that the defendant had purposely availed the jurisdiction of the forum state.

Another test that can be used to decide jurisdiction in e-commerce matters is the forum convenience test. This is a test derived from the general doctrine of forum non conveniens which pertains to all civil matters. The general principle is that a court can recognise that a select forum is inconvenient for the parties involved in a suit and can, in accordance with that recognition, send the case to a more appropriate court. This change is to be made in the interests of all the parties and intent of reaching end of justice. 15

In the Supreme Court’s decision in Kusum Ingots & Alloys Ltd. v. Union of India16, this principle was legitimised and allowed in the Indian context when it laid down that in appropriate cases as it deemed fit, the Court could refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum convenience. Part of cause of action arising in a certain territorial jurisdiction cannot compel the relevant court to decide the case conclusively. Instead, they can choose to exercise this principle to concede and confer jurisdiction. In light of this, it is reasonable to infer that this principle can be applied to e-commerce matters, when appropriate, as well. Considering this is a legitimate principle under the law and has been affirmed by the Supreme Court, there is no reason why it cannot be applied.

While Indian courts have not adopted a specific manner of adjudication, there are many more available tests derived from law across the world that can be applied and derived for deciding jurisdiction in e-commerce disputes. One such significant example is the minimum contacts test. This is a test based on a theory first instituted in the US Supreme Court’s decision in International Shoe Co. v. Washington 17. It governs personam jurisdiction in a forum state when parties are “non-residents”. Curiously, this theory works where the personam jurisdiction is derived from connections and contacts to forum state. It can be applied if the court feels that a person has “sufficient minimum contacts” – which may be the defendant’s physical presence, conferred jurisdiction through a contract, a stream of commerce, etc.

More tests like the substantial connection test18, zippo test19 and the effects test20 are also continually being adopted for e-commerce cases abroad. Clearly, there is a substantial number of precedents available internationally, regarding jurisdiction in e-commerce. Ultimately, it is up to Indian courts to decide which test is most suitable for them or to come up with a new test altogether. 

Analysing Indian judicial precedents

With the advent of the internet and e-commerce, Indian courts as well as courts around the world are having a difficult time in deciding the place where a person can sue, or which courts shall have the requisite jurisdiction. This becomes increasingly complicated because e-commerce is not like the traditional business transaction. It involves various intermediaries before the final product reaches the beneficiary. When there are more people involved, things get even more complicated as far as exact jurisdiction, and the power of courts are concerned. This section of the paper will try and analyse Indian case laws to provide some clarity in cases pertaining to e-commerce.

Naturally, the question that arises is why it is necessary to delve into a discourse pertaining to the jurisdictions of courts. Ergo, this discussion would entail exploring the implications of a court not having any jurisdiction. In Kiran Singh v. Chaman Paswan21, the court held that any decision passed by courts without having a proper jurisdiction to adjudicate the suit would end up as a nullity. A defect in jurisdiction can be of anything – meaning territorial, pecuniary, or even subject-matter. Therefore, if the court does not have proper jurisdiction, then it loses all its power to decide a case. Even if both parties consent to a particular court’s jurisdiction, the law will strike down the authority of the court, in such a case.22

Initially when the courts were not experienced while dealing with questions of jurisdiction in cases dealing with transactions over the internet, certain incorrect judgments were made. One of them is Casio (I) Co. Ltd. v. Ashita Tele Systems (P) Ltd.23. The court in this case held that only because the plaintiff was able to use the internet from a particular place, the court had the requisite jurisdiction to adjudicate upon the matter.24 This case is perhaps against the interest of the defendants which the CPC would certainly not endorse. Perhaps the court did not envisage the wrong precedent it was setting up because if this case were to be applied in the current times where any website could be virtually accessed from anywhere, then according to this judgment every court would have competent jurisdiction.

After this the Banyan Tree25 case removed the inadequacy with the Casio (I) Co. Ltd.26 judgment. In Banyan Tree27, the defendant challenged the jurisdiction of the High Court of Delhi. The plaintiff argued relying on the Casio28 case that since the internet is accessible to everyone in India, therefore, the question of jurisdiction should not be entertained. This argument of the plaintiff is completely erroneous, and the court rightfully rejected this claim of the plaintiffs. The court held that plaintiff either must show that he or she carried on a business within the jurisdiction of the court and if not, he or she should show that the injury arose within the jurisdiction of the court where the plaintiff has filed the case. This case was the very few ones who set a right precedent and tried to bring in some objectivity in absence of any previous judgments.

Things get quite perplexing as one cannot possibly fathom what the term “carrying business” encompasses. In today’s times with large e-commerce companies spread across several jurisdictions, it is difficult to specify where exactly the customer can sue a particular e-commerce company. For further clarity, we can refer to Dhodha House v. S.K. Maingi29. In this case, the court clarified the meaning of the term “carrying business”. A mere presence of an agent at a particular place, say X, does not mean that the firm carries out its business at the place X. For example: Amazon has various agents across the country which deliver its packages to many places. Just because its agents deliver packages to various places it cannot be said that Amazon carries out its business from all those places. One would have to look at that branch of Amazon which regularly receives orders and initiates the transactions. This place does not have to be the head branch necessarily. If we go by the reasoning of the Dhodha House case30, Amazon can be sued even those places where there are sub-branches. However, it should be shown that the specific branch does in fact carry out substantial business of Amazon.

Indian laws and precedents still do not provide a clear picture specifically in cases involving business to customer transactions (B2C). Indian laws were enacted without considering the numerous complexities that the internet creates. It is highly recommended that there should be separate legislation in the form of a statute specifically dedicated to e-commerce transactions or if not, then certain additions must be made to the CPC so that there is no room for confusion when dealing with such transactions. Although there is some clarity regarding B2B transactions, issues arise when there are multiple intermediaries and consumers are involved.

Understanding the impact of foreign judgments on cross-border jurisdictions

Indian statutory provisions accommodate and acknowledge the applicability of certain rulings that are in compliance with the judgments of international courts. The implication of international rulings on courts within the Indian jurisdiction is laid down in Section 13 of the CPC31. This provision also allows for judicial compliance in all situations, except for a few scenarios wherein the courts would have to delve further to ascertain the court’s jurisdiction. In certain cases, courts have noted that if there was a mutual arrangement to accede to a particular court’s jurisdiction, then the court would be officially recognised as having presiding authority over the issue at hand. As a result, its final verdict would be binding upon both parties.32

The role of legislation holds utmost importance especially with regards to decisions of foreign tribunals concerning internet-related conflicts. The Indian judiciary does not refuse to implement the decision of a foreign court. It can only maintain that the decision of a foreign court is incomplete when it does not comply with the requirements specified under Section 13 of the CPC.33 Hence, if a judgment is issued against such a citizen of India in consequence of any egregious infringement of some other country’s laws, the judgment would be implemented against such an Indian citizen within the subcontinent, given that they do not have to bear any of the maladies laid down in Section 13 of the Code of Civil Procedure.34 When it becomes an issue of who shall be vested with the “primary jurisdiction” over the internet, the legal precedents examined would strongly suggest that the Indian courts will have no reservation in endorsing a rational judgment of a foreign court, in the instance of such a court passing an extra-territorial judgment to be enforced against an Indian citizen.35

Understanding the corpus of private international law (PIL) and alternative dispute resolution (ADR)

Private international law, which is referred to as a dispute of laws in more common law-based countries, is a corpus of statutes that aims to address any issues stemming from the existence of an external factor in contractual relationships.36 Upon the emergence of the internet, cross-border ties gradually escalated, creating increasingly complicated issues of purview and relevant legislation. A variety of unique features of internet-based operations has also introduced fresh complexities. The fundamental challenge in dealing with legal relations involving international facets arises from the fact that the legal structures of more than a few nations can be observed to have a correlation with each other.37 Thus, the implementation of the regulations from one regulatory regime, instead of the latter, would, for most cases, yield different outcomes.38

Theory of harmonisation and reaching a middle ground

A proposed solution to this issue seems to be the option of choosing, on the basis on some parameters between the multiple presumably practicable systems, the legislation of a one specific legal framework to regulate the contractual relationship. This would mean the process of deciding the relevant legislation could take place under private international law. This also happens to be the approach that has the minimum impact on existing national legislation, since it does not entail any amendments to it to tackle the issue presented by way of inclusion of a foreign factor.39

Concepts of private international law are acknowledged in the Indian subcontinent. The Supreme Court held in 1964 that India follows the very well-established concept of private international law that the “law of the forum”, in which the litigation is commenced, regulates all issues of procedural practice.40 It is left at the discretion of the parties to consent and select one or more appropriate court systems to resolve their differences. If the respondents and plaintiffs specifically agree, in compliance according to their own arrangement, that their case be heard by a specific court, the two parties shall be obliged by the “forum selection” provision in their contract.41

The other approach, that is far more invasive to established domestic law, would be to attempt via a mechanism of “harmonization”, to eliminate the root cause of the issue by removing the discrepancies that arise amongst the law and regulations of a nation. “Harmonization” can be implemented via the conciliation process between nations by way of treaties instituting uniform policy and following ratification by the participating nations of the foreign conventions concerned. The results in the adjustment of state laws to harmonise them into conformity with the provisions of the requisite convention.42

Conclusion

Not only can e-commerce platforms have revolutionary multidisciplinary facilities, but also well-functioning information systems including appropriate data protection and precautions for individuals. The clauses of the agreement, based on the location of the products, must not be generic, but instead should be specific in nature in order to avoid jurisdiction discrepancies in the event of disputes. These must be drawn to the customer’s appropriate attention and should even provide them with a sufficient chance to read, review and then finally accept the conditions given. It will indicate that perhaps the concerns continue to be properly dealt with or that at minimum e-commerce platforms have a resolute plan in place to tackle such issues with ease and efficiency.


Undergraduate student enrolled in the BA, LLB (Hons.) course at Jindal Global Law School (Authored on 10-11-2020), e-mail: 18jgls-raghav.sg@jgu.edu.in.

[1] <http://www.scconline.com/DocumentLink/Uei3bEDC>.

[2] Misra, J.P., and J.P. Mishra, Dr B.R. Ambedkar and the Constitution – Making in India, Proceedings of the Indian History Congress 52 (1991): 534-41, accessed 17-10-2020. <http://www.jstor.org/stable/44142653>.

3 Mishra, Sachin, 2020, Determining Jurisdiction over E-Commerce Disputes in India, docs.manupatra.in, accessed October 8 <http://docs.manupatra.in/newsline/articles/Upload/FE4BA350-DBEF-49DA-97D4-09E54ED8B813.pdf>.

4 India, Legal, 2020, Jurisdiction of Civil Court and Place of Suing, legalservicesindia.com, accessed October 9 <http://www.legalservicesindia.com/article/1780/Jurisdiction-of-Civil-Court-and-Place-of-Suing.html>.

5 India, Legal, 2020. Jurisdictional Challenges in Online Transactions, legalservicesindia.com, accessed October 13 <http://www.legalservicesindia.com/article/2268/Jurisdictional-Challenges-in-Online-Transactions.html>.

6 (1969) 3 SCR 92

7 Ibid.

8 J. McIntyre Machinery Ltd. v. Nicastro, 2011 SCC OnLine US SC 122: 564 US 873 (2011) 

9 2009 SCC OnLine Del 3780

10 2018 SCC OnLine Del 6392

11 Ibid.

12 Ibid.

13 Banyan Tree Holding (P) Ltd., supra note 9.

14 2018 SCC OnLine Del 6392

15 Bryan A. Garner and Henry Campbell Black, Black’s Law Dictionary (St. Paul, Minn. West Group, 1999).

16 (2004) 6 SCC 254

17 1945 SCC OnLine US SC 158 : 326 US 310 (1945) 

18 Douglas De Savoye v. Morguard Investments Ltd., 1990 SCC OnLine Can SC 124 : (1990) 3 SCR 1077 

19 Zippo Mfg. Co. v. Zippo Dot Com Inc., 952 F Supp 1119 (WD Pa 1997).

20 Calder v. Jones, 1984 SCC OnLine US SC 58 : 465 US 783 (1984)

21 (1955) 1 SCR 117

22 Ibid.

23 2003 SCC OnLine Del 833

24 Ibid.

25 2009 SCC OnLine Del 3780

26 2003 SCC OnLine Del 833

27 2009 SCC OnLine Del 3780

28 2003 SCC OnLine Del 833

29 (2006) 9 SCC 41

30 (2006) 9 SCC 41

31 <http://www.scconline.com/DocumentLink/Mw0TY9U5>.

32 Narhari Shivram Shet Narvekar v. Pannalal Umediram, (1976) 3 SCC 203

33 Ibid.

34 Lalji Raja and Sons v. Firm Hansraj Nathuram, (1971) 1 SCC 721

35 O.P. Verma v. Gehrilal, 1960 SCC OnLine Raj 89

36 Dr Verschraegen Bea, Private International Law, 1st edn., (Kluwer Law International, 2001)

37 Malcolm N. Shaw, International Law 573 (Cambridge University Press, 5th edn. 2003).

38 Ibid.

39 S.C. Symeonides, Private International Law Bibliography 2017: US and Foreign Sources in English, American Journal of Comparative Law, 66 (2018), No. 2, pp. 89-100.

40 Ramanathan Chettiar v. Somasundaram Chettiar, 1963 SCC OnLine Mad 187

41 Ibid.

42 P. Hay, P.J. Borchers and R.D. Freer, Conflict of Laws: Private International Law: Cases and Materials, St. Paul, MN, Foundation Press, 2017.

Op EdsOP. ED.

The substantive legal provision dealing with extraterritorial jurisdiction under the Penal Code, 1860[1] (IPC) are Section 3[2] and Section 4[3] and its procedural counterpart under the Criminal Procedure Code, 1973 (CrPC) is Section 188 CrPC[4].

The proviso to Section 188 casts an obligation to obtain previous sanction of the Central Government for inquiry and trial of offences committed outside India. It is a procedural impediment while conducting criminal trial under Section 188 CrPC. The rationale behind the same lies in the principle of double jeopardy.

One of the first judgments which discussed the ambit for the term “inquiry” within the meaning of Section 188 CrPC is Sanoop v. State of Kerala[5]. The Court gave a broad interpretation of the word “inquiry” and included certain stages of investigation also (arrest and detention) within its sweep, to attract the sanction requirement under the proviso to Section 188 CrPC. However, this judgment runs contradictory to the jurisprudence constante of the Supreme Court in Ajay Aggarwal  v. Union of India[6], Thota Venkateswarlu v. State of A.P.[7] and  Hardeep Singh v. State of Punjab[8].

A Single-Judge Bench in Remla v. SP of  Police[9]  by relying upon State of W.B. v. Jugal Kishore More[10] ,  Nikka Singh v. State[11]  and Narumal v. State of Bombay[12] , held that the proviso to Section 188 casts an obligation to obtain previous sanction of the Central Government to inquire into and try such person and that Section 188 has a message that for the pre-inquiry stage, no such sanction is needed and since the pre-inquiry stage substantially relates to investigation of the crime, no sanction is required for investigation.

Interpretation of the word “dealt with” under Section 188 CrPC

In order to understand whether sanction will be required under Section 188 CrPC for investigation, the words “dealt with” under Section 188 CrPC need detailed construction. The most significant Supreme Court judgment on this point is Delhi Admn. v. Ram Singh[13]. The Court broadly constructed the words “dealt with” under Section 188 CrPC to include within its sweep not only “inquiry” and “trial” but other aspects also. The words “dealt with” in Section 188 CrPC, must be held to include “investigation” also, apart from “inquiry” and “trial”. It was also held that the “words ‘dealt with’ in the main part cannot be restricted to ‘inquiry’ and ‘trial’ used in the proviso”. Also, on a conjoint reading of Section 188 CrPC and Section 4 IPC, it must cover the procedure relating to investigation and hence the scope and ambit of the main part of Section188 CrPC cannot be controlled by the proviso. In the backdrop of conflicting High Court judgments on this point, the Full Judge Bench of Samaruddin v. Director of Enforcement[14], following Delhi Admn. case[15] upheld  the views rendered in Remla case[16] and in Mohd. Shameer Ali v. State of Kerala[17]

Ambit of “inquiry” under Section 188 CrPC: At what stage of inquiry will the sanction be needed – Post-cognizance or pre-cognizance

The judiciary was embroiled in a huge controversy over the interpretation of the word “inquiry” for attracting the proviso to Section 188 CrPC. After a perusal of rationale rendered in Rabindra Rai v. State of Bihar[18], State of U.P. v. Lakshmi Brahman[19]  and Dalu Gour v. Moheswar Mahato[20] it can be clearly said that the moment the charge-sheet is filed before the court, the inquiry is said to commence under Section 2(g) CrPC[21]. It is not necessary that such inquiry shall commence only after a formal order is passed by the Magistrate. In order to understand what stage of inquiry will attract the proviso of Section 188 CrPC, it is relevant to note four important judgments.

Firstly, in C.V. Padmarajan v. Govt. of Kerala[22], the Court under para 20 held that application of judicial mind to the police report, deciding to take cognizance of offences will certainly be part of the “inquiry” which is barred unless the prior sanction of the Central Government has been obtained under Section 188 CrPC in respect of the offences committed outside India. In other words, the Court held that taking cognizance of an offence will attract the proviso to Section 188 CrPC.

Secondly, in para 27 of Ajay Aggarwal  v. Union of India[23], the Court held that prior sanction under the proviso to Section 188  CrPC is not a condition precedent for taking cognizance of the offence and that if need be, such sanction could be obtained after the trial begins. However, since the offence in this case was committed at Chandigarh in India and not outside India and therefore, Section 188 CrPC was not attracted and hence, is only an obiter dictum which cannot be treated as law laid down by the Supreme Court within the meaning of Article 141 of the Constitution of India[24].

Thirdly, a 3-Judge Bench of the Supreme Court in Thota Venkateswarlu v. State of A.P.[25] has held that bar in the conduct of “inquiry” by the Magistrate Court in relation to an offence committed outside India without obtaining sanction of the Central Government as per the proviso to Section 188 CrPC would apply only in respect of the “post-cognizance inquiries”. The Court by applying “purposive and contextual interpretation” held that only “inquiries” within the meaning of Section 2(g) which are to be conducted after the taking of cognizance and before the framing of the charges alone would come within the zone of prohibition of the proviso to Section 188 CrPC, thus partially overruling Padmarajan case[26].

Fourthly, the 5-Judge Bench in Hardeep Singh v. State of Punjab[27] held that all “inquiries” held after submission of the final report/charge-sheet, including the “inquiry” by the court in the matter of taking cognizance, will be also barred by the proviso to Section 188 CrPC however, the Court made it clear that so long as the above specific legal position in Thota Venkateswarlu case[28] is not specifically overruled by the Supreme Court, it is only to be held that even taking of cognizance is not barred in such cases.

From the abovementioned analysis, it can be said that the Courts have given a restrictive interpretation of the word “sanction” restricting it to post-cognizance stage and not to the investigation. The rationale for the same is twofold:

  • Firstly, as investigation is the very first stage that will determine the flow of criminal proceedings in later stages, the requirement for sanction at the first stage will derail the criminal process in totality. To ensure that investigation is not in any manner fettered by the restriction as per the proviso to Section 188 CrPC and to ensure full freedom on the police to conduct investigation, it is kept outside the zone of prohibition under the proviso to Section 188 CrPC.
  • Secondly, to prevent enormous and unrealistic burdens[29] on the Central Government to take decisions on the question of sanction in each and every case, which may arise in various parts of the country, the Court logically kept investigation outside the requirement of sanction from the Central Government.

Conclusion

Thus, from the above discussion, it can be succinctly said that the bar as per the proviso to Section 188 (requirement of sanction) can be only in relation to conduct of inquiry and trial and the said proviso cannot impose any restriction on the powers of the police to the conduct of investigation into such offences committed outside India. Investigation is kept outside the requirement of sanction of the Central Government under the proviso to Section 188 CrPC.


*3rd year student, BA LLB (Hons.), Maharashtra National Law University, Nagpur. Author can be reached at shreyatripathi.204@gmail.com.

[1] Penal Code, 1860

[2] Section 3 IPC. 

[3] Section 4 IPC. 

[4] Section 188 CrPC.  

[5] 2018 SCC OnLine Ker 1268. 

[6] (1993) 3 SCC 609. 

[7] (2011)  9 SCC 527. 

[8] (2014) 3 SCC 92.

[9] 1992 SCC OnLine Ker 323. 

[10] (1969) 1 SCC 440. 

[11] 1950 SCC OnLine Punj 126. 

[12] 1960 Cri LJ 1674: AIR 1960 SC 1329.

[13] (1962) 2 SCR 694.   

[14] 1999 SCC OnLine Ker 279. 

[15] Supra Note 13.

[16] Supra Note 9.

[17] 2019 SCC OnLine Ker 2778. 

[18] 1983 SCC OnLine Pat 155. 

[19] (1983) 2 SCC 372. 

[20] 1946 SCC OnLine Pat 175.

[21] Section 2(g) CrPC

[22] (2009) 1 ILR Ker 36 : 2009 (1) KHC 65.

[23] (1993) 3 SCC 609. 

[24] Article 141 of the Constitution of India

[25] Supra Note 7.

[26] Supra Note 22.

[27] (2014) 3 SCC 92 

[28] Supra Note 7.

[29]Mohd. Shameer Ali v. State of Kerala, 2019 SCC OnLine Ker 2778, para 34

Case BriefsDistrict CourtTribunals/Commissions/Regulatory Bodies

Consumer Disputes Redressal Commission Gujarat State, Ahmedabad: Justice V.P. Patel, President and U.P. Jani, Member, addressed an appeal which was raised in light of a complaint raised due to excess of electricity duty being charged.

Appellants filed the instant appeal under Section 15 of the Consumer Protection Act, 1986 on being dissatisfied with the decision of the District Commission.

 Factual Matrix

Complainant obtained electric connection for their industrial undertaking and consumed exclusively low-tension energy from the opponent company. Energy bills were raised by the opponent corporation and said bills included charges of electricity duty liable under the Bombay Electricity Duty Act, 1958 (Electricity Act). Complainant realized in the year 2012 that the opponents have been collecting electricity duty at a higher rate than the prescribed rates under the Electricity Act.

Opponent charged the electricity duty at the rate of 60%, 30%, 15%, 50% or 25% without any basis. Further, it was stated that the charges of electricity duty were collected by the opponent illegally and unconstitutional in service. It was stated that the opponents could charge the electricity duty as per rules, but they have charged at a higher rate than prescribed in the rules.

Vide letter on 19-12-2012, opponent replied that the electricity duty was required to be collected at the rate of 10% as per the rules and they have started to issue bill with electricity duty at the rate of 10%. Therefore, the complainant had filed a consumer complaint about the difference in amount.

Limitation Period 

Limitation prescribed under the local or special act will be applicable and no general provision of limitation Act will be applied for counting prescribed period.

As per Rule 12(1) of the Electricity Rules, the period of limitation prescribed is 1 year to file an application for refund. Electricity Rules were amended with effect from 31-07-2014.

Coram noted that the documents produced by the complainant addressed to the Collector of Electricity Duty can be said to be applicants for a refund of an amount of excess electricity duty under Rule 12 of the Electricity Rules.

Section 3 of Consumer Proetction Act cannot be said to be inconsistent with Rule 12 of the Electricity Duty Rules.

Since the Collector of Electricity Duty did not act in conformity with fundamental principles of judicial procedure, District Consumer Commission had jurisdiction to deal with the matter.

Commission observed that:

It is true that where the statute gives finality to the order of the Collector of Electricity Duty jurisdiction of Courts is excluded. However, Collector of Electricity Duty had not been complied with the fundamental principle of judicial procedure and acted in conformity of Electricity Duty Act.

In view of the above observation, Consumer Court has jurisdiction in this case.

Collector of electricity duty has not considered the period of 1 year under Section 12(2) of the rules and has not passed an order of refund of electricity duty, this amount to deficiency in service as well as unfair practice.

Hence, in the present matter, it was held that the complainant can get refund of the amount of Electricity Duty charge not prescribed under the Electricity Act and Rules.

As per the documentary evidence and arguments of the parties, Commission concluded that the complainant was not entitled to get any amount of electricity duty for last one year. Therefore, the appeal was allowed.

On verifying the amount deposited by appellant the same shall be refunded with interest. [Gujarat Urja Vikas Nigam Ltd. v. Cham Trawi Nets Organisation, Appeal No. 913 of 2014, decided on 24-05-2021]


Additional Read:

Section 2(1)(o) of Consumer Protection Act, 1986: Supply of electricity is included in the definition of service. [for the definition of “service” in CPA, 2019, see S. 2(42)]

Section 2(1)(c) of Consumer Protection Act, 1986: ‘Complainant’ means any allegation in writing made by the complainant that trader or service provider, as the case made, has charged for the goods or for the service mentioned in the complaint a price in excess of the price, fixed by or under any law in time being force.[for the definition of “complainant” in CPA, 2019, see S. 2(6)]

Case BriefsHigh Courts

Bombay High Court: S.C. Gupte, J., dismissed a guardianship petition on the ground of jurisdiction.

A Guardianship petition was filed under Sections 6 and 11 of the Hindu Minority and Guardianship Act, 1956.

Petition sought petitioner’s appointment who was stated to be the father of the two minors for whose guardianship the present petition was filed.

Another relief was sought concerning the minor’s property, particularly a declaration that the respondent mother had unauthorizedly and fraudulently withdrawn or transferred amounts from the bank accounts of the minors for her personal use and benefit and a recovery order by making payment to the petitioner as their natural guardian or by depositing the same in the bank accounts of the minors.

Section 7 read with Section 8 of the Family Courts Act reserves exclusive jurisdiction to entertain a suit or proceeding in relation to the guardianship of the person of any minor unto Family Courts by virtue of Clause (f) of the Explanation to Sub-section (1) of Section 7.

Full Bench of Bombay High Court observed that in view of the provisions of the Family Courts Act, the Court exercising its ordinary original civil jurisdiction relating to matters under the Family Courts Act would lose its jurisdiction to the Family Court, since the former would be a district court and under Section 17 of the Family Courts Act that Act would have an overriding effect.

An application for guardianship of the minor’s person can lie only before the Family Court.

Bench while moving forward with other prayers expressed that an application for a declaration about the property of a minor, which is said to be fraudulently or unauthorisedly transferred, and an order for recovery of that property cannot lie in a guardianship petition independently of any claim for being appointed as a guardian of the person or property of a minor.

“…what lies before a court, other than a family court under Section 7 of the Family Courts Act, is an application for appointment of guardian of the property of a minor or an application for permission to deal with such property. It is only these applications which are made by means of a guardianship or a miscellaneous petition before this court.”

 Petitioner’s case was that the bank accounts were created and monies were deposited into them for the sake of ensuring the minors’ pursuit of education and that these amounts, meant for the minors’ education, were illegally withdrawn by the respondent mother.

To the above, Court stated that is the petition sought to be framed as a petition for making provision for maintenance of the minors by seeking to recover amounts illegally withdrawn by respondent-wife, it would obviously be an application in the nature of a proceeding for maintenance. The said application would also exclusively lie before the family court.

Hence, In Court’s opinion, the instant guardianship petition was dismissed, and this Court had no jurisdiction to entertain the same. [Ashu Khurana Dutt v. Aneesha Ashu Dutt, 2021 SCC OnLine Bom 550, decided on 01-04-2021]


Advocates before the Court:

Mr Shanay Shah i/b. Sapana Rachure for Petitioner.

Mr Santosh Paul, Senior Advocate with Pradip Chavan, Mahir Bhatt and Manan Sanghai i/b. Wasim Ansari for Respondent.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Anil Choudhary (Judicial Member) allowed an appeal in which the issue before the Tribunal was that whether the show cause notice was validly served on the appellant which is a condition precedent for giving jurisdiction to the Adjudicating Authority to pass an order.

Appellant was neither an importer nor engaged in the business of import and export. Further, he does not have any Import Export Code (IEC). The Revenue had seized post parcels imported from China not bearing the name of consignor, at foreign post office, New Delhi. The parcels were examined by the officers of DRI under panchnama. Summons were issued in the name of the appellant dated 11-02-2016, 02-03-2016 and 15-03-2016. Thereafter, nobody appeared before the DRI. An officer personally visited the premises at D-164, Punjabi Basti, Baljeet Nagar, New Delhi-110008, but the person – Shri Baljeet Singh was not found. Thereafter, without ascertaining or identifying the main person – Shri Baljeet Singh, show cause notice dated 20-07-2016 was issued by speed post and also marked to notice board of DRI.

Counsel for the appellant, Mr. Akhil Krishan Maggu submitted that neither the aforementioned show-cause notice nor any communication like summons or notice, nothing was served on him thus the ex-parte was wholly without jurisdiction and a nullity.

Authorised Representative for the Revenue, Mr. Pradeep Gupta submitted that the address given by the appellant in the memo of appeal was same on which the show cause notice etc. was issued through speed post, and accordingly stated that there was sufficient service of show cause notice.

The Tribunal noticed that inspite of opportunity given, Revenue failed to produce the proof of delivery of the show cause notice and from the perusal of records it was observed that Adjudicating Authority had not recorded satisfaction of service of show cause notice and have proceeded to pass the ex-parte order-in-original, which is held to be a nullity in the eyes of law.

The Tribunal while allowing the appeal held that for passing a valid adjudication order, valid service of show cause notice is essential.[Baldeep Singh v. Commr. of Customs, 2021 SCC OnLine CESTAT 176, decided on 07-04-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Bombay High Court: A Division Bench of Dipankar Datta, CJ. and G.S. Kulkarni, J. has directed the Central Bureau of Investigation (CBI) to conduct a preliminary enquiry into the complaints against the Home Minister of the State of Maharashtra, Anil Deshmukh. The Court’s order came after the former Commissioner of Mumbai Police, Param Bir Singh, and others moved the High Court seeking investigation into allegations of illegal money collection ordered by the Home Minister, Anil Deshmukh. While opining that the information furnished prima facie discloses commission of cognizable offence by Anil Deshmukh, and directing that preliminary inquiry be preferebly concluded within fifteen days, the Court held:

[Anil] Deshmukh is the Home Minister. The police department is under his control and direction. There can be no fair, impartial, unbiased and untainted probe, if the same were entrusted to the State Police Force. As of necessity, the probe has to be entrusted to an independent agency like the CBI.”

  1. Backdrop, Timeline and the Factual Matrix

In February, a vehicle laden with explosives was found parked at Altamount Road, Mumbai, near ‘Antilia’, the residence of Mukesh Ambani, the Chairman and Managing Direcotr of Reliance Industries Ltd. In this matter, on 25-2-2021, an FIR was registered with Gamdevi Police Station, Mumbai, and investigation was handed to the Anti-Terror Squad. Simultaneously, the National Investigation Agency (NIA) started conducting investigation. Soon thereafter, the owner of the vehicle died under mysterious circumstances. During NIA’s investigation, the role of one Sachin Vaze, a police officer attached to the Mumbai Crime Branch came under scanner and he was arrested.

On 17-3-2021, the incumbent Commissioner of Mumbai Police, Param Bir Singh was transferred. On 20-3-2021, Param Bir Singh, in a letter to the Chief Minister of Maharashtra, took exception to statements made against him by the Home Minister wherein he said that there were serious lapses committed by the Commissioner’s office, and Param Bir Singh’s transfer was not on administrative grounds.

In his letter to the Chief Minister, Param Bir Singh made some serious allegations stating that the Home Minister, Anil Deshmukh, had instructed Sachin Vaze to assist in collection of funds for the Home Minister, with a target of accumulating Rs 100 crores a month. As per further allegations, similar instructions were given by Anil Deshmukh to some other officers of the Mumbai Police. It was also alleged that Anil Deshmukh, on several occasions, called officers of the Mumbai Police to instruct them to adopt a specific course of action in police investigations. Param Bir Singh asserted that the Home Minister found his reservations and resistance undesirable and his transfer seem to be for extraneous and vindictive reasons.

On 21-3-2021, Param Bir Singh moved the Supreme Court under Article 32 of the Constitution seeking a writ of mandamus directing the CBI to conduct an impartial and fair investigation into the complaints against Anil Deshmukh, and to quash his transfer order. This writ petition was however withdrawn by Param Bir Singh with a liberty to approach the High Court. Availing such liberty, Param Bir Singh approached the High Court on 24-3-2021, filing a Public Interest Litigation (PIL).

On 21-3-2021 itself, one Dr Jaishri Laxmanrao Patil lodged a complaint with the Malabar Police Station and the Director, Anti-Corruption Bureau of the CBI in the same matter. No action was taken on the complaint, which prompted Dr Patil to file a Criminal Writ Petition in the present matter before the High Court seeking direction to CBI/ED to investigate the matter.

  1. Analysis

2.1. Need for an FIR

There was much debate at the Bar in respect of the omission or failure to furnish information to/lodge a complaint before the police for the same to crystallize into an FIR, which could be investigated. According to the High Court, the issue paled into insignificance in view of the disclosure made by Dr Patil of she having lodged a complaint disclosing commission of cognizable offence on 21-3-2021 and that such complaint was not given the attention that it deserved. Had such disclosure been made at the inception of hearing, much of the early exchanges may not have been necessary at all and could be avoided.

2.2. Maintainability of Param Bir Singh’s PIL

The High Court refused to be drawn into the larger controversy raised by the respondent State on the aspect of maintainability of the PIL filed by Param Bir Singh and another PIL filed by another petitioner (there were a total of three PILs including that of Param Bir Singh and one Criminal Writ Petition of Dr Patil, which were heard together). The controversy, in the Court’s opinion, which was common to the petitions, could be taken care of within a narrow compass by deciding whether, if at all, and to what extent, if any, action on the complaint of Dr Patil should be directed to be taken.

2.3. Maintainability of Dr Patil’s Criminal Writ Petition

The High Court noted that registration of a case is a sine qua non for starting an investigation. The jurisdictional fact for setting the criminal law in motion in the present case was traceable in the Criminal Writ Petition of Dr Patil, who provided a crucial breakthrough by lodging a complaint in the matter.

2.3.1. Writ Petition versus Efficacious Alternate Remedy

The State’s objection to Dr Patil’s Criminal Writ Petition was primarily grounded on existence of an efficacious alternative remedy before the Magistrate under the CrPC, which she had not availed of.

The Court explored the answer to the question: The Criminal Writ Petition of Dr Patil raises an important issue of lack of enforcement of law by the police. Does this per se warrant entertainment of the Criminal Writ Petition?

In the context of the nature of the concern expressed in the Criminal Writ Petition, the Court considered that the restriction to be kept in mind in deciding the question of entertainability is, whether there exists any equally efficacious alternative remedy in a criminal court and even if such a forum of redress is available, should the writ court entertain the writ petition. The Court found answer to this stating that where the facts of any case are such that the remedy provided by the law is found to be inadequate or inefficacious to the judicial mind, a writ petition may be entertained and decided. Provisions in Section 23 of the Police Act, 1861 and the CrPC cast a duty on the police to prevent commission of offence and to bring an offender to justice. Where a person or authority is vested with a duty by specific statutory provisions, to compel such person or authority to perform such duty is certainly within the power and jurisdiction of a writ court.

[T]he courts shall not countenance violation of Constitutional principles by anyone, howsoever high an office he occupies, and hence while acting as the sentinel on the qui vive and being always there as a watch guard of the Constitution to repel any attack on it, the courts would ensure that the democratic values enshrined in the Constitution are respected and the ideals upheld.

On this point, the High Court relied on several decisions of the Supreme Court including, Municipal Council, Ratlam v. Vardichan, (1980) 4 SCC 162; Union of India v. R. Redappa, (1993) 4 SCC 269; and N. Kannadasan v. Ajay Khose, (2009) 7 SCC 1.

While finally deciding this point, the Court held that it is not unknown that despite the existence of a remedy, the remedy against the particular mischief complained of and the redress sought for, at times, might be of no avail. It would be opposed to Constitutional philosophy if relief is refused only on the ground of existence of an alternative remedy, which may not be equally efficacious. Therefore, if a case presented before a writ court appears to it to be extraordinary, which the Criminal Writ Petition of Dr Patil indeed is, there is no bar that could operate for entertaining the same. After all, the rule which requires exhaustion of an alternative remedy is a rule of convenience and discretion, rather than a rule of law.

[I]t is indeed unheard of and unprecedented that a Minister could be so openly accused of wrongdoings and corrupt practices by none other than a senior police officer attracting wide attention from all and sundry.”

2.4.  Cognizable Offence (prima facie)

The High Court perused the complaint of Dr Patil to consider whether it makes out a prima facie case of a cognizable offence. It was clarified that examination of the veracity and/or credibility of the allegations contained therein is not the Court’s task at this stage. Dr Patil annexed to her complaint, a copy of Param Bir Singh’s letter to the Chief Minister.

As per the Court prima facie opinion, the information furnished therein discloses commission of cognizable offences by Anil Deshmukh and should have been acted upon in the manner required by the CrPC, and as judicially interpreted by the Supreme Court in Lalita Kumari v. State of U.P., (2014) 2 SCC 1.

2.5. CBI Investigation

The High Court noted that a CBI inquiry cannot be ordered as a matter of routine or merely because a party makes an allegation. But, if after considering the materials on record, the Court concludes that such materials disclose a prima facie case calling for investigation by the CBI, the Court can make the necessary order. Reliance was placed on Common Cause v. Union of India, (1999) 6 SCC 667 and T.C. Thangaraj v. V. Engammal, (2011) 12 SCC 328, among others. The Court opined that w]hen high officials are likely to be involved and a question of public confidence in the impartial working of the State agencies arises, the writ court in exercise of its jurisdiction under Article 226 of the Constitution is certainly not powerless to order such inquiry and investigation by the CBI.

It was noted by the Court that Dr Patil had submitted her complaint to the Senior Police Inspector of the Malabar Hill Police Station on 21-3-2021; however, except for making an entry in the Inward Register, no action whatsoever, was initiated. The allegations made by Param Bir Singh in his letter dated 20-3-2021, which triggered Dr Patil to lodge the complaint are of a serious nature and against the highest functionary of the Government of Maharashtra, when it comes to the functioning of the police department. Prima facie, the issues are such that the very faith of citizens in the functioning of the police department is at stake. If there is any amount of truth in such allegations, certainly it has a direct effect on the citizens’ confidence in the police machinery in the State. Such allegations, therefore, cannot remain unattended and are required to be looked into in the manner known to law when, prima facie, they indicate commission of a cognizable offence

It is, hence, certainly an issue of credibility of the State machinery, which would stare at the face when confronted with the expectations of the law and when such complaints are received against high ranking public officials. This Court cannot be a mere spectator in these circumstances. There is certainly a legitimate public expectation of a free, fair, honest and impartial inquiry and investigation into such allegations which have surfaced in the public domain.

2.6. Preliminary Inquiry

While holding that to instill public confidence and safeguard the fundamental rights of the citizens, it is necessary that an inquiry and investigation is conducted by an independent agency, the Court also noted the caution in P. Sirajuddin v. State of Madras, (1970) 1 SCC 595, wherein the Supreme Court held that before a public servant is publicly charged with acts of dishonesty which amount to serious misdemeanour or misconduct and a first information is lodged against him, there must be some suitable preliminary enquiry into the allegations by a responsible officer. The means adopted no less than the end to be achieved must be impeccable.

  1. Directions

Concluding the discussion, the High Court ordered the following:

3.1. Although there is no immediate reason to direct registration of an FIR by the CBI based on Dr Patil’s complaint, interest of justice would be sufficiently served if the Director, CBI is directed to initiate a preliminary inquiry into the complaint of Dr Patil which has the letter of Param Bir Singh addressed to the Chief Minister, as an annexure.

3.2. Such preliminary inquiry shall be conducted in accordance with law and concluded as early as possible but preferably within 15 (fifteen) days from receipt of a copy of the instant order.

3.3. Once the preliminary inquiry is complete, the Director, CBI shall be at liberty to decide on the future course of action, also in accordance with law. Should the Director, CBI see no reason to proceed further, Dr Patil shall be duly informed of the same.

3.4. Param Bir Singh shall be at liberty to raise grievances, if any, in regard to transfers and postings of police officers and for enforcement of the directions in Prakash Singh v. Union of India, (2006) 8 SCC 1, before the appropriate forum in accordance with law, if so advised.[Param Bir Singh v. State of Maharashtra, 2021 SCC OnLine Bom 516, dated 05-4-2021]


Advocates who appeared in this case:

Mr. Vikram Nankani, Senior Advocate a/w Dr. Birendra Saraf and Mr. Sharan Jagtiani, Senior Advocates, a/w Mr. Subodh Desai, Mr. Chetan Kapadia, Mr. Sunny Punamiya and Mr. Akshay Bafna, Advocates for Petitioner.

Mr. A.K. Singh and Mr. Piyush Singh, Advocates for Applicant/Intervenor in I.A. St. No. 6356/2021.

Mr. A.A. Kumbhakoni, Advocate General a/w Mr. Deepak Thakare, Public Prosecutor, a/w Mr. Akshay Shinde, “B” Panel Counsel and Mr. Manoj Badgujar, Advocate for State.

Mr. Anil C. Singh, Additional Solicitor General a/w Mr. D.P. Singh, Mr. Amogh Singh and Mr. A.A. Ansari, Advocates for Respondent nos. 2 and 3.

Dr. Jaishri L. Patil, Petitioner-in-person.

Mr. A.A. Kumbhakoni, Advocate General a/w Mr. Deepak Thakare, Public Prosecutor, a/w Mr. Akshay Shinde, “B” Panel Counsel and Mr. Manoj Badgujar, Advocate for State.

Mr. Subhash Jha, Mr. Nilesh Ojha a/w Mr. Samir Vaidya, a/w Mr. Harekrishna Mishra a/w Mr. Siddharth Jha, Mr. Abhishek Mishra a/w Mr. Munish Hemani i/b Law Global for Petitioner.

Mr. A.A. Kumbhakoni, Advocate General a/w Mr. Deepak Thakare, Public Prosecutor, a/w Mr. Akshay Shinde, “B” Panel Counsel and Mr. Manoj Badgujar, Advocate for State.

Mr. Alankar Kirpekar and Mr. Shekhar Bhagat, Advocates i/b Maglegal for petitioner.

Mr. A.A. Kumbhakoni, Advocate General a/w Mr. Deepak Thakare, Public Prosecutor, a/w Mr. Akshay Shinde, “B” Panel Counsel and Mr. Manoj Badgujar, Advocate for State.

Case BriefsHigh Courts

Jammu and Kashmir High Court: Sanjay Dhar, J., addressed the instant petition against the order of Judicial Magistrate, Bandipora, whereby the Magistrate had returned the petition seeking maintenance stating it to be beyond the jurisdiction of the Trial Court. The Bench remarked,

“If at all there was any ground for returning the petition to the petitioners, the same should have been done at the very first hearing, not after proceeding with the case for more than six months, that too in a case where a destitute lady had approached the learned Magistrate for grant of maintenance.”

The petitioner, who was the wife of the respondent and was the mother of a minor son. The petitioner approached the Court of Chief Judicial Magistrate, Bandipora, with a petition under Section 488 of CrPC seeking maintenance from the respondent. The petition was transferred by CJM to Judicial Magistrate 1st Class, Bandipora, for disposal.

The Trial Court had observed that the petitioner at the time of filing the petition were residing at Hajin, Bandipora whereas the respondent was residing at Grath Saloora, Ganderbal, and according to the magistrate, neither Hajin, Bandipora nor Grath Saloora, Ganderbal fall within his territorial jurisdiction. The Magistrate had further observed that it was not the case of the petitioners that they at any point in time last resided within the jurisdiction of the Trial Court. Therefore, the Trial Court held that it did not have territorial jurisdiction to entertain the petition and, accordingly, the same was directed to be returned to the petitioner.

Observation and Analysis

The Bench, after going through the provisions of Section 488(8) of the J&K CrPC, which is in pari material with Section 126(1) of Central CrPC opined that proceedings for maintenance could be filed by a wife against her husband either in the district where she resides or in the district where the husband resides and also where she had last resided with her husband. The provisions of Section 488(8) read as under:

“488(8)Proceedings under this section may be taken against any person in any district where he is or his wife resides or where he last resided with his wife, or as the case may be, the mother of the illegitimate child.”

Noticing that the petition was transferred to the Trial Court by the orders of CJM, Bandipora, who was vested with jurisdiction over whole of the District Bandipora and that Section 192 of J&K CrPC gave jurisdiction to CJM to transfer any case of which he had taken cognizance, for inquiry or trial, to any Magistrate subordinate to him, the Bench opined,

“When a Chief Judicial Magistrate transfers a petition or a complaint to a Magistrate subordinate to him, the said subordinate Magistrate is conferred with the jurisdiction to entertain and try such complaint or petition.”  

Hence, the Court reached the findings that the Magistrate, while passing the impugned order, had ignored the provisions contained in section 192(2) of the J&K CrPC. Also, the Court vehemently criticised the fact that, the petition was pending in the Court of Judicial Magistrate for about six months and the Trial Court had put the hapless petitioner in a precarious position by returning the petition citing lack of jurisdiction.

Consequently, it was held that the impugned order of the Trial Court suffered from grave illegality as the same had been passed in disregard of the provisions contained in Section 192 of the J&K CrPC and, therefore, was unsustainable in law. Hence, the impugned order was set aside with the directions to the Trial Court to entertain and dispose of the petition filed by the petitioners with utmost promptitude in accordance with the law.[Masooda Begum v. Mohammad Ashraf Dar,  2021 SCC OnLine J&K 163, decided on 03-03-2021]


Appearance before the Court by:

For the Petitioner: Adv. Aftab Ahmad


Kamini Sharma, Editorial Assistant has reported this brief.

Op EdsOP. ED.

The principle of least judicial interference was legislatively codified as Section 5 of the Arbitration and Conciliation Act, 1996[1] (Act) in order to ensure continuation of the arbitration without periodic interdicts by any court.  Section 16[2] of the said Act carves out an exception to the general rule by providing a right to the parties before arbitration to raise the plea of objection to the competency of an Arbitral Tribunal. This is based on the principle of kompetenz-kompetenz i.e., the power of the Tribunal to rule on its own jurisdiction[3].  The reason is that if an arbitrator is himself of the view that he is not competent, no purpose would be served by continuation of the arbitration proceedings. If the arbitrator finds lack of competency, the arbitral proceedings would come to an end. It is in view thereof that an appeal has been provided under Section 37[4] of the said Act. The position would be however different where the Arbitral Tribunal finds that it is competent to proceed with the arbitration. No appeal has been provided in such a case. The consequences of such a decision are provided in Section 16(5) of the said Act is that the arbitral proceedings would continue resulting in an arbitral award. The remedy is provided in Section 16(6) of the said Act which is to challenge the ultimate award under Section 34[5] of the said Act. There is no segregated challenge permissible only on the question of the competency of the Arbitral Tribunal.

            The question then would be, at what stage should the jurisdictional objections raised by a party to the arbitration be considered and decided by the Arbitral Tribunal?  This question also arises in view of the prevalent trend of Arbitral Tribunals deferring the consideration of jurisdictional objections to the stage of final award which often results in the party which has raised the objection at the threshold, having to contest the entire proceedings, thereby wasting considerable amount of time and that too at great expense.

            In the respectful view of the author, the bare reading of Section 16(2) along with Section 16(5) of the Act leaves no manner of doubt that the Tribunal has no discretion in deferring a decision on an application under Section 16 of the Act. Section 16(2) stipulates that a party raising jurisdictional objections shall have to do so not later than the submission of the statement of defence.  The very purpose of having a party raise objections at the threshold would get defeated in the event the decision on these objections is also not taken with equal promptitude. As per Section 16(5) of the Act, the Arbitral Tribunal “shall” decide on the jurisdictional objections, and where the Arbitral Tribunal takes a decision rejecting the plea, the Tribunal shall continue with the arbitral proceedings and make an arbitral award. The reading of Section 16(5) indicates that a decision rejecting the jurisdictional objections is a statutory precondition for continuance of arbitral proceedings. The statute envisages only one of two situations i.e. first, where Section 16 objections are accepted and Tribunal holds that it does not have jurisdiction and second, where the objections are rejected by the Tribunal. In the first case, the remedy of Section 37 appeal is available and in the latter, the award passed by the Tribunal can be assailed under Section 34 of the Act. Therefore, once a statutory remedy has been provided against an order passed on a challenge to the jurisdiction of the Tribunal under Section 16, then, such a challenge must, in the opinion of the author be determined at the threshold itself and there is no apparent reason for deferring a decision on the Section 16 application.

            Any refusal to go into the merits of the dispute is a jurisdictional issue.[6] Therefore, it would be manifest, that a decision on any objection regarding the competence of the Tribunal to go into the merits of the dispute must not, and indeed cannot be deferred and must be taken at the preliminary stage itself. This position is consistent with the decisions of the Supreme Court in McDermott[7], Kvaerner Cementation[8] and also in Ayyasamy[9], where it was held that “the jurisdictional challenge is required to be determined as a preliminary ground”.

            In several cases, while deferring the consideration of a challenge under Section 16, parties and Tribunals have placed reliance on the decision in Maharshi Dayanand University v. Anand Coop. L/C Society Ltd.[10] where it was held by a two-Judge Bench of the Supreme Court that there is no mandatory requirement to decide jurisdictional challenge as a preliminary matter, and that the same can be decided along with the final award. It is to be noted that the decision in Maharshi[11] did not consider the previous decision in McDermott[12], therefore, it could be argued that the decision in Maharshi[13] is “per-incuriam” and would not be good law. Similarly, in SAIL v. Indian Council of Arbitration[14] the Delhi High Court held that the wordings of Sections 16(2) and 16(5) do not place any mandatory condition of deciding preliminary objections to jurisdiction of the Tribunal at the threshold. Again, the High Court in arriving at its conclusion did not take into account the decision in McDermott[15] and Kvaerner Cementation[16], as such, the decision of the High Court cannot be said to be good law.

            Another aspect of the matter is the impact of the introduction of the Arbitration and Conciliation (Amendment) Act, 2015[17] (“2015 Amendment”) on the timeline and stage of consideration of the jurisdictional objections under Section 16 of the Act.  The 2015 Amendment was introduced with the objective of making arbitration user-friendly, cost effective and expeditious disposal.[18] In particular, Section 29-A was introduced mandating strict timelines of approximately one year for conclusion of arbitration proceedings.  With the introduction of the stricter timelines, there is a stronger case to be made for threshold examination of any jurisdictional objections at the preliminary stage itself. This would be consistent with the objective of expeditious disposal of arbitration proceedings and would also ensure that in cases of abuse of process, apparent jurisdictional bar, the party raising such objections is not made to wait till the conclusion of the proceedings for determination of these fundamental objections.  Such a course, if adopted, in the opinion of the author would pave way for furthering the cause of expeditious, and inexpensive arbitration proceedings.


Advocate, Delhi High Court and Supreme Court of India.

[1] <http://www.scconline.com/DocumentLink/87bn601l>.

[2] <http://www.scconline.com/DocumentLink/C8X6A4y5>.

[3] Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641; Duro Felguera SA v. Gangavaram Port Ltd., (2017) 9 SCC 729; Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455.

[4] <http://www.scconline.com/DocumentLink/0Vi7sQsH>.

[5] <http://www.scconline.com/DocumentLink/teuo89l3>.

[6] National Thermal Power Corpn. Ltd. v. Siemens Atkeingesellschaft(2007) 4 SCC 451.

[7] McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

[8] Kvaerner Cementation India Ltd. v. Bajranglal Agarwal, (2012) 5 SCC 214.

[9] A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386.

[10] (2007) 5 SCC 295.

[11] (2007) 5 SCC 295.

[12] (2006) 11 SCC 181.

[13] (2007) 5 SCC 295.

[14] 2013 SCC OnLine Del 4490.

[15] (2012) 5 SCC 214.

[16] (2012) 5 SCC 214.

[17] <http://www.scconline.com/DocumentLink/9ajA4z9b>.

[18] Statement of Objects & Reasons – Arbitration and Conciliation Amendment Bill, 2015.

Case BriefsInternational Courts

Caribbean Court of Justice: A Full Bench of Justice Saunders, Wit, Anderson, Rajnauth-Lee, Barrow and Jamadar dismissed the appeal being devoid of merits.

BACKGROUND

The facts of the case are such that criminal complaints were filed in the Magistrates’ Court by the Respondents pursuant to Sections 56 and 59 of the House of Assembly (Elections) Act (i.e. “Elections Act”). The Respondents alleged that the Appellants (members of the Dominica Labour Party, “DLP”) were guilty of the offence of treating by hosting two free public concerts shortly before the 2014 General Elections, intending thereby to corruptly influence the electorate to vote for the DLP. After the Magistrate issued the summons, the Appellants sought judicial review of his decision to assume jurisdiction over the complaints. It was held that the Magistrate was acting in excess of his jurisdiction since a charge of treating challenged the validity of the Appellants’ election, and as such, any action had to be brought by election petition to the High Court. This view was premised on Section 40 (1) (a) of the Constitution which provides that the High Court has the jurisdiction to hear questions of membership and questions concerning the validity of an election. The summons was quashed. The Respondents appealed. The majority Court of Appeal decided in favour of the Respondents and reinstated the summons. The majority stated that Section 59 created a summary process and gave the Magistrate the power to summarily try and convict a person for treating. That power did not intrude upon the accepted exclusive jurisdiction of the High Court in Section 61 of the Elections Act and Section 40 (1) (a) of the Constitution to determine questions of membership of the House. Therefore, the relevant sections did not conflict. Thereby instant appeal before the CCJ was filed.

ISSUES

The parties disagree on four main points which may conveniently be encapsulated as follows:

  1. The ‘Parallel Modes of Trial Point’;
  2. The ‘Constitutionality Point’;
  3. The ‘Weight of Jurisprudence Point’ and
  4. The ‘Equality before the Law Point’.

OBSERVATION AND DECISION

The ‘Parallel Modes of Trial Point’

The Court observed that where a candidate was involved, there were two distinct modes of addressing elections offences, evident on a reading of the Elections Act. First, the summary offences procedure, where offences like treating are tried before a Magistrate. Second, the election petition procedure, which was concerned with the undue return or undue election of a member of the House and where one of the bases upon which such return or election can be found to be undue is the engagement in certain corrupt practices, inclusive of treating. The imposition of the disqualification from retaining a seat in the House set out in Section 61 of the Act did not fall within the summary jurisdiction mode of trial and therefore, was not within the Magistrate’s power.

The ‘Constitutionality Point’;

The Court observed that the relevant provisions of the Elections Act did not conflict with Section 40 (1) of the Constitution. First, summary proceedings for treating did not concern the validity of elections; they were concerned to vindicate the criminal law. Second, on reading section 35 (4) of the Constitution, it was clear that ‘any person’ may be convicted of treating and such conviction impacts, inter alia, their membership, or prospective membership, in the House. Such a person necessarily included members of the House of Assembly.

‘Weight of Jurisprudence Point’,

The Court observed that the cases relied on by the Appellants were all inapplicable to the present appeal as they dealt with the quite separate issue of the exclusive jurisdiction of the High Court, to determine the validity of an election by way of election petition. The proceedings before the Magistrate did not directly concern any question of the validity of elections, it concerned the criminal prosecution of the summary offence of treating.

 ‘Equality Before the Law Point’,

The Court observed that the Appellants’ contention, if correct and put into practice would create two categories of offenders, that is, ordinary citizens subject to the summary prosecution process and members of the House who were immune from it. Such an interpretation offended the principles of equality before the law and the rule of law which were deeply embedded in the Constitution. There was no evidence that it was the intention of the Legislature of Dominica to create this bifurcation in the exposure to the criminal law.

In a concurring judgment, Burgess J. agreed with the decision of the majority, that the appeal should fail as the Elections Act created a two-pronged punitive approach aimed at eliminating corrupt electoral practices, first, the imposition of criminal consequences and second, the unseating of successful candidates. A comparative analysis of legislation from various Commonwealth jurisdictions demonstrated that this two-pronged approach is not anomalous. The Appellants argued that the words, “every person” in Section 56 of the Elections Act did not encompass successful candidates, and Justice Burgess found that in the absence of express language by Parliament, that argument must fail.

In view of the above, appeal was dismissed.[Roosevelt Skerrit v. Antoine Defoe, CCJ Civil Appeal No DMCV2020/001, decided on 09-03-2021]


Arunima Bose, Editorial Assistant has reported this brief.

Op EdsOP. ED.

Introduction

A commercial contract stipulates the terms whereupon the contracting parties jointly conduct their proposed business or a transaction. At times, the parties are unable to agree to a governing law clause. In such situations, where the governing law clause is intentionally omitted, some rules/guidelines are resorted to determine where the governing law of the contract should be. The rules include – determining the location of the parties, the obligations that are to be performed in different jurisdictions, and other factors.

The complexity of the rules makes determining of the governing law of contract difficult. The purpose of a governing law clause is to express the parties’ mutually agreed choice as to what that law should be. Governing law or choice of law is different from the choice of jurisdiction. The selection of choice of law and choice of jurisdiction clauses (in contracts) is more important than an afterthought, pro forma usage, or cut and paste, as the subject-matter of commercial contracts regularly expands beyond domestic intra-State activities and into inter-State and international trade and commerce.

Often international business and trade involves traders belonging to different countries whose legal systems may differ in many ways to that of the other, presenting complicated and even conflicting features. The courts of each country have jurisdiction only within the territorial limits of the country concerned. The rules of private international law resolve the issues concerning conflict of laws, which arise because of differences between the law of the country of nationality of a person and that in which that person may reside, or of which he may acquire nationality. These issues most frequently arise in relation to personal matters such as marriage and divorce, custody of children, abduction of children, adoption and succession. These rules are mainly based on court decisions.

Conflict of laws may also arise in such cases where two or more parties belonging to different countries enter into a contract, and they are governed by two different systems of laws. Conflict of laws or private international law may be described as physics of the law because it is concerned with the application of the law in space and time. It is that part of private law of a country which deals with cases having a foreign element[1].

The first question that arises in conflict of laws cases is whether the forum or the court has the power to decide the case in hand. If the answer to the first question as to the jurisdiction of the court is positive, then the second issue that arises is which law should be applied to decide the dispute?

Choice of law

There has remained always a conflict regarding either the place of contracting or the place of performance of parties as the criteria to determine which law should be applied to the issue related to contract arising between two parties. But under the Indian and English private international law, the autonomy of the parties in this regard has been consistently recognised and the parties are deemed to be free to choose any law which can govern their contract.

However, this freedom of choice is not absolute and is subject to certain restrictions—the reason is that such choice may mean the exclusion of the operation of some law, which could be otherwise applicable. It means this choice makes that applicable law, inapplicable in particular circumstances. Subject to certain limitations, the court will give effect to a choice of law by the parties, either express or implied.

For international contracts, in the absence of any domestic codification on that aspect, the Indian judiciary relies, for its persuasive value, on the traditional common law position as enunciated in Vita Food Products Inc. v. Unus Shipping Co. Ltd.[2], wherein it was held by the Privy Council that the parties were free to choose any governing law, irrespective of its connection with the contract, provided that the choice was bona fide, legal and not contrary to public policy.

Choice of forum

In some countries, parties are at liberty to make a choice of judge or arbitrator to decide the dispute arising between them. Moreover, the parties may also make a choice of the law which the Tribunal shall apply at that particular place. In case the parties do not express the specific law which the Tribunal has to follow, then the English private international law is there to solve this problem. There is a rule which is recognised in the English private international law i.e. elegit judicem elegit jus, which means the implied choice of law can be inferred from the express choice of the Tribunal. The Latin term “lex fori” has its relevance here that means law of the forum. Basically, it means that once the parties have chosen a particular tribunal, then the law of that forum should be the governing law to the dispute of the parties.

In Hemlyn and Co. v. Talisker Distillery[3], the question was that whether in view of the arbitration clause, could an action under the contract be brought in Scotland. Thus, while answering this question the House of Lords held that a contract was governed by English law, according to which the arbitration clause was valid, and the courts of Scotland had no jurisdiction to decide upon the merits of the case until unless the arbitration proved abortive. The observation of Lord Herschel, L.C. in this case was as:

“The present case solved the conflicting situation in a very good manner. He further stated that it appears to me that the language of the arbitration clause very clearly indicated that the parties intended that the rights under that clause should be determined according to the law of England.”

In James Miller and Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd.[4], again it was observed by the House of Lords that the contract with reference to arbitration would have been absolutely null and void if it were to be governed by the law of the country which did not have any real and close connection with the contract. It is unreasonable to attribute that intention on the parties which was not actually their intention. Thus, it is easy to construe the contract in the language which could be used as an indication that the contract or that term of the contract was to be governed by the law of a particular country.

In Tzortzis v. Monark Line A/B[5], it was held by the Court of Appeal that from the choice of English arbitration the natural inference was also about the choice of English law as it was provided that the matters of dispute between the parties were to be decided by arbitration in London, and this choice raises an irresistible inference which overrides all the other factors. However, the freedom of choice of law which was provided was subject to certain conditions like by selecting such jurisdictions the parties could not escape from the obligation, which would otherwise had normally arisen under the law, with which the contract has the most real and closest connection.

Indian jurisprudence and choice of law

In India, the situation is more complicated because here the applicable law is the personal law relating to these matters which is determined by the religion of the individuals concerned. India is also a member of the Hague Conference on Private International Law. In international trade and commerce, every commercial activity is generally preceded by a contract fixing the obligations of the parties to avoid legal disputes. But in this ever-changing world of trade and commerce, disputes between parties are inevitable. No matter how carefully a contract is drafted, a party to the contract may understand his right and obligations in a different way.

Under Indian law, certain rules related to conflict of laws are mentioned specifically in the Civil Procedure Code, 1908. The rules relating to jurisdiction in action inter parties are laid down in Sections 19, 20 of the Code. Section 19 is confined to suit for compensation for wrongs to person or movables. But this section is confined to torts committed in India and to defendants residing in India. It does not include within its ambit the suits in respect of foreign torts. Such cases are covered by Section 20.

The Explanation to this section says that a corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place. Essentially, the Indian rules of private international law are identical to the rules of English private international law. Thus, it is submitted that Indian courts should not construe strictly the requirement of residence in private international law cases, nor should it exercise jurisdiction over persons on whom process has not been served just because cause of action arises within jurisdiction.

If a person to the court submits to the jurisdiction then the court gets the jurisdiction to try the action and a decree or an order is passed if such action will be valid internationally. Mere appearance in the court is considered to be the submission. A person may submit to the court either impliedly or by way of express stipulation in the contract. If a person is outside the jurisdiction, the court will have the jurisdiction on him only if he submits to the jurisdiction of the court. In case, the foreign defendant does not submit to the jurisdiction of the court, then the judgment delivered in his absence would be null and void.

Indian private international law is majorly governed by judiciary decisions in concrete cases. The courts have generally adopted the English rules of private international law. The Supreme Court in Delhi Cloth and General Mills Co. Ltd. v. Harnam Singh[6] had to decide whether Indian private international law gave the parties the freedom to choose whatever governing law from any part of the world. The case pertained to the recovery of balance from the plaintiff who resided in Pakistan and was in business with the defendant in India.

It was observed that the subjective theory may produce strange results because of the unconnected law and it is possible that there must be difficulty in enforcing the law if it is illegal or against the public policy. Similar observation was made in British India Steam Navigation Co. Ltd v. Shanmughavilas Cashew Industries[7], where the court emphasised that the choice of proper law must be bona fide and legal, and not against public policy. Similarly, the Calcutta High Court in Rabindra N. Maitra v. LIC of India[8] upheld the same principle and observed that there would be no justification for a choice of an unconnected law in the contractual agreement between international parties, unless the law is also the proper law.

However, it has been argued that the position has changed subsequently, and in NTPC v. Singer Co.[9], the Supreme Court abandoned the restrictive approach that confined the parties to make a choice of the governing law that was unconnected to the contract. The parties were permitted to make a choice of law even if there was no geographical nexus between the obligation in the contract and the chosen law. Thus, it implied that the parties became more autonomous in their choice of law. The court also extended the autonomy by observing that the parties were free to choose different laws to govern different parts of the contract. It also observed that the only limitation to the parties’ freedom to choose a governing law for their international commercial contract would be that such choice was not bona fide or was opposed to public policy. Similarly, in Modi Entertainment Network v. WSG Cricket Pte. Ltd.[10], the Supreme Court again clarified that Indian private international commercial law permits the choice of any legal system even if the legal system does not have any connection with the contractual obligation in question.

Conclusion

In recent years, the basic features of the conflict of laws, its methodology, and its governing ideologies have been seriously questioned. No scholarly or judicial consensus is found on the choice of law rules. Particularly, the conventional ideas of seeking uniformity of result and of establishing equality between domestic and foreign laws have been criticised on the grounds that such ideas are not pragmatic and appropriate, since the domestic courts actually do and in fact, should be inclined to domestic law in a situation where it is one of the applicable legal systems. To conclude, it can be stated that the stability and fairness of international legal undertakings seem to depend upon the strengthening of this renewed attempt to supra-nationalise the conflict of laws.


*Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in.

**Ritisha Gupta, Research Assistant and final year student with Hidayatullah National Law University, Raipur, e-mail: ritishagupta02@gmail.com

[This article was first published in the Practical Lawyer Magazine, March Issue 2021. Republished with the kind permission of Eastern Book Company.]

[1] Professor Emeritus, I.O. Agbede, Conflict of Laws, (1998) at p. 513.

[2] 1939 AC 277.

[3] (1894) AC 202.

[4] 1970 AC 583 : (1970) 2 WLR 728 : (1970) 1 All ER 796.

[5] (1968) 1 WLR 406.

[6] AIR 1955 SC 590

[7] (1990) 3 SCC 481.

[8] 1963 SCC OnLine Cal 48 

[9]  (1992) 3 SCC 551 

[10] (2003) 4 SCC 341.

Case BriefsSupreme Court

Supreme Court: The bench of Dr. DY Chandrachud* and MR Shah, JJ has held that under Insolvency and Bankruptcy Code, 2016 (IBC), NCLT has jurisdiction to adjudicate disputes which arise solely from or which relate to the insolvency of the Corporate Debtor. The Court, however, issued a note of caution to the NCLT and NCLAT to ensure that “they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor. The nexus with the insolvency of the Corporate Debtor must exist.”

Jurisdiction of the NCLT/NCLAT over contractual disputes

“NCLT owes its existence to statute. The powers and functions which it exercises are those which are conferred upon it by law, in this case, the IBC.”

The NCLT has been constituted under Section 408 of the Companies Act, 2013 ―to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.

Sub-section (1) of Section 60 provides the NCLT with territorial jurisdiction over the place where the registered office of the corporate person is located. NCLT shall be the adjudicating authority ―in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors.

The institutional framework under the IBC contemplated the establishment of a single forum to deal with matters of insolvency, which were distributed earlier across multiple fora. In the absence of a court exercising exclusive jurisdiction over matters relating to insolvency, the corporate debtor would have to file and/or defend multiple proceedings in different fora. These proceedings may cause undue delay in the insolvency resolution process due to multiple proceedings in trial courts and courts of appeal.

“A delay in completion of the insolvency proceedings would diminish the value of the debtor‘s assets and hamper the prospects of a successful reorganization or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner.”

Residuary jurisdiction of the NCLT under section 60(5)(c)

The residuary jurisdiction conferred by statute may extend to matters which are not specifically enumerated under a legislation. While a residuary jurisdiction of a court confers it wide powers, its jurisdiction cannot be in contravention of the provisions of the concerned statute.

The residuary jurisdiction of the NCLT under Section 60(5)(c) of the IBC provides it a wide discretion to adjudicate questions of law or fact arising from or in relation to the insolvency resolution proceedings.

“If the jurisdiction of the NCLT were to be confined to actions prohibited by Section 14 of the IBC, there would have been no requirement for the legislature to enact Section 60(5)(c) of the IBC. Section 60(5)(c) would be rendered otiose if Section 14 is held to be the exhaustive of the grounds of judicial intervention contemplated under the IBC in matters of preserving the value of the corporate debtor and its status as a ‘going concern’. “

Ruling on facts 

In the present case, NCLT stayed the termination by the Gujarat Urja Vikas Nigam Limited of its Power Purchase Agreement (PPA) with Astonfield Solar (Gujarat) Private Limited on the ground of insolvency. The order of the NCLT was passed in applications moved by the Resolution Professional of the Corporate Debtor and Exim Bank under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. On 15 October 2019, the NCLAT dismissed the appeal by Gujarat Urja Vikas Nigam Limited under Section 61 of the IBC.

The PPA was terminated solely on the ground of insolvency, since the event of default contemplated under Article 9.2.1(e) was the commencement of insolvency proceedings against the Corporate Debtor. Hence, the NCLT was empowered to restrain the appellant from terminating the PPA. In the absence of the insolvency of the Corporate Debtor, there would be no ground to terminate the PPA. The termination is not on a ground independent of the insolvency. The present dispute solely arises out of and relates to the insolvency of the Corporate Debtor.

“The PPA has been terminated solely on the ground of insolvency, which gives the NCLT jurisdiction under Section 60(5)(c) to adjudicate this matter and invalidate the termination of the PPA as it is the forum vested with the responsibility of ensuring the continuation of the insolvency resolution process, which requires preservation of the Corporate Debtor as a going concern. In view of the centrality of the PPA to the CIRP in the unique factual matrix of this case, this Court must adopt an interpretation of the NCLT‘s residuary jurisdiction which comports with the broader goals of the IBC.”

The Court further explained that the adjudication of disputes that arise dehors the insolvency of the Corporate Debtor, the RP must approach the relevant competent authority. For instance, if the dispute in the present matter related to the non-supply of electricity, the RP would not have been entitled to invoke the jurisdiction of the NCLT under the IBC. However, since the dispute in the present case has arisen solely on the ground of the insolvency of the Corporate Debtor, NCLT is empowered to adjudicate this dispute under Section 60(5)(c) of the IBC.

The Court took further care to clarify that,

“Judicial intervention should not create a fertile ground for the revival of the regime under section 22 of SICA which provided for suspension of wide-ranging contracts. Section 22 of the SICA cannot be brought in through the back door. The basis of our intervention in this case arises from the fact that if we allow the termination of the PPA which is the sole contract of the Corporate Debtor, governing the supply of electricity which it generates, it will pull the rug out from under the CIRP, making the corporate death of the Corporate Debtor a foregone conclusion.”

Conclusion

“NCLT‘s jurisdiction shall always be circumscribed by the supervisory role envisaged for it under the IBC, which sought to make the process driven by trained resolution professionals.”

The jurisdiction of the NCLT under Section 60(5)(c) of the IBC cannot be invoked in matters where a termination may take place on grounds unrelated to the insolvency of the corporate debtor. Even more crucially, it cannot even be invoked in the event of a legitimate termination of a contract based on an ipso facto clause, if such termination will not have the effect of making certain the death of the corporate debtor. As such, in all future cases, NCLT would have to be wary of setting aside valid contractual terminations which would merely dilute the value of the corporate debtor, and not push it to its corporate death by virtue of it being the corporate debtor‘s sole contract.

Section 60(5)(c) of the IBC vests the NCLT with wide powers since it can entertain and dispose of any question of fact or law arising out or in relation to the insolvency resolution process. However,

“NCLT‘s residuary jurisdiction, though wide, is nonetheless defined by the text of the IBC. Specifically, the NCLT cannot do what the IBC consciously did not provide it the power to do.”

The Court, however, made it clear that it’s finding on the validity of the exercise of residuary power by the NCLT is premised on the facts of the case at hand and that it was not laying down a general principle on the contours of the exercise of residuary power by the NCLT. However, it is pertinent to mention that the NCLT cannot exercise its jurisdiction over matters dehors the insolvency proceedings since such matters would fall outside the realm of IBC.

[Gujarat Urja Vikas Nigam Limited v. Amit Gupta,  2021 SCC OnLine SC 194, decided on 08.03.2021]


*Judgment by: Justice Dr. DY Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

Appearances before the Court by”

For appellant: Senior Advocate Shyam Diwan and Advocate Ranjitha Ramachandran

For Respondent: Senior Advocate C U Singh and Nakul Dewan

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Division Bench of Justice Bansi Lal Bhat (Acting Chairperson) and Dr Ashok Kumar Mishra (Technical Member) observed that:

“I&B Code would not permit the Adjudicating Authority to make a roving enquiry into the aspect of solvency or insolvency of the Corporate Debtor except to the extent of the Financial Creditors or the Operational Creditors, who sought triggering of Corporate Insolvency Resolution Process.”

Present appeal has been heard in ex-parte.

Bench notes that the application of appellant filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 has not been admitted or rejected by the Adjudicating Authority (NCLT, Bengaluru Bench).

Adjudicating Authority disposed of the application directing the respondent to make endeavours for resolution in respect of outstanding debt, failing which the appellant would be at liberty to invoke the arbitration clause contained in the Agreement.

The above finding of the Adjudicating Authority was found to be unique and not in conformity with the provisions embodied in Section 9 (5) of the I&B Code, hence cannot be supported.

Section 9(5) of the I&B Code, 2016:

“9(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order—

(i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,—

(a) the application made under sub-section (2) is complete;

(b) there is no repayment of the unpaid operational debt;

(c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;

(d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and

(e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any.

  1. ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if—

(a) the application made under sub-section (2) is incomplete;

(b) there has been repayment of the unpaid operational debt;

(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;

(d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or

(e) any disciplinary proceeding is pending against any proposed resolution professional:

Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority.”

The above provision abundantly makes it clear that the Adjudicating Authority has only two options, either to admit Application or to reject the same. No third option or course is postulated by law.

Appellant’s counsel invited Tribunal’s attention to the fact that the Adjudicating Authority took note of the fact that the respondent did not respond to the Demand Notice, demanding the outstanding amount in respect of the four invoices noticed in the impugned order.

Further another point was brought in from the impugned order wherein it was observed that mere acceptance of the debt in question by the Respondent would not automatically entitle the Appellant to invoke the provisions of the Code, unless the debt and default is undisputed and proved to the satisfaction of the Adjudicating Authority.

Bench in view of the above expressed that the Adjudicating Authority should have, in absence of any dispute contemplated under Section 8(2) having been raised by the Respondent as a pre-existing dispute or that the claim of Appellant had been satisfied, proceeded to admit the Application, as no dispute had been raised before it, justifying its disinclination to admit the Application.

We cannot understand as to how the availability of alternate remedy would render the debt and default disputed.

Tribunal further added to its reasoning that

In absence of pre-existing dispute having been raised by the Corporate Debtor or it being demonstrated that a suit or arbitration was pending in respect of the operational debt, in respect whereof Corporate Debtor was alleged to have committed default, the Adjudicating Authority would not be justified in drawing a conclusion in respect of there being dispute as regards debt and default merely on the strength of an Agreement relied upon by the Appellant.

Adjudicating Authority clearly landed in error by observing that the course adopted by it was warranted on the principle of ease of doing business, ignoring the fact that such course was not available to it, ease of doing business only being an objective of the legislation.

Hence, while allowing the appeal and setting aside the impugned order, Tribunal directed the Adjudicating Authority to pass an order of admission. [Sodexo India Service (P) Ltd. v. Chemizol Additives (P) Ltd., 2021 SCC OnLine NCLAT 18, decided on 22-02-2021]

Case BriefsHigh Courts

Madhya Pradesh High Court: G.S. Ahluwalia, J., disposed of a writ petition setting aside the orders passed by the Board of Revenue and Additional Commissioner in relation to a matter of Will.

The petition contained that the husband of the petitioner had one-half share in the agricultural land bearing survey nos.1031 area 0.81 hectare, 1033 area 0.15 hectare, 1040 area 0.72 hectare, 1084 area 0.76 hectare total area 2.44 hectare situated in a village. The husband of the petitioner had died issue-less on 17-5-2006 due to illness. The respondents had then filed an application for mutation of their names on the basis of a “Will” purportedly executed by the deceased. The petitioner submitted her objection and claimed that she is the sole legal heir of deceased, being his legally wedded wife. After which the Tehsildar had rejected the application filed by the respondents, being aggrieved an appeal was filed before the Court of SDO which was again rejected. Finally respondent made n appeal before the Additional Commissioner which was allowed after relying upon the so called “Will” executed by deceased and the names of the respondents were directed to be mutated in the revenue records, aggrieved by which the petitioners had preferred an appeal before the Additional Commissioner which was dismissed. Thus, the instant appeal was filed.

The Court relied on the decision given in Ranjit v. Nandita Singh, MP No.2692 of 2020 which talked about the Conferral of Status of Courts on Board and Revenue Officers where it was clearly held that the revenue authorities have no jurisdiction to decide the correctness and genuineness of a “Will” and if the propounder of the “Will” wants to take advantage of the “Will”, then he had to get his title declared from the Civil Court of competent jurisdiction.

The Court while setting aside the orders passed by the Board of Revenue and Additional Commissioner directed that the revenue authorities restore the names of the petitioner in the revenue records.[Ramkali v. Banmali, 2021 SCC OnLine MP 359, decided on 17-02-2021]


Suchita Shukla, Editorial Assistant has put this story together.

Case BriefsSupreme Court

Supreme Court: The bench of Dr. DY Chandrachud* and MR Shah, JJ has held that the presence of an arbitration clause within a contract between a state instrumentality and a private party does not act as an absolute bar to availing remedies under Article 226.

“If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie.”

In the case where it was argued that a remedy for the recovery of moneys arising out a contractual matter cannot be availed of under Article 226 of the Constitution, the Court clarified that the recourse to the jurisdiction under Article 226 of the Constitution is not excluded altogether in a contractual matter. A public law remedy is available for enforcing legal rights subject to well-settled parameters.

“The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena.”

The Court, however, made clear that though the presence of an arbitration clause does not oust the jurisdiction under Article 226 in all cases, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked.

[Unitech Ltd. v. Telangana State Industrial Infrastructure Corporation, 2021 SCC OnLine SC 99, decided on 17.02.2021]


*Judgment by: Justice Dr. DY chandrachud 

Know Thy Judge| Justice Dr. DY Chandrachud