Case BriefsHigh Courts

Delhi High Court: Sanjeev Narula, J., decides a matter covering various aspects of the arbitration agreement.

Instant petition under Section 11 of the Arbitration and Conciliation Act sought appointment of a Sole Arbitrator.

Respondent was called upon to file a reply to the petition vide Order 08-02-2021, but no reply was filed.

Factual Matrix

Parties entered into a Memorandum of understanding on 1-01-2020 with the objective of promoting their respective business interests and profitability.

In the MoU it was provided that both the parties agree that they shall not attempt to solicit, contact or attempt to contact employees of each other for the purpose of offering employment.

Disputes arose as MSD breached its obligations under Clause 2.4 as explained above. MSD also indulged in various criminal activities which violate the terms of MoU, such as tampering with the servers of IMZ, forcibly gaining access to the computer database and electronic records of IMZ, sending emails to clients of IMZ and further making a false allegation against the directors and employees of IMZ.

On being aggrieved with the above, IMZ invoked the arbitration. Since MSD did not respond to the notice of Delhi International Arbitration Centre, IMZ approached this Court by way of the present petition.

Analysis

High Court while analyzing the matter stated that in exercising jurisdiction under Section 11, Court needs to only examine if there is an existence of the arbitration agreement and whether there is the existence of arbitral disputes.

Supreme Court in the decision of Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, observed that “the rule for the Court is ‘when in doubt, do refer”.

Therefore, it was noted that only in cases when ex-facie, the document appeared to be fabricated, that the Court would make a judicial enquiry. Mere allegation of fraud is not enough.

Bench stated that the purported veracity of the document in the present case, though disputed by MSD, was not sufficient to hold that the document is fraudulent, or that the Court should not proceed to appoint an Arbitrator.

Non-Compliance of Pre-Arbitration Procedure 

Arbitration clause stipulated that the parties shall attempt to resolve the disputes mutually through negotiations, falling which the same shall be referred to and decided by a sole arbitrator.

Bench found it to be surprising and irreconcilable that, on hand, MSD initiated criminal proceedings by filing an FIR against IMZ and on the other hand, it looked forward to mutually resolve the disputes through negotiation.

Moreover, in Court’s opinion, having regard to the ongoing litigation between directors of the parties before the NCLT, criminal proceedings, and conduct of the parties, relegating them to mutual negotiation to resolve the disputes would be an empty formality

 In such a situation which arose in the present matter, insistence on negotiation as a pre-condition to arbitration should not get in the way of the dispute resolution process agreed upon between the parties.

Non-payment of stamp duty on a commercial contract would invalidate the arbitration agreement?

High Court stated that the issue of stamping also stands covered by N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2021 SCC OnLine SC 13, wherein the Supreme Court in clear and unequivocal terms overruled the decisions in SMS Tea Estates (P) Ltd. v. Chandmari Tea Company (P) Ltd.,(2011) 14 SCC 66, and Garware Wall Ropes Ltd. v. Coastal Marine Constructions and Engg. Ltd., (2019) 9 SCC 209, however, the same was affirmed in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1.

Thus, Court opined that the plea of agreement being unstamped wouldn’t prevent the Court in appointing an arbitrator while exercising jurisdiction under Section 11 of the Act.

IMZ established that the contingencies provided under Section 11(6) of the Act were satisfactorily made out. Hence the present petition was allowed.

Shashank Garg, Advocate was appointed as the Sole Arbitrator to adjudicate the disputes that arose between the parties under the MoU.

Appeal was allowed in view of the above terms. [IMZ Corporate (P) Ltd. v. MSD Telematics (P) Ltd., 2021 SCC OnLine Del 3016, decided on 4-06-2021]


Advocates before the Court:

For Petitioner: Mr Nikhil Malhotra, Advocate

Mr Devadatt Kamat, Senior Advocate with Mr Sumeet Lall,

Mr Sidhant Kapoor and Mr. Javedur Rehman, Advocates.

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

Jammu and Kashmir High Court: Sanjay Dhar J., while dismissing the present petition, discussed the scope of interference under Article 226 in Contractual matters and further called the present case a classic example of filing successive petitions for the same relief after failing to get the interim relief in the earlier writ petitions. Taking a lenient view of the matter, and considering that the petitioner is a student, Court did not impose any costs but only left with a severe warning against the same.

Through the medium of the instant writ petition, the petitioner has sought a direction against the respondents for release of all the instalments of fee in her favour and transfer of the same to a medical college in Bangladesh, so that she is able to pursue her MBBS course from the institution therein. Further, a writ of certiorari for quashing of communication dated 31-01-2020 has also been sought. Issue to be determined by the Court precisely was, whether the petitioner is entitled to seek a direction upon the respondent corporation to release the loan amount sanctioned in her favour to college different from the one mentioned in the sanctioned letter. It is to be noted that such borrowings/loan from a Financial Institution is purely contractual in nature governed by the terms and conditions of the loan agreement indicating a very restricted approach of the Court exercising writ jurisdiction.

Court referred to the following cases pursuant to its decision;

  1. Noble Resources Ltd. v. State of Orissa, (2006) 10 SCC 236; While answering whether a writ petition was maintainable in contractual matters and if so, what is the scope of jurisdiction of the Court in such matters, Supreme Court said, “It is trite that if an action on the part of the State is violative of the equality clause contained in Article 14 of the Constitution of India, a writ petition would be maintainable even in the contractual field. A distinction indisputably must be made between a matter which is at the threshold of a contract and a breach of contract; whereas in the former the court’s scrutiny would be more intrusive, in the latter the court may not ordinarily exercise its discretionary jurisdiction of judicial review, unless it is found to be violative of Article 14 of the Constitution.” [Law laid down in Radhakrishna Agarwal v. State of Bihar, (1977) 3 SCC 457]
  2. Kisan Sehkari Chini Mills v. Vardan Linkers, (2008) 12 SCC 500; With respect to an administrative action involved in conclusion of the Contract, Court said, “…when there is a contractual dispute with a public law element, and a party chooses the public law remedy by way of a writ petition instead of a private law remedy of a suit, he will not get a full fledged adjudication of his contractual rights, but only a judicial review of the administrative action.”
  3. Rishi Kiran Logistics v. Board of Trustees of Kandla Port Trust, (2015) 13 SCC 233; Distinguishing between a remedy sought under the Contract Act, by means of damages, Specific Performance under the specified Act and invoking Writ Jurisdiction, Court observed in the words, “Ordinarily, the remedy available for a party complaining of breach of contract lies for seeking damages. He would be entitled to the relief of specific performance, if the contract was capable of being specifically enforced in law. The remedies for a breach of contract being purely in the realm of contract are dealt with by civil courts. The public law remedy, by way of a writ petition under Article 226 of the Constitution, is not available to seek damages for breach of contract or specific performance of contract. However, where the contractual dispute has a public law element, the power of judicial review under Article 226 may be invoked.

Narrowing down to the facts and circumstances of the present case, Court said that the terms and conditions of the loan agreement suggest that the institution in whose favour the loan was being sanctioned was an essential ingredient to the contract and the college in which the petitioner now seeks to take admission in, was not at all in picture during the grant of the first installment.

Therefore, “…the action of the respondent-Corporation in not releasing the second installment of loan in favour of the petitioner appears to be justified and the same cannot be termed either arbitrary or malafide”. Court further said, “So far as the action of the respondent Corporation directing the petitioner to refund the first installment of loan amount is concerned, the same also appears to be justified because the petitioner admittedly had, on her own, transferred the first installment of loan from the Community Based Medical College, Bangladesh to Khwaja Younis Ali Medical College, Bangladesh without informing the respondent Corporation which is a breach of terms and conditions of the sanction letter.” [Mubashir Ashraf Bhat v. Union Territory of J&K, 2021 SCC OnLine J&K 8, decided on 19-01-2021]


Sakshi Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Patna High Court: Shivaji Pandey, J. allowed the writ application to the extent that the impugned order was remanded back to the competent authority to consider the claim of the petitioner afresh and take a decision in accordance with law.

The petitioner challenged the order, whereby the competent authority had refused to refer to the industrial dispute raised by the petitioner for adjudication on the ground that the disputant was engaged in the capacity of Sales Manager, and as such he would not qualify to be a workman within the definition given in Section 2(s) of the Industrial Disputes Act, 1947. The petitioner was appointed as Trainee Sales Team Manager, but he claimed to be a workman. A conciliation proceeding was held, but it failed to materialize and ultimately the dispute was denied from being referred to an Industrial Tribunal.

The Court held that the authority while exercising the power of conciliation and consideration to referring the dispute raised exercises a power which is administrative in nature and thus, it cannot exercise the power of adjudication and as such, cannot adjudicate the status of an employee whether he is a workman or not. It was emphasized by the Court that the appropriate authority while refusing to refer the dispute to the Tribunal cannot embark upon adjudicatory mechanism.

The Court was of the view that that authority had usurped the power of a quasi-judicial body and hence, the impugned order stood quashed. The matter was remanded back to the competent authority to consider the claim of the petitioner afresh and take a decision in accordance with law within a period of eight weeks from the date of receipt/production of a copy of this order.

In view of the above-noted facts, the instant petition was allowed accordingly.[Rahul Muzaffarpuri v. Union of India, 2019 SCC OnLine Pat 1264, decided on 05-07-2019]

Case BriefsHigh Courts

Patna High Court: A Full Bench of Hemant Kumar Srivastava, Aditya Kumar Trivedi and Ashutosh Kumar, JJ. refrained from adjudicating on the validity of Section 76(2) of the Bihar Prohibition and Excise Act, 2016.

In the present case, the question for consideration was whether the provisions of Section 438 Code of Criminal Procedure, 1973 continue to apply in spite of the bar created under Section 76(2) of the Bihar Prohibition and Excise Act, 2016 and as to whether such an application under Section 438 CrPC for anticipatory bail was maintainable. A Single Judge Bench had ruled that anticipatory bail applications cannot be entertained for offences under the purview of the Act. However, another Single Judge Bench in Manish Kumar v. State of Bihar,  Cr. Misc. No. 21578 of 2017, held that the previous judgment was per incuriam as Section 76(2) of the Act of 2016 ran repugnant to Section 438 CrPC and, therefore, violative of Article 254 of Constitution of India and referred the matter to Division Bench. The Division Bench was of the view that the matter was already under consideration in the Supreme Court and to decide on the matter would amount to judicial overreach. The case was then referred to this Full Bench due to the conflict in judgments given by the prior Benches.

The Court opined that a Single Judge Bench could not overrule the judgment given by another Single Judge Bench, and the Judge in Manish Kumar case was not right in declaring the judgment given by another Single Judge Bench per incuriam.

The Full Bench was unanimous in the opinion that till the matter was still under consideration in the Apex Court which would include the justification of a State Legislature in providing a complete bar to the grant of anticipatory bail to accused persons of offences under the Act, anticipatory bail petitions shall not be maintainable; unless from the facts of the case, it would prima facie appear that none of the ingredients of the offences under the Act of 2016 are made out for attracting the bar of Section 76 (2) of the Act. For coming to the aforesaid conclusion as to whether the offence can be said to be made out of the facts of the case, no detailed enquiry was to be made.

The Full Bench, hence, approved the view of the Division Bench in Manish Kumar case that it was not right to decide the matter till the matter was still pending in the Supreme Court and refrained from adjudicating into the matter.[Ram Vinay Yadav v. State of Bihar, Criminal Appeal (SJ) No. 431 of 2019, decided on 17-05-2019]

Case BriefsHigh Courts

Bombay High Court: S.C. Gupte, J. while setting aside an arbitral award for patent illegality, observed that “any forum, which adjudicates upon the rights and liabilities of the parties based on a contract, is enjoined upon to determine those rights and liabilities in accordance with the contractual terms, be it a court or an arbitral forum.”

The respondents were the borrowers of the Madhavpura Mercantile Coop. Bank Ltd. whose accounts were declared as non-performing assets (NPAs) for committing default in repayment of loans. To expedite the recoveries, the Bank formulated Compromise Scheme of Settlement (CSS-2013). As per the CSS, the NPA date in case of respondents was expressly stated to be 31-3-2001 and it was expressly stipulated that no conditional proposal for settlement or proposal disputing the NPA date would be accepted. The respondents accepted CSS unconditionally. Later, the respondents raised a dispute about the NPA date and therefore disputed their liability under the CSS. The matter went to arbitration and the Arbitral Tribunal accepted the respondents’ case on the applicable NPA date and made an award in their favour. Aggrieved thereby, the Bank filed the present petition.

The High Court was of the view that the arbitrator exceeded his jurisdiction by reformulating the contract between the parties contained in the CSS. It was noted that CSS-2013 was not a statutory scheme and nothing prevented the petitioner from naming any particular date as the NPA date, 31-3-2001 was treated as NPA date on the basis of statutory auditor’s report. It was made clear in CSS-2013 that the scheme could not be accepted conditionally. It was for the individual debtor to accept or reject the scheme. The respondents accepted it unconditionally which brought about a concluded contract substituting the original contract of loan between the parties. The Court said: “The arbitrator, who was to adjudicate the rights and liabilities of the parties, was expected to determine such rights and liabilities under such contract, namely, CSS2013. It was not open to him to question CSS-2013 or relieve any debtor from his obligations under it on some notion of equity or sympathy.” 

It was also observed: “The consensus between the parties to refer their dispute to arbitration merely implies that the parties are agreeable to have the dispute adjudicated by an arbitral forum as opposed to a court of law. The rights and liabilities, which are to be thereby determined, are the rights and liabilities arising under the contract. Such consensus does not in any way impinge upon these rights and liabilities.”

It was held that the impugned award, thus, deserved to be quashed, both on the grounds of patent illegality, since the declaration in it was in the face of a contract as well as for the reason of the arbitrator having taken an impossible view, or a view which no fair or judiciously mined person  would take. [Madhavpura Mercantile Coop Bank Ltd. v. Rasiklal D. Thakkar, Commercial Arbitration Petition No. 179 of 2016, decided on 25-03-2019]

Case BriefsHigh Courts

Punjab and Haryana High Court: This writ petition was filed before the Bench of G.S. Sandhawalia, J., against the award passed by the Arbitrator under the Railway (Amendment) Act, 2008, whereby the market value had been fixed for the land acquired for the Dedicated Freight Corridor Project.

The dispute was with regard to the Arbitrator’s action where he modified the initial award passed to enhance the compensation. Thus, landowners approached this Court for further enhancement of the compensation. Respondent contended that the arbitral award should have been challenged under Section 34 of the Arbitration and Conciliation Act, 1996 which is a statutory remedy available with petitioner.

High Court was of the view that the landowners who approached Court were similarly situated to landowners who had already approached the District Judge. The only feasible argument for the landowners was to point out the delay caused and difficulty in filing objections under Section 34 of the Act. Court opined that Section 14 of the Limitation Act should also be considered. Case of Narendra Singh v. State of U.P., 2017 (9) SCC 426 was referred to where with respect to Section 28-A of the Land Acquisition Act, 1894 Court had held that it was not an adversarial form of adjudication and fair compensation was to be determined for all landowners whose land was taken away by the same notification. Thus, landowner’s apprehension was without any basis; therefore, this petition was dismissed. [Satbir v. Union of India, 2019 SCC OnLine P&H 132, decided on 13-02-2019]

Case BriefsHigh Courts

Kerala High Court: The Bench of Dama Seshadri Naidu J. hearing a civil writ petition filed by a vehicle dealer granted an interim stay on the levy of Goods and Services Tax on the amount collected by vehicle dealers from purchasers.

Petitioner, a motor vehicle dealer, challenged the applicability of Section 15(2) of the GST Act, 2017 which mandates that the value of supply should include any taxes, duties, cesses, fees and charges levied under any other law in force. His contention was that the amount of 1% that the dealer of motor vehicle collects from the purchaser of a car worth more than ten lakhs (which is the tax collected at source), under Section 206C (1F) of the Income Tax Act, 1961 cannot be treated as an integral part of the value of the goods and services supplied by the petitioner. This is so because the dealer of the motor vehicle, acts only as an agent for the State to collect income tax under Section 206C(1F) of the IT Act and that amount eventually goes to the vehicle purchaser’s credit.

The Court concluded that the petitioner had raised a prima facie issue which needed Court’s attention and further and deeper adjudication. In view thereof, it directed the tax authorities to not act on the clarification at serial no. 5 of the notification issued by the Central Board of Indirect Taxes and Customs till the disposal of the instant petition.[PSN Automobiles (P) Ltd. v. Union of India, WP (C) No. 680 of 2019, order dated 17-01-2019]

Case BriefsForeign Courts

“When in the name of preservation of tradition these jirgas/panchayats assume the powers of a pillar of the State, i.e. the judiciary, they threaten the very foundations of the rule of law. What these bodies in effect preserve is the unfair social constructs in the rural areas where the word and arbitrary decisions of the elites, waderas, chaudhries, and persons of influence are treated as law and imposed upon the socially and financially weaker parties.”

Supreme Court of Pakistan: The Division Bench of Mian Saqib Nisar, HCJ and Ijaz Ul Ahsan, J. hearing a petition filed under Article 184(3) of the Constitution of the Islamic Republic of Pakistan, 1973 challenging the legality of operation of jirgas/ panchayats as adjudicatory bodies, held the same to be illegal.

‘Council of elders’ or ‘kangaroo courts’ exist in some tribal areas of Pakistan, particularly in north Khyber Pakhtunkhwa (KPK) and in some rural areas of KPK, Punjab, Sindh and Balochistan.

The Court noted perused the research report prepared by petitioner titled “Women, Violence and Jirgas – Consensus and Impunity in Pakistan” and opined that jirgas violate fundamental rights of citizens as they apply their own customary/tribal/feudal procedure in taking decisions. Customarily negligible representation of women before such councils violates Article 2 of the International Covenant on Civil and Political Rights (ICCPR).

Reliance was placed on Shazia v. Station House Officer, PCrLJ 2004 Karachi 1523 where it was held that operation of kangaroo court/council of elders violates principles of natural justice, due process and fair trial as it does not follow any procedure and operates as a parallel judicial system, thus usurping powers of Court.

The Court also noted the rulings of Supreme Court of India in Arumugam Servai v. State of Tamil Nadu, (2011) 6 SCC 405 and Shakti Vahini v. Union of India, (2018) 7 SCC 192 wherein khap panchayats were declared illegal; and preventative, remedial and punitive measures were introduced to eradicate any khap panchayat ordering honour killings. The Court observed that just like India, Pakistan must also take stringent and immediate action to eradicate the menace of jirgas/panchayats to the extent that they assume power to adjudicate criminal or civil disputes without following any law.

In view of the above, it was held and clarified that it is not the term ‘panchayat’ or ‘jirga’ which is illegal but the act of them posing as courts and usurping the powers of a court of law which is illegal. [National Commission on Status of Women v. Government of Pakistan, Constitution Petition No. 24 of 2012, dated 16-01-2019]

Case BriefsHigh Courts

Allahabad High Court: A Single Judge Bench comprising of Rajeev Misra, J., dealt with this petition which was filed under Article 227 of the Constitution of India where a summoning order under Sections 323, 504, 379, 427 and 452 IPC, criminal revision petition and any proceedings arising out of them were prayed to be quashed.

Petitioner had made contentions on factual basis pleading that he had been falsely implicated. Various cases were referred before the Court which elucidated in length the legal aspects evolved with regard to matters where proceedings can be quashed. Cases, where allegations made against accused or investigation was done by investigating officer, do not show any offence committed by accused or the allegations seems absurd, or extremely improbable, or where prosecution is legally barred, or the criminal proceeding is found to be made maliciously with motive of grudge can be quashed.

The Court observed that as per the submissions of petitioner, adjudication was required on the question of facts and even the question of law coming therein can be adjudicated by the trial court itself. Court found no reason to quash the summoning order, complaint or any other proceedings arising out of them. Therefore, the writ petition was dismissed. [Vivek Kumar v. State of U.P.,2018 SCC OnLine All 1166, order dated 23-08-2018]