Op EdsOP. ED.

Arbitration is considered as one of the most preferred modes of dispute resolution as it is expedient, it values party autonomy and ensures party equality and these features are also the pillars on which arbitration as a method of dispute resolution enjoys its standing.

Mr Fali S. Nariman in one of his lectures said “the development of arbitration in India is not attributable to the success in arbitration, rather to the failures of the Court”.

The above-quoted statement quite vehemently and rightly express the development of the law concerning arbitration in India. The Indian jurisprudence has seen a constant development in its understanding and applicability of the concepts and principles of arbitration and the major changes in its jurisprudence has to be attributed to the developing judicial understanding over the same.

However, this method of dispute resolution suffers from various limitation and this article will be dealing with the issue of arbitrability, which is one of the most important issues and limitations of arbitration and it discusses whether the scope of the Arbitration Tribunal extends to disputes of all nature or there exists disputes which the Tribunal is not capable of resolving and have to be mandatorily tried in the courts.

Arbitrability

Arbitrability refers to determining which type of disputes may be resolved by arbitration and what kind of disputes shall be exclusively dealt with by the courts.[1] As per Article V(2)(a) of the New York Convention, the arbitration award may be refused recognition or enforcement if the subject-matter of the difference is not capable of settlement by arbitration under the law of that country.[2] Further, Article 36(1)(b) of the UNCITRAL Model Law, a court can refuse enforcement if it finds that the subject-matter of the dispute is not capable of settlement under the law of the State.[3]

In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., the Supreme Court while propounding the three-prolonged test of determining arbitrability bifurcated the disputes into dealing with rights in rem and right in personam and held that the latter were arbitrable whereas the former was not arbitrable as they have the potential to affect the society at large.[4] The  Court also listed out certain types of disputes which were not arbitrable and there has been an evolving jurisprudence which has further added type of disputes to this list.

                  There are various categories of dispute like intellectual property rights, antitrust, insolvency, criminal matters, fraud, etc. which are considered to be non-arbitrable.[5] Fraud has been defined as concealing or making false representation by way of a statement or conduct which results into loss of the person relying on such representation.

Section 17 of the Contract Act, 1872[6] defines “fraud” to mean and include suggesting “a fact knowing it to be untrue, knowingly active concealment of a fact, making a promise without intending to fulfil it or any other act which is capable of deceiving and is committed by a party to a contract, or with his participation, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract”.

The Evolving Jurisprudence

The following judicial decisions highlight the evolving jurisprudence over the concept of arbitrability of fraud:

  1. Russel v. Russel.—The issue of arbitrability of fraud for the first time arose in this case, wherein it was held that if there exists prima facie evidence to support the existence of fraud the court can refuse to refer the matter to arbitration.[7]
  2. Thereafter, the Supreme Court in Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak  held that cases involving serious allegations of fraud were to be decided by the court and it was a valid ground for not referring the matter to arbitration.[8]
  • The  Supreme Court  again in N. Radhakrishnan v. Maestro Engineers  held that an issue of fraud is not arbitrable as the case involved serious allegations of fraud and such dispute were to be settled by the courts through detailed evidence led by both parties. In addition to this, the  Court also emphasised that the dispute would be non-arbitrable on public policy consideration if it was related to serious allegations of fraud.[9]
  1. A. Ayyasamy v. A. Paramasivam[10].—It was held that, cases where there exists serious allegation of fraud are to be treated as non-arbitrable and such matters have to be dealt with only by the civil courts. However in case, the allegations are in the nature of fraud simpliciter, such disputes can be dealt by the Arbitral Tribunal.[11] The Supreme Court further deliberated that issues in which there exists serious allegation of forgery/fabrication of documents or where fraud is capable of invalidating the entire contract or affects the validity of the arbitration clause will be dealt only by the courts and the Arbitration Tribunal will not have jurisdiction to decide the same.
  2. The concept of “complex fraud” may be found in the opinion of Lord Hoffman, in Fiona Trust & Holding Corpn. v. Privalov, where the Court dealt with the concept of “complex fraud” and held that it refers to a scenario where the very foundation of an arbitration agreement is challenged due to a fraudulent act.[12]
  3. Further in Rashid Raza v. Sadaf Akhtar, the  Supreme Court formulated a two-step test to determine what constitutes a complex fraud It held that firstly, it has to be seen that whether the plea perrmeates the entire contract and specifically the arbitration agreement, thus rendering it void and secondly, the courts have to see whether the allegations of fraud are related to the internal affairs of the parties and have no implication in the public domain and such case it would be arbitrable.[13]
  • The Supreme Court in Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd. observed that a dispute becomes non-arbitrable only when the court comes to the conclusion that the “serious allegations of fraud” which make arbitration agreement itself is inexistent and has been vitiated by fraud; or in cases where the allegations are levelled against the State or its instrumentalities, relating to arbitrary, fraudulent, or mala fide conduct, raising  the question of public law as opposed to questions limited to the contractual relationship between the parties and rest all the allegations of fraud are arbitrable.[14]

The Problematic Jurisprudence

The existing jurisprudence highlights the complexity with which the issue of arbitrability of fraud has been dealt with and more importantly it has been overfilled with various test making it more prone for judicial intervention. There exists no sound logic for differentiating between fraud simpliciter and fraud complex as the arbitrators also has the power to seek assistance for the recording of evidence under Section 27 of the Arbitration and Conciliation Act, 1996[15] (hereinafter referred to as “the Act”) and hence decide accordingly based on such evidence the issue of fraud like the courts would ordinarily do.

The fact that this distinction is superfluous and impractical is evident by the fact that the Supreme Court itself after suggesting this distinction in Ayyaswamy[16] has suggested new and complex factor to the same and thus making it unpredictable and wavering.

Even the Law Commission in its 246th Report proposed addition of sub-section (6) to Section 16 of the Act and empowering the Tribunal to pass an award even if there were allegations of fraud  which would still leave the parties with the option of raising the issue of arbitrability before the arbitrator at the pre-award stage and thus adhering to the principle of Kompetenz-Kompetenz and if rejected by the Tribunal, it would be available at the post-award stage as the award can be challenged on the ground of conflicting with the public policy of India under Section 34(2)(b)(ii) of the 1996 Act.[17]

Further, the  Supreme Court in  World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd. while dealing with a foreign seated arbitration held that every kind of fraud is arbitrable, there exists no reasonable differentia for this different approach for foreign and domestic arbitration.[18]

Solving the Problem

Recently, the  Supreme Court in Vidya Drolia v. Durga Trading Corpn. held that allegations of fraud are arbitrable when it relates to a civil dispute and exclude only those claims which vitiates and render the arbitration clause invalid.[19] The Court analysed the fact that arbitration is a private dispute resolution mechanism which aims at securing just, fair and effective resolution of disputes in an expedient manner. The Court focused on the distinction between matters which deal with right in rem and right in personam.

Previously, in N Radhakrishnan case[20], the Supreme Court had held that a dispute would be non-arbitrable on public policy constraints if it is related to serious allegations of fraud. However, the Supreme Court in Vijay Drolia[21] held that if the reasoning propounded in N. Radhakrishnan[22] has to be accepted, it would be similar to agreeing that the arbitration mechanism of the country is flawed and compromised one which can be set aside on grounds that public policy or public interest demands that such dispute should be decided in the court and it would be abrupt to second this opinion. In addition to this, the  Court also highlighted the fact that an  arbitrator is also an expert and decides a case on basis of facts, evidence and law. Further simplicity, informality and expedition are hallmarks of arbitration. Also the principle of party autonomy which finds its place in Sections 8[23] and 11[24] of the Act and also Section 89 of the Civil Procedure Code, 1908[25] of respecting the autonomy of parties and their decision to arbitrate the matter by simply referring the matter to arbitration and not try it themselves.

The  Court further highlighted that the general rule and principle, given the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019[26], and the principle of severability and Kompetence Kompetence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The Court has been conferred the power of “second look” on aspects of the non-arbitrability post the award in terms of sub-clauses (i), (ii) or sub-clause (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act[27].

The Court propounded the fourfold test for determining the arbitrability of the subject-matter:

  1. When the cause of action and subject-matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem;
  2. When the cause of action and subject matter of the dispute affects third-party rights; have erga omnes effect; require centralised adjudication, and mutual adjudication would not be appropriate and enforceable;
  3. When the cause of action and subject-matter of the dispute relates to the inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable; and
  4. When the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

It held that only when the answer is affirmative, the subject-matter would be considered as non-arbitrable and accordingly it overruled the ratio in N. Radhakrishnan judgment[28]  and held that allegations of fraud can be arbitrable when it relates to a civil dispute. However, the only caveat being that fraud which vitiates or rends the arbitration clause invalid would be non-arbitrable. It further held that matters which are to be adjudicated by the Debts Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 will not be arbitrable.

Conclusion

This recent judgment of the Supreme Court has cleared its stance over the issue of arbitrability of disputes concerning serious allegation of fraud and its relation to the public policy of India and is definitely a step towards the agenda of a pro-arbitration regime, however in the author’s view the Supreme Court has left the matter half done by holding that “those frauds which vitiate or renders the arbitration clause invalid would still be non-arbitrable”, as this still leaves the scope for judicial intervention in arbitration matters where the courts can delve into the question of validity of the arbitration clause and thus can still intervene in arbitration matters which is against the basic principle of arbitration i.e. Kompetenz-Kompetenz.

In Henry Schein Inc. v. Archer and White Sales Co.,  the US Supreme Court held that the issue of arbitrability must be decided by the arbitrator in all cases and not by the civil courts.[29] It further emphasised that even where any party pleads that the reference to arbitration is baseless or has no grounds, even that plea should be decided by the arbitrator because of the principle of Kompetenz-Kompetenz.

This approach adopted by the US Supreme Court is in consonance with the basic principles of arbitration and hence acts as a benchmark towards establishing and functioning a pro-arbitration regime and is a favourable approach than the one propounded by the Indian Supreme Court. Thus it can be concluded that though the Indian jurisprudence on arbitraibility is moving towards a pro-arbitration regime, it cannot be said to be settled notion and in full consonance with the established principles of arbitration like Kompetenz-Kompetenz.


* Principal Associate, Hammurabi and Solomon Partners.

** IVth year student, BA LLB (Hons.), National Law University, Nagpur.

[1]Nigel Blackaby, Constantine Partasides et al., Redfern and Hunter on International Arbitration, 110, (5th Edn. 2014).

[2]Article V(2) NYC, United Nations Commission on International Trade Law, UNCITRAL Model Law on

 International Commercial Arbitration 1985: With amendments as adopted in 2006 (Vienna: United Nations,

2008), available from www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf.

[3] Article 36, United Nations Commission on International Trade Law, UNCITRAL Model Law on International

 Commercial Arbitration 1985: With Amendments as adopted in 2006 (Vienna: United Nations, 2008)

[4] (2011) 5 SCC 532 

[5]See O.P. Malhotra on The Law and Practice of Arbitration and Conciliation, Third Edn. authored by Indu Malhotra.

[6]http://www.scconline.com/DocumentLink/4JVnT6aM

[7](1880) 14 Ch D 471

[8](1962) 3 SCR 702

[9] (2010) 1 SCC 72

[10] (2016) 10 SCC 386

[11]Shubham Jain and Prakshal Jain, Arbitrability of Fraud in India – Is Ayyasamy only about “Seriousness”?, IndiaCorpLaw (31-10-2019), available at https://indiacorplaw.in/2017/12/arbitrability-fraud-india-ayyasamy-seriousness.html.

[12]Fiona Trust & Holding Corpn. v. Privalov, 2007 UKHL 40.

[13] (2019) 8 SCC 710 

[14]2020 SCC OnLine SC 656

[15] Arbitration and Concialiation Act, 1996 

[16] Supra Note 10.

[17] Law Commission of  India, Report No. 246 on Amendments to the  Arbitration and Conciliation Act, 1996 (2014).

[18](2014) 11 SCC 639

[19]2020 SCC OnLine SC 1018

[20] Supra Note 9.

[21] Supra Note 18.

[22] Supra Note 9.

[23] http://www.scconline.com/DocumentLink/0P4pSy8x.

[24] http://www.scconline.com/DocumentLink/02bfnuC4.

[25] http://www.scconline.com/DocumentLink/3iU0MzIU.

[26] http://www.scconline.com/DocumentLink/L7728DGv.

[27] http://www.scconline.com/DocumentLink/teuo89l3.

[28] Supra Note 9.

[29] 2019 SCC OnLine US SC 1 : 202 L Ed 2d 480 :  139 S Ct 524 : 549 US           (2019)

Case BriefsHigh Courts

Himachal Pradesh High Court: Jyotsna Rewal Dua J., dismissed the petition being non-maintainable.

The petitioner by way of this instant petition has challenged the election of Respondent 5 as Member, Block Development Committee, Misserwala, District Sirmour in the elections to Panchayati Raj Institutions of the State concluded in January 2021. The writ petition has been filed seeking that the respondent election commission may be directed to start the fresh election and declare the election under challenge as null and void.

The issue before the High Court is the maintainability of writ petitions under Article 226 of the Constitution of India vis-à-vis Article 243-O of the Constitution of India in respect of limitation in exercise of judicial review by the Court in election matters.

Section 162 of the H.P. Panchayati Raj Act provides that no election under the Act shall be called in question except by an election petition presented in accordance with the provisions of the chapter and Section 175 of the Act enumerates the grounds for declaring election to be void.

The Court stated

 “We are also conscious of the limitations set forth on such exercise of judicial review in view of bar of jurisdiction imposed by Article 243-O of the Constitution of India, which is quoted hereinbelow:-

“243-O. Bar to interference by Courts in electoral matters- Notwithstanding anything in this Constitution-

(a) the validity of any law relating to the delimitation of constituencies or the allotment of seats to such constituencies made or purporting to be made under article 243K, shall not be called in question in any court;

(b) no election to any Panchayat shall be called in question except by an election petition presented to such authority and in such manner as is provided for by or under any Law made by the Legislature of a State.”

 The Court further relied on judgment Laxmibai v. Collector, Nanded, (2020) 12 SCC 186 wherein it was observed the maintainability of writ petitions under Article 226 of the Constitution of India vis-a-vis Article 243-O of the Constitution of India in respect of limitation in exercise of judicial review by the Court in election matters, it was held that all election disputes must be determined only by way of an election petition. This by itself may not per-se bar judicial review, which is the basic structure of the Constitution but ordinarily, such jurisdiction would not be exercised. The relevant paragraphs of the judgment are extracted hereinafter:

 “15. It is true that the High Court exercises a plenary jurisdiction under Article 226 of the Constitution of India. Such jurisdiction being discretionary in nature may not be exercised inter alia keeping in view of the fact that an efficacious alternative remedy is available therefor. (See Mrs.

  1. Article 243-O of the Constitution of India mandates that all election disputes must be determined only by way of an election petition. This by itself may not per se bar judicial review which is the basic structure of the Constitution, but ordinarily such jurisdiction would not be exercised. There may be some cases where a writ petition would be entertained but in this case we are not concerned with the said question.
  2. ….a writ petition should not be entertained when the main question which fell for decision before the High Court was non-compliance of the provisions of the Act which was one of the grounds for an election petition in terms Rule 12 framed under the Act.”
  3. Section 10A of the 1959 Act and Section 9A of the 1961 Act read with Articles 243-K and 243-O, are pari material with Article 324 of the Constitution of India. In view of the judgments referred, we find that the remedy of an aggrieved person accepting or rejecting nomination of a candidate is by way of an election petition in view of the bar created under Section 15A of the 1959 Act. The said Act is a complete code providing machinery for redressal to the grievances pertaining to election as contained in Section 15 of the 1959 Act. The High Court though exercises extraordinary jurisdiction under Article 226 of the Constitution of India but such jurisdiction is discretionary in nature and may not be exercised in view of the fact that an efficacious alternative remedy is available and more so exercise restraint in terms of Article 243-O of the Constitution of India. Once alternate machinery is provided by the statute, the recourse to writ jurisdiction is not an appropriate remedy. It is a prudent discretion to be exercised by the High Court not to interfere in the election matters, especially after declaration of the results of the elections but relegate the parties to the remedy contemplated by the statute. In view of the above, the writ petition should not have been entertained by the High Court. However, the order of the High Court that the appellant has not furnished the election expenses incurred on the date of election does not warrant any interference.”

 The Court thus held that “the instant writ petition is not maintainable at all and the same is accordingly dismissed with liberty reserved to the petitioner to avail appropriate alternate remedy in accordance with law.” [Kauser v. State Election Commission,  2021 SCC OnLine HP 227, decided on 08-02-2021]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

Allahabad High Court: The Division Bench of Pankaj Mithal and Saurabh Lavania, JJ., dismissed a Public Interest Litigation.

The petitioner in Public Interest had sought quashing of letter of the Chief Engineer (Purchase) of U.P. Jal Nigam requesting  Crown Agents (India) Pvt. Ltd. to inspect Rashmi Metaliks Ltd., Kolkata and issuance of mandamus directing respondent 2 and 3 not to permit re-inspection of Rashmi Metaliks Limited, Kolkata.

The Court while explaining the purpose of PIL said that normal rule was that a person, who suffered a legal injury or whose legal right was infringed, alone had locus standi to invoke the writ jurisdiction to avoid miscarriage of justice but the said common rule of locus standi stood relaxed where the grievance was raised before the Court on behalf of poor, deprived, illiterate or the disabled persons, who cannot approach the Court independently for redressal of the legal wrong or the injury caused to them on account of violation of any constitutional or legal right. However, the relaxation was misused by unscrupulous persons seeking cheap publicity quoting the judgment of Supreme Court in State of Uttaranchal v. Balwant Singh Chaufal, (2010) 3 SCC 402.

The Court further observed that in the present petition the petitioner had not mentioned anything substantial other than he was a Lawyer and was involved in social work, thus not fulfilling the conditions of the rule laid down in the above case. The Court further stated that the petitioner in filing this petition in Public Interest had not even disclosed that he was filing this petition on behalf of such disadvantageous persons or that injustice was meted out to a large number of people and therefore it has become necessary for him to come forward on their behalf.

The Court while dismissing the PIL held that the petitioner was not a person, who had any credentials to move in Public Interest. Simply on the allegation that he was a Lawyer and a person involved in social work without disclosing his credentials and in the absence of the fact that the petition had been preferred in the interest of justice for large number of downtrodden persons who are unable to approach the Courts of Law, the petitioner was not entitled to maintain this petition in the public interest that too in a matter which does not involve basic human rights.

The Court, however, mentioned that U.P. Jal Nigam was not directly involved in the purchase of any material from any firm, rather it awarded contracts on a turn-key basis and it was the contractor who made purchases of the material from amongst firms prescribed by the U. P. Jal Nigam, provided there was otherwise no legal impediment thus letter of the Chief Engineer (Purchase) on record, since the purchases from the aforesaid firm would be taken subsequent to its certification by the inspecting agency, thus interference by the Court was not required.[Narendra Kumar Yadav v. State of U.P., 2020 SCC OnLine All 1395, decided on 05-11-2020]


Suchita Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Jharkhand High Court: Sujit Narayan Prasad, J. dismissed the petition by asking the appropriate authority to look into the dispute among the office bearers of the organisation concerned.

A petition was filed under Article 226 of the Constitution of India, whereby the petitioner sought for directions upon the Respondent 2 to take final decision upon the representation dated 08.03.2016 and grant licence to run Public Distribution System shop in the name of Sarda Mahila Mandal for village Patratu, Gola or in alternative to taking action against the wrongdoer, i.e. erstwhile Secretary Sabitri Devi.

A license was granted in the name of Sarda Mahila Mandal, a group of women of self-help in which the respondents Sabitri Devi was the President while Koshil Devi was the Secretary and the respondent Basni Devi was the treasurer but due to internal dispute and allegations and counter-allegations, the licence has been cancelled by the competent authority.

The Government, in order to provide food grain articles and other materials to be supplied under the control rate, came out with a decision sometime in the year 2006 to grant licence to group known as self-help group and in pursuance thereto, the petitioner Sarda Mahila Mandal, through its President, has made an application for grant of licence under PDS and taking into consideration the fulfillment of requirement as per the policy decision, the licence had been granted.

The Court held that when there was internal dispute amongst the office bearers of the Sarda Mahila Mandal and considering the said circumstances, if the licence had been cancelled by the licensing authority, it cannot be said that any illegality had been committed, it is for the reason that the concept of extending the licence of Sarda Mahila Mandal for smooth distribution of food grain articles and more particularly to deal with situation of black marketing since the individuals in whose favour the licence was earlier been granted who indulged in case of black marketing having no control of anyone, save and except the raid and inspection if conducted by the inspecting authority, and if the licence would be granted in favour of a group, there would be check and balance amongst the members itself.

Keeping that fact into consideration, the Court, directed the Deputy Commissioner, Ramgarh to look into the matter, so that people at large of the area who are getting food grain articles from the shop in question may not suffer and disposed of the petition. [Sarda Mahila Mandal v. State of Jharkhand, 2019 SCC OnLine Jhar 1535, decided on 13-11-2019]

Case BriefsHigh Courts

Jammu & Kashmir High Court: Ali Mohammad Magrey, J. disposed of the writ petition on the grounds that questions of fact could not be the subject matter of a writ petition.

The petitioner filed the instant petition praying that the respondents be commanded to implement the recommendations of the Human Rights Commission. The petitioner claimed to be the widow of one Abdul Ahad Malik) who as argued by her, left his home towards Srinagar on 16-02-2003 and on the very next day, his dead body was received by his family members. It is stated that since the deceased was the only breadwinner of the family, the petitioner filed a complaint before the State Human Rights Commission, Srinagar on 11-05-2004, in terms of the J&K Human Rights Act, praying therein for compensation.

The State Human Rights Commission recommended the Government payment of ex-gratia relief of Rs 10 lacs in favour of the petitioner and benefit of employment in terms of SRO 43 to the elder son of the petitioner. Since the Government did not act upon the recommendations of the State Human Rights Commission, the petitioner filed the instant petition for the above-stated reliefs.

B. A. Misri, learned counsel for the petitioner, provided on record a letter issued by Senior Superintendent of Police, addressed to the Principal Secretary to Government, Home Department, J&K, Jammu, making reference to some report that the deceased Abdul Ahad Malik was killed by some un-known militant at Srinagar, with further clarification that no case/report has been registered in the concerned police station nor any Medico legal formalities conducted.  In his reply, the Deputy Commissioner stated that the petitioner had a natural death, and also has placed on record photocopy of certificate issued by Deputy Medical Superintendent, SMHS Hospital, Srinagar certifying that the deceased was admitted in the hospital on 16-02-2003 as a case of Cardio Vascular Arrest and expired on 16-02-2003. The Petitioner in response, to such a report placed on record a certificate issued by Resident Medical Office Records, Government SMHS Hospital which said that there was an un-known patient admitted in the hospital without giving any details regarding the address and parentage.

After perusing the pleadings the court held that it was not forthcoming that the deceased died in a militancy-related incident, therefore, disputed questions of fact were involved in the present case, which could not be determined by this Court and no relief could be passed on such disputed question of facts. The petitioner has to approach a civil Court for the establishment of her right before filing a writ petition. The recommendations of the Human Rights Commission were not binding on the State. The petitioner was free to approach the Civil Court for the establishment of her right with reference to the death of her husband as well as the implementation of the recommendations of the Human Rights Commission. [Nazira Begum v. State of J&K, 2019 SCC OnLine J&K 832, decided on 09-10-2019]

Case BriefsHigh Courts

Punjab and Haryana High Court:  Lisa Gill, J. allowed the application for the refund of the fees on the ground that the matter was resolved between the parties.

An appeal was filed by the appellant-plaintiff against the order passed by the Additional Civil Judge (Senior Division), Faridabad where the suit for specific performance filed by the appellant was dismissed.

Rakesh Kumar Sharma, counsel for the applicant/appellant submitted that the appellant does not wish to pursue the appeal which was filed for the specific performance as the dispute between the parties had been resolved amicably.The applicant/appellant further prayed for the refund of the court fee.  Reliance was placed upon the decision of Division Bench of the Karnataka High Court in the case of A. Sreeramaiah v. South Indian Bank Ltd., 2006 SCC Online Kar 563 in which it was held that the matter being resolved by the parties amicably, amongst themselves without the intervention of the court, the court fees should be refunded.

In the above-mentioned case, the court held that the object behind Section 89 of the Civil Procedure Code, 1908 is to encourage the parties to arrive at the settlement. It is not important that the parties are referred to the four methods but if parties themselves at the earliest stage before the court come to the settlement, it will be considered that the object of Section 89 is achieved. The court further held that “No party should be discriminated in the matter of refund of Court Fees mainly on the ground that they have settled the dispute at the earliest stage before the court without recourse to any of the methods mentioned under Section 89 of the Civil Procedure Code, 1908.” Thus, the court directed the refund of the court fees appended with the appeal to the appellant. [Raj Kumar v. Gainda Devi, 2019 SCC OnLine P&H 658decided on 29-5-2019]

Case BriefsHigh Courts

Orissa High Court: The Bench of A.K. Rath, J. allowed the petition filed that challenged the order which allowed the appointment of an Amin Commissioner for local investigation under Order 26 Rule 9 CPC for the suit land.

The facts of the case were that the plaintiff-opposite party instituted the suit for declaration of right, title and interest, confirmation of possession and recovery of possession. Case of the plaintiff was that he was the owner of the suit land. Defendants filed a written statement denying the assertions made in the plaint. Case of the defendants was that the plaintiff had no title over the suit land and the defendants purchased the same by means of a registered sale deed. While matter stood thus, the plaintiff filed an application under Order 26 Rule 9 CPC for the appointment of a commissioner for demarcation of the property. Defendants filed an objection to the same. The Trial Court appointed a commissioner for local investigation. Mr. P.K. Satapathy, the counsel for the petitioners submitted that there was no justifiable reason to appoint a survey knowing commissioner in the factual scenario. The dispute did not pertain to demarcation or identification of the land.

The Court held that since both parties were claiming title over the suit land, it was not per se a ground to appoint a commissioner. The plaintiff could adduce evidence to substantiate the case. The dispute did not pertain to the area or identification or measurement or location of the land. Thus the Court had traveled beyond its jurisdiction in appointing a commissioner. The impugned order was quashed and the petition was allowed. [Regional Coop. Marketing Society v. Amarnath Saraph, 2019 SCC OnLine Ori 172, Order dated 19-04-2019]

Hot Off The PressNews

Port of Spain, Trinidad: Judgment was delivered today by the Caribbean Court of Justice (CCJ) in the consolidated matters of Trinidad Cement Limited and Arawak Cement Limited vs. The State of Barbados, and Rock Hard Cement Ltd. v. State of Barbados and  Caribbean Community (CARICOM). The CCJ ruled that the regional tax payable on ‘other hydraulic cement’, imported by Rock Hard Cement from Portugal and Turkey, should be 5%. The case was in the CCJ’s Original Jurisdiction where the Court interprets the Revised Treaty of Chaguaramas.

In 2001, CARICOM’s Council for Trade and Economic Development (COTED) granted Barbados an exemption, in respect of the regional Common External Tariff (CET) of 0-5%, so that the State could apply taxes of 60% to categories of cement described as ‘other hydraulic cement’. The regional tariff is intended to offer goods produced and distributed in the region an advantage over imported ones. In 2015, Barbados decided to return to the CET and apply a 5% tax on the ‘other hydraulic cement’ imported by Rock Hard Cement Limited.

In its ruling, the Court decided that where COTED allowed a Member State to charge taxes higher than the regional tariff on the importation of good from outside the region, there was no need for the Member State to obtain approval from COTED to revert to the CET. However, in these circumstances, the Member State should give reasonable notice of its intention of returning to the regional tariff. The Court stated that this notice would ensure that regional businesses enjoy transparency, certainty, and predictability of tax structures. This was, according to the Court, “reflective of good administrative practices, preserved the sovereign autonomy of the Member State and ultimately enhanced the overall functioning of the CSME”.

The Court also found that the regional manufacturers of cement, who had brought the action against Barbados, had noticed for several years of the intention of Barbados to revert to the regional tariff and therefore could not succeed in their action.


Press Release dt. 17-04-2019

Caribbean Court of Justice

Case BriefsHigh Courts

Uttaranchal High Court: The Bench of Manoj K. Tiwari, J. disposed of a compounding application in favour of the parties as they had amicably settled the dispute by entering into a compromise.

In the pertinent case, an FIR was lodged by the respondents under Sections 420 and 468 IPC on 05-01-2019. Later a compounding application duly supported by affidavits was filed stating that they have buried their differences and settled the dispute amicably outside the Court by entering into a compromise, therefore, no useful purpose would be served if the same is continued. They further relied on Gian Singh v. State of Punjab, (2010) 15 SCC 118 which has considered the question with regard to the inherent power of the High Court under Section 482 CrPC in quashing the criminal proceedings. Moreover, it was contended that the offence involved in the case is of a personal nature and is not an offence against the society and is not heinous offence showing extreme depravity.

The Court opined that “the possibility of conviction is remote and bleak and continuation of the criminal case would put the accused to great oppression and prejudice, which would tantamount to abuse of process of law.”And thereby, allowed the application. [Shiv Shankar v. State of Uttarakhand, 2019 SCC OnLine Utt 91, Order dated 15-02-2019]

Case BriefsHigh Courts

Uttaranchal High Court: The Bench of Manoj K. Tiwari, J. allowed a criminal miscellaneous application challenging the proceedings of the criminal case on the ground that the parties had settled the dispute between themselves.

The counsels for the parties submitted that parties had buried their differences and entered into a compromise and settled the dispute amicably outside the court, therefore, no useful purpose would have been served if the criminal case was to be continued.

The Court relied on Gian Singh v. State of Punjab, (2010) 15 SCC 118 which had considered the question with regard to the inherent power of the High Court under Section 482 CrPC in quashing the criminal proceedings against the offender, who had settled his dispute with the victim of the crime in a case, where crime is not compoundable under Section 320 CrPC. The Court held that in view of the settlement arrived at between the complainant and the applicants and the possibility of a conviction being remote and bleak, the FIR shall be quashed. [Abdul Rahman v. State of Uttarakhand, 2019 SCC OnLine Utt 87, Order dated 18-02-2019]

 

Case BriefsHigh Courts

Kerala High Court: A Single Judge Bench comprising of Raja Vijayaraghavan V, J. invoked its extraordinary powers under Section 482 of the Code of Criminal Procedure, 1973 and quashed criminal proceedings pending against the petitioners in view of resolution of dispute between the warring parties.

The petitioners herein were accused of committing offences punishable under Section 420 of the Indian Penal Code, 1860. Since the disputes between parties to the case had been amicably resolved, the instant petition was filed praying for quashing of proceedings pending against petitioners. It was urged on behalf of the petitioners that the dispute was purely personal in nature and would not affect public peace or tranquility; and the respondents stated that they had no subsisting grievance.

The Court took note of Apex Court’s rulings in Gian Singh v. State of Punjab, (2012) 10 SCC 303 and Narinder Singh v. State of Punjab, (2014) 6 SCC 466 where it had been laid down that in appropriate cases, the High Court can take note of amicable resolution of disputes between the victim and wrongdoer to put an end to the criminal proceedings.

It was observed that the offence committed by petitioners was not grave or serious having ingredients of extreme mental depravity. It appeared that the offence would not have a serious impact on society. Persisting with the prosecution would be nothing but a waste of time as the prospects of conviction were bleak; while on the other hand quashing of proceedings on account of compromise would bring about peace and secure the ends of justice. In view thereof, the petition was allowed.[Narayanan Nair v. Station House Officer, 2018 SCC OnLine Ker 5067, Order dated 28-11-2018]

Case BriefsHigh Courts

Uttaranchal High Court: A Single Judge Bench comprising of Sudhanshu Dhulia, J. dismissed a petition finding no anomaly in the matter.

The petitioner was a transporter who participated in E-tender process which was invited by the respondent for supply of 100 trucks for transporting gas cylinders where he made a bid for 13 trucks out of which only two trucks were selected. Further, as the need for 100 trucks could not be completed the respondent called for the existing transporters for the supply of additional trucks. The petitioners challenged it for non-transparency and contended that e-tender should have been made open to all and it shall not be restricted to the existing transporters.

The respondents reasoned out their act by contending that firstly the petitioner being the existing transporter had no reason to challenge the order plus he has been ordered to supply additional trucks and secondly e-tendering being a time-consuming process with gas cylinders being the essential commodity transported hence leaving no reason to raise a dispute for the matter.

Accordingly, the petitioner being the non-aggrieved party the petition was dismissed. [Tanuja Parwati Transport & Forwarding Agency v. IOCL, 2018 SCC OnLine Utt 969, decided on 02-11-2018]

Case BriefsSupreme Court

Supreme Court: A Bench comprising of A.K. Sikri and Ashok Bhushan, JJ. dismissed an appeal filed against the judgment of the Division Bench of the Madras High Court whereby it held it had no jurisdiction to adjudicate the dispute in question.

In short, the real essence of the dispute was that the plaintiffs, resident nationals of Dubai, had filed a derivative action on behalf of a company incorporated in Dubai. They held 34% shareholding in the said company, whereas the defendants held 66% of the shares. The defendants also held around 6.16% shares in Star Health and Allied Insurance Co. Ltd., a company incorporated in Chennai, India. According to the plaintiffs, these shares actually belonged to the company registered in Dubai mentioned above. Since Star Health was incorporated in Chennai, the plaintiffs instituted a suit in Madras High Court to protect an declare the beneficial interest of the Dubai company in the said 6.16% shares. A Single Judge of the High Court admitted the suit; however, on appeal by the defendants, the Division Bench held that it had no territorial jurisdiction to adjudicate in the matter. Aggrieved thus, the plaintiffs filed the instant appeal.

On perusal of the facts, the Supreme Court noted that the plaintiffs made certain averments to the said Dubai Company being the real owners of the shares held by the defendants in the Indian Company, which was denied by the defendants. In reality, it was a dispute between the plaintiffs and defendants, all of who were residents of Dubai. Even the company whose beneficial interest was claimed was incorporated in Dubai. The Court held inter alia, that merely because the dispute is about shares issued by an Indian Company would not lead to the conclusion that cause of action has arisen in India. As a consequence, the Madras High Court has no territorial jurisdiction to adjudicate the matter. Accordingly, the judgment impugned was upheld and the appeal was dismissed. [Ahmed Abdulla Ahmed Al Ghurair v. Star Health and Allied Insurance Company Ltd.,2018 SCC OnLine SC 2554, decided on 26-11-2018]

Case BriefsHigh Courts

Karnataka High Court: A Single Judge Bench comprising of S.G. Pandit, J. while hearing a petition praying for appointment of Court Commissioner, held that a property dispute seeking injunctive relief does not require determination of age of the suit property.

Petitioner, who was plaintiff in a property dispute, filed an application in lower court under Order XXVI Rule 9 of the Code of Civil Procedure, 1908 for appointment of Court Commissioner to ascertain age of the suit property. The trial court rejected this application and aggrieved thereby the instant writ petition was filed.

Petitioner contended the age of building to be over 25 years but the respondent submitted that it was constructed only 2 years before filing of the written statement. Submission on behalf of the petitioner was that appointment of Commissioner is, therefore, necessary to ascertain the age of building at suit schedule.

The Court held that the suit filed in lower court was for injunction and it was for the petitioner to establish his possession over the suit schedule property by producing cogent evidence before the court. It was not necessary to determine the age of building situated at the suit schedule as the same was of no consequence to the relief sought for by the petitioner in the pending suit.

Accordingly, the writ petition was dismissed.[B.M. Ramasubba Reddy v. B.R. Venkataravanappa, 2018 SCC OnLine Kar 2213, decided on 09-11-2018] 

Case BriefsHigh Courts

Jammu & Kashmir High Court: A Single Judge Bench of Dhiraj Singh Thakur, J., dismissed a writ petition filed against the actions of private respondents 6 to 13, whereby respondents were interfering with the property owned by the petitioner.

The main issue that arose before the Court was whether the writ petition filed by the petitioner was maintainable.

The Court observed that in the Supreme Court judgment of Mohan Pandey v. Usha Rani Rajgaria, (1992) 4 SCC 61, it was held that a regular suit is the appropriate remedy for settlement of disputes relating to property rights between private persons and that the remedy under Article 226 of the Constitution of India shall not be available except where violation of some statutory duty on the part of a statutory authority is alleged. In such a case, the court will issue appropriate direction to the authority concerned. It is not intended to replace the ordinary remedies by way of a suit or application available to a litigant. The jurisdiction is special and extra-ordinary and should not be exercised casually or lightly.

The Court held that in the instant matter, the dispute between the parties was a property dispute which could be well resolved by filing a suit before the appropriate court. Further, the parties involved in the matter were private parties and not statutory authorities. The Court refused to interfere in the matter and the writ petition was dismissed.[Kuldeep Singh v. State of J&K,2018 SCC OnLine J&K 806, order dated 03-11-2018]

Case BriefsHigh Courts

Karnataka High Court: A Single judge bench comprising of Dinesh Maheshwari, J. while hearing a petition praying for the appointment of an arbitrator, ruled that if an agreement between parties provides for arbitration and a dispute arises therefrom then it must be settled through arbitration.

The petitioner company, involved in exporting of fruit products, approached the respondent to process mangoes for export purpose. On respondent’s assurance that it possessed the necessary machinery and expertise to process mangoes, an agreement was executed between the parties. However, respondent delayed in the process of unloading mangoes. Since the season was drawing to a close and there was a loss in business due to the delays caused by respondent, the petitioner gave it a concession for procuring mangoes on its own and a further concession for processing the rejections into mango pulp. But still the respondent did not take steps to procure mangoes and also failed to meet the quantity and quality of the finished product.

Despite these lapses, the respondent raised an invoice which the petitioner refused to clear. In turn, the petitioner sent it a legal notice demanding payment for loss caused due to respondent’s failure to meet its contractual obligations. Since respondent did not revert to the said notice, petitioner invoked arbitration clause of the agreement nominating an arbitrator and called upon respondent to do the same. Respondent’s failure to even nominate an arbitrator, constrained the petitioner to file the instant petition.

The limited aspect for the court’s consideration was whether there existed an arbitration agreement between the parties. On perusal of the agreement executed between parties, the court noted that clause 5 of the said agreement provided that in case of disputes between parties not being settled amicably, the same would be settled in arbitration.

It was held if a dispute between the parties cannot be resolved amicably and there is the failure to appoint an arbitrator, then in such a case, it is just and proper that an independent arbitrator be appointed to adjudicate upon and decide such dispute. Accordingly, the petition was disposed of by appointing a retired judge as an arbitrator.[Pellagic Food Ingredients (P) Ltd. v. Oceanic Edibles International Limited, Civil Miscellaneous Petition No. 300 of 2016, decided on 09-10-2018]

Case BriefsHigh Courts

Punjab and Haryana High Court: A Single Judge Bench comprising of Amit Rawal, J., allowed a revision petition which was filed against the order whereby an application submitted under Section 8 of the Arbitration and Conciliation Act, 1996 for resolution of dispute was dismissed by the Trial Court.

The facts of the case are such that a suit was filed by respondent seeking permanent injunction on the property in question. In the suit, respondent was aggrieved by the fact that petitioner had cancelled an agreement for sale of property in furtherance of which respondent had already made payments. Petitioner contested the suit by filing an application under Section 8 of the Act stating any dispute which arises between the parties are to be taken to arbitration. This application was dismissed by the trial court as they found no agreement entered into between the parties. Hence, the petitioner approached the High Court.

The High Court was of the view that a stand-alone agreement, an application submitted by the respondent that contained terms and condition would be considered to suggest that the parties were willing to resolve the dispute by way of arbitration. The Court observed that the suit was not maintainable as the matter was to be resolved by way of arbitration by virtue of Section 8 of the Act. Therefore, the impugned order whereby application filed under Section 8 was dismissed was set aside.[IREO Grace Realtech (P) Ltd. v. Neeru Babbar,2018 SCC OnLine P&H 1205, decided on 01-06-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal: The NCLAT has held in an appeal against a common order passed by the NCLT’s Allahabad Bench that any dispute within a corporate debtor company (“debtor”) is not one defined in the Insolvency and Bankruptcy Code (the Code), which only takes into consideration disputes between the debtor and its operational creditors (“creditors”).

The appellant is the head of a company which is a corporate debtor, appealing against a common order passed by the NCLT for separate appeals filed by different operational creditors, who are owed a total sum of about 6 crore rupees by the debtor. In response to applications filed under Section 9 of the Code, the NCLT admitted one application, passed a moratorium order and appointed an Interim Resolution Professional. The other applications were disposed of.

The creditors-respondents have stated that the debtor-appellant placed orders for crude rice bran oil but refused to pay for the same even after demand notices were issued under Section 8(1) of the Code.

The debtor, however, claimed that though the debtor company did place purchase orders for the oil, the oil was actually delivered to one Dinesh Arora, the then MD of the debtor company. The invoices, however, were raised against the debtor though it was never actually supplied the ordered oil. Once this fraud was discovered, Mr Arora signed a MoU with the debtor undertaking personal liability to pay off all invoices raised against the fraudulent delivery. The debtor argued that there was consensus ad idem between the debtor, Mr Arora and the creditors on the MoU and this led to novation of the contract, making only Mr Arora, and not the debtor liable for the payment. He further contended that the creditors could not back out of this due to the application of Section 62 of the Contracts Act and must claim all payment from Mr Arora.

The counsel for the creditors argued that the creditors were never a party to the MoU and the same is a mere instrument of collusion between the debtor and Mr Arora to escape their liability. It was shown by the creditors that the debtor company in its balance sheets had accepted its credit liability towards the creditors, these ledgers having been duly signed by the debtor company’s director.

NCLAT was of the view that the ‘dispute’ was merely one of the officials of the debtor company and not between the debtor and the creditors. It stated that while a debt was an asset of the creditor, which he could assign to an assignee of his will, the liability to pay off a debt was not transferable and the burden of repayment being shifted from one official of the debtor company to another does not absolve the debtor company of its liability. Since the appellant had taken over the shares of the other stakeholder-Mr Arora, he would be responsible to pay off the entire debt. The MoU was an agreement between different stakeholders in the same company and so was the issue of who received the delivery of the oil, which was an internal matter of the debtor company and the creditors were entitled to payment for the same. Lastly, the NCLAT also found that the debtor company had shown purchases made from the creditors in its tax returns and had claimed input tax credit on the same. Hence the appeal was dismissed. [Mr Chetan Sharma v. Jai Lakshmi Solvents (P) Ltd.,  Company Appeals (AT) (Insolvency) Nos. 66-70 of 2017, decided on 10.05.2018]