Interviews

A science student turned advocate, Mr. Sanjay Bhasin is a designated Senior Advocate at the Allahabad High Court. Apart from having a 36 year long standing before the Court, he is a leading Arbitration Counsel in India.

He has been interviewed by Ayush Shukla, EBC/SCC Online Student Ambassador who is currently pursuing law from TNNLU.

 

1. What motivated you to pursue law as a discipline and a career. Was it an obvious choice for you, given that your father was an advocate?

No, it was not my obvious choice at all. I was a science student throughout and was interested in the same, but because I did not do well in my MSc, my father said I had no other option but to go for law. But while pursuing my law, I developed a great liking for it. So yes, it was not my first choice and was only my second-best choice, I did not want to get into the hassles of law, but somehow, I got involved in it.

Based on my interest in Science, I wanted to be a scientist or a lecturer. Still, destiny brought me here, and I have relished this period spanning from 1986-1987 that I have spent in the field of law.

2. Could you tell our readers about your experience in law school and what lessons you have learned in your law school that have been an integral part of your journey as a practitioner?

I was not that serious during my law school. I did my law at DAV College, where we only had two morning classes. So, I spent the rest of my day in labour courts, as I used to be a chauffeur to my father, who used to practise in the labour courts. So, throughout the day, I watched the proceedings before various authorities of the Labour Court. If one does this religiously, one will start picking up things from there itself.

But here, I always remembered my father’s lessons during those days, which have been with me throughout my life. He told me to maintain the profession’s integrity, always be honest and dedicated to the judicial system, and create your image through your hard work. He used to tell me that if you are hardworking, you will succeed. Whether or not you are going to succeed in that particular case or not, will depend on the merits of the case, but in any case, you should not be found in a situation where you did not do enough labour, or you did not present it well enough.

My teachers also taught the same lessons. They said that lawyers are otherwise taken to be liars, but they are not so, as whatever they say or present is based on the strength of the affidavits and documents exchanged between the parties, and based on those, only a lawyer takes its stand. So, integrity and honesty are the things that have been imbibed in me by my father and teachers, and I have been following that very religiously.

One more thing that I would like to advise all the students that my father used to tell me is to work on your oratory skills. One needs to practise oration. That practice of oration could only be for a short duration, like 5 minutes or 10 minutes a day. Like just read a newspaper aloud, as that will provide thrust to your voice, it will give clarity to what you speak, it will improve your pronunciation, and it will change your overall personality. So, everybody, who wants to be a practicing lawyer, should practice this.

Here I also remember the advice given to me by my senior, Justice Bhalla, who, as and when I joined him, was an Additional Chief Standing Counsel, and later on, he went on to become a Judge. He taught me that I should read one judgment a day and make notes of the same. So, I had a diary, where I used to note all the important points of the judgment, and I used to observe how those points have been dealt with in the judgment.

3. During your initial days in the field, how did you do research on a case? Today we have research tools like SCC Online, which has to an extent, made our job more manageable. And what can our generation learn from your initial days’ experience of researching, which we can inculcate in today’s time?

In the absence of present time research tools, we were solely dependent upon the digests and the commentaries. We had those yearly digests of Supreme Court, labour and industrial court cases, factory law journals, etc. Those digests and commentaries were prepared so that you could reach the particular case law you are looking for by referring to the index itself.

Personally, I think that the manual thing was quite beneficial because it gave us insights into the complete aspect of the section we were researching. Moreover, when going through these commentaries, you will find judgments from both sides, so you can always read the other view. Once you do that, you get an obvious idea of the provision because you must have read judgments from both sides. At present, I agree we can reach the judgment faster, but that much off reading is missing among the youngsters. As by that additional reading, we used to learn ten more things besides what you were searching for, which perhaps is now missing. So, I feel this is what the upcoming generation can inculcate in themselves.

4. You have had an illustrious career in the field of arbitration, so according to you, what are the reforms or changes that should be introduced in the current regime of arbitration in India to make it a more viable option for the resolution of disputes by parties in India?

A4. Coming to arbitration, you see, I started with labour courts, then ventured to service matters. I was appointed in the Service Tribunal for a brief moment and then appointed as Standing Counsel in High Court, where I served the State for 20 years with different Governments. The first arbitration case that came to me was somewhere in 2003, so for the last 20 years, I have been dealing with arbitration, contracts, and other matters.

What I have found in arbitration is that the arbitrator has been given unfettered powers, and there are very limited grounds, as have been enumerated in Section 34, based on which the arbitrator’s award can be challenged. The award cannot be challenged on merits, so the arbitrator’s words are final on merits. I find this one thing very arbitrary, as this gives unfettered powers to the arbitrator because if he gives an award in his prudence, it is to be accepted as it is unless there are any legal flaws in it or it is not in conflict with the public policy then it is binding upon the parties. So, he can go overboard; he can do anything without any framework to stop him. I agree there is this entire legislation, but despite that, he has so much power in him without any checks and balances. This, I feel, needs a little consideration and deliberation. Personally, I think there should be some sort of an appellate authority, like, for instance, NCLT where we have an appellate authority, NCLAT, so whatever happens in NCLT, there is a provision for appeal in NCLAT. Here, in the arbitration act, there is no such forum available. Of course, the act states that you can seek setting aside of the award under Section 34, but that is based on some limited grounds only.

Moreover, invariably every award is challenged. Like in almost 90% of the cases, the award is challenged. So, we are having litigation, and the idea behind arbitration was to reduce litigation, but we are actually added to the litigation because the case goes before the District Court in the first place, then it comes to the High Court, and at times people even come to the court in between the proceedings. Very recently, there was a challenge to the arbitrator’s order, invoking Article 227 of the Constitution of India, which is related to the power of superintendence, and the inherent power of the court, which we are still dealing with this matter, and the judgment has been reserved. So, there should be an appellate forum provided by the act, which is the one thing I would like to suggest.

The second thing that I would like to suggest is that the parties should be given some sort of right to seek a change of arbitrator. You see, an arbitrator is somebody who is supposed to be Caesar’s wife, beyond all doubts; here, I am not questioning the integrity of the arbitrator, but due to the unfettered power given to them by the act, there can be an angle of bias in the proceedings. Although an arbitrator is supposed to make disclosures, like he is not related to any of the parties in any way, but suppose one of the parties thinks that the arbitrator, who throughout the proceedings will be the same person, is biased or has developed a bias towards particular party during the proceedings. Then the award passed by him could be maligned by his prejudices, which he may have developed during the course of proceedings itself. So, for this, there should be some cure. That cure can be given in the form of some sort of rights to the parties for seeking a change of the arbitrator or institutionalising the whole thing. Once it gets institutionalised, the case does not go to the same person with whom the party could have some grounds (not in all cases). In this way, the parties will not feel that they have been deprived of justice. So, that is the little grey area, where the party, even during the proceedings, may feel that they will not receive justice from the arbitrator, and besides that, they are forced to continue. So, these are the two areas where I feel some work needs to be done on the legislative side.

5. Recently Chief Justice of India N.V. Ramana inaugurated the International Mediation and Arbitration Centre in Hyderabad, so could you tell our readers about the need for institutional arbitration, as inaugurated in Hyderabad, and how is institutional arbitration different from ad hoc arbitration?

So, you talked about mediation and arbitration centres. We also have it here in the High Court. Here, court-annexed mediations are referred to the centre. We also have arbitration chambers, but they are meant only to hold the arbitration proceedings. When I say institutionalisation, it actually means something like an arbitral court, where we have a number of arbitrators. When the matter is referred to the institution, it provides an arbitrator, and those arbitration proceedings are also held there.

Moreover, these institutions on the administrative side work upon and ensure that arbitration is carried out free from any biases and prejudices. In such an institution, there ought to be a facility for transferring arbitration matters conducted by one arbitrator to another arbitrator within the same institution. Here, the institution itself can be taken as an arbitral forum. The institution itself provides the arbitrator, who will not be static for one arbitration, facilitating the same arbitration matter before different arbitrators based on modus operandi, rules, and regulations.

6. The extravagant cost involved in arbitration proceedings has often been criticised, so what are your views on this issue, and what can be some possible solutions?

Yes, the cost involved in the disputes is stupendous. What is there in Schedule 4 was only indicative. Until Schedule 4 was inserted, the arbitrator was free to decide its fee. But now, once this schedule has been introduced, everyone has to stick with it. When we talk about Schedule 4, I am yet to understand its impact, as the schedule gives slabs of fees depending upon the sum of the dispute, and just below the schedule, you will find that 25% extra has to be paid in case there is only one arbitrator. Now, what does this mean, is the fees as have been specified in the schedule related to the cost of the whole arbitral panel, or is it the cost of one arbitrator. Based on the intent behind this provision, it actually means that if there is a panel of three arbitrators, then only the slab amount is to be given to the whole panel, which perhaps has to be divided among the three arbitrators. Otherwise, the type of fees given to an arbitrator, let’s suppose ten crores, if is to be given to an individual arbitrator, then it is a huge amount. Therefore, I do not find these figures irrational, as when High Court under Section 11 states that the fees have to be decided in accordance with the schedule, then it is also binding on the parties to follow it, and as far as the negotiation with the arbitrator on fees is concerned, that thing is not possible.

A possible solution to this can be that there should be some declaration that the fee prescribed in the schedule should be for the whole panel of three arbitrators. And in case there is only one arbitrator, then his fees should be one-third of what is prescribed in the schedule plus 25% of that amount.

7. What will be your advice to law students and practitioners looking forward to a career in arbitration?

A7. There is a lot of scope in arbitration. The law students and practitioners looking forward to a career in arbitration should be thorough with the Contract Act and the Arbitration Act. Nowadays, the Government has made it mandatory that every government contract invariably has to have an arbitration clause, so with this, the Government is trying to lighten the burden of the courts. Still, the Government has not been successful, which is one thing. There is another thing which I would like to say regarding the lawyers. Being a lawyer is a job; he has to handle the court, handle the clients, and handle the people around him to increase his clientele. It is a very engaging profession. The lawyer will find significantly less time for his family or any miscellaneous job. Moreover, for a young lawyer to get arbitration matters is in itself a job. So, I would suggest that young lawyers should first establish themselves in the eyes of their seniors so that their senior has confidence in them and give out cases of arbitration and others to young lawyers. Once this confidence is developed, they have to prove their worth by their dint of labour. Otherwise, what I perceive is that getting arbitration matters for a young lawyer is not an easy job.

8. We all know that you have been in the legal industry for over three decades, so what, according to you, are the skill sets that are essential for this profession, and how can a law student utilise their time in the law school to develop these skills?

I have talked about certain skills like oration practice and reading one judgment a day, which are some skill sets that one should develop. One more thing I may have missed out on, and it will cover up, is that you need to carry a smile throughout. You see, half of your job is done with politeness and smile; if you are polite in your submissions, if you are submissive in your arguments, half of your job is done. When I entered this profession, I was told by my teachers, my guru, my father, and others that you should learn three words, “Ji Sir; Yes Sir; Ha Sir”, nothing beyond this. Whenever a Judge says something, it must be any of these three things. One should never say “na” or no to anything; start with a “Yes My Lords” even if you do not agree with what the Judge said, or he may even be wrong in his proposition, then also you must start from Yes Sir or Yes My Lords and then put across your point, this is essential for a youngster. So never start with a no, always be submissive, and then very sweetly and softly take the Judge along with you with whatever you wish to say, because if you start with a no, then it is human psychology that he would become resistant to you, he may not be receptive to what you would be saying, but once you say yes, then he may be receptive to what you may be having to speak. Another thing will be never frown or show your anger in the court, even if you are. Never fight with your colleague on the other side of the dice. Always show respect to him and the court; the world would be yours. So, this is one mantra that I learned during the initial days of my practice.

9. Any final piece of advice for our readers.

Hard work and labour with every brief that comes. Here, I would like to share one thing. When I started practicing in the High Court, there was a perception among the people that I was an expert in the Labour Laws. But to be upfront and honest, I will say I learned Labour Laws in just three months, and those three months were on my first case, which I asked for from my father. Once he permitted me, I went through the entire pleadings, prepared my notes, and started working on the legal aspects of it. Once I started working on it, I was neck deep in Industrial Disputes Act. Once you start reading the case laws related to it, you get ten more case laws referred to in that particular case that you read, and so on. In this way, I had a great command of that topic. During those days, my schedule was such that I used to return at 7.00 p.m. from the courts, and then I used to do this work till around 2.00 to 2.30 a.m., that too when I was scolded by my mother to leave the work and go to sleep. But for doing that extra work, I never forced myself. I enjoyed the process throughout. As once you start enjoying it, you begin to imbibe it, appreciate it, and understand it. Once you do that, you will become a master of that particular thing. So, my final word would be that you can never achieve success without hard work.

Interviews

Mr Sanchit Garga, Advocate-on-Record, Supreme Court of India. He is a very young lawyer who has not only conquered the AOR examination but is also an established name at the Supreme Court as well as the Delhi High Court. He deals in a wide array of cases ranging from civil to criminal to arbitration matters.

In this conversation, he shares with us some valuable insights on the practicality of law and how practice is different from the theoretical concepts we learn at law school. He also shares some tips on litigation and the AOR examination.

This interview has been conducted by Vranda Agarwal, EBC/SCC Online Student Ambassador who is currently pursuing law from NLIU, Bhopal.

  • Can you please introduce yourself and give us a glimpse of your law school journey? Also tell us how do you define the change that you have seen from law in books to law at practice?

I graduated in 2012 from Bangalore Institute of Legal Studies (Bangalore University). Simultaneously, I also completed my company secretaries course. Apart from reading law, while in college I got driven to a world other than law but very closely related to law such as psychology, history, social science, etc, which ultimately helps in understanding the nuances of law. When one practises in superior courts, the Judges are more well versed with law than the young lawyers, one has to come to the point in no time for there is no time for recovery. If a lawyer is not quick on his feet or is not conversant with the facts, he might not be able to answer the volley of questions often asked by the Judges.

Litigation practice is completely different, life as a litigator is far more diverse and different from reading the law in books. Law is an ocean and nobody can learn it all. One always has to be a student of law.

  • Sir can you also share your early experiences with litigation as a career, what was the journey like? What should one expect while embarking upon this journey?

Initial days were a struggle, you keep waiting for briefs, but those were days where you learn the most. One learns courtcraft watching veterans argue in courts. In the initial days, finances become a big problem and it can get frustrating also. Briefs are scarce to come by since litigants do not trust young lawyers, easily. However, this should not deter young lawyers from embarking on the beautiful journey of life as a litigating lawyer. One should look for light from anywhere. Initial days are tough but persistence and self-belief are the key factors which keep you going. Young lawyers should have the courage of conviction to stay put for success might be slow but not far to see.

  • Next is a question which every law student tries to look for. What is the life like as an independent counsel? Also, please throw some light on the profile in contrast to other legal careers like corporate jobs. Is it helpful to work in a firm and then start with your own practice as is the trend these days?

Life as an independent counsel is a wholesome experience. It is a bitter-sweet experience of failure and success in courts as a part of everyday life. But failure should not deter one from moving ahead. Failure is the condiment that gives success its flavour. When in law school, the student should make up his mind on what journey and future he looks for himself though it is a tough decision to make at that time.

 

Law firms provide financial security, the corporate practice of the law firms is diametrically opposite to litigation while the litigation practice of law firms provides a similar experience with heavy briefs and since law firms engage Senior Advocates on regular basis, it is a great learning experience as well. The arbitration practice of law firms is also a great learning curve. The transition from law firms to litigation as an independent counsel might not be smooth always but the idea of being your own boss is a good enough motivating factor.

 

  • A lot many students fear this career path as there is a lot of uncertainty and in the initial days, not much of returns so to say. How does one make a successful litigation career? What are some of the things that he/she needs to keep in mind while opting for a career in this domain?

Persistence, self-belief, patience are the only keys to success. Apart from financial struggles there is so much to learn which in itself is an incentive. There is no straitjacket formula or secret formula to achieve success. It is only by trial and error. The experiences and journey of each litigator is his own and one has to chart his own course. The difficulties may be wide ranging and diverse which are unique to every individual but the way you turn adversities into opportunities is what will take you ahead. Develop a mindset of growth and be a problem-solver for your clients as well as for yourself.

  • What should be the basic approach and expectations one must have while starting the practice at High Court or Supreme Court? What should be the ideal trajectory and please share some do’s and don’ts while starting out this journey?

Before moving to constitutional courts, a lawyer needs to first start with practice in District Courts for at least two years. The basics of CPC and CrPC are implemented in District Courts exercising original jurisdiction.  If the foundation is not strong the entire structure will be weak. I also practised initially in District Court for two years. The idea is to first become a good drafting counsel and then become a good arguing counsel, though there is no ideal trajectory but I always endeavour to draft my own matters which in turns enable me to remember facts, better.

In my advice and experience,

Do’s:

(a) Thorough examination of facts and the applicable case laws should be done while drafting the petitions.

(b)  Always be fair to the opposite side as well.

(c)  Argue without hesitation or fear.

Don’t’s:

(a)  Never mislead the court.

(b)  Never conceal facts prejudicial to your client’s interest.

(c)   Never get agitated in court.

  • Since you took the AOR examination in recent past, please share some tips with the readers on how to clear this exam and what are the benefits of becoming an AOR? Please share your experiences with the examination.

AOR examinations are not that tough to crack especially, if you have been practising in Supreme Court. The key is memorising Supreme Court Rules, 2013 which helps in practice and procedure, drafting as well as ethics paper. Leading case laws though is an open book exam but I find it to be the toughest. Time management during the exams is something to watch out for. Attending the lectures delivered by Senior Advocates conducted by the Supreme Court is a must and should not be avoided for any reason. The lectures are important for they are delivered by the “test author”. Be careful to read and understand the question and then write the answers. The benefits of becoming an AOR are plenty. First you become a certified advocate of the Supreme Court who can plead in his own name. Several public sector companies and private organisations also engage the services of an AOR only. Advocates of High Courts also recognise the Advocate-on-Record. Becoming an AOR helps in boosting the practice and also enhances self-confidence.

 

  • Any advice from your side to all the law students out there, particularly for those who want to get into litigation and aspire to establish their own independent practice?

Litigation is a beautiful profession. Be honest to your profession and the clients. Integrity, perseverance, hard work are the keys to success in any profession. My advice to all the budding litigators is just go out there and make the world your oyster. Success will eventually follow, learn to enjoy the journey. “When the tough gets going, the going gets tough.”

Interviews

Mr Tushar Agarwal completed his LLB from the Amity Law School, Amity University, Noida in the year 2015, and enrolled with the Bar Council of Delhi. Mr Agarwal also successfully completed a diploma course in “criminal justice” from Harvard University, United States.

His practice primarily focuses on criminal law, constitutional law and commercial arbitration. His chamber caters to all the needs of the litigants starting from legal opinion and legal drafting to presenting arguments before the court of law.

Mr Agarwal was one of the assisting counsels representing Dr Shashi Tharoor in a famous State v. Shashi Tharoor, Sessions Case (SC) No. 5/2019. He has also appeared in few pro bono cases with Senior Counsels representing Association of Victims of Uphaar Tragedy, Association of Victims of Meerut Fire Tragedy, etc. Mr Agarwal is currently handling few important matters relating to corruption, corporate frauds, moneylaundering and goods and services tax (GST) evasion being investigated by Central Bureau of Investigation (CBI), Serious Fraud Investigation Office (SFIO), Enforcement Directorate (ED) and Directorate General GST Intelligence (DGGI) respectively.

He has been interviewed by Khushbu Sood, EBC/SCC Online Student Ambassador who is currently pursuing law from HPNLU.

 

1. To begin with, if I may request you to please share with our readers something about yourself, your journey in the profession and your early years.

I am a first generation lawyer from a small town of U.P. i.e. Meerut and shifted to Delhi in 2009 to chase and fulfil my dreams. I completed my LLB from the Amity Law School, Amity University, Noida in the year 2015, and enrolled with the Bar Council of Delhi. I have also successfully completed a diploma course in “criminal justice” from Harvard University, United States.

During my law education, I explored about my deep interest in criminal law and with God’s grace, I was fortunate enough to start my professional journey with one of the stalwarts of criminal law in India Mr Vikas Pahwa, Senior Advocate. I joined his chamber as Legal Associate which provided me a great exposure as I got an opportunity to assist him in variety of high profile cases across various legal forums in Delhi as well as outside Delhi. One case which I would like to mention is State v. Shashi Tharoor, Sessions Case (SC) No. 5/2019 wherein Mr Pahwa was representing Dr Shashi Tharoor and I assisted him at the initial stage of the case. So the right guidance and mentoring in early years helped me in laying down a strong foundation of my professional career.

 

2.  What inclined you towards the field of legal education? Do you reckon any specific incident that made you choose law as a career?

Law is considered to be one of the noblest profession. A lawyer is the only professional who is addressed as learned. So, with the knowledge of law, it is expected from a lawyer that he/she will use that knowledge in making people aware about their legal rights and also fight on their behalf before a court of law for protecting those rights. So, being a participant in fight for protection of legal rights of the people of your country, was the biggest motivation for me to practise this profession.

There is no specific incident that made me choose law as a career. I was curious since my school days to learn about the genesis of various laws implemented in India because I feel that having deep knowledge of law makes you more socially empowered.

 

3.  How did you shape at the law school? Please also share your interests and motivations. How did you navigate through your career path?

At law school, apart from academic sessions and classes, the participation in moot courts, mock trials and other extracurricular activities also helped me a lot in pursuing my studies with utmost dedication and interest. Such activities used to act as a refresher/stressbuster in the hectic college schedule. I had also been in the leadership teams of various college associations like moot court society, legal entrepreneurship cell, media society, etc. Such roles helped me in developing good quality leadership skills.

I had interest in taking up challenging leadership roles since my school days. Such leadership roles not only refine your personality but also provide an opportunity to polish your communication and interaction skills. The motivation behind pursuing law as a career and taking these leadership roles was the direct opportunity of interaction with the legends and renowned Judges and senior advocates who used to visit the college on various occasions.

Further a combination of right guidance from college teachers, mentoring by fraternity seniors, support from family and strong self-belief and hard work and blessings of God and elders, together helped me in pursing my career path in an effective and efficient manner.

4. How has your experience shaped you into the professional? How has your primary interests in criminal law, constitutional law and commercial arbitration, helped you set up your chambers?

The internships across my entire law degree with various advocates, senior advocates, law firms and Judges, helped me in exploring my interest into litigation and that too especially in criminal, arbitration and constitutional law. So pursuing my internships sincerely made my journey easy to formally start practising as an advocate.

  1. Starting your own chambers is a hardworking and tiresome task, do you think it is important to have some specialisation or should there be generalist approach?

 

In the initial days of independent practice through your own chamber, the biggest challenge is to build your face value in the fraternity and to convince the clients about your quality of services in order to retain them. It is very hard to get the relief from the court of law for your clients. So in these initial times, your work experience during trainings and internships plays a major role.

I religiously follow all the ethical and professional practices learnt from my seniors and continue to do hard work with utmost dedication. I spend good amount of time in reading judgments and doing legal research to update my knowledge. My updated legal knowledge and awareness helped me a lot in retaining the clients.

In my opinion, in initial few years of independent practice, one should be open to take up all sort of cases like civil, criminal, arbitration, etc. Once you start building your image in one sort of matters and start gaining a good command over that particular field of law, then a chamber can think of narrowing down its practice to only that matter which falls within its area of specialisation. The specialist approach in initial days limits a lawyer within a periphery which he becomes unable to cross in future.

 

  1. Since your recent achievement, please share your experience of being awarded with “Top 100 Lex-Falcon Award” in LexTalk World Global Conference in Dubai for his contributions in legal industry.

This award indeed was a milestone in my professional journey. These kind of awards and recognition not only enhances your visibility in the fraternity but also motivates you to continue to contribute towards your industry. This award gave me an opportunity to take my practice at global level by making good relations with advocates and counsels across the world.

 

     7.   What, according to you, has changed/modified in law, both in statutes and in the society.

In my opinion, the law with passage of time has become more dynamic. With more frequent and new technological, political and global developments, the requirement of repealing old and obsolete statutes has increased and enactment of new statutes keeping in view the current situation, has become necessary. Further with the passage of time, the awareness about law and status has increased in the society. The people have become more aware about legal rights and the ways to enforce them. But in my view, this increased awareness has also resulted into increased filing of cases before courts. Therefore the onus is on lawyers to guide their clients in a correct manner in order to avoid frivolous and baseless litigations.

     8.  Not many people are familiar with the concept “exhaustion of a search”. What are your views on it?

I guess, the concept of “exhaustion of a search” is a very subjective matter and it differs from individual to individual. The stage of exhaustion of a search for a researcher will never arise until and unless his/her purpose of research is not completed and all questions are not answered.

For example: while doing a research on a law point, finding a case law is not sufficient. One should also research about any executive ordinance or government notification or any report of Law Commission or any report of Parliamentary Committees, etc. in order to have a holistic view regarding that particular law point.

  9.   What advice would you like to give students of law in a post-COVID era where students are anxious about choosing career paths?

In my opinion, this pandemic is a temporary phase which has now almost come to its end. The legal work in courts and corporates has started gaining its original pace which was there before pre-COVID era. Therefore my sincere advice to all aspiring lawyers is that instead of getting disappointed and anxious, they should use their time to enhance their legal knowledge either by reading legal books, judgments or writing articles or pursuing online internships, etc. They should focus on exploring new areas like artificial intelligence in law, etc. They can also plan to go for higher studies.

There are endless opportunities floating in this legal ocean, one just has to look and wait for it with patience and grab the same once it knocks your door. I might be sounding very bookish and non-realistic, but after spending so many years in this profession I have learnt that patience, persistence and hard work are the only ways to climb the stairs of success.

   10.  Any advice you would like to give to the readers of SCC blog? Apart from this is there anything else that you would like to share with the readers of SCC Online?

To all the aspiring lawyers which are readers of SCC blog, my sincere advice would be that whenever you join any chamber as an associate, you should spend good amount of time in that office without making any haste to start independent practice. You should focus on learning art of legal drafting, courtcraft, style of arguments, case management, etc. from your senior because none of these arts can be learnt by reading books. I still remember the exact words of my senior-cum-mentor, who trained me, that “you cannot become Ram Jethmalani in 2 or 3 years of practice. You have to be patient and give adequate time to this profession if you want to achieve success”.

Conference/Seminars/LecturesLaw School News

The Internship & Placement Cell of the University School of Law and Legal Studies, Guru Gobind Singh Indraprastha University, Delhi is organizing a lecture series on different career opportunities for law students. The series aims to provide students with some exposure to the various avenues that they can pursue as a legal practitioner, with key insights regarding the practicalities of such a career. Through these talks, the Cell hopes to empower students with knowledge gained through years of experience.

The third lecture of the series “Nuances of Supreme Court Litigation: From Procedure to Court Craft” will be taken by Mr. Raghenth Basant, an independent litigator practicing mainly before the Hon’ble Supreme Court, the National Company Law Appellate Tribunal, and the National Consumer Disputes Redressal Commission and an alumnus of NLSIU, Bangalore. Mr. Basant will be speaking on Tuesday, June 28, 2022, at 11:00 AM.

We invite all students and professionals to participate in this interactive session. Interested participants must register on the following link before 11:59 PM, June 27, 2022 to receive the meeting credentials: HERE .

About the Organizers

USLLS has ranked 12th in the National Institutional Ranking Framework’s 2021 Rankings (Law) and is one of the premier law schools located in Delhi. The I&P Cell is a student-cum-faculty initiative of the law school, which seeks to secure internship and placement opportunities for USLLS students and undertakes several activities for facilitating professional development of the students.

Madras High Court
Case BriefsHigh Courts

Madras High Court: Expressing that, Power of discretion is to be exercised to mitigate the injustice if any occurred to the litigants, S.M. Subramaniam, J., remarked that,

Litigations/appeals are expected to be filed within the period of limitation as contemplated under the Statutes. Rule is to follow limitation. Condonation of delay is an exception. Exceptions are to be exercised discreetly, if the reasons furnished are genuine and acceptable.

Petitioner was a senior citizen and suffering from ailments and hence, could not come over to Madurai and make arrangements for filing appeal.

Petitioner’s Counsel stated that the appeal was presented to the Court as early as on 31-7-2008, but the appeal papers could not be traced out in the office of the Court for long years as the papers were returned.

Analysis, Law and Decision

The entire case bundle revealed that there was no proof to establish that the appeal was filed on 31-7-2008.

High Court stated that,

Mere affixing a seal of the Madras High Court is insufficient as such filing of papers must be registered in the appropriate register maintained by the Registry.

Bench expressed that,

Uncondonable delay cannot be condoned in a routine manner. Law of limitation is substantive.

Elaborating the reasoning, High Court added that the Courts are vested with the power of discretion to condone the delay, that does not mean that enormous delay in instituting the suit or appeal is to be condoned mechanically.

Though, if the reasons are candid and convincing, then the Courts are empowered to exercise its power of discretion for the purpose of condoning the delay.

Time limits

Question may arise about the purpose and object of the law of limitation as the refusal of condonation of delay sometimes causes denial of rights to the litigants. However, there is a definite purpose for the prescription of the period of limitation for the institution of litigations/appeals.

The Bench also added that,  If any citizen of our great Nation is allowed to exercise his right at his whims and fancies without reference to the law of limitation, circumstances may arise that the rights of other fellow citizens are prejudiced or infringed. Rights cannot be exercised in an unguided manner.

Any citizen, who slept over his right, cannot wake up one fine morning and knock the doors of the Court for redressal of his grievances

Adding to the above analysis, Court stated that, Exceptions can never be adopted as a rule and they are to be exercised exceptionally and condoning long delay in a mechanical manner by the Courts cannot be considered as a good practice.

Imposing Heavy Costs

Costs cannot be in terms with reference to the number of days of delay. It is not an arithmetic principle, where long delay is to be condoned with heavy costs and meagre delay is to be condoned with meagre costs. Such a principle is opposed to public policy and therefore, this Court is not prepared to accept such a concept of imposing heavy costs for condoning enormous delay by violating the law of limitation, which is substantive and also the legal principles to be followed.

Lastly, the High Court held that,

If the delay is about three months or upto five or six months, the Courts may take a lenient view, but not in respect of longer delay.

Hence, the Court declined to condone the delay of 2575 days in filing the appeal. [T Lakshmi v. M. Vasantha, 2022 SCC OnLine Mad 1406, decided on 30-3-2022]


Advocates before the Court:

For Appellants: Mr A.C. Arun Kumar

ArticlesMental Health

In the midst of winter, I found there was, within me, an invincible summer.

Albert Camus

With the Government directing a countrywide lockdown in 2020, our movement got restricted to our homes. But the question was: did our life really get restricted in these times? For me, even with this lockdown/pandemic, my mind simply refused to be locked down. In fact, it was blooming. Blooming with thoughts, which, now when I think, were always part of my subconscious but it is during the last two years that I thought about them, may be, consciously.

 

Life has always been known to be unpredictable. The fragility and vulnerability of life is experienced in moments of loss whether personal or public. Or pandemics like we are currently facing, which bring us close to this reality. What is certain, is death. The fear of the unknown, does not allow us to live, live in the present. We mostly live our lives cribbing about the past, fearing about our future and completely forgetting about in the moment, which is now. It is well said that crisis like situations serve as an intense reminder to each one of us to pause, reflect, and take stock of our priorities. It forces us to put things in perspective, challenges us to expand our understanding of how things work, and connects us with one another in a profound way.

 

I frankly have nothing to complain from this pandemic. I am nothing but grateful. But does that mean I have had a gala time, sitting in my pyjamas all day, getting my fat pay cheque at the end of every month? The answer is no.

 

According to me, the kind of complex lives we are all leading today, is not sustainable. I would be lying if I would say that everyday was all normal for me in these last two years, in fact, in the last couple of years. Working from home; handling a toddler; doing all odd jobs; household chores; juggling between work and home can make anyone go crazy. It is even more difficult if you are the kinds who enjoys her work; wants a career and is ambitious.

 

This time gave me the kind of churning/the manthan that I really required. This period brought me close to myself. It gave me a perspective to a lot of things which were missing in my life. Had it not been for this period, I would have may be continued to live my life through distractions, like the most of us do today, pushing the burning questions to the next day and to the next day, and before we know it, its time. It is these times, which made me spend time with my daughter, the kind of time she and I deserved. I could see her grow. We have created memories together. I got to spend time with my family. Most basic but true in my case, I got to enjoy my house, where in the last 14 years, I came only, may be, to sleep. I got the time to go back to things I once loved doing. Amongst others, I got back to writing. The question was, “did anyone stop me from doing what I did in the last two years or was I (with my conditioning), the real hindrance to my own growth?”

 

Having had a career, most would envy, there were aspects which were unsettling for me. When I would sit by myself, I would constantly travel back through my time machine to the happy times spent as a junior to Justice Kaul and wished how I could go back to that time. This is, when (1) I have had the pleasure of working with some of the bright minds at my workplace; (2) I had a family like team; and (3) had an overall healthy work environment. A deeper introspection made me realise that through these years, I had completely lost sight of and moved away from the reasons why I chose to do law in the first place. Amongst other reasons, I was unhappy for I had trapped myself to the conditioning of the society and did not know how to detangle from that web. I had a life way too comfortable to let go. It is the social construct of our society, I feel which somewhere makes you tick the boxes, which if given a choice to redo, you would not have wanted to tick. An evening out with friends to a fancy restaurant with your exquisite jewels/clothes on, in an ostentatious car is a great distraction, but when you are back home, to yourself, behind those close doors, when no one is watching, having a conversation with self, the thought of, “what am I doing? Is this what I really want? Is this how it is going to be for the rest of my life?” can be troubling, sometimes engulfing. Until the next day, you return back to normal. But the question is, is it normal?

 

Another blow came around when I saw people close to me in our fraternity dealing with their struggles quietly. Through different conversations, I realised that as lawyers, often what we fundamentally miss is that acting as sounding boards to clients, we get vicariously affected. We do not want to acknowledge that there is a problem and/or deal with the root cause, we are happy with finding distractions. That is why, that drink in the evening is so important for us.  I still remember, as a young member of the Bar, the first guiding principle told to me by my senior was, “… do not get attached to a brief, it would be the biggest mistake of your life”. I understand it fully well now. Even before we know it, being a constant ear to all the problems brought to our attention, can get to us. After all we are humans not Gods/demi-Gods.

 

I feel, while this issue has always been there, the pandemic, made us confront it at close quarters from where there was no running away. It was a dormant volcano waiting to be erupted. One comforting factor through this manthan was that I was not alone. I felt that to each one of us, the reasons may be different; causes may be different, struggle may be different, but, one common thread that binds us is that there is a problem which needs to be brought to the forefront and needs to be addressed. And interestingly, it is not a problem restricted to a particular set of lawyers. It is equally relevant for all members of the legal fraternity be it the judiciary; senior counsels; in-house counsels; lawyers working in law firms; independent counsels as well as law students. Each one with their own unique story to narrate.

 

I feel, to bring about a change, changes have to be brought both at the community level as also at an individual level.

At a community level, we need to recognise and realise our interdependence on each other. A collective conversation about the well-being of those around us is necessary. It is imperative to shatter stigmas, initiate serious and concerted conversations and a collaborative public-private-social partnership approach to redress issues concerning mental health and well-being in the legal fraternity.

 

They say, be the change you want to see. At an individual level, I think, we need to ask ourselves this question, “what are those small little changes that I can make to my life or rather would want to make to my life to see a better me”.

 

Solution is within us not outside but are we ready for it is the real question. Try to understand and accept your cause. Having no reason at all is also ok. Is it stemming out of an emotional blockage/baggage giving you a feeling of insecurity; fear; guilt, yearning for sympathy of others; ignorance of true knowledge; worry about the future; inability to focus and work to your own perfection or a combination of these or more factors or none at all.

 

At this juncture, I am reminded of the famous Jagjit Singh’s gazal, “Tum itna jo muskura rahe ho, kya gam hai jise chipa rahe ho.…” Its time, that for once, we remove the supermen/superwomen’s robes that as lawyers the society has bestowed us with and remind ourself that we are human beings. Being human is our greatest responsibility towards ourself. There is one life to live which each one of us should live without any fetters.

 

Through my little realisation, I have learnt to take pride in who I am, accept myself, my journey, organise my priorities, be kind to myself, make the conscious choices that I feel are relevant and important to me (and not because the society expects me to). It is only when I would respect myself, love myself that I would be able to grow and evolve and help others around me, else I would remain stuck to the clutches of the society.

 

It is time that we ask ourselves, “is our life determined by our conscious intentions and deliberate choices, or are we mechanically reacting to the world around us?”

 

To end, let me quote Nora Roberts,

“if you do not go after what you want, you will never have it. If you do not ask, the answer is always no. If you do not step forward, you are always in the same place”.

 

You decide, the choice is yours.


† Independent counsel and Arbitrator. She is also a Trained Mediator; Former Partner, Disputes, Cyril Amarchand Mangaldas.

Case BriefsHigh Courts

Rajasthan High Court: A Division Bench of Akil Kureshi, CJ and Rekha Borana, J. dismissed the petition and kept it open for the petitioners to file a fresh public interest petition.

A PIL was filed by the petitioners sustaining serious allegations with respect to mismanagement of respondent 2 Arth Credit Cooperative Society.

The Court observed that in this public interest petition as it stands today, there are no supporting documents or informative evidence, even prima facie sustaining serious allegations made by the petitioners with respect to mismanagement of the respondent 2 Arth Credit Cooperative Society.

The Court further observed that a citizen approaching the Court in a public interest jurisdiction holds a greater duty to make full research and present necessary facts before the Court to cause further investigation.

The Court thus held “we are not inclined to entertain this petition.”[Gajendra Purbia v. Union of India, D.B. Civil Writ Petition (PIL) No. 3069/2022, decided on 02-03-2022]


Appearances:

For Petitioner(s): Mr. Sumit Singhal


Arunima Bose, Editorial Assistant has reported this brief.

Advani LawExperts Corner


  1. What are Asymmetrical Arbitration Clauses?


Arbitration clauses by its very nature envisage reference of all disputes governed under the auspices of an arbitration agreement to be resolved vide arbitration by reference of the parties to the contract. However, in certain instances, the parties enter into arbitration agreements that vest disparate powers pertaining to the reference of disputes. These clauses are also commonly known as “unilateral option clauses”, “hybrid clauses” and “asymmetrical arbitration clauses” in international legal parlance.

 

An “asymmetric arbitration clause” or “unilateral option arbitration clause” under which the parties bound by it limit themselves to bringing an action in a particular jurisdiction, while at the same time allowing one or more parties to choose whether to refer a dispute to arbitration.[1]

 

The asymmetric arbitration clause only gives one party the advantage of choosing whether the dispute should be resolved by means of arbitration, it follows that the party entitled to decide has a certain advantage over the other. For the beneficiary party, the clause can represent as an effective risk management mechanism as they will have the security and flexibility to initiate, however this shall only apply when the clause is deemed valid.

 

Any arbitration clause which gives unequal powers to refer disputes for adjudication to all parties but one, is usually referred to as “asymmetrical arbitration clause”. This ranges from:

(i) Instances where only a single party has the power to refer the disputes to arbitration (unilateral clauses).

(ii) Instances where both parties have an option to refer the disputes to arbitration, however only one party has the power to refer the dispute to litigation or alternative redressal forums.

 

These clauses may be further tweaked by the parties such that reference of disputes to either litigation/arbitration may be made at the option of only one party, which in legal parlance is referred to as “option clauses”.

 

The present article, in turn, seeks to examine the validity of asymmetrical arbitration clauses including option clauses in the Indian scenario and analyse the judicial pronouncements that examine the validity and enforceability of arbitration clauses and the extent to which such clauses affect the validity and existence of the arbitration agreement.


  1. Pronouncements by Indian Courts on Asymmetrical Clauses


The beneficiary of a unilateral arbitration clause is vested with the power to refer disputes to arbitration, usually at his option, however the same is distinguished from unilateral appointment of an arbitrator. In the former, only one party may refer disputes to arbitration however, the appointment becomes a different matter altogether; whereas in the latter, only a single party has the power to appoint an arbitrator. Such unilateral clauses often contain provisions for unilateral appointments as well, however the operation and purport of the two are vastly different. The Supreme Court of India took the view that in an arbitration agreement providing for adjudication by a sole arbitrator, the appointment of the sole arbitrator cannot be made unilaterally by one of the parties, even if the clause so vested such a power in the said party, and that to maintain absolute fairness and impartiality, the competent court alone could affect the said appointment in exercise of powers under Section 11 of the Arbitration and Conciliation Act, 1996[2]

 

In Emmsons International Ltd. v. Metal Distributors (UK)[3] the Delhi High Court decreed that where an arbitration clause arising under a bill of lading is conceptualised with a view to deprive the other party of approaching the local courts/tribunals or initiate arbitration, such clauses run afoul of Section 28 of the Contract Act, 1872 (Contract Act) that declares agreements restraining legal proceedings as illegal and cannot be enforced as it is an agreement in restrain of legal. It is pertinent to note however, that the arbitration clause in the instant case vested the seller with the option to initiate arbitration as well as decide the forum of adjudication and gave no rights to the buyer to initiate proceedings.

 

The present case also reaffirms the decree of the Delhi High Court[4] that holds invalid, any unilateral dispute resolution clauses that completely deprive the other party to seek recourse to legal proceedings as well as deciding the appropriate forum of adjudication without the consent and approval of the other party.

 

However, in a case before the Supreme Court[5], the validity of an arbitration clause which provided only one party to either initiate appropriate legal proceedings in UK or initiate arbitration was deemed to be valid and further stated that these unilateral options clauses are valid and that there is no dispute with the same. The judgment however is received with skepticism since the court has interpreted the clause in accordance with the applicable English law which cannot be used to interpret clauses governed by Indian law, however being a decision of the Supreme Court the powers under stare decisis operates, hence the applicability of the same is uncertain.

 

The Delhi High Court in Lucent Technologies Inc. v. ICICI Bank Ltd.[6], yet again held that unilateral option clauses are invalid. The Court relied on both Bhartia Cutler[7] and Emmsons International[8] cases and stated that the party’s right to recourse through legal proceedings had been infringed under Section 28 of the Contract Act, 1872.

 

Curiously, the Madras High Court took a contrarian view in Castrol India Ltd. v. Apex Tooling Solutions[9] by upholding unilateral clauses in line with the view adopted in international jurisprudence that an arbitration clause need not necessarily have mutuality.


  1. Issues concerning Optional Clauses


What differentiates an optional clause from a mandatory one is the positioning of any prefix to the option to arbitrate/litigate. The usage of prefixes such as “shall”, “will” or “must” presupposes that such clauses stipulate that all disputes arising must be resolved in the manner provided under the dispute resolution clause and the parties are bound by the same.

 

Whereas the usage of the prefix “may” or “at the option of party (x)” gives discretion to the party/parties with the option to initiate appropriate disputes at its time of choosing at such appropriate forums as may be enumerated in the dispute resolution clause. Where the option to refer disputes is to be exercised by the parties jointly, the disputes clause shall only come to life once the parties by consent agree to refer the disputes as per the mechanism enshrined. An example of such a clause is “all disputes arising thereof shall be referred for arbitration if the parties so determine”. This draws a distinction from optional clauses where either party has an option to arbitrate or refer the disputes which takes the form such as “all disputes arising thereof shall be referred for arbitration at the option of either party”.

 

The Bombay High Court[10] has clarified that where the prefix “may” is attached in optional arbitration clauses, the party opting to initiate either arbitration/litigation has to seek consent anew of the other party before commencing arbitration, whereas situations envisaging mandatory arbitration are those where consent is deemed to have been given with the usage of the word “shall” or “will”  and thus either party to the agreement may initiate appropriate arbitration/litigation proceedings.

 

The Bombay High Court also distinguishes the Supreme Court case of Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. v. Jade Elevator Components[11], where both parties were given a choice to select a forum of under arbitration or litigation. Here, since the petitioners initiated arbitration, the respondent was bound to comply with the arbitration process as well since the clause was not optional in nature but mandatory.

 


  1. Analysis and Concluding Remarks


One of the more visible concerns in asymmetrical clauses is the power of the party having recourse to more than one forum of adjudication to seek and enforce a stay on proceedings initiated by a party having only recourse to a single method of adjudication. For example, where the party having a sole option to refer the disputes to arbitration invokes the same, the opposite party having more than one option for adjudication of the disputes stemming from the contract, may invoke an alternative forum under the asymmetrical clause, thereby inconveniencing his counterpart through greater control of the dispute resolution process. This would also run counter to Section 28 of the Contract Act by creating hindrances and restraints in the commencement of legal proceedings by the aggrieved party.

 

Yet, courts in India (with the exception of the Delhi High Court) and abroad do not dispute the existence of arbitration agreements which are entered into willingly by the parties, since contractual covenants must be given effect to without deviation to the terms stipulated by the contractual intent of the parties. Therefore, as a logical consequence even if arbitration agreements are asymmetrical in nature the same would be valid keeping in line with the principles of party autonomy enumerated by the Supreme Court,[12] which are the cardinal pillars of the Arbitration and Conciliation Act, 1996.

 

On closer examination on contractual agreements containing such clauses it would be discovered that these are found in several employer-contractor agreements, usually with one side being a corporate entity with deep pockets and the tenacity to weather several disputes whereas the other side being small to medium sized companies who have little room to bargain.

 

When taking into account the nature of the parties entering into such agreements, the clauses arising thereof would seem to be founded on unequal terms that violate Article 18 of the UNCITRAL Model Law where the “parties must be treated with equality and each party shall be given an opportunity to present his case”. The sequitur being that even the ability of the parties to refer disputes must be treated at parity.

 

Contracts containing terms that do not keep parties at parity are deemed by the Supreme Court[13] to be those against public policy and therefore invalid, since the parties do not enjoy equal bargaining power and therefore are construed as unconscionable contracts under Section 23 of the Contract Act.

 

However, the prevailing judicial view is that there is no requirement for mutuality in arbitration agreements which stem from equal considerations given by the parties to a contract and hence there is no requirement for an arbitration agreement to confer a mutual right to initiate a reference to arbitration and any agreements providing for an option for one party alone to refer disputes to arbitration is deemed valid. The extent of consideration in the main contract that flows into the arbitration agreement must be examined in further detail considering that arbitration agreements by its very nature are a separate agreement and are severable from the main contract.

 

At the present juncture in time, asymmetrical and optional clauses are prima facie deemed to be valid by the Indian courts in line with the international cases conclusively opining on the same. However, there are disparate views prevailing across the Indian courts as to its validity unless there is a clear indication that the manner or terms of the contract itself are contrary to the public policy of India.[14]

 

Though the courts in the United Kingdom and Singapore – two of the most arbitration-friendly hubs – deem asymmetrical, optional clauses as valid,[15] it is imperative that the Indian courts analyse the validity of such clauses in the socio-economic backdrop of India rather than the prevailing global sentiment in order to give effect to a uniform standard as to the treatment of asymmetrical and optional clauses in order to ensure expeditious adjudication and disposal of arbitration proceedings.


† Founder & Chairman, Advani Law LLP.

†† Senior Partner, Advani Law LLP.

††† Associate, Advani Law LLP.

* Associate, Advani Law LLP.

[1] Maastricht Journal of European and Comparative Law 2018, Vol 25 (I) 77–86, Bas van Zelst, page 77.

[2]Perkins Eastman Architects DPC v. HSCC (India) Ltd., 2019 SCC OnLine SC 1517.

[3] 2005 SCC OnLine Del 17

[4]Bhartia Cutler Hammer Ltd. v.  AVN Tubes Ltd., 1991 SCC OnLine Del 322 : (1993) 1 BC 472.

[5] Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356.

[6]2009 SCC OnLine Del 3213.

[7] 1991 SCC OnLine Del 322 : (1993) 1 BC 472.

[8] 2005 SCC OnLine Del 17

[9] 2015 SCC OnLine Mad 2095.

[10]Quick Heal Technologies Ltd. v. NCS Computech (P) Ltd., 2020 SCC OnLine Bom 693.

[11](2018) 9 SCC 774.

[12]PASL Wind Solutions (P) Ltd. v. GE Power Conversion (India) (P) Ltd., (2021) 7 SCC 1.

[13]Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly, (1986) 3 SCC 156.

[14]ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705; Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552; Shri Lal Mahal Ltd. v. Progetto Grano Spa, (2014) 2 SCC 433.

[15]NB Three Shipping Ltd. v. Harebell Shipping Ltd., 2004 EWHC 2001; Dyna-Jet Pte. Ltd v. Wilson Taylor Asia Pacific Pte. Ltd., 2017 SGCA 32.

Case BriefsSupreme Court

Supreme Court: While addressing the appeal against Telangana High Court’s order imposing costs of Rs. 10,000 on Asst. Commissioner of Sales Tax, the Division Bench of Dinesh Maheshwari and Hrishikesh Roy, JJ., refused to interfere with well-considered and well-reasoned order of the High Court and instead proceeded to enhance the cost by Rs. 59000. The Bench remarked,

“…error, if any, on the part of the High Court, had been of imposing only nominal costs of Rs. 10,000 on the respondent…”

The Bench held that the attempted inference on the part of the respondent that the writ petitioner was evading tax because the e-way bill had expired a day earlier was not only baseless but also the intent behind the proceedings against the petitioner were questionable per se, particularly when it was found that the goods in question, after being detained were strangely kept in the house of a relative of the respondent for 16 days and not at any other designated place for their safe custody.

The respondent-petitioner, a Private Limited Company had made an intra-State supply of paper to M/s. Sri Ayappa Stationery and General Stores and had also generated an e-way bill dt.04-01-2020. The goods were delivered to a transporter for making delivery to the consignee by an auto trolley however, due to Anti CAA protest traffic was blocked and the auto trolley driver could not make the delivery, next day being Sunday the driver took the trolley for delivery on the next working day, i.e. 06-01-2020.

It was the case of the petitioner that the auto driver was wrongfully detained by the Deputy State Tax Officer alleging that the validity of the e-way bill had expired proposing to impose tax and penalty. The petitioner revealed that the paper boxes were unloaded by the appellant-respondent at a private premises in the house of respondent’s relative without tendering any acknowledgment of receipt of detention of the goods in his custody, and subsequently, the auto trolley driver was released.

Considering that there was no material before the appellant-respondent to come to the conclusion that there was evasion of tax by the petitioner merely on account of lapsing of time mentioned in the e-way bill because even the appellant-respondent did not say that there was any evidence of attempt to sell the goods to somebody else on 06.01.2020, the High Court had held that on account of non-extension of the validity of the e-way bill by petitioner or the auto trolley driver, no presumption could be drawn that there was an intention to evade tax.

The High Court had set aside the levy of tax and penalty of Rs. 69,000 and imposed costs of Rs. 10,000 on the appellant-respondent payable by the petitioner within four weeks. Deprecating the conduct of the appellant-respondent and blatant abuse of power in collecting from the petitioner tax and penalty both under the CGST and SGST and compelling the petitioner to pay Rs.69,000, the High Court remarked,

“We deprecate the conduct of respondent in not even adverting to the response given by petitioner to the Form GST MOV-07 in Form GST MOV-09 and his deliberate intention to treat the validity of the expiry on the e-way bill as amounting to evasion of tax without any evidence of such evasion of tax by the petitioner.”

Approving the reasoning of the High Court, the Bench said,

“The analysis and reasoning of the High Court commends to us, when it is noticed that the High Court has meticulously examined and correctly found that no fault or intent to evade tax could have been inferred against the writ petitioner.”

However, on the amount of costs the Bench opined that it was rather on the lower side considering the overall conduct of the respondent and the corresponding harassment faced by the writ petitioner. Accordingly, the Bench imposed a further sum of Rs. 59,000 on the appellant-respondent toward costs, to be paid to the writ petitioner over and above the sum of Rs. 10,000 already awarded by the High Court.

Lastly, opining that even the instant appeal was misconceived, the Bench made it clear that the State would be entitled to recover the amount of costs, after making payment to the writ petitioner, directly from the person/s responsible for the entirely unnecessary litigation.

[CST v. Satyam Shivam Papers (P) Ltd., 2022 SCC OnLine SC 115, decided on 12-01-2022]


Appearance by:

For Appellants: P. Venkat Reddy, Prashant Tyagi, P. Srinivas Reddy, Advocates and M/S. Venkat Palwai Law Associates, AOR


Kamini Sharma, Editorial Assistant has out this report together 

Case BriefsHigh Courts

Delhi High Court: While expressing its opinion on the position of an advocate in law, C. Hari Shankar, J., expressed that,

There is, after all, a duty that we all owe, to ourselves, higher than that owed to the client, the brief, the opposite party, or even the court. The conscience of the Counsel should be the last sounding board.

Background

The case set out in the applications, qua the involvement of Mr Singhal, Advocate was that Mr Singhal was a close friend of the family and closely associated with Mr L.R. Kapur, late father of the parties in the disputes.

Senior Counsel, Rajeev Virmani, submitted that his client was completely unaware of the involvement of Mr Singhal in the proceedings.

In 2017, the applicant received a legal notice from Advocate M.K. Dhingra who purported to represent the clients on whose behalf Mr Singhal was appearing.

Following the said notice, CS (OS) 188/2018 was filed by Mr Dhingra before this Court, on behalf of the said parties. Mr Singhal appeared on behalf of Mr Dhingra in the said proceedings. It was only thereafter, Mr Virmani, submitted that the applicants came to know that Mr Dhingra was actually a chamber junior/associate of Mr Singhal.

On learning the above fact, the applicants, in October, 2019, filed IA 3869/2019 (one of the applications being decided here) for a direction to Mr Singhal not to represent the plaintiff in CS (OS) 188/2018.

It was contended that Mr Singhal has acted as a mediator among the parties and the parties, including the applicants in the present case, had exchanged confidences, with respect to the dispute, with Mr Singhal.

Further, Mr Virmani submitted that, despite the pointed allusions in the application to the specific occasions and instances on which Mr Singhal had met the parties and had come to learn of confidential details regarding the dispute and even acted as a mediator, there was no clear denial, to the said facts, in the reply filed by Mr Singhal.

Analysis, Law and Decision

High Court expressed that,

There can be no gainsaying the position in law that an advocate owes, to the litigating public, the Court, his client and to the opposite parties, the highest degree of probity and transparency.

Adding to the above, Court elaborated stating that,

There can be no dispute with the proposition that, where the Court finds that the appearance of an advocate, before it, is not in keeping with the standards expected of the legal profession and is likely to prejudice a fair espousal and prosecution of the lis, the Court can step in and restrain such appearance.

Bench opined that the Court has power to restrain a person from appearing in the proceedings as an advocate on behalf of one or the other party, if it feels that such appearance would be illegal or even improper.

If an advocate has earlier acted, qua the lis between the parties, in judicial or quasi-judicial capacity or even as a mediator, the Court can certainly injunct him from appearing as an advocate in the matter before it. Equally, if the concerned advocate has advised one or the other party or has been a repository of confidences between the parties, the court may, in an appropriate case, direct that he should not represent the parties before the Court. Such directions, if issued, are essentially intended to allow the purity of the stream of justice to remain unsullied, and are, therefore, fundamentally ex debito justitiae.

Reply filed by the defendants through Mr Singhal denied the allegations that Mr Singhal acted as a mediator between the parties or advised the parties in the instant litigations or was a repository of confidence between them.

On perusing the material on record, Court stated that it was not in a position to pass an order of restrain since the standard of material that was required for such order to be passed was lacking. The Court was also of the opinion that Rules 13 and 15 of Volume V, Chapter VI of the Delhi High Court Rules, cited by the applicant, were not applicable to the instant case.

Court also found that Mr Singhal admitted his association with the family and the fact that he had handled cases on their behalf, along with this, he also admitted that in the meeting in which he was associated present case was subject matter of consideration. Though nothing indicated that in connection with the present case, the meeting had taken place in which Mr Singhal participated, irrespective of whether the exact nature of the dispute and the facts were or were not, discussed.

Lastly, the Bench concluded by expressing that,

it would be advisable for Mr Singhal, as a member of a profession which aspires, at all times, to nobility, to introspect, and consider whether his continued appearance in the present matter was in consonance with the highest degree of probity that he, as an advocate, was expected to maintain.

On that note of advice, the application was dimissed.[Sandeep Kaur v. Janak Kapur, 2021 SCC OnLine Del 5211, decided on 6-12-2021]


Advocates before the Court:

Mr. Rajeev Virmani, Sr. Adv. with Mr. Jai Sahai Endlaw, Mr. Shivek Trehan, Mr. Rajat Soni, Mr. Pranay Mohan Govil & Mr. Subhoday Banerjee, Advs. along with Mr. Sandeep Kapur (Plaintiff)

Ms. Niharika, Adv.
Mr. Ashish Kumar, Adv.
Mr. S.C. Singhal, Adv.
Mr. S.C. Singhal, Adv.
Mr. Rajeev Virmani, Sr. Adv. with Mr. Jai Sahai Endlaw, Mr. Shivek Trehan, Mr. Rajat Soni, Mr. Pranay Mohan Govil & Mr. Subhoday Banerjee, Advs. along with Mr. Sandeep Kapur (Defendant 1)

Ms. Niharika, Adv.

Mr. Ashish Kumar, Adv.

Case BriefsSupreme Court

Supreme Court: In a case where the party, in a subsequent petition seeking same relief, had not disclosed the filing of the suit, its dismissal by the Civil Court and the confirmation of the said judgment by the High Court in the writ petition, the bench of SA Nazeeer* and Krishna Murari, JJ has held that the appellants did not come to the court with clean hands and stressed that the parties have to disclose the details of all legal proceedings and litigations either past or present concerning any part of the subject-matter of dispute which is within their knowledge.

Factual Background

After lapse of 34 years from 3 the completion of acquisition proceedings and receiving of award amount, the petitioners had filed the present writ petition challenging the allotment of a portion of the land on the ground that the same has not been acquired by the Bangalore Development Authority (BDA).

It was the appellants’ case that since 8 guntas of land had not been acquired, they had partitioned the said property amongst themselves and each of them was in possession of a site formed in this 8 guntas of land. It was argued that when the said 8 guntas of land itself has not been acquired, question of formation of the sites by the BDA in this land and its allotment was illegal.

However, admittedly, the appellants had, in 1999, filed a suit before the Additional City Civil Court against the BDA seeking permanent injunction while pleading identical facts and urging similar grounds. The said suit was dismissed by the trial court. The appeal filed against the said judgment of the trial court was also dismissed by the High Court. The appellants had not disclosed the dismissal of the aforesaid Suit and the appeal in the writ petition.

Analysis

Noticing that the jurisdiction exercised by the High Court under Article 226 of the Constitution of India is extraordinary, equitable and discretionary, the Court said that it is imperative that the petitioner approaching the writ court must come with clean hands and put forward all facts before the Court without concealing or suppressing anything.

“A litigant is bound to state all facts which are relevant to the litigation. If he withholds some vital or relevant material in order to gain advantage over the other side then he would be guilty of playing fraud with the court as well as with the opposite parties which cannot be countenanced.”

In order to check multiplicity of proceedings pertaining to the same subject-matter and more importantly to stop the menace of soliciting inconsistent orders through different judicial forums by suppressing material facts either by remaining silent or by making misleading statements in the pleadings in order to escape the liability of making a false statement, the Court held that

“… the parties have to disclose the details of all legal proceedings and litigations either past or present concerning any part of the subject-matter of dispute which is within their knowledge. In case, according to the parties to the dispute, no legal proceedings or court litigations was or is pending, they have to mandatorily state so in their pleadings in order to resolve the dispute between the parties in accordance with law.”

Important rulings

Prestige Lights Ltd. V. State Bank of India, (2007) 8 SCC 449

It is of utmost necessity that when a party approaches a High Court, he must place all the facts before the Court without any reservation. If there is suppression of material facts on the part of the applicant or twisted facts have been placed before the Court, the writ court may refuse to entertain the petition and dismiss it without entering into merits of the matter.

Udyami Evam Khadi Gramodyog Welfare Sanstha v. State of Uttar Pradesh, (2008) 1 SCC 560

The writ remedy is an equitable one and a person approaching a superior court must come with a pair of clean hands. Such person should not suppress any material fact but also should not take recourse to legal proceedings over and over again which amounts to abuse of the process of law.

K.D. Sharma v. Steel Authority of India Limited, (2008)12 SCC 481

If there is no candid disclosure of relevant and material facts or the petitioner is guilty of misleading the court, his petition may be dismissed at the threshold without considering the merits of the claim.

Ruling

The Court noticed that identical contentions were raised by the appellants in the previous suit and that the said suit was dismissed and the judgment of the civil court was confirmed by the High Court. Hence, since this finding of the High Court has attained finality, the writ court cannot sit in an appeal over the judgment passed by the High Court in the appeal.

Hence, the conclusions reached by the court in the appeal were held to be binding on the appellants.

[K. Jayaram v. Bangalore Development Authority, 2021 SCC OnLine SC 1194, decided on 08.12.2021]


Counsels

For appellants: Senior Advocate Prof. Ravivarma Kumar

For BDA: Advocate S.K. Kulkarni


*Judgment by: Justice SA Nazeer

Know Thy Judge | Justice S. Abdul Nazeer

Case BriefsHigh Courts

Rajasthan High Court: Sanjeev Prakash Sharma, J., allowed a petition which dealt with the issue as to whether the third child born to the petitioner on account of failure of the ligation operation can be said to come within the ambit of memorandum dated 01-06-2017 to deny the ACP to the petitioner for three years.

The wife of the petitioner had undergone a ligation operation however the said operation was unsuccessful and she gave birth to a girl child. The petitioner already had two male children making the total to three. State Authorities had denied the petitioner to grant ACP thereafter.

Counsel for the petitioner, Mr Tanveer Ahamad submitted documentary proof to show that the third child cannot be said to have been born with deliberate intentions and was born on account of failure of operation which cannot be treated to come within the ambit of the Memorandum dated 1-6-2017. It was further informed that petitioner submitted a certificate issued from a Doctor who had conducted the concerned Tubal Ligation operation on applying and also produced relevant proof of registration relating to the admission of petitioner for the concerned operation. Counsel further submitted that petitioner’s case cannot be said to be one where a third child was born out of willingness of the parents and that the third child was born after a period of 12 years of the earlier child and in such circumstances, the submission of the petitioner cannot be doubted.

The Court after perusing all the documents came to a conclusion that it cannot be said that the certificate was ambiguous or suspicious and the authorities ought to have taken a pragmatic view. The Court then perused the memorandum and found that it was apparent that an employee who has more than two children on or after 1-6-2002 shall not be granted next ACP for three years from the date on which his/ her ACP becomes due and it would have a consequential effect on the subsequent financial upgradation. The Court however noticed that circular does not take into consideration the circumstances which may have arisen in the birth of a third child.

The Court explained that in the present case, the child was born on account of the

failure of the ligation operation and getting an operation done showed the intention of the couple not to have a third child. However, on account of failure, if a child was born, they cannot be penalized for the same. The Court held that these were exceptions to the rule and has to be taken into consideration.

The very purpose of the rule is to deter Government servants from having a third child. However, if a third child is born, without there being any deliberate intent, the circular would not come in way to deprive the concerned individual of the benefits which are available under the service rules.

The Court allowing the petition opined that any child born after 1-6-2002 to a couple already having two children cannot be denied ACP by applying the memorandum by a blanket order. The circumstances need to be examined and exceptions to be taken into consideration.

The Court directed the respondents to grant ACP to the petitioner on completion of 20 years of service from the date it became due without applying the circular dated 1-6-2017 and arrears of salary to be released.[Rajveer Sharma v. State of Rajasthan, 2021 SCC OnLine Raj 756, decided on 13-01-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Gujarat High Court: The Division Bench of Vineet Kothari and B.N. Karia, JJ., took up a petition which dealt with the parties not only filing Civil Suits, Writ Petitions, and Letters Patent Appeals under Article 226 of the Constitution but also going for forum shopping.

The Writ petition was dismissed by the order dated 06-10-2010. In Letters Patent Appeal, this Court had initially passed the status quo order on 13-12-2010 which came to be modified after detailed hearing on 17-02-2021.

The assets of the Defaulter Company –  GPPML were taken over by GSFC in the exercise of its statutory powers under Section 29 of the SFC Act, 1951 and sold away to SIL at a price which was the subject matter of challenge.

Detailed interim orders passed in the matter leading to the proposed order passed by the Court for facilitating the transfer of all the proceedings to the National Company Law Tribunal (NCLT), Ahmedabad, which is the expert fact-finding Tribunal constituted under the provisions of the New & Special Law viz. Insolvency and Bankruptcy Code, 2016 in terms of the decision of the Supreme Court in the case of Action Ispat and Power (P) Ltd. v. Shyam Metalics and Energy Ltd., (2021) 224 Comp Cases 35 (SC) where it was held that the winding up Court or the Company Court should transfer the winding up proceedings to NCLT, not only at the initial stage, but even in the mid stage of winding-up proceedings, unless the winding-up proceedings have reached a stage where it would be irreversible and making it impossible to set the clock back and then only that the Company Court must proceed with the winding-up, instead of transferring the proceedings to NCLT under IBC provision.

The Court noticed that the auction purchaser – SIL not only was involved in litigation before this Court, and entered into an alleged OTS (One Time Settlement) with GSFC which is with a doubtful integrity to say the least and is under a serious contest by left out Secured and Unsecured Creditors, but SIL also approached the Hon’ble Delhi High Court by way of writ petitions merely because it had a namesake registered office of the Company in Delhi also, whereas its industry in question is in Gujarat.

The Court stated that scattering the litigation in various Forums is the root cause of multiplicity of litigation and amounts to misuse and abuse of process of law and by sheer passing of the different orders which may or may not be conflicting orders inter-se by different Forums, who apparently would have the competent jurisdiction to be seized of those proceedings and passed those orders, ultimately may result in an utter messy confusion of the things and unresolved problems for long time. Such malpractices deserve to be seriously checked by enacting some kind of filters where the parties to one lis essentially are restricted to one competent Forum to avoid any such chance of conflicting orders and forum shopping.

The hurried One Time Settlement of GSFC with SIL in favour of which even the major part of the auction price was converted into a term loan by GSFC and in the repayment of which, SIL defaulted, still instead of again taking over the assets and re-auctioning them, GSFC chose, for the reasons best known to it to enter into One Time Settlement with SIL at a mere Rs.60 lakhs and that is a matter to be looked into by the NCLT. The said SIL is also said to have stopped its production activities and the assets of GPPML sold to it under Section 29 way back in the year 1990 are still in disuse or are not being used for any productive activity and that is not only a wastage of assets for the creditors and other stakeholders, but also a national waste.

The Court was of the view that NCLT would be the best suited Forum in these circumstances to the concerned and connected issues in this case.[Lalitaben Govindbhai Patel v. Gujarat State Financial Corpn., 2021 SCC OnLine Guj 1077, decided on 26-07-2021]


Suchita Shukla, Editorial Assistant has reported this brief.


Appearance:

For the Appellants: Mr Sandeep Singhi and Mr AS Vakil

For the Respondents: Mr BH Bhagat, Mr RD Dave, Mr Pranav G Desai, Mr Abhijit P Joshi, Mr Nandish Y Chudgar and Mr Devang D Trivedi

Op EdsOP. ED.

Introduction

Third-party funding (TPF) of litigation is one of the hottest discussion topics in India given the usurious cost of litigation. As the name indicates, it involves an entity/person who is not concerned with, or involved in a dispute between two (or more) parties funding the costs of conducting a litigation by one of the parties. A more scientific and comprehensive definition is the one suggested by the Task Force of the International Council for Commercial Arbitration and Queen Mary University of London in their April 2018 Report, which takes into account multiple models of funding:[1]

The term “third-party funding” refers to an agreement by an entity that is not a party to the dispute to provide a party, an affiliate of that party or a law firm representing that party,

(a) funds or other material support in order to finance part or all of the cost of the proceedings, either individually or as part of a specific range of cases; and

(b) such support or financing is either provided in exchange for remuneration or reimbursement that is wholly or partially dependent on the outcome of the dispute, or provided through a grant or in return for a premium payment.

As the definition demonstrates, the benefactor is not impelled by considerations of altruism, but by a possibility of a profit, or gaining the asset in dispute. The profit, too, is made by either obtaining a share in the eventual sum awarded, or a fixed figure to be paid in the event of a successful outcome.

The concept, as outlined above, is bound to cause some discomfort in the minds of any student or practitioner of law. This is because a diligent student or practitioner of law will be quick to draw an analogy to a prohibited practice in Indian law – that of contingent fee arrangements, where a lawyer agrees to represent a party in a dispute subject to being paid a share in the amount eventually awarded. While contingent fee arrangements are legal in many other countries, it is still strictly frowned upon in India, with such agreements not only being illegal, but also capable of inviting disciplinary action against the practitioner concerned. This approach of Indian law seems justified given the experiences of countries like the United States, where lawyers are termed “ambulance chasers”, when they pursue victims of accidents to represent them on a contingent fee basis.

It is worthy recounting here the observations of the Supreme Court in “G” Senior Advocate, In re[2], where a practitioner had entered into a contingent fee arrangement with his client for 50% of the monies recovered to be his fees. When the agreement was defended by the practitioner drawing reference to the practice in parts of the United States of America, the Court observed:

  1. We see no reason why we should import what many feel is a mistake, even in the country of its origin, from another country and seek to perpetuate their error here when a sound and healthy tradition to the contrary already exists in our Bar. The reasons for exacting these high standards in this country, where ignorance and illiteracy are the rule, are even more important than they are in England where the general level of education is so much higher….

TPF transactions, however, do not involve funding from advocates or solicitors, and to such extent, do not run afoul of the above observations. Much of the legitimacy for TPF transactions in India is presently claimed from an observation by the Supreme Court in Bar Council of India v. A.K. Balaji[3]  that there appears to be no prohibition to TPF so long as they are not lawyers. The obiter observation is merely suppositional, with the Supreme Court not having any occasion to consider the issue. Thus, such obiter cannot be considered binding but merely directional. Though a similar observation has been made by the Supreme Court in the judgment in “G”  Senior Advocate, In re[4], it is submitted that the observations, as in the A.K. Balaji decision[5], are obiter as well.

History – Maintenance and Champerty

To consider the legitimacy of TPF transactions in the context of extant laws in India, one needs to first understand the concept of maintenance and champerty. Briefly put, maintenance, in its modern form, is when a third-party cause or promotes unwanted litigation by causing or supporting a person to sue another. Champerty is an aggravated form of maintenance where the third party funds a party to enable such party to sue another, in return for funds if the litigation were successful. As is apparent from the definitions, champerty and TPF transactions are significantly similar to each other, since both involve an unrelated person funding a party to initiate or continue to prosecute a dispute, in return for monetary consideration. It is thus essential to consider the law of champerty and assess whether TPF transactions stand the test of prohibition against champerty.

Dating back to as early as the year 1275, champerty was a common feature in the first two Statutes of Westminster,[6] as well as the articles upon the Charter.[7] It was initially intended to prevent powerful lords, noblemen and officers of the courts from funding or maintaining disputes that they otherwise had no interest in. The observations of Lord Mustill, speaking for a unanimous House of Lords in Giles v. Thompson,[8] on the history of champerty is particularly instructive in this regard:

the crimes of maintenance and champerty are so old that their origins can no longer be traced, but their importance in medieval times is quite clear. The mechanisms of justice lacked the internal strength to resist the oppression of private individuals through suits fomented and sustained by unscrupulous men of power. Champerty was particularly vicious, since the purchase of a share in litigation presented an obvious temptation to the suborning of justices and witnesses and the exploitation of worthless claims which the defendant lacked the resources and influence to withstand. The fact that such conduct was treated as both criminal and tortious provided an invaluable external discipline to which, as the records show, recourse was often required.

With the evolution of a stronger and more independent judiciary, as well as quality of legal ethics, the need to prosecute persons for the offences of champerty and maintenance were obviated. However, the civil consequences remained even after Parliament repealed champerty as an offence, with issues arising on considerations of contracts being contrary public policy.[9] An analysis of the evolution of champerty in the United Kingdom is beyond the scope of this essay.[10] It is, however, apparent that the primary concerns of the law in respect of champerty arises from the fact that it causes the maintenance of litigation that would ordinarily not be maintained, by a person who has no greater interest than the financial benefits that will accrue to them from a successful outcome.

Position in India on Maintenance and Champerty

In India, however, maintenance and champerty were never made offences, largely because the circumstances that existed in mediaeval England did not obtain in the courts operated by the East India Company (and later by the Crown). Nonetheless, the law, as with England, remained relevant to consider validity and enforceability of agreements on questions of public policy and morality.[11] The law in this regard, set by a few decisions in the late 19th century by the Judicial Committee of the Privy Council, remains unchanged till date, and are particularly instructive of how courts viewed champerty.

The earliest occasion when the Judicial Committee had occasion to consider the issue was in G.F. Fischer v. Kamala Naicker,[12] where it had to consider whether an agreement must not be enforced merely because it was champertous in nature. Observing that the Sudder Adawlut was perhaps overzealous in assessing whether the agreement was champertous when the parties were not even at issue on the same, the Judicial Committee nonetheless laid the principal test for assessing whether a champertous agreement violates public policy in the following terms:[13]

The Court seem very properly to have considered that the champerty, or, more properly, the maintenance into which they were inquiring, was something which must have the qualities attributed to champerty or maintenance by the English law: it must be something against good policy and justice, something tending to promote unnecessary litigation, something that in a legal sense is immoral, and to the constitution of which a bad motive in the same sense is necessary….

Thus, the Judicial Committee, in effect, imported principles of champerty and maintenance from England to India, albeit for the limited purpose of assessing whether an agreement is void on considerations of public policy. This was further expounded upon by the Judicial Committee in Ram Coomar Coondoo v. Chunder Canto Mookerjee,[14] where the Court, in considering a TPF transaction, held:

Their Lordships think it may properly be inferred from the decisions above referred to, and especially those of this tribunal, that a fair agreement to supply funds to carry on a suit in consideration of having a share of the property, if recovered, ought not to be regarded as being, per se, opposed to public policy. Indeed, cases may be easily supposed in which it would be in furtherance of right and justice, and necessary to resist oppression, that a suitor who had a just title to property, and no means except the property itself, should be assisted in this manner.

The Committee, however, went on to clarify in the very next paragraph:

But agreements of this kind ought to be carefully watched, and when found to be extortionate and unconscionable, so as to be inequitable against the party; or to be made, not with the bona fide object of assisting a claim believed to be just, and of obtaining a reasonable recompense therefor, but for improper objects, as for the purpose of gambling in litigation, or of injuring or oppressing others by abetting and encouraging unrighteous suits, so as to be contrary to public policy, — effect ought not to be given to them.[15]

The above decisions were regularly followed by the various courts in India, to assess whether agreements where a third party financed litigation fall on the right side of morality. Since there may be situations where a litigant has a genuine cause of action, but is unable to proceed due to lack of funds, a champertous agreement in such a situation may be valid, indicating that not every champertous agreement will be considered as being against public policy. Nonetheless, however salutary the principles laid down may be, the reality of champertous and maintained litigations were bleak in pre-Independence India, especially given the socio-economic conditions and the state of literacy.[16]

While much discussion can and may be had on what transactions may amount to an unenforceable champertous agreement, the law is silent on the issue that is being considered in the present essay: how best to govern and control such agreements. Even the recommendation of the Civil Justice Committee,[17] which was at great pains to narrate the ills of champerty in British India, was merely to offer a remedy to the uninformed and illiterate victim of speculative champertous agreements to avoid such agreements. Even extant provisions of law[18] and decisions[19] deal only with the aspect of enforceability or otherwise of such agreements, and not the regulation thereof.

A TPF transaction, no matter how it may be structured, is in essence?? of a dealing in a right to sue, inasmuch as it empowers a third party to control and take decisions in a litigation, and also obtain benefit under the litigation. It is pertinent to note that under Section 6(e) of the Transfer of Property Act, 1882, a mere right to sue cannot be transferred. This derives from the salutary principles prohibiting champertous agreements.[20] An agreement made to defeat a provision of law is in itself unlawful and cannot be enforced. Historically, the maxim ubi jus ibi remedium[21] was understood in reverse in common law. Courts dispensing the Crown’s justice had pre-written writs that were drawn up for specific purposes, such as compelling a person to pay damages. The system of having pre-written writs soon devolved into forms of actions, with assumpsit[22] and indebitatus assumpsit[23] rapidly growing as popular writs.

Tempered by equity and eventually abolished by successive Judicature Acts, the concept of writs, and of forms of actions played a significant role in enabling the modern lawyer to determine what is known as the right to sue. What is of significance of the modern rights is that a party is expected, even till date, to take a conscious decision to exercise and enforce their right against another, for the law to help vindicate their right. Thus, for instance, sleeping over one’s right results in claims becoming barred, and having to dispel presumptions of acquiescence. So too is a person expected to bear the fee of initiating their action, as a compensation to the Court for its service, howsoever meagre it be.

Thus, a clear image emerges regarding modern rights, which is that they are always accompanied by the right to sue. The right to sue has its own set of socio-economic as well as legal factors attached to its exercise or non-exercise thereof. It would be quite myopic to contend that the right to sue can be exercised by a person merely by being funded by another, with absolutely no application of mind by the person exercising such right. A person with a right to sue may choose to not sue, if only to avoid indulging in speculative litigation, which likelihood is highly reduced if no restrictions are placed on TPF transactions.

Thus, a TPF transaction is not merely champertous in its nature, it deals with the very basis of modern civil justice delivery system – the right to sue and enforce such right. Transactions of such nature, though they may be beneficial in certain instances, ought to not be enforced without any law governing it. It is submitted that appropriate legislation of TPF is absolutely essential. Such legislation ought to, at the first instance, compel parties to disclose the factum of the litigation being funded by a third party. Clear guidelines that are more detailed than the presently existing “public policy” principles must be adopted for discriminating permissible from impermissible TPF transactions. A counterparty must have a right to seek summary disposal by calling upon the Court to consider whether the TPF transaction is above board and genuine, and not merely speculative litigations. Indian courts cannot bear the burden of a surge in litigation when the backlog and case disposal schedule make interim relief the new means to a sometimes-unjust end.

We hope that this practice does not commence given the interest being shown in this area before a framework for its use has been implemented. The Government should seriously consider such an initiative. TPF is not per se bad but its champertous nature requires careful handling and strict regulation. After all, public policy is amorphous but ever improving as society develops.

The author would like to thank Madhura Ajit Zende for her contribution to this article. Madhura is an associate of ASA Legal Services LLP and is based in Mumbai.


* Practicing Advocate in Delhi and other places in India.

** Experienced lawyer with over 20 years of experience at various law firms. Currently, heads Ashwin Mathew & Associates, a commercial law firm in Mumbai.

[1] <https://cdn.arbitration-icca.org/s3fs-public/document/media_document/Third-Party-Funding-Report%20.pdf>
(last accessed on 5-2-2020).

[2] (1955) 1 SCR 490.

[3] (2018) 5 SCC 379.

[4] Supra note 2, para 11.

[5] Supra note 4.

[6] Statute of Westminster, 3 Edw. 1, c. 25 and 13 Edw. 1, c. 49.

[7] 28 Edw. 1, c. 11

[8] (1994) 1 AC 142, 153 : (1993) 2 WLR 908 (HL).

[9] See Giles v. Thompson, (1994) 1 AC 142 :  (1993) 2 WLR 908 (HL).

[10] For a comprehensive analysis of the history and evolution of the law of champerty, see Winifield, P.H., The History of Conspiracy and Abuse of Legal Procedure, Cambridge University Press, 1921, particularly Ch. VI.

[11] A survey of the early decisions of subordinate courts on the issue can be found in Ram Coomar Coondoo v. Chunder Canto Mookerjee, 1876 SCC OnLine PC 19 :  (1876-77) 4 IA 23, 40-44.

[12] 1860 SCC OnLine PC 2 : (1859-61) 8 Moo IA 170.

[13] Id., 187.

[14] 1876 SCC OnLine PC 19: (1876-77) 4 IA 23, 47.

[15] Ibid.

[16] See Ch. 43 of the Report of the Civil Justice Committee, 1924-1925 for a detailed discussion of the extensive speculative and champertous litigations that were observed in courts.

[17] Ibid.

[18] See the amendments by High Courts of Bombay, Gujarat, Madhya Pradesh and Allahabad in Order 25 of the Code of Civil Procedure, 1908 whereby courts are empowered in those States to compel third-party financiers to furnish security for costs.

[19] See S.V.R. Mudaliar v. Rajabu F. Buhari, (1995) 4 SCC 15.

[20] Per K.K. Mathew, J. in Union of India v. Sri Sarada Mills Ltd., (1972) 2 SCC 877. The majority does not express any opinion on this, and differs from Mathew, J’s opinion on facts.

[21] Translates to “where there is a right, there is a remedy”.

[22]A promise by which someone assumes or undertakes an obligation to another person. The promise may be oral or in writing, but it is notunder seal. It is express when the person making the promise puts it into distinct and specific language, but it may also be implied because the law sometimes imposes obligations based on the conduct of the parties or the circumstances of their dealings. Taken from Assumpsit legal definition of assumpsit (thefreedictionary.com).

[23] That species of action of assumpsit, in which the plaintiff alleges in his declaration, first a debt, and then a promise in consideration of the debt, that the defendant, being indebted, he promised the plaintiff to pay him. The promise so laid  is, generally, an implied one only. Taken from ibid.

Case BriefsHigh Courts

Madhya Pradesh High Court: The Division Bench of Sujoy Paul and Shailendra Shukla, JJ., dismissed a petition which was filed challenging the order passed by the specified authority under M.P. Lok Parisar (Bedakhali) Adhiniyam, 1974.

The petitioners categorically averred that said Adhiniyam was not applicable to the agricultural land of the petitioners. In paras-2 & 3 of petition, the petitioners had not disclosed that they had previously filed any litigation in this regard. On a specific query from the Bench as to why proper disclosure was not made regarding WA No.185/2012, counsel for the petitioners repeatedly and vehemently urged that it was not necessary because the subject matter was different.

The Court reminded that as per High Court of MP Rules 2008, a prescribed format of writ petition was mentioned, wherein as per para-2, the litigant was required to give declaration as under:-

“A declaration that no proceeding on the same subject matter has been previously instituted in any Court, Authority or Tribunal. If instituted, the status or result thereof, along with copy of the order.”

The Court observed that in the instant case, neither in relevant para nor in the entire petition, had the petitioners disclosed regarding filing of said WA, wherein it was already held that public premises authority under the Lok Parisar Bedakhali Adhiniyam was competent to take action in relation to an agricultural land. Thus, suppression was relating to “subject matter” and is a serious suppression of fact.

The Court dismissed the petition and held that “a litigant must approach the Court with clean hands, clean mind, clean objective and clean heart. Suppression of fact or half disclosures of fact are growing tendencies to pollute the stream of justice. Litigation in the Court is not a “game of chess”.

Petitioner however at the last stage wanted to withdraw the petition with liberty to file a properly constituted petition disclosing all relevant facts so the Court in the interest of justice permitted them to do so.[Shyamlal v. State of M.P., 2021 SCC OnLine MP 503, decided on 09-03-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Allahabad High Court: The Division Bench of Dr Kaushal Jayendra Thaker and Gautam Chowdhary, JJ., has requested the Registrar (Listing) through the Registrar General to place the matter before the Chief Justice that periodical listing of matters be taken up in the High Court so that those who are in jail for more than 10 or 14 years, where the appeals are pending, may at least get their appeal heard which are mainly jail appeals. The Court was deciding an appeal filed by the appellant who was in jail for 20 years. The Court reversed the conviction recorded against the appellant.

“Since 20 years, the accused is in jail.”

It was expressed by the Court that the most unfortunate aspect of the instant litigation was the same being preferred through jail.

The appellant challenged the decision passed by the Court of Sessions Judge, Lalitpur, whereby he was convicted under Section 376 IPC. Further, the appellant was convicted under Section 3(2)(v) read with Section 3(1)(xii) of the Scheduled Castes and Schedules Tribes (Prevention of Atrocities) Act, 1989 and Section 506 IPC.

Prosecution case was that the prosecutrix was raped by the accused-appellant. On disclosing the incident to the family, they did not report the same to the police station due to being threatened. Later, however, the victim along with her father-in-law and husband went to the police station to report the same.

Analysis, Law and Decision

The Court noted that the Trial Judge brushed aside the fact that the report was lodged three days later, but did not give any credence to this fact and decided to go through the merits of the case.

Further, the Court noted that although there were concrete positive signs from the oral testimony of the prosecutrix as regards the commission of forcible sexual intercourse; however, the medical officer opined both in ocular as well as her written report that the prosecutrix was having five months pregnant and no definite opinion about rape could be given.

In view of the above, the Court added that there were no injuries on the private part of the lady, who was a fully grown-up person and was pregnant.

Adding, the Court stated that even if it went as per the version of the prosecutrix that the accused had gagged her mouth for ten minutes and had thrashed her on ground, there would have been some injuries to the fully grown lady on the basis of the body. However, according to the doctor’s opinion, there were no signs of forcible sexual intercourse.

In such view of the discussion, the Court was of the opinion that the chain of the incident goes to show that the prosecutrix was not raped as would be clear from the provision of Section 375 read with Section 376 IPC.

The Court held that the Trial Judge did not make any finding as to the fact of how the commission of offence under Section 376 IPC was made out. The Trial Judge had materially erred as he did not discuss what was the evidence that the act was committed because of the caste of the prosecutrix. The reasoning of the lower Court Judge were against the record and perverse as the Judge without any evidence on record on his own has felt that the heinous crime was committed because the appellant had captured the will of the prosecutrix and because the police officer had investigated the matter as an atrocities case which would not be undertaken within the purview of Section 3(2)(v) of Atrocities Act and had recorded conviction under Section 3(2)(v) of Act, which cannot be sustained.

Hence, in view of the above discussion, the Court held that the appellant was wrongly convicted resulting in reversing the impugned decision.

While concluding, the Court noted that the State of U.P. even after 14 years of incarceration does not even send the matter to the Magistrate for re-evaluation of the cases for remission as per mandate of Sections 432 and 433 CrPC.

“Sections 433 and 434 CrPC enjoins a duty upon the State Government as well as Central Government to commute the sentences as mentioned in the said section. We are pained to mention that even after 14 years of incarceration, the State did not think of exercising its power for commutation of sentence of life imprisonment of the present accused and it appears that power of Governor provided under Article 161 of the Constitution of India are also not exercised though there are restriction to such power to commute sentence. The object of Sections 432 read with Section 433 of the CrPC is to remit the sentence awarded to the accused if it appears that the offence committed by him is not so grave.”

In the Court’s opinion, in the instant case, the appellant should have been entitled to remission. The factual scenario in the present case would show that had the Government thought of taking up the case of the appellant as per jail manual, it would have been found that the case of the appellant was not so grave that it could not have been considered for remission/commutation.

Seeing the sorry state of affairs, the Court requested the Registrar (Listing) through the Registrar General to place the matter before the Chief Justice that periodical listing of matters be taken up in the High Court so that those who are in jail for more than 10 or 14 years, where the appeal have been pending, may at least get their appeal heard which are mainly jail appeals.[Vishnu v. State of U.P., 2021 SCC OnLine All 133, decided on 28-01-2021]

Case BriefsHigh Courts

When youth of the country is gripped in the specter of unemployment, the arbitrary and whimsical stand of such kind of agency, like respondent 4, has compelled the unemployed persons in litigation which is avoidable if proper application of mind is genuinely made to the controversy” – A.C. Rao, J.

Gujarat High Court: A.C. Rao, J. while allowing the present petition has highlighted the mindset of Government agencies, to engage in vexatious litigation and not following the repeated orders of the Courts hence, overburdening the judicial system.

Petitioner who was a Graduate in Veterinary Science and Animal Husbandry and was duly registered under the Gujarat Veterinary Council had applied for the post of Veterinary Officer in Gujarat Animal Husbandry Service which was conducted by State Public Service Commission(GPSC). It was the case of the petitioner that he belonged to the Scheduled Tribe category and was waitlisted at no. 1. still was denied the post, when eventually another candidate from the same category resigned within 1 yr of service. The petitioner submitted that according to the Resolutions provided by GPSC, whenever such kind of post fell vacant within one year on account of the eventualities mentioned, the post was to be filled in, from that particular category from which it had fallen vacant and resolution thus have full effect in case of the petitioner.

GPSC contended that resolution was essentially pertaining to Medical or Educational Department and therefore, cannot be utilized for other services. The respondent-State further contended that State had sent the recommendations to GPSC and it was the said authority that did not recommend the petitioner’s case. On the other hand, GPSC submitted that the representation of the petitioner was duly examined by the authority however, they found petitioner unfit since the candidate who had resigned had served for 1 year on the said post.

Advocate K.B. Pujara appearing for the petitioner vehemently contended that the stand taken by the respondent GPSC to discriminate against the petitioner and by deviating from applicable policy, the alleged stand was examined on several occasions by this Court, and the said stand was negated repeatedly.

Issue no 1. Whether the stand of the GPSC, which was reflected in the impugned communication, was just and proper?

The Court was not pleased by the stand of the GPSC and found that the reason for denial of appointment was per-se contrary to their policies. The policy was undisputedly applicable in the case of the petitioner. It was held that the stand of the respondent was unreasonable, arbitrary, capricious and not substantive in the eyes of law.

Issue no. 2.:  Whether the case of the petitioner was within the parameters of the policy of operating the waitlist ?

Court found that the stand of the petitioner has been examined by several Benches, the policy, undisputedly applies to the petitioner and it is the GPSC who has given a whimsical interpretation.

Hence, in the above-mentioned view, the petition was allowed.[Chirag Kishorbhai Joshi v. State of Gujarat, 2020 SCC OnLine Guj 2467, decided on 23-12-2020]


Suchita Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Andhra Pradesh High Court: Battu Devanand, J., observed that:

It is the duty of the Courts to see that the senior citizens shall be given priority for early disposal of their cases whether those are civil or criminal or service or any type of litigation to enable them to enjoy the fruits of litigation during their life time.

Petitioners sought decree in favour of them and against defendants 4 and 9 in light of the following reliefs:

  • sale deed, dated 18-03-2002 executed by defendant 4 in favour of defendant 9 in relation to the schedule property does not bind the plaintiffs and defendants1 to 7 after the lifetime of defendant 4 as she is entitled to collect rents from it and live and for consequential relief of permanent injunction restraining the defendants 4 and 9 for disturbing the status quo by inducting defendant 9 into the scheduled house as the purchase of the same under above sale deed.
  • for the partition of the plaint schedule house by passing a preliminary decree into six shares and allot two such shares to the plaintiffs
  • for past profits from the 9th defendant since 04-06-2003 in a sum of Rs 2000 per month x 14 = Rs 28,000 and from the 8th defendant at Rs 900 per month x 14 = Rs 12,600;
  • for a direction for ascertainment of mesne profit on those portions from the date of suit till the date of realization from the defendants 8 to 9 respectively.

Analysis and Decision

Bench stated that the request of the petitioners, who are the senior citizens, has to be considered positively and their hope towards this institution has to be proved to meet the ends of justice.

The year 1999 was observed as “International Year of Older Persons”. In view of the “National Policy for Older Persons” adopted by the Government of India, the High Court of Andhra Pradesh at Hyderabad issued a Circular directing all the Judicial Officers in the State to identify and dispose of matters in which persons above “65 years” of age are involved, on a priority basis.

Circulars were issued in which specific instructions were issued to give priority to the cases relating to senior citizens for expeditious disposal.

Dealy of 9 Years

Bench observed that petitioners filed the suit in the year, 2002 and it was decreed in the year 2010 and the petitioners filed an interlocutory application on 07-02-2011 as per the docket proceedings of I.A.No. 565 of 2011. It was adjourned time to time and pending till date. As such, it is clear that the said interlocutory application is pending before the Court below for more than 9 years which is very unreasonable and contrary to the procedure contemplated under law.

It is not sufficient to respect and honour the senior citizens in the late evening of their life by giving some concessions in bus, rail and Airfares and giving priority in allotting lower births in the trains and comfortable seats in buses.

The real respect and honour to the senior citizens is to render speedy justice to them for which they would have a legitimate expectation.

Court cited the Supreme Court’s decision in Rajinder Singh v. Prem Mal, (2007) 11 SCC 37, wherein it was held:

“People in India are simply disgusted with this state of affairs, and are past loosing faith in the judiciary because of the inordinate delay in disposal of cases. We request the authorities concerned to do the needful in the matter urgently to ensure speedy disposal of cases if the people’s faith in the judiciary is to remain.”

In view of the above, Court directed the Additional District Judge to dispose of the matter s expeditiously as possible. [Pelluri. Venkata Hanumantha Krishna Murthy Sharma v. Pelluri. Venkata Lakshmi Narasimha Rao, 2020 SCC OnLine AP 1750, decided on 07-12-2020]

Op EdsOP. ED.

When we study the origins and functioning of the Indian credit recovery infrastructure, it can be seen that originally the only remedy was suits under the provisions of CPC[1] which was long and cumbersome. Here, the process had two parts i.e. debt adjudication which end in a judgment/decree followed by execution proceedings under Order 21 CPC for recovery of decreed amount. Later, with the enactment of the RDBFI Act, 1993[2], DRTs[3] were established as exclusive forums for speedy adjudication and recovery of debts due to Banks and Financial Institutions (FIs). As per the RDBFI Act, DRTs had the power to issue a Recovery Certificate certifying the amount payable by the debtor after debt adjudication in a summary procedure. This amount was thereafter recovered by the Recovery Officer attached to DRT as per the procedure of recovery of tax under Schedule II of the Income Tax Act, 1961. So, the design was to speed up the recovery once the debt adjudication by DRTs. Although, the RDDBFI Act gave 180 days for disposal of recovery applications, cases have been pending for many years due to prolonged hearings. Almost 70,000 cases involving more than Rupees 5 lakh crore were pending in DRTs as of April 2016[4]. Majority of the delay is at the debt adjudication stage with long drawn processes and adjournments in DRTs. It was for overcoming this hurdle and to further speed up recovery that the SARFAESI Act[5] was enacted. This Act give the Banks and FIs the power to recover their debts classified as non-performing assets by various modes including taking possession and sale of the security, without approaching any Court or Tribunal. Interestingly, the SARFEASI Act dispenses the requirement of debt adjudication and the debt amount stated by the creditor in their demand notice issued under Section 13(2) is conferred sanctity to trigger recovery actions under the Act. When we read through the provisions of the aforesaid Acts and the procedure laid down by them for recovery, it is clear that one of the major causes for delay in securing recovery was the time taken for ascertaining the debt amount payable[6].

Most of the litigation in money recovery laws are in the nature of disputes on the amount claimed for recovery by the creditors. This kind of litigation and resultant delay in recovery can be avoided if there is a mechanism for collection, collation, authentication and dissemination of information regarding debts/defaults by independent third parties that are reliable as evidence of debt/default.

The law-makers of the country seem to have appreciated this point while enacting the Insolvency and Bankruptcy Code, 2016 (IBC) which in its Chapter V under Part IV talks about ‘Information Utilities’ (IUs) which is a first of its kind in the world. In this regard, it is significant to note the following statements in the Report of the Bankruptcy Law Reforms Committee[7]:

“Under the present arrangements, considerable time can be lost before all parties obtain this information. Disputes about these facts can take up years to resolve in court. Hence, the Committee envisions a competitive industry of information utilities who hold an array of information about all firms at all times. When the IRP commences, within less than a day, undisputed and complete information would become available to all persons involved in the IRP and thus address this source of delay.”

This article attempts to understand the concept and working of IUs as contemplated under the IBC regime and its utilities in securing the objectives of IBC.

What is ‘Information Utility’?

IUs are entities that would act as data repositories of financial information which would receive, authenticate, maintain and deliver financial information pertaining to a debtor with a view to facilitate the insolvency resolution process in a time-bound manner. IU maintains an information network which would store financial data like borrowings, default and security interests among others of debtors for providing such information to businesses, financial institutions, adjudicating authorities, insolvency professionals and other stakeholders.

As per Section 3(21) of IBC, ‘Information Utility’ is defined as a person registered with the IBBI[8] under Section 210. Furthermore, as per Section 209 of IBC, a person shall be eligible to carry on business as IU only if a certificate of registration is obtained from the IBBI. As per Section 210 of IBC, a certificate of registration shall be issued to an entity to function as IU if all the technical formalities are completed as prescribed by the IBBI.

Historical perspective of ‘Information Utilities’

The setting up of IUs was preceded by a regime of Credit Information Companies (CICs) and Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) that provided credit-related information services including details of security interests.

In his Budget speech made in  Parliament on 28th February 1994, the then Finance Minister of India announced that Reserve Bank of India (RBI) would put in place arrangements for circulating names of defaulting borrowers among the Banks and FIs. The purpose of the same was to alert them and to put them on guard against the borrowers who have defaulted in their dues to other lending institutions. Pursuant to the above announcement, a Working Group was set up under the Chairmanship of Mr N.H. Siddiqui (Chief General Manager, RBI) which submitted its Report in 1999 recommending the establishment of CICs[9]. Accordingly, Credit Information Bureau (India) Ltd. (CIBIL) was incorporated in August 2000. Later, pursuant to the enactment of the Credit Information Companies (Regulation) Act, 2005[10], three other CICs have also been set up in India[11]. Further, in 2013, RBI constituted another Committee under the Chairmanship of Mr Aditya Puri (Managing Director, HDFC Bank) to examine the reporting formats used by CICs and other related issues. This Committees’ report led to the standardisation of data formats for reporting corporate, consumer and MFI[12] data by all credit institutions and streamlining the process of data submission by credit institutions to CICs[13]. In 2015, all credit institutions were directed by RBI to become members of all the CICs and submit current and historical data about specified borrower to them and to update it regularly.

Later, in the year 2011 the then Finance Minister declared in his budget speech about creation of a central registry of equitable mortgages. Pursuant to the same, the Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) was established to maintain and operate a registration system for the purpose of registration of transactions of securitisation, asset reconstruction of financial assets and creation of security interest over property, as contemplated under the SARFAESI Act. CERSAI is providing a platform for filing registrations by the Banks and FIs with an option for other lenders and the public to search its database.

The idea to establish IUs appears to be an outcome of the research and efforts to set up a hybrid model unique to India by incorporating the best features of CICs, CERSAI and other similar agencies across the world that are engaged in financial information services.

How an ‘Information Utility’ can be created under IBC?

As per Section 196 of IBC, IBBI is entrusted with the power to grant, renew, withdraw, suspend or cancel registration to IUs. This provision further empowers IBBI to make regulations for registration and matters connected therewith. In exercise of the said power, IBBI has notified the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017[14] (“the IU Regulations”) which provide detailed regulations for registration and working of IUs.

As per Regulation 3 of the IU Regulations, registration can be applied by any public company having a minimum net worth of fifty crore rupees and; (a) whose sole object is to provide core services and other services under the IU Regulations, and discharge such functions as may be necessary for providing these services; (b) its shareholding and governance is in accordance with Chapter III of the IU Regulations; (c) its bye-laws are in accordance with Chapter IV of the IU Regulations; (d) its promoters, directors, key managerial personnel, and persons  holding more than 5%, directly or indirectly, of its paid-up equity share capital or its total voting power, are fit and proper persons[15].

A person eligible for registration as aforesaid may make an application to IBBI in Form A of the Schedule to the IU Regulations, along with a non-refundable application fee of five lakh rupees. After due enquiry as contemplated under the IU Regulations, IBBI shall issue a Certificate of Registration in Form B of the Schedule within sixty days of receipt of the application excluding the time taken for removal of difficulties and for obtaining additional documents, if any. Such certificate of registration is valid for a period of five years from the date of issue and it may be renewed by filing an application for renewal at least six months before the expiry of its registration along with the renewal fees of five lakh rupees. IUs are also required to pay annual fee of fifty lakh rupees to IBBI, within fifteen days from commencement of the financial year. However, no annual fee shall be payable in the financial year in which an IU is granted registration or renewal[16].

The shareholding pattern and governance of IUs should be in compliance to the requirements under Chapter III of the IU Regulations. Furthermore, all changes in the shareholding and voting power of IUs are to be reported to the IBBI. As per Regulation 8 of the IU Regulations, no person shall at any time, directly or indirectly, either by itself or together with persons acting in concert, acquire or hold more than 10% of the paid-up equity share capital or total voting power of an IU. However, there are certain exemptions to the said restriction as follows:

  • None of the restrictions on shareholding are applicable to the holding of shares or voting power by the Central Government or a State Government[17].
  • A government company, stock exchange, depository, bank, insurance company and public financial institution either by themselves or together in concert, acquire or hold up to 25% of the paid-up equity share capital or total voting power of an IU[18].
  • Holding up to 51% of paid-up equity share capital or total voting power of an IU by a person directly or indirectly, either by itself or together with persons acting in concert, is allowed up to 3 years from the date of its registration[19], if the IU is registered before 30th September, 2018.
  • Indian companies (i) which are listed on a recognised stock exchange in India, or (ii) where no individual, directly or indirectly, either by himself or together with persons acting in concert, holds more than 10% of the paid-up equity share capital, may hold up to 100% of the paid-up equity share capital or total voting power of an information utility up to three years from the date of its registration[20], if such IU is registered before 30th September, 2018.

Importance and Utility of Information Utilities

The Bankruptcy Law Reforms Committee (BLRC) led by Mr T. K. Viswanathan which designed the IBC, visualised four pillars of supporting institutional infrastructure to make the processes under IBC to work efficiently. They are:  (1) a private industry of IUs, (2) a private industry of Insolvency Professionals (IPs) with oversight by private insolvency professional agencies (IPAs), (3) adjudication infrastructure at the National Company Law Tribunal (NCLT) and DRT, and (4) a regulator i.e.  IBBI[21]. As noted rightly by the BLRC, IU is a very significant institution for the successful operation of the processes under IBC.

IBC was enacted with a view to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of the value of assets of such persons[22]. Section 12 of IBC thus mandates that the Corporate Insolvency Resolution Process (CIRP) of a corporate debtor (CD) must conclude within 330 days[23] from the insolvency commencement date which includes (a) normal CIRP period of 180 days, (b) one-time extension, if any, up to 90 days of such CIRP period granted by the adjudicating authority, and (c) the time taken in legal proceedings in relation to the CIRP of the corporate debtor. This ambitious time-limit prescribed for concluding CIRP appears to be based on an assumption that information relevant for the process will be easily accessible to the parties involved viz. creditors, adjudicating authorities, insolvency resolution professionals, etc. This assumption appears to be based on the confidence of the framers of the law in the idea of IUs envisaged under IBC. As the timelines specified by IBC are strict, they can be met only if the IUs stand ready to provide all relevant information quickly.

The relevant financial information in this stage includes the details of the default, disputes on the same, other financial information of debtors such as records of its debt, liabilities at the time of solvency, assets over which the security interest is created by debtor, timely records of its default and its financial statements of preceding years. Furthermore, it is quintessential for the adjudicating authority to ascertain the existence of default as claimed by the applicant and such existence would decide the fate of the application for CIRP.

As per the scheme of IBC, once CIRP gets initiated against any  corporate debtor, the management of its affairs vest in the Interim Resolution Professional (IRP) and thereupon all the powers of its Board of Directors stands suspended and the same is exercised by the IRP. During such phase, there is every possibility for the Resolution Professionals to face non-cooperation from the management and the suspended Board of the  corporate debtor in disseminating relevant financial information. In these circumstances, an independent and reliable third party which is a repository of validated information regarding debt/default that is capable of providing the same quickly can add significant value to the process.

IBBI has now strengthened the role of IUs by allowing it to access the data of MCA-21[24] database and CERSAI portals to speed up the process of debtor default authentication[25]. By ensuring access of MCA-21 and CERSAI portal data to an IU, IBBI is also providing the mechanism for quick and reliable data for all the stake-holders in the processes under IBC. It may also be noted that RBI has directed all the Scheduled Commercial Banks (Including RRBs), small finance banks, local area banks, non-banking financial companies and all the co-operative banks of the country to put in place appropriate systems and procedures for submission of financial information to IUs[26].

Functions of ‘Information Utility’ as contemplated under the IBC

As per Section 213 of IBC, IUs shall provide services which include core services to any person, if such person complies with the terms and conditions of the IU Regulations. Furthermore, as per Section 3(9) of IBC, “core  services” means – (a) accepting electronic submission of financial information; (b) safe and accurate recording of financial information; (c) authenticating and verifying financial information submitted by person; and (d) providing access to information stored with IUs to persons as may be specified.

As per Section 3(13) of IBC, “financial information”, in relation to a person, means one or more of the following categories of information, namely:  (a) records of the debt of the person; (b) records of liabilities when the person is solvent; (c) records of assets of person over which security interest has been created; (d) records, if any, of instances of default by the person against any debt; (e) records of the balance sheet and cash-flow statements of the person; and (f) such other information as may be specified.

Section 214 of the IBC elaborate the functions to be performed by IUs for the purpose of providing core services. The major obligations of IUs as per Section 214 can be summarised as follows:

  • Acceptance of financial information in electronic form from persons who are under obligation to submit the same under IBC and also from other persons who intend to submit the same. This acceptance is to be in such form and manner as specified under the IU Regulations.
  • Authentication of the financial information so received by all the parties concerned.
  • Storage of the financial information received as aforesaid in a universally accessible format after the same is duly authentication by all the parties concerned.
  • Providing the financial information stored by it as aforesaid to any person who intend to access such information in such manner as may be specified by the IU Regulations.
  • Publication of such statistical information as may be specified by the IU Regulations.

While performing aforesaid obligations, IUs are required to meet such minimum service quality standards as may be specified by IBBI and they are also required to ensure systems to facilitate inter-operatability with other IUs[27]. As per Section 215 of IBC, while it is mandatory for the financial creditors[28] to submit financial information and information relating to assets in relation to which any security interest has been created; submission of information is optional for the operational creditors[29]. Insolvency professionals also may submit reports, registers and minutes in respect of any insolvency resolution, liquidation or bankruptcy proceedings to an IU for storage[30].

Significance of Information Utility in the operation of processes under IBC

As per the scheme of IBC, a CIRP can be triggered by the corporate debtor itself or by the financial or operational creditors of such corporate debtor[31]. Application for CIRP by a financial creditor is governed by Section 7 of the IBC read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016[32].  The application is to be filed as per Form 1 of the said Rules along with the record of the default recorded with the IU or such other record or evidence of default as may be specified. As per Part V of the said Form 1, record of default with IU is listed among the documents acceptable as evidence of default. Upon submission of application, NCLT is required to ascertain the existence of default from the records of an IU or on the basis of other evidence furnished by the financial creditor. It is significant to note that this activity is to be completed by NCLT within fourteen days of the receipt of application. This timeline can be met only if such ascertainment can be done from the records of an IU. Furthermore, upon initiation of CIRP when public announcement is made by the IRP calling for claims, financial creditors may submit their claims along with sufficient proof of such claims. In this regard, it may be noted that the records available with an IU is accepted as a proof of existence of debt due[33].

Whereas, application for CIRP by operational creditors is governed by Section 9 of the IBC read with Rules 5 & 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. On the occurrence of a default, operational creditors are required to deliver either a demand notice of the unpaid debt to the debtor as per Form 3 of the said Rules or a copy of an invoice attached with a notice in Form 4. On receipt of notice, the debtor may, within 10 days, bring to the notice of the creditor about any pre-existing dispute on such debt and get out of the clutches of IBC. On expiry of 10 days from the said notice, if the payment is not done by the defaulter, the operational creditor can file application for CIRP in Form 5 of the aforesaid Rules. As per the aforesaid Forms 3 and 5, record of default with IU is listed as one of the documents to prove the debt. Furthermore, upon initiation of CIRP when the public announcement is made by the IRP calling for claims, operational creditors may submit their claims along with records available with IU which are acceptable as proof for the debt.

Similarly, in an application for CIRP by corporate applicants and in the claims submitted by the other categories of claimants/creditors including workmen, records with IU is accepted as proof of such debt/default. Furthermore, as per IBC and the Rules, the records with IUs can be accessed and relied by the adjudicating authority as evidence for the default/debt in their proceedings. Hence, IUs play a very significant role in enabling timely completion of the processes under IBC.

Operating Procedure of ‘Information Utility’ under IBC

IBC provides little guidance on how IUs are to function, leaving the details to subordinate regulation. Section 240 of IBC empowers the IBBI to make regulations by notification with regard to the registration of IUs, their functioning and on matters connected thereto. The IU Regulations were notified in exercise of this power in order to prescribe the details on how IUs shall operate to meet their objectives as contemplated under IBC.

As per the IU Regulations, a person shall register itself with an IU for submitting information to; or for accessing information stored with any of the IUs. Upon such registration, IU shall verify the identity of the applicant and assign him with a unique identifier and intimate the same to him. A person registered once with an IU shall not register itself with any IU again. A registered user may submit information to any IU and not only to the IU with which he is registered. Different parties to the same transaction may use different IUs to submit, or access information in respect of the same transaction and a user may access information stored with an IU through any IU[34].

A user can submit information of debts or defaults to the IU[35] and on receipt of the same, IU is to assign a unique identifier to the information and intimate the same to the user along with an acknowledgement. In the case of information of default, IU is to expeditiously undertake the process of authentication and verification of the information of default. For this purpose, IU is to deliver the information of default to the debtor seeking confirmation of the same within the specified time. If the debtor fails to respond, IU is to send three reminders giving 3 days’ time in each case for the debtor to respond. If the debtor do not respond even after three reminders as aforesaid, the information is deemed to be authenticated[36]. In case if the debtor confirms the information of default, the information is treated as authenticated and green colour is assigned to the status. If the debtor disputes the information of default the information is treated as disputed and red colour is assigned to the status. Whereas, in cases where the debtor does not respond even after three reminders, the information is‘Deemed to be authenticated’ and yellow colour is assigned to the status. After recording the status of information of default, IU is to communicate the status of authentication in physical or electronic form of the relevant colour, as aforesaid, to the registered users who are- (a) creditors of the debtor who has defaulted; (b) parties and sureties, if any, to the debt in respect of which the information of default has been received[37].

IUs are required to store the information received by it in their facilities located in India and they shall allow the following persons to access the information stored with it- (a) the user which has submitted the information; (b) all the parties to the debt and the host bank[38], if any, if the information is regarding record of debts or assets or instances of default by a person against any debt; (c) the corporate person and its auditor, if the information is of liabilities of a person during solvency or balance sheet and cash-flow statements of the person; (d) the insolvency professional; (e) the adjudicating authority; (f) the IBBI; (g) any person authorised to access the information under any other law; and (h) any other person who the persons referred to in (a), (b) or (c) have consented to share the information.

Provisions to ensure protection of the data with Information Utilities

As per the provisions of IBC, data entrusted with the IUs by the users are to be held as a custodian and hence they shall not have ownership over the data available with them. As such, it is one of the most important duties of the IUs to ensure safety of the data and its protection from unauthorised interferences and data theft. To ensure safety of the data, the IU Regulations prescribe the following to be complied by the IUs:

  • Establish adequate procedures and facilities to ensure that its records are protected against loss or destruction and adopt secure systems for information flows.
  • Storage of all information in a facility located in India shall be governed by the laws of India.
  • Not to outsource the provision of core services to a third-party service provider.
  • Not to use the information stored with it for any purpose other than providing services under these Regulations, without the prior approval of the Board.
  • Not to seek data/details of users except as required for the provision of services under IBC[39].
  • Adequate arrangements, including insurance is to be made for indemnifying the users for losses that may be caused to them by any wrongful act, negligence or default of the IU, its employees or any other person whose services are used for the services[40].
  • Appoint external auditor having relevant qualifications to audit its information technology framework, interface and data processing systems every year. The auditor’s report along with the comments of the Governing Board of IU is to be submitted to the IBBI within one month from the receipt of the same[41].
  • Establish an appropriate risk management framework in line with the Technical Standards[42].
  • Declare a Preservation Policy providing for the form, manner and duration of preservation of information stored with it; and details of the transactions of the IU with each user in respect of the information stored with it[43].
  • Inspection by the IBBI with such periodicity as may be considered necessary[44]. Disciplinary actions can be taken by IBBI including imposition of penalty under Section 220(3) of IBC.

Evidentiary Value of Information with Information Utilities

Authenticated information stored by IUs with regard to a debt or its default amounts to admission of such debt and default thereto by and between the parties to such debt or default. In the light of this fact, evidentiary value of information with IUs can be appreciated by referring to certain provisions of the Evidence Act, 1872. As per Section 65-B of the Evidence Act, information contained in any electronic record shall be deemed to be a document and shall be admissible in the court of law. Furthermore, Section 31 of the Evidence Act state that admissions are not conclusive proof of the matters admitted, but they may operate as estoppels under the provisions hereinafter contained.  In the context of information with IUs, Section 115 of the Evidence Act is significant, which state as follows:  “When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.”

When we examine the provisions of IBC with regard to IUs as explained in the preceding paragraphs of this article, it can be noted that the adjudicating authorities are given the option to accept records with IUs as proof/evidence of debts and defaults. This is on the basis of estoppel which would operate against the parties as per the aforesaid provisions of the Evidence Act. In Swiss Ribbons Pvt. Ltd. v. Union of India[45], constitutional validity of the various provisions of IBC was considered by the Supreme Court of India. One of the arguments in the matter was that IBC provides for private information utilities not only to collect financial data, but also to check whether a default has occurred or not. It was also argued that certification of debt/default by IUs is in the nature of a preliminary decree issued without any hearing and without any process of adjudication. On this ground along with others, the constitutional validity of IBC was challenged in this matter. However, the  Supreme Court of India upheld the constitutional validity of IBC and on the basis of statements made by the then Attorney General of India, declared at para 57 of the judgment that the record of default with IU is only a prima facie evidence of default, which is rebuttable by the  corporate debtor. So, the records with IUs are not conclusive proof and they are only a prima facie evidence of default, which is rebuttable by the corporate debtor.

Conclusion

It can be concluded that creation of IU is definitely a step towards ensuring an information-rich environment for the working of IBC. IUs certainly provide an infrastructure which ensure relevant financial information of debtors easily accessible at anytime from anywhere. This infrastructure undoubtedly empower the creditors and lenders to make informed choices and also provide essential financial information enabling time-bound insolvency resolution process. While, the purpose of setting up the above regime of IUs was to reduce information asymmetry; IUs not only reduce information asymmetry, but it is also enable the processes of IBC to meet the strict timelines prescribed. It can also be seen that the IUs are significant as they provide for improved credit risk assessment and improve the recovery processes. Though there is no doubt about the significance of the IUs; it may take a while before they become relevant as expected. As the first step, IBBI has registered National E-Governance Services Limited (a Union Government company) as the first IU of the country on September 25, 2017. Being sanguine about the developments thus far, we can expect that the data available with the IUs will grow in terms of quantity and quality over a period of time making them an important pillar in the overall resolution process.


* BA LLB (Hons.), LLM, currently working as Manager-Legal with Hindustan Petroleum Corporation Limited at Zonal Administrative Office, Chennai.

[1] Civil Procedure Code, 1908 (Act  5 of 1908).

[2] Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act  51 of 1993).

[3] Debts Recovery Tribunal.

[4]Indu Bhan, “Long Due – Banks can now confiscate security in case of a loan default”, Financial Express, August 19, 2016, available at https://www.financialexpress.com/opinion/long-due/351486/, last visited on 15.05.2020.

[5]Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act  54 of 2002).

[6] Prasanth V. Regy and Shubho Roy, “Understanding Judicial Delays in Debt Tribunals”, Paper No. 195 in the Working Paper Series of National Institute of Public Finance and Policy at New Delhi, May 2, 2017, available at https://www.nipfp.org.in/media/medialibrary/2017/05/WP_2017_195.pdf, last visited on 15.05.2020.

[7] Government of India, “Report of the Bankruptcy Law Reforms Committee” (Ministry of Finance, November 2015).

[8] Insolvency and Bankruptcy Board of India established under Section 188 of the Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016).

[9]Reserve Bank of India, “Report of the Working Group to explore the possibilities of setting up a Credit Information Bureau in India” (Department of Banking Operations and Development, October 1999)

[10] Credit Information Companies (Regulation) Act, 2005 

[11] Equifax Credit Information Services Private Limited, Experian Credit Information Company of India Private Limited and CRIF High Mark Credit Information Services Private Limited have been granted Certificate of Registration by RBI.

[12]Monetary Financial Institutions.

[13]Reserve Bank of India, “Report of the Committee to Recommend Data Format for Furnishing of Credit Information to Credit Information Companies”, (Department of Banking Operations and Development, January 2014)

[14] Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017

[15]As per Explanation to Regn. 3 of Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, a person is considered as fit and proper, if he (a) is having integrity, reputation, character and financial solvency (b) has never been convicted by a Court for an offence or sentenced to imprisonment for a period less than 6 months, and (c) has not suffered any restraint order issued by financial sector regulator or adjudicating authority.

[16] IBBI (Information Utilities) Regulations, 2017, Regns. 5 and 6.

[17]Id, Regn.  8(3).

[18]Id,  proviso to Regn. 8(1)

[19]Id, Regn. 8(2)(a).

[20]Id,  Regn. 8(2)(b).

[21]Supra Note 7.

[22]Government of India, “Report of the Working Group on Information Utilities” (Ministry of Corporate Affairs, January 2017).

[23] This cap of 330 days was brought by the Insolvency and Bankruptcy Code (Amendment) Act, 2019 (w.e.f. 16-8-2019).

[24]MCA-21 is an e-Governance initiative of Ministry of Company Affairs (MCA), Government of India that enables an easy and secure access of the MCA services to the corporate entities, professionals and citizens of India. It is designed to fully automate all processes related to the enforcement and compliance of the legal requirements under the Companies Act, 1956, the New Companies Act, 2013 and the Limited Liability Partnership Act, 2008. Its database will contain the master data and the charges registered on companies and LLP.

[25]Insolvency and Bankruptcy Board of India, Circular No. IBBI/IU/025/2019 dated 07-09-2019.

[26] Notification No: DBR.No.Leg.BC.98/09.08.019/2017-18 dated December 19, 2017 issued by Reserve Bank of India, available at https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11189&Mode=0, last accessed on 16.05.2020.

[27] Insolvency and Bankruptcy Code, 2016 (31 of 2016), Ss. 214(d) and (h).

[28] As per Section 5(7) of IBC, “financial creditor” means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred. Eg. – Banks and financial lenders.

[29] As per Section 5(20) of IBC, “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. Eg. – Suppliers and vendors.

[30]Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, Regn. 38.

[31] Insolvency and Bankruptcy Code, 2016 (31 of 2016), S.6.

[32] Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016

[33]Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Regn. 8(2)(a)

[34]Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, Chapter V (Regns.17 to 27).

[35]Id, Form C of the Schedule.

[36]Deemed authentication was inserted by Notification No. IBBI/2019-20/GN/REG046 dated 25/07/ 2019. Prior to this, there was no option for deemed authentication when debtor do not respond to notice for authentication.

[37] Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, Regn. 21.

[38] Host bank means the financial institution hosting the repayment account.

[39] Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, Regn. 30.

[40]Id, Regn. 31.

[41]Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, Regn 34.

[42]Id,  Regn. 33.

[43]Id, Regn. 35.

[44]Id,  Regn.37.

[45] 2019 SCC OnLine SC 73.

Case BriefsSupreme Court

Supreme Court: The bench of SK Kaul and Indu Malhotra, JJ has recommended the Central Government to consider the efficacy of the advance tax ruling system and make it more comprehensive as a tool for settlement of disputes rather than battling it through different tiers, whether private or public sectors are involved. It suggested that a council for Advance Tax Ruling based on the Swedish model and the New Zealand system may be a possible way forward.

Writing two postscripts, the Court said that it was forced to do so on account of the backbreaking dockets which are ever increasing and as a move towards a trust between the Tax Department and the assessee. The Court said that it hoped that both the aspects meet consideration at an appropriate level.

Postscript 1:

The Indian legal system is reeling under a docket explosion. The Government and public authorities are active contributories to this deluge. To top it, a number of litigations arise inter se the Government and its bodies and, thus, the only question, as stated in the beginning, is which pocket of the Government will be benefitted?

The Central Government and the State authorities have been repeatedly emphasising that they have evolved a litigation policy. Our experience is that it is observed more in breach. The approach is one of bringing everything to the highest level before this Court, so that there is no responsibility in the decision-making process – an unfortunate situation which creates unnecessary burden on the judicial system.

“The object appears to be that a certificate for dismissal is obtained from the highest court so that a quietus could be put to the matter in the Government Departments. Undoubtedly, this is complete wastage of judicial time and in various orders of this Court it has been categorized as “certificate cases”, i.e., the purpose of which is only to obtain this certificate of dismissal.”

  • In 1988, the 126th Law Commission of India Report titled ‘Government and Public Sector Undertaking Litigation Policy and Strategies’ debated the Government versus Government matters which weighed heavily on the time of the Courts as well as the public exchequer.
  • In 2010, the National Litigation Policy (for short ‘NLP’) was formulated with the aim of reducing litigation and making the Government an efficient and responsible litigant. Five (5) years later it reportedly saw a revision to increase its efficacy, but it has hardly made an impact.
  • In 2018, the Central Government gave its approval towards strengthening the resolution of commercial disputes of Central Public Sector Enterprises (for short ‘CPSEs’)/ Port Trusts inter se, as well as between CPSEs and other Government Departments/Organisations. The aim was and is to put in place a mechanism within the Government for promoting a speedy resolution of disputes of this kind, however it excluded disputes relating to Railways, Income Tax, Customs and Excise Departments. This now been made applicable to all disputes other than those related to taxation matters.
  • Insofar as non-taxation matters are concerned, the Administrative Mechanism for Resolution of CPSEs Disputes was conceptualised to replace the Permanent Machinery of Arbitration and to promote equity through collective efforts to resolve disputes. It has a two-tiered structure. At the first level, commercial disputes will be referred to the Committee comprising Secretaries of the Administrative Ministries/Departments to which the disputing parties belong and the Secretary, Department of Legal Affairs. In case the two disputing parties belong to the same Ministry/Department, the Committee will comprise Secretary of Administrative Ministry/Department concerned; the Secretary, Department of Legal Affairs and the Secretary, Department of Public Enterprises. If a dispute is between a CPSE and a State Government Department/Organisation, the Committee will comprise of the Secretary of the Ministry Department of the Union to which the CPSE belongs, the Secretary, Department of Legal Affairs and the Chief Secretary of the State concerned. Such disputes are ideally to be resolved at the first level itself within a time schedule of three (3) months, and in the eventuality of them remaining unresolved, the same may be referred to the Cabinet Secretary at the second level, whose decision will be final and binding on all concerned.

The Court, however, noticed that one of the main impediments to such a resolution, plainly speaking, is that the bureaucrats are reluctant to accept responsibility of taking such decisions, apprehending that at some future date their decision may be called into question and they may face consequences post retirement.

“In order to make the system function effectively, it may be appropriate to have a Committee of legal experts presided by a retired Judge to give their imprimatur to the settlement so that such apprehensions do not come in the way of arriving at a settlement.”

It was hence, noticed that a serious thought should be given to the aspect of dispute resolution amicably, more so in the post-COVID period.

Postscript 2:

This part dealt with the issue of matters pertaining to CPSEs and Government authorities insofar as taxation matters are concerned, because they are consistently sought to be carved out as a separate category of cases. One of the largest areas of litigation for the Government is taxation matters. The petition rate of the tax department before the Supreme Court is at 87%.

The Court was of the opinion that a vibrant system of Advance Ruling can go a long way in reducing taxation litigation. This is not only true of these kinds of disputes but even disputes between the taxation department and private persons, who are more than willing to comply with the law of the land but find some ambiguity.

“Instead of first filing a return and then facing consequences from the Department because of a different perception which the Department may have, an Advance Ruling System can facilitate not only such a resolution, but also avoid the tiers of litigation which such cases go through as in the present case. In fact, before further discussing this Advance Ruling System, we can unhesitatingly say that, at least, for CPSEs and Government authorities, there would be no question of taking this matter further once an Advance Ruling is delivered, and even in case of private persons, the scope of any further challenge is completely narrowed down.”

  • In 1971 that a report was submitted by the Direct Taxes Enquiry Committee recognising the need for providing Advance Ruling System, particularly in cases involving foreign collaboration with the aim to give advance rulings to taxpayers or prospective taxpayers, which would then considerably reduce the Revenue’s workload and decrease the number of disputes.
  • In 1993, a scheme of Advance Ruling was brought into effect, with the introduction of a new Chapter in the Income Tax Act, 1961. A quasi-judicial tribunal was established as the Authority for Advance Rulings (AAR) to provide certainty and avoid litigation related to taxation of transactions involving non-residents.
  • The scope of the transactions on which an advance ruling can be sought from the AAR has gradually increased to now include both residents and non-residents, who can seek the same for issues having a substantial tax impact. Chapter XIX-B of the IT Act deals with advance rulings and it has been defined in Section 245N(a) of the 43 IT Act. These rulings are binding both on the Income Tax Department and the applicant, and while there is no statutory right to appeal, the Supreme Court has held that a challenge an advance ruling first lies before the High Court, and subsequently before the Supreme Court. The advance ruling may be reversed in the event a substantial question of general public importance arises or a similar question is already pending before the Supreme Court for adjudication.

The Court, however, noticed that the ground level situation is that this methodology has proved to be illusionary because there is an increasing number of applications pending before the AAR due to its low disposal rate and contrary to the expectation that a ruling would be given in six months (as per Section 245R(6) of the IT Act), the average time taken is stated to be reaching around four years!

“There is obviously lack of adequate numbers of presiding officers to deal with the volume of cases. Interestingly, the primary reason for this is the large number of vacancies and delayed appointments of Members to the AAR. In view of the time taken, the very purpose of AAR is defeated, resulting in the mechanism being used infrequently as is evident from the everincreasing tax related litigation.”

Noticing a significant development in Section 245N of the IT Act, the Court said that in 2000, public sector companies were added to the definition of ‘applicant’, and in 2014, it was made applicable to a resident who had undertaken one or more transactions of the value of Rs. 100 crore or more.

“Insofar as a resident is concerned, the limit is so high that it cannot provide any solace to any individual, and we do believe that it is time to reconsider and reduce the ceiling limit, more so in terms of the recent announcement stated to be in furtherance of a tax friendly face-less regime!”

Referring to the international scenario where there has been an incremental shift towards mature tax regimes adopting advance ruling mechanisms, the bench noticed that the increase in global trade puts the rulings system at the centre-stage of a robust international tax cooperation regime. The Organisation for Economic Cooperation and Development (OECD) lists advance rulings as one of the indicators to assess trade facilitation policies, making it an aspirational international best practice standard.

The Court, hence, said,

“The aim of any properly framed advance ruling system ought to be a dialogue between taxpayers and revenue authorities to fulfil the mutually beneficial purpose for taxpayers and revenue authorities of bolstering tax compliance and boosting tax morale. This mechanism should not become another stage in the litigation process.”

The Court concluded by referring to the legal legend Mr. Nani A. Palkhivala, who while addressing a letter of congratulations to Mr. Soli J. Sorabjee on attaining his appointment as the Attorney General on 11.12.1989 referred to the greatest glory of Attorney General as not to win cases for the Government but to ensure that justice is done to the people. In this behalf, he refers to the motto of the Department of Justice in the United States carved out into the Rotunda of the Attorney General Office:

“The United States wins its case whenever justice is done to one of its citizens in the courts.”

The Court said that the Indian citizenry is entitled to a hope that the aforesaid is what must be the objective of Government litigation, which should prevail
even within the Indian legal system. In the words of Martin Luther King, Jr.,

“We must accept finite disappointment, but never lose infinite hope.”

[National Co-operative Development Corporation v. Commissioner of Income Tax, 2020 SCC OnLine SC 733, decided on 11.09.2020]