Advance RulingsCase Briefs

Securities Exchange Board of India (SEBI): The proceedings against Varun Beverages’ Ravi Kant Jaipuria came to an end after a settlement of Rs.55,90,000 was reached between SEBI’s Internal Committee and Jaipuria’s Authorized Representatives.

Adjudicating Officer Barnali Mukherjee left it open to SEBI to take enforcement actions, in terms of Regulation 28 of the SEBI  (Settlement  Proceedings)  Regulations,  2018, including restoring or initiating the proceedings in respect to which the settlement order was passed against the applicants, if:

  1. any representations made  by  the  applicant  in  the  settlement  proceedings  is subsequently found to be untrue; or
  2. The applicant breaches any of the clauses / conditions of undertakings/ waivers filed during the current settlement proceedings.

 

Factual Background

Varun Beverages and Pepsico entered into strategic partnership and concluded the same on December 21, 2017. In a press release dated January 04, 2018, it was disclosed that the VBL and Pepsico are going for strategic partnership for larger portfolio of Tropicana, Gatorade and Quaker value added dairy. Right after the press release there was a hike of 9.13% in one trading day.

Two more entities, namely, Spank Management Services Pvt. Ltd (owned and controlled by Patanjali Govind Keswani) and Fenton Investment Pvt. Ltd.(owned and controlled by Arvind Singhania) traded in scrip of VBL during Unpublished Price Sensitive Information(UPSI) period i.e. the period until it was disclosed by the company to Stock Exchange.The directors/ owners of these entities were connected to Lemon Tree Hotels Ltd. where the noticee was also a director. Patanjali Govind Keswani was the chairman and managing director of Lemon Tree Hotel Pvt. Ltd. Based on their connection with the noticee, both Spank and Fenton were suspected entities.It was alleged that the Noticee, being an insider and was in possession of UPSI, has communicated UPSI to Arvind Singhania (Fenton) and to Patanjali Govind Keswani (Spank), violating Section 12A(e) of the SEBI Act,1992  read with Regulation 3(1) of SEBI PIT Regulations, 2015.

Fenton placed an order to buy 15000 shares of VBL during UPSI period and Spank palced an order to buy 17685 shares during UPSI period. These shares were sold on January 05, 2018, immediately after the announcement was made public, post UPSI period.

SEBI observed that as per Regulation 2(1)(n)(iv) of SEBI PIT Regulations, 2015, this type of strategic partnership was constituted Price Sensitive Information(PSI) as a hike of 9.13% was seen in one day. As the period until it was disclosed by the company to Stock Exchange is considered as UPSI, hence, the period from December 21, 2017 to January 04, 2018 will be UPSI period in the case at hand. Ravi Kant Jaipuria was in possession of UPSI as he was privy to the discussion period from March 2017 to January 04, 2018.

SEBI conducted an investigation for the period December 05, 2017 to February 28, 2018. It then  appointed an Adjudicating Officer on October 11, 2021 to enquire and adjudge under the Section  15G(ii) of the SEBI ACT. The Settlement terms were placed before the High Powered Advisory Committee (HPAC) on May 10, 2022 and the committee stated that the adjudication proceedings may be settled on payment of the aforesaid amount and the same was communicated to applicant on June 10, 2022.

In light of the fact that Ravi Kant Jaipuria has remitted the respective settlement fees by way of online transfer on June 10, 2022 and the receipt of the same has been confirmed by SEBI on June 17, 2022, the adjudicating authority disposed off the ajudication proceedings initiated against Ravi Kant Jaipuria.

[Varun Beverages Limited, In re, Settlement Order No: SO/BM/DS/2022-23/6779, Order dated 21.06.2022]

 

Case BriefsTribunals/Commissions/Regulatory Bodies

A coram of Justice Ashok Bhushan (Chairperson), Shreesha Merla (Technical member) and Naresh Salecha (Technical Member) has held that non-payment of TDS by the Corporate Debtor is not a default and an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be admitted over the same.

Factual Background:

The present Appeal was preferred by a ex director of the CD against the order of the Adjudicating Authority which admitted a Section 9 application filed by the Operational Creditor (OC).

The facts leading up to the Section 9 application were as such. The OC had preferred a Section 9 application, however the parties agreed to enter into a settlement. The Adjudicating Authority passed an order to the effect, that the application could be revived in the event of settlements talks failing.  Subsequently, the CD and OC entered into certain settlements. The settlement explicitly conveyed that the amounts were inclusive of the TDS amount.

Subsequent to settlement amounts being paid by the CD, the OC prayed before the Adjudicating Authority revival of the Section 9 Application and the Adjudicating Authority passed an order asking the CD to indicate the details of the payment.

Consequently, via a supplementary affidavit the appellants conveyed the Adjudicating Authority that certain TDS amounts remained outstanding. Post this, the Adjudicating Authority admitted the Section 9 application and it is this order that the appeal has been preferred.

Observations and Decision:

The Tribunal observed that there was no event or scope of settlement talks between parties failing and thus the Adjudicating Authority could not have intervened and made an order approving the revival.

The only outstanding amount payable were the two TDS amounts. It was held that non-payment of the TDS amount by the CD was no occasion for admitting Section 9 application by the Adjudicating Authority.  The appropriate authority for taking action against non-payment of TDS is provided under Income Tax Act, 1961 and is in the domain of income tax authorities. Therefore, the approval of Section 9 application was termed to be unsustainable and set aside.

Further, the tribunal clarified that the provisions of the IBC could not be used for giving effect to the recovery of TDS amounts. Appeal was allowed with a cost of Rupees One Lakh on the OC for misusing the process under IBC.

[Amitabh Roy v Master Development Management (India) Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 274 of 2022, decided on 18-5-2022]


Advocates appearing before NCLAT:

For appellants: Mr Anand Sukumar, Mr Mainak Bose and Mr Bhupesh Kumar Pathak

for Respondent: Mr Ankur Rai

Case BriefsHigh Courts

Delhi High Court: Stating that, cases under Section 376 of Penal Code, 1860 should not be quashed and should not be taken as a crime against the society at large, Swarana Kanta Sharma, J., expressed that, in peculiar circumstances, where the complainant states that her future depends on quashing of the FIR and adding that the rape was not committed upon her, it would be in the interest of justice to quash the FIR.

The instant petition was filed for quashing of an FIR registered for offences punishable under Sections 376/377/498-A of Penal Code, 1860 read with Section 34 IPC.

In the present matrimonial dispute, it was noted that a charge sheet had been filed under Section 376 of the Penal Code, 1860, however, in her statement under Section 164 CrPC, the complainant had stated that only an attempt to rape had been made by her father-in-law and the charges were not yet framed by the trial Court.

The complainant gave her statement which she had given under Section 164 CrPC and on a query made by this Court, the complainant who was present in person stated that she has entered into a compromise out of her own free will and without any pressure, coercion or threat. Further, she stated that she had no objection if the FIR was quashed.

High Court expressed that,

“…any case coming to an end is a welcome step at it decreases the pendency of the Courts, more so, in matrimonial offences quashing is welcome as it shows that parties have decided to put an end to the lis as well as to the misery they undergo due to a matrimonial case pending between them.”

Further, the Bench added that, the fact that now-as-days Sections 376 and 354 of the Penal Code, 1860 are being used along with Section 498-A IPC, which later are compromised and are brought to this Court for quashing, needs to be curbed.

The Court appreciated the stand taken by the complainant and her wish to move in life as her future depended on the settlement of the matrimonial dispute and quashing of the present FIR. In case the FIR is not quashed in this case, the entire settlement between the parties will come to an end.

Lastly, the High Court held that “Court wishes that the compromise would have taken place much earlier, however, through this order let a message be sent to the society at large that compromise is the best way possible to settle disputes and the sooner the better.”

Therefore, the FIR was quashed. [Arshad Ahmad v. State NCT of Delhi, 2022 SCC OnLine Del 1736, decided on 2-6-2022]


Advocates before the Court:

For the petitioners:

Mr Arun Bhardwaj, Senior Advocate with Mr Abhishek Sharma and Mr Rahul Sharma, Advocates.

For the respondents:

Mr Ranbir S. Kundu, ASC for State with Mr Mukul Dagar, Ms Pooja and Mr Agniwesh Singh, Advocates along with SI Jyoti Phogal, PS Mehrauli.

Mr Hilal Haider and Mr Butul Khan, Advocates for R-2 with complainant in person.

Karnataka High Court
Case BriefsHigh Courts

Karnataka High Court: M Nagaprasanna, J., quashed the proceedings against the petitioners in Crime No.87 of 2022 of Byadarahalli Police Station pending before the Chief Judicial Magistrate, Bangalore Rural District, Bangalore.

The facts are that the respondent 2 is the complainant who filed made an FIR for the offence punishable under Section 376 of Penal Code, 1860 i.e. IPC against the petitioner 1/accused 1 and other offences. During the pendency of these proceedings, the parties to the lis entered into a settlement and have produced such settlement by way of an affidavit before the Court. A joint memo and an application under Section 483 read with Section 320 of Criminal Procedure Code i.e. CrPC were also filed before the Court seeking to compound the offences alleged.

Counsel for petitioners Mr Mohan Kumar D submitted that due to settlement arrived at between the parties, even in case of offence punishable under Section 376 IPC, the proceedings can be terminated.

Counsel for respondents Mr K S Abhijith and Raghavendra Gowda K. objects to quashing of proceedings against the petitioners on the ground of settlement arrived at between the parties since the offence punishable is one under Section 376 of IPC.

The Court relied on judgments as follows:

  1. The Karnataka High Court in V Prabhu v. State of Karnataka, Crl. P. No. 8754 of 2021 decided on 19-01-2022 it was observed “The allegation against the petitioner is that he had sexual intercourse with the respondent No.2 under the pretext of marrying her, therefore the complaint came to be filed. Subsequently, both decided to resile from each other and compounded the offence, therefore both of them filed joint application for closing the matter. In view of the submission of both the parties having compounded the offence and in view of the judgment of the Supreme Court in the case of Gian Singh Vs. State of Punjab , (2012) 10 SCC 303 wherein it is laid down where the parties have settled the dispute between them and the same is not affected to the public, the Court can quash the proceedings.”
  2. The Karnataka High Court in H S Chandan v State of Karnataka, Criminal Petition No. 1111 of 2022 c/w Criminal Petition 1116 of 2022 decided on 15-02-2022 it was observed “9. Therefore, in view of the settlement between the parties, the compromise filed by both the parties in both the case are accepted and permitted to compound their offences.”
  3. The Delhi High Court in Lalit Kumar Vats v. State of NCT of Delhi, 2020 SCC OnLine Del 1956 of Delhi quashed the proceedings in an allegation pertaining to Section 376 of IPC.

The Court noted that in the light of facts of the case, judgments rendered by the Supreme Court, this Court and that of Delhi High Court the complainant is said to have married and is leading her life with another man within the family itself and the accused being members of the same family, thus the Court held “I deem it appropriate to accept the application seeking compounding of offences aforesaid and terminate the proceedings against the petitioners.” [Sathish K v. State of Karnataka, 2022 SCC OnLine Kar 899, decided on 23-05-2022]


Arunima Bose, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: The Division Bench of M.R. Shah* and Sanjiv Khanna, JJ., held that an independent suit questioning the Compromise Decree would not be maintainable. The Bench observed that a mere clever drafting would not permit the plaintiff to make the suit maintainable which otherwise would not be maintainable and/or barred by law.

Factual Background

Brief facts of the case were such that the suit schedule property was gifted to the respondent 1–original plaintiff during his minority by his paternal grandmother, respondent 2 vide registered Gift Deed dated 13-02-2003, however the deed was revoked on 10-12-2004 and thereafter a registered Development Agreement-cum- General Power of Attorney dated 18-01-2008 came to be executed between the grandmother and the appellant–M/s. Sree Surya Developers and Promoters. Under the said Development Agreement, the grandmother was entitled to 35,000 sq. ft. of fixed saleable super built-up area along with proportionate number of car parking spaces and undivided share in the land.

The father of the respondent 1 filed a suit as the next friend of then minor respondent 1 seeking for declaration that revocation of Gift Deed as being illegal and not binding on the plaintiff therein and also for perpetual injunction. Subsequently, a compromise was arrived at between the parties vide Compromise Deed Dated 30-12-2015 under which it was agreed that the respondent 1 would be entitled to entire 35,000 sq. ft. of the constructed area and the Developer would be entitled to assign the development rights accrued to it under the said Development Agreement to the third parties. Thereafter the appellant–Developer assigned its development rights to respondent 4 and on the basis of the same, the respondent 4 had started developing the subject property.

On attaining the age of majority, the respondent 1 filed a suit before the Trial Court praying inter alia declaration of right, title and interest over the suit schedule property and declaration of Compromise Decree. He also prayed the revocation of deed as null and void.

Findings of the Courts below

The Trial Court rejected the plaint on the ground that in view of Order XIII Rule 3A CPC, no independent suit would be maintainable against the Compromise Decree. In appeal, the High Court had quashed and set aside the order passed by the Trial Court and has remanded the matter to the Trial Court by observing that the effect of the provisions of Order XXXII Rules 1 to 7 CPC had not been considered by the Trial court, which would have a direct bearing on the validity of the Compromise Decree.

Analysis and Observations

The Bench observed that the High Court had not at all dealt with and considered the provisions of Order XXIII Rule 3A CPC and had not considered whether in fact the suit challenging the Compromise Decree and/or for the reliefs sought in the suit would be maintainable or not. The Bench opined,

“What was required to be considered by the High Court was whether the independent suit questioning the Compromise Decree would be maintainable or not. The aforesaid crucial aspect had not been dealt with by the High Court at all and High Court had gone into the validity of the Compromise Decree in view of Order XXXII Rule 7 CPC.”

The Bench held that the plaint in exercise of powers under Order VII Rule 11 of CPC to challenge the Compromise Decree would be barred under Order XXIII Rule 3A of CPC and the party to a consent decree based on a compromise has to approach the same court, which recorded the compromise to challenge a decree based on compromise.

Rejecting the argument of the respondent that he had not specifically prayed for setting aside the Compromise Decree and what was prayed was to declare that the Compromise Decree was not binding on him and that for the other reliefs sought, the suit would not be barred, the Bench held that a mere clever drafting would not permit the plaintiff to make the suit maintainable which otherwise would not be maintainable and/or barred by law. The Bench remarked,

If we consider the reliefs of declaration of title, recovery of possession, cancellation of revocation of Gift Deed, declaration for DGPA and Deed of Assignment-cum-DGPA, the said reliefs can be granted only if the Compromise Decree is set aside.

Conclusion

In the light of the above, the Bench concluded that the High Court had erred in setting aside the order of the Trial Court. Accordingly, the impugned judgment and order passed by the High Court was set aside and quashed and the order of the Trial Court was restored.

[Sree Surya Developers and v. N. Sailesh Prasad, 2022 SCC OnLine SC 165, decided on 09-02-2022]


*Judgment by: Justice M.R. Shah


Kamini Sharma, Editorial Assistant has put this report together

 

 

Case BriefsSupreme Court

Supreme Court: The bench of MR Shah* and BV Nagarathna, JJ has held that a consent decree cannot be modified/ altered unless the mistake is a patent or obvious mistake.

The Court said that if held otherwise, there is a danger of every consent decree being sought to be altered on the ground of mistake/ misunderstanding by a party to the consent decree.

Factual Background

The Case pertains to ORPAT and CASIO scientific/Electronic calculators.

  • According to the Plaintiff, the Defendant lifted each and every novel element of the original design, shape and configuration for its scientific/ electronic calculator ‘ORPAT FX-991ES PLUS’.
  • The Respondent applied for a design registration for its electronic calculator namely ‘CASIO FX991ES PLUS’ and it was introduced in India in October, 2011. Having knowledge about the sale of the scientific calculator by the Appellant under the name ‘ORPAT FX- 991ES PLUS’, the Respondent filed a civil suit.
  • The High Court of Delhi passed an ex-parte ad-interim order of stay on 28.11.2018.
  • Thereafter, the parties were referred to mediation by the High Court of Delhi on 18.12.2018.
  • After a detailed correspondence and exchange of e-mails between the counsel appearing for the parties, a settlement was arrived at vide a Settlement Agreement dated 16.05.2019.
  • The High Court decreed the suit on 03.07.2019 in terms of the Settlement Agreement.
  • Subsequently, an Application was filed by the Appellant under Sections 152 and 153 read with Section 151 of the CPC for correction/ rectification/ amendment of the judgment dated 03.07.2019. The Appellant stated in the said Application that the Settlement Agreement pertains only to trademark “FX-991ES PLUS’/ ‘FX-991”. However, there was an inadvertent typographical error of the trademark in the Settlement Agreement as “FX-991ES PLUS/ FX/ 991”.
  • The High Court dismissed the said application.

Analysis

The Court explained that a judgment by consent is intended to stop litigation between the parties just as much as a judgment resulting from a decision of the Court at the end of a long drawnout fight. A compromise decree creates an estoppel by judgment. However, a consent decree would not serve as an estoppel, where the compromise was vitiated by fraud, misrepresentation, or mistake. The Court in exercise of its inherent power may rectify the consent decree to ensure that it is free from clerical or arithmetical errors so as to bring it in conformity with the terms of the compromise. Undoubtedly, the Court can entertain an Application under Section 151 of the CPC for alterations/ modification of the consent decree if the same is vitiated by fraud, misrepresentation, or misunderstanding. But a consent decree cannot be modified/ altered unless the mistake is a patent or obvious mistake.

In the present case, the Court observed that the misunderstanding as projected by the Appellant between parties relates to use of “FX” or “991” as separate marks in the Settlement Agreement. The understanding between the parties was with respect to “FX-991ES PLUS” as a whole and not with reference to “FX”. A close scrutiny of the correspondence between the parties showed that the Settlement Agreement was arrived at after detailed consultation and deliberations. Thereafter, the parties were communicating with each other and they took six months to arrive at a settlement. The final Settlement Agreement was approved by the mediator.

The High Court applied its mind and passed a decree in terms of the Settlement Agreement dated 16.05.2019.

There is no allegation either of fraud or misrepresentation on the part of the Respondent. The Court disagreed with the Appellant that there was a mistake committed while entering into a settlement agreement due to misunderstanding.

“Correspondence between the advocates for the parties who are experts in law would show that there is no ambiguity or lack of clarity giving rise to any misunderstanding. Even assuming there is a mistake, a consent decree cannot be modified/ altered unless the mistake is a patent or obvious mistake. Or else, there is a danger of every consent decree being sought to be altered on the ground of mistake/ misunderstanding by a party to the consent decree.”

[Ajanta LLP v. Casio Keisanki Kabushiki Kaisha d/b/a Casio Computer Co. Ltd, 2022 SCC OnLine SC 148, decided on 04.02.2022]


*Judgment by: Justice MR Shah


Counsels

For appellant: Senior Advocate K.V. Viswanathan

For respondents: Senior Advocate Dr. Abhishek Manu Singhvi and Mr. Chander Lal

Case BriefsHigh Courts

Allahabad High Court: Rajeev Singh, J., reiterated that under Section 482 of the Criminal Procedure Code, an FIR i.e. First Information Report can be quashed in view of the settlement terms.

Application under Section 482 CrPC was filed with a request that the matter may be referred to the Mediation and Conciliation Centre of the Court in relation to FIR under Sections 323, 354, 498A, 504 of Penal Code, 1860 and Section 3/4 of Dowry Prohibition Act, 1961 and also quashed the entire proceeding in relation to the said FIR.

In the present case, the investigation was started and mediation was also initiated before the court below, but applicant No.1 was not satisfied with the mediation proceeding initiated before the court below, hence, the present application was filed and with the consent of counsel for the applicant as well as counsel for the opposite party 4, the matter was sent to the Mediation and Conciliation Centre of this Court on 31.07.2020.

The matter was successfully concluded, and a settlement agreement was executed between the parties and OP 4 joined her matrimonial home on 7-3-2021 and started enjoying her life with her husband and children.

In the case of Ram Lal Yadav v. State of U.P., 1989 SCC OnLine All 73  the provision of anticipatory bail, under Section 438 Cr.P.C. was not existing, therefore, there was a dilemma to get the remedy of pre-arrest during the investigation, then it was clarified by this Court that High Court has no inherent powers, under Section 482 Cr.P.C. to interfere with the arrest of accused persons during the course of investigation, but it was clarified that High Court can always issue a writ of mandamus, under Article 226 of the Constitution restraining the police officer for misusing his legal power in relation to arrest and FIR can be quashed, under Section 482 Cr.P.C., which is covered under the principle laid down by Hon’ble Supreme Court in the Case of Bhajan Lal and the present case law laid down the by the Supreme Court in the cases as discussed.

Analysis and Decision

High Court stated that, as in the decision of Ram Lal Yadav v. State of U.P.,1989 SCC OnLine All 73, this Court held that Investigating Officer cannot be restrained from arresting the accused of a cognizable offence. Supreme Court in the case of State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335: 1992 SCC (Cri) 426] and  Ram Lal Yadav v. State of U.P., 1989 SCC OnLine All 73 already held that FIR and its consequential proceedings can be quashed under Section 482 CrPC.

Therefore, in the present matter, Bench opined that impugned FIR and its consequential proceedings are liable to be quashed in terms of the settlement agreement of parties before the Mediation and Conciliation Centre of this Court.

Hence, in view of the above discussion, the present application was allowed and FIR was quashed. [Ishwar Singhal v. State of U.P., 2022 SCC OnLine All 28, decided on 11-1-2022]


Advocates before the Court:

Counsel for Applicant:- Durgesh Kumar Singh
Counsel for Opposite Party:- G.A., Vinod Kumar

Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of Dr Dhananjaya Y Chandrachud* and A S Bopanna, JJ., held that the powers of NCLT under S. 7(5) of IBC are limited to verifying existence of default and then accordingly, either admit or reject an application. Holding that the Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute, the Bench remarked,

“While the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.”

The question before the Bench for adjudication was whether, in terms of the provisions of the IBC, the Adjudicating Authority (NCLT) can without applying its mind to the merits of the petition under Section 7, simply dismiss the petition on the basis that the corporate debtor has initiated the process of settlement with the financial creditors?

The grievance of the appellants was that on a petition instituted under Section 7 of the IBC for initiating the Corporate Insolvency Resolution Process (CIRP) in respect of the respondent, the NCLT declined to admit the petition and instead directed the respondent to settle the claims within three months which was further affirmed by the NCLAT.

Noticeably, a Master Agreement to sell was entered into between the respondent, IDBI Trusteeship Ltd. and Karvy Realty (India) Ltd. in order to raise an amount of Rs 50 crores for the development of 100 acres of agricultural land. Since the requisite funds could not be generated through the Master Agreement, a Syndicate Loan Agreement was entered into between the respondent, IDBI Trusteeship Ltd. and the Facility Agent for availing a term loan of Rs 18 crores from prospective lenders. It was in that background that the petitioners-appellants had instituted a petition under Section 7 of the IBC before the NCLT due to the respondent’s default in making the re-payment of an amount of Rs 33,84,32,493.

Decisions of NCLT

The Adjudicating Authority listed the petition for admission on diverse dates and had adjourned it, inter alia, to allow the parties to explore the possibility of a settlement yet no settlement was arrived at by all the original petitioners who had instituted the proceedings. Though, the Adjudicating Authority noticed that joint consent terms had been filed before it but it was common ground that those consent terms did not cover all the original petitioners who were before the Adjudicating Authority. Eventually, the Adjudicating Authority did not entertain the petition due to following factors:

  • Respondent’s efforts to settle the dispute were bona fide, as evinced by the fact that they had already settled with 140 investors, including 13 petitioners before it;
  • The settlement process was underway with 40 other petitioners;
  • The procedure under the IBC was summary in nature, and could not be used to individually manage the case of each of the 83 petitioners before it; and
  • Initiation of CIRP in respect of the respondent would put in jeopardy the interests of home buyers and creditors, who have invested in the respondent’s project, which was in advanced stages of completion.

IBC Mandate

On a bare reading of the provision, Section 7 (5) Clauses (a) and (b) use the expression “it may, by order” while referring to the power of the Adjudicating Authority. Section 7(5)(a) states that the Adjudicating Authority may, by order, admit the application while Section 7(5)(b) states that it may, by order, reject such an application.

Thus, two courses of action are available to the Adjudicating Authority in a petition under Section 7. The Adjudicating Authority must either admit the application under Clause (a) of sub-Section (5) or it must reject the application under Clause (b) of sub-Section (5). The statute does not provide for the Adjudicating Authority to undertake any other action, but for the two choices available.

Factual Analysis

Observing that no settlement had been arrived at by the respondent with all the appellants and impleadment applications had also been filed on behalf of an additional set of individuals claiming non-payment of their dues by the respondent, the Bench held that the order of the Adjudicating Authority, and the directions which eventually came to be issued, suffered from an abdication of jurisdiction.

The Appellate Authority was cognizant of the fact that even the time schedule for settlement which had been indicated by the Adjudicating Authority had elapsed, but then noted the impact of the outbreak of COVID-19 pandemic on the real estate market, including on the respondent. Therefore, the Adjudicating Authority failed to exercise the jurisdiction which was entrusted to it. Furthering, holding that the Adjudicating Authority’s observation that the appeal was not maintainable was erroneous, the Bench remarked,

“While acknowledging that the consent terms were “filed by some of the stake holders though may not be all encompassing”, the Appellate Authority nonetheless proceeded to dismiss the appeal as not maintainable.”

Findings of the Court

IBC is a complete code in itself and the Adjudicating Authority and the Appellate Authority are creatures of the statute and their jurisdiction is statutorily conferred, the Bench stated that the statute which confers jurisdiction also structures, channelises and circumscribes the ambit of such jurisdiction. Thus, while the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.

Referring to the IBC mandate, the Bench opined that the Adjudicating Authority had clearly acted outside the terms of its jurisdiction as it is empowered only to verify whether a default has occurred or if a default has not occurred and accordingly, it must then either admit or reject an application.

There are the only two courses of action which are open to the Adjudicating Authority in accordance with Section 7(5), therefore, the Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute.”

Further, opining that undoubtedly, settlements have to be encouraged because the ultimate purpose of the IBC is to facilitate the continuance and rehabilitation of a corporate debtor, as distinct from allowing it to go into liquidation, the Bench stated, what the Adjudicating Authority and Appellate Authority, however, had proceeded to do was to abdicate their jurisdiction to decide a petition under Section 7 by directing the respondent to settle the remaining claims within three months and leaving it open to the original petitioners, who were aggrieved by the settlement process, to move fresh proceedings in accordance with law.

Conclusion

Consequently, the appeal was allowed and the impugned judgments of NCLT and NCLT were set aside. The petition was restored to the NCLT for disposal afresh. [E S Krishnamurthy v. Bharath Hi Tech Builders Pvt. Ltd, 2021 SCC OnLine SC 1242, decided on 14-12-2021]


Kamini Sharma, Editorial Assistant has put this report together


Appearance by:

For the Appellants: Srijan Sinha, Advovate

For the Respondent: Aakanksha Nehra, Advocate


*Judgment by: Justice Dhananjaya Y Chandrachud

Case BriefsHigh Courts

Delhi High Court: Mukta Gupta, J., decided whether a settlement of parties wherein an accused and his family members who subjected his wife to harassment due to which the wife committed suicide can be accepted or not?

By the present petition, 5 petitioners sought quashing of an FIR under Sections 498A, 304B, 34 Penal Code, 1860 on the ground that the parties have settled.

In the above-noted FIR, respondent 2 had stated that his daughter got married to petitioner 1 who was unemployed and this his parents used to bear the expenses. After the marriage, the in-laws of his daughter started demanding dowry though nothing was demanded at the time of the marriage and respondent 2 had performed the marriage as per his capacity.

Later the daughter was harassed by her husband, mother-in-law, brother-in-law and two nieces.

One day, respondent 2 got a phone call that his daughter had committed suicide.

During the pendency of the investigation, petitioners and respondent 2 entered into a memorandum of understanding and as per the terms of the settlement, the parties entered into a settlement without any coercion and without any transfer of money.

Even respondent 2 agreed that he had no claim and grievance against the petitioners and will cooperate in the quashing petition preferred before this Court as also make sincere efforts in getting the petitioners released on bail and that no grudges were left between the parties.

Analysis, Law and Decision

High Court cited the Supreme Court decision in Parbatbhai Aahir v. State of Gujarat, (2017) 9 SCC 641, wherein it was clearly held that where serious and grave offences are involved, the quashing of FIR cannot be allowed on the basis of the compromise. Broad principles were also laid down in respect of the inherent power of the High Court to quash the first information report or the criminal proceedings.

Bench held that in the present case, a woman committed suicide within five months of her marriage due to harassment caused by the husband and his family members and the offences punishable under Section 304-B IPC were not only grave and heinous but an offence against the society actuated by the social evil of demand od dowry, therefore needs deterrence nad cannot be quashed on the basis of settlement arrived between the accused and complainant.

In view of the above discussion, the petition was dismissed. [Dalbir Singh v. State GNCT of Delhi, 2021 SCC OnLine Del 5449, decided on 17-12-2021]


Advocates before the Court:

For the Petitioner: Vikrant Chowdhary, Pradeep Chowdhary, Advocates (through VC)

For the Respondent: Kamna Vohra, ASC for the State with Inspector Hari Singh, P.S. Tilak Nagar

Case BriefsHigh Courts

Bombay High Court: Division Bench of M.S. Sonal and Pushpa V. Ganediwala, JJ., quashed the charges of abetment of suicide and other offences under IPC against the applicants, on finding that no purpose would be served in continuing criminal proceedings against them.

In the present matter, applicants sought quashing of FIR registered for the offences punishable under Sections 498-A, 306, 323, 504 and 506 of the Penal Code, 1860. This Court issued notice and directed that though the investigation shall be carried on, no charge sheet shall be filed without obtaining leave of this Court.

Applicants 1 to 3 are the relatives of the applicant-husband. Allegations against these applicants was that the said persons were supporting the applicant husband. There were absolutely no specific allegations against the said applicants about their role in the abetment of suicide by the deceased.

Mother of the deceased on whose complaint crime came to be registered now stated that she had lodged the report under rage without giving proper thought to the factual situation.

In the FIR, it was alleged that the applicant-husband of the deceased was having extramarital affair with some other girl, due to which the deceased was undergoing physical and mental harassment at the hands of her husband and relatives, which culminated in her suicide.

Analysis, Law and Decision

High Court in view of the nature of allegations called upon the police investigation papers/charge sheet.

Report of psychological testing revealed that the deceased was under the treatment of psychiatrists and was also admitted to hospital as she was under mental trauma and attempted suicide on the death of her father as she had an anxiety as to how her single mother would repay bank loan so also arrange finance for her marriage and maintain her brother.

Mother of the deceased also conceded that the mental condition of the deceased was not stable. It appeared that the deceased was not mentally fit to withstand the shock of the illicit relations of her husband with some other girl.

The mother of the deceased now stated that due to her vulnerable mental condition on the death of her daughter she lodged the report and now she does not want to prosecute further against the applicants.

In the Supreme Court decision of Pinakin Mahipatray Rawal v. State of Gujarat, (2013) 10 SCC 48, it was held that mere extramarital relationship, without anything more cannot be treated as sufficient to invoke the provisions of Section 306 IPC.

In view of the decisions of Supreme Court in Joseph Shine v. Union of India(2019) 3 SCC 39, B.S Joshi v. State of Haryana, (2003) 4 SCC 576, and a few other decisions, it was held that the interest of justice would demand that no purpose would be served in continuing the criminal proceedings against the applicants.

In Court’s opinion, no case was made out to proceed applicants and the offences punishable under Sections 306, 498-A, 323, 504 and 506 IPC were quashed and set aside. [Baburao v. State of Maharashtra, 2021 SCC OnLine Bom 5460, decided on 13-12-2021]


Advocates before the Court:

Mr Anil S. Mardikar, Senior Advocate assisted by Mr Ved R. Deshpande for applicants in both applications.

Mrs M.A. Barabde, APP for State in both applications.

Mr Palash Mohta, Adv (appointed) for non-applicant no.3 in (APL 846/19 and complainant in APL 1168/21)

Case BriefsHigh Courts

Chhattisgarh High Court: Rajendra Chandra Singh Samant, J., dismissed the petition being devoid of merits.

The facts of the case are such that the petitioner and respondent 5 are husband and wife who are unhappy together and want no reconciliation. An FIR has been lodged against the petitioner alleging the commission of offences under Sections 498A, 377, 323, 34 of IPC and Sections 3 and 4 of Dowry Prohibition Act. The instant petition was filed under Article 226 of Constitution of India seeking quashing the said FIR.

Counsel for the petitioners submitted that subsequent to lodging of FIR, the petitioner and respondent negotiated a compromise through a certain amount to be given to respondent 5 as there is no possibility of reconciliation and a petition for divorce will be filed and the cases will be withdrawn. It was further submitted that as the agreement still exists it is a fit case in which the FIR with respect to offences under Section 498A, 377, 323 and 34 of IPC and Section 3 and 4 of Dowry Prohibition Act is liable to be quashed.

Counsel for the State submitted that a prima-facie case is made out, which reflects the commission of offences registered against them. The offences under Section 498A, 377, 323 and 34 of IPC and Section 4 and 6 of Dowry Prohibition Act are not compoundable. There may be an agreement between the parties for settlement of the disputes, but that cannot be made a ground for quashment of the FIR against the petitioner.

Section 24 of the Contracts Act provides as follows:-

“24. Agreements void, if considerations and objects unlawful in part. —If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.”

The Court observed that in view of the provision under Section 24 of the Contracts Act one of the terms of the agreement was that the Respondent 5 wants to withdraw the criminal complaint against the petitioner after receiving payment for the same, which cannot be regarded as any lawful term as the agreement cannot be enforced under any law.

The Court relied on Gian Singh v. State of Punjab, (2012) 10 SCC 303. and observed that “In respect of serious offences like murder, rape, dacoity, etc; or other offences of mental depravity under IPC or offences of moral turpitude under special statutes, like Prevention of Corruption Act or the offences committed by public servants while working in that capacity, the settlement between offender and victim can have no legal sanction at all. However, certain offences which overwhelmingly and predominantly bear civil flavour having arisen out of civil, mercantile, commercial, financial, partnership or such like transactions or the offences arising out of matrimony, particularly relating to dowry, etc. or the family dispute, where the wrong is basically to victim and the offender and victim have settled all disputes between them amicably, irrespective of the fact that such offences have not been made compoundable, the High Court may within the framework of its inherent power, quash the criminal proceeding or criminal complaint or F.I.R if it is satisfied that on the face of such settlement, there is hardly any likelihood of offender being convicted and by not quashing the criminal proceedings, justice shall be casualty and ends of justice shall be defeated.”

 The Court observed that the terms of agreement in the compromise may be a ground of defence for the petitioner, but that cannot be a ground for quashment of the whole criminal case against them. Without there being any reason to believe that the settlement is complete between the parties, this Court cannot hold that the continuation of proceedings will be an exercise in futility, as the respondent No.5 is intent in prosecute the petitioner and others on the basis of a complaint against them

The Court thus held that one of the charges against the petitioner is the charge under Section 377 of I.P.C. regarding commission of unnatural sexual intercourse with the respondent 5, which is a ground connected with the offence under Section 498 (A) of I.P.C. regarding imparting cruel treatment to the respondent 5 by the petitioner, therefore, after overall consideration of the facts and circumstances and the case law cited, I am of this view that this is not a fit case, in which the petitioner can be granted relief as prayed by him, therefore, this petition is dismissed and disposed off.

[Nimish Agrawal v. State of Chhattisgarh, 2021 SCC OnLine Chh 3202, decided on 25-10-2021]


Arunima Bose, Editorial Assistant has reported this brief.


Appearances

For Petitioner: Mr. Manoj Paranjpe

For respondent 01 to 04: Mrs. Hamida Siddiqui.

For respondent 05: Mr. Jaydeep Singh Yadav

Case BriefsSupreme Court

Supreme Court: In a bid to curb the worrying trend of parallel proceedings for complaints under Section 138 of the NI Act, the bench of Dr. DY Chandrachud*, Vikram Natha and BV Nagarathna, JJ has held that a complainant cannot pursue two parallel prosecutions for the same underlying transaction.

“Once a settlement agreement has been entered into by the parties, the proceedings in the original complaint cannot be sustained and a fresh cause of action accrues to the complainant under the terms of the settlement deed.”

What led to the decision?

In the case at hand, a set of cheques were dishonoured, leading to filing of the first complaint under Section 138 of the NI Act. The parties thereafter entered into a deed of compromise to settle the matter. While the first complaint was pending, the cheques issued pursuant to the compromise deed were dishonoured leading to the second complaint under Section 138 of the NI Act. Both proceedings were pending simultaneously and hence, the issue before the Supreme Court was to decide whether the complainant can be allowed to pursue both the cases or whether one of them must be quashed and the consequences resulting from such quashing.

Analysis

Ingredients of the offence under Section 138

(1) drawing of the cheque,

(2) presentation of the cheque to the bank,

(3) returning the cheque unpaid by the drawee bank,

(4) giving notice in writing to the drawer of the cheque demanding payment of the cheque amount,

 (5) failure of the drawer to make payment within 15 days of the receipt of the notice.

Remedies under Section 138 of the NI Act

The effect of an offence under Section 138 of the NI Act is limited to two private parties involved in a commercial transaction. However, the intent of the legislature in providing a criminal sanction for dishonour of cheques is to ensure the credibility of transactions involving negotiable instruments.

Given that the primary purpose of Section 138 of the NI Act is to ensure compensation to the complainant, the NI Act also allows for parties to enter into a compromise, both during the pendency of the complaint and even after the conviction of the accused.

Worrying trend of parallel proceedings for complaints under Section 138 of the NI Act

“The pendency of court proceedings under Section 138 of the NI Act and the multiplicity of complaints in which a cause of action arising from one transaction is litigated has dampened the ease of doing business in India, impacted business sentiments and hindered investments from investors.”

The Court noticed that the introduction of a criminal remedy has given rise to a worrying trend where cases under Section 138 of the NI Act are disproportionately burdening the criminal justice system

Hence, under the shadow of Section 138 of the NI Act, parties are encouraged to settle the dispute resulting in ultimate closure of the case rather than continuing with a protracted litigation before the court. This is beneficial for the complainant as it results in early recovery of money; alteration of the terms of the contract for higher compensation and avoidance of litigation. Equally, the accused is benefitted as it leads to avoidance of a conviction and sentence or payment of a fine. It also leads to unburdening of the judicial system, which has a huge pendency of complaints filed under Section 138 of the NI Act.

Whether once the settlement has been entered into, the complainant can be allowed to pursue the original complaint under Section 138 of the NI Act?

Holding that a complainant cannot pursue two parallel prosecutions for the same underlying transaction, the Court said that allowing the complainant to pursue parallel proceedings, one resulting from the original complaint and the second emanating from the terms of the settlement would make the settlement and issuance of fresh cheques or any other partial payment made towards the original liability meaningless.

The Court explained that a contrary interpretation, which allows for the complainant to pursue both the original complaint and the consequences arising out of the settlement agreement, would lead to contradictory results.

First, it would allow for the accused to be prosecuted and undergo trial for two different complaints, which in its essence arise out of one underlying legal liability.

Second, the accused would then face criminal liability for not just the violation of the original agreement of the transaction which had resulted in issuance of the first set of cheques, but also the cheques issued pursuant to the compromise deed.

Third, instead of reducing litigation and ensuring faster recovery of money, it would increase the burden of the criminal justice system where judicial time is being spent on adjudicating an offence which is essentially in the nature of a civil wrong affecting private parties.

A complainant enters into a settlement with open eyes and undertakes the risk of the accused failing to honour the cheques issued pursuant to the settlement, based on certain benefits that the settlement agreement postulates. The benefits may include – higher compensation, faster recovery of money, uncertainty of trial and strength of the complaint, among others.

Hence,

“Once parties have voluntarily entered into such an agreement and agree to abide by the consequences of non-compliance of the settlement agreement, they cannot be allowed to reverse the effects of the agreement by pursuing both the original complaint and the subsequent complaint arising from such non-compliance. The settlement agreement subsumes the original complaint.”

The Court, hence, held that non-compliance of the terms of the settlement agreement or dishonour of cheques issued subsequent to it, would then give rise to a fresh cause of action attracting liability under Section 138 of the NI Act and other remedies under civil law and criminal law.

[Gimpex Private Limited v. Manoj Goel, 2021 SCC OnLine SC 925, decided on 08.10.2021]

__________________________________________________________________________________________________________________

Counsels:
For appellant: Senior Advocate V Giri and Advocate Liz Mathew

For respondent: Senior Advocate Jayant Bhushan


*Judgment by: Justice Dr. DY Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

Case BriefsSupreme Court

Supreme Court: In a case where the members of the Lok Adalat, Madhya Pradesh High Court had entered into the merits of the writ petition and had dismissed it on merits, the bench of MR Shah* and AS Bopanna, JJ has set aside the order and has held that it was not open for the members of the Lok Adalat to enter into the merits of the writ petition and to dismiss the same on merits, in absence of any settlement arrived at between the parties.

Relevant provisions under the Legal Services Authorities Act, 1987 explained

As per sub-section (5) of Section 19, a Lok Adalat shall have jurisdiction to determine and to arrive at a compromise or a settlement between the parties to a dispute in respect of

  • any case pending before; or
  • any matter which is falling within the jurisdiction of, and is not brought before, any court for which the Lok Adalat is organised.

As per sub-section (1) of Section 20 where in any case referred to in clause (i) of sub-section (5) of Section 19- (i) (a) the parties thereof agree; or (i) (b) one of the parties thereof makes an application to the court, for referring the case to the Lok Adalat for settlement and if such court is prima facie satisfied that there are chances of such settlement or (ii) the court is satisfied that the matter is an appropriate one to be taken cognizance of by the Lok Adalat, the court shall refer the case to the Lok Adalat.

It further provides that no case shall be referred to the Lok Adalat under sub-clause (b) of clause (i) or clause (ii) by such court except after giving a reasonable opportunity of being heard to the parties.

As per sub-section (3) of Section 20 where any case is referred to a Lok Adalat under sub-section (1) or where a reference is made to it under sub-section (2), the Lok Adalat shall proceed to dispose of the case or matter and arrive at a compromise or settlement between the parties. Sub-section (5) of Section 20 further provides that where no award is made by the Lok Adalat on the ground that no compromise or settlement could be arrived at between the parties, the record of the case shall be returned by it to the court, from which the reference has been received under sub-section (1) for disposal in accordance with law.

Analysis of the provisions

The provisions make clear that,

  • the jurisdiction of the Lok Adalat would be to determine and to arrive at a compromise or a settlement between the parties to a dispute and once the aforesaid settlement / compromise fails and no compromise or settlement could be arrived at between the parties,
  • the Lok Adalat has to return the case to the Court from which the reference has been received for disposal in accordance with law and in any case,
  • the Lok Adalat has no jurisdiction at all to decide the matter on meris once it is found that compromise or settlement could not be arrived at between the parties

Conclusion

The impugned order passed by the Lok Adalat dismissing the writ petition on merits was found to be unsustainable and deserves to be quashed and set aside.

In the present case, the consent to place the matter before the Lok Adalat was to arrive at a settlement and or a compromise between the parties and not for placing the matter before the Lok Adalat for deciding the matter on merits.

“Once there is no compromise and/or a settlement between the parties before the Lok Adalat, as provided in sub-section (5) of Section 20, the matter has to be returned to the Court from where the matter was referred to Lok Adalat for deciding the matter on merits by the concerned court.”

[Estate Officer v. Colonel H.V. Mankotia, 2021 SCC OnLine SC 898, decided on 07.10.2021]
____________________________________________________________________________________________________________

Counsels:

For appellant: Vikramjit Banerjee, ASG


*Judgment by: Justice MR Shah

Know Thy Judge | Justice M. R. Shah

Experts CornerTariq Khan

Vigilantibus non dormientibus jura subveniunt, the common rationale behind the law of limitation which means “laws serve the vigilant, not those who sleep”, is not a stranger to the arbitration proceedings.

 

It is not uncommon to see the claims of the parties being rejected by the Arbitral Tribunal on account of same being barred by the law of limitation. In fact, some parties are under a misconception that if they send continuous reminders seeking their pending payments, then the period of limitation gets extended or the cause of action gets delayed and as a result, their “live claims” become “stale claims”.

The applicability of the Limitation Act, 1963 to various provisions of Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act”) has often been an issue before various courts in India. Time and again, the courts have given conflicting decisions; however, in March, 2021, the Supreme Court in BSNL v. Nortel Networks India (P) Ltd.[1] (hereinafter referred to as “Nortel Networks”) has settled the law and held that Article 137 of the First Schedule of the Limitation Act will govern the limitation period for filing an application under Section 11 of the Arbitration Act, 1996 and the limitation period will trigger from the date when there is failure to appoint the arbitrator. Further, the Court held that in exceptional cases, where the claims are ex facie time barred, and it is evident that there is no subsisting dispute, the Court may refuse to appoint an arbitrator.

 


Statutory Regime for Applicability of Limitation to Arbitration 


Section 43(1) of the Arbitration Act states that “the Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in court”. Moreover, Section 3 of the Limitation Act bars the remedy of filing of suits, appeals and applications, after a prescribed period of time. Thus, the claim for arbitration should be raised as soon as the “cause of arbitration arises” just like “cause of action arises” in a civil suit. Incidentally, Incidentally, Section 9 of the Limitation Act states that, “once time begins to run no subsequent disability or inability can stop to institute a suit or make an application”.[2]

 

In Nortel Networks[3], it was observed that since there is no provision in the Arbitration Act specifying the period of limitation for filing an application under Section 11; however, the Limitation Act nowhere provides a time period for filing an application for appointment of an arbitrator under Section 11, thus it would be covered by the residual provision Article 137 of the Limitation Act. The Court also clarified that once the period of limitation starts, no subsequent disability or inability can stop it.

 


Starting Point of the Limitation Period 


The period of limitation for filing an application seeking appointment of an arbitrator stands on a different footing than the period of limitation applicable to the substantive claims made in a contract. As per Article 55 of the Schedule of the Limitation Act, the limitation period for making a claim in cases pertaining to breach of contract is three years from the date of accrual of the cause of action. Furthermore, by virtue of Article 137 of the First Schedule to the Limitation Act, the limitation period for filing an application under Section 11 for appointment of an arbitrator before a court is three years from the date of refusal to appoint the arbitrator or on expiry of 30 days from receipt of notice invoking arbitration by other side, whichever is earlier.

 

The two­-Judge Bench in Panchu Gopal Bose v. Port of Calcutta[4] observed that the claim is “hopelessly barred” by limitation as the petitioner by his own conduct had slept over his right for more than 10 years. It was further held that the period of limitation for an application for appointment of arbitrator under the Arbitration Act, had there been no arbitration clause, commences on the date on which the “cause of arbitration” accrued.

 


Extension of Limitation Period: A Fresh Start


As per Section 18 (effect of acknowledgement in writing) of the Limitation Act, the period of limitation for filing a claim gets extended when there is an acknowledgement of an existing liability. The said acknowledgement shall be in writing and signed by the party against whom the claim is sought. Further, the acknowledgement shall be made before the expiry of the limitation period for raising that claim.

 

As per Section 19 (effect of payment of debt or interest) of the Limitation Act, where payment on account of a debt is made before the expiration of the prescribed period, a fresh period of limitation shall be computed from the time when the payment was made.


Initiation of Proceedings


Arbitration can be initiated by sending a notice of invocation to the other party as per Section 21 of the Arbitration Act or by filing an application under Section 8 or Section 11 of the Act.

 

Thus, the starting point of limitation for initiation of arbitration is from the date when the cause of action accrues, and the stopping point is the giving of the notice of invocation or the filing of the application under Section 11 or Section 8 of the Arbitration Act.

 


Time Spent in Pre-Arbitration Negotiations/Settlement Discussions


In Geo Miller & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd.[5] (hereinafter referred to as “Geo Miller”), the Supreme Court has held that time spent in pre-arbitration negotiations, held in good faith, may be excluded while computing the period of limitation. However, the entire negotiation history between the parties must be carefully considered and the court must find out the “breaking point” at which any reasonable party would have abandoned all efforts to arrive at the amicable settlement or reconciliation and considered referral of the dispute to arbitration. For the computation of the limitation period such “breaking point” would be treated as the date on which the cause of action arises, regardless of whether the arbitration agreement mentions a clause on pre-arbitration negotiation or not.

 

In Shree Ram Mills Ltd.[6], the Supreme Court considered the history of negotiation and concluded that the limitation for arbitration purpose would be deemed to have not commenced.

 


No Denial, No Dispute


In some cases, the courts have taken a view that where there is no denial to the claim, the limitation period does not get triggered. In other words, the cause of action arises only when one party asserts and the other party denies any right.[7]

In Paramjeet Singh Narula v. DDA[7], the Court held that since, the contract was kept alive by the respondent and the respondent had not finalised the bills of the petitioner, it cannot be said that the claims were barred by limitation. Accordingly, the petition under Section 11 was allowed and an arbitrator was appointed.

 


Conclusion


The judgment in Nortel Networks[8] case answers many questions which were unanswered for a long time and it gives clarity to the application of Limitation Act to the Arbitration Act. Interestingly, the Court rightly opined that the period of three years, when the right to apply accrues, is an “unduly long” period for filing an application under Section 11. The author is in full agreement with the suggestion given by the Supreme Court that a limitation period for filing an application under Section 11 should be provided under the Act of 1996.

In the absence of any specific time frame for filing an application under Section 11, the purpose of the Arbitration Act, 1996 gets defeated i.e. speedy resolution of disputes. Incidentally, Section 29-A provides a total time frame of 18 months for completion of arbitral proceedings and passing of an award. Moreover, Section 11 itself provides that an endeavour shall be made to dispose of the petition within a period of 60 days from the date of service of the notice on the opposite party therefore, providing a period of 3 years for filing an application under Section 11 for appointment of an arbitrator is against the ethos of the Arbitration Act, 1996. We can only hope that in future, this issue is addressed by the legislature by introducing a limitation period of 2-3 months for filing an application under Section 11 from the date of refusal to appoint the arbitrator or on expiry of 30 days from receipt of notice invoking arbitration by other side, whichever is earlier.

 


† Advocate, Supreme Court of India.The author can be reached at advocate.tariqkhan@gmail.com.

The author would like to thank Dikshi Arora, Third Year Student at Rajiv Gandhi National University of Law for her able assistance.

[1] (2021) 5 SCC 738 : 2021 SCC OnLine SC 207.

[2] Secunderabad Cantonment Board v. B. Ramachandraiah & Sons, (2021) 5 SCC 705

[3] (2021) 5 SCC 738 : 2021 SCC OnLine SC 207.

[4] (1993) 4 SCC 338.

[5] (2020) 14 SCC 643 : 2019 SCC OnLine SC 1137.

[6] Shree Ram Mills Ltd. v. Utility Premises (P) Ltd., (2007) 4 SCC 599.

[7]Rashtriya Ispat Nigam Ltd. v. Prathyusha Resources and Infra (P) Ltd., (2016) 12 SCC 405.

[8] 2009 SCC OnLine Del 2948.

[9] (2021) 5 SCC 738 : 2021 SCC OnLine SC 207.

Case BriefsHigh Courts

Bombay High Court: Bharati Dangre, J., addressed a matter wherein a mother was cheated of an amount Rs 16,50,000 by a man who assured her that her son will be released on bail in 15 days.

A complaint was filed wherein she stated that her son 20 years of age was in love with a minor girl and an offence was registered against him by invoking relevant provisions of the Penal Code and POCSO Act. She tried to get him released on bail.

Later, she was introduced to the present applicant through some common friends of her son, who assured her to secure the release of her son on bail and the impression given was that his father was a well-known lawyer and he will guarantee that bail is secured in fifteen days. In the moment of desperation, the Complainant allege that, she parted with an amount of Rs 16,50,000/- in total, sometimes in cash and sometimes by way of cheques. However, when her son could not walk free and when inquiries were made with the Applicant, who gave evasive response, she lodged the complaint, which resulted in invocation of Section 420 of the IPC.

Prima facie, the offence was of ‘Cheating’, it seemed that cheating is for the purpose of manipulation of Court proceedings and what had been assured was that the settlement will be worked and the term ‘settlement’ can very well be appreciated in light of the nature of the proceeding.

It is not uncommon feature that when the matter is pending before the particular Court, the parties indulge into transaction under the guise of ‘settlement’ and sometimes it so happens, even without the knowledge of counsel on record, who may prefer to argue the case on its merit. This tendency of guaranteeing the decision to come in favour of one party or the other, amounts to maligning a particular Judge and at large, the institution itself by giving an impression that justice can be bought and the Prosecutors and Judges can be sold.

 For the above-stated, High court held that vexatious attempts are rampant and the same need to be nipped in the bud.

Bench observed that the offence punishable was under Section 420 IPC, the nature of allegations levelled against applicant complainant was duped for an amount on assurance that bail will be sought by effecting ‘settlement’ makes the offence grave and the particular fact disentitled the applicant to be released on bail.

Hence, application was rejected. [Minol Anil Hudda v. State of Maharashtra, Criminal Bail Application no. 920 of 2021, decided on 21-09-2021]


Advocates before the Court:  

Mr A.I.Mookutiar with Mr Adnan A. Mookutiar i/b Mr Sanjay Bhatia for the Applicant.

Ms J.S.Lohokare, APP for the State.

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: Shircy V., J., held that argument that now the victim of rape had attained majority and was living happily with the accused are not valid grounds or justifiable reasons for quashing the criminal proceedings. The Bench remarked,

“When it (rape) is towards a child the gravity is all the more severe and excruciating as it may even low self-esteem, self confidence and dignity of the child and that the psychic effect and impact would cause a devastating effect on the minor and result in far-reaching consequences.”

The petitioners, accused for the offences punishable under Sections 366A, 376 and 34 of Penal Code, 1860 and Section 4 read with Section 3, Section 6 read with Section 5 and Section 17 read with Section 16 of the Protection of Children from Sexual Offences Act, 2002 (POCSO), had approached the Court for seeking quashment of FIR and other related proceedings.

The case against the petitioners was that they had procured the victim, who was aged only 17 years, from her lawful custody and took her forcibly to the rental house where accused 1 committed rape on her. The petitioners contended that the entire matter had been amicably settled between the parties and the victim did not intend to proceed with the case since they were living together as husband and wife.

Whether criminal proceedings could be quashed in a rape case in view of the compromise arrived at between the parties?

The inherent power given to the High Court under Section 482 CrPC is with the purpose to prevent abuse of process of the court and with the object of advancement of justice which is an exception and not the rule which should be used sparingly with great caution and circumspection.

Reliance was placed by the Court on Gian Singh v. State of Punjab, (2012) 10 SCC 303, wherein the Supreme Court had answered the similar issues stating that, “inherent power is of wide plenitude with no statutory limitation but it has to be exercised in accord with the guideline engrafted in such power viz:

  • to secure the ends of justice, or
  • (ii) to prevent abuse of the process of any court…”

The Delhi High Court held that, “Heinous and serious offences of mental depravity or offences like murder, rape, dacoity etc. cannot be fittingly quashed even though the victim or victim’s family and the offender have settled the dispute. Such offences are not private in nature and have a serious impact on society. Similarly, any compromise between the victim and the offender in relation to the offences under special statutes like the Prevention of Corruption Act or the offences committed by public servants while working in that capacity, etc.; cannot provide for any basis for quashing criminal proceedings involving such offences.”

Terming the offence of rape worse than murder as humiliating and horrifying experience are caused to the victim, the Bench stated when the crime of rape is towards a child the gravity is all the more severe and excruciating as it may even low self-esteem, self confidence and dignity of the child and that the psychic effect and impact would cause a devastating effect on the minor and result in far-reaching consequences. Accordingly, the Bench stated,

“When the magnitude of the crime is so grave and heinous as such to shock the sense of justice, settlement between the parties and a marriage subsequently between them are not matters for consideration to quash the proceedings in a criminal case.”

Hence, it was held that as the victim was a minor and the provisions of the special Act enacted to protect and save minor children from sexual offences and harassment were also involved, the argument that, now the victim had attained majority and was living happily with petitioner 1 were not valid grounds or justifiable reasons for consideration to quash the criminal proceedings.

Therefore, the compromise and settlement entered between the parties was rejected and the petitioners were directed to stand the test of judicial scrutiny and face the Trial. [Rahul P.R. v. State of Kerala, 2021 SCC OnLine Ker 3348, decided on 26-08-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance by:

For the Petitioners: Advocate C.A.Chacko, Advocate C.M.Charisma and Advocate Alekh Thomas

For the State of Kerala: P.P. Ajith Murali

Case BriefsHigh Courts

Delhi High Court: Emphasizing on the gravity of seriousness of Section 307 Penal Code, 1860, Subramonium Prasad, J., observed that,

“…an offence under Section 307 IPC will fall under the category of heinous offence, and therefore, has to be treated as a crime against the society and not against the individual alone and the proceedings under Section 307 IPC cannot be quashed only on the ground that the parties have resolved the entire disputes amongst themselves.”

Present matter was in the Court for quashing an FIR registered for offences under Section 307/34 of Penal Code, 1860.

Factual Matrix

It was stated that victim was assaulted by some unknown persons and the nature of injuries was opined to be serious, for further treatment he was shifted to RML Hospital.

Since the victim was unfit for treatment, his father gave a statement wherein he stated that Hannan and petitioner were quarrelling with his son. They both were holding the victim and then stabbed him. After stabbing, they escaped from the spot.

On father’s statement, the FIR was registered for offences under Sections 307/34 IPC.

Hannan was declared as a Proclaimed Offender.

Further, the charge sheet was filed and enough material against the accused was there to proceed against him under the above-stated Sections.

Later the parties entered into a compromise and as per the compromise deed accused was to pay a sum of Rs 3,00,000 as compensation/medical charges. Accused had paid Rs 1,00,000 at the time of settlement and remaining amount would be paid at the time of quashing the FIR.

Crux

Quashing of criminal proceedings for offences under Section 307 IPC on the ground that parties had entered into a settlement.

It was noted that Supreme Court had a conflict of opinion with regard to whether an offence under Section 307 IPC could be quashed by the High Court while exercising power under Section 482 CrPC.

In the decision of State of Rajasthan v. Shambhu Kewat, (2104) 4 SCC 149, it was held that an offence under Section 307 IPC is a serious offence and ordinarily should not be quashed by the High Court while exercising its powers under Section 482 CrPC on the ground that the parties have settled their disputes.

Further, Supreme Court in the decision of Narinder Singh v. State of Punjab, (2014) 6 SCC 466 had quashed the proceedings under Section 307 IPC after noting the judgment in State of Rajasthan v. Shambhu Kewat, (2104) 4 SCC 149.

In view of the conflict of opinion in the above two decisions, matter was referred to a larger bench of Supreme Court in State of M.P. v. Laxmi Narayan, (2019) 5 SCC 688, wherein it was observed that,

“…It would be open to the High Court to examine as to whether incorporation of Section 307 IPC is there for the sake of it or the prosecution has collected sufficient evidence, which if proved, would lead to framing the charge under Section 307 IPC. For this purpose, it would be open to the High Court to go by the nature of injury sustained, whether such injury is inflicted on the vital/delicate parts of the body, nature of weapons used, etc. However, such an exercise by the High Court would be permissible only after the evidence is collected after investigation and the charge-sheet is filed/charge is framed and/or during the trial. Such exercise is not permissible when the matter is still under investigation. Therefore, the ultimate conclusion in paras 29.6 and 29.7 of the decision of this Court in Narinder Singh [Narinder Singh v. State of Punjab, (2014) 6 SCC 466 : (2014) 3 SCC (Cri) 54] should be read harmoniously and to be read as a whole and in the circumstances stated hereinabove”

 (emphasis supplied)

In the above decision, Court also stated that the powers conferred on the High Court under Section 482 CrPC can be exercised keeping in mind the injuries sustained, whether such injury is inflicted on the vital/delicate parts of the body, nature of weapons used etc.

High Court stated that in view of the above decision of the Supreme Court, it can be seen that the fight involved in the present matter was not an ordinary fight between the neighbors, infact petitioners should be thankful that they are not facing trial in a case of murder because in ordinary circumstances the injuries inflicted by the petitioners were sufficient to cause death.

Victim was stabbed with a dangerous weapon i.e. a knife and the injuries caused were of such nature that they would have caused death in ordinary circumstances.

Hence, Court declined to quash the FIR solely on the ground that the parties entered into a compromise. [Mukhtiyaar Ali v. State (NCT of Delhi), 2021 SCC OnLine Del 4428 , decided on 20-09-2021]


Advocates before the Court

For the Petitioners: Rishipal Singh, Advocate with petitioners in person

For the respondents: Meenakshi Chauhan, APP for the State with ASI Naresh, PS Jaffrabad Complainants in person

OP. ED.SCC Journal Section Archives

The jurisdiction of the Arbitral Tribunal emanates from the agreement between the parties.1 Therefore, the existence of the arbitration agreement between the parties is a sine qua non for reference of the disputes between parties to arbitration.2

 

The Arbitration and Conciliation Act, 1996 (“the Act”) is the law governing arbitration proceedings in India. Section 7 of the Act defines an “arbitration agreement” to mean an agreement by the parties to submit disputes that have arisen or which may arise between them in respect of a defined legal relationship to arbitration.3 Further, Section 7(3) of the Act mandates that an arbitration agreement shall “be in writing”. Under the Act, an arbitration agreement is deemed to be in writing if : (a) it is contained in a document signed by the parties;4 (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement;5 (c) an exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other;6 or (d) a contract between the parties making a reference to another document containing an arbitration clause indicating an intention to incorporate the arbitration clause from such other document into the contract.7

 

This article seeks to examine the scope and purport of Section 7(4)(c) of the Arbitration and Conciliation Act, 1996 which stipulates that an arbitration agreement is deemed to be in writing if it is contained in an exchange of statement of claim and defence wherein the existence of arbitration agreement is alleged by one party and not denied by the other. In order to accomplish the aforesaid objective, the authors first examined the legislative history of Section 7 of the Act resulting in its enactment. Thereafter, the authors briefly examined the divergent views expressed by the High Courts and the Supreme Court of India on the scope and meaning of Section 7(4)(c) of the Act. The authors concluded by summarising their views on the true scope and purport of the said sub-section.

 

READ COMPLETE ARTICLE HERE

 

———

Senior Advocate and Additional Advocate General of Karnataka.

†† Advocate enrolled with the Bar Council of India in May 2016. He is a gold medallist from National Law University, Jodhpur and practises law at Bangalore, India.

*The article has been published with kind permission of Eastern Book Company. Cite as (2021) 3 SCC J-32

1 Indu Malhotra, O.P. Malhotra’s the Law & Practice of Arbitration and Conciliation (3rd Edn., 2014), p. 354.

2MTNL v. Canara Bank, (2020) 12 SCC 767, para 9; Yogi Agarwal v. Inspiration Clothes & U, (2009) 1 SCC 372, para 10; Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306

, para 13.

3 Section 7(1), Arbitration and Conciliation Act, 1996.

4 Section 7(4)(a), Arbitration and Conciliation Act, 1996.

5 Section 7(4)(b), Arbitration and Conciliation Act, 1996.

6 Section 7(4)(c), Arbitration and Conciliation Act, 1996.

7 Section 7(5), Arbitration and Conciliation Act, 1996; Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306, para 12.

8 Generally see, Rohan Tigadi, “Indian Arbitration : Ghost of Implied Exclusion and other related issues”, 12 (2) Asian International Arbitration Journal 181 (2016).

9 See, Article 7 of the Model Law on International Commercial Arbitration 1985 (United Nations Commission on International Trade Law, UN Doc. A/40/17, Annex I).

10 Generally see, Hindustan Construction Co. Ltd. v. Union of India, 2019 SCC Online SC 1520, para 19; BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, para 68.

11Kalpana Mehta v. Union of India, (2018) 7 SCC 1, paras 123-35.

12 A/RES/40/72, Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (11 December 1985); Preamble, Arbitration and Conciliation Act, 1996.

13K.S. Puttaswamy (Privacy-9J.) v. Union of India, (2017) 10 SCC 1, para 154.

14 It is an international government organisation formed in 1956 to serve as an advisory board to member States on matters of international law.

15 International Commercial Arbitration, Note by the Secretary General (A/CN.9/127)

16 UNCITRAL, Note by the Secretariat further work in respect of International Commercial Arbitration (A/CN.9/169), Para 2.

17 UNCITRAL Report of the Secretary General : Study on the application and interpretation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (A/CN.9/168)

18 Note by the Secretariat : Further work in respect of International Commercial Arbitration (A/CN.9/169), Para 6.

19 Report of Working Group on International Contract Practices on the Work of its Third Session, A/CN.9/216, Para 1.

20 UNCITRAL, Report of the Secretary General : Possible Features of a Model Law on International Commercial Arbitration (A/CN.9/207), Paras 39-43.

21 Article 7(2) of the UNCITRAL Model Law, 1985; Report of the Working Group on International Commercial Arbitration of its Third Session (A/CN.9/216), Para 23.

22 Report of the Working Group on International Commercial Arbitration of its Third Session (A/CN.9/216), Para 24 (in this connection, the question was raised whether a party which had appeared before an Arbitral Tribunal without contesting jurisdiction may later invoke lack of a written arbitration agreement. The prevailing view was that such a party could not in those circumstances invoke lack of written agreement. However, it was agreed that the question should be dealt with in the Model Law, as it was a question which could be adequately dealt by domestic law”.); International Commercial Contract : Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration (A/CN.9/264), Paras 6-8.

23 Generally see, UNCITRAL, Report of the Working Group on International Commercial Practices on the work of its Fourth Session (A/CN.9/232); UNCITRAL, Report of the Working Group on International Commercial Practices on the work of its Seventh Session (A/CN.9/246)

24 Summary records of the 320th UNCITRAL Meetings, available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/320meeting-e.pdf> (last accessed on 31-1-2021), Para 5.

25 Summary records of the 320th UNCITRAL Meetings, available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/320meeting-e.pdf> (last accessed on 31-1-2021), Para 6.

26 Report of the United Nations Commission on International Trading Law on the work of its 18th Session, A/40/17, Para 87.

27Ibid. Introduction to the UNCITRAL 2012 Digest of Case Law on International Commercial Arbitration (1985 with amendments adopted in 2006), p. 1, Para 1 available at <https://www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf> (last accessed 31-1-2021)

28 Report of the Working Group on Arbitration of its Thirty-third Session (A/CN.9/485), Para 38.

29 Report of the Working Group on Arbitration on the work of its Thirty-fourth Session, A/CN.9/487, Para 34.

30 Report of the Working Group on Arbitration on the work of its Thirty-sixth Session, A/CN.9/508, Paras 32-35.

31Id, Paras 34-35; Settlement of commercial disputes : Preparation of a model legislative provision on written form for the arbitration agreement, A/CN.9/WGII/WP.136, Para 10; Report of the Working on Arbitration on the work of its Forty-fourth Session (A/CN.9/592), Para 68.

32 Report of the Working Group on Arbitration on the work of its Forty-fourth Session (A/CN.9/592), Para 65.

33Id, Paras 66-67.

34 Article 141, Constitution of India.

35(2011) 1 SCC 320.

36Id, para 12.

37 Order 8 Rule 5, Code of Civil Procedure, 1908.

38(2020) 12 SCC 767.

39Canara Bank v. MTNL, 2011 SCC OnLine Del 5705; Canara Bank v. MTNL, 2011 SCC OnLine Del 5704.

40MTNL v. Canara Bank, (2020) 12 SCC 767, paras 9, 10.

41(2018) 12 SCC 736.

42Tata Elxsi Ltd. v. Anand Joshi, 2000 SCC OnLine Kar 120; Shyamraju & Co. (India) (P) Ltd. v. City Municipal Council, 2019 SCC OnLine Kar 3177

43G. Kapoor v. Reacon Engineers (P) Ltd., 2019 SCC OnLine Del 10667.

44Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi, 2009 SCC OnLine AP 202.

452000 SCC OnLine Kar 120.

46Id, para 5.

472019 SCC OnLine Kar 3177

48G. Kapoor v. Reacon Engineers (P) Ltd., 2019 SCC OnLine Del 10667, paras 15-17.

49Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi, 2009 SCC OnLine AP 202, para 11.

50Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, (2012) 2 SCC 108, paras 20-21.

51High Court of Gujarat v. Gujarat Kishan Mazdoor Panchayat, (2003) 4 SCC 712, paras 35 & 36; Rajdeep Ghosh v. State of Assam, (2018) 17 SCC 524, para 23.

52Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, (2012) 2 SCC 108, para 48; Badshah v. Urmila Badshah Godse, (2014) 1 SCC 188, paras 16-18.

53Badshah v. Urmila Badshah Godse, (2014) 1 SCC 188, para 20.

Case BriefsHigh Courts

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

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

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

Factual Matrix

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

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

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

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

Analysis

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

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

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

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

Non-Compliance of Pre-Arbitration Procedure 

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

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

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

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

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

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

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

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

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

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


Advocates before the Court:

For Petitioner: Mr Nikhil Malhotra, Advocate

Mr Devadatt Kamat, Senior Advocate with Mr Sumeet Lall,

Mr Sidhant Kapoor and Mr. Javedur Rehman, Advocates.

Case BriefsHigh Courts

The parents together are a young child’s world. It is together that they groom him into his youth. It is together that they ensure the overall development of his personality in its myriad facets.

But marriage, like life, sometimes takes an unpleasant turn, where the spouses could turn into an estranged couple. 

It is in this situation that the Court, in the exercise of its parens patriae jurisdiction, called upon to perform the onerous task of keeping the young child’s world, as much together as can be. 

Allahabad High Court: J.J. Munir, J., observed that

What is important while deciding the issue of custody between two natural guardians, is where the minor’s welfare would be best secured. The statute indicates a preference for the mother, so far as a child below five years is concerned.

The instant petition was filed for a writ of habeas corpus, instituted by Master Anav’s mother, the first petitioner, asking the Court to liberate the minor from his father’s custody by entrusting the minor into hers, is about a young child’s devastating world.

Petitioner 1 states that during her stay with her husband, she was tortured physically and mentally, both. Her mother even gave dowry.

Later, petitioner 1 realised that her husband had an amorous relationship with her sister-in-law and another girl from the village to which she objected in vain. She was even forced to abandon the marriage and go back to her mother’s home.

The discord between parties was mediated by kinsmen, which resulted in what Meenakshi claims to be a mutual divorce.

Further, it was stated that Meenakshi after the above settlement went back to her mother’s home along with her young son, Anav. After some time petitioner 1 claimed that there was an unholy alliance between Meenakshi’s brother, Sunny and her estranged husband with two making it common cause to oust her minor son from her mother’s home.

While Ram Narayan wanted his son to stay with him, Sunny who is arrayed as the respondent 6 to this petition, wanted the child out of his mother’s home, where Meenakshi stays, because he thought Meenakshi may claim a share for her son in her ancestral property.

In light of the above motive, Meenakshi was beaten up and her son was snatched away, leading to locking up Meenakshi.

Later Anav was handed over to Meenkashi’s husband.

Analysis and Decision

Bench observed that the mother of the minor came up with serious allegations about her son being kidnapped by force by her brother and being delivered into her husband’s custody.

Court found no tangible evidence in regard to the child being forcibly removed from mother’s custody.

The minor is a young child of tender years. He is just four years old. The Court did not find him capable of expressing an intelligent preference between his parents, in whose custody, he would most like to be.

Amongst many things that this Court noticed is the fact that the father is not, particularly, interested in raising the minor.

A perusal of the settlement between the parties contained clause wherein it was specifically stated that the minor, Anav, then aged two and a half years, would stay in his mother’s custody.

The above-stated discloses the disinclination of the father to bear a whole-time responsibility for the minor’s custody and the complementary inclination of the mother to take that responsibility.

Mother’s right and that of the father, under Section 6(a) as to guardianship has been considered at par by the Supreme Court in Githa Hariharan v. Reserve Bank of India, (1999) 2 SCC 228.

So far as custody goes, as distinct from guardianship, between the two natural guardians, the mother is to be preferred by virtue of the proviso to Section 6(a) of the Act of 1956, in the case of a child below five years of age.

Bench observed the Supreme Court Decision in Ratan Kundu v. Abhijit Kundu, (2008) 9 SCC 413, wherein it was held that

A court while dealing with custody cases, is neither bound by statutes nor by strict rules of evidence or procedure nor by precedents. In selecting proper guardian of a minor, the paramount consideration should be the welfare and well-being of the child.

Court added to its observation in custody matters that,

But, the general rule about custody of a child, below the age of five years, is not to be given a go-by. If the mother is to be denied custody of a child, below five years, something exceptional derogating from the child’s welfare is to be shown.

Bench noted that nothing on record was placed where it could be stated that the mother was unsuitable to raise the minor. Court found that the mother in the present case is more educated than the father.

Adding to the above, Court also stated that:

The mother, being found fit to have the minor’s custody, it cannot be the best arrangement to secure the child’s welfare, or so to speak, repair his devastated world. He must have his father’s company too, as much as can be, under the circumstances.

This Court must, therefore, devise a suitable arrangement, where the minor can meet his father in an atmosphere, that is reassuring and palliative. The father must, therefore, have sufficient visitation while the minor stays with his mother.

Hence, the habeas corpus writ petition was allowed in view of the above discussion. [Meenakshi v. State of U.P., 2020 SCC OnLine All 1475, decided on 02-12-2020]


Advocates who represented the parties in the matter:

Counsel for Petitioner:- Sushil Kumar Sharma, Mohit Kumar

Counsel for Respondent:- G.A., Amar Nath, Shravana Kumar Yadav