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5 as there is no possibility of reconciliation and a petition for divorce will be filed and the cases will be withdrawn.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.

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.

 

Legislative History of Section 7 of the Arbitration and Conciliation Act, 1996

Prior to enactment of Section 7 of the Act, there was no provision under Indian laws that was pari materia to the said section. The Arbitration Act has been enacted to consolidate and amend the law relating to arbitration in India taking into account the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration (“Uncitral Model Law”).8 Thus, Section 7 of the Arbitration Act mirrors Article 7 of the Uncitral Model Law, 1985.9 Therefore, the reports setting out the historical background for formulation of the Uncitral Model Law is relevant in construing Section 7(4)(c) of the Arbitration Act. In fact, in the recent past, the Supreme Court of India has examined the provisions of the Uncitral Model Law while interpreting the provisions of the Arbitration Act.10 It is settled that special committee reports preceding the enactment can be looked into for interpreting the meaning of a statute that is ambiguous and unclear or for appreciating the background leading to the enactment of the provision.11

 

The reports/deliberations at the time of formulating the Uncitral Model Law assume significance for another purpose. One of the primary reasons for formulating Uncitral Model Law was to evolve a harmonised legal framework for settlement of international commercial disputes.12 Moreover, in India, it is settled law that the provisions of the domestic statute must be read to enhance their conformity with the global legal regime.13 Therefore, the historical background will be extremely critical in interpreting Section 7(4)(c) of the Arbitration Act. Hence, this section briefly examines the legislative history of Article 7 of the Uncitral Model Law.

 

In 1976, the Asian-African Legal Consultative Committee (“Aalcc”)14 invited the United Nations Commission on International Trade Law (“Uncitral”) to consider the possibility of drafting a Protocol to the United Nations Convention on the Recognition and Enforcement of Foreign Awards, 1958 (“NYC”) to redress several issues arising from divergent interpretations of the NYC.15 In the light of the said proposal, the Uncitral requested the Secretary General to prepare a report on the application and interpretation of the NYC.16 Accordingly, the Secretary General of the Uncitral submitted his report on further steps to be taken by the Uncitral in respect of international commercial arbitration.17 The participants at the consultative meeting unanimously agreed that the preparation of a Model Law on arbitration (instead of a Protocol) would be the most appropriate way to achieve desired uniformity.18 Accordingly, Uncitral entrusted the work to prepare draft Model Law on international commercial arbitration to Working Group on International Contract Practices.19

 

Since an arbitration agreement between the parties is the edifice on which the arbitral proceedings are structured, it was considered necessary to stipulate the requirements of a valid arbitration agreement in the Uncitral Model Law in line with the provisions of the NYC.20 Therefore, like the NYC, the Uncitral Model Law defines “arbitration agreement” to include an arbitral clause in a contract or an arbitration agreement signed by the parties and/or contained in an exchange of letters or telegrams.21 Additionally, the Working Group felt that arbitration agreement should be defined to include arbitration clauses incorporated by reference to other documents and also cover scenarios wherein parties appeared before the Arbitral Tribunal without contesting its jurisdiction.22 However, none of the initial drafts23 of the Uncitral Model Law contained provisions akin to Section 7(4)(c) of the Arbitration Act which stipulates that an arbitration agreement comes into existence by 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 fact, it appears that a provision akin to Section 7(4)(c) of the Arbitration Act was incorporated in Uncitral Model Law at the suggestion of Bulgarian representative at the 320th Committee meeting of the Uncitral held in June 1985. In the said meeting, the Bulgarian representative proposed to amend draft Article 7(2) of the Uncitral Model Law that defined “agreement in writing” to include “an exchange of statements in which neither party denied the existence of an [arbitration] agreement”. This suggestion was based on the fact that some countries recognised such arbitration agreements.24 In order to give effect to the recommendation of the Bulgarian observer, the Australian representative suggested that the concluding phrase of draft Article 7(2) of Uncitral Model Law be amended to read “or in an exchange of statement of claim and defence where one party alleges and the other party does not deny existence of an arbitration agreement”.25 This suggestion found favour with the Commission and was engrafted in Article 7(2) of the Uncitral Model Law.26 Amongst other things, such a provision seems to have been incorporated to cover scenarios wherein the reference of dispute to arbitration was based on the tacit conduct of the parties.26 Most importantly, the original intention appears to include all exchange of statements (and not merely exchange of statement of claim and defence) in which neither party denied the existence of arbitration agreement to qualify as an arbitration agreement in writing.

 

The Model Law was amended by Uncitral on 7-7-2006.27 Several suggestions were made to amend the language of Article 7(2) of the Uncitral Model Law, 1985 to clarify its true scope and purport. A careful study of the several amendments proposed to Article 7(2) of the Uncitral Model Law provides useful insights into the real scope and purport of Section 7(4)(c) of the Arbitration Act.

 

At the time of amending Uncitral Model Law in 2006, it was suggested that Article 7 of the Uncitral Model Law defining “agreement in writing” be amended to read “if is contained in statements of claim and defence [on the substance of the dispute] in which the existence of arbitration agreement is alleged by one party and not denied by the other.”28 The words “on the substance of the dispute” were sought to be added to exclude procedural submissions such as notice of arbitration on the ground that the addressee may not carefully review and reply to such procedural submissions.28 Eventually, the said amendment was not adopted. Therefore, the aforesaid amendment makes it clear that the term “statement of claim and defence” have not been used restrictively in Article 7 of the Uncitral Model Law to be confined to pleadings before the Arbitral Tribunal, but also include any exchange of statements such as notice of arbitration alleging the existence of an arbitration agreement.

 

In fact, while considering changes to the Uncitral Model Law in 2006, suggestions were also made that the phrase “exchange of statement of claim and defence in which the existence of agreement is alleged by one party and not denied by the other” should be placed elsewhere in the Model Law because the said phrase did not deal with the writing requirement, but “with the existence and validity of an arbitration agreement”.29 However, in order to avoid confusion the text was retained in its original form. Therefore,it is clear that Section 7(4)(c) of the Arbitration Act does not merely stipulate a writing requirement but deals with the existence and validity of an arbitration agreement. Thus, the mere fact of the party not denying the existence of arbitration agreement alleged by other party is proof of its intention to refer disputes to arbitration.

 

There were also suggestions that the phrase “exchange of statement of claim and defence in which existence of agreement is alleged by one party and not denied by the other” in Article 7 of the Uncitral Model Law should be deleted because (i) the words “statement of claim and defence” were misleading as reference to existence of arbitration agreement was made at the earlier stage of arbitration proceedings i.e. at the time of issuance of arbitration; and (ii) the subject-matter was already covered under Article 4 read with Article 16(2) of the Uncitral Model Law on arbitration and no further provision was needed.30 Article 4 of the Uncitral Model Law stipulates that a party is deemed to have waived its right to object to non-compliance with a derogable provision if it does not object to such non-compliance and proceeds with arbitration. Article 16(2) of the Uncitral Model Law stipulates that any plea regarding the jurisdiction of the Arbitral Tribunal has to be taken at the earliest instance and not later than submission of statement of defence. After deliberations, the prevailing view was that the scope of Article 7 of Uncitral Model Law was much wider than scenarios covered under Article 4 and Article 16(2) of the Uncitral Model Law. Unlike Article 7, Article 4 read with Article 16(2) of the Uncitral Model Law did not permit a positive presumption of the existence of an arbitration agreement by mere exchange of statement of claims and defence.31 Therefore, the Working Group retained the phrase “exchange of statements of claim and defence in which the existence of agreement is alleged by one party and not denied by the other.”

 

Finally, at the Forty-fourth Session, the Working Group also considered amendment to Article 7 of the Uncitral Model Law to read “Furthermore, an arbitration agreement is in writing if it is contained in an exchange of written submissions in an arbitral or legal proceedings in which the existence of an agreement is alleged by one party and not denied by the other party in such submissions.”32 Another suggestion was made to amend Article 7 of the Uncitral Model Law to include more generic words to include situations where parties communicated on the merits of the dispute or scenarios wherein no arbitration agreement existed but a party nevertheless submitted the claim to arbitration which was not opposed by the other parties.33 However, the Working Group decided to retain the original text (i.e. Article 7 of the Uncitral Model Law) and not incorporate any of suggested amendments because the word “statement of claim” and “statement of defence” had well established and broad meanings in arbitral practice.32 The terms “written submissions” in the proposed amendment were held to be vague and imprecise.32 Therefore, it is clear that the terms “statement of claim and defence” in Article 7 of the Uncitral Model Law were not confined to pleadings filed before the Arbitral Tribunal, but have a wider connotation.

 

Therefore, a perusal of the preparatory works of Article 7 of the Uncitral Model Law makes it clear that the terms “statements of claim and defence” were not restricted to pleadings filed before the Arbitral Tribunal, but were used in a broader sense to include procedural submissions such as notice of arbitration. Moreover, Article 7 of the Uncitral Model Law intended the mere act of “exchange of statement of claim and defence in which the existence is alleged by one party and not denied by the other” to constitute an arbitration agreement between the parties and it was not merely a mere “writing requirement”. Most importantly, while the Working Group acknowledged that there was some overlap between Article 7 and Articles 4/16(2) of the Uncitral Model Law, Article 7 of the Uncitral Model Law was of wider import and therefore all the proposals for its deletion were rejected.

 

Indian Courts & Varied Interpretations of Section 7(4)(C) of the Arbitration Act, 1996

This section briefly discusses some of the significant cases wherein Indian courts have interpreted Section 7(4)(c) of the Arbitration Act. Since the law laid down by the Supreme Court binds all courts and tribunals in India, the judgments of the Supreme Court on Section 7(4)(c) of the Arbitration Act will be examined first.34

 

In S.N. Prasad v. Monnet Finance Ltd.35, the Supreme Court of India held that the words “statement of claim and defence” occurring in Section 7(4)(c) of the Arbitration Act are not restricted to the statements of claim and defence filed before the arbitrator. It held that, if there is an assertion of existence of an arbitration agreement in any suit, petition or application filed before any court, and if there is no denial thereof in the defence/counter/written statement thereto filed by the other party to such suit, petition or application, then it can be said there is an “exchange of statements of claim and defence” for the purposes of Section 7(4)(c) of the Arbitration Act.36 There is no reason forthcoming in the judgment as to why an interpretation was accorded to the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act. However, it appears that, such an interpretation is inspired by the law of pleadings codified in the Code of Civil Procedure, 1908 (“CPC”). Under CPC, every allegation of fact if not denied specifically or by necessary implication or stated to be not admitted in the pleading of the counter-party/defendant is deemed to be admitted.37 Be that as it may, the interpretation of the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act in the said judgment are in consonance with intent of the drafters of Uncitral Model Law.

 

In MTNL v. Canara Bank38, despite there being no arbitration agreement between the parties, matter was referred to arbitration on a joint request made by the parties before the High Court in writ proceedings. Consequently, statement of claim and defence along with counter-claims was filed before the Tribunal and no objections were raised to the jurisdiction of the Tribunal. Thereafter, the appellant therein filed a special leave petition challenging the order39 passed by the Delhi High Court referring the parties to arbitration on the ground that there was no arbitration agreement in existence. The Supreme Court dismissed38 the application inter alia on the ground that an arbitration agreement had come into existence between the parties under Section 7(4)(c) of the Arbitration Act by exchange of statement of claim and defence along with the counter-claim.40 Similarly, in State of W.B. v. Sarkar & Sarkar41, the Supreme Court of India held that an arbitration agreement had come into existence under Section 7(4)(c) of the Arbitration Act by virtue of exchange of statement of claim and defence along with counter-claim before the Arbitral Tribunal.

 

Hence, on a conspicuous reading of the judgments of the Supreme Court of India, it is clear that the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act is not confined to pleadings before the Arbitral Tribunal, but also includes any suit, application or petition filed by a party asserting the existence of the arbitration agreement and not denied by the other party in its statement of defence/counter or objections to such suit, petition or application. However, the judgments of the Supreme Court have not expressed any opinion on whether an exchange of notices wherein the existence is alleged by one party and not denied by other in its reply to the notice will constitute an “arbitration agreement” within the meaning of Section 7(4)(c) of the Arbitration Act. The High Courts have expressed divergent opinions on this aspect.

 

The Karnataka High Court42 and the Delhi High Court43 have interpreted the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act to include exchange of notice and reply between the parties in which the existence of arbitration is asserted by one party and not denied by the other as constituting an “arbitration agreement” within the meaning of Section 7(4)(c) of the Arbitration Act. On the other hand, the Andhra Pradesh High Court has held44 that the exchange of notices and reply wherein existence of arbitration agreement is alleged by one party and not denied by the other will not constitute an “arbitration agreement” within the meaning of Section 7(4)(c) of the Arbitration Act. At this juncture, a closer examination of the judgments of the High Courts needs to be undertaken to understand the rationale for the divergent views expressed.

 

In Tata Elxsi Ltd. v. Anand Joshi45, a notice was dispatched by the petitioner alleging the existence of an arbitration agreement between the parties. Thereafter, the respondent replied to the letter stating that “averments in the notice are false”. Subsequently, the respondent vide another letter denied the existence of an arbitration agreement. The petitioner filed an application under Section 11 of the Arbitration Act seeking appointment of an arbitrator. While the petition was dismissed, the High Court of Karnataka held that notice and reply exchanged between the parties will constitute an “arbitration agreement” if in the reply notice “all other matters such as claim, objections, etc. are replied but if the reply is silent about the arbitration agreement then such an agreement could be inferred”.46 Similarly, in Shyamraju & Co. (India) (P) Ltd. v. City Municipal Council47, the exchange of notice and reply wherein the claimant asserted the existence of arbitration agreement and the respondent did not deny it in reply while objecting to other claims was held to constitute an “arbitration agreement” within the meaning of Section 7(4)(c) of the Arbitration Act.

 

In G. Kapoor v. Reacon Engineers (P) Ltd.43, the petitioner issued a legal notice alleging the existence of an arbitration agreement. The respondent in its reply did not deny the existence of the arbitration agreement but asserted that it intended to suggest its own list of arbitrators for adjudication of the dispute. The Delhi High Court held that an “arbitration agreement” had come into existence by exchange of notice and reply within the meaning of Section 7(4)(c) of the Arbitration Act and appointed an arbitrator.48

 

An analysis of the aforesaid judgments seems to suggest that the High Courts have construed “statement of claim and defence” liberally to include exchange of notice and reply between the parties in line with the liberal and correct interpretation of the Supreme Court of India in S.N. Prasad v. Monnet Finance Ltd.35 discussed supra. In fact, the Delhi High Court in G. Kapoor43 and the Karnataka High Court in Shyamraju47 specifically advert to the decision of the Supreme Court in Monnet Finance35. While Monnet Finance35 which does not lay down an exhaustive definition of the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act, it advocates liberal and expansive interpretation of the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act. That apart, no other aspect appears to have been considered by the Karnataka High Court and Delhi High Court while taking a view that an exchange of notice and reply will lead to constitution of an “arbitration agreement” under Section 7(4)(c) of the Arbitration Act.

 

On the other hand, the Andhra Pradesh High Court in Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi44, has held that the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act are confined to pleadings before the Arbitral Tribunal. Therefore, an acrimonious exchange of notices will not result in an “arbitration agreement” coming into existence in terms of Section 7(4)(c) of the Arbitration Act.49 The view taken by the Andhra Pradesh High Court is contrary to the law laid down by the Supreme Court of India in Monnet35. Therefore, on that count alone, the views expressed therein are bad in law.

 

For reasons detailed in next section, the authors argue that the view expressed by the Karnataka High Court and Delhi High Court that exchange of notice and reply wherein the existence of arbitration agreement is asserted by one party and not denied by the other constitute an “arbitration agreement” within the meaning of Section 7(4)(c) of the Arbitration Act.

 

Exchange of Notice, Reply and Arbitration Agreement Under Section 7(4)(C) of the Arbitration Act, 1996

Section 7(4)(c) of the Arbitration Act stipulates that an arbitration agreement is deemed to come into existence by exchange of statement of claim and defence in which the existence of arbitration agreement is alleged by one party and not denied by the other.

 

In order to ascertain whether exchange of notice and reply wherein the existence of arbitration agreement is alleged by one party and not denied by the other will result in an arbitration agreement within the meaning of Section 7(4)(c) of the Arbitration Act, the scope of the words “statement of claim and defence” will have to be considered.

 

Apart from Section 7 of the Arbitration Act, the words “statement of claim and defence” only find mention in the heading of Section 23 of the Arbitration Act. The said section stipulates that the parties shall file their statement of claim and defence stating the facts supporting the claim/defence, the points at issue and the relief or remedy sought before the Arbitral Tribunal as per the timelines set out in the agreement or determined by the Arbitral Tribunal. Thus, it is clear that Section 23 of the Arbitration Act does not intend to define “statement of claim and defence” in the Arbitration Act, but only set out framework for conduct of arbitration proceedings. Moreover, it is settled principle of law that words derive colour from the context in which they are placed.50 Therefore, given the fact that Section 23 is contained in Chapter V of the Arbitration Act dealing with conduct of arbitration proceedings, it is abundantly clear that it did not intend to define “statement of claim and defence” for the entirety of the Arbitration Act.

 

Therefore, in the absence of any guidance available in the statute, the preparatory works provide an important tool for interpretation of the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act. As noted earlier, Section 7(4)(c) of the Arbitration Act mirrors Article 7 of the Uncitral Model Law. In 2006, Article 7 of the Uncitral Model Law was proposed to be amended to read “exchange of statements of claim and defence [on the substance of the dispute] in which the existence of the arbitration agreement is alleged by one party and not denied by the other”. The words “on the substance of the dispute” were sought to be added to exclude procedural submissions such as notice of arbitration on the ground that the addressee may not carefully review and reply to procedural submissions. The said amendment was rejected since “statement of claim and defence” were used liberally to include exchange of notices between the parties regarding the substance of the dispute.

 

That apart, it is settled principle of law that the words in a statute should be interpreted to give effect to every provision in the statute. Therefore, an interpretation which renders a provision otiose or nugatory should be eschewed.51 For reasons detailed below, if Section 7(4)(c) of the Arbitration Act is interpreted to exclude existence of arbitration agreement that has come into existence by exchange of notice and reply, it will render Section 7(4)(c) of the Arbitration Act nugatory.

 

Section 16(2) of the Arbitration Act clearly stipulates that the plea that Arbitral Tribunal has no jurisdiction must be taken not later than the statement of defence. Therefore, if a party is aggrieved by the fact that there is no arbitration agreement in existence but fails to take that contention in its statement of defence, it is deemed to have waived its right under Section 16(2) read with Section 4 of the Arbitration Act. Section 4 of the Arbitration Act provides that a party has waived its right if it does not object to non-compliance of a derogable provision of the Arbitration Act. Therefore, Section 16(2) of the Arbitration Act already deals with scenarios wherein the arbitration agreement is alleged to exist in statement of claim and not denied by the other party in its statement of defence “before” the Arbitral Tribunal. Thus, in order to give effect to Section 7(4)(c) of the Arbitration Act, it has to be interpreted to cover scenarios wherein the exchange of statement of claim and defence was “not before” the Arbitral Tribunal. Otherwise, Section 7(4)(c) and Section 16(2) of the Arbitration Act will operate in the same field, rendering Section 7(4)(c) of the Arbitration Act nugatory.

 

Additionally, it is settled principle of law that a statute should be interpreted practically having regard to ground realities.52 Therefore, where alternative constructions are possible the courts must give effect to that interpretation which will result in smooth working of the system for which the statute has been enacted rather than one which will reduce the legislation to futility.53 From a practical standpoint, parties do not impromptu convene before the Arbitral Tribunal. The convening of the Arbitral Tribunal is necessarily preceded by issuance of a notice of arbitration wherein the existence of the arbitration agreement is alleged by one party and the other party usually objecting to the constitution of the Arbitral Tribunal or denying the arbitration clause. Therefore, if the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act are interpreted restrictively, it would be divorced from the ground reality of how arbitration proceedings are ordinarily conducted. Hence, in order to make words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act workable and meaningful, the words have to be necessarily interpreted to include notice wherein the existence of the arbitration agreement is alleged by one party and not denied by the notice in the reply. Such an interpretation would be in consonance with Uncitral Model Law basis which the Arbitration Act has been enacted and the practical ground realities.

 

Viewed from another angle, the starting point of arbitration in terms of Section 21 of the Arbitration Act is the notice of arbitration. If the notice alleges the existence of an arbitration clause whilst making and stating its claims and the other party responds to all the claims but does not respond to the claim of existence of an arbitration clause, the law deems acceptance of the arbitration clause. Such arbitration clause is for reference of only present disputes to arbitration.

 

Thus, based on the aforesaid analysis, it is clear that the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act are not confined to pleadings before the Arbitral Tribunal. It includes any suit, petition or application filed before any court or tribunal wherein the existence of arbitration agreement is alleged by one party and not denied by the other party in the defence, counter-claim, written statement filed by the other party to such suit, petition or application. Moreover, having regard to the legislative history and well-settled cannons of interpretations, the words “statement of claim and defence” in Section 7(4)(c) of the Arbitration Act should be read to include exchange of notice and reply wherein the existence of arbitration agreement is alleged by one party and not denied by the other. There is no reason to restrict the meaning of the words “statement of claim and defence” to only pleadings before the tribunal. Every document which contains a claim would be a statement of claim and every document containing a defence in response to the claim would be a statement of defence.

 

———

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

Case BriefsHigh Courts

Bombay High Court: A Division Bench of S.S. Shinde and V.G. Bisht, JJ. refused to quash the FIR and criminal proceedings against the petitioner, a rape accused, despite settlement between the petitioner and the victim.

The matter related to alleged sexual assault and exploitation of the victim by the petitioner. The victim was a TV actress working in Delhi who was lured by the petitioner, a restaurant owner from Mumbai. It was alleged that the petitioner made promises of marriage to the victim and called her from Delhi to Mumbai. He also said he will get work for her. The petitioner arranged for the victim’s accommodation in Mumbai and it is alleged that on the pretext of marriage, the petitioner made physical relation with the victim against her will. It was also alleged that the victim got pregnant but had to undergo abortion despite resistance as the petitioner allegedly put a gun to her head and forced her to abort the pregnancy. Subsequently, the victim came to know that the petitioner is already married. After this, she filed an FIR against the petitioner and a criminal case was registered.

The petitioner also filed a cross complaint against the victim addressed to the Police Commissioner, Mumbai, in which the victim filed an affidavit in reply that as per advice of their elders, the petitioner and the victim have decided to amicably settle the dispute between them and move on in their careers.

Vishal Kanade and Satyaprakash Sharma instructed by  Shakuntala Sharma counsel for the petitioner, and Abhinav Chandrachud instructed by Prem Kumar R. Pandey, counsel for the victim jointly submitted that the FIR as also the chargesheet against the petitioner may be quashed. Per contra, S.D. Shinde, the Additional Public Prosecutor vehemently opposed the quashing of FIR on the ground that the alleged offences are serious and heinous offences.      

Relying on the Supreme Court decision in Gian Singh v. State of Punjab, (2012) 10 SCC 303 and State of M.P. v. Laxmi Narayan, (2019) 5 SCC 688, the High Court was of the opinion that the FIR and the chargesheet could not be quashed on the basis of alleged settlement and consent terms arrived at between the parties for the following reasons:

(i) The alleged offences are serious in nature and in particular, offence punishable under Section 376 of the IPC is heinous.

(ii) The petitioner told the victim that he was unmarried and wished to marry the victim, when in fact he was already married.

(iii) The petitioner sexually abused the victim by promising her that he will give her a job in the film industry.

(iv) There is serious allegation that the victim conceived from the petitioner, and he compelled the victim for abortion at the gunpoint.

The petitioner than advanced arguments on merits. He submitted that there was inordinate delay in lodging the FIR. Further, the victim was a consenting party and therefore the ingredients of Section 375 IPC were not attracted. On this point also, the Court declined to quash the FIR against the petitioner as it thought fit that the merits could not be dealt with in a summary manner and need to go to trial.

The Court observed that: “It prima facie appears that the consent given by the 2nd respondent [victim] for quashing the FIR and charge-sheet is not free from coercion, inasmuch as, it is stated in the said affidavit filed by the 2nd respondent that the petitioner’s wife also filed complaint against the 2nd respondent for the offence punishable under Section 452 IPC.”

It was further observed: “The alleged offences are not individual in nature and quashing of the impugned FIR, chargesheet and pending proceedings on the basis of alleged settlement or on merits is not possible since the alleged offences are not individual in nature and outcome of present proceedings will have impact on Society.”

As far as the issue of inordinate delay in lodging the FIR was concerned, the Court said that adjudication of issue of delay is a mixed question of fact and law and therefore that will have to be considered at the trial.

The petition to quash the FIR and the chargesheet was accordingly dismissed. [Chirag Sundarlal Gupta v. State of Maharashtra, 2020 SCC OnLine Bom 627, decided on 13-3-2020] 

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Coram comprising of Justice S.J. Mukhopadhaya, Chairperson and Alok Srivastava, Member (Technical), while deciding an appeal filed against Bank of India, stated that,

“Bank of India once accepted amount is expected to reach a settlement, failing which the question, whether application under Section 7 was filed under malicious intent for recovery and not for resolution will be considered.”

Bank of India (Financial Creditor) had moved an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 that had been admitted by impugned order passed by the National Company Law Tribunal.

Further, it is to be noted that, in the meantime, appellant (Corporate Debtor) tried to reach settlement with Bank of India who had already received a sum of Rs 80,00,000 but was not reaching any settlement.

Adding to the above, it was submitted that the money was accepted by Bank of India during the ‘Corporate Insolvency Resolution Process’, which is otherwise not permissible, on the ground that it wants settlement and then refusing to settle.

It was also stated that the application under Section 7 was filed by Bank of India with malicious intent and not for resolution or liquidation and calls for penal action under Section 65 of IBC.

Appellate Tribunal while posting the case for orders on 12-03-2020, gave a direction that in the meantime, Interim Resolution Professional will not constitute the ‘Committee of Creditors’, if not yet constituted, to enable the parties to reach settlement. Further, the Interim Resolution Professional will also ensure that company remains a going concern and will take assistance from the (suspended) Board of Directors and the officers/directors/employees.

Further, adding to the above, Appellate Tribunal also stated that the bank account of the ‘Corporate Debtor’ be allowed to be operated for the day-to-day functioning of the company. [Akshay Arun Shetty v. Bank of India, 2020 SCC OnLine NCLAT 96, decided on 14-02-2020]

Business NewsNews

Settlement of misclassification of workers & tax fraud dispute against Infosys

As reported by PTI, “Infosys” has agreed to pay $800,000 (nearly Rs 5.6 Crores) to settle the misclassification of foreign workers and tax fraud.

California Attorney General Xavier Becerra announced a settlement of $800,000 against Infosys Limited.

Allegations against Infosys was that,

between 2006 and 2017 approximately 500 Infosys employees were working in California on Infosys-sponsored B-1 visas rather than H-1B visas.

Further, the above-mentioned misclassification resulted in Infosys avoiding California payroll taxes.

In the settlement, Infosys, however, denied the allegations and asserted of no wrongdoings.

Further, the company on Wednesday informed Indian stock exchanges that it has reached a settlement with California Attorney General.

In the regulatory filing, it said the case is being dismissed with prejudice and was reached to avoid the time, expense, and distraction of protracted litigation on allegations dating back more than 13 years.

California had initiated legal actions against Infosys after a complaint was filed by whistleblower Jack “Jay” Palmer, a former Infosys employee.


[Source: PTI]

[Image Credits: The Asian Age]

Case BriefsHigh Courts

Allahabad High Court: Sanjay Kumar Singh, J. allowed the instant application in terms of compromise and quashed the chargesheet as well as the entire proceedings.

This instant application was filed for the quashing of the chargesheet. The applicant, Gomti Devi purchased a plot that it got in a dispute with Madhu Sharma, daughter-in-law of Opposite Party 2. An FIR was lodged against Madhu Sharma by Opposite Party 2 under Section 156(3) of the Code of Criminal Procedure, 1973, for wrongly and illegally executing a sale deed which is in dispute. Investigating Officer filed the chargesheet under Section 420 of the Penal Code, 1860.

Counsel for the applicants, Vinod Sinha, submitted that during the pendency of the trial both the parties entered in compromise and all things were settled outside the court. So an affidavit was filed for cancellation of sale deed dated 12-12-2011. Since the compromise was made the continuance of criminal proceedings pursuant to impugned charge-sheet against the applicants after compromise arrived at between the parties would be a futile exercise.

The issue before the Court was whether the Court can quash the proceedings of a non-compoundable offence under Section 482 CrPC.

This Court relied on the judgment of the Supreme Court in the case of State of M.P. v. Laxmi Narayan, (2019) 5 SCC 688  where it laid down the guidelines for exercising the inherent power of the court under Section 482 of Code of Criminal.

The Court after considering the facts and circumstances of this case observed that this is a fit case, where this Court can exercise its inherent power to secure the end of justice. Accordingly, the Court quashed the subject proceedings. [Gomti Devi v. State of U.P., 2019 SCC OnLine All 4269, decided on 30-10-2019]

Case BriefsHigh Courts

Allahabad High Court: Sanjay Kumar Singh, J. while allowing the application under Section 482 CrPC observed that even the law provides that it may not be necessary for every criminal offence to mete out punishment, particularly, if the victim wants to bury the hatchet.

In the instant case, applicant 1 is the husband and applicant 2 is the brother-in-law of opposite party 2 (OP). Due to non-fulfilment of dowry demands, OP was tortured, beaten and harassed and thereby made OP lodge an FIR against the applicants, her father-in-law and sister-in-law.

On the request of applicants, time was granted to them to make arrangement of payment to settle the dispute amicably. Afterwards, a joint affidavit was filed by the applicants and OP submitting that they have settled their matrimonial dispute outside the Court and they have no grievance against each other. The settlement was based on certain terms and conditions like OP will receive an amount of Rs 22 lakh from applicant 1 and would not prosecute each other or family members with regard to present matrimonial dispute between them.

After observing the submissions of the parties, the Court looked into some relevant judgments of the Supreme Court where guidelines for quashing of criminal proceedings on the basis of compromise and amicable settlement of the matrimonial dispute between the parties concerned was laid down.

In Madhavrao Jiwajirao Scindia v. Sambhaji-Rao Chandrojirao Angre, (1988) 1 SCC 692, it was laid down that the inherent power under Section 482 CrPC should be used where special features appear or it is expedient and in the interest of justice to permit a prosecution to continue.

In G.V. Rao v. L.H.V. Prasad, (2000) 3 SCC 693, the Supreme Court made some apt observations in relation to matrimonial disputes. Little matrimonial skirmishes suddenly escalate which often assume serious proportions resulting in commission of heinous crimes in which elders of the family are also involved. Instead of fighting out in the Court, the parties should amicably terminate their disputes.

In Swati Verma v. Rajan Verma, (2004) 1 SCC 123 similar to the present case, the Supreme Court had quashed the criminal proceedings under Sections 498A and 406 IPC before the CJM as the divorce litigation between the sparring spouses was decided on the basis of a compromise.

With these cases referred and a few others, the Court observed that If the offender and victim want to move on in matrimonial cases, they may be allowed to compound the offences in terms of the settlement.[Alok Jaiswal v. State of U.P., Application u/s 482 No.  27720 of 2019, decided on 08-08-2019]

Case BriefsHigh Courts

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

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

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

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

Case BriefsHigh Courts

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

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

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

 

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): A Bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial) allowed an appeal filed against the order of National Company Law Tribunal, Chandigarh admitting respondent’s application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

It was submitted by the Corporate Debtor that a settlement was reached between the parties and the said fact was brought to the notice of NCLT, however, it declined to allow Financial Creditor to withdraw the application for the reason that the matter has been fixed for pronouncement. The parties brought on record the settlement deed and the Resolution Professional submitted that parties had paid fees and insolvency cost to him.

Perusing the record, the Appellate Tribunal found that parties had reached settlement much prior to the date of admission of the application. As such, there was no default of payment on part of Corporate Debtor and there was no occasion for NCLT to admit application under Section 7. Consequently, the actions taken by NCLT were declared illegal and were set aside. The proceedings were directed to be closed. The appeals were thus allowed. [Gaurav Pandey v. Eternity Investment Services (P) Ltd., 2018 SCC OnLine NCLAT 836, dated 30-11-2018]

Case BriefsSupreme Court

Supreme Court: Uday U. Lalit, J. delivered the judgment for Abhay Manohar Sapre, J.  and himself whereby the Court reiterated that no eviction can be ordered unless grounds for seeking eviction are made out.

The appellant-tenants and respondent-landlord entered into a lease agreement. Subsequently, the respondent wanted the premises to be evicted which effort was resisted by the appellants. The matter became a dispute and a police complaint was filed. A written settlement was reached between the parties under which the appellants agreed to vacate the premises. The appellant disputed the said agreement alleging that they were made to enter into the compromise by coercion under police pressure. The matter travelled through various competent authorities; the Principal Subordinate Judge allowed the application filed by the appellant; however, on appeal by the respondent, the High Court reversed the order of the said Judge. Aggrieved thus, the appellants preferred the instant appeal.

The Supreme Court referred to its earlier judgments including K. K. Chari v. R.M. Seshadri, (1973) 1 SCC 761 and Nagindas Ramdas v. Dalpatram Ichharam, (1974) 1 SCC 242. The Court observed that the common thread running through the judgments referred was that ‘in cases where protection under Rent Act is available, no eviction can be ordered unless grounds seeking eviction is made out, even in a case where parties have entered into a compromise. Moreover, invalidity on that count can even be raised in execution.’ In the present case, however, noted the Supreme Court, the order of the High Court did not even remotely note that any particular ground under the Rent Act was made out. In the view of the Court, the order passed by the Principal Subordinate Judge was correct and did not call for any interference by the High Court. Therefore, the order impugned was set aside and the appeal was allowed. [Alagu Pharmacy v. N. Magudeswari,2018 SCC OnLine SC 961, dated 14-08-2018]

Case BriefsHigh Courts

Himachal Pradesh High Court: A criminal revision petition filed under Section 320 read with Section 482 CrPC for compounding the criminal case pending against the petitioners was allowed by Single Judge Bench comprising of Tarlok Singh Chauhan, J.

The petitioners were allowed to have assaulted the complainant out of the previous enmity between them. They were tried and sentenced by the trial court under Sections 324 and 477 read with Section 34 IPC. Petitioners filed the present petition submitting that they have entered into an amicable settlement with the complainant. It was further submitted that the parties have buried their differences and disputes; they have good relations and live in peace and harmony; the complainant did not want to prosecute the matter any further.

The parties were present before the High Court and they submitted the deed of settlement by which it was clear that the complainant did not want to pursue the case further. The Court relied on Gian Singh v. State of Punjab; (2012) 10 SCC 303, wherein it was held that the powers of the High Court under Section 482 are wider than the power of a criminal court to compound an offence under Section 320 CrPC. Considering the fact that the offence for which the petitioners were charged cannot be stricto sensu held to be an offence against the State, and also that the parties have settled the suit amicably; the High Court held it to be a fit case to exercise powers under Section 482. Accordingly, the petition was allowed and the matter was ordered to be compounded. [Sunit Singh v. State of H.P,2018 SCC OnLine HP 606, dated 15-05-2018]