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®INDIAN LEGAL IMPETUS

FEBRUARY 2020. Vol. XIII, Issue II

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S i n g h a n d A s s o c i a t e s

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Manoj K. Singh Founding Partner

EDITORIAL

Dear Friends,

We are pleased to present the February 2020 edition of our monthly newsletter “Indian Legal Impetus.” In this edition, we have covered recent developments, case laws and issues relating to various disciplines of law in India. We sincerely hope that you will find this issue of Indian Legal Impetus informative and engaging and keeping in tune with the latest interpretation of laws in the wake of recent judgments by the Hon’ble courts as well as recent amendments in law.

To begin with, we have an article that analyzes the recent judgment delivered by the Hon’ble Supreme Court in the case of BGS SGS Soma JV vs NHPC Ltd. [Civil Appeal No. 9307 of 2019] wherein were decided important issues regarding the interpretation of arbitration clauses in agreement vis-a-vis seat/venue of arbitration proceedings along with the scope of appealable orders under the Arbitration and Conciliation Act, 1996. This is followed by a critical analysis of the recent judgment delivered by the Hon’ble Supreme Court in the case Perkins Eastman Architects DPC & Anr. Vs. HSCC (India) Ltd. [MANU/SC/1628/2019], where it was held by the apex court that the person who has an interest in the outcome or decision of the dispute must not unilaterally appoint a sole arbitrator. In furtherance to this, we also have an article on role of public policy to set aside an arbitral award in Arbitration and Conciliation Act, 1996.

With respect to Companies Law and the Insolvency and Bankruptcy code, we have articles that talk about recent updates with respect to the Companies Act, 2013 such as buying out of a minority/residual stake in a company, mechanism to close down business of Companies through legislature & a critical study on discharge of Corporate Debtor in an approved resolution plan under Section 32A of the IBC, 2016.

Further on, we present a comparative study of the interpretation of Per-se Rule vis-à-vis Rule of Reason in competition laws under Indian and the U.S jurisdictions. Thereafter, we have articles throwing light on Euthanasia, the issue of Jurisdiction under Income Tax Act and on Alibi. This is followed by articles talking about Parole and role of Special Clauses in Consumer Law. Lastly, owing to the growth in cultural diversity we have an article that deals with the cultural aspects with regards to resolving disputes in India.

Trust you will enjoy reading this issue. Please feel free to send your valuable inputs/comments at [email protected].

Thanks

Note: All reasonable precautions have been taken to verify the information contained in this publication. However, the published material is being distributed without warranty of any kind, either expressed or implied. The responsibility for the interpretation and use of the material lies with the reader. In no event shall the author and/or the firm be liable for damages arising from its use.

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SINGH & ASSOCIATES ADVOCATES & SOLICITORS

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INDIAN LEGAL IMPETUSVolume XIII, Issue II

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Managing Editor Manoj K. Singh

Published by Singh & Associates

Advocates and Solicitors

Editor Anmol Kumar & Shruti

Shivkumar

1. SEAT / PLACE/ VENUE OF ARBITRATION: THE SAGA CONTINUES 042. INELIGIBILITY OF PERSONS INTERESTED IN THE OUTCOME OF DISPUTE TO APPOINT A SOLE ARBITRATOR: A CASE ANALYSIS 083. ROLE OF PUBLIC POLICY IN ARBITRATION AND CONCILIATION ACT, 1996 TO SET ASIDE AN ARBITRAL AWARD 114. APPLICABILITY OF TIME LIMIT ON THE ARBITRATION PROCEEDINGS PENDING BEFORE 2019 AMENDMENT - THE ARBITRATION AND CONCILIATION ACT, 1996 145. RECENT UPDATES W.R.T COMPANIES ACT, 2013 15 • BUYINGOUTTHEMINORITYSTAKEORTHERESIDUALSTAKE IN A COMPANY • MECHANISMTOCLOSE-DOWNTHEBUSINESSOFCOMPANIES THROUGH LEGISLATURE • CRITICALSTUDYONDISCHARGEOFCORPORATEDEBTORIN AN APPROVED RESOLUTION PLAN UNDER SECTION 32A OF INSOLVENCY&BANKRUPTCYCODE20166. PER SE RULE VIS-À-VIS RULE OF REASON: A COMPARATIVE STUDY OF COMPETITION LAWS IN INDIA AND THE U.S. 237. EUTHANSIA: A PERSPECTIVE 278. JURISDICTION UNDER INCOME TAX 309. ALIBI- A CONUNDRUM BETWEEN PROSECUTION AND ACCUSED 3210. WHAT IS PAROLE? DECODING THE PRIVILEGE 3411. ROLE OF SPECIAL CLAUSES IN CONSUMER LAW 3712. CULTURAL ASPECTS WITH REGARDS TO RESOLVING DISPUTES IN INDIA 40

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SEAT / PLACE/ VENUE OF ARBITRATION: THE SAGA CONTINUESDIVYA KASHYAP

INTRODUCTIONThe seat of arbitration is a critical aspect of any arbitration proceeding. Every arbitration must have a “seat” or “locus arbitri” or “forum” which not only determines the governing law for conduct of arbitration proceedings, but also which courts will have supervisory power over the arbitration and the scope of those powers, especially in relation to enforcement of awards.

On December 10, 2019, the Hon’ble Supreme Court of India, in its judgment titled BGS SGS Soma JV vs NHPC Ltd. 1decided important issues regarding the interpretation of arbitration clauses in agreements vis-a-vis seat/venue of arbitration proceedings along with the scope of appealable orders under the Arbitration and Conciliation Act, 1996 (“Act”). The judgment was delivered by a three-judge bench comprising of Justices Rohinton Fali Nariman, Aniruddha Bose and V. Ramasubramanian, where the bench declared its earlier judgments in Union of India Vs. Hardy Exploration and Production (India) Inc.2 (“Hardy Exploration”) and Antrix Corporation Ltd. Vs. Devas Multimedia Pvt. Ltd. 3 (“Antrix Corporation”) to be incorrect in law.

The Hon’ble Court delved into a plethora of cases to lay down the rules for determination of “seat” of arbitration, inter alia opining that the “venue” is really the “seat” of the arbitration proceedings in the absence of no other significant contrary indicia. In addition to this, the Court also dealt with the scope of appealable orders under Section 37 (1) (c) of the Act and held that an appeal against an order

1 Civil Appeal No. 9307 of 2019 (Arising out of SLP (Civil) No. 25618 of 2018), Civil Appeal No. 9308 of 2019 (Arising out of SLP (Civil) No. 25848 of 2018) and Civil Appeal No. 9309 of 2019 (Arising out of SLP (Civil) No. 28062 of 2018), decided on 10.12.2019

2 AIR 2018 SC 4871

3 2018 (4) Arb LR 66 (Delhi)

for transferring proceedings under Section 34 is not maintainable under Section 37 of the Act.

FACTUALBACKGROUNDIn terms of contract between NHPC Ltd. (“Respondent”) and one BGS SGS SOMA JV (“Petitioner”) for a hydroelectric project located in the lower Subansri districts of Assam and Arunachal Pradesh, Clause 67.3 of the agreement provided for dispute resolution which stated that “Arbitration Proceedings shall be held at New Delhi/Faridabad, India.” Certain disputes arose between the parties and a three-member Arbitral Tribunal was constituted as per the contract. The arbitration proceedings were conducted in New Delhi and an award was also made there. In January 2017, the Respondent filed and application under Section 34 of the Act seeking setting aside of the award before the Court of the District and Sessions Judge, Faridabad, Haryana. In April 2017, the Petitioner filed an application under Section 151 read with Order VII Rule 10 of the Code of Civil Procedure, 1908 (“CPC,1908”) and Section 2 (1) (e) (i) of the Act seeking return of the Section 34 petition for presentation before the appropriate court at New Delhi and /or the District Judge at Dhemaji, Assam. However, in November 2017, after constitution of Special Commercial Court at Gurugram, the Section 34 petition filed at Faridabad was transferred to the said Commercial Court, which allowed the aforementioned application of the Petitioner, and returned the Section 34 petition for presentation at the courts of New Delhi. Aggrieved by this, the Respondent filed an appeal under Section 37 of the Act read with Section 13 (1) of the Commercial Courts Act, 2015 (“ CC Act” ) before the High Court of Punjab and Haryana at Chandigarh. The Hon’ble High Court held that the appeal filed under Section 37 was maintainable, and that Delhi being only a convenient venue where arbitral proceedings were held and not the seat of arbitration proceedings, the courts of Faridabad would have jurisdiction on the basis of cause of action having arisen there. As a result, the appeal was allowed and the judgment of the Special Commercial Court at Gurugram was set aside, to which the petition in question was filed before the Supreme Court.


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ISSUES IN QUESTIONi. Whether an appeal under Section 37 of the Act

is maintainable against an order transferring a Section 34 petition from one court to another?

ii. Whether designated place of arbitration confers exclusive jurisdiction upon the courts of the said place?

iii. What is the seat of arbitration in the present dispute?

ARGUMENTS ON BEHALF OF THE PARTIESAs per the counsel on behalf of the Petitioner, a combined reading of Section 13 of the CC Act and Section 37 of the Act made it clear that Section 13 of the CC Act only provides forum for challenge, whereas Section 37 of the Act circumscribes the right of appeal. Further, read with Section 5 of the Act, it was clear that only certain judgments and orders are appealable and no appeal would lie under any provision outside Section 37 of the Act. He further contended that an order allowing an application under Section 151 read with Order VII Rule 10 of the CPC, 1908 could in no stretch of imagination amount an order refusing to set aside an arbitral award under Section 34 of the Act.

With respect to the second and third issue, the Counsel contended that the conclusion drawn by the High Court as to New Delhi being the venue and not the seat of arbitration was incorrect as the parties chose to have sittings at New Delhi and the award was made in New Delhi, thereby making New Delhi the seat of arbitral proceedings. He relied on many judgments, including the Five Judge Bench in Bharat Aluminum Co. Vs. Kaiser Aluminum Technical Service Inc. 4 (“BALCO”) and contended that Hardy Exploration was not correctly decided.

Per contra, Smt. Maninder Acharya, learned Additional Solicitor General, supported the impugned judgment and contended that the reasoning of the High Court was correct when it held that an order passed under Section 151 read with Order VII Rule 10 of the CPC, 1908 would amount to refusal to set aside an arbitral award and relied heavily upon Antrix Corporation. On the second issue, she argued that the arbitration clause did not expressly state that either New Delhi or

4 (2012) 9 SCC 552

Faridabad was to be the seat of the arbitral proceedings. The arbitration clause only mentioned a convenient venue and the fact that sittings were held at New Delhi would not make New Delhi the seat of arbitration under Section 20 (1) of the Act. Furthermore, since the contract was signed in Faridabad, notices were sent to the Respondent’s Faridabad office, courts in Faridabad would have jurisdiction to decide a Section 34 petition.

WHAT THE SUPREME COURT HELDi. Whether an appeal under Section 37 of

the Act is maintainable against an order transferring a Section 34 petition from one court to another?

The Hon’ble Supreme Court relied upon the judgments of Kandla Export Corporation Vs. M/s OCI Corporation & Anr.5 and South Delhi Municipal Corporation Vs. Tech Mahindra6 to hold that since there was no independent right of appeal under Section 13(1) of the CC Act which merely provides forum for appeals, it is the parameters of Section 37 of the Act alone which had to be looked into in order to determine whether the appeal was maintainable. Furthermore, the Court observed that the High Court missed the words “under Section 34” in Section 37 (1) (c) of the Act which implied that refusal to set aside an award must be under Section 34 i.e. after the grounds set out there have been turned down. Hence, an order transferring Section 34 proceedings from one court to the other would not amount to a refusal to set aside the award. It was held that the appeal filed by the Respondent did not fall within the ambit of Section 37 of the Act and accordingly, the appeal was not maintainable.

ii. Whether designated place of arbitration confers exclusive jurisdiction upon the courts of the said place?

ANTRIX CORPORATION7 BAD IN LAW?The Hon’ble Court at first examined the historical background of the juridical seat of the arbitral proceedings in terms of provisions under the Arbitration Act, 1940, the UNCITRAL Model Law on International Commercial Arbitration and the Arbitration & Conciliation Act, 1996. It then went on to

5 (2018) 14 SCC 715

6 EFA (OS) (Comm.) 3 of 2019

7 Supra, Note 3.

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discuss some of the earlier judgments of the Court on the concept of “seat” and “venue” of an arbitral proceeding such as BALCO8 and Roger Shashoua and Ors. Vs. Mukesh Sharma9and concluded that where parties have selected the seat of arbitration in their agreement, such selection would then amount to an exclusive jurisdiction clause and that Section 2(1)(e) of the Act has to be construed keeping in mind the Section 20 of the Act. The Court then went on to discuss other judgements 10 to observe that the moment the seat is designated by agreement between the parties, it is akin to an exclusive jurisdiction clause, which would then vest the Courts at the “seat” with jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement.

While discussing the discordant notes struck by some High Courts, the Supreme Court held that the view taken by the Delhi High Court in Antrix Corporation was incorrect as it looked at paragraph 96 of the BALCO judgment in isolation and failed to consider the subsequent paragraphs and the findings in Enercon (India) Ltd. and Ors. Vs. Enercon GmBH and Anr.11 and Reliance Industries Ltd Vs. Union of India12.

TEST FOR DETERMINATION OF “SEAT” The Supreme Court at paragraph 63 of the judgement13 observed: “It will thus be seen that wherever there is an express designation of a “venue” and no designation of any alternative place as the “seat”, combines with a supranational body of Rules governing the arbitration, and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding.”

The Court then examined various judgments across different jurisdictions such as Roger Shashoua 14Enercon GmBH15,Shagang South Asia

8 Supra, Note 4.

9 (2009) EWHC 957 (Comm.)

10 Indus Mobile Distribution Private Limited (2017) 7 SCC 678, Enercon (India) Ltd. and Ors. Vs. Enercon GmBH and Anr (2014) 5 SCC 1

11 (2014) 5 SCC 1

12 (2014) 7 SCC 603

13 Supra, Note 1.

14 Supra, Note 8.

15 Supra, Note 10.

(Hong Kong) Trading Co. Ltd. vs. Daewoo Logistics16, Process and industrial Developments Ltd. Vs. Nigeria17, Dozco India (P) Ltd. Vs. Doosan Infracore Co. Ltd.18etc. and concluded at paragraph 84 that whenever there is a designation of a place of arbitration in an arbitration clause as being the “venue” of the arbitration proceedings, the expression “arbitration proceedings” would make it clear that the “venue” is really the “seat” of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the proceedings as a whole, including making of award at that place. Further, the Clause does not state that the venue is so that some, or all, of the hearings take place at the venue; neither does it use language such as “the Tribunal may meet”, or “may hear witnesses, experts or parties”. The expression “shall be held” also indicates that the so-called “venue” is really the “seat” of the arbitral proceedings. This coupled with there being no other significant contrary indicia that the stated venue is merely a “venue” and not a “seat”, would then conclusively show that such a clause designates the “seat” of arbitration.

CORRECTNESS OF JUDGMENT IN HARDY EXPLORATION19

The Supreme Court at paragraph 93 of the judgment opined that the Three Judge Bench in Hardy Exploration failed to apply the Shashoua20 principle to the arbitration clause in question according to which the answer would have been that Kuala Lumpur, which was stated to be the ‘venue’ of arbitration proceedings, being governed by the UNCITRAL Model Law, would be governed by a supranational set of rules, and there being no other contrary indicator, it would be clear that Kuala Lumpur would therefore be the juridical ‘seat’ of the arbitration and thereby, the Bench did not follow the law as to determination of juridical seat laid down in BALCO. Therefore,

16 (2015) EWHC 194

17 (2019) EWHC 2241

18 (2011) 6 SCC 179

19 Supra, Note 2.

20 Supra, Note 9


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the Court held, “Hardy Exploration and Production (India) Inc. (supra), being contrary to the Five Judge Bench in BALCO (supra), cannot be considered to be good law.”

WHAT IS THE SEAT OF ARBITRATION IN THE PRESENT DISPUTE? Applying the Shashoua principle to the matter in question, the Supreme Court held that the arbitration clause in the appeal in question signified that all the hearings, including making of the award, were to take place at one of the stated places i.e. New Delhi/Faridabad. The expression “shall be held” also indicated that the so-called “venue “was really the “seat” of arbitration proceedings. However, since all the three appeals were finally held at New Delhi, the conclusion that was made was that the parties chose New Delhi as the seat of arbitration under Section 20 (1) of the Act. Hence, courts at New Delhi alone had the jurisdiction over the arbitration proceedings and the fact that a part of the cause of action arose in Faridabad was irrelevant once the seat was chosen.

Hence, the judgment of the High Court was set aside and Section 34 petition was ordered to be presented in the Courts of New Delhi.

CONCLUSION AND ANALYSISThe Supreme Court has inarguably held that a place or venue is effectively the juridical seat unless there is any indicator of a contrary intention of the parties. Not only has the Court provided the much needed clarity on the issue of juridical seat of arbitration proceeding, it has also laid down tests for determination of the same. Consequently, the judgment also clarifies certain grey aspects pertaining to the issue of seat/venue/place of arbitration and also throws light on the importance of choosing a seat at the very beginning of the arbitration as the same would also be relevant in determining the jurisdiction of courts having supervisory jurisdiction over the proceedings. However, it is to be kept in mind that the judgment has been pronounced by a Three Judge Bench, which is the same as in the case of Hardy Exploration. Hence, there is quite

a possibility that the judgment would not have an overruling effect on Hardy Exploration and the matter would be referred to a larger bench for determination.

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INELIGIBILITY OF PERSONS INTERESTED IN THE OUTCOME OF DISPUTE TO APPOINT A SOLE ARBITRATOR: A CASE ANALYSIS

SOUMYA JHA

INTRODUCTION The Hon’ble Supreme Court of India, on November 26, 2019, in the matter of Perkins Eastman Architects DPC & Anr. Vs. HSCC (India) Ltd.1, decided that the person who has an interest in the outcome or decision of the dispute must not unilaterally appoint a sole arbitrator. This judgment, although is in express consonance of the amended A&C Act, 1996, it seems to have applied one of the fundamental principles of natural justice i.e. “Nemo judex in causa sua” (No one can be a judge in his own cause). Even though, the judgment does not specifically make a mention of the said principle, the underlying gist of the judgment bears the sense of it.

BRIEF FACTSThe respondent had floated a tender on 15.07.2016 for the appointment of Design Consultants for “comprehensive planning and designing, including preparation and development of concepts, master plan for the campus, preparation of all preliminary and working drawings for various buildings/structures, including preparation of specifications and Schedule of quantities” for the proposed All India of Medical Sciences at Guntur, Andhra Pradesh.

Appellants comprising the consortium of (i) Perkins Eastman Architects DPC, an architecture firm having its registered office in New York and (ii) Edifice Consultants Private Limited, having its registered office in Mumbai submitted their bid on 28.09.2016 and was awarded the LOA by the respondent on 22.02.2017. The contract was entered into by the Appellant and the Respondent on 22.05.2017, which provided inter alia for a dispute resolution in Clause 24 which read as follows:“24.0 DISPUTE RESOLUTION

(i)….. If the Design Consultant is dissatisfied with the decision, the Design Consultant shall within a period of 30 days from receipt of this decision, give notice to the CMD, HSCC for appointment of arbitrator failing which the said decision shall be final, binding and

1 MANU/SC/1628/2019

conclusive and not referable to adjudication by the arbitrator.

(ii) Except where the decision has become final, binding and conclusive in terms of sub-Para (i) above disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the CMD HSCC within 30 days from the receipt of request from the Design Consultant. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason, whatsoever another sole arbitrator shall be appointed in the manner aforesaid……”

Furthermore, within six days of signing of the said contract, the respondent alleged failure on the part of the Appellants vide its letter dated 26.05.2017 and eventually issued a ‘stop work notice’ to them on 03.11.2017. Subsequently, the respondent issued a termination notice on 11.01.2019 and a termination letter dated 20.02.2019 alleging non-compliance of contractual obligations on the part of the appellant was issued.

In response to this, the Appellant invoked the dispute resolution clause of the contract raising a claim of Rs. 20.95 crores. As per clause 24 of the contract, the respondent was required to take a decision in respect of the notice dated 11.04.2019 within 1 month; instead, the respondent sent a communication on 11.05.2019 intimating that a reply to the notice would be sent within 30 days.

An appeal was filed by the Appellants before the Director (Engineering) in terms of said Clause 24; subsequently, by letter dated 28.06.2019, the Chief Managing Director of the respondent was called upon to appoint a sole arbitrator in terms of said Clause 24. However, no appointment of an arbitrator was made within thirty days but a letter was sent by Chief General Manager of the respondent on 30.07.2019, thereby, appointing one Major General K.T. Gajria as the sole arbitrator.


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ISSUES RAISED1. Whether the court had the jurisdiction to deal with

the present application under section 11(6) r/w section 11(12) (a) of the A&C Act vis-à-vis whether the arbitration in the present case was tantamount to International Commercial Arbitration or not?

2. If yes, whether there was a case made out for exercise of power by the court to make an appointment of an arbitrator?

ARGUMENTS ADVANCED BY THE APPELLANTSAs per the contract, the Appellant had duly invoked the arbitration clause, as per which the Chairman and Managing Director was the competent authority to appoint a sole arbitrator as per clause 24 of the contract. Having said that, the Chairman and Managing Director not only failed to appoint the sole arbitrator within the stipulated time, but the sole arbitrator so appointed was wrongfully appointed by the Chief General Manager of the respondent, as against the Chairman and Managing Director. It was further alleged, that the Chairman and Managing Director of the Respondent would naturally be interested in the outcome or decision in respect of the dispute, therefore, an independent and impartial arbitrator was required to be appointed. The decision of the Hon’ble Supreme Court in the case of TRF Limited v Energo Engineering Projects Limited2 was relied on. Lastly, it was argued that the matter was an International Commercial Arbitration since as per the Consortium Agreement entered between the Appellants, Appellant no. 1 i.e. Perkins Eastman Architects, having its registered office in New York, was stated as the lead member of the Consortium.

ARGUMENTS ADVANCED BY THE RESPONDENTThe period of requisition expired on a Friday and the arbitrator was appointed at the first available working day thereafter. It was argued that the appointment of Major General K.T. Gajria was in consonance with clause 24 of the contract and such appointment could not in any way be said to be illegal. The arbitrator was appointed by the Chairman and the Managing Director of the Respondent but was only conveyed by the Chief General Manager. Further, the instant matter was not

2 (2017) 8 SCC 377

an International Commercial Arbitration as under Clause 9 of the Consortium Agreement both the Applicants were jointly and severally responsible for the execution of the project.

FINDINGS OF THE COURTIssue 1: While deciding Issue no 1, the Hon’ble court placed reliance on the Consortium Agreement entered into between the Appellants on 20.09.2016 which described Perkins Eastman Architects as the lead member of the Consortium. The court further relied on the case of Larsen and Toubro Limited SCOMI Engineering BHD3and observed that even though it was held in that case that “Association” and “Body of individuals” referred to in section 2(1)(f ) of the Act would be separate categories, the lead member of the Association/Consortium in that case being an Indian entity, the “Central Management and Control” of the Association was held to be in India, thereby not qualifying it as International Commercial Arbitration (ICA).

However, in the instant case, the lead member of the consortium was an architectural firm with a registered office in New York, therefore the ‘Control and Management” of the Association was in a country other than India, hence the requirements of section 2(1)(f ) of the Act were satisfied. Consequently, the present case was held to qualify as an ICA, thereby conferring upon the Hon’ble court with the jurisdiction to deal with the present application.

Issue 2: While deciding this issue, the Hon’ble court placed heavy reliance on the case of TRF Limited4 wherein the provisions of the Amending Act (Act no 3 of 2016) and the insertion of Fifth and Seventh Schedules in the Act were discussed at length, and it was further held that the Managing Director became ineligible by operation of law to act as an arbitrator. It was observed by the court that any person having direct interest in the dispute and as such could not act as an arbitrator. The Apex court in the instant matter sought an extension of this principle to hold that any person who himself was disqualified and disentitled could also not nominate any other person to act as an arbitrator. An excerpt of the judgment is reproduced hereunder:

3 (2019) 2 SCC 271

4 (2017) 8 SCC 377

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“16. …The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter-balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognised by the decision of this Court in TRF Limited MANU/SC/0755/2017 : (2017) 8 SCC 377.”

CONCLUSIONIt may be correct to conclude that this judgment brings a paradigm shift in dealing with the applications under the scheme of Section 11 of the A&C Act. Moreover, in view of the above mentioned judgment, the courts across the jurisdiction have widely started recognizing that if there are justifiable doubts as to the independence and impartiality of the person nominated, and if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, such an appointment can be made by the Court5.

This judgment reinforces the significance of independence and impartiality in the appointment of an arbitrator or arbitrators, as the case may be in order to grant impartial and justifiable reliefs to the parties involved. It also comes as a ray of hope in cases of

5 Central Organisation for Railway Electrification vs. ECI-SPIC-SMO-MCML (JV) [MANU/SC/1758/2019]; SMS Ltd. vs. Rail Vikas Nigam Limited [MANU/DE/0077/2020]; Bilva Knowledge Foundation and Ors. vs. CL Educate Limited [MANU/DE/4556/2019]

contracts with unequal bargaining power between the parties, where one of the parties is left with very little to no option while entering into a contract with a dominating party, who may take over the right to appoint sole arbitrator in case of a dispute. Therefore, the attempt, as one may presume, is to ensure a healthy arbitration environment by making stringent requirements for appointment of impartial and independent arbitrators.

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ROLE OF PUBLIC POLICY UNDER THE ARBITRATION AND CONCILIATION ACT, 1996, FOR SETTING ASIDE AN ARBITRAL AWARD

PRIYADARSHINI

The Arbitration and Conciliation Act, 1996, brings into scope the system of ‘minimal court intervention’ for dispute resolution. The intrusion of the Courts is extremely restricted in the dispute resolution process. The provision that provides for the grounds on which an Arbitral Award can be set aside through the Court is Section 34 of Arbitration and Conciliation Act.

DOCTRINE OF PUBLIC POLICYSection 34(2)(b)(ii) states that an arbitral award may be set aside by the Court if the arbitral award is in conflict with the public policy of India. It is difficult to interpret the meaning of “public policy” as it has not been defined in the Act. However, in the broader view, the doctrine of “Public Policy” is equivalent to the “Policy of Law,” whatever leads to obstruction of justice or violation of a statute or is against the good morals when made the object of contract would be against ‘Public Policy of India” and being void, would not be susceptible to enforcement.

Interpreting the doctrine of public policy of India in its broader view, courts of law may intervene permitting recourse against an arbitral award based on irregularity of a kind which the court considers has caused or will cause substantial injustice to the applicant. Extreme cases where arbitral tribunal has gone so wrong in its conduct of arbitration that justice calls out for it to be corrected may justifiably fall within the ambit of the doctrine of ‘Public Policy of India” to enable courts of law in India to intervene under section 34 of the 1996 Act permitting recourse against arbitral award.

In Renusagar Power Electric Company v. General Electric Company1, a pre-1996 Act case involving enforcement of an ICC Award, the Hon’ble Supreme Court explained the expression Public Policy in section 7 (1) (b) (ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961. The Court stated that the term public policy has been used in narrow sense and in order to attract the bar of public policy, the enforcement

1 AIR 1994 SC 860

of the award must involve something more than the violation of the Indian Law. Applying the said criteria, enforcement of a foreign award would be refused on the ground of public policy if such enforcement would be contrary to:1) Fundamental Policy of Indian Law; or

2) The interests of India; or

3) Justice or morality.In 2003, in Oil & Natural Gas Corporation Ltd. vs. SAW Pipes Ltd2, the scope of interpretation of public policy was significantly widened. The Court held that in case of an application u/s 34 to set an award aside, the role of the Court was deemed to be that of an appellate/revision court, thereby rendering it wide powers. Further, the Court also added a new ground – patent illegality to the grounds enumerated in Renusagar Power Electric Company vs. General Electric Company under which the arbitral award could be set aside.

“Therefore, in our view, the phrase ‘Public Policy of India’ used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice.”

This opened a floodgate of litigations under Section 34 as every award where there was an alleged error of application of statutory provisions could now be challenged.

2 AIR 2003 SC 2629

1 2


In 2011, the Hon’ble Supreme Court in Phulchand Exports Ltd. Vs. OOO Patriot 3 while deciding the meaning of ‘public policy’ under Section 48 of the 1996 Act, held that the test laid down in Saw Pipes must be followed in case of foreign awards as well, thereby allowing Indian Courts to deny enforcement of a foreign award on additional grounds of “patent illegality”. However, the Supreme Court expounded no reasons for ignoring the distinction drawn between foreign awards and domestic awards in Oil & Natural Gas Corporation Ltd. vs. SAW Pipes Ltd itself or for departing from Renusagar Power Electric Company vs. General Electric Company which although dealt with a separate statute, had in fact interpreted a provision identical in text and intention to that of Section 48.

The judgment of Hon’ble Supreme Court in 2011 in Phulchand Exports Ltd. Vs. OOO Patriot came to be overruled by the Supreme Court in 2013 in Shri Lal Mahal Ltd. Vs. Progetto Grano Spa4. The Hon’ble Supreme Court reinstated the position held in Renusagar Power Electric Company vs. General Electric Company with respect to enforcement of foreign awards and confirmed that the Renusagar test shall apply for refusal of enforcement of a foreign award on the grounds of conflict with public policy of India. The wider import of the term as laid down in Oil & Natural Gas Corporation Ltd. vs. SAW Pipes Ltd therefore, ceased to apply to Section 48 and the possibility of an attack to a foreign award in India at the stage of enforcement was limited.

Further, in ONGC Ltd. Vs. Western Geco International Ltd.5, it was anticipated that the three judge bench, had the opportunity of reviewing the interpretation of ‘public policy’ under Section 34 of the 1996 Act might overrule the wide interpretation given by Oil & Natural Gas Corporation Ltd. vs. SAW Pipes Ltd, which was a decision of the division bench. However, the larger bench of the Supreme Court referred to the Saw Pipes ratio, and further added additional vague terminologies.

The apex court was required to decide whether the award violated the public policy of India. The Court while agreeing with ratio of Saw Pipes, went a step further to elaborate the meaning of ‘fundamental policy of Indian law’. It determined that three ‘distinct

3 (2011) 10 SCC 300

4 (2014) 2 SCC 433

5 2014 (9) SCC 263

and fundamental juristic principles’ form a part and parcel of fundamental policy of Indian law - First, the court or adjudicating authority must adopt a ‘judicial approach’ when determining the rights of a citizen. This implies that it cannot ‘act in an arbitrary, capricious or whimsical manner’; second, the court or quasi-judicial authority must determine rights and obligations of parties in accordance with principles of natural justice which encompasses that the authority deciding the matter must apply its mind to the attendant facts; and third, a decision which is perverse or so irrational that a reasonable person could not have reached such a conclusion may not be sustained in a court of law.

The Court concluded that the decisions reached by the Arbitrators in the instant case, based on the expansive interpretation of the concept ‘fundamental policy of India’, could not have logically flowed from the proved facts, and that the tribunal erroneously clubbed the entire period since intimation for holding the Appellant responsible for the delay. The Court went on to reduce the period for which the deductions were held to be invalid, thereby partly allowing the Appellant’s contention.

The above-mentioned judgments have widened the scope of interpretation of the term ‘public policy’ in regard to the Arbitration and Conciliation Act, 1996. In 2015, Section 34 of the Act was amended with a view to limit the permissibility under ‘Public policy’.

THE 246TH LAW COMMISSION REPORTIn February 2015, the Law Commission of India issued a response to these judgments, by issuing a Supplement to the Report about the Act that it had published in August 2014, known as the 246th Law Commission Report. The Law Commission emphasized that Section 34 sets out an exhaustive list of grounds to challenge an award, and these relate to the procedural issues only without going into substantive problems. The Law Commission criticized Oil & Natural Gas Corporation Ltd. vs. SAW Pipes Ltd for “opening the floodgates” and criticized ONGC vs Western Geco and Associate Builders v Delhi Development Authority6 for reinforcing the broad scope of public policy.

The Law Commission had previously stated that Section 34 must expressly state that an award cannot be set aside merely because the tribunal has made a

6 2014 (4) ARBLR 307


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mistake of law, or because the court takes a different view of the evidence. It has now suggested that section 34 also states, “For the avoidance of doubt the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.”

THE 2015 AMENDMENTS TO THE ACTThe Arbitration and Conciliation (Amendment) Act, 2015, made major changes to section 34. These changes had been suggested by the 246th Report of the Law Commission of India on Amendments to the Arbitration and Conciliation Act, 1996 of August 2014. There was also a Supplementary to the 246th Report of the Law Commission of India issued on Amendments to the Arbitration and Conciliation Act, 1996 of February 2015. These were the changes that focused on restricting Courts from interfering with arbitral awards on the ground of “public policy.” Thus, the amendment was added, “Explanation 2” to section 34(2) as well as Section 2A. Explanation 2 of section 34(2) states –“For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian Law shall not entail a review on the merits of the dispute.”Further, in Associate Builders v Delhi Development Authority 7, the Hon’ble Supreme Court also clarified the scope of interpretation of most basic notions of morality and justice. Accordingly, an award could be set aside on the ground of justice when the “award” would be such that it would shock the conscience of the Court. Further, an award against morality was considered to be something that was against the mores of the day that would shock the conscience of the Court.

Therefore, this explanation significantly limited the scope of interpretation supplied in ONGC v Western GECO8. Due to the presence of this amendment, Courts could no longer interfere with the award passed by the Arbitrator. The explanation makes it especially clear that in no way would a Court be entailed to review the award on merits of the dispute. Similarly, Section 2A further curtails the scope of interpretation of the term “patently illegal” as propounded in ONGC v Saw Pipes9. Section 2A states –

7 2014 (4) ARBLR 307

8 2014 (9) SCC 263

9 AIR 2003 SC 2629

“An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiate by patent illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the ground of an erroneous application of law or by reappreciation of evidence.”

Thus, the Courts are no longer permitted to reappraise evidence or set aside awards merely because the Arbitral Tribunal has made errors when dealing with it. It is further to understand that the amendment did not make any changes to the interpretation of “justice and morality” as was laid down in Associate Builders.

Since the amendment, the Courts have avoided giving a wide interpretation to “public policy” or with interfering with the merits of the case. In the November 2017, the Hon’ble Supreme Court in Venture Global Engineering LLC and Ors v Tech Mahindra Ltd. and Ors 10 observed that –

“The Award of an arbitral Tribunal can be set aside only on the grounds specified in Section 34 of the AAC Act and on no other ground. The Court cannot act as an Appellate Court to examine the legality of Award, nor it can examine the merits of claim by entering in factual arena like an Appellate Court.”

This view has also been taken in other judgments such as Sutlej Construction v. The Union Territory of Chandigarh 11

These judgments are proof of the recent trend of interpretation of “public policy” which has been one where the Courts have refused to examine the arbitral awards on merits, thereby following the legislative intent “minimal intervention of the Courts in the arbitral process” as reflected by the changes brought by the Arbitration and Conciliation (Amendment) Act, 2015.

***

10 (2018) 1 SCC 656

11 (2017) 14 SCALE 240 (SC)

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APPLICABILITY OF TIME LIMIT ON THE ARBITRATION PROCEEDINGS PENDING BEFORE 2019 AMENDMENT - THE ARBITRATION AND CONCILIATION ACT, 1996

RAJDUTT S SINGH

In 2015, Section 29A (Time Limit for arbitral award) was inserted in the Arbitration and Conciliation Act, 1996 (“Act”). As per which, the award is required to be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Further, an explanation was added to this section which states that an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. In addition, as per sub section 3 of the Section 29A, the parties could, by consent, extend the aforesaid period of 12 months period for making award for a further period not exceeding six months.

Therefore, the time limit for making the Award under the Act was 18 months from the arbitral tribunal entering upon the reference. If the award is not made within the aforesaid period of 18 months, the mandate of the arbitrator(s) was to terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period.

In 2019, Section 29A of the Act was amended with effect from 9th August 2019 whereby, Section 29 A (1) of the Act was substituted as follows: “The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23”. Sub-section (4) of section 23 was added in 2019 which states that the statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing, of their appointment. Accordingly, as per 2019 amendment, Award is to be made by the Arbitral Tribunal within 12 months from the date of completion of proceedings. Further, by virtue of sub section 3 of section 29A, this period of 12 months may be extended by the consent of the parties for another 6 months.

Recently, the High Court of Delhi12 held that the time limit for completion of arbitration proceedings enhanced by amending Section 29 A (1) of the Act through the 2019 amendment is applicable to arbitrations pending as on the date of amendment. In this matter, the Arbitral Tribunal entered upon reference on 26 May 2018 and the time period for conclusion of the arbitration proceedings in terms of Section 23 (4) and 29A (1) of the Act was up to 23 November 2019 and the parties by consent mutually extended the time period by six months which period is to be expired on 23 May 2020. The Court observed that Section 23 (4) and 29A (1) of the Act, being procedural law, would apply to the pending arbitrations as on the date of the amendment. Therefore, the Court held that the time period for conclusion of arbitration proceedings has not yet expired.

In light of the above, time limit for completion of the arbitration proceedings enhanced under Section 29 A is applicable to proceedings pending as on the date of 2019 Amendment i.e. 9th August 2019. Therefore, in the arbitration proceedings pending as on 9 August 2019, the arbitral tribunal is required to make the award within 12 months after completion of pleadings under sub-section (4) of section 23 of the Act and the parties may by consent extend this period of 12 months for a further period of 6 months.

***

12 Shapoorji Pallonji and Co. Pvt. Ltd. vs. Jindal India Thermal Power Limited O.M.P. (MISC.) (COMM.) 512/2019


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BUYINGOUTTHEMINORITYSTAKEORTHERESIDUALSTAKEINA COMPANY

SANDESH KUMAR

INTRODUCTION In case of any kind of compromise, arrangement, amalgamations, share exchange, conversion of securities or for any other reason by which an acquirer or any person or group of persons who acquires 90% or more stake in a company, such persons can acquire the residual/remaining shares of the company at a price determined based on the valuation report given by a registered valuer. Section 236 of the Companies Act 2013 under the Chapter XV Compromises, Arrangements and Amalgamations provides for such a buy-out. These regulations were made with an intention to buy-out the stake of dissenting minority shareholders in case of any kind of compromises, arrangements and amalgamations at an agreed price prescribed.

Judicial Pronouncement Relating to Purchase of Minority Shareholding in the National Company Law Appellate Tribunal, New Delhi

S. GOPAKUMAR NAIR AND ORS VS OBO BETTERMANN INDIA PRIVATE LIMITED AND ORS [COMPANY APPEAL (AT) NO. 272/2018]1

This appeal was filed against the order of the NCLT Chennai Bench. In this case the appellants were holding 100% shares in the respondent company. Later, pursuant to shareholders’ agreement OBO Bettermann Holdings - GMBH acquired 74% stake in the company and in addition due to execution of a different agreement it was increased from 74% to 99.64% and the appellants were left with only 0.36% shareholding. Subsequent to that, a “Put and Call Option Agreement” was executed to buy out the remaining shareholding. In relation to this, OBO Bettermann Holdings - GMBH had sent a Put and Call Option Notice to the appellants to sell their shares on sale consideration rather than an agreed price and subsequent to that, one more notice was sent to the appellants invoking the Put and Call Option, calling upon them to sell at an agreed price to

1 https://www.manupatrafast.com

be decided by a mutually acceptable Chartered Accountant. Finally, one more notice was issued for the purchase of the minority shareholding under Section 236 of the Companies Act, 2013. Though the appellants disputed these notices, the Company cancelled the appellants’ shares under Section 236 of the Companies Act and communicated the same to them.

Appeal was preferred by the appellants against such action to the NCLT Chennai Bench under Sections 241 to 244 read with 246, 337 to 341 of the Companies Act, 2013. But the Tribunal held that since the appellants were no longer shareholders in the company the petition cannot be maintained.

ISSUES DEALT IN THIS APPEAL:1. Maintainability of Appellants’ Petition for

Oppression & Mismanagement?

The NCLAT held that Section 244(1) (a) of the Companies Act says that, one of the criteria to apply under Section 241 is that minimum one-tenth of the total number of its members should file the application making grievances for oppression and mismanagement. In this case out of three members two were appellants claiming that their shares were taken by the oppressive act of the majority shareholder, hence, they had the minimum number to admit the application under the Section 241 of the Act. Thus, such application should be admitted.

2. Whether such “Put and Call Option Agreement” is covered under the ambit of Section 236 of Companies Act with regards to buying out minority stake?

The NCLAT observed that Section 236 of the Companies Act 2013, can be invoked in case of amalgamation, share exchange and conversion of securities and for any other reasons. Here the phrase “for any other reasons” should be read ejusdem generis with the

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preceding word and must take the same or similar colour. If this was not the intention of the legislature they could have generally mentioned that, in the event of any person or group of persons becoming 90% shareholder of the issued equity share capital of the company, such members can express their intention to buyout the remaining stake. Thus, Appellate Tribunal Held that Section 236 cannot be invoked and the notices which were sent under Section 236 and the communication cancelling the shares shall be set aside and considered as illegal.

New Takeover Rules for acquiring minority shares of Unlisted Public Company and private companies

The Ministry of Corporate Affairs vide notification dated February 03 2020, has notified rules regarding acquiring the remaining shares by the Major Stakeholder. According to this new rule now a member/ members having minimum 75% stake in the company can apply to the tribunal expressing their intention to buy out the remaining shares in terms of the sub-section (11) of section 230.Such application of arrangement to take over the residual shares shall also contain:

1. Report from the registered valuer disclosing the details of the valuation of the shares proposed to be acquired by the member after taking into account the following factors:

A. The highest price paid by any person or group of persons for acquisition of shares during last 12 months.

B. The fair price of shares of the company to be determined by the registered valuer after taking into account valuation parameters including return on net worth, book value of shares, earning per share, price earning multiple vis-a-vis the industry average, and such other parameters as are customary for valuation of shares of such companies.

2. Separate Escrow account to be opened by the member wherein minimum 50% of total consideration of the takeover offer shall be deposited.

These rules shall not be applicable to any kind of transfer or transmission of shares through a contract, arrangement or succession, as the case may be, or any transfer made in pursuance of any statutory or regulatory requirement.

CONCLUSIONThis rule will be helpful for the unlisted public Companies and Private Companies where majority stakeholders are facing obstacles from the minority shareholders in taking some management decisions. By this rule now majority stakeholders having 75% stake in the company can acquire the residual shares of the minority stakeholders as per the price fixed by the registered valuer. The minority shareholder will also have an option to file an application to the tribunal in case of any grievances with respect to the takeover offer, thus ending up in a win – win situation for both the parties.

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MECHANISM TO CLOSE-DOWN THE BUSINESS OF COMPANIES THROUGH LEGISLATURE

SANDESH KUMAR

Winding up of a company means closing of the company by realising its assets, paying off creditors’ dues and distribution of the remaining assets to the Shareholders through a Liquidator as per the procedure prescribed under the Companies Act. Winding-up has been defined under Section 2(94A) of the Companies Act 2013 as “Winding up means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable”.

Prior to the implementation of the Insolvency and Bankruptcy Code 2016, all the winding-up proceedings were governed under the Companies Act. Due to introduction of the IBC 2016 winding-up cases are now dealt by both the said Code and the Companies Act. The Insolvency and Bankruptcy Code covers:

1. Voluntary liquidation in case of companies with no default

2. Winding-up by a Tribunal in case of inability to pay debt

Under the Companies Act, companies can wind-up in case of any reasons mentioned in Section 271 such as:

1. Companies by special resolution may decide to wind up their business through a Tribunal

2. Companies acting against the interests of the sovereignty and integrity of the Nation

3. If the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up.

4. Default in filing the financial statements or annual returns for five financial years consecutively

5. Tribunal on its own if it thinks it is just and equitable to wind up the company

NEW RULES FOR WINDING UP FOR CERTAIN SPECIFIED COMPANIESThe Ministry of Corporate Affairs has notified The Companies (Winding up) Rules, 2020, which will be effective from 1st April 2020. Rationale behind introducing these rules is to make the Winding up procedure simpler for smaller companies to shut down their business without the intervention of the tribunal.

APPLICABILITY OF THE NEW WINDING UP RULESThe rules prescribed under the Companies (Winding Up) Rules, 2020, will be applicable only to certain class of companies which are mentioned under Section 361 of the Companies Act, 2013, which provides Summary Procedure for Liquidation and Part V of the Companies (Winding Up) Rules, 2020, such as companies having book value of assets not exceeding Rs. 1 crore and certain class of companies as mentioned below:

1. Companies having outstanding loan not exceeding Rs. 50 lakh or

2. Companies having a turnover not exceeding Rs. 50 crore or

3. Companies with paid-up capital not exceeding Rs. 1 crore or

4. Companies who have taken deposit and its total outstanding deposits do not exceed Rs. 25 lakh

The above figures shall be based on the latest audited Balance Sheet of the company.

MAIN FEATURES OF THE NEW WINDING UP RULES

1. These specified companies as mentioned above are not required to apply to tribunal for winding up their company.

2. While complying with the procedure laid down

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in the rules the word Tribunal shall be read as Central Government.

3. The Rules have been divided into 6 parts con-sisting of 191 rules and 95 forms.

4. Central Government will appoint the Official Liquidator as the liquidator of the company in place of Tribunal.

5. The Company Liquidator shall maintain the registers and books of accounts as provided in rules 79 and 80.

6. The Official Liquidator will dispose the assets in the manner prescribed in rules 165 to 167 with the modification that wherever the word Tribunal is mentioned it shall be read as Central Government.

7. Creditors shall prove their claim in the manner as provided under rules 100 to 125, with the modification and directions by Central Government as mentioned in sub-rule (4).

CONCLUSIONUnder the new winding-up rules all the approvals will be given by the Central Government without the intervention of the tribunal, thus, resulting in speeding up of the liquidation process for the specified companies. Normally the liquidation through the Tribunal is time consuming. With these new rules smaller companies can opt to close their business through this procedure which will be cost-effective and time-bound procedure for them.

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CRITICAL STUDY ON DISCHARGE OF CORPORATE DEBTOR IN AN APPROVED RESOLUTION PLAN UNDER SECTION 32A OF INSOLVENCY & BANKRUPTCY CODE 2016

P. CHONBENTHUNG HUMTSOE

INTRODUCTION Even with the enactment and introduction of the Insolvency and Bankruptcy Code 2016, the country witnessed a huge cry of deficiency in achieving the objects of the code for maximum credits through resolution process of the non-performing assets. After analyzing various reports and addressing numerous cases, the Parliament amended the code by introducing new concept and provision protecting the corporate debtor that will boost the economy of India and promote ease of doing business. Thus, a new section 32A was brought into the Insolvency and Bankruptcy code which reads that the prior liability or the offence committed by the corporate debtor will be ceased and discharged once the resolution plan is approved by the adjudicating authority if there is change in the management and control of such corporate debtor and will not be prosecuted for such earlier offence of the corporate debtor.

Further, the section also provides that if prosecution of a corporate debtor has been initiated during the resolution plan it will stand discharged. However, every person who is a designated partner as defined in the Limited Partnership Act or an officer as defined in Clause 60 of Section 2 of the Companies Act 2013 who is in charge of the business of the corporate debtor and is directly or indirectly in the commission of such offence as per report or complaint filed by the investigating authority shall continue to be liable and prosecuted for such offence committed by the corporate debtor notwithstanding that the liability of the corporate debtor has ceased. So also it provides for protection of the assets of the corporate debtor in an approved plan.

NECESSITY AND FACTORS IN PROTECTING CORPORATE DEBTOR

It is a prodigious step taken by the Government which will enhance the revival of the stressed assets of corporate debtor as it will attract investments from successful bidders for the resolution plan before Adjudicating Authority and they face no further prosecution by taking over the corporate debtor from the prior clutches of such corporate debtor. A dire scenario substantiates the need of protecting the corporate debtor from its prior offence as even after taking over of a Corporate Debtor through a successful resolution plan, a successful bidder faces prosecution and liabilities before courts and tribunals for the prior acts of such corporate debtor.

Such grievance is relatable in Monnet Inspat & Energy that has been acquired under CIRP (Corporate Insolvency Resolution Process) jointly by AION and JSW, where certain claims used to arise even after a successful bidding. Further, from ongoing case of Bhushan Power Steel Ltd which is under insolvency resolution process, to be acquired by JSW for over Rs.19,700 crore, where the Enforcement Directorate attached assets of Bhushan Power Steel Ltd by alleging that an offence under the Prevention of Money Laundering Act has been committed. In the appeal case of Committee of Creditors versus Directorate Enforcement,1 the apex court stayed the ED attachment order while hearing the petition and the court asked ED to explain whether its money-laundering charges would trump the insolvency proceedings to be heard in forthcoming days.

RECENT OBSERVATIONS AND INTERPRETATION OF SECTION 32A BY THE APPELLATE TRIBUNALEmphasizing on the object of the very section, the Appellate Tribunal (NCLAT), vide its judgement dated 17.02.2020 covering 108 pages, made certain

1 Petition(s) for Special Leave to Appeal(c) no.29327-29328 of 2019

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observations and interpreted the provisions of the said section while adjudicating and addressing numerous appeals and petitions for the acquisition of Bhushan Power Steel Ltd by JSW Ltd 2being the Successful Bidder in the CIRP process.

In the very instant cases, the Appellate Tribunal in the light of Section 32A of IBC 2016 (ordinance which came into force on 28th December 2019) addressed the issues raised by Enforcement Directorate for attaching and releasing of the assets of the Corporate Debtor (Bhushan Power Steel Ltd) where the Appellate Tribunal by analyzing, observing the object of the enactment declared and held that the attachment of assets of the corporate debtor by the Enforcement Directorate as illegal and without Jurisdiction. Though various issues were addressed by the Appellate tribunal, a certain issues faced by the Appellate Tribunal are highlighted in this article.

First issue is regarding the retrospective or prospective effect/applicability of the section in the said case. Second notable issue is of any declaration to be made by the successful bidder to be in the scope of Section 32A for immunity after its acquisition of the Corporate Debtor.

Addressing the first issue raised by the Enforcement Directorate before the appellate Tribunal, the Appellate body in an appreciable manner at para no.43 and 45 in its judgement made clear that the immunity provided under Section 32A is to be applied retrospectively as the ordinance which inserted a provision of immunity of corporate debtor is clarificatory. The said paras are as below:

Para no. 43 reads “A plain reading of Section 32A(1) and (2) clearly suggests that the Directorate of Enforcement/ other investigating agencies do not have the powers to attach assets of a ‘Corporate Debtor’, once the ‘Resolution Plan stands approved and the criminal investigations against the ‘Corporate Debtor’ stands abated. Section 32A of the ‘I&B Code’ does not in any manner suggest that the benefit provided thereunder is only for such resolution plans which are yet to be approved. Further, there is no basis to make distinction between a resolution applicant whose plan has been approved post or prior to the promulgation of the Ordinance.3”

2 Company Appeal (AT) (Insolvency) No. 957 of 2019


Para no. 45 reads “The Union of India had unequivocally stated that after the completion of the ‘Corporate Insolvency Resolution Process’, there cannot be any threat of criminal proceedings against the ‘Corporate Debtor’, or attachment or confiscation of its assets by any investigating agency, after approval of the ‘Resolution Plan’. In any event, by virtue of Section 238 of the ‘I&B Code’, the ‘I&B Code’ has an overriding effect over anything inconsistent therewith in any other law. Accordingly, it is clear that subsequent promulgation of the Ordinance is merely a clarification in this respect. Therefore, it is ex facie evident that the Ordinance being clarificatory in nature, must be made applicable retrospectively4.”

While addressing the second issue raised by the Enforcement Directorate w.r.t availing of benefits of Section 32 A, a self-declaration to be made by the Successful Bidder of Corporate Insolvency Resolution Process, the appellate body had taken a broad view that in its judgement, it opined that there is no mandate stated in Section 32A to be declared or made by the Successful bidder of Corporate Resolution process which is to be only decided by the Competent Authority if such issue and allegation is being levelled. In this aspect, the applicable para is:

Para no. 20 of the judgement reads “Aforesaid stand taken by the Directorate of Enforcement cannot be accepted, in absence of any mandate under Section 32A that the ‘Successful Resolution Applicant’ after approval of the plan is required to give any such declaration as to whether the benefit of Section 32A will be applicable to them or not. Only the competent authority can decide such issue if any such allegation is levelled.”5

Therefore, the very intent of the section is to address the aforesaid grievance and problems that a successful bidder in resolution plan faces and also to secure the assets of corporate debtor that such assets should not become stressed with the delay of prosecution before courts. Thus, discharging of corporate debtor will be like a golden handshake favoring the successful bidder to the creditors of a corporate debtor. A supportive expression can be drawn and seen even from the Adjudicating Authority to the legislation of protecting the immunity of corporate debtor “You are going to kill the economy of the country... (You are) playing with fire,” the bench headed by NCLAT chairman Justice SJ




2 1

Mukhopadhyaya told the directorate. “No outsider will come and purchase (distressed companies)... IBC cannot be annulled in this manner. Money laundering is by an individual.6

By analyzing the issues addressed by the Appellate Tribunal, an express opinion can be drawn that the appellate body by preserving the non obstante clause of the said section tends to protect successful bidder in its acquisition process that will achieve the very object of the enactment. Further, adhering to the said enactment, the Appellate body expressed a favoring nature which will help in achieving the very objective of the Code. It is to be noted that even while protecting the successful bidder and the corporate debtor, the appellate body in its judgement wisely interpreted adhering to the said section that the proceedings against the promoters, officers and officials of the corporate by the CBI, SFIO and Enforcement Directorate cannot be interfered and intervened as mentioned in the said section.

CRITICAL DICHOTOMY Though, the section enshrined in the code provides immunity and protection of prior offence to the corporate debtor, it is vague. One needs to interpret broadly as the new section does not define under which law immunity and protection to the corporate debtor be discharged and of what kind of offences. Some critical outcomes can be elucidated herein.

Firstly, the very section opens with non obstante clause that critical question may arise whether a corporate debtor facing prosecution before a special court involving and investigating agency such as CBI, EOW, Enforcement Directorate will be immune under the very code by its non obstante Clause? Secondly, if the corporate debtor is to be discharge from its prior liability/offence then the real culprit will have washed off his hands from the offensive acts. Thirdly, by triggering the insertion of 32A to the Code, it will be dubious while ascertaining the assets whether such assets of the corporate debtor were obtained lawfully or through an act of white-collar crime. Fourthly, while

6 Saloni Shukla, Sachin dave ET Bureau dated 09 December 2019 IBC to be amended to protect new owners of bankrupt companies https://economictimes.indiatimes.com/industry/banking/finance/ibc-to-be-a m e n d e d - t o - p r o t e c t- n e w - o w n e r s - o f - b a n k r u p t- c o m p a n i e s /articleshow/72431790.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

reading the review and report of the Company Law committee report of November 2019, it revealed that the decriminalization of corporate debtor is for the procedural and technical offence enshrined in the very Act. However, after a month, the amendment was made and section 32A was inserted to the IBC giving a hope in redeveloping of business structure by acquiring the corporate Debtor through Resolution process. However, a negative viewpoint can be made that it may even lead to frivolous filing of resolution by a corporate debtor for discharging him of its prior offence. Further, without prejudice and appreciating the decisions of courts and authorities, the very section bears an ambiguity for its interpretation by a layman and even to an extent by the professionals that though the code has a vast and wide scope in the process of resolution, the adjudicating authority and the courts vary in passing verdicts decisions and observations. Such can be relatable from the case of Bank of Baroda vs. Rotomac Global (p) Ltd 7 where the NCLAT observed IBC (Insolvency Bankruptcy Code) and PMLA (Prevention of Money Laundering Act) exercise simultaneously. A similar aspect can be drawn and create doubts in mind when the apex court asked the Enforcement Directorate whether money laundering will triumph over IBC. The hon’ble Supreme Court in the case of Solidaire India Ltd. Vs. Fairgrowth Financial Services Pvt. Ltd.8 has held that where two statutes contain non-obstante clause, latest statute would prevail. A critical note to be seen while narrating and reading the Judgement of the Appellate Tribunal that has been passed recently which leaves a doubt in arriving to a satisfactory conclusion as the Appellate Tribunal leaves out to determine the discharging of the corporate Debtor due to pendency of appeals and petition before other courts. Hence, it is not clear whether the new section 32A will be applicable in the cases before special court where the corporate debtor is facing trials and criminal prosecution on the complaint lodge by CBI, EOW, Enforcement Directorate, though the reading of the very section has a retrospective effect as the Appellate Tribunal triggers a green signal in protecting the corporate debtor through its recent judgement.Keeping all the aforesaid assumption of doubts, the final interpretation now rests with the apex court for the applicability of section 32 A of the code to the


8 Solidaire India Ltd v. Fairgrowth Financial Services Pvt. Ltd., (2001) 3 SCC 71

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prosecution faced by the corporate debtor involving investigating agencies of government in discharging and ceasing the prior liability and offence of the corporate debtor being in the ambit of approved resolution plan before adjudicating authority.

CONCLUSIONThe concept of corporate liability emerges when the corporates are held liable for causing harm or injury to person, public in any form and act. However, this recent legislation seeks to protect the corporate debtors from prosecution which is a new trend adopted and enacted by the parliament. In this aspect, it is a changing era as the country aims to boost the economy by enabling investments in the stressed assets of a corporate debtor and removing obstacles faced by successful bidders in the resolution of a corporate debtor. Such a step will not only boost the economy but will also lead to encouragement of entrepreneurship in the country. To sum up, in the case of Assistant Commissioner vs. Velliappa Textiles Ltd9, the Supreme Court held that in any case a Corporation cannot be imprisoned, it can also be not prosecuted for the offence that is punished with imprisonment under Indian Penal Code (IPC), and this is very much appreciated while studying the protective enactment of the corporate debtor. Therefore, it is concluded that once this legislation is in practice, an ambiguity may arise in case of some private enterprises and parties.

***

9 MANU/SC/0721/2003 The Assistant Commissioner, Assessment-II, Bangalore and Ors. vs. Velliappa Textiles Ltd. and Ors. (16.09.2003 - SC) : MANU/SC/0721/2003


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PER SE RULE VIS-À-VIS RULE OF REASON: A COMPARATIVE STUDY OF COMPETITION LAWS OF INDIA AND THE U.S.

SATYAM PAL SINGH

INTRODUCTIONIt was in the year 1890 that the most famous Sherman Act 1890 came in existence. The effects of this law were that there was a ban on business arrangements that may lead to restraint in trade1, and followed by that it also prohibited the attempts to acquire monopoly2. This act was passed due to the ill practices of railway companies, which were exploiting their monopoly position which as a result had negative effects on the farmers, shippers and other traders. And many industries were conjointly having ‘trusts’ and were adopting measures to drive out the competitors out of the market. Therefore, Section 1 of the Sherman Act institutes that, any contract in the form of combinations or any trust or any otherwise, or any conspiracy, which may lead to restraint in trade …… is to be declared illegal3. And followed by Section 24, it made it as an offence if any attempts are made to acquire monopoly in market.

The competition law in India came into existence as result of Article 38 and 39 of the Constitution of India which inter alia, construes that the state might endeavour to advance the welfare of the public and ensuring effectively, as it might be, a social request in which the equity, social financial and political, should advise all foundations of national life and State should, specifically, direct its strategy towards securing:5

• That the possession and the control of material assets of the group are so dispersed as best to sub serve the benefit of all

• That the operation of the monetary framework does not bring about the grouping of riches and method for creation to regular disadvan-

tage.

1 Sherman Act,15 U.S.C. Section 1(1890)

2 Sherman Act, 15 U.S.C. Section 2 (1890)

3 Supra note 1.

4 Supra note 2.

5 D.P. Mittal, Competition Law and Practice, 9-10(2nd ed. 2008).

The main aspects of competition law are, first, the ‘rule of reason and second, is the ‘per se rule’. These rules originated from the US - the “The Sherman Act 1890, and the famous case of “Northern Pacific Railway Co. v United States and Others”6. In India the dimensions of ‘Rule of Reason’ and ‘Per se Rule’ can be found in the case of Neeraj Malhotra v. Deustche Post Bank Home Finance ltd. and others7also known as the payments loan case.

THE UNITED STATESAs mentioned earlier, the Sherman Act 1890, was the first anti-trust law in US. Section 1 of the Act declares all contracts, combination in the form of trust, conspiracy…. as unlawful. This section consists of two parts: a. “contract or the any combination or any conspiracy” b. “restraint of trade”. Some interpretations were attempted by the US Courts for the second requirement i.e. restraint of trade. In the case of the United States v. Trans-Missouri Freight Association8 the court held that if the act clearly specifies that all contracts… that are in restraint of trade will be illegal, then it does not preclude only that type of contract will there which is given, but carries ambit towards all contracts, no limitation or any exclusion can be permitted unless defined in the act.

After some years, the court channelled new dimension for section 1 in its decision in the case Standard Oil Co. v. United States9. This is one of the greatest celebrated case in view of antitrust case under Sherman Act. To be sure the name “antitrust” had been authored in light of trust, for example, Standard Oil. Setting the decided antitrust masters of the time against the money related premiums of John D. Rockefeller and other industrialists, the case denoted an end of antitrust’s immaturity in more courses than one. At the end of the case, a standout amongst the broadest trust to rise up out of the late nineteenth century turned into a loss of the twentieth, dismantled into its more than thirty constituent parts. More critically for current purposes,

6 356 U.S. 1(1958).

7 (2011) 106 SCL 62 (CCI).

8 166 U.S.290, 328 (1897)

9 221 U.S 1 (1911).

2 4


the court did recommend as such in the wake of inferring a reasonable alteration to the wordings of section 1of the Act. Presently composing for the court’s opinion of majority, Justice White actualized the approach he had initially laid out in his dissenting opinion in Trans Missouri10 - “the rule of reason”. In this manner, the court always played Judas on the plain significance approach of Trans-Missouri, underlining rather the connection between the Sherman Act, the English and American common law in consonance with restraint of trade as it remained in 1890.

Again, “rule of reason” was discussed and explained in the case of Chicago Board of Trade v. United States11. It lays down that, the legitimateness of an agreement can’t be dogged by a simple test, as to whether it limits rivalry/competition. Each agreement and regulation with respect to trade, restrains. To bind or to control, is their exceptional quintessence. The genuine test for legitimateness is whether the restrain forced i.e. it only directs and maybe along these lines, advances competition or regardless of whether it is, for example, may stifle or even demolish competition. To establish that question the court should usually consider the facts atypical to the business to which the restrain is adhered to; its condition previously, then after the fact the limitation was forced; the nature of the restriction and its impact, genuine or likely. The historical backdrop of the restraint, the insidiousness accepted to exist, the reason behind receiving the specific remedy, the purpose or end tried to be accomplished, are all relevant and applicable facts. This is not so that a good intent will shield an otherwise questionable regulation or the opposite of it, but also the mere knowledge of the intention may help in interpretation of facts and to predict consequences by the courts.

From the discussion above, some main points that determine the anti-competitive nature can summarised as:

1. Due to the activity of collaborators, what are the possible harms caused as result?

2. Is the object of their act or goal legitimate or not?

3. Are there any other legitimate means to achieve their intention, goal or objective?

10 Supra note 8.

11 246 U.S. 231, 238-39 (1918).

These three tests are comprehensive in nature, and in order to rectify these three tests, there is a need of detailed research and enquiry and also the determination of the reasonableness and what constitutes the unreasonableness would be of very broad context.

INDIAThe Supreme Court of India, opined the cases Mahindra and Mahindra v. Union of India12and TELCO v. Registrar of RT13 that the rule of reason is supposed to be functional in these case because the term “Restricted trade Practices” is very vast and is of non-inclusive nature. Further in case of Sodhi Transport Co. v. State of U.P14 it was held that ‘Shall be presumed’ is taken as an assumption and not as an evidence itself, yet just characteristic on whom onus of proof lies. Vertical agreements identifying with exercises alluded to under Section 3(4) of the Competition Act then again must be dissected as per the ‘rule of reason’ investigation under the Competition Act.

INDIACURRENT STATUS OF BOTH PER SE AND RULE OF REASON IN INDIA

Section 3 of the Competition Act, 2002, has been instituted with a specific end goal - to get the diverse sort of Agreements having anticompetitive nature and additionally the anti-trust nature. There are the two noteworthy categories of the agreement under Competition Act:

Horizontal Agreements15:

Horizontal Agreements will be arrangement/agreement between at least two endeavours/enterprises that are at a similar stage of the generation chain and, in a similar market16.The best illustration which can illustrate this kind of agreement are within two providers trading in similar items, in similar markets and both the items must be a substitute to each other. Being at a similar phase of the generation chain infers

12 (1979) 2 SCC 529.

13 (1977)2 SCC 55.

14 (1986)1 SCR 939.

15 Section 3(3) of The Competition Act, 2002, 12 of 2003; supra note. 17

16 Supra note 17,18


2 5

that the parties to the understanding/agreement are both (all) makers, or the retailers or the wholesalers. Under section 3(3) the accompanying agreements are dared as anti-competitive if:

• Agreements specifically or in a roundabout way decide buy or deal costs;

• Agreements on confinement or controls gen-eration, supply, markets, specialized improve-ment, venture or of administrations;

• Agreements on sharing the market or well-spring of creation or arrangement of admin-istrations by method for distribution of land territory of market, or sort of products or ad-ministrations, or number of clients in the show-case or some other comparative way;

• Agreements regarding directly or by implica-

tion decide buy or deal costs;

VERTICAL UNDERSTANDINGS17

Vertical agreements are agreements between endeavours/enterprises that are at various stages or levels of the manufacturing chain, and accordingly, in various markets. A case of this would be an agreement between a manufacturer and wholesaler. Vertical limitations on competition include18:

• Tie-in agreement

• Agreement for Exclusive supply

• Agreement for Exclusive circulation/distribu-tion

• Refusing to bargain

• Maintaining of resale price

Raghavan’s board of trustees’ report on competition law observes: On Horizontal Agreements: “Agreements are viewed as illicit just on the off chance that they result in irrational confinements on rivalry. In light of the U.S. law, this is tried on what is known as the “rule of reason” scrutiny. It is likewise required that the parties to the agreement

17 Id.

18 Id.; supra note. 5.

are occupied with opponent rivalry exercises. A potential opponent is one who could be fit for participating in the same sort of activity.”19

The board gave an illustrative rundown of understandings that must be liable to the “rule of reason”20:

• Agreements with regard to settling of procure-ment or offering costs;

• Agreements constraining amounts, markets, specialized advancement or speculation;

• Agreements with regards to domains/areas to be served and source of the supply;

• Agreements with regards to divergent treat-ment of equal exchanges amongst trading par-ties that place them off guard.

The accompanying sorts of horizontal agreements are frequently seen as anti-competitive21:

• Agreements with respect to settling costs. This would incorporate all agreements which spe-cifically or by implication settle the purchase or selling price.

• Agreements with respect to quantities. This in-corporates agreements meant for restricting or controlling generation/production and invest-ment.

• Agreements with respect to offers or bids (tricky offering). This incorporates tenders sub-

mitted as an after effect of any joint agreement.

In India, the agreements which are not competing are secured under section 3(3) of the Competition Act 2002. According to the substance of the Act this can be considered as the denounced agreement according to the “per se rule”. This is translated from the way that Section 3(3) covers understandings which are thought as anti-competitive in character. With regards to the agreements that are non-competitive, the assessment for the sensibility is of very significant nature and can’t be disregarded. The purchaser has an honest enthusiasm from the precedent-based law to shield the preferred gain due to such procurement.

19 Id.

20 Id.

21 Id.

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Subsequently, such an agreement ought not to be anti-competitive in nature; also, there must be legitimate test for sensibility. According to the Raghvan Committee report it can be expressed that the test for anti-competitiveness is according to per se determination. This appears to be clear from the substantial dependence by the Commission on the position in USA in reference to certain denounced showcase prohibitive agreements.22

There are many case laws in which it has been concluded that as such there is no provision of “per se rule” in India. The section 3(3) of the Act accommodates the provision of per se, yet the same can be disproved through Section19 (3) of the Act. This was held in the current instance of Neeraj Malhotra v Deustche Post Bank Home Fund Limited (Deustche Bank) and ors23, where the court plainly held that inspite of the fact that the per se rule is incorporated into the section 3(3) of the Act it is losing its hugeness with its elucidation with section 19(3) of the Act accordingly. Section 19(3) furnishes the indirect exemption to this rule24. Here the majority arrived at the conclusion that there was no infringement of section 3(3) of the act, in spite of the fact that there were two contradicting judges. The learned contradicting judge completely expressed that section 3(3) of the concerned Act sets out the rule of “per se”. He arrived at the conclusion that the assumption under section 3(3) can be rebuttable. As per se was scrutinized by the contradicting judge as the “per se” in essence disallows the respondents from demonstrating the pro-competitiveness of their activities. He additionally expressed that the “assumption” just moves the weight of verification against the litigants. The respondents can be released with this burden by taking asylum under section 19(3) of the act25. Thus, we can express that as for the per se norms like United States, India has likewise limited the utilization of as such rule to an exceptionally constrained degree and in this manner this is utilized by the court just in the issues like value fixings, cartels and so forth where there is no need of point by point examination and no compelling reason to check the sensibility as the act in itself is invalid and can’t be advocated at any cost. With regards to “Rule of reason”, we can see that with the choices of the court, “Rule of

22 Ibid.

23 Supra note 7.

24 Id.

25 Id.

reason” has secured far and has been broadly utilized by the courts. The “Rule of reason” has been gradually supplanting the essentially control or we can state that it has constrained the extent of “per se rule” to just a very few regions.

***


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EUTHANSIA: A PERSPECTIVESAHIL SOOD

INTRODUCTIONThe term euthanasia may have been derived from a Greek word which means “good death” but in 21st century it is well known as “mercy killing”. Euthanasia is defined as administration of a lethal dose of sedative or drugs to a patient by the physician or any other person for the purpose of relieving the patient’s intolerable and incurable suffering.1 There are two types of euthanasia - passive euthanasia and active euthanasia. Active euthanasia is defined as taking an immediate action such as using lethal injection to painlessly put a terminally-ill patient to death.

Death is inevitable and whoever has taken birth will die ultimately. If a person is suffering from a disease which is incurable, painful and chronic then the patient must have the option to choose a pain free dignified way to death. However, Article 21, which guarantees right to life to all its citizens cannot be interpreted as having the right to die. But the people who know that their life is nearly over and whatever time they have left will befull of pain and distress and they cannot enjoy their right to life in the truest sense, under such exceptional circumstances, patient should be allowed to choose his/her own fate.

HISTORICALBACKGROUNDOFEUTHANASIAAND PHYSICIAN ASSISTED SUICIDE.In ancient Greece and Rome (5th Century B.C.-1st Century B.C.), before the coming of Christianity, attitudes toward infanticide, active euthanasia, and suicide tended to be tolerant. Many ancient Greeks and Romans had no cogently defined belief in the inherent value of individual human life, and pagan physicians likely performed frequent abortions as well as both voluntary and involuntary mercy killings. Although the Hippocratic Oath prohibited doctors from giving ‘a deadly drug to anybody, not even if asked for,’ or from suggesting such a course of action, only a few ancient Greek or Roman physicians followed the oath faithfully. Throughout classical antiquity, there was widespread

1 Future of assisted suicide and euthanasia, Neil. M Goursuch, Oxford University Press,2003

support for voluntary death as opposed to prolonged agony, and physicians complied by often giving their patients the poisons they requested.

Since ancient times, Jewish and Christian thinkers have opposed suicide as inconsistent with the human good and with responsibilities to God. In the 13th century, Thomas Aquinas supported Catholic teaching about suicide in arguments that would shape Christian thought about suicide for centuries. Aquinas condemned suicide as wrong because it contravenes one’s duty to oneself and the natural inclination of self-perpetuation and since it injures other people and the community of which the individual is a part and because it violates God’s authority over life, which is God’s gift. This position exemplified attitudes about suicide that prevailed from the Middle Ages through the Renaissance and Reformation.

BEGINNINGS OF RECOGNITION OF EUTHANASIA AS AN OPTION.In the mid-1800s, the use of morphine to treat “the pains of death” emerged, with John Warren recommending its use in 1848. A similar use of chloroform was revealed by Joseph Bullar in 1866. However, in neither case was it recommended that the use should be to hasten death.

“That in all cases of hopeless and painful illness, it should be the recognized duty of the medical attendant, whenever so desired by the patient, to administer chloroform or such other anesthetic as may by-and-bye supersede chloroform – so as to destroy consciousness at once, and put the sufferer to a quick and painless death; all needful precautions being adopted to prevent any possible abuse of such duty; and means being taken to establish, beyond the possibility of doubt or question, that the remedy was applied at the express wish of the patient.” —Samuel Williams (1872), Euthanasia Williams and Northgate: London2

2 Emanuel, Ezekiel; The history of euthanasia debates in the United States and Britain

2 8


PERSPECTIVES IN DIFFERENT COUNTRIESThe Netherlands - In the Netherlands, euthanasia and physician-assisted suicide have been practiced with increasing openness, although technically they remain illegal. In 1995–1996 a new procedure for reporting cases of euthanasia and physician-assisted suicide was introduced. Probably as a result, the number of reported cases of euthanasia increased, from 486 in 1990 to 1466 in 1995. The purpose of the 1995 study was to make reliable estimates of the incidences of euthanasia and other medical practices pertaining to the end of life to describe the patients, physicians, and circumstances involved; and to evaluate changes in these practices between 1990 and 1995.The study attracted a great deal of attention, partly because it gave the first complete overview of medical decisions concerning the end of life in a single country.

Belgium - In 2002, Belgium became the second country in the world after Netherlands, to legalize euthanasia. Over the next decade the country became a living laboratory for radical social change.3 Belgium’s euthanasia doctors even believe they are being humane because they are liberating people from their misery. Fundamentalist humanists go further and describe euthanasia as the ultimate act of self-determination. The opinion of the patient’s family has no weight whatsoever. A doctor is entitled to give the mother of a family a lethal injection without offering any explanation to her children. Euthanasia is being promoted as a “beautiful” and positive way to die. Doctors are transplanting organs from patients who die in the operation.

PHYSICIAN ASSISTED SUICIDE AND BEHAVIORAL SCIENCEProponents of legalizing of physician assisted suicide argue that the practice is ethically justifiable because it can alleviate prolonged physical and emotional sufferings associated with debilitating terminal illness. Opponents claim that legally sanctioned lethal prescriptions might destroy any remaining desire to continue living - a sign of society having given upon the patients. Ultimately arguments rest on differing opinions regarding the effect of this policy on the patients’ wellbeing. The challenge, then, is to determine how legalization of physician assisted suicide would

3 Euthanasia: A reference handbook; Jennifer FecioMcdougal, Martha Gorman.

affect the wellbeing of terminally ill patients and their medical decision making.

Looking at the question from an expected utility perspective suggests that given the option to terminate their own life, terminal patients will decide how long they want to live by comparing the value they expect to gain from rest of their lives to the expected intensity of their suffering. At the point where future utility is expected to be negative and so intolerable that living any longer is not worth the cost - the patient would choose to end life if the option was so available.

The critical point from this perspective is that patients choose the amount of time they are willing to continue living with their illness, which will depend on how quickly they deteriorate. If the rate of deterioration is slower than expected, then patients should delay terminating their lives; if the rate of deterioration is faster than expected, patients desire to end their lives quicker. But now let us say that patients have been prescribed lethal medication and have the option of ending their lives at any point of their choosing. Being given the option to determine the time of our own death can transform patients from powerless victims of their illness to willing survivors of it. Together, the importance of feeling in control and the ability to reduce (but not eliminate) uncertainty about rate of deterioration adds an interesting new dimension to the underlying ethical debate and seems to provide credence to the benefits of legalized physician-assisted suicide.

Some form of euthanasia is legal in Belgium, Luxembourg, The Netherland, Switzerland and the US’s state of Oregon and Washington. It seems that the legislators started responding to the needs of terminally ill patients. Importantly, the legalized use of voluntary euthanasia in this jurisdiction is not out of control as has been claimed by those opposing voluntary euthanasia. Interestingly, but not surprisingly, the rate of euthanasia in the Netherlands has decreased rather than increased because inter alia, people are aware that a voluntary euthanasia, and suicide by premature access of more drastic and less dignified options, is not required.


2 9

ECONOMIC ARGUMENTThe reading speech for the euthanasia laws act by Kevin Andrews (MP) referred to economic pressure on terminally ill patients, but not in a way that reflects a tight monetary situation. Is it preferable to pay $5000 to $6000 on average for a person in the terminal stages of their life even if they want to die, rather than spending this on, say a younger person who is badly injured and wants to live.

In India, 87% of the health sector expenditure comes from the private sector funding and private healthcare facilities are expensive and not everyone can afford it. This definitely puts financial pressure on the family of the patient.4

THE HUMAN FACTORThese people must be treated in a humane and compassionate way. But for some people drugs do not provide a good quality of life, and they may suffer from continuous pain, discomfort or loss of dignity. Therefore, some people would like to choose the option of euthanasia rather than taking medicines for lifetime.

To deny terminally ill patients the right to euthanasia is to condemn them to a miserable existence, against their wishes and best interests. It is difficult to establish any difference in moral character between someone, who denies a legitimate request for voluntary euthanasia, and who subsequently watches that person die a slow and a painful death like someone watching a cancer –ridden pet writhe in agony without putting it down. Most people - around 80 per cent - would argue that if you are terminally ill, are of sound, mind not clinically depressed, and choose euthanasia, then it is morally right.

For acts like voluntary euthanasia that affect directly on an individual, and only an individual, the moral and humane thing to do is what is right for that individual. Voluntary euthanasia is moral and humane because it is what the individual wants, and the gist of above analogies is that not providing the option of voluntary euthanasia in the above situations is inhumane and callous. In our society the prevention of suffering and dignity of the individual should be the uppermost on the minds of those caring for the terminally ill. When

4 WHO report,2008

quality of life is more important than quantity, voluntary euthanasia is good option.

***

3 0


JURISDICTION UNDER INCOME TAX JUHI CHANDEL & SANDESH KUMAR P

Jurisdiction means legal authority over a certain area or certain persons. Generally, it is an authority given to a department/legal body to deal with and make pronouncements on legal matters. It can also be defined as the limit of a judicial authority or legally constituted body to the extent to which they can exercise authority over suits, cases, appeals etc.

Jurisdiction was introduced mainly with the reason that department/legal body can try, adjudicate and investigate matters which fall within the geographical boundaries of its authority.

JURISDICTION OF ASSESSING OFFICERSSection 124 of the Income-tax Act, 1961, states the jurisdiction of the Assessing Officer.

The Assessing Officer shall have jurisdiction over any area in which he shall have jurisdiction

(a) In respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situated within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situated within the area, and

(b) In respect of any other person residing within the area.

Any question regarding jurisdiction to assess any other person, shall be decided by the Principal Director General or Director General or the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner.

Further, in case of question relating to areas within the jurisdiction of different Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners, it shall be decided by the Principal

Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners concerned, or if they are not in agreement, by the Board or by such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify.

QUESTIONING THE JURISDICTION OF AN ASSESSING OFFICER No person can question the jurisdiction of the Assessing Officer in case:

1. Where he has made a return under sub-section (1) of section 115WD or under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 115WE or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier;

2. Where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier;

3. Where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier.


3 1

CIRCUMSTANCES UNDER WHICH AN INCOME TAX FILE CAN BE TRANSFERREDIncome tax file can be transferred in two ways:

1. By the Assessee

2. By the Department

BY THE ASSESSEE An assessee can file an application to transfer his Income Tax File from one Assessing Officer (AO) to another. Normally, such situation arises when an assessee shifts from one place to another due to which, jurisdiction of an assessing officer is transferred.

BY THE DEPARTMENTA file can be transferred from one Assessing Officer (AO) to another by the Tax Department/Authority itself.Section 124 of the Income-tax Act, 1961, gives the power to the Department to transfer the cases. The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner have the power to transfer any case from one Assessing Officer subordinate to him to any other Assessing Officer or Assessing Officer subordinate to him, after giving the assessee a reasonable opportunity of being heard in the matter

OPPORTUNITY OF BEING HEARD There is no requirement to give opportunity of being heard to assessee in case where the transfer is between Assessing Officers whose offices are situated in the same city, locality or place.

INSTANCES WHEN DEPARTMENT CAN TRANSFER THE FILE1. In case of search, usually on administrative

directions all files of a group are transferred to one assessing officer. For this purpose normally files are being transferred to Central Circle.

2. If Total Income of an assessee increases, then file can be transferred to Addl. Commissioner of Income Tax or Asst. Commissioner of Income Tax or if Income decreases then it can be sent

back to current assessing officer. Generally these transfers are made on administrative directions.

***

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ALIBI - A CONUNDRUM BETWEEN PROSECUTION AND ACCUSEDSURBHI KOHLI

INTRODUCTIONAlibi is a maxim which means at another place. The word “alibi” comes from Latin and its literal translation means “elsewhere”. The Black’s Law Dictionary (8th ed. 2004) defines Alibi as “A defense based on the physical impossibility of a defendant’s guilt by placing the defendant in a location other than the scene of the crime at the relevant time. The fact or state of having been elsewhere when an offense was committed.” Alibi, therefore, is a defense which can be taken by the accused in the criminal proceedings by taking the plea that when the offence was committed, the accused was not present at that place.

“Alibi” itself is not defined in the Indian Penal Code, 1860 (hereinafter referred to as “IPC”) or the Evidence Act, 1872 (hereinafter referred to as “Evidence Act”). However, it falls within the scheme of Section 11 of the Evidence Act. As per Section 11, there are certain facts which otherwise not relevant become relevant.1 Under the scheme of Section 11 of the IPC, the fact that the accused was not present/near to the place where crime was committed is a relevant fact. The same is the essence of Illustration (a) of Section 11, which reads “The question is, whether A committed a crime at Calcutta on a certain day. The fact that, on that day, A was at Lahore is relevant.”2 It is pertinent to note therefore that “alibi” cannot be referred to as an exception (special or general) contemplated in the IPC or any other law.3 It is only a rule of evidence mentioned in Section 11 of the Evidence Act stating that the facts which are inconsistent with the fact in issue are relevant4.

There are few essentials which are required to be present to raise the plea of alibi. In order to raise the plea of alibi, accused should make sure that he wasn’t there at the place of crime when the crime was committed. It should always be kept in mind that it can only be the accused who can raise the plea of alibi. No

1 Section 11 of Indian Evidence Act, 1872

2 ibid

3 Binay Kumar Singh v. State of Bihar MANU/SC/0088/1997 : (1997) 1 SCC 283

4 ibid

other person, besides the accused can raise the plea of alibi which should be raised at the earliest possible opportunity.

EARLIEST POSSIBLE OPPORTUNITYThe plea of alibi cannot be treated like a plea of self-defense. It is supposed to be taken at the earliest possible opportunity/first instance which can either be at the stage of framing of charge or at the preliminary hearing but not later than the stage of defense evidence5. Plea of alibi raised by the accused will have a great credence if it is raised at the correct time - at the earliest possible opportunity.

BURDEN OF PROOFAt the outset the prosecution will have to prove that the accused was present at the site of crime and his involvement was there in the crime. After the burden is discharged by the prosecution, it is up to the accused to prove his innocence, which can be through the plea of alibi. Once the accused takes the plea of alibi, as per the Evidence Act, burden of proof is on the accused to establish that he was at some other location and not at the site where the crime was committed.6 The accused, while taking the plea of alibi has to take care of the fact that the defense of alibi taken by him/her is proved with certainty in order to totally exclude the possibility of his presence at the place of occurrence of crime.7 In Nirmal Singh and Ors. vs. State of Haryana8, it was held that “The plea of alibi is a double-edged weapon. In case the accused fails to prove the plea of alibi, his presence at the spot cannot be ruled out”. But this doesn’t mean that if the accused fails to prove his plea of alibi then such failure would result in the success of the case of the prosecution as the prosecution will have to prove his case independently beyond

5 Lakhan Singh @ Pappu Vs. The state of NCT of Delhi, Delhi HC Crl Appeal No. 166/1999

6 Section 103 of Indian Evidence Act; Satya Vir vs. State (1958) AIR 746 (All)

7 Shaikh Sattar v. State of Maharashtra MANU/SC/0649/2010 : (2010) 8 SCC 430

8 11.04.2019 - PHHC) : MANU/PH/0340/2019


3 3

reasonable doubt.9 If the accused succeeds in proving his plea of alibi beyond certainty, he will be acquitted.

RAISING OF A FALSE PLEA OF ALIBI BY THE ACCUSEDMany times, it is observed that the accused raises a false plea of alibi as a defense in the criminal proceedings against him which can lead to a change in the whole case. Giving a false evidence for alibi leads to a suspicious act of the accused and the court will be more cautious in the trial of the case. When a false plea of alibi is raised, it affects the process of investigation as well.

In Sahabuddin and Ors. vs. State of Assam10, it was held by the Hon’ble Supreme Court of India that “Once, the Court disbelieves the plea of alibi and the accused does not give any explanation in his statement Under Section 313 Code of Criminal Procedure, the court is entitled to draw adverse inference against the accused”.

CONCLUSIONTo sum up, it can be reiterated that merely because the plea of alibi has been taken by the accused, the same in no way reduces the possibility of the accused having committed the crime or dispenses with the burden of proof on the accused to prove his alibi. The accused must prove his plea of alibi beyond any reasonable doubt and with strong evidence in support. Only then it will be accepted by the court in a criminal trial. Needless to say, that the prosecution will have to independently prove that the accused has committed the offence because as per the law in India, an accused is generally “presumed innocent until proved guilty”. Thus, it is not necessary for the accused to raise the plea of alibi until and unless the prosecution has discharged his burden of proving the accused guilty. If the prosecution has failed to prove the guilt of the accused beyond reasonable doubt, then it will not be important for the accused to prove his defense of the plea of alibi. But if the prosecution has discharged his burden then it is important for the accused to prove his plea of alibi for proving the fact that he wasn’t present at the place where the crime was committed. Ultimately, it will be on the court to measure who has more

9 ibid

10 MANU/SC/1097/2012 : (2012)13SCC213

weightage - the prosecution side in proving the guilt or the defense side in proving the innocence of the accused. There is always more burden on the accused to prove his innocence through the defense raised by him 11. If the accused succeeds in proving only a part of his defense, court will shift its inclination in favor of the accused.

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11

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WHAT IS PAROLE?DECODING THE PRIVILEGE

MEANING OF PAROLEParole is the release of a prisoner, either temporarily for a special purpose or completely before the expiry of a sentence, on the promise of good behavior; such a promise is known as a word of honour provided in the parole order. The word parole is derived from the French ’je donne ma parole ‘I give my word.’ i.e. the word of honour. This word was used by the prisoners of war for their release by giving promise to the captor.

Therefore, in simple words, Parole is the pre-mature conditional temporary release of a prisoner on the terms of abiding by the conditions along with the observance of certain restrictions to avail the privilege of returning back to the society and socialize with family and friends keeping in mind correctional theory and preparing to return back to his social life. It is mere suspension of the sentence for time-being keeping the quantum of sentence intact. If the paroled prisoners violate the conditions on which they are released, they may be returned back to the prison.

HISTORY OF PAROLEThe idea of parole was introduced in 1840 by Alexander Maconochie, a Scottish geographer and captain in the royal navy.. He was appointed as Superintendent of British penal colonies. Instead of necessitating the prisoners to serve their sentence hopelessly until full sentence had been served, he aimed to punish the prisoners for the deed committed and to train them for the future. He developed a plan and divided it into 3 grade system. The first and second grade group was mainly for the promotions earned through good behavior, study and labor. The third grade consisted of obtaining conditional liberty outside the prison while obeying rules. On violation of such rules, the prisoner would return back to prison and would start all over again the rank of three-grade process. The ticket to the ‘leave system’ was reformed and this led to what many consider as world’s first parole system. The prisoners who were served indeterminate sentences i.e. open ended sentences could now be released if they show evidences of reforming and rehabilitation. Through participation in the grade system which was based on

the unit of marks, ensured they earned marks for their good behavior and lost marks on their bad behavior and could spend them on passage to higher classification statuses ultimately conveying freedom.

This thought was based on the ideology that a sentence should not be a mere arbitrary sentence but a source for reformation and the greed to return back to the society. Francis Lieber’s thoughts on parole later re-appeared in the Hague Convention, Declaration of Brussels of 1874 and the Geneva Convention relative to the treatment of prisoners of war. In 1847, parole was first coined in a correctional context by Samvel G. Howe, a Boston penal reformer.

OBJECTIVESParole leaves are progressive measures of correctional services. The main objectives to release the prisoners on leave as per rule 1(A) and 19 of The Prisons (Bombay Furlough and Parole) Rules, 1959, are as follows:

1. To enable the prisoner to maintain continuity with his family life and deal with family matters.

2. To save the prisoner from evil effects of continuous prison life.

3. To enable the prisoner to maintain and develop his self-confidence.

4. To enable the prisoner to develop constructive hope and active interest in life.

PAROLE IS NOT COVERED BY SECTION 432 OF CRIMINAL PROCEDURE CODE, 1973Section 432 of Cr.P.C deals with Power to Suspend or Remit Sentences. However, Supreme Court, in Sunil Fulchand Shah v. Union of India, reported in AIR 2000 SC 1023, has categorically observed that “parole does not amount to suspension of sentence’’. From this it becomes clear that parole cannot be covered by Section 432 of Criminal Procedure Code.


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The grant of parole is governed by rules made under Prison Act, 1894 and Prison Act, 1900. Many State governments have also formulated guidelines to bring out objectivity and facilitate decision-making to determine whether parole needs to be granted in a particular case or not. Such decisions are taken in accordance with guidelines framed from time to time. The Prisons (Bombay Furlough and Parole) Rules, 1959, have been enacted by exercising rule making power under section 59(5) of the Prisons Act, 1984.

Furlough is for breaking the monotony of imprisonment and is granted as a good conduct remission. Furlough is a brief release from the prison, it is conditional and is given in case of a long-term imprisonment. The period of sentence spent on furlough by the prisoners need not be undergone by the prisoner as is done in parole. Following are the different types of Parole:

a) Regular Parole

All prisoners eligible for furlough shall be eligible for regular parole for the following stated reasons:

1. Delivery of child by wife (except high security risk prisoners)

2. Serious illness of father/mother/spouse/son/daughter

3. In case of natural calamities such as flood, house collapse, earthquake, fire etc.

4. To pursue the filing of special leave petition before supreme court against a judgment delivered by High Court convicting or upholding the conviction, as the case may be.

b) Emergency Parole or Custody parole

All convicted persons except foreigners and those serving death sentence may be eligible for emergency parole for 14 days for reasons like death of grandfather or grandmother/ father/mother/spouse/son/daughter/ brother/sister and marriage of son/daughter/ brother/sister, provided that no extension can be granted to emergency parole. Emergency parole is granted by Superintendent of police for the reasons of death of parental grandfather or grandmother/ father/ mother/spouse/son/ daughter/brother/ sister and by concerned Dy. I.G. for the reason

of marriage of son/daughter/brother/ sister and the authority approving emergency parole shall decide whether to grant parole under police escort or with a condition to report daily to the local police station depending upon the crime committed by the prisoner and his conduct during his stay. The expenses of police escort will be borne by the prisoner himself prior to his release on parole.

A prisoner shall not be released on regular or emergency parole for a period of one year after the expiry of his last emergency or regular parole except in case of death of his nearest relatives mentioned above.

RELEVANT CASE LAWS IN RECENT TIMESThe Hon’ble Delhi High Court, in the case between Election Commission of India vs. Mukhtar Ansari (MANU/DE/0487/2017), held that custody parole cannot be a substitute for grant of bail and cannot be extended for long periods or for daily visits. The Hon’ble Supreme Court in the case of Asfaq. vs. State of Rajasthan & Ors reported in (2017) 15 S.C.C. 55, assumes significance because the said judgment specifically pertains to grant or rejection of parole. “Rejection of parole leave shall not be maintainable if it is denying prison justice”, is the ratio decidendi given in Gujrat High Court Judgment Vasram Gagji vs. State of Gujarat and Ors. dated 29.06.1992 (MANU/GJ/0258/1992)

Recently, Dr Jalees Ansari who is also called as Dr. Bomb as he has been convicted in the Ajmeer blasts, Jaipur serial blast and Malegaon blast case and accused of plotting and executing over 50 bombs blasts across the country since early 90s and was presently serving life sentence was released on parole by Supreme Court order on 28.12.2019. He was found missing on 16.01.2020 when he was supposed to report next day. Delhi High Court had granted 18 days parole to Manu Sharma, who is undergoing life term for killing model Jessica Lall in 1999, to pursue his LLB course and get his marriage registered. Actor Sanjay Dutt was granted over five months of Parole and furlough for various reasons in his five year jail term due to involvement in 1993 Mumbai blasts case.

Allahabad High Court recently granted parole for two days to Mr. Atul Rai who won last year’s Lok Sabha election from Ghosi parliamentary constituency in Mau, Uttar Pradesh for taking oath as Member of Parliament in New Delhi.

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CONCLUSIONThe provisions of parole are not well-known by the common man and often considered to be quite cumbersome. Awareness was possible after media highlighted about the grant of parole in high profile cases. The Rules of the Central government framed in 1955 are the skeleton and there is undoubtedly an affirmative need for updating these rules and thereby enunciating comprehensive provisions so as to provide suitable guidelines to those who have to consider applications for grant of parole. Grant of parole enables inmates an opportunity to maintain their social relations and ties to facilitate bouncing back into the society on their service of sentence. Parole had often been integral part of English and American system. Sir Alexander Paterson had said in 1930 that no human being can stand prison life for more than 10 years. If the goal of imprisonment is reformation, on which he further said that there should not be a second opinion, there should be no hesitation on the part of the legislature to effect it. Parole is claimed to be a success in rehabilitation and checking the attitude of the convict during the parole. It acts like an executive action after the door has been shut on the convict. However, not all people are equal and there are exceptional cases where there has been misuse of the parole granted and convicts have fled away thereby, abusing the privilege granted. Having said that, it should also not take away an opportunity from the convicts who can emerge as a successful person with the help of parole as measure of penal reform. It is rightly said that criminality is the expression of a `symptom’ of certain disorder in the offenders and they can be easily diagnosed and correct treatment administered to them. Knowing the fact that parole is not a right but a privilege upon the good behavior observed, allowing them to reinstate in the social environment and giving a fair opportunity to rehabilitate is what can bring the change in them and in the society instead of merely overcrowding the prisons.

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ROLE OF SPECIAL CLAUSES IN CONSUMER LAWRISHAB KHARE

INTRODUCTIONExemption Clauses are the contractual terms that limit, alter, change or oust the liability that generally flows from the contractual relationships. Thus, the contracting parties seek to exercise maximum control and contain the risks involved through exemption clauses.1

A common example of exemption clause shall be: “The Vendor shall not be under any liability to the Purchaser for any defects in the goods or for any damage, loss, death or injury (other than death or personal injury caused by the negligence of the Vendor) resulting from such defects or from any work done in connection therewith.”2

Special contracts are those contracts which set up well-defined and distinguishable rights and liabilities of the contracting parties.

One of the key features of the latest economic regulation in various countries has been the adoption of effective legislation of consumer protection. The consumer in India is not educated and not organized like the ones in the West. This has been one of the contributing reasons for the continuation of exploitation of consumer class to go unchecked in India.

The preamble of the Consumer Protection Act, 1986, highlights the legislative intent behind the act which reads as, “an Act to provide for better protection of the interest of consumers and for that purpose, to make provision for establishment of consumer councils and other authorities for the settlement of consumer disputes and for matters connected therewith.”

The massive shift towards the focus on protecting the consumer interests in recent times has been attributed to the growth of the phenomenon of consumerism.

1 Mckendrick Contract Law: Text, Cases and Materials (2008) 101

2 This clause was found in the English case of British Fermentation Products Ltd v Compare Reavell Ltd

1999 BLR 352; Mckendrick 437.

This is turn led to the advent of effective consumer law legislations across various jurisdictions.

“Consumerism is a social as well as an economic order which encourages the buying of goods and services in ever-greater amounts. This term is sometimes associated with critics of consumption beginning with Thorstein Veblen. Veblen’s topic of examination, the newly emerging middle class coming up at the threshold of the twentieth century, is coming to full fruition by twentieth century end through the globalization process.”

INDEMNITY CLAUSE AND CONSUMER LAWIndemnity has been adequately defined under the Indian Contract Act, 1872. Indemnity Clauses are contractual transfer of risk between two contracting parties to mitigate the losses or limit the liability of one or both the contracting parties. Indemnity clauses are the clauses that are incorporated in the contract with the intent to limit the liability of the supplier wherever the supplier may cause damage directly or indirectly.

In earlier welfare jurisdictions, special legislations such as Consumer Protection Act, 1986, did not exist. The dynamics of the market were governed by the principle of “caveat emptor” i.e let the buyer beware. Despite there being ample safeguards in legislations like Indian Contract Act, 1872, and Sale of Goods Act, 1930, consumer interests were always jeopardized.

It has to be borne in mind that the indemnity clause though legally permissible has to surpass the test of reasonability and fairness, in order to sustain judicial scrutiny. The Consumer Law though has not ousted the legality of indemnity clauses, but it goes a long way in regulating and controlling the enforceability of indemnity clauses in the contracts entered between the parties. Such clauses shall withstand the test of law only if they meet the statutory requirements as incorporated under the Consumer Protection Act. The consumer law has precluded the supplier from claiming indemnity clause as a defense if the loss has arisen during the course of the contract due to the gross negligence attributable to the supplier.

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CONTRACT OF GUARANTEE AND CONSUMER LAWIn contract, Guarantee is an undertaking that stipulates that an innocent party shall be compensated on account of loss suffered by it if certain terms of the contract are breached.

These are the guarantees that are a basic ingredient of the contract and inalienable. Parties cannot curtail these implied guarantees by contract or otherwise.

The essentials of guarantee are:

1. There are generally three parties i.e. principal debtor, creditor and surety.

2. Promise by the surety to compensate on event of default committed by the Principal Debtor.

3. There should be a valid consideration

4. The liability of the Principal Debtor is primary and that of the Surety is secondary.

5. There should be a valid contract entered between the parties.

In India, the Contract of Guarantee is governed by Section 126-147 of the Indian Contract Act, 1872.

Thus, in case of breach of a contract of guarantee, the consumer has remedy to seek damages under the Consumer law against the supplier. However, there would still be a set of defense that shall be available in favor of the supplier. For example, if such damage has occurred for reasons beyond the control of the supplier or loss occurring for a reason that was not reasonably foreseeable by the supplier.

CONTRACT OF PLEDGE AND CONSUMER LAWPledge is a form of security that acts as an assurance of a parties’ performance under the contract. As a general rule, pledges are used as a security in transactions involving loans or pawning of property in lieu of money or as a guarantee that the work in question shall be performed.

“Pledge is a delivery of goods, or the documents of title to goods, by a debtor to his creditors as security for a debt, or for any other obligation. It is understood that

the subject of the pledge will be returned to the pledgor when the debt has been paid or the obligation fulfilled.”3

“A pledge or pawn is a delivery of chattels or choses in action by a debtor to his creditor as security for his debt or any other obligation. Whilst possession of the thing passes to the pledgee, the property in the thing (i.e. the legal ownership) remains with the pledger.”4

The Contract of Pledge is governed by Section 172-181 of the Indian Contract Act, 1872.

Both Pawnor as well as the Pawnee have sufficient rights available to them under the contract of pledge.

The rights available to the Pawnee under the Consumer Law are:

1. Right of claiming Retainer

2. Right of claiming particular lien

3. Right to claim extraordinary expenses.

4. Right to bring to an end the contract of pledge on account of any default committed by the Pawnor

The rights available to the Pawnor under the Consumer Law include:

1. Right of Redemption

2. Right to reclaim the goods

CONTRACT OF BAILMENT AND CONSUMER LAWBailment is an arrangement between the parties whereby the possession of goods is transferred temporarily from one person to the other. The arrangement of bailment is statutorily defined under Section 48 of the Indian Contract Act, 1872.

The Contract of Bailment has three essential features:

1. There should be delivery of goods from one person to the other.

3 Dictionary of Banking by F.E. Perry & G.Klein, 3rd Edn, 1988, p.240

4 Thomson’s Dictionary of Banking by F.R. Ryder & D.B.Jenkins, 12th Edn, 1974, p.462


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2. The goods have been delivered for some purpose or consideration

3. The goods have been delivered with a condition that once the reason for which they have been bailed is achieved, they shall be dealt with in a way that was agreed between the parties.

The Bailee has several rights with him in under the Consumer Law to seek appropriate remedies. Such remedies of the Bailee includes:

1. Right to interplead if the goods are claimed by some other person

2. If the Bailee is wrongfully denied by some third person to use such goods, the Bailee shall assume the position of the Bailor as far as his rights against that person are concerned.

3. Right to claim particular lien

4. Right to claim general lien

5. Right to claim compensation in case the goods are faulty

6. Right to claim necessary expenses

Whereas, the Bailor shall have the following rights available to him:

1. Right to terminate the contract of bailment. The Bailor can terminate the contract of bailment if the Bailee does or omits to do anything which is inconsistent to the contract of bailment entered between the parties.

2. Right to demand the return of goods.

CONCLUSION & SUGGESTIONSThe idea of effective consumer law is linked with an idea of having an effective and well informed pool of consumers. The idea of having effective laws to promote consumer interests are closely linked with an idea of having an organized group of consumers who are given statutory support to file consumer complaints.

The Consumer Protection Act, 1986, implies the guidelines which the United Nations has suggested for

incorporation to ensure best consumer protection. It is an undeniable fact that many consumer movements are already working in the country and spreading fast countrywide. However, it is still in its primitive stage due to such consumer movements often failing to achieve the desired success. They are usually confined to certain areas or to low consumer awareness levels. It is crucial to develop awareness campaigns in the entire country through imparting proper education to consumers to understand the precise legal framework pertaining to their rights and responsibilities as consumers. It is a draconian task to educate a mass of more than 130 crores, that too representing several diverse groups and categories. Difficulties are more in the rural regions with lower literacy rate that makes them more susceptible to exploitation by the departments or ministries concerned.

Hence, it is imperative that a legal framework is adopted with the executive at the helm of affairs to formulate a multi pronged strategy involving aggressive consumer awareness campaigns along with a sharpened legislation to ensure that illiteracy never contributes to the exploitation of consumers.

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CULTURAL ASPECTS WITH REGARDS TO RESOLVING DISPUTES IN INDIA

ANMOL KUMAR

Culture may be defined as “the shared assumptions, values, and beliefs of a group of people which result in characteristic behaviours”. While culture may change and adapt through contact with outsiders, the deep structure of a culture, including values and beliefs, tends to persist from generation to generation.Impact of Culture on Dispute Resolution:

1. Culture dictates how we frame our interactions, including disputes and how we resolve them. Parties approach disputes with different mindsets, informed by underlying cultural forces. Cultural fluency defines the way parties communicate, frame conflicts and approach and understand different identities and roles.

2. All laws and the law-makers reflect the cultural ethos of the society. A traditional and conservative society has stricter norms and harsher penalties for their violation, while a more contemporary society has a more relaxed set of norms and laws that govern the citizen’s life. For instance, an outcry against excessive violence and sex in films leading to stricter censorship laws is just an expression of culture prevailing upon the laws.

3. The Indian legal system has grown and evolved with the lives and aspirations of its diverse people and cultures. It is inspired and strengthened by age-old concepts and precepts of justice, equity, and good conscience, which are, indeed, the hallmarks of common law.

i. The cultural dimensions of the law are especially important for marginalized groups, as law can act as a barrier to political and social inclusion or offer protection from discrimination. For example, the Indian legal system, through Article 29 and 30 of the Constitution of India, provides for protection of cultural and educational rights.

ii. The laws of India relating to matrimonial disputes emphasize the need, and indeed the duty, of the presiding judge to ensure that all avenues for reconciliation have been exhausted before granting a divorce. This is because Indian culture abhors a broken family and this is reflected in the matrimonial laws.

4. Culture is found to have direct effects on a court’s ability to achieve legal ideals, such as timeliness, access and fairness, and managerial effectiveness, but this empirical relationship does not presume any one culture is more desirable than another. A reason why some cultures might come closer than others is because judges and managers in some courts act to avoid the limitations associated with their present culture.

5. Although an individual’s culture does not necessarily determine the attitude and behaviour he will bring to the table, it can provide valuable guidelines as to which negotiation strategies are likely to work and which are likely to end in failure.

6. Values composing a court’s culture shape the how, why, and when of decisions made by judges and the activities conducted by staff members. Because these individuals are responsible for putting policies and procedures into place, they are the key ingredients for ideas to take hold. For this reason, cultural values are more important to assess as indicators of the current state of affairs than virtually any other aspect of a court, such as structure, organization, process or resources.

7. Thus, the culture, tradition, and values of a society not only form the foundation of the laws that govern it, but changes in values and traditions with the passage of time also influence and bring about fresh legislation reflecting the changed ethos of a society,


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underlining the ever-present link between culture and law.

For example: The courts have now adopted a new approach for interpretation of commercial contracts i.e. the concept of Relational contract wherein the attempt has been made to weave implied good faith into the contract along with the express terms.

The concept of relational contracts which dates back to 1889 wherein Lord Bowen in the judgment titled The Moorcock1 propounded the ‘business efficacy’ test, as per which a proposed term would be implied if it is necessary to give business efficacy to the transaction as must have been intended at all events by both parties who are business men. Recently, the principle of implying good faith terms into a commercial contract to boost business efficacy has been recognized by the Hon’ble Supreme Court of India in the case titled Nabha Power Limited vs Punjab State Power Corporation2 in the form of Penta principles which include:

1. reasonable and equitable;

2. necessary to give business efficacy to the contract;

3. it goes without saying, i.e., The Officious Bystander Test;

4. capable of clear expression; and

5. must not contradict any express term of the contract which are centralized around the business efficacy of a contract.

Therefore, a cultural shift in the interpretation of contracts can be evidently seen in this scenario.

1 [1889] 14 PD 64

2 (2018) 11 SCC 508

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