Failures in Law Making: The Case of Arbitration Law in India

A recently published paper of this blawgger deals with failures in law making with focus on arbitration law in India. The abstract is provided below:

The Statement of Objects and Reasons to the Arbitration & Conciliation (Amendment) Bill, 2015 placed substantial blame on the judiciary for the delay in disposal of arbitration matters and the increasing court interference in arbitration, both of which, according to the said Statement, had, the effect of undermining the object of the Arbitration & Conciliation Act, 1996. It is true that although the decisions in some cases could have been delivered taking into consideration the framework of arbitration, this paper argues that a substantial amount of blame falls on the law makers as well on two major aspects: If the judiciary has wrongly interpreted a particular provision, it is for the legislature to be proactive and immediately take action to correct the erroneous interpretation. However, it took about fifteen years for the government and the legislature to bring about the statutory reforms in the 1996 Act. This constitutes the first failure of the government and the legislature vis-à-vis the 1996 Act. Secondly, the courts cannot be entirely faulted since it was difficult to trace the legislative intent in enacting a particular provision of the 1996 Act. Therefore, an authoritative source such as parliamentary debates or reports of the Government on the 1996 Act would have aided the courts in finding out the legislative intent. This paper argues that failure by the lawmakers on both these counts contributed immensely to the failure of Arbitration & Conciliation Act, 1996 in achieving its objects.

The conclusive portion of the paper notes that whenever courts misconstrue a statute or render judgements contrary to, or which undermine, legislative intent, the government and the legislature should be more dynamic and correct such errors. Failure to do so will make law uncertain and justice costlier, and at times, elusive; It, secondly, argues, that authoritative sources from which legislative intent can be gathered should be made available especially in statutes that address a new area or which is drafted in a manner different from the previous law on the subject; Lastly, the paper reminds readers that legislative ambiguities impose immense costs on the parties and great burden on the judicial system and that therefore, the government and the legislature should act proactively to address these ambiguities.

The paper can be accessed from here.

[The paper was written for a conference in Kolkata which was held on 09.12.2016. ]

Two-Tiered Tribunal with the first Tier Indian & Second Tier Foreign Valid Says SC: Another Pro-Arbitration Decision?

Readers would be aware of the two-Judge Bench of the Supreme Court in Centrotrade (2006) 11 SCC 245:2006(3) Arb LR 201 (SC).) where SB Sinha, J. held a two-tiered tribunal invalid when the first tier was Indian and the second tier was foreign while Tarun Chatterjee, J. disagreed with him. Due to the difference of opinion between the judges, the matter was referred to a larger Bench. . 

Readers may note that while SB Sinha, J. tried to distinguish two tier tribunals of arbitral institutions from the two-tiers in the case, there are observations in his judgement to the effect that two tiered tribunals of the nature discussed in the case (one Indian and the other foreign) is not contemplated in the 1996 Act. A three judge-Bench heard the matter and held such a clause to be valid.

Two questions were before the three-Judge Bench:

"(1) Whether a settlement of disputes or differences through a two-tier arbitration procedure as provided for in Clause 14 of the contract between the parties is permissible under the laws of India? 

(2) Assuming a two-tier arbitration procedure is permissible under the laws of India, whether the award rendered in the appellate arbitration being a ‘foreign award’ is liable to be enforced under the provisions of Section 48 of the Arbitration and Conciliation Act, 1996 at the instance of Centrotrade? If so, what is the relief that Centrotrade is entitled to?"

The judgement of the three judge-Bench primarily rests on party autonomy and non-applicability of public policy  to set aside the award. Holding that such a clause was valid, the Supreme Court, the Supreme Court held that the appeal should be listed again for consideration of the second question quoted above. 

The decision of the three-judge Bench can be accessed from here. 

Arbitration in India: New Developments

We've not been blogging for some time but the period of lull is over. In this post, we intend to bring to the readers a few developments in Indian arbitration law and provide link comments on those developments.

Raffles Design Intl. India Pvt. Ltd v. Educomp Professional Education (Del HC: Oct. 2016): Non-applicability of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 to arbitration related court proceedings; whether Part I has been excluded?; Non-availability of relief under Section 9 to enforce orders of the arbitral tribunal; power of the court to award interim relief under S. 9 independent of the tribunal's orders; non-availability of relief under S. 27(5) (purportedly contempt) for disobedience of interim relief awarded by a Singapore seated arbitral tribunal.  

Comments: here and here

Ayyasami v. Paramasivam (SC: Oct. 2016): Disputes involving fraud are non-arbitrable; But allegations of such fraud should not only be serious and in normal course constitute a criminal offence but also that they "are also complex in nature and the decision on these issues demand extensive evidence for which civil court should appear to be more appropriate forum than the Arbitral Tribunal." The court later held: "It is only in those cases where the Court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits."

The blogger still thinks N Radhakrishnan is based on shaky foundations and is liable to be overruled. If at all disputes of the nature mentioned in Ayyasami have to be made non-arbitrable, it could be only for the purposes of bringing such disputes tainted by serious allegations of fraud to the public domain rather than deciding it in arbitration, which is private and confidential. Unfortunately, N. Radhakrishnan and Ayyasami are based on the misconceived basis that "the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, Courts, i.e. public for a, are better suited than a private forum of arbitration." This is totally misconceived considering that English law abandoned the legal position, as has been argued in this paper.

Comments: here and here

[Note: The links are just one of many comments on the topic and there is no particular reason for providing only those links and not others. Readers may please provide links to more comprehensive analyses in the comment section of this blog post.]

Symposium Alert: 10th Annual NLSIR Symposium on Regulating E-Commerce in India

Symposium Announcement:

The National Law School of India Review (NLSIR), the flagship journal of the National Law School of India University (NLSIU), Bangalore is pleased to announce the 10th Annual NLSIR Symposium on Regulating E-Commerce in India scheduled to be held on 26-27 November, 2016 at the International Training Centre, National Law School of India University, Bangalore. 

The E-commerce sector in India has seen tremendous growth in recent years. However, the legal environment has imposed one of the biggest challenges to the growth of the sector, with the development of law seldom keeping pace with business innovation. The Symposium puts these issues in the spotlight with four sessions discussing various aspects such as foreign investment, taxation, and liability.

Confirmed speakers for the Symposium include Mr. Chetan Nagendra, Partner, AZB Partners, Ms. Ashwini Vittalchar, Partner, Samvaad, Mr. Mahesh Murthy, Founder, Pinstorm, Mr. Suhaan Mukerji, Partner, PLR Chambers, Mr. Samsuddha Majumder, Partner, Trilegal, Mr. ​Rajesh Simhan, Partner, Nishith Desai, Mr. Promod Jain, Tax-Director, Flipakrt, Ms. Nisha Uberoi, Partner, AZB Partners, Mr. Manas Chaudhary, Partner, Khaitan & Co., Mr. Ramji Srinivasan, Senior Advocate, Mr. Yaman Verma, Senior Associate, Shardul Amarchand​, Prof. Rahul Singh,​ ​NLSIU, Bangalore, Mr. Pranav Mehra, Snapdeal and Ms. Pratibha M. Singh, Senior Advocate, and more are yet to confirm.

This year, the discussions will be divided into four panels:

Session I: Business Models and Regulation of Foreign Investment

(Forenoon, 26th November, 2016)

Session II: Indirect Taxation: Challenges and Concerns

(Afternoon, 26th November, 2016) 

Session III: Interplay between E-Commerce and Competition Law

(Forenoon, 27th November, 2016)

Session IV: Liability Regimes: Ensuring Compliance

(Afternoon, 27th November, 2016)

Registration charges are Rs. 500 for Students and Rs. 1000 for Professionals. To register for the event, please fill out this form - goo.gl/S5qkhm

For more details visit our Facebook page at https://www.facebook.com/nlsir/

For further information, please contact Akshat Agarwal (Chief Editor): +91-9731390988 ; Sharwari Pandit (Deputy Chief Editor) : +91-9619439861 or email us at mail.nlsir@gmail.com

Gary B. Born Essay Writing Competition: Results

Message from CARTAL, NLU Jodhpur:

The NLU Jodhpur Centre for Advanced Research and Training in Arbitration Law (CARTAL) is pleased to announce the results of the Gary B. Born National Essay Writing Competition on International Arbitration. The name of the winners can be accessed from here.

Indian Parties Agreeing on Foreign Seat: Sasan Power v North American Coal: Part II

In the previous post on this topic, we had given an introduction to Sasan Power Ltd. v. North American Coal Corporation India Private Limited, a recent ruling of the Supreme Court on an interesting issue. Readers not familiar with the facts are advised to have a look at the previous post. For those who don't want to do so, we'll try to touch upon facts as and when they become relevant for the discussion.

In this post, we provide a descriptive comment of the decision of the Madhya Pradesh High Court:

Proceedings before the District Court, Singrauli:

Readers would recollect that an Indian Company ("Sasan Power Ltd." or "Sasan") and an American company ("North American Coal Corp." or "NACC" or "American Coal") entered into an Agreement in January 2009 for mine development ("Agreement I"). Article XII of the Agreement provided that the Governing Law would be the laws of the United Kingdom" (whatever it meant!- England & Wales, North Ireland or Scotland?) and that dispute resolution would be by ICC Arbitration in London as seat. American Coal established a full owned Indian subsidiary which, for the sake of convenience can be referred to as "American Indian". Sasan, American Coal and American Indian entered into an Agreement ("Agreement II") whereby North American purported to assign all its rights and obligations with the consent of Sasan to American Indian. Agreement II also provided that American Coal was not relieved of its obligations and liabilities although Sason agreed to the transfer and assignment of the rights of American Coal to American Indian. These facts were noted in the previous post itself. 

When disputes arose, American Coal wrote to Sasan terminating Agreement I (July 2014) and made a request to the ICC for arbitration (August 2014). Sasan approached the District Court seeking several reliefs against American Indian (not American Coal). Sasan sought the relief of declaration holding Article XII of the Agreement as null, void, inoperative and unenforceable. There was absolutely no relief claimed in respect of Agreement II. The District Court passed an ex-parte order in November 2014 injuncting the ICC from proceeding with the arbitration. This was intimated by Sasan to ICC. Interestingly, American Coal wrote to the ICC in December 2014 requesting arbitration and stating that Sasan's letter about the ex pare injunction should be seen as a reply to the request for arbitration.

Subsequently, the District Court extended the injunction. American Indian filed two interlocutory applications, one for rejection of plaint on the ground that the suit was barred by law, and the other for vacating the interim injunction. Meanwhile American Indian filed an appeal to the High Court against the grant of injunction. The High Court directed (January 2015) the District Court to dispose of the applications within a month. 

The District Court passed an order (March 2015) allowing the Interlocutory applications of American Indian. As can be deciphered from the judgement of the Supreme Court and the High Court of MP, it appears that the District Court held that the court was bound by a decision of a two-judge Bench of the Supreme Court in Atlas Exports Industries v. Kotak & Company and not by the decision of a Single Judge of the Supreme Court in TDM Infrastructure (P) Ltd. Vs. UE Development India (P) Limited. The District Court relied on Section 45 of the Arbitration and Conciliation Act, 1996 and held that it was bound to refer the dispute to arbitration and therefore rejected the Plaint. It appears that the District Court also held that Agreement II was a tripartite agreement and that therefore the arbitration was an international commercial arbitration. It also appears that the District Judge held that the decision of the Supreme Court in Enercon and Chloro Controls bound the court to refer the dispute to arbitration.

Proceedings before the High Court: 

Against the decision of the District Court, Sasan appealed to the High Court. 

Contentions of behalf of Sasan: Sasan, the appellant contended:

• Once under the Assignment Agreement all the rights and liabilities were transferred from American Coal to American Indian, the agreement was between two Indian parties. Therefore, there was no question of agreeing to have their dispute seated abroad and that therefore, the arbitration agreement was null and void.
• The District Court could not have rejected the plaint under Order VII Rule 11(d) since Section 45 was not a bar for maintainability of the suit. Section 45 did not bar a suit as such and a court if it finds the conditions in Section 45 satisfied can only refer the parties to arbitration.
• Section 45 was applicable only in case of a foreign award or agreement and did not concern a case where there was an agreement between two Indian parties.
• Agreement II was not a tripartite agreement but only a bipartite agreement, between Sasan and American Indian. 
• Further, Section 12  of Agreement I was null and void as it provided for foreign arbitration between two Indian parties and allowed two Indian parties to agree on a foreign substantive law. 

On behalf of American Indian the following were argued:

• The Appeal was not maintainable in view of Section 50 of the 1996 Act against the decision under Section 45 of the said Act.
• Since the matter came under Part II of the 1996 Act, Section 45 created a bar against a suit.
• Atlas Export will apply since there is not much of difference between the relevant provisions of the 1996 Act and the law as it stood before.
• Section 28 of the Act is in Part I and is not applicable where Part II is applicable.
• TDM Infrastructure was decided by a Single Judge while Atlas Export was a two-judge Bench decision. Therefore, Atlas Export will prevail over TDM infrastructure.
• An order passed under Section 11 is not an order of the Court and therefore is not law declared by the Supreme Court for the purposes of Article 141 of the Constitution of India.
• The District Court has correctly rejected the Plaint.
• However, Agreement II is not a tripartite agreement but is a bipartite agreement. However, even if it is a bipartite agreement, the same will not affect the end result of the District Court.
• The arbitration agreement under Agreement II imports the arbitration agreement found in Agreement I and therefore it is an agreement between two Indian Companies agreeing to resolve all their disputes though arbitration with London as the seat of arbitration.

(certain other contentions were made by American Indian which are either referred to subsequently whenever relevant or not referred to)

Decision of the Madhya Pradesh High Court

The High Court's decision is summarised below:

• The decision of the Supreme Court in Bharat Aluminium v. Kaiser Aluminium (as contained in Para 118 thereof) that if the arbitration is not an International Commercial Arbitration as per Section 2(1)(f), the court does not have any choice but to decide the dispute as per Indian substantive law is not applicable in case of arbitrations seated outside India. In such a case, the conflict of laws rules of the seat will apply. The converse interpretation would amount to extra-territorial operation of Part I of the 1996 Act.  In fact, Supreme Court in the same paragraph has said that Section 28 r/w 2(1)(f) modifies the conflict of laws rule as applicable when the place (seat) of arbitration is in India.
• TDM Infrastructure, although contains observations contra to the eventual decision of the Court, is a proceeding under Section 11 of the 1996 Act and also provides that the observations contained therein pertained only to determining the jurisdiction of the court and not for any other purpose. However, in Atlas Exports case, the Supreme Court held that an agreement providing for arbitration between two Indian parties by foreign arbitrators is valid. Thus, from the case, it appears that an agreement providing for arbitration between two Indian companies in a foreign seat is valid. Given that the provisions of the 1940 Act and 1996 Act are similar, there is no reason why Atlas Exports, a decision by a Bench larger than TDM Infrastructure, and under the 1940 Act, should apply. Besides, a corrigendum was added in TDM Infrastructure subsequent to its pronouncement that the observations in the decision would apply only for the determining the court's jurisdiction. Therefore, the decision is not law declared by the Supreme Court for the purpose purposes of Article 141 of the Constitution.
• Atlas Exports has held valid a contract between Indian parties agreeing to a foreign seat. Such an arbitration is governed by Section 44 of the 1996 Act. For such an arbitration, it has to be established under Section 45 that the arbitration agreement is null & void or inoperable or incapable of being performed. The question on nationality of the parties is to be considered only for the purposes of Part I and not for the purposes of Part II as applicability of Part II is determined based solely on the seat of arbitration.
• Once it is determined that Section 45 is applicable, the judicial authority has no other choice but to refer the matter to arbitration.
• The contention that a plaint cannot be rejected under Order VII Rule 11 CPC on the ground of Section 45 of the 1996 Act is not correct. Once Section 45 is attracted, the suit is not maintainable. Under Section 9 CPC, the suit is not maintainable if it is expressly or impliedly barred. The suit in such a case has to be dismissed even as per the Madras High Court in Adam & Coal Resources case. An appeal from such a decision would be hit by Section 50 of the 1996 Act. 
• The crucial test as per Enercon case is whether the parties intended to arbitrate. If the parties intended to arbitrate, then it is the "bounden duty" of the judicial authority to refer the parties to arbitration.
• As regards the two agreements, although Agreement II permitted American Indian to step into the shoes of American Coal, Agreement I between Sasan and American Coal still subsisted. Therefore, the contention that the entire Agreement I stood novated by Agreement II is incorrect. The nature of the transaction itself is akin to Section 43 which contemplates two joint promisors making a promise. In such a case, any of the parties can compel performance of the agreement.
• Once parties themselves have chosen a foreign seat, Section 2(2) of the 1996 Act is inapplicable. In such a case, Part I of the 1996 Act will not apply. Part II will come into play since the agreement complies with Section 44 of the 1996 Act and therefore Section 45 will bar the suit.

On the basis of the aforesaid reasoning, the High Court dismissed the appeal by Sasan. The decision of the High Court can be accessed from here.

In the next posts, we will look at the decision of the Supreme Court and our take on the entire case. 

Soumya Murder Case: Awaiting the debate between Justice Katju and the Supreme Court Bench (Guest Post)

Ms. Prerana Saraf, who writes at Legal Parley, has contributed this guest post on the Sowmya murder case and the recent order of the Supreme Court pertaining to Justice Katju. The guest post is reproduced below (with a few formatting changes).

Govindswamy v. State of Kerala came into the limelight after Markandey Katju, retired Supreme Court judge blamed the judges of making a grave error by acquitting the accused of murder on the basis of hearsay evidence in his personal blog, Satyam Bruyat.

In his blog post dated 17^th September, 2016, Markandey Katju questions how Supreme Court could rely on hearsay evidence which is inadmissible as evidence. He also mentions Section 300 of IPC, which reads that an accused is guilty of murder even if he had no intention to kill, if he has caused grievous wound that is sufficient to cause death.

On the basis of what has been observed in paragraph 398 of the judgment, he says that the Court has erred in its judgment and requests the court to review the same.

Facts:

On 1^st February, 2011, the deceased boarded the Ernakulam-Shornur Passenger Train at 5:30 PM to go to her home at Shornur. She boarded the ladies division of the last compartment. However, when the train reached Mulloorkara, all other lady passengers alighted the bus. Therefore, the deceased also got down with them and entered the ladies coach just in front of the last compartment. The accused saw that the deceased was alone and entered the ladies compartment as soon as the train left the Vallathol Nagar Railway station. The prosecution alleged that the accused assaulted the deceased and repeatedly hit her head against the walls of the compartment.

It is then alleged that the victim was dropped/pushed by the accused from the running train to the track. The accused also jumped from the other side, after which he lifted the victim to another place by the side of the track and sexually assaulted her.

The prosecution in support of their case had examined 83 witnesses. Among them Witness No. 4 and 40 were travelling in the general compartment and had heard the woman crying and wailing. Even though witness No. 4 wanted to pull the chain, he was told by a middle aged man that the woman had jumped off the train and made good her escape and that he should not take the matter any further as they would all then be dragged to the court. The witnesses brought the incident to the attention of the guard as soon as they reached Shornur, which triggered the search for both the victim and accused. The victim was then found in badly injured condition by the side of the track.

Analysis:

On the basis of the forensic evidence, the court found the accused guilty of rape under Section 376 of IPC and confirmed the imposition of life sentence as awarded by Trial Court and confirmed by High Court. With respect to the charge of murder against the accused under Section 302 of IPC, it was observed that the death was a result of two sets of injury. 

The court was of the opinion that the fact that first set of injury was caused by the accused did not need reconsideration, as it was already clear with the witnesses’ statement and the forensic report. 

However, the second set of injury was caused due to the victim’s fall from the train. The court was of the opinion that unless the fall from the train can be ascribed to the accused on the basis of reliable evidence as against the possibility of deceased herself jumping out, the liability of the accused for the victim’s death cannot be determined. 

In this connection, it was the state’s contention that owing to the first set of injury that had impaired her mental reflexes, the deceased could not have been in a position to jump off the train.

However, the court observed that the circumstances against the accused had to be weighed against the oral evidence of the witnesses. The statement wherein it is said that a middle-aged man told them that the girl had jumped off the train and made her escape.

Also, according to the forensic report, the death was caused due to the supine position (head and torso facing upwards) that the victim laid in. Here again, the court observed that the victim was kept in supine position only for the purpose of sexual assault and the fact that the victim was alive for a few days after the incident goes on to establish that the accused had no intention of killing the deceased.

Judgment:

The court, therefore held that the accused cannot be convicted of murder under Section 302 of IPC. The bench instead held him guilty under Section 325 of IPC, which provides punishment for voluntarily causing grievous hurt.

Suo motu notice by Supreme Court:

A three judge bench consisting of Justices Ranjan Gogoi, P.C. Pant and U.U. Lalit took suo motu judicial notice of Justice Katju's blog criticising the order and called for a debate on the case.

The order was passed after a review petition was filed by the state. The bench observed that it was not appropriate to take a decision until the debate with Justice Katju was over.

Justice Katju posted on his Facebook page that he has not received any official letter from the court. He has however, been informed by the Kerala State Advocate on record and he would be delighted to appear and discuss the case in the open court provided the Court feels that Article 124(7) does not debar him on account of him being a former Supreme Court judge.

Well, this would be one hearing to look forward to and hopefully the discussion would provide the victim and her family the justice she deserves.  

The Debate on the Law Commission's Questionnaire on the Uniform Civil Code: Some Comments

This post pertains to Questionnaire published by the Law Commission of India about reforming personal laws and the uniform civil code. The post is in two parts (both published in this post). The first part of the post attempts to answer the questionnaire. The second part of the post discusses a more serious aspect about the role of the Law Commission of India.

I: Responses to Law Commission's Questionnaire

[Disclaimer: This post represents the author's, and not the blog's view, on the questionnaire. The lead co-author, who is an expert in constitutional law (and this author is neither an expert on constitutional law nor on personal laws), we're sure, has a more nuanced perspective to the entire issue.]

The questions in the Commission's questionnaire are in italics.

1. Are you aware that Article 44 of the Constitution of India provides that “the State shall endeavour to secure for the citizens a Uniform Civil Code throughout the territory of India”? 

Yes. This matter requires further initiatives for the following reason:

The Directive Principles of State Policy (hereinafter “Directive Principles”) have been enshrined in the Indian Constitution primarily in order to promote social and economic justice. As per Article 37, these Principles shall be “fundamental in the governance of the country” and the Constitution of India has mandated “the State to apply these principles in making laws.” In the course of the Constituent Assembly debates, several members opposed to the idea of a uniform civil code, it was observed that a uniform law applicable to all would promote national unity and, at the same time, no legislature would forcibly amend personal law if people were opposed to it. 

At this juncture in Indian polity, considering the opposition to a complete disregard to personal laws and bringing in a uniform civil code it its stead, a civil code on aspects hitherto covered by personal laws may be a drastic move and may lack legitimacy. As noted by the Constituent Assembly, ultimately, the citizens should be subjected to one civil code. Hence, introduction of a Uniform Civil Code should be a gradual process. At the same time, personal laws are being regarded as biased, especially against gender. Many a time, personal laws operate harshly against a particular gender, which is against the Constitution of India. These realities must be kept in mind in a debate on the subject. 

Broadly, the reforms towards a Uniform Civil Code should be a two-step process. The first step should be bring about comprehensive reforms to personal laws thereby eliminating all aspects which discriminate against a particular gender and bringing them in line with the fundamental rights and the Constitution of India. The first step includes codification of customary practices in each personal laws and ensuring a uniform code under each personal law. Once sufficient reforms are achieved, the second step is to introduce a Uniform Civil Code.

Q. No. 2 regarding the ambit of a Uniform Civil Code does not arise in view of Answer to Q. No. 1. However, if introduced it should cover all aspects presently covered by personal laws. 

3. Do you think the existing personal laws and customary practices need codification? 

Personal laws and customary practices should be codified to bring clarity in them and prevent uncertainty in application. Codification will be very helpful in bringing such practices in line with the Constitution.

4. Will the Uniform Civil Code or the codification of personal laws and customary practices bring about gender equality?

Yes. Both per se cannot strictly bring about gender equality. But a UCC or codification will help bring certainty to these laws and practices and will enable ease of testing them for constitutional consonance. 

5. Should the Uniform Civil Code be optional?

As stated in answer to Q. No.1, in the two-step process, neither should be optional. The first step in codifying and reforming personal laws and the second step in bringing about a Uniform Civil Code. 

6. Polygamy, polyandry and similar customary practices should be banned as they are not in tune with the current circumstances. 

Reforming personal laws should include these aspects as well.

7. Triple talaq operates harshly against women and should be abolished in toto.

8. Do you think that steps should be taken to ensure that Hindu women are better able to exercise their right to property, which is often bequeathed to sons under customary practices?

None of the three options suggested by the Commission are appropriate. Following are the measures that could be adopted:

It is true that in many families, the testator bequeaths immovable property to sons rather than daughters. This author had the opportunity to deal with a similar case. While it is acknowledged that this is predominantly a social issue, a few safeguards in law could be taken: A provision should be introduced in the Indian Succession Act, 1925 to the effect that any bequest denied to a female heir but made to a male heir on the ground that the testator spent money and resources in getting her married or such similar reason should be void.

Another measure that could be adopted is that wills which deny benefit to a female heir but which grant the benefit to a male heir should be viewed as a suspicious circumstance per se. This would be rule of evidence than a substantive legal rule. This principle should be statutorily recognized so that the burden lies on the propounder to establish that there were sufficient reasons to deny the female heir of the bequest. 

9. Do you think that a two-year wait period for Christians violates Christian women’s right to equality?

Yes, it does. The wait period should be made uniform across all religions. The present two-year wait period operates as a source of corruption. Judges at their option apply decisions of certain High Courts (Kerala, the Karnataka and Bombay [Nagpur Bench] High courts) reading the two year waiting period as one year. 

10. Do you think that there should be a uniform consent age for marriage across all personal laws?

Yes. Consent is a matter of body and mind and has very little to do with which religion a person belongs to.

11. Do you agree that all religious denominations should have common grounds for divorce?

c. Not necessarily, However, the grounds should be the same for men and women. 

12. Would a uniform civil code address the problems of insufficient maintenance?

Yes it would. Even if the (suggested) first step to codify and reform personal laws is implemented as a first step, the law on maintenance should be able to adequately address the problem of insufficient maintenance. This is because maintenance is more a matter of economic security to ensure that the woman leads a dignified life and is not at all a matter of religion. 

13. How can compulsory registration of marriages be implemented better?

a. Temples, churches, mosques and other religious places which conduct marriages should be obligated to counsel the parties to the marriage to get their marriage registered.

b. Before issuing identity cards such as Aadhar Card, licence, ration card or documents such as passports, etc., the husband or the wife or the parent, as the case may be, applying for the said document, should furnish proof of marriage registration irrespective of the religion. 

14. What measures should be taken to protect couples who enter into inter-religious and inter-case marriages?

a. Special Marriage Act should be made simpler. Registration offices should not insist on producing marriage cards or receipts of proof of marriage, which they do in case of such marriages, even though the Act does not strictly mandate it. The Registration offices should, instead be offices where marriage is conducted in the presence of sufficient witnesses.

b. Where such marriages take place or registrations take place, the same should be adequately videographed and documented.

c. Special Protection Homes should be introduced in such cases where the bride and the groom fear their safety. Suitable counselors should be appointed. Special training should be given in trades and crafts to them and suitable economic opportunities such as jobs in self-help groups, etc. should be facilitated. 

15. Would a uniform civil code infringe an individual’s right to freedom of religion?

No, it would not. If a uniform criminal law does not infringe an individual right’s to freedom, a uniform code will not infringe on an individual right to freedom of religion. Further, Constitution of India is supreme and anything that conflicts with the Constitution cannot remain above the Constitution. However, as stated in response to question no. 1, this is not the appopriate time for bringing about a uniform civil code. 

16. What measures should be taken to sensitise the society towards a common code or a codification of personal law?

Firstly, the codification and reforms to be brought out should be from the specific communities themselves. Such codes should come from the communities themselves. Secondly, Law Commission should assess each such code for their constitutional compatibility with jurists and experts well-versed with each personal law and thrash out all outstanding issues and thereby reform and codify personal laws. 

Once these reformed and codified personal laws are implemented and their success gauged, introduction of a Uniform Civil Code will become a legitimate exercise.

Part II: Shouldn't Law Commission be Made an Independent Statutory Body?

The recent attack by certain sections of certain religions vehemently attacked the Law Commission's questionnaire. Among other allegations, the prominent one was that the questionnaire was an attempt by the Government-in-power to target certain religious communities. Irrespective of the validity of such a criticism, such comments reflect poorly on the Law Commission. The Commission is supposed to be a prestigitous body instrumental in initiating, discussing and suggesting reforms in law. Such allegations lower the image of the Commission. Another aspect is that the task of the Commission inherently involves the possibility of criticising the Government-in-power's laws and testing their effectiveness. Often the views of the Commission can (and at times, should) be in contradiction with the Government's views. For these reasons, the Law Commission must be an independent statutory body. It is time for a suitable legislation for making the Law Commission a statutory body and ensuring its independence and competence by a suitable process constituting it and laying down its framework. 

(P.S. Forgive us readers for not posting Part II of Sasan Power. We are in the process of completing the second part (Part II will deal with the MP High Court decision) and we will also post the concluding part hopefully by next week. Lots to post on, especially the recent decision of the Supreme Court on arbitrability of disputes involving allegations of fraud. )

Reforms on Court Fee to Set Aside Arbitral Award in Tamil Nadu

A recent Report by the Court Fee Rationalisation Committee in Tamil Nadu has recommended that the court fee for setting aside arbitral awards be made ad valorem.  Court Fee for setting aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 is currently on Rs. 5,000/- irrespective of the quantum of the award.

The Court Fee Rationalisation Committee (CFRC) was constituted by a Division Bench of the Madras High Court vide order dt.  18.12.2015 pursuant to several writ petitions. The fundamental reason why the Committee was constituted was to address the anomaly in court fee in plaints in the original side of the High Court and that of other courts ("[C]ourt fees is levied on plaints filed in the original jurisdiction of the High Court at 1% ad valorem on a tapering scale while court fees is levied on plaints filed in courts subordinate to the High Court at 7.5% ad valorem on a flat scale."). The Committee's primary recommendation was to reduce the court fee from 7.5% to 2-3%. On arbitration, the Committee noted that the court fee for challenging arbitral awards should be made ad valorem and the percentage to be charged should be same as that of suit, that is, 2-3%. The Committee further noted that the maximum court fee to be charged in such actions should be Rs. 1,00,000. The Committee was of the view that the same recommendations should apply to petitions under Section 48 as well.

It is intuitive that a party would be willing to take file a petition to set aside arbitral awards so as to postpone payment even if the grounds of challenge of the arbitral awards are frivolous, especially in a legal environment where indemnity costs are not imposed for frivolous challenges and the rate of interest awarded is less. It is also intuitive that the court fee payable for setting aside an arbitral award will have a lot of bearing on a party deciding whether to challenge an arbitral award issued against it.

The existing fee regime in Tamil Nadu, however, provided for Rs. 5,000 as the court fee for setting aside arbitral awards. This neither has the potential to deter frivolous challenges to awards nor reflects the considerable court time in hearing these matters, especially when the dispute forming the subject of the award is complicated. Therefore, the recommendation of the Committee to make the court fee ad valorem is welcome. In fact, we had previously advocated the same in several forums [See, for instance, Developing India as a Hub of International Arbitration: A Misplaced Dream? (page 107)( July 2016)and this Letter to the Government].
 .  

However, it is doubtable if the cap would make the increase in court fee effective at all. In case of large disputes, the proposed cap on maximum court will will prove ineffective as the cap will eliminate the effect of court fee as one of the methods of reducing frivolous challenges in case of disputes with larger stakes.

Considering the policy of law towards a general deference to arbitral awards, it is suggested that the court fee for challenging awards be around 7.5% to 8%. But a provision could be made that in case of arbitral awards against individuals or other "persons" (such as Micro, Small undertakings, individuals, etc.) who establish their inability to pay the court fee, appropriate security such as bank guarantee or any other mode of security could be sought to ensure that such parties are not denied access to justice merely because of their inability to cough up court fee.

The Report can be downloaded from here.

The Worth of an Indian LL.M.: Possible Solutions (Part II & Concluding Part)

The previous post in this blog dealt with the problems that beset the LL.M. programme in India. This post proposes certain solutions in addressing the problems identified therein. It may be noted that the solutions suggested are tentative and a lot of further research and experimentation is required to test the applicability of these solutions in various contexts.

Solutions

Changing Goals of the LL.M. Programme: There has been a marked change in the way in which institutions view the LL.M. programme in India. Gone are the days when LL.M. was viewed as an entry point for law teaching. Even in 2001, the Curriculum Development Committee of the UGC felt that a thorough knowledge of a particular field of law was the purpose of the LL.M. programme, irrespective of whether the students opt to study it for “teaching, practice of law, administration of justice or management of legal counseling in a firm”. The NKC WG (Working Group of the National Knowledge Commission) recommended that there was a need to introduce internship programmes at the LL.M. level. The UGC Guidelines give scope for practical training at a postgraduate level. The said Guidelines insists that the courses offered in the LL.M. programme shall have “practical training and research” and that the students should be evaluated for grades based on their performance in these aspects. At p. 8, the UGC Guidelines mandates in respect of the courses to be undertaken in the LL.M. programme the following: 

“Each of these courses will have a practical training and research component for students to perform on which evaluation for grades is determined.” (emphasis mine)

Considering these aspects, it would not be wrong to conclude that the shift in the goal of the LL.M. programme has taken place even at the policy level. Consequently, Universities/ Institutions cannot simply stand by the orthodox position that the goal of LL.M. programme is only to equip students to teach law. Even for the traditional notion of LL.M., internship and other means of practical training will only help postgraduate students become better law teachers. Further, with the changing landscape of Indian legal profession and the opening up of the Indian legal sector to foreign players in the near future, continuing with the orthodox view of LL.M. would be to do disservice to the students and the legal sector. Therefore, it is of utmost importance that Universities/ Institutions expand their vision of the LL.M. programme and not constrict its ambit to merely being a factory for law teachers.

Change in Dogmatic Approach of Law Faculty: A related aspect is that there should be a drastic change in the teaching methodology to the postgraduate students. Universities/ institutions imparting legal education and regulators/ quasi-regulators of legal education such as the Bar Council of India and the University Grants Commission stress on practical approach to legal education both at the undergraduate and the post-graduate level. While Universities/ Institutions these days insist on compulsory internship, there is hardly any focus on practical approaches to law at the Masters level. While it is true that at the LL.M. level, a theoretical approach should be the foundation, theory unsupported by practice becomes irrelevant [see, Jayanth K. Krishnan, Professor Kingsfield Goes to Delhi: American Academics, the Ford Foundation, and the Development of Legal Education in India, 46 American Journal of Legal History 447-499, 474-475 (2004)(noting how American law professors presented practical dimensions to “even the most doctrinally-based courses”)]. Besides, in order to afford a critical approach to law, learning law from a practical standpoint becomes indispensable. For this purpose, it becomes important for the faculty members to have in-depth knowledge of law-in-practice in the course which they propose to teach. The means of acquiring such in-depth knowledge is the challenge to the legal education sector in India.

Student Quality: In order to address the problem of failure of students to match the rigours of the LL.M. programme, the following measures are suggested:

• One way of dealing with this problem is to have an entrance exam with high standards and keep a relatively high cut-off so that only students who are able to cross the threshold are taken. This is already in existence, However, there are a few problems with this approach: For instance, fixing a high cut-off may not work in the current format of Common Law Admission Test (CLAT) as the choice of the institution depends predominantly on ranking of the applicant in the exam. Another problem is that this may eliminate candidates who are otherwise proficient but are not able to do the entrance well for reasons extraneous to their knowledge or ability. 
• Another method to ensure better quality of students is to make the students shortlisted for admission attend rigorous pre-admission orientation. Courses in these pre-admission orientations should be similar to crash courses but should be based on subjects such as constitutional law of India, jurisprudence, basic legal research methodology, international law, etc. This will provide a stronger foundation to enable them meet the standards of the LL.M. programme.

Improving Quality of Legal Research at the LL.M. Level: Another contributor to the dismal state of the LL.M. programme in India is the lack of incisive legal research at the LL.M. level. The previous Part of this series identified the lack of training in legal research at the undergraduate level as a chief contributor to this state of affairs. Institution offering LL.M. courses could improve the quality of research skills by making submission of research work a part of evaluation in each course. In fact, The UGC Guidelines contemplate a research component in each course offered in the LL.M. programme that would be one of the bases for evaluating the students’ grades. Another way of improving the quality of legal research is to make publication in journals/ law review compulsory in the LL.M. programme. At present, this is done at the research degree level [Rule 9.4, University Grants Commission (Minimum Standards and Procedure for Award of M.PHIL./PH.D Degrees) Regulations, 2016 reads: “M.Phil scholars shall present at least one (1) research paper in a conference/seminar and Ph.D. scholars must publish at least one (1) research paper in refereed journal and make two paper presentations in conferences/seminars before the submission of the dissertation/thesis for adjudication, and produce evidence for the same in the form of presentation certificates and/or reprints.”].

But, if legal research in India is to be improved, this drastic measure has to be introduced even in the LL.M. programme. At least one publication by each student should be made mandatory. This will make students undertake serious legal research.

Another hindrance to learning legal research skills in the LL.M. programme is that the unimaginative syllabus of the course on legal research methodology. The legal research methodology courses are offered based on text books/ reading materials that either borrow heavily concepts of research methodology from social/ physical sciences or do not reflect the latest practices in legal research. It is time that legal research methodology courses taught in India reflect the current trends in legal research. This includes introducing the students to advanced research avenues like empirical legal studies, statistics-based legal research, and so on. Further, it is important to bring out course content at a national level on legal research methodology that would equip students to undertake legal research, understand concepts of legal research and learn the latest developments in the field of legal research.

Making Internships/ Training a part of the LL.M. Programme: As stated previously, UGC Guidelines contemplates practical training in law as a method of evaluating performance of students. Institutions/ Universities could offer or support various types of internship/ training programmes such as internships in Non-Governmental Organisations, law firms, offices of advocates, corporations or even in educational institutions in the form of teaching internships. These could be made a compulsory part of the LL.M. programme so that students are well-equipped to have a practical perspective of law and, possibly, apply their research skills in the legal domain in which they undergo internship or training. This will go a long way in equipping them to apply their legal research skills in the legal domain in which they would work after passing out from the LL.M. programme. 

Often, academicians think that a practical training of law is irrelevant to post gradute courses on law such as LL.M., M.Phil, etc. This is an unfortunate trend. If academicians are unaware of how law works in practice, how would they perform their primary duty of undertaking legal research for proposing legal reforms?

Comprehensive Ranking of Institutions offering LLM Programmes: In order to jumpstart the reforms in the LLM programme, it would do good to introduce a comprehensive methodology based ranking of the institutions offering LLM programme. This would benefit the students at least in two ways: one, a proper methodology-based ranking would foster healthy competition between institutions in making the LLM programme more attractive to the students. This would results in one institution trying to better the other in order to attain better rankings. The second benefit is that it would aid the students in choosing an institution which offers the best value for their time and money. At present, there are no such comprehensive rankings for institutions offering LL.M.

Conclusion:

Of all, two crucial challenges face postgraduate legal education in India at the Masters level. The first challenge is the dearth of student quality. This series of posts argued that one of the ways of addressing this problem was by selecting only the most serious students through a rigorous entrance examination. Pre-admission orientation programmes with rigorous training of students who are to attend the LL.M. programme was another way discussed to counter this problem. It is suggested that these orientation programmes would be a better bridge to reduce the gap between institutional expectations and student quality.

The second important challenge is to address problem that permeates not only the post graduate legal education but also legal education in general- the disconnect between law as taught in law colleges and law-in-practice. The chief contributor to this state of affairs is the way in which legal academia is structured. Either the faculty members are not adequately equipped to deal with the practical aspects of a particular law course or even if they are, they are not able to devise teaching methods which will enable them teach both theoretical and practical approaches to law. This is especially true in LL.M. where specialised courses are studied. Often Universities/ Institutions hold the view that for an LL.M. course, there is no need to teach law from a practical stand point. This is a misconception even for those institutions which hold the orthodox view that the LL.M. course is to train law teachers. Even in that case, the prospective law teachers would not be adequately trained in a practical approach to law thereby furthering the disconnect between taught law and law-in-practice.

At present, there seems to be no fool proof method to address the second challenge. Universities/ Institutions either recruit full time law faculty members who are academicians through and through or practitioners as part-time faculty members. Once the former begin their career as academicians, they are hardly trained on the practical aspects of law. The latter give least importance to the theoretical aspects of law while the former do stress mostly on theoretical aspects of law. The possible way to address this problem is to invite committed practitioners/ industry experts to take up law academics (research and teaching) full time with attractive salaries. At present, except in certain rare cases in National Law Schools, University/ Institutional regulations do not systematically address this aspect. As a consequence, several industry experts have either shifted to foreign universities or have gone to elite private law schools which provide attractive salaries and also offer adequate facilities for research or otherwise.

Real reforms in the LL.M. programme in India would be possible only if these two fundamental problems are addressed.

(Many thanks to Ms. Smitha Poovani, Ms. Madhavi Nalluri, Mr. MLS Kaarmukilan, Mr. J. Ravichandran, Ms. Jasmine Joseph and Dr. Ananya Chakraborty for their inputs on the subject).

The Worth of an Indian LL.M.: A Critique of the LL.M. Programme in India

This blog post discusses a paper titled "LL.M. in India: A Critical Review" presented by the author in a recent conference on Legal Education in in India in a Globalised World. This post discusses some of the major problems with the course in India as identified in the paper. The next post would suggest possible means to address these problems.

Introduction

The Working Group on Legal Education constituted under the aegis of the National Knowledge Commission declared in 2007 that LL.M. in India was on a “steady decline”. LL.M. was a two-year course then and was beset with several problems. Many institutions ran the course without even a proper specialisation or a syllabus for the courses. LL.M. was seen by these institutions as a mere training ground for future law teachers. The teaching pedagogy was either unimaginative or, at times, absent. Even in the national law schools, which are considered to be institutions of excellence, LL.M. was neglected. Hardly would serious students opt for an Indian LL.M. They would rather do their “masters” abroad for various reasons; some of which included a shorter duration, rigorous standards and excellent faculty guidance (see, for instance, here, here, here and here.

In the recent past, there has been a shift in the way in which the LL.M. programme is being offered. This shift is mainly due to the introduction of the one-year LL.M. programmes and recognition therefor by the University Grants Commission. Despite the reduction of the course duration, many of the problems continue to exist. As a consequence, the recommendation of the Working Group on Legal Education of the National Knowledge Commission that the steady decline in the quality of the LL.M. programme could be reversed by better designing appropriate courses, study materials, internship programmes, systems of evaluation for the LLM programme remains relevant. Shortening the duration of the course cannot be seen as a panacea to the issues relating to LL.M. [Sudhir Krishnaswamy & Dharmendra Chatur, Recasting the LLM: Course Design and Pedagogy, 9 Socio-Legal Review 101-120, 102 (2013)(hereinafter "Recasting the LLM"]

Problems with the LL.M. Programme in India

LL.M. Programme & its Goal: One of the fundamental problems of the LL.M. programme is its goal. While LL.M. in India has been predominantly viewed as a training ground for law teachers, there is another school of thought which considers the programme to be able to attract students with multifarious goals (See, Recasting the LLM). It is this lack of a proper goal coupled with the demand from LL.M. students for better job opportunities similar to their undergraduate juniors which is largely responsible for the current state of affairs. While many of the students are not interested in pursuing a LL.M. course whose sole aim is to equip students to become law teachers, they are faced with the abject lack of institutional support for pursuing careers outside academia. 

A substantial number of students who pursue LL.M. in India either do so for want of further knowledge in law that would aid them in law practice or for getting jobs in the corporate sector. Typically, students attempt to get into one of the national law schools for the LL.M. programme targeting the potential for “corporate” jobs there. Except for a very few national law schools , there seems to be hardly any institutional support for such career pursuits. Even the student-based initiatives to compensate for the lack of institutional support have not been very successful. 

Unoriginal Research Methodology Courses: Legal research, unlike several other fields, is not an exclusive domain of postgraduate courses. It is taught, and is required to be taught, even at the undergraduate level, since legal research is one of the indispensable requirements of the legal profession. Hence, at a post-graduate level, research methodology courses should be something more than what the students ought to be equipped with at an undergraduate level. 

Unfortunately, legal research methodology courses taught at LL.M. courses are nothing new from what is taught at the undergraduate law courses. Students seriously lack skills in advanced legal research methods. For instance, only a few universities teach courses like empirical legal studies to their students. Even the faculty members are not equipped to handle such innovative legal research methods. Further, even the traditional methodologies of legal research such as doctrinal legal research, case survey methods, etc. are not taught using real papers/ works that take up a particular legal research methodology. Students woefully lack skills in presenting data. 

Lack of Substantive Research Output: One of the main problems that haunt LL.M. in India is the lack of quality research output which is the soul of the LL.M. programme. It is questionable if LL.M. programmes in India have actually had the effect of encouraging legal research. A chief contributor to this state of affairs is the lack of training in legal research in the undergraduate level. Students who have not had training in legal research at the undergraduate level for five years or three years (in case of the three-year course) cannot be expected to develop legal research skills overnight at the LL.M. level, which is rigorous, especially due to its limited duration. 

Although submission of dissertation has been a compulsory part of the post-graduate programme, one would be justified in doubting the quality of the dissertations that are submitted. Neither the supervisors nor the post-graduate council (of whatever name) does a thorough quality check on the research output. Students often do a rehash of some work previously done. Thus, at the end of the LL.M. programme, students miserably fail to learn research skills or acquire the experience of doing a serious research exercise in the form of dissertation. This is perhaps one of the serious failures of the LL.M. programme. 

Student Quality: One constant complaint of teachers of LL.M. programmes is that the students do not meet the high standards that the course demands. As stated previously, majority students of the pursuing LL.M. in India are from institutions with less rigorous academic standards as compared to the national law schools and other institutions offering such competitive curriculum. The problem with this is that the students are not able to cope up adequately with the higher standards set in the LL.M. programme. As a consequence, faculty members are forced to either bring down the level of the courses or the students being unable to match those standards either quit the course mid-way or do little justice to the course. Ultimately, the LL.M. programme fails to meet its goal. 

Doctrinaire Approach by Faculty Members: Another complaint about legal education in India is that it is not at all reflective of law in practice. This state of affairs is probably due to the lack of law teachers who are well versed with the theory as well as the practice of law. Law teachers who are strong on theory are not able to teach the complexities of law-in-action while law practitioners who teach part-time are neither able to devote substantial time to law teaching nor do make the students learn theory underlying law practice. The research output from students who law training in law-in-motion is often unrealistic. Lack of a practical approach ill-equips the LL.M. students to conduct legal research. This is perhaps one of the fundamental reasons for the relative failure of the Indian legal academia in contributing substantially to legal reform. 

One Year LL.M. Programme: The One-Year LL.M. programme has been heralded by many as a possible turn in revolution in post-graduate legal education in India just like how the National Law School revolution dramatically improved undergraduate legal education. But has it achieved the goal? Given the existence of other problems which remain unresolved, except to benefit the students by making them available to the market one year in advance, the course has not seemed to have brought substantial qualitative improvements in the LL.M. programme. Given the lack of quality in students to undergo the rigours of the LL.M. programme, the two-year course gave sufficient time for the students to improve. However, the one-year course seems too short for the students to have any qualitative improvement.

The second and concluding part would discuss possible solutions to address these problems.

Sasan Power v North American Coal: Part I

Many initial news reports about Sasan Power Ltd. v. North American Coal Corporation India Private Limited said that Supreme Court allowed Indian parties to contract out Indian law or that Indian parties could agree to a foreign seat. Later reports make a little more sense in reporting what the judgement actually meant. Had there not been much publicity about the Madhya Pradesh judgement which preceded the Supreme Court decision, we do not think that the Supreme Court's decision would have surprised (disappointed?) many. There are two judgements in the case- the lead judgement by Chemaleswar, J. and the concurring judgement by AM Sapre, J.  

A crucial question was involved in the case: whether two Indian parties could contract out Indian law? Note that Section 28 of the Arbitration and Conciliation Act, 1996 provides that "Where the place of arbitration is situate in India, a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India..." Note also that Section 28 is in the context of arbitration law. Before this, the facts.

An Indian Company ("Sasan Power Ltd." or "Sasan") and an American company ("North American Coal Corp." or "NACC" or "American Coal") entered into an Agreement in January 2009 for mine development. Let's call this agreement "Agreement I" (as the Supreme Court did). Article XII of the Agreement provided that the Governing Law would be the laws of the United Kingdom" (whatever it meant!- England & Wales, North Ireland or Scotland?) and that dispute resolution would be by ICC Arbitration in London as seat. American Coal established a full owned Indian subsidiary which, for the sake of convenience can be referred to as "American Indian".

Now, Sasan, American Coal and American Indian entered into an Agreement ("Agreement II") whereby North American purported to assign all its rights and obligations with the consent of Sasan to American Indian. Agreement II also provided that American Coal was not relieved of its obligations and liabilities although Sason agreed to the transfer and assignment of the rights of American Coal to American Indian.

Disputes arose. American Coal wrote to Sasan terminating Agreement I and sought to refer the dispute to arbitration. Sasan, interestingly, approached the relevant District Court seeking several reliefs against American Indian (not American Coal, it may be noted). Sasan sought the relief of declaration holding Article XII of the Agreement as null, void, inoperative and unenforceable. Again, interestingly, there was absolutely no relief claimed in respect of Agreement II. 

Eventually, the suit was dismissed. On appeal, the Madhya Pradesh High Court held that where parties decided to resolve their disputes by arbitration in a seat outside India, Part I of the Act would not apply. On this basis, the MP HC held that if the agreement satisfied the requirements of Part II, Part II would apply, in which case the parties have to be referred to arbitration as per Section 45. The Court therefore dismissed the appeal. 

While summarising the MP HC decision, the Supreme Court made an interesting observation (See, para 11 of the SC judgement). The SC acknowledged that one of the grounds of appeal to the SC was that the HC erroneously rejected the contention that two Indian parties could not agree to have their arbitration seated outside India. But the SC stated: "We do not find from the impugned judgement anything to indicate that such a submission was made before the High Court." In other words, the Supreme Court clarified that although the MP HC held valid and enforceable an agreement whereby two Indian parties could agree to a foreign arbitral seat, such a submission was seemingly never made by the parties before the HC (at least from the decision of the HC)! It appears that the counsel of American Coal clarified before the Supreme Court that he was not making that submission. 

Wow! What was happening? Did the Madhya Pradesh High Court draw a rabbit out of the hat?!

In any case, the Supreme Court in Sasan did not decide on whether two Indian parties could agree to a foreign seat, in opposition to the Supreme Court's judgement in TDM Infrastructure. As the Supreme Court clarified in para 12 of its judgement in Sasan, the court confined itself to deciding whether two Indian companies could contract out Indian substantive law.

More on the interesting case in the next post.