When policies go under knife: The Haj Subsidy Decision

The recent incident of review of a policy by the SC was in an interim order of 7th May 2012 relating to Haj subsidy. This was a SLP between UoI and Rafique Shaikh Bikan. The fundamental issue was on the justifiability of the norms of registration of Private Tour Operators ferrying Haj Pilgrims. The SC decided to look into the entire Haj policy and in this leg of the proceeding was reviewing among others the Haj subsidy issue. The court observed the subsidy to be constitutional as it was already found so in an earlier judgment (Prafull Goradia v. UoI) but un-islamic and advised the government to progressively reduce and eliminate the subsidy within a period of ten years. Advised also that the amount so saved shall be employed for the upliftment of the community in education and other social development programmes. The decision has attracted opposing responses for obvious reasons.

I am not intending to enter into the issue visited ad nauseum, whether judiciary can review policy. Rather, I raise the point, how judiciary has reviewed policy in this judgment.

Use of history

The court have extensively used history to understand the reason behind sending goodwill team during Haj before finding it irrelevant as the basic reason no more stands. So also the way the selection to the team is done has less or nothing to do with the objective sought to be achieved.  When it came to the question of Haj subsidy, the court treated it ahistoric and decided that it is something to be discontinued without offering much of reason to hold so.

Haj subsidy was started in 1973 when the government had stopped a cheaper mode of transport that is by sea. To offset the extra cost that the pilgrims will have to bear the subsidy was instituted. That is the reason why even today, the reasonable travel cost is fixed and the over and above killing made by the opportunistic monopoly carrier (Air India) is subsidized by the government. On the lighter side, the subsidy will become irrelevant on the liquidation of Air India, which seems to be much prior to the decade limit kept by the judiciary. The history would have given the judiciary a perspective to understand the policy better.

Reason to discontinue the policy

Ask the court why the policy should be discontinued. Was it adopting a liberal secular stand? (See here for interesting read)  Seems not, nothing to suggest so. On the contrary court apologetically co-opted muslim theology and attempted to establish why should muslims themselves reject subsidy. Apart from this no reason come that easily, let alone legal reason, which anyway will not stand as already a bench of same strength in a writ proceeding had upheld the validity of the subsidy.

Limits of review

This judgment gives an opportunity to visit a frequented area within judicial review scholarship. What is the extent of judicial review to maintain a healthy balance? Though a one-size-fits-all formula is far from desirable, it could safely be said that judicial prescription of alternate policy is far from desirable. The court in the case doles out free advises as how to relocate the resources so saved from discontinuance of Haj subsidy. Were they compelled to be on the safe side to show that though 'we' are withdrawing a privilege 'we' make sure that the community remains to be the beneficiary in another way?

Do we call it justice, sensitivity or appeasement? In any case it does not fall within review.

Break Trust and Be Damned (Even in Government Contracts)

'No trust no more deal' is the commonsense rule of any business. Can the government follow the same line in commercial activities? It should, would be the definite commonsensical answer. The concomitant issue is, can the government act the same way a private person behaves in all aspects of commercial activities. Here the answer starts to branch. Its much more simple and easy for a private person to eliminate a non-trustworthy contract partner for future. One just does not deal with her/firm any more. It is a matter of choice, freedom to contract.

Government contract on the other hand is governed by multiple legal aspects; constitutional and statutory. Art. 298 vests the executive with power to enter into contract with the Union and the State Governments. There are various statutes that regulate the commercial activities of the state. Though contract formation essentially is a private law function the public character of one of the party to the contract, i.e., the government, adds certain extra responsibilities in the contract formation. The government in the deal making is expected to act reasonable, non-arbitrary, and fair so as not to attract the tentacles of Article 14. If that were the case when they break the deal what shall guide them is the question dealt in Patel Engineering v. Union of India, Decided on 11th of May, 2012.

For declining to honour a bid, which was initially been accepted, the Government blacklisted the petitioner for a year. Against which a writ was moved and the rejection of which resulted in the present SLP. The two major arguments of the petitioner were that the government lacked the power to blacklist as it is not incorporated in any of the conditions of tender and the punishment is disproportionate.

The court found the power to blacklist is located in the executive power of the state to carry on trade and business. To decline to do business due to legitimate reasons need not flow from any statute as long as state act rationally, non-arbitrarily and for legitimate purposes. The legitimate purpose is to be determined depending on the facts and circumstances.

The crucial question is of blacklisting. The bid document does not confer any power nor does the corresponding statute, the National Highway Authorities Act. The court still finds the power to blacklist with the state in the following way. " … in our opinion, the failure to mention blacklisting to be one of the probable actions that could be taken against the delinquent bidder does not, by itself, disable the 2nd respondent from blacklisting a delinquent bidder, if it is otherwise justified. Such power is inherent in every person legally capable of entering into contracts."

While concluding the judgment Justice Chelameswar even said that the punishment though was argued to be disproportionate cannot be held so. Rather it is setting an example for future delinquents who may behave the same way with the government. Making an example of the one in hand for the future rest has been the order of the old day that still continues.

Blacklisting by a private person has limited to nil consequence compared to blacklisting by governments. This raises certain issues. In commercial matters should the government be treated at par with private players? Should bigger consequence of being blacklisted by government prescribe a different course of action in a commercial activity? Answer to the first seems to be a conditional yes, as long as they act within the precincts of constitutional restrictions. For the second, though consequence in itself cannot prescribe course of action in commercial activities, the shadow of first answer will take care of the concern in the second.

Notice of Dispute Issued Against the Retrospective Amendments by Vodafone International Holdings BV

News reports suggested that Vodafone International Holdings BV (Vodafone) invoked arbitration under the Agreement between the Republic of India and the Kingdom of the Netherlands for the Promotion and Protection of Investments (India-Netherlands BIT-pdf) in relation to the proposed amendment in the Income Tax Act, 1961 to retrospectively alter the law pertaining to capital gains through indirect transfers of Indian assets  (Livemint).

Vodafone has served a Notice of Dispute invoking Article 9(1) of the India-Netherlands BIT, which reads:

"Any dispute between an investor of one Contracting Party and the other Contracting Party in connection with an investment in the territory of the other Contracting Party shall, as far as possible, be settled amicably through negotiations between the parties to the dispute. The party intending to resolve such dispute through negotiation shall give notice to the other of its intentions."

The purpose of the said Notice of Dispute as it suggests is to settle the dispute in an amicable way. Further, it states that the failure of the Government to respond to the Notice of Dispute or to withdraw the complained amendments to the Act “would establish that the Government of India is not interested in amicable resolution…”

In the Notice, Vodafone has complained that the retrospective amendment to the Income Tax Act, 1961 violated the following provisions of the India-Netherlands BIT:

• Breach of obligation to accord fair and equitable treatment and fill protection and security to the Investment [Article 4(1)]
• Breach of obligation to accord to the Investment treatment not less favourable than that accorded either to investments of its own or investments of investors of any third state, whichever is more favourable to the investor concerned [Article 4(2)]
• Breach of obligation not to subject the Investment to expropriation or measures having the effect equivalent thereto except in the public interest in accordance with law, on a non-discriminatory basis and against compensation [Article 5(1)]

The Notice of Dispute dated 17.04.2012 can be accessed from here.

The Cartoon Politics

Suhas Palshikar responds in today's The Hindu. He raises one plus five thought provoking issues in this piece. Concludes by pointing out the transformation of the understanding of the study of politics from statistical and historical information to dynamic notion of politics in the following words.

Politics is about creating and running institutions; politics is about power and about power being used for various collective purposes; politics is not a sanitised anthem of democracy but a shrill and not so sweet mix of different sounds. This politics produces governance — and sometimes may even fail to produce governance. Politics is ‘good' and ‘bad' — unlike the romantic movie, there are men and women in politics rather than sanitised heroes and heroines and villains and side villains. Is this not a robust and democratic depiction of politics?

When the lapse in the law becomes the defense for judiciary: SC on the petition to inquire into allegations against the chairman of NHRC

The law prescribes a procedure, I follow it but when the procedure is defective to bring justice what shall I do. Approach the court would be the immediate answer. The petitioner in Common Cause v. Union of India, Writ Petition (C) No. 35 of 2012, decided by the SC on 10the May, 2012 prayed for a writ of mandamus to direct the President of India to refer the complaints against the Chairman, NHRC for inquiry on which she has been sleeping over for more than a year. The connivance of the executive need not be specifically stated as the President assumes and court observes that she has to act according to aid and advice of the executive.

The complaint authority sure is the President of India but what is the solution when the President keeps quiet despite such complaints, especially when the complaint procedure does not prescribe time limit for taking actions. The court gets an immediate way out in the relief prayed for, we cannot direct the President as Section 5 (2) of the Act speaks about satisfaction of the President to initiate inquiry and courts can not interfere. The court responded in the following way:

"6. We have given our thoughtful consideration to the solitary prayer made in the instant Writ Petition. It is not possible for us to accept the prayer made at the hands of the petitioner, for the simple reason that the first step contemplated under Section 5(2) of the 1993 Act is the satisfaction of the President of India. It is only upon the satisfaction of the President, that a reference can be made to the Supreme Court for holding an enquiry … As noticed above, the satisfaction of the President of India is based on the advice of the Council of Ministers. The pleadings in the Writ Petition do not reveal, whether or not any deliberations have been conducted either by the President of India or by the Council of Ministers in response to the communication dated 4.4.2011 (addressed to the President of India, by the Campaign for Judicial Accountability and Reforms). It is also the submission of the learned counsel for the petitioner, that the petitioner has not been informed about the outcome of the communication dated 4.4.2011.

7. In the peculiar facts noticed hereinabove, we are satisfied, that the instant Writ Petition deserves to be disposed of by requesting the competent authority to take a decision on the communication dated 4.4.2011 (addressed by the Campaign for Judicial Accountability and Reforms, to the President of India). If the allegations, in the aforesaid determination, are found to be unworthy of any further action, the petitioner shall be informed accordingly. Alternatively, the President of India, based on the advice of the Council of Ministers, may proceed with the matter in accordance with the mandate of Section 5(2) of the 1993 Act."

Section 5 (2) does not make any timeline of action as in so many other legislations. A convenient way out for the executive when does not wish to act on issues that might be inconvenient. This is one issue to be flagged. True, court has not much role here than to point out the lacunae, else, there would be uproar against judicial legislation. It is another fact that the bench ignored this anomaly in law to be highlighted.

Next is an issue of constitutional importance. Is there anything the law prescribes about the satisfaction of the President, if so, is the satisfaction solely bound by the will of the executive.

Here is the reading of Section 5 (2)

"the Chairperson or any other Member of the Commission shall only be removed from his office by order of the President on the ground of proved misbehaviour or incapacity after the Supreme Court, on reference being made to it by the President, has, on inquiry held in accordance with the procedure prescribed in that behalf by the Supreme Court, reported that the Chairperson or such other Member, as the case may be, ought on any such ground to be removed."

The provision does not seem to give power to the President to withhold reference to the SC. It may be convincingly argued that the position of the President is not to act as a mere clearing and forwarding centre that it mindlessly forward all such complaints to the SC but is a well thought after filter mechanism.  The observation made by the court that "the satisfaction of the President of India is based on the advice of the Council of Ministers" raises a further issue. Is the President bound by the advice and have to wait ad infinitum for a nod? Two issues; first, totally basing the action of the president on the advice of the executive is concentration of power, the appointing authority being the executive seldom there is a chance that it may refer the matter for inquiry unless there is a change of government. Second, the President then is not a filtering mechanism but an extension of the executive without any real power.

Therefore in the context of issues arose it will be beneficial that section 5 (2) is amended to figure-in timeline for action on the complaints and to clarify that the President's action is not solely dependent on the advice of the cabinet but it is a power vested in the office to be exercised conjointly with the executive with clear mandate with the President to override the advice in befitting cases as the matter will anyway go under the scrutiny of the apex court of the nation. This clarification would have sounded better from the Judiciary.

Recent Developments in India on Foreign Arbitrations- Videocon & Agritrade

In this very short post, we take note of a couple of interesting developments in India concerning foreign arbitration.

Agritrade International v. NAFED 2012(1) Arb LR 405 (Delhi):

Agritrade International v NAFED (Agritrade) relates to a foreign arbitral award that was passed in favour of Agritrade International directing National Agricultural Co-operative Marketing Federation of India Limited (NAFED) to pay USD 580,000 plus pre-award interest at 8% and post award interest at 8% plus costs. Agritrade filed a petition for execution of the arbitral award. NAFED objected to the enforcement on the ground that there was no concluded contract between the parties. A Single Judge of the Delhi High Court found that Agritrade had neither complied with the requirement of Section 47(1)(b) of producing the original arbitration agreement or a duly certified copy thereof even after affordign adequate opprotunity nor was there any concluded contract between Agritrade and NAFED. The court refused enforcement of the award on the ground that the enforcement of the award would be contrary to the public policy of India. A couple of questions here- (1) Shouldn't the court have examined whether to refuse enforcement on the ground mentioned in Section 48(1)(a) ("...agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.")? (2) If the court should have examined whether to refuse enforcement under Section 48(1)(a) for the reasons stated, has the Delhi High Court impliedly followed the Supreme Court in reading public policy in a wider manner (See, Phulchand Exports Ltd. v. OOO Patriot) and disregarded  Penn Racquet Sports v. Mayor International Ltd.?

Union of India v. Videocon Industries Limited 2012(1) Arb LR 416 (Delhi) 

In mid-2011, the Supreme Court had passed a controversial judgement in Videocon Industries v Union of India regarding, among other things, whether there was a transfer of seat from Kuala Lumpur to London in arbitration proceedings under the Production Sharing Contract. Our comments criticising the judgement can be accessed from here. The Supreme Court had held that there was no transfer of seat from Kuala Lumpur to London and therefore the forum for challenge of arbitral award was Malaysia and not UK. Despite the judgement of the Supreme Court, Videocon pursued proceedings pertaining to the arbitration in London. These proceedings were in the nature of those dealt with by the courts of the seat of arbitration. Therefore, Union of India filed a suit in the Delhi High Court praying for injunction to be granted against Videocon restraining it from pursuing the said proceedings in the London court. A single judge of the Delhi High Court granted the same. It may be noted that in a previous post, there was no necessity for the Delhi High Court and the Supreme Court to deal with the issue as to the seat of arbitration in the proceedings under Section 9 in the first place and hold that the “governing procedural law is yet to be determined”. Videocon’s argument was that in view of London as the choice of seat of the parties, Part I was impliedly excluded. Union of India contended that Malaysia was the seat of arbitration. The question as to whether London or Malaysia was the seat of arbitration was immaterial in deciding whether Part I was excluded impliedly because the argument was that the choice of a foreign seat had impliedly excluded applicability of Part I. So the court had to simply decide whether the choice of a foreign seat, of English Law as the law of arbitration agreement and of Indian law as the substantive law of contract excluded the applicability of Part I. It would be interesting to see if Videocon goes on appeal from the order of the Single Judge

Tareek Pe Tareek

Recently in news is the out of court settlement by the legal heirs of the unfortunate victims in the Enrica Lexie incident and legalizing it through the Permanent Lok Adalat. Experts says, it is nothing but a wise decision on the part of the family as the maximum compensation awarded would have been anything between 10 to 17 lakhs, and God only know when that would have be.

The culture of settlement for pragmatic reasons and the justification of delay and inadequate compensation is not something new. We have heard it from Bhopal days and sometimes even sugar coated with the idea of harmony. The real question in Bhopal and even here remains -whether this settlement was voluntary? It is not the suggestion that someone might have coerced the legal heirs or unduly influenced them. Was it their choice is the question. I would say that they were left with no choice but to settle given the discredited judicial system. Choice would have been real had they had a real chance to fight it out in the court and yet chose to settle. A truly volitional settlement would results in harmony not when one settles because they are prey of an inefficient legal and judicial system. 

The larger issue is the rapidly eroding credibility of our legal system, which has already given rise to private justice, at times to dangerous magnitude of public lynching of accused persons. The primordial instinct of revenge is channelized in a civilized society through the state centric system of punishments. It is this system that is on the verge of collapse.

I held breath after giving a query in Google, 'average lifetime of a suit in Indian judiciary', apprehending that it might bring a result - infinity. Though relieved not to get the expected, the result was disquieting - a lifespan which may range from anything between 15 to 25 years. The Supreme Court accepts a conservative estimate of three crore as the tally of pending cases in all courts put together. This figure in all probability is ill-fated to remain a statistics, while the agonizing stories behind it ignored like that of Shambhu Nath Mukherjee who started litigation against a dismissal order in 1965 and fought his way up to Supreme Court twice and the third time when the case reached Supreme Court he had became Late Shambhu Nath Mukherjee. Fittingly the Supreme Court described it as 'a fight between Goliath and a dwarf', the saga of the life experience of an average Indian litigant. (Delhi Cloth And General Mills Ltd. v. Shambhu Nath Mukherjee AIR 1985 SC 141)

Lately Supreme Court in the case of Ramrameshwari Devi v. Nirmala Devi, (2011) 8 SCC 249 - a litigation commenced in 1979 and is still pending - once again expressed anguish about the long pendency of cases while disposing of the appeals with an exemplary cost of Rs. 2,00,000/- noticing the dilatory tactics used by the litigant to 'harass the respondents and their children till eternity by abusing the judicial system.' A natural response by any would be 'is our judicial system so vulnerable abused and used to make a travesty of justice?' if so, what has the judiciary and the concerned Ministry done to undo the malaise. The system is yet to find an answer but people seems to have found one, 'do not repose faith in judiciary.' The irony is that access to justice and right to speedy trial are judicially recognized fundamental rights.

The delay in justice delivery and inefficiency plaguing the delivery system has been in vogue for a long time. Law Commission of India in its 188th report suggested a way out for high stake commercial litigation to bypass the queue and be tried in Commercial Division that may be established in each High Court, which will be techno savvy and will accept online petitions and have video-conferencing facilities. The objective is to bring down the longevity to a worldwide acceptable level of two years as pendency period. This may bolster the faith of the business class but will fall short to address the eroding confidence of the masses. Two years back the then Minister for Law and Justice had declared National Legal Mission to reduce the pendency to three years, which each States were expected to follow up with policies on similar lines. The Mission seems to have ended at the beginning. 

The reasons for long life of litigation are aplenty. From infrastructural deficiencies, archaic procedural laws to manipulation by the litigants. Different bodies and institutions also by far have contemplated solutions but results seem to be hard to come by. Fragmented approaches of finding solutions in the establishment of special courts, alternate dispute resolution mechanisms, sporadic introduction of court management techniques do not seems to work. A concerted effort at making realistic plan outlay, budgetary provisions, targeted central support to states, overhaul of procedural and substantive laws, efficient and sustainable court management system, sound litigation policy for government agencies, infrastructural and human resource development and judicial accountability is to be worked out. Else the fundamental right to access to justice will remain a chimera and people will be forced seek private justice and the rule of the jungle than the rule of law will be the outcome.