"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Monday, January 28, 2013

Kishanganga Arbitration: Pakistan v. India: Hearing on Merits

Image from here
Previously, we had blogged about the arbitration between India and Pakistan under the Indus Water Treaty, 1960 (the previous sixteen posts can be accessed from this label). The hearing on merits took place in August 2012. The PCA Rules of Procedure provides: “[t]he Court shall endeavour to render its Award within 6 months of the close of the hearings." Hence, the award could be expected to be published by the end of February 2013. Two issues appear to be the crux of the case of Pakistan:

"1. Whether India’s proposed diversion of the river Kishenganga (Neelum) into another Tributary, i.e. the Bonar Madmati Nallah, being one central element of the Kishenganga Project, breaches India’s legal obligations owed to Pakistan under the Treaty, as interpreted and applied in accordance with international law, including India’s obligations under Article III(2) (let flow all the waters of the Western rivers and not permit any interference with those waters) and Article IV(6) (maintenance of natural channels)? [the “First Dispute”]
2. Whether under the Treaty, India may deplete or bring the reservoir level of a run-of-river Plant below Dead Storage Level (DSL) in any circumstances except in the case of an unforeseen emergency? [the “Second Dispute”]
India proposed to construct a dam (KHEP) across the Kishanganga/ Neelum, a tributary of Jhelum river.The dam's design was to divert the river from the dam site (located at higher elevation) to another tributary of Jhelum, Bonar Madmati Nallah (located at lower elevation). From the difference in elevation, water current was to be created and hydroelectricity (330 megawatts) was to be generated through rotation of turbines by the diverted water. Since the diversion would bring a lot of sediments into the KHEP reservoir due to the design, a technique known as draw-down flushing technique is proposed to be used by India.Accumulation of sediments in the reservoir lessens the storage capacity of the reservoir. It is estimated that the annual loss of storage capacity in reservoir due to sediment accumulation if 0.46% in India and 1% worldwide (Liu, J., Liu, B.Y., and Ashida, K., "Reservoir Sedimentation Management in Asia", Advances in Hydro-Sciences and Engineering, 5th International Conference on Hydro-Science and Engineering, Warsaw, Poland, 2002). Hence, several methods are employed to manage sediments, which are:
  • Water shed management
  • Sediment flushing
  • Sluicing
  • Density current venting
Of these methods, sediment flushing is the most widely used for its economy and effectiveness. Two methods of sediment flushing are commonly used- complete draw-down flushing and partial draw-down flushing. In complete draw-down flushing, the reservoir is emptied before the flood season through low level outlets located near the reservoir bed. This creates a river-like situation where there is water flow along with sediment flow through the outlets. in KHEP the employment of draw-down techniques would bring the storage level in the reservoir below the Dead Storage Level as defined in Para 2(a), Annexure D of the Treaty are reproduced below:
“Dead Storage” means that portion of the storage which is not used for operational purposes and “Dead Storage Level” means the level corresponding to Dead Storage.
This, according to Pakistan is impermissible under the Treaty.

Contentions of India and Pakistan are summarised below:

Pakistan (Petitioner):
  • A treaty was necessary between the parties as mutual co-operation at that historical juncture was impossible. Hence, the Treaty inked was by both parties after "painstaking negotiations" of ten years.
  • The fundamental premise of the historic Indus Water Treaty is that India should not interfere with flow of the Western Rivers of Indus System which has been allocated to Pakistan. India's plan to divert Kishanganga/ Neelum is in breach of this fundamental premise of the Treaty.
  • Through the Treaty, both parties have been apportioned the rivers of the Indus System and the rights and obligations of both parties are strictly delineated. Hence, the Treaty should be interpreted in its ordinary meaning and in case of ambiguity, interpretation should take into consideration the precise delineation of the rights and obligations under the Treaty.
  •  Article III of the Treaty obligates India to "let flow" and "not permit any interference with" the Western Rivers (the Indus, the Chenab, the Jhelum and their tributaries, including the Kishenganga/Neelum). this obligation constitutes the essential element of the delineation in the Treaty. The purpose of the obligation is to prevent India from "manipulating" the water flow to Pakistan's detriment.
  • The only exception as regards the Western Rivers is provided in Article III(2) of the Treaty. As per this provision, India could use the Western River waters for certain purposes such as for hydroelectic generation but through"run-of-river" projects. The Treaty strictly regulates the right to use the Western Rivers for such purposes, including through Annexure D which creates restrictions on hydroelectric generation.
  • Particularly, the Treaty does not permit intra-tributary transfer of water and such an act is contrary to the general obligation to "let flow" and "not permit any interference with" the Western Rivers.
  • India is specifically obligated under Para 15, Annexure D of the Treaty (quoted below) to deliver into the river below the hydroelectric plant the same quantity of water it received during the 24 hour period.
"Subject to the provisions of Paragraph 17, the works connected with a Plant shall be so operated that (a) the volume of water received in the river upstream of the Plant, during any period of seven consecutive days, shall be delivered into the river below the Plant during the same seven-day period, and (b) in any one period of 24 hours within that seven-day period, the volume delivered into the river below the Plant shall be not less than 30%, and not more than 130%, of the volume received in the river above the Plant during the same 24-hour period..."
  • The exception to the above rule contained in Para 15(iii) to Annexure D permits diversion from one tributary to another but only when such diversion is "necessary". This however does not mean that India can permanently divert the waters from one territory into another simply to create a potential for hydroelectric generation. "Necessity" can only mean diversion from time to time and that too for emergency purposes such as "emergency exit".
"Provided however that :
(iii) where a Plant is located on a Tributary of The Jhelum on which Pakistan has any Agricultural use or hydro-electric use, the water released below the Plant may be delivered, if necessary, into another Tributary but only to the extent that the then existing Agricultural Use or hydro-electric use by Pakistan on the former Tributary would not be adversely affected
  • The above said provision also prioritises downstream agricultural or hydroelectric use by Pakistan and requires India to adjust its use so that it shall not affect the use by Pakistan. If KHEP is built, Pakistan will be adversely affected. During lean season, the project would divert the entire waters of Kishanganga/ Neelam and up to its design capcaity of 58.4m^3/s during peak season. This would result in significant loss in power generation and revenue for downstream N-JHEP of Pakistan and any other future power project. Pakistan has been informing India of this since the commencement of KHEP.
  • Article VI(6) of the Treaty reproduced below obligated India to conduct downstream impact assessment of the KHEP which India failed to do. Expert evidence showed that reduced flow in Kishanganga would have an adverse environmental impact on the downward reaches of the river.
"Each Party will use its best endeavours to maintain the natural channels of the Rivers, as on the Effective Date, in such condition as will avoid, as far as practicable, any obstruction to the flow in these channels likely to cause material damage to the other Party."
  • Employment of draw-down flusing for sediment management is prohibited by the Treaty. Further, such a method would give India control over the timing and volume of flow of water downstream of the dam which is not permissible under the Treaty. Further such technique will have adverse environmental impact downstream of the dam. Hence, India should employ alternative sediment management methods.
More on hearings in the next post.

Sunday, January 27, 2013

Extension of Deadline for Submission in Indian Journal of Arbitration Law

Received this email from the Indian Journal of Arbitration Law (excerpt):

"On the request of students and the professional community the Indian Journal of Arbitration Law has decided to further extend the deadline for the Second Issue.
Due to technical issues the same has not been changed on www.ijal.in however it shall updated as soon as possible.

Manuscripts may be submitted via email to info@ijal.in and editor.cartal@gmail.com latest by February 15, 2013."

Wednesday, January 16, 2013

Case Comment: Denel Proprietary v. Ministry of Defence

In this post, we analayse a fairly old decision of a single Judge of the Supreme Court of India in Denel Proprietary v. Ministry of Defence, Government of India (decided on 09.01.2012).

The Ministry of Defence, Government of India (MoDS) placed an order on Denel Proprietary Limited (Denel) for the supply of certain units of an equipment. Some of the units supplied by Denel were rejected by MoD. Subsequently, MoD put hold to all the contracts with Denel. Denel contended that the rejected units failed due to the use of improper items by MoD. Disputes arose. Clause 19(4), the arbitration clause in the contract, provided: 
"All the disputes and difference arising out of or in any way touching or concerning the agreement (matters for which the decision of a specific authority as specified in the contract shall be final under this agreement, shall not be subject to arbitration) shall be referred to the sole arbitration of the Director General, Ordnance Fys. Govt. of India for the time being or a Government servant appointed by him. The appointee shall not be a Govt. Servant who had dealt with the matters to which this agreement relates and that in the course of his duties as Govt. Servant has had not expressed views on all or any of the matter is in dispute or difference. In case the appointed Govt. Servant in place of the incumbents."
Apprehending bias, Denel wrote to the arbitrator invoking Section 14 of the 1996 Act and terminating the mandate of the arbitrator. The arbitrator nevertheless proceeded with the arbitration. Consequently, Denel applied to the District Court which terminated the mandate of the arbitrator and ordered the Director General, Ordnance Factory, Govt. of India to either act as the arbitrator or nominate the arbitrator as per the contract. The Director General, Ordnance Factory, Govt. of India did not take any action pursuant to the said direction within thirty days. Hence, Denel approached the Supreme Court of India under Section 11(6) of the 1996 Act on 02.03.2011 for the appointment of an independent arbitrator.


Denel contended as follows:

1.      The District Court acted without authority by erroneously directing the Director General to be the sole arbitrator or appoint his nominee as arbitrator when no such power is contemplated under Section 15 of the 1996 Act.
2.      Since the dispute is between an arm of the Government of India and Denel, the Director General would be disqualified to be appointed as arbitrator as he, as a government servant, is always bound by the directions of the Government and would not be independent or impartial.
3.      The Director General colluded with MoD and appointed the arbitrator without any notice to Denel.
4.      The correspondences show that the Director General was directly involved in the dispute. Vide letter dt. 30.06.2008, the Director General had specifically stated that Denel was to replace the rejected equipments.
5.      In any case, the Director General failed to appoint the arbitrator in compliance with the directions of the District Court.   

In reply, MoD contended as follows:

1.      The application under Section 11(6) (dated 02.03.2011) was not maintainable as MoD had appointed the substitute arbitrator ad directed on 16.03.2011.
2.       The Supreme Court has held valid arbitration clauses in which an employee of the Respondent was a party in cases such as Indian Oil Corporation v. Raja Transport (2009) 8 SCC 520.


Summary of the decision of the Supreme Court is as below:

1.      There is no time limit fixed under Section 11(6)  unlike Sections 11(4) and (5) where a thirty day period is fixed. Although, there is no such time limit, there is a right to appoint within thirty days but on expiry of the said period, the right does not automatically get forfeited. The right exists till the other party applies to the court for appointment.
2.      On facts, the mandate of the earlier arbitrator was terminated by the District Court and a thirty day period was available to the DGOF. Since no arbitrator was appointed and since Denel approached the court under Section 11(6), DGOF had forfeited the right to be, or to appoint, the arbitrator.
3.      It is settled law that arbitration clauses providing for senior employees of government/ PSUs as arbitrators in disputes involving such agency/ PSU are valid.
4.      Generally, while exercising powers under Section 11, the court implements the agreement between the parties to appoint arbitrator. However, in the peculiar circumstances, which the records indicate, Denel was effectively denied opportunity by the arbitrator. Hence, there is reasonable apprehension that the person mentioned in the arbitration agreement is not likely to act independently or impartially as arbitrator.
Consequently, the court appointed a retired Chief Justice of Madras High Court as the arbitrator.


Where the court is of the view that it needs to divert from the norm of implementing the arbitration agreement, it should clearly spell out the factual circumstances which has made it to go for the exception. Apart from holding the following, the court has failed to spell out the relevant facts clearly: 
In the present case also, Mr. Naphade has made reference a to various notices issued by the arbitrator, none of which were received by the Petitioner within time. Therefore, the Petitioner was effectively denied the opportunity to present his case before the Sole Arbitrator.

It is doubtable whether receipt of notices late by Denel would per se indicate that the arbitrator was not independent or impartial. In cases, circumstances indicated absence of independence or impartiality, the same should come out clearly.

Further, the arbitration clause provides for arbitration by DGOF or his nominee. The finding of the court was that the nominee of the DGOF had denied opportunity to Denel and not the DGOF. Hence, shouldn't it have asked the DGOF to be the arbitrator or appoint his nominee as arbitrator, unless there was a specific finding that the DGOF was biased or that he has failed to appoint an unbiased or independent nominee?

Wednesday, January 9, 2013

Keep the fire burning - random thoughts post Delhi incident

Emotions ran high in past few weeks, so were discussions, analysis, claims for new and stringent laws. The canvass of discussions got unprecedentedly wide thanks to the media focus and efforts. Statistics, law, sociology, psychology, juvenile delinquency all got featured in the discussions. The heat and dust is slowly settling down though a rest in peace is far from possible in the minds of concerned human beings. Mathura still haunts our conscience and this is set for another long haul.

The incident was seen as living example of the increasing rate of violence against women in India. Women's dignity, rights and freedom has been in the forefront of discussions. Claims are for more laws, stringent laws and capital punishment and even invasive therapies to sexually defunct the offender. Without ignoring the women's rights, dignity and freedom issues involved, I would like to see this in a larger perspective.

The moot question in very mind is why such incidents are repeatedly happening? Answer to this is multidimensional. The societal outlook towards women, the social conditioning experienced by children (of either gender), sexual depravity due to social and psychological reasons, law and its response to criminal cases in general and rape cases in particular contribute to recurrence of such incidents.

The present incident should be an eye opener about the systemic failure which also is a cause. Often it is said that every crime comes with a price tag. Punishments are the promises made to the offender that he/she will be made to pay the price. Though a very rudimentary approach in penology, this becomes one of the moot points today. Chances are much higher, given the conviction rate of the day, that crimes can very well escape the payment. Then what stops a person from not committing crimes is his/her own value system. Law/legal system fails to keep its promises.

More than severity of punishment, which mostly would call for stringent standards of proof and lesser rate of conviction, it is certainty of punishment that will help to keep the crime rates in check. What we would need beside social and contextual changes would be a legal system that keeps its promises.

A police system in which one could place trust to investigate efficiently and impartially that one would be confident to file a complaint. A judicial system which responds efficiently and conduct time-bound prosecution and final resolution. A reformative system in correctional houses that will address the requirements of individual convicts. Above all, a political system which can keep its political preferences at bay and act corrupt free.

Writing above, what rings in my mind is that I am asking for the impossible, this much is never going to happen. I guess this belief is what has kept us lagging for long, that nothing would be done. The way public took to street on recent two occasions if nothing is an indicator that people will not take things lying down always. It is this flame that need to go on, the vigil till there is a systemic overhaul, become iconoclast if need be.