"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.

Tuesday, February 27, 2018

Transfer of Arbitral Awards to Court of Execution is Unncessary: SCI Clarifies

Way back in 2011, we did a post providing a descriptive comment on the decision of the Madras High Court in Kotak Mahindra Bank Ltd. v Sivakama Sundari S Narayana S B Murthy where it was held that it was not really necessary to file the award in the court within whose jurisdiction the award was transferred for the purposes of executing it in another court. But some High Courts had held that it was so required as the Code of Civil Procedure, 1908 necessitated it in the context of decrees and that since the arbitral award was deemed to be a decree, the execution of the arbitral award had to also undergo the same rigour. 

In view of the divergence in views of different High Courts, the Supreme Court has clarified the legal position, correctly, in the case of Sundaram Finance Ltd.v. Abdul Samad. This presentation provides a descriptive comment of the judgement of the Supreme Court.

The presentation concludes by arguing that the vestigial requirement of filing the award in the court having jurisdiction over the arbitration for onward transfer to the executing court had the effect of only delaying the award holder from enjoying the fruits of the arbitral award and that the decision has paved way for an easier and more efficient execution of arbitral awards. 

This begs a larger question: Is filing a decree in the civil court which passed the judgement really necessary? 

Wednesday, February 21, 2018

Further Updates on the Nissan- Government of India Treaty Arbitration

Readers would recollect that we had done a post on the invocation of investor treaty arbitration by Nissan against the Government of India for the default committed by the State of Tamil Nadu. In the presentation uploaded in the post, we had noted that the State of Tamil Nadu had filed a petition in the Madras High Court seeking an anti-arbitration injunction against Nissan from proceeding with the arbitration. Nissan had filed a counter in the Madras High Court stating, among other things, that the Government had filed the suit belatedly after 10 months from the invocation of arbitration (February 2017)

Nissan had also moved an anti-suit injunction seeking to restrain the Government from proceeding further in the suit. 

Newspapers report that Nissan is now mulling withdrawal of the application for anti-suit injunction. It appears that the application it filed with the tribunal, whose seat is at Singapore, could not be taken up by the tribunal owing to the Chinese New Year. These submissions were made in the Madras High Court in the recent hearing held in the matter. The Judge has posted the matter on 27 February to enable Nissan's counsel to obtain instructions from his client on the anti-suit injunction it sought from the tribunal. 

The newsreport from the Hindu can be accessed from here.

It also appears that against the arbitration notice, the Government had raised jurisdictional issues and had appointed Justice JS Khehar (former Chief Justice of India) as its nominee arbitrator. It also appears that Nissan had no objections to the tribunal bifurcating the arbitration by deciding the jurisdictional issues first. (See this newsreport)

We'll keep the readers posted on further proceedings in the matter.

Monday, February 19, 2018

Lok Prahari and the Aesop's Fable

The Supreme Court of India resembled the council of rats in Aesop's fables while deciding Lok Prahari v. Union of India. Everyone knew the necessity to rein in the unscrupulous politicians who amass wealth merely by being a legislator or position of power in a political party. The petitioner presented a list of legislators who had 500% enhancement in assets within the span of a single term in legislature. The ultimate question is what the wise old mouse asked, who would bell the cat?

The chequered history of attempts to control ‘money power’ in elections exposes sporadic efforts by the judiciary, which were undercut systematically by the executive and legislature. The legislative inaction does not surprise anyone as our politicians aren't that dumb to kill the goose laying golden eggs.

The acrobatic manoeuvres our elected members of central government and legislature featured to avoid the impact of ADR judgment [(2002) 5 SCC 294] is alive for anybody who follows India’s electoral laws. (Read pages 14-19 of the Lok Prahari judgment for a summary). 

Had there been political will and resolve, the nudge in ADR would have been enough to gain ground in regulating unjust enrichment by our elected representatives. In para 48 (3) of ADR the court had mandated declaration of the following with nomination:

(3) The assets (immovable, movable, bank balance, etc.) of a candidate and of his/her spouse and that of dependants. 

If this was followed up guided by the spirit of democracy, Jay Shah, Amit Shah’s son would not have had golden touch at his finger tips. Binoy Vinodhini Balakrishnan, son of a veteran Marxist politician would not have been in a position to get sizable amount of loan from an entity in Dubai and land up in a scandal. Interestingly his dues have been recently paid off by undisclosed business person/s. Bineesh Kodiyeri another son just happened to be the Vice President of Mr. Ravi Pillai’s firm. Questioning his qualification for the post wont fetch any tenable answers other than being the son of Mr. Kodiyeri Balakrishnan.

Lok Prahari asked the court to address such problems and the judiciary prescribed some solutions, which needs legislative and executive backing. Ironically, the same group of people who benefit out of inaction. One has to be extremely wishful to expect the legislature to act.

The cat of the folklore will continue to maraud the rats as yet another indicator of a dying democracy. 

Friday, February 16, 2018

Citizens United - Guns – Electoral Bonds in India

An aspect where both the majority and minority opinions in Citizens United v. FEC 558 U.S. 310 (2010) united was on the value of section 203 of Bipartisan Campaign Reform Act, 2002 to democracy. The majority sustained the disclosure norm in section 203 about political contribution, though restriction on political funding was taken down citing first amendment. 

In the wake of yesterday’s Florida School shooting, the President of United States addressed the nation, carefully avoiding the word gun being mentioned even once. The Guardian reports that seven weeks into 2018 there has been already eight shootings in US Schools. Too many too soon to ignore about the issue of guns but only to focus on the mental health of the alleged shooter, especially since shooter is a white American which leaves out other possible narratives. Incidentally one of the first Bills this President signed was to ease conditions for procuring guns by people with mental illness. 

This raises two questions, why should a President do something like enabling mentally ill persons to legally possess guns and what prevents the President from calling the spade what it is. To develop the question further, why does the congress consistently failing to legislate on guns within permissible limits, which any sensible legislature would do? Why are the State legislatures relatively silent on the issue?

Answer to all questions is writ large on the power gun lobby wields in US politics, through electoral funding. The dynamics of lobbying is such that the National Rifle Association and allied actors can sway representatives through contributions.

Citizens United facilitated flow of funds to political parties aiding purchase of policies and laws but did not obliterate the trail of money. Justice Stevens in his dissent had mentioned that ‘a democracy cannot function effectively when its constituent members believe laws are being bought and sold.’ in US at the least there still exist a posibility to link the actions of politicians to their donors as there is disclosure of fund flow. 

India has recently introduced a new form of election funding through ‘electoral bonds.’ These bonds of specified values are issued by designated Banks, which can be bought and presented to preferred political party/ies. The political party need to declare the receipt of encashment of bonds in its Income Tax returns. 

The electoral bonds will keep public completely out of loop and will not reveal who contributed to whom. 'We the people' will have no idea who has bought and sold the law and policies governing ‘us,’ the most dispensable commodity in Indian democray. Government through bank and IT returns will have clear idea who has contributed to whom helping them to profile contributors to rival political parties. Politcal parties will know their benefactors and therefore whose interst to cater. Paradox is that Mr. Arun Jaitly tout this as a step towards transparancy in political funding.

In US, when they are hit by a bullet at least they know who paid for it.

Wednesday, February 7, 2018

Proceedings under Section 34 of the 1996 Act in the District Courts

Many District Courts which hear applications under Section 34 of the Arbitration and Conciliation Act, 1996 in the State of Tamil Nadu adopt different procedures in hearing those applications. Some District Courts have even insisted on oral evidence in the matter. The problem is mainly owing to the lack of guidelines in the civil rules of practice or any other guidelines. This state of affairs is infinitely compounded by the decision of the Supreme Court in Fiza Developers & Inter-Trade P. Ltd. v. AMCI (I) Pvt. Ltd. where the Supreme Court observed:
"The applicant is permitted to file affidavits of his witnesses in proof. A corresponding opportunity is given to the defendant/respondent to place his evidence by affidavit. Where the case so warrants, the court permits cross-examination of the persons swearing to the affidavit. Thereafter, court hears arguments and/or receives written submissions and decides the matter. This is of course the routine procedure."
The court had also ruled that the court under Section 34 was not obligated to frame issues. As stated in Para 6 of the judgement, the question that arose for consideration before the Supreme Court was whether issues have to be framed. The above quoted observations, therefore, have to be taken as obiter. Even some prominent commentaries tend to critique the above quoted part of the judgement in Fiza Developers. [See, for instance, Indu Malhotra, OP Malhotra's The Law & Practice of Arbitration and Conciliation 1276, where the author says that the observations relating to permitting evidence in proceedings under Section 34 requires reconsideration- the author wrongly refers to the para number as para 31 of the judgement. The total number of paras in the judgement is only 15, at least in the copy uploaded in the website of the Supreme Court. The correct para reference should be para 14] 

In any case, the above quoted decision should be treated as obiter. Further, these observations may make sense only in the limited cases where the certain facts providing grounds for setting aside an award emerge after the award is passed. For instance, a party is able to obtain certain documents or information relating to the relationship between the arbitrator and the other party after the award is passed. In such cases, the party seeking to challenge the arbitral award on such a ground may be permitted to place his evidence by affidavit and the other party could be permitted to cross-examine. Such evidence should be limited only to the facts that emerged or which came to be known post the arbitrator reserving the award or after the award. 

The proper procedure that is to be followed by a District Court hearing an application under Section 34 of the Arbitration and Conciliation Act, 1996 is to call for records from the arbitrator or to ask if the parties were willing to produce copies of the arbitral record by consent and then proceed to hear the grounds.

The proceedings under Section 34 of the 1996 Act are in the nature of summary proceedings and are not appeal proceedings under the Code of Civil Procedure, 1908. The parties to the proceedings under Section 34 are to ordinarily confine to their pleadings and evidence presented before the arbitral tribunal. 

Insofar as the State of Tamil Nadu is concerned, the law on the issue has been aptly summarised in the case of Brick Steel Enterprises v. The Superintending Engineer, Public Works Department 2006 (5) CTC 519: MANU/TN/1463/2006, the High Court of Madras observed: 
The scope of Section 34 is very limited one and whatever documents filed earlier by the parties before the Arbitrator can be filed before the court to support the respective claim. Any new document or new plea would not be entertained while filing the application for setting aside the award under Section 34 and the letting in oral evidence also could not be entertained. If such letting in of oral evidence is allowed, it amounts to enlarging the scope of restricted provision, similar to an appeal proceeding. In the present case the lower Court permitted to take de novo trial by letting in evidence and accepting new documents for the first time which totally alien to arbitration proceedings.” 
The Hon’ble High Court further observed:
After considering the judgments cited supra, I am of the view that while filing the application for setting aside, parties are not entitled to letting in oral evidence and not allowed to file a fresh document or raise a new plea for the first time before the Court. They are only permitted to file documents which were already filed and considered by the Arbitrator alone, before the Court for the purpose of supporting their claim.” 
The District Courts in the State of Tamil Nadu will do well to follow this judgement of the High Court of Madras in Brick Steel Enterprises. An award-debtor will typically look for ways to have a second chance at leading evidence in Section 34 proceedings. Courts have to be wary of attempts to derail the arbitral award or delay the award-creditor from enjoying the award proceeds.

Thursday, February 1, 2018

(A Lot) More on Reciprocal Arrangement Countries under the Arbitration & Conciliation Act, 1996

Recently, we did a post in this blog titled "(Nothing?) More on Reciprocal Arrangement Countries under the Arbitration & Conciliation Act, 1996" where we discussed another post titled "Reciprocal Arrangement Countries under Section 44 of the 1996 Act" in this blog penned about four years back on the countries which the Government has notified as having made reciprocal provisions for the enforcement of the New York Convention.

To recap, Section 44 of the 1996 Act defines the term "foreign award" for the purposes of Chapter I, Part II of 1996 Act to mean, among other things, an award made in one of the territories to which the New York Convention, 1958 (Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958) applied and the Central Government had notified that such a territory made reciprocal provisions for enforcement of awards made in India [S. 44(b)]. 

The territories notified under Section 44(b) of the 1996 Act: Singapore, Malaysia, Canada, Australia, China, Hong Kong SAR and Macao SAR, and Mauritius. The notifications (provided in the previous post) are available here

We had noted in the previous post that by virtue of Section 82(2)(b) of the 1996 Act {which reads: "(2) Notwithstanding such repeal-...(b) all rules made and notifications published, under the said enactments [Arbitration (Protocol and Convention) Act, 1937, Arbitration Act, 1940, and Foreign Awards (Recognition and Enforcement) Act, 1961] shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act."} notifications issued under Section 2 of the Foreign Awards (Recognition and Enforcement Act, 1961 are deemed to have been issued under the 1996 Act. Section 2(b) contains provisions virtually identical to Section 44(b). Section 2(b) reads: "In this Act, unless the context otherwise requires," foreign award" means an award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960 -... (b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be territories to which the said Convention applies."

We had further noted that this blogger had filed an RTI application with the Ministry of Law and Justice seeking notifications issued under the 1961 Act but the PIO had given the notifications under the 1996 Act (See the reply of the CPIO). Thereafter, this blogger had filed an RTI Appeal, to which the Appellate Authority issued the following order dt. 18.01.2018: 

"Please refer to your appeal dated 23.12.2017 received on 10.01.2018 regarding furnishing of information sought under RTI Act, 2005.
2. Your appeal has been examined and it is found that CPIO has provided you the information in respect of notifications issued under the Arbitration & Conciliation Act, 1996 in place of the Foreign Awards (Recognition & Enforcement), 1961. Therefore, CPIO is directed to provide information within two weeks in respect of notifications issued under section 2 of the Foreign Awards (Recognition & Enforcement), 1961.
3. The Appeal is disposed of accordingly."

Vide Reply dt. 24.01.2018, the CPIO gave information on about 11 notifications issued under Section 2 of the 1961 Act. The entire sequence of events pertaining to the RTI application is narrated above to point out the efficacy of the RTI Act and the spirit in which the officials of the Ministry of Law and Justice disposed of the RTI application. 

The notifications provided now by the Ministry covers several territories mentioned in the previous post. The list of territories and the notification details are provided here. 

Sl. No.
Territories Covered
Notification No.
Notifying Ministry
Notification Date
S.O. 1238
Greece, Equador, Bulgaria, Rumania, and Norway
S.O. 428 (E)
Foreign trade
Japan, Phillippines, USA, Tanzania, The Netherlands, Thailand, Sweden, and Austria
S.O. 732 (E)
Foreign trade
Nigeria, Tunisia, Ghana and Morrocco
S.O. 282 (E)
S.O. 4302
Botswana, Cuba, Malagasy Republic, Mexico, Trinidad & Tobago, German Democratic Republic, Denmark and Egypt
S.O. 42 (E)
S.O. 2920
Commerce, Civil Supplies & Cooperation
S.O. 290 (E)
Commerce and Civil Supplies
San Marino
S.O. 84 (E)
Central African Republic
S.O. 85 (E)
S.O. 86 (E)

The PIO has not provided notifications of the following territories: Chile, Czechslovak Socialist Republic, Federal Republic of Germany, Ghana, Hungary, Italy, Republic of Korea, Spain, Switzerland, and USSR. The CPIO had clarified in his reply that he was able to provide notifications as were available with his Section.

Belgium was not in the original list of territories noted in popular commentaries on Indian arbitration law but it appears that Belgium is also a notified territory. Hence authors of commentaries may take note of this add to the list of reciprocal territories notified. 

The above listed notifications can be accessed from here.