Arbitration and Conciliation (Amendment) Bill 2018: Comments on Certain Amendments

In a previous post in this blog, we had linked readers to the Bill that is proposed to be introduced in the Parliament to amend the arbitration law in India. We had noted in the said post that we are not sure if the Bill that would be introduced in the Lok Sabha would be the same as the above Bill. In this post, we comment on certain amendments made to the Bill relating to the time-limit to complete the arbitral proceedings. 

Amendment to Section 23

Section 5 of the Amendment Bill seeks to introduce Section 23(4) in the Arbitration and Conciliation Act, 1996. The sub-section sought to be introduced reads as follows:

"(4) The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing, of their appointment."

This amendment is pursuant to the recommendations by the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India to provide for a deadline of six months for the completion of exchange of pleadings and for making the twelve month period in Section 29A (introduced under the 2015 amendment law) commence from the date of completion of exchange of pleadings. The committee's recommendation was based on its finding that "[w]ith respect to domestic arbitrations, the general opinion of arbitrators is that the timelines fixed for conducting domestic arbitrations under section 29A should take effect post completion of pleadings."

Amendment to Section 29A

Section 29A inserted as a part of the 2015 amendments was criticised for being against party autonomy by imposing a condition that the arbitral proceedings were to be completed within twelve months. The High Level Committee took note of criticism. The provision has also been regarded as allowing interference and anti-institutional arbitration. The Committee observed: 

"In fact, one of the provisions of the ACA — section 29A — which was inserted by the 2015 Amendment Act, is perceived to have made arbitral institutions wary of arbitrations in India. Section 29A provides for strict timelines for completion of arbitration proceedings. This has been criticised as unduly restrictive of the conduct of arbitrations by arbitral institutions which provide for timelines for different stages of the arbitration proceedings."

In view of the criticisms, the High Level Committee recommended the following:

• Insertion of a new provision in S 29A limiting its applicability to non-international commercial arbitrations seated in India.

• The time limits under Section 29A were to run after completion of exchange of pleadings.

• The exchange of pleadings were to be complete by six months from the date of appointment.

• Pending an application to the court for extension of the time limit, the mandate of the tribunal shall continue.

• An application filed in the court under S. 29A, if not disposed of within sixty days, is deemed to have been granted.

• Prior to reducing the arbitrator's fee under Section 29A(4), the court shall give the arbitrator an opportunity of being heard. 

For these purposes, Section 6 of the Bill proposes the following:

Substitution of Section 29A(1) with the following: "(1) The award in matters other than international commercial arbitration shall be made within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23." (amended portions)

Insertion of Two provisos in Section 29A(4), after which Section 29A(4) would look like this:

"(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period: 

Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay:

Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application: 

Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced." (the emphasised portions are the proposed amendments)

Comments

• The drafters seem to have committed an error by failing to clarify that the six month time limit for exchange of pleadings (sought to be introduced in Section 23) would not apply to India-seated international commercial Arbitrations. The High Level Committee recommended the exclusion of the time limit in Section 29A in respect of India-seated international commercial Arbitrations and also for commencement of the one year period from the date of completion of exchange of pleadings. However, by placing the six month limit in Section 23, and without clarifying that the said provision did not apply to India-seated international commercial Arbitrations, the Bill, perhaps inadvertently, applies the six month limit to India-seated international commercial Arbitrations as well. This could not have been the intent of the drafters, and is surely not what the High Level Committee recommended since the criticisms as regards Section 29A noted by the Committee would apply even for the six month limit sought to be provided for completion of pleadings. The Bill to be introduced in the Lok Sabha needs to address this crucial defect. 

• The Bill does not contain incorporate the recommendation by the High Level Committee that in case the application to court for extension of time period is not decided within sixty days as provided, it would be deemed to have been granted. The reason for non-implementation is not known. However, consider a rare hypothetical scenario that a party or the parties together jointly apply to the court for extension of time limit with a supplementary prayer that the arbitrator fee has to be reduced by 5% per month. Assume that such an application is not decided within sixty days, would a provision similar to the one recommended by the Committee mean that the prayer for reduction of fee would be deemed to be allowed in such a case? Generally, the Government is not comfortable with such a deemed grant provision. Therefore, it is not altogether surprising that the Government did not choose to incorporate this provision. 

• The penultimate proviso proposed to be introduced in Section 29A(4) provides that the mandate of the tribunal shall continue till the application for extension of time is disposed of by the court. This provision has to be read in conjunction with Section 32 which provides that the mandate of the arbitral tribunal shall terminate if a final arbitral award is passed. Now, assume that an application is filed for extension of time limit and pending the application, by virtue of the 2018 amendments, the mandate of the tribunal continues and the arbitral award is passed. Ordinarily, by virtue of Section 32, the tribunal’s mandate would terminate. However, due to the penultimate proviso sought to be introduced to Section 29A(4), would the tribunal’s mandate continue till the arbitral application is disposed of? The Bill needs to clarify these aspects.

More on the proposed amendments in another post.

Arbitration and Conciliation (Amendment) Bill 2018

The Government's plan to introduce the Arbitration and Conciliation (Amendment) Bill, 2018 amending the existing law on the subject has received attention in the news. The Bill as approved by the Cabinet was not available in the public domain. The Bill was planned to be introduced in the Lok Sabha on 28 March 2018 but owing to the disturbances, the proceedings in the Lok Sabha were adjourned to 2 April 2018. 

But a purported version of the Bill is available online and is available here. We are not sure this Bill will be introduced in the Lok Sabha in the same form. We will provide the link to the official version of the Bill when it is made available in the website of the Lok Sabha. Meanwhile, readers can peruse through the Bill in its present form (purportedly).

Comments on the Specific Relief (Amendment) Bill, 2018

After a long time, the Specific Relief Act, 1963 is likely to be amended (Bill). Some significant changes have been introduced into the law and the implications of these are far-reaching. It is surprising that the Bill has received little attention in the academic community. 

The Government, as usual, is doing a sordid job in failing to communicate the legislative intent in introducing the amendments to the courts by not publishing the Report of the Expert Committee. Except for a press release or two, nothing about the deliberations of the Committee or its report is in public domain, which is really sad. Considering the ground breaking changes that are being suggested, it is important for the government to make the Report publicly available. We will do a section by section comment on the Bill (Bill No. 248/2017) in a few parts.

Just a tiny detour prior to the discussion of the provision. This Reply by the then law minister on the Expert Committee gives a description about the constitution of the Committee and its Terms of Reference. 

A summary of the proposed amendments can be culled out from the Statement of Objects and Reasons to the Bill and are listed below:

• Due to wide discretion conferred on courts, the courts award damages in majority of the cases as a general rule and award specific performance in exceptional cases. The Bill proposes to do away with damages as a general rule and provide for specific performance as a general rule. 
• The Bill seeks to provide for substituted performance of contracts as an alternative remedy by getting the broken contract performed through a third party and to recover costs, expenses, including compensation for failure to perform.
• In respect of infrastructure projects as enumerated in the Schedule proposed to be added, no injunction would be granted in any suit where it would appear that the grant of injunction would cause hindrance or delay in the continuance or completion of the project.
• Special courts are to be designated to try suits relating to infrastructure projects and the same are to be disposed of in 12 months.

The first change listed above, is a fundamental change to contract law since in the entire common law world, damages is the default remedy and specific performance is the exception. The basis of this principle is the efficient breach theory. The proposed amendments therefore go to the root of contract law theory and requires extensive discussions.

Even so, the Bill was introduced in the Lok Sabha on 21.12.2017 and was passed by the Lok Sabha on 15.03.2018. Despite the substantial changes that the Bill seeks to achieve, there was hardly any discussion in the Lok Sabha on the Bill. Except for Mr. NK Premachandran from Kollam, nobody even discussed the proposed amendments in the Lok Sabha.

In this post, we will discuss the change proposed to Section 6 of the 1963 Act. Subsequent posts on this topic will discuss the remaining amendments proposed to be made.  

Section 2 of the 2018 Amendment Bill seeks introduction of the phrase "through whom he has been in possession or any person" in the existing Section 6(1) of the 1963 Act. Post-amendment, the provision would look like this:

"If any person is dispossessed without his consent of immovable property otherwise than in due course of law, he or any person through whom he has been in possession or any person claiming through him may, by suit, recover possession thereof, notwithstanding any other title that may be set up in such suit."

The first amendment proposed allows a person through whom the dispossessed came to possess the immovable property to file a suit against the party who dispossesses such dispossessed. For instance, if Ramu is the owner of an immovable property and has allowed Shamu possession of the said property, in case Gholu dispossesses Shamu forcibly, Ramu, as the owner of the property, could sue Gholu for repossession. Thus, the provision grants an additional remedy to the owner in case of dispossession by a third party. Such an owner could file a suit under the Code of Civil Procedure, 1908 based on his title to the property.

It would seem that the proposed amendment gives statutory backing to the decision of the Supreme Court in Sadashiv Shyama Sawant v Anita Anant Sawant (2010) 3 SCC 385. In Sadashiv the two judge Bench of the Supreme Court had to decide whether in order to invoke Section 6, actual possession is necessary. The Supreme Court took note of contradictory rulings by different High Courts and settled the law by holding: "The key words in Section 6(1) are "dispossessed" and "he or any person claiming through him". A person is said to have been dispossessed when he has been deprived of his possession; such deprivation may be of actual possession or legal possession. Possession in law follows right to possession. The right to possession, though distinct from possession, is treated as equivalent to possession itself for certain purposes."

As regards the rights of a landlord if the tenant is forcibly dispossessed by a third party, the court's view requires to be extensively quoted: 

"19. A landlord by letting out the property to a tenant does not lose possession as he continues to retain the legal possession although actual possession, user and control of that property is with the tenant. By retaining legal possession or in any case constructive possession, the landlord also retains all his legal remedies. As a matter of law, the dispossession of tenant by a third party is dispossession of the landlord. The word "dispossessed" in Section 6(1) must be read in this context and not in light of the actual possession alone. If a tenant is thrown out forcibly from the tenanted premises by a trespasser, the landlord has implied right of entry in order to recover possession (for himself and his tenant). Similarly, the expression "any person claiming through him" would bring within its fold the landlord as he continues in legal possession over the tenanted property through his tenant. As a matter of fact, on plain reading of Section 6(1), it is clear that besides the person who has been dispossessed, any person claiming through him can also file a suit seeking recovery of possession. Obviously, a landlord who holds the possession through his tenant is competent to maintain suit under Section 6 and recover possession from a trespasser who has forcibly dispossessed his tenant. A landlord when he lets out his property to the tenant is not deprived of his possession in the property in law. What is altered is mode in which the landlord held his possession in the property inasmuch as the tenant comes into physical possession while the landlord retains possession through his tenant..."

The view taken by the court is correct. On the question on whether while bringing the suit the tenant should be made a necessary party, the court held that it is possible that a tenant may not be interested in suing the third party, Therefore, according to the court, it was not absolutely necessary to implead the tenant as a party in all cases.

The proposed amendment seeks to clarify this shift in the legal position through an amendment. 

We will discuss the remaining amendments in the next few posts on the topic.

Future of election law in the era of big data, data analytics, and psychographics

“The fairness of Indian democracy and electoral process is a matter of pride and any attempt to influence the sanctity of the electoral franchise through dubious and questionable means is unacceptable. In particular, all intermediaries and their associates have the legal obligation to maintain security, confidentiality and sanctity of data and any unauthorized use of data can entail legal action.”

Press release of the Ministry of Electronics & Information Technology on Cambridge Analytica, dated 23-03-2018

The press release highlights the harm already done to the democratic process and the potential of obliteration of Indian democracy. Free and fair election is the bulwark on which every democracy is founded. The Ministry appears to focus more on the issue of data security and violation of the fundamental right to privacy than the damage to free and fair election. 

Fundamental to free and fair election is the existence of an electorate who exercises their free will. The term ‘free will’ has an important dimension that the choice electorate make shall be informed at the same time not unduly influenced. The logic therein could be extended to say that the electorate’s choice shall not be impaired by calculated manipulations. The term “ undue influence” used in the Representation of the People Act 1951 (R P Act) is highly significant in this context.

The law permits campaigns to influence voters but the same shall not cross the border and tread into the spectrum of undue influence. The determination of influence as due and undue is a subtle task as the line distinguishing both is opaque. Campaigns should be able to reach the electorate with their messages, as it is pivotal for informed choice. The challenge is when the campaigns manoeuvre the messages to electorate to suit the profile of target group to augment their beliefs and generate biases. The Cambridge Analytica saga went further to profile individual electors and cater messages to suit their sketch, through data analytics and psychographics. 

This raises two fundamental questions; (i) will the actions of campaign get the protection of free speech or are they manipulations that should attract legal barriers (ii) is section 123 (2) of R P Act, which identifies undue influence as corrupt practice in elections, capable of dealing with this phenomena. 

The exposition of undue influence in RP Act and Indian Penal Code (IPC) Section 171 (C), have been done by various judicial forums of India. The features of section 123 (2) of the RP Act can be broken down into the following:

1. Direct/indirect interference or attempt to interfere
2. By a candidate, agent or any one with the consent of either
3. Interference in free exercise of any electoral right

Section 171 (C) of IPC declares voluntary interference of any one with the free exercise of electoral rights as a punishable offence.

“Undue” influence and interference are the pivotal expressions that call for consideration. Supreme Court have settled that running a campaign and getting across once message is not undue influence. (See, Baburao Patel v. Dr. Zakir Hussain 1967, Shiv Kripal v. V V Giri 1970). In a relatively recent decision in Krishnamoorthy v. Shivkumar (2015), the court deliberated whether non- disclosure of entre information about the candidate will amount to undue influence, the court observed thus;

The notion of what constitutes the free exercise of any electoral right cannot be static. The exercise of electoral rights in a democracy is central to the very existence of a democracy. The notion of the free exercise of any electoral right is thus not something that can be ossified. It must evolve with the constitutional jurisprudence and be judged by contemporary constitutional values.

In the context of the issues before the court, it was held that undue influence in RP Act imply ‘any influence on the mind of the voter that interferes with free exercise of the electoral right.’

The standard to identify illegality is the influence the actions of candidate, his agent or any one with their consent, create ‘upon the minds and feeling of the ordinary average voters’ (Ziyauddin Burhanuddin Bukhari v. Brijmohan Ramdass Mehra 1975) the net of undue influence is cast wide. In Krishnamoorthy, the court adopted the standard, as “an act which is calculated to interfere with the free exercise of electoral right, is the true and effective test whether or not a candidate is guilty of undue influence.”

If freedom to elect includes autonomy to exercise judgment and that judgment if mired by external actors, it can be called undue influence. If a candidate, or agent causes such factors to impact, it will be counter to the spirit of free and fair election, which is also part of the basic structure of the constitution of India. In Bachan Singh v. Prithvi Singh 1975, the court observed that the prefix "undue" indicates that there must be some abuse of influence. 

Having said that, there are few practical issues, the effect of Section 123 that deals with corrupt practices in election is all about election campaign. The gateway to it is opened on the notification of election and shuts after the conclusion of it. The activities of profiling and psychographics know no time limits. Also the standard of proof demanded by courts are such that it is rare that election petitions succeed. 

In the world of big data, data anlayitcs and psychographics, the 1951 legislation will have to stretch really hard to upkeep the promise of free and fair election. It must evolve and update with the changing times to be relevant and sustain the already volatile Indian democracy.