SUPREME COURT RULES ON PROSPECTIVE APPLICABILITY OF SECTION 36 OF THE ARBITRATION AND CONCILIATION ACT, 2015

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The Supreme Court has recently passed a judgment in Board of Control for Cricket in India v Kochi Cricket Pvt. Ltd. and etc on 15.03.2018. The Appellant herein had filed Chamber Summons in December 2015 before a Single Judge Bench of the Supreme Court for dismissal of Execution Applications moved by the Respondent on the ground that the filing of Section 34 Application under the Arbitration and Conciliation Act 1996 (the Act), which provides for setting aside of arbitral award, resulted in an automatic stay of Execution of the Awards under Section 36 of the Act. But the Single Judge dismissed the Chamber Summons and held that Section 36 of the Act as amended in 2015 (the Amended Act) would be applicable in the facts of this case. Thus, the Respondent was not barred from proceeding with the Execution Applications. The Appellant, therefore, filed an appeal against the aforesaid judgment before the Division Bench of the Supreme Court, which made the following observations:

The Supreme Court referred to this Court’s judgment in National Aluminum Co. Ltd. v. Pressteel & Fabrications, (2004) 1 SCC 540 and the 246th Law Commission Report 2014, where it was discussed that pendency of Section 34 application under the Act rendered an arbitral award unenforceable. This automatic suspension of execution of award with the filing of Section 34 application left no discretion with the court to put the parties to terms and that it became impermissible for the court to pass any order directing the losing party to deposit the award amount, wholly or substantially, into the court.

The Supreme Court further discussed the Objects of the Act stating that the Act was enacted to provide for speedy disposal of cases relating to arbitration with least court intervention. But it was observed that there was an increase in the intervention of courts in arbitration matters as stated above, which resulted in delay of disposal of arbitration proceedings. As a consequence, it defeated the very objective of the alternate dispute resolution system to which arbitration belongs.

Thus, the Law Commission suggested in its Report certain amendments to the Act including Section 36, which provides that the award will not become unenforceable merely upon the making of an application under Section 34. These amendments would facilitate settlement of disputes in a more user-friendly, cost effective and expeditious manner.

The Supreme Court further held that applications under Section 34 cannot be considered as an appeal against the arbitral award and that court proceedings in relation to arbitral proceedings, being independent from arbitral proceedings, would not be viewed as a continuation of arbitral proceedings, but would be viewed separately.

Further, execution proceedings are matters of procedure and in case there is a change in law during the pendency of such matter, the appellate court is bound to take notice of the change in law.

Thus, in view of the aforesaid observations, the Supreme Court herein held that:

Section 36 of the Amended Act is applicable to court proceedings commenced on or after 23.10.2015;

Section 36 of the Amended Act is also applicable to applications filed under Section 34 of the Act pending on the date of commencement of the Amended Act, i.e. 23.10.2015;

Arbitration and Conciliation (Amendment) Act 2015, as a whole, is prospective in nature.

 

Harini Daliparthy

Senior Legal Associate

RESERVE BANK OF INDIA SETS NEW RULES FOR CROSS BORDER MERGER AND AMALGAMATION

Cross-Border-Mergers

The Reserve Bank of India (RBI) has framed new rules for mergers, amalgamation and arrangement between Indian and foreign companies under Foreign Exchange Management Act (FEMA), 1999. The Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (“RBI Cross Border Merger Regulations”), will cover both inbound and outbound investments. The Regulations come into effect to encourage foreign direct investments into the country to allow cross-border mergers and amalgamation.

The Ministry of Corporate Affairs had already amended Section 234 of the Companies Act, 2013 set to ease the way for merger and amalgamation (M & A) of a foreign company with an Indian company and vice-versa.

As per the Cross Border Merger Regulations in the case of inbound merger, the rules allow the resultant company to issue or transfer any security to a person resident outside India subject to pricing and sectoral foreign investment conditions and FEMA Rules and in case of outbound merger, the rules allow resident Indian entities to acquire or hold securities of the resultant company in accordance with FEMA Regulations. Further, any compensation to the shareholders by the resultant Indian company or foreign company may be paid in accordance with the scheme sanctioned by the National Company Law Tribunal (NCLT).

RBI as per the Cross Border Merger Regulations allow the Indian company outside India to hold the assets and anything which is not permitted to be acquired or held has to be disposed off within a period of two years from NCLT’s sanction date. RBI with a purpose to enhance the cross-border M&A activity, set the rules which will allow Indian companies to merge their foreign businesses with their domestic companies while foreign companies will no longer be required to maintain an Indian company after a merger and instead fold it up into a single entity.

Key features of the RBI Cross Border Merger Regulations are as under:

Particulars Inbound Merger Outbound Merger
Mechanics A merger or amalgamation of foreign company with an Indian company; A merger or amalgamation of Indian company with a foreign company;
Issue / Acquisition of securities pursuant to cross-border merger Issuance/ transfer of shares to person resident outside India should comply with the pricing guidelines, entry routes, sectoral caps, attendant conditions and reporting requirements as laid down in Foreign Exchange Management (Transfer and issue of Security by a person Resident outside India) Regulations, 2017.

However, if the foreign company is joint venture (“JV”)/ wholly owned subsidiary (“WOS”) of Indian company then conditions prescribed under Foreign Exchange Management (Transfer or issue of any foreign security) Regulations, 2004 shall need to be complied by Indian company.

Further, in case the merger of the JV/ WOS results into acquisition of step down subsidiary of JV/ WOS of the Indian party, then Regulation 6 and 7 of Foreign Exchange Management (Transfer or issue of any foreign security) Regulations, 2004 shall need to be complied with;

A person resident in India may acquire or hold securities of the foreign Company pursuant to the outbound merger in accordance with current regulations pertaining to investment in Joint Venture / Wholly Owned Subsidiary abroad or the Liberalized Remittance Scheme (“LRS”), as applicable.

 

Office outside/ in India An office outside India of the foreign company, pursuant to the sanction of the Scheme shall be deemed to be the branch/office outside India of the resultant Indian company in accordance with Foreign Exchange Management (Foreign Currency Account by a person resident in India), Regulations, 2015. Accordingly, the resultant Indian company may undertake any transaction as permitted to a branch/ office under the aforesaid Regulations; An office in India of the Indian company, pursuant to sanction of the Scheme of cross border merger, may be deemed to be a branch office in India of the foreign company in accordance with the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business), Regulations, 2016. Accordingly, the foreign company may undertake any transaction as permitted to a branch office under the aforesaid Regulations;
Conditionalities on Borrowings Any borrowing or guarantees of the foreign Company from overseas source which becomes the borrowing of the Indian company pursuant to inbound merger shall conform with the External Commercial Borrowing norms or Trade Credit norms or other foreign borrowings norms within a period of two years.

In the initial two years, the Indian company will not be able to make remittance for repayment of the foreign liability.

Further, end use restrictions for such borrowings shall not apply;

Foreign Company shall be liable to repay outstanding borrowings or guarantees as per the Scheme sanctioned by National Company Law Tribunal (“NCLT”) in terms of the Companies (Compromise, Arrangement or Amalgamation) Rules, 2016 pursuant to the outbound merger.

However, the resultant foreign company shall not acquire liability payable to lender in India if the same is not in conformity with Foreign Exchange Management Act, 1999 (“Act”), rules or regulations framed by the RBI.

Further, no-objection certificate to this effect shall need to be obtained from the lenders in India of the Indian company;

Acquisition / Holding of assets or securities An Indian company may acquire and hold any assets/securities outside India pursuant to the inbound merger, which an Indian Company is permitted to acquire under the current provisions of the Act, rules or regulations framed by the RBI; Foreign Company may acquire and hold any assets/securities in India pursuant to the outbound merger which Foreign Company is permitted to acquire under the provisions of the Act, rules or regulations framed by the RBI;
Transfer of assets / securities not permitted to be acquired / held In a situation where an Indian company is not permitted to acquire or hold any assets/securities outside India which is forming part of the foreign Company under inbound merger, such assets/securities need be transferred by the Indian company within a period of two years from the date of sanction of the Scheme and sale proceeds shall be repatriated to India immediately through banking channels.

Any liabilities not permitted to be held by the Indian company, the same may be extinguished from the sale proceeds of such overseas assets within a period of two years;

In a situation where foreign company is not permitted to acquire or hold any assets/securities in India which is forming part of an Indian Company under outbound merger, such assets/securities can be transferred by the foreign company within a period of two years from the date of sanction of the Scheme and sale proceeds shall be repatriated outside India immediately through banking channels.

Repayment of Indian liabilities from sale proceeds of such assets/securities within a period of two years shall be permissible;

Bank accounts Pursuant to the Scheme of inbound merger, the resultant Indian company may open a bank account overseas, in foreign currency for a maximum period of two years from the date of sanction of Scheme; Pursuant to the scheme of outbound merger, the resultant foreign company may open Special Non-resident Rupee (“SNRR”) account in India in accordance with Foreign Exchange Management (Deposits) Regulations, 2016 for a maximum period of two years from the date of sanction of Scheme;

 

Taruna Verma

Senior Associate

SUPREME COURT RULES ON ARREST UNDER SC/ST ACT

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The Supreme Court has recently passed a judgment in Dr. Subhash Kashinath Mahajan vs. the State Of Maharashtra and Anr. on 20.03.2018 and held that there is no absolute bar against grant of anticipatory bail in cases under the Atrocities Act if no prima facie case is made out or where on judicial scrutiny the complaint is found to be prima facie mala fide.

Herein, the Respondent-Complainant, a store-keeper at the Government Distance Education Institute, Pune (College) and a member of Scheduled Castes/Scheduled Tribes (SC/ST), had lodged an FIR against the Directors of the College, under various provisions of the Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989 (the Act) and the Indian Penal Code (IPC) for making adverse entry in the Respondent’s annual confidential report to the effect that his integrity and character was not good. Thereupon, the investigating officers applied for sanction to the Appellant, the then Director of Technical Education in the State of Maharashtra, under Section 197 Cr.PC against the Directors of the College. But the sanction was refused by the Appellant and five years after passing such order, the Respondent filed an FIR under the Act against the Appellant on the grounds that the he was not competent to grant or refuse the sanction as the Directors of the College were Class-I officers and that in such cases only the State Government could grant or refuse sanction.

After being granted anticipatory bail, the Appellant applied to the Bombay High Court under Section 482 CrPC for quashing the proceedings on the ground that he had merely passed a bonafide administrative order in his official capacity. But the High Court rejected his petition stating that it cannot exercise its inherent powers to quash the proceedings as it may send a wrong signal to the downtrodden and backward sections of the society. Therefore, the Appellant filed an appeal before the Supreme Court against the aforesaid High Court judgment.

The Supreme Court made the following observations and held that:

The provisions of the Act may require a check on any false implications and accusations against innocent citizens on caste lines.

Section 18 of the Act provides that provisions of anticipatory bail under Section 438 of CrPC shall not apply to any case involving the arrest of any person on an accusation of having committed an offence under this Act.

The Object of the Act was that the members of SC and ST are highly vulnerable and often subjected to humiliation and harassment. In the event that the accused-perpetrators of atrocities under the Act are granted anticipatory bail, they may misuse their liberty and threaten/intimidate the victims and prevent or obstruct them in the prosecution of such offenders.

On the other hand, there has also been rampant misuse of such provisions to make false complaints or wreak personal vengeance against public servants/quasi judicial/judicial officers, etc.

Thus, the Supreme Court herein held that the express exclusion under Section 18 of the Act is limited to only genuine cases and is inapplicable where the accused is able to prove that he has not committed any atrocity against a member of SC/ST and that the allegation was mala fide and prima facie false. It further held that limiting the exclusion of anticipatory bail in such genuine cases is essential for protection of fundamental right of life and liberty under Article 21 of the Constitution.

Otherwise, it may be difficult for public servants to conduct their official duties. People may take undue advantage of such provisions of the Act and black mail public servants with the threat of registering a false case under the Act and the public servants may be left with no protection of law. This could not have been the intention of the Legislature behind enacting the Act.

Further, there cannot be a presumption of guilt so as to deprive a person of his liberty without an opportunity of being heard before an independent forum or Court of law.

Furthermore, the innocent persons against whom no prima facie case is made out cannot be subjected to the same treatment as the persons who are prima facie perpetrators of the crime.

Thus, in case the Appellant apprehends arrest, he is entitled to show to the Court that there is no prima facie made out against him.

Thus, the Apex Court quashed the proceedings filed against the Appellant and further held that any arrest of a public servant under the Act can only be upon approval of the appointing authority and of a non-public servant upon approval by the Senior Superintendent of Police of the concerned district based on reasons recorded, which have to be scrutinized by the Magistrate for permitting further detention. Further, before making any arrest of a public servant, a preliminary enquiry may also be conducted by the concerned Deputy Superintendent of Police to find out whether the allegations make out a case under the Act and the allegations are not frivolous or motivated.

The Government has reportedly taken note of the aforesaid Judgment of the Supreme Court with regard to diluting the provisions of the Act to the extent of automatic arrest and registration of criminal cases under the said law, but the Government has also decided to file a review petition against the said Judgment in the Supreme Court in the coming week.

 

Harini Daliparthy

Senior Legal Associate

SUPREME COURT RULES THAT FOREIGN LAWYERS OR FIRMS CANNOT PRACTISE LAW IN INDIA

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On Tuesday, 13th March 2018, the Supreme Court in the matter Bar Council of India vs. A.K. Balaji and Ors., held that foreign law firms and lawyers cannot open offices or practise profession of law in India either on the litigation or non-litigation side. However, the Supreme Court allowed casual visits by foreign lawyers on a “fly in and fly out” basis for rendering legal advice to clients in India.

The matter was heard by a Bench comprising of Justice A.K. Goel and Justice U.U. Lalit. The matter arose from two appeals which were challenging the Madras and Bombay High Court Judgments on foreign lawyers practising in India.

The Judgment of the Bombay High Court on 16th December, 2009 in Lawyers Collective vs. Bar Council of India, held that the RBI was not justified in allowing foreign law firms to establish liaison offices in India. It had then ruled that such foreign law firms can establish their offices in India only after being enrolled as advocates under the Advocates Act, 1961. This Judgment was challenged in the Supreme Court by the Global Indian Lawyers Association.

The Judgment of the Madras High Court in February 2012 in Global Indian Lawyers vs. Bar Council of India &Ors., held that foreign lawyers and law firms are not permitted to practice law in India either on the litigation or non-litigation side without complying the requirements of the Advocates Act and the Bar Council of India (BCI) Rules. The Court had held that there is no bar on such persons from visiting India for a temporary period on a “fly in and fly out basis”, for providing legal advice to their clients regarding foreign law or their own system of law and on diverse international legal issues. It had further held that there is no restriction against them coming to India for conducting arbitration proceedings in disputes involving international commercial arbitration. This decision of the Madras High Court had been appealed against by the Bar Council of India. (BCI).

However, the Supreme Court in the present matter modified the direction of the Madras High Court in Para 63(ii) that there was no bar for the foreign law firms or foreign lawyers to visit India for a temporary period on a “fly in and fly out” basis for the purpose of giving legal advice to their clients in India regarding foreign law or their own system of law and on diverse international legal issues. The Supreme Court held  and thereby clarified that the expression “fly in and fly out” will only cover a casual visit not amounting to “practice”. In case of a dispute whether a foreign lawyer was limiting himself to “fly in and fly out” on casual basis for the purpose of giving legal or whether in substance he was doing practice which is prohibited can be determined by the BCI. The Court ruled that, “If the Rules of Institutional Arbitration apply or the matter is covered by the provisions of the Arbitration Act, foreign lawyers may not be debarred from conducting arbitration proceedings arising out of international commercial arbitration in view of Sections 32 and 33 of the Advocates Act. However, they will be governed by code of conduct applicable to the legal profession in India. Bar Council of India or the Union of India are at liberty to frame rules in this regard.

The Court said Business Process Outsourcing (BPO) companies providing a range of services to customers like word processing, secretarial support, transcription and proof reading services, travel desk support services and others would not come under the Advocates Act. Thus, the Court ruled that BPO’s would not violate provisions of the Advocates Act only if their activities do not amount to ‘practice of law’ as defined earlier.

On the issue whether the expression ‘practise the profession of law’ includes only litigation practice or non-litigation practice also, the Court held that the practice of law includes litigation as well as non-litigation activities. It relied on the Judgment in the case of Pravin C. Shah vs. K.A. Mohd. Ali to hold: “Ethics of the legal profession apply not only when an advocate appears before the Court. The same also apply to regulate practice outside the Court. Adhering to such Ethics is integral to the administration of justice. The professional standards laid down from time to time are required to be followed. Thus, we uphold the view that practice of law includes litigation as well as non-litigation.”

The Supreme Court has finally put to an end a burning topic that was of great interest to the legal profession. It is now clear foreign law firms/companies or foreign lawyers cannot practice profession of law in India, neither in the litigation nor in the non-litigation side.

Taruna Verma

Senior Associate

PASSIVE EUTHANASIA ACCEPTED BY THE SUPREME COURT

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Ranked at No. 16 in the Top 40 Indian Law Blogs published by the Feedspot in https://blog.feedspot.com/indian_law_blogs/ on 06.03.2018.

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A five-Judge Constitution Bench of the Supreme Court of India has recently in a Judgment Common Cause vs. Union of India and Another dated 09.03.2018 upheld that the fundamental right to life and dignity includes the right to refuse medical treatment and die with dignity under Article 21 of the Constitution of India.

Herein, a Writ Petition was filed under Article 32 of the Constitution by the Petitioner seeking declaration that right to die with dignity comes within the fold of right to live with dignity guaranteed under Article 21 of the Constitution. On the other hand, the States had argued that saving a life is the primary duty of the State and that Article 21 of the Constitution means availability of food, shelter and health and does not include the right to die with dignity.

The Supreme Court herein has analyzed the case and concluded as follows:

Euthanasia is an intentional premature termination of another person‘s life either by direct intervention (active euthanasia) or by withholding life-prolonging measures and resources (passive euthanasia) either at the express or implied request of that person (voluntary euthanasia) or in the absence of such approval/consent (non-voluntary euthanasia). Further, that euthanasia is an act which leads to a good death.

The Supreme Court in Gian Kaur vs. State of Punjab 1996 SCC (2) 648, had observed that the following constitute a right to live with dignity:

i) right of a dying man to die with dignity when the life is ebbing out, and

ii) in the case of a patient terminally ill or in a persistent vegetative state (PVS), where there is no hope for recovery, the acceleration of process of death to reduce the pain and suffering.

Further, that the Supreme Court in Gian Kaur (supra) has not held that passive euthanasia can be introduced only by way of legislation.

The advancement in medical science and technology has made it possible to prolong the death of patients. A patient, terminally ill or in a PVS, who has come of age and is of sound mind has a right to refuse a specific medical treatment, or all treatment or opt for an alternative treatment, to avoid protracted physical suffering even if entails a risk of death. This is different from an act of suicide, which is a self initiated act with an intent to cause one’s own death. Whereas, a patient refusing medical treatment would merely allow the disease to take its natural course and if, in this process, death occurs, the cause for it would primarily be the underlying disease and not any self initiated act.

Whereas, in cases of incompetent patients who are unable to take an informed decision, the Supreme Court herein held that “the best interests principle” may be applied and such   decision   be   taken   by   specified   competent   medical experts. It may be implemented after providing a cooling period to enable the aggrieved person to approach the court of law. Also, there are advance medical directives which are used across other jurisdictions in such cases. For instance, a living will, medical power of attorney, etc which are documents which prescribe the wishes of a person regarding the medical treatment he/she would want if he/she was unable to share his/her wishes with the health care provider or appoint a trusted person to take health care decisions when the patient is not able to take such decisions.

Dignity of an individual has been internationally recognized as an important facet of human rights and the first and foremost responsibility of the State is to protect human dignity. The Supreme Court in S. Puttaswamy and another v. Union of India and others (2017) 10 SCC 1 has held that dignity has been reaffirmed to be a component under Article 21 of the Constitution.

Thus the Supreme Court herein has reiterated that right to life including right to live with human dignity is a part of Article 21 of the Constitution as held by the Supreme Court in Gian Kaur case and further held that the right to live with dignity including smoothening of the process of dying in case of a terminally ill patient or a person in PVS with no hope of recovery/revival falls under the purview of Article 21 of the Constitution of India.

The Supreme Court, therefore, has by this Judgment dated 09.03.2018 made the choice and decision of a patient who is terminally ill or a person in PVS and undergoing a prolonged medical treatment or is surviving on life support, binding for the doctors subject to being satisfied that the illness of the patient is such that it is incurable and there is no hope of his being cured.

 

Harini Daliparthy

Senior Legal Associate

THE SUPREME COURT ON INFORMED CONSENT IN INDIA

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Ranked at No. 16 in the Top 40 Indian Law Blogs published by the Feedspot in https://blog.feedspot.com/indian_law_blogs/ on 06.03.2018

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The concept and scope of informed consent has been one of the most critical and highly debated issues in medical treatment in India and elsewhere. According to the Supreme Court in Samira Kohli vs. Dr. Prabha Manchanda and Another (2008) 2 SCC 1, consent in the context of a doctor-patient relationship, has been defined as the grant of permission by a patient for an act to be carried out by a doctor, such as a diagnostic, surgical or therapeutic procedure.

The Medical Council of India (MCI) has laid down in the Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 that a physician, before performing an operation, should obtain in writing the consent from the husband or wife, parent or guardian in the case of minor, or the patient himself as the case may be. Otherwise, it shall constitute professional misconduct on the part of the physician rendering him/her liable for disciplinary action by MCI.

The Supreme Court in Samira Kohli (supra) has discussed about the following essentials elements of informed consent:

A doctor must give a patient adequate information for him to understand the various aspects of the proposed treatment as given below so that he can make a balanced judgment as to whether to submit himself to the particular treatment or not:

the nature and procedure of the treatment;

its purpose and benefits;

its likely effects and any complications which may arise;

any alternatives if available;

an outline of the substantial risks; and

adverse consequences of refusing treatment.

Such adequate information need not include remote risks, rare complications and possible results of a hypothetical negligent surgery.

Further, the consent obtained by the doctor from the patient before commencing a treatment (including surgery) should be real and valid, which means that: i) the patient should have the capacity and competence to consent; ii) his consent should be voluntary; and iii) his consent should be on the basis of adequate information concerning the nature of the treatment procedure, so that he knows what is consenting to.

Also, even if a doctor deems necessary any additional procedure or treatment for a patient, then he/she cannot perform such procedure without the consent of the patient unless the unauthorized additional or further procedure is necessary in order to save the life or preserve the health of the patient and it would be unreasonable to delay the further procedure until the patient regains consciousness and takes a decision. The Supreme Court in another case of Martin F.D’ Souza v. Mohd. Ishfaq, (2009) 3 SCC 1 has also laid down that a doctor should not experiment unless necessary and even then he should ordinarily get a written consent from the patient.

Further, the consent given for a specific treatment procedure will not be considered valid for conducting some other treatment procedure. Moreover, the correctness or appropriateness of the treatment procedure, does not make the treatment legal, in the absence of consent for the treatment. This principle has been reiterated by the Supreme Court in Nizam’s Institute of Medical Sciences vs. Prasanth S. Dhananka & Ors (2009) 6 SCC 1.

The Supreme Court in Samira Kohli (supra) has held that performance of such a surgery was an unauthorized invasion and interference with the patient’s body which amounted to a tortious act of assault and battery and therefore, a deficiency in service under the Consumer Protection Act 1986. The Courts in India have in various other cases also held doctors liable for performing medical treatments and surgeries, etc without obtaining informed consent from the patient.

 

Harini Daliparthy

Senior Legal Associate