CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP) UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016

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INTRODUCTION :-

Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016”) was notified by the Government of India on 28th May 2016. The Act consolidates and amends the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of these persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. IBC, 2016 also altered the order of priority various payment dues; and put the payments of workmen’s dues in foremost priority over Government dues. The payments of Government dues are kept after payment of financial debts owed to unsecured creditors. IBC, 2016 provides the complementary ecosystem for the insolvency law, and aims to ensure smoother settlement of insolvency cases, enable faster turnaround of businesses and provide for creating a database of creditors.

The Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) can be initiated by making an application to the National Company Law Tribunal (NCLT) by the  Financial Creditors under Section 7 of IBC, 2016 by Operational Creditors under Section 9 of the IBC, 2016 and by the Corporate Debtor himself under Section 10 of the IBC, 2016. The basic departure from the old law and fundamental rule under this new codified law is that a company which has gone insolvent cannot start the Liquidation process at the primary stage until and unless it has gone through the process of Corporate Insolvency Resolution Process (CIRP), under the said resolution process options for revival of the company is looked into and if the said resolution process fails then only the company goes into liquidation.

STAGE-WISE PROCESS FOR INSOLVENCY:-

In case a corporate debtor makes a default in repayment of dues of the creditors, the financial creditor/s, an operational creditor or a corporate debtor through Corporate applicant or any authorised member, a person who has the controlling capacity over the financial affairs of the corporate debtor has the power to start the insolvency resolution process. In order to initiate the resolution process, an application has to be made to National Company Law Tribunal (NCLT) under (Section 10, IBC, 2016 in case of Corporate Debtor, Section 7 and 9 of IBC, 2016 in case of Financial Creditors and Operational Creditors).

A ten days demand notice under (Section 8(2) of IBC, 2016 in case of Operational Creditors) has to be given to the corporate debtor by the Operational Creditors before he approaches the NCLT under Section 9 of IBC, 2016). However, an operational creditor can directly approach the NCLT if the corporate debtor does not repay the outstanding dues or fails to show any existing difference.

The new code states that the insolvency process of a Corporate Debtor must be concluded within 180 days from the date of initiation in the NCLT (Section 12, IBC of 2016). The claims of the Creditors shall be frozen for a period of six months on admission of application by NCLT. During this time, the NCLT shall listen to the options to revive and decide the future course of action. It is further clarified that unless a resolution plan is made or liquidation process is initiated, no legal claim shall be sought against the corporate debtor in any other forum or Court (Section 14 of IBC, 2016).

When the application for insolvency is accepted under Section 7/9/10 of IBC, 2016 the NCLT within fourteen days appoints an Insolvency Resolution Professional (IRP) on receiving a confirmation from Board of Insolvency and Bankruptcy.The appointed IP then takes up the responsibility of the debtor’s properties and functioning. He also collects all the information that is relevant with regard to the financial condition of the debtor from information utilities. IP is appointed for a term of thirty days only within which he does all the necessary scrutinization (Section 18, IBC, 2016).

The next step is to make a public announcement about the commencement of corporate insolvency process so that claims from any other creditors can also come forward, if any. A creditor’s committee is constituted by the IRP post receiving any claims by public announcement (Section 13 of IBC, 2016). In the event any financial creditor is a related party of the defaulting debtor, such a creditor will not have the right to represent, participate or vote in the committee of creditors so constituted by the IP. In order to be a part of the Creditor’s Committee, the average dues of the operational creditors must be at least ten percent of the debt. The Committee of Creditors shall first seven days of its incorporation decide through seventy five percent votes whether the interim IRP should be used as a Resolution Professional or should be replaced with someone else.

After the Committee finalizes the Resolution Professional he is appointed by the NCLT (Section 16 of IBC, 2016). The Resolution Professional so appointed can be replaced anytime by the Creditor’s Committee with a majority of seventy five percent votes. In the interim, i.e. till the appointed of any new Resolution Professional, the Creditor’s Committee can take decisions with regard to insolvency resolution by seventy five percent majority voting.

In the event majority (75%) of the financial creditors are of the view that the case is very complex and more time extension is required, the NCLT may grant a one-time extension of up to a maximum of 90 days over and above the pre decided tenure of 180 days. It shall be the sole responsibility of the Resolution Professional to manage and conduct the corporate insolvency resolution procedure during such a term (Section 18 of IBC, 2016).

To enable the resolution applicant for preparing a resolution plan, the Resolution Professional shall compile a statistics note. A resolution applicant can be defined as an individual who has the duty and responsibility to submit a resolution plan to the Resolution Professional. The Creditor’s Committee further receives the plan from the Resolution Professional for its approval.

On the resolution being approved, the next step by the Creditor’s Committee is to come up with options on restructuring which can be either coming up with a modified repayment plan or to simply liquidate the properties of the company in order to recover dues. If the Creditor’s Committee fails to take any binding decision with regard to the repayment by the debtor, the debtor’s assets are liquidated in order to pay back the creditors. If there is a plan prepared for resolution, the same shall be sent to NCLT for approval and implementation.

LIQUIDATION

The liquidation process commences only if:

The Creditors Committee fails to submit the resolution plan with the provided time frame to the NCLT.

The Resolution Plan is rejected because of non-adherence to the Code.

The Creditor’s Committee takes a decision for liquidating the assets by a majority vote.

The resolution plan is flouted by the debtor.

As mentioned above, no suit can be instituted by or against the corporate debtor during liquidation process (Section 14 of IBC, 2016). The only exception, in this case, can be through the liquidator representing the corporate debtor based on the permission of the NCLT. The liquidator shall be the same person as the Resolution Professional lest replaced. The liquidator so appointed shall constitute the liquidation estate which shall comprise of all the properties, whether financial or immovable, of the corporate debtor. The claims of the creditors may be received, verified, admitted or rejected based on the final decision of the liquidator within a prearranged time. In order to appeal to the adjudicator, the creditor gets a total of fourteen days.

Based on the priority, a security creditor may receive the proceeds from sale of assets or realize the security interest by enforcing or dealing with the secured asset as per the applicable laws related to him. He may either relinquish his security interest or realize it based on his intent. Any supplementary sum so realized shall be submitted to the liquidator. Although the security creditors will be paid by the liquidator on priority basis out of the corporate debtor’s assets, his claim shall be considered subordinate to the unsecured creditors to the extent of deficit. The distribution shall be in manner laid down in the Code. All those persons who have any sort of individual rights over the assets of the debtor shall also form a part of the liquidation procedure. There are certain funds which cannot be attached to the estate of the debtor for recovery of debts. Such funds are provident fund, gratuity fund and the pension fund because this amount belongs to the employees and workmen and hence they are given the priority with regard to these funds. Once all the assets of the corporate debtor are liquidated, the NCLT passes an order to finally liquefy the corporate debtor.

 

IMAAD M. KHAN

SENIOR ASSOCIATE

TAXABILITY OF DAMAGES IN INDIA

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The Authority for Advance Rulings (AAR) is a high level quasi judicial body set up in 1993 under the Income Tax Act 1961 for giving binding advance rulings which may indicate the prospective indirect tax liabilities in respect of any activity undertaken under the Customs Act, 1962, or Central Excise Act 1944, or taxable services rendered under Finance Act 1994 by a person.

The AAR has recently on 21.05.2018 ruled that payment of damages in respect of non-performance of contracts, except in certain cases, would attract goods and services tax (GST) in India (Ruling).

In contracts for supply of goods and services, parties generally stipulate that both the service provider and the service recipient would abide by the terms and conditions of the contract. In addition there is a provision of liability which states that if any of the parties breaches the contract for any reason including non-performance of contractual obligations, then such person is liable to pay damages in the form of fine/penalty/damages to the other party.

According to AAR, in such cases, the non-defaulting party is tolerating the non-performance of contract for which consideration in the form of fine or liquidated damages is payable by the defaulting party. The AAR has concluded that tolerating such non-performance of contract is an activity or transaction which is deemed to be a supply of service as they fall under the category of agreeing to the obligation to tolerate an act or a situation under clause 5 of Schedule II of CGST Act 2017. Therefore, the person who has received the damages from the defaulting party is liable to pay GST on such amount.

However, the AAR has clarified that payment of fine or liquidated damages to Government of India or any local authority, in case of non-performance or breach of contracts for supply of goods or services to the Government, violation of laws, bye-laws, rules or regulations, etc would not attract GST. Thus, the consideration received by the Government from any person or supplier for non performance of contract, or violation of laws, etc is exempted from GST.

Earlier, there was no service tax payable on the amount of fine or liquidated damages so received by a person and this position was continued under GST regime until the Ruling was published by AAR.  A number of industry experts have commented negatively on this Ruling stating that for GST to be applicable to an activity or transaction there has to be an element of supply, which is absent in the case of receipt of liquidated damages in the case of non-performance of contract. Moreover, there is a need to set up a mechanism whereby such rulings are well debated before they are published.

It is anticipated that this Ruling can lead to a lot of litigation, particularly in those sectors, such as infrastructure sector, where provisions for liquidated damages are commonly used in contracts.

 

 

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

SC RULES NCLAT TO ACT WITHIN THE DOMAIN PRESCRIBED BY LAW

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The Supreme Court, in M/s B. Himmatlal Agrawal v. Competition Commission of India & Anr., decided on 18th May, 2018, has held that the National Company Law Appellate Tribunal (NCLAT) has no jurisdiction to dismiss the appeal failing non-compliance of deposit as a pre-condition for grant of stay.

In the instant case, the Competition Commission of India had imposed penalty of Rs. 3.61 crores on the Appellant, namely, M/s B. Himmatlal Agrawal and nine other parties for indulging in anti-competitive and unfair trade practices. The Appellant appealed against the order before the NCLAT, and also prayed for interim stay of the penalty order. The NCLAT granted stay to the Appellant on the condition that it deposits 10% of the total penalty. The Appellant failed to deposit the amount and the NCLAT disposed off the appeal without further reference to the Bench.

The pure legal question that came up for consideration before the Supreme Court was whether the order of the NCLAT dismissing the main appeal itself for non-compliance of the direction to deposit the amount as a condition for grant of stay, is justified and legal.

The Bench of Justice A. K. Sikri and Justice Ashok Bhushan, referring to Section 53B of the Competition Act, 2002, which pertains to Appeal to NCLAT, ruled as follows:

“This statutory provision does not impose any condition of pre-deposit for entertaining the appeal. Therefore, right to file the appeal and have the said appeal decided on merits, if it is filed within the period of limitation, is conferred by the statute and that cannot be taken away by imposing the condition of deposit of an amount leading to dismissal of the main appeal itself if the said condition is not satisfied. Position would have been different if the provision of appeal itself contained a condition of pre-deposit of certain amount. That is not so. Sub-section (3) of Section 53B specifically cast a duty upon the Appellate Tribunal to pass order on appeal, as it thinks fit i.e. either confirming, modifying or setting aside the direction, decision or order appealed against. It is to be done after giving an opportunity of hearing to the parties to the appeal. It, thus, clearly implies that appeal has to be decided on merits.”

In conclusion, it needs to be understood that the condition of deposit was attached to the order of stay. In case of non-compliance of the said condition, the consequence would be that the stay has ceased to operate as the condition for stay is not fulfilled. However, non-compliance of the conditional order of stay would have no bearing insofar as the main appeal is concerned.

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

DEATH WHILE BOARDING/DE-BOARDING TRAIN: VICTIM ENTITLED TO COMPENSATION, PLEA OF CONTRIBUTORY NEGLIGENCE UNTENABLE

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While considering an appeal, Union of India v. Rina Devi, decided on 9th May, 2018, the Supreme Court resolved 4 issues under the Railways Act, 1989 replete with conflicting decisions by various High Courts. The same are as follows:

Quantum of Compensation

The compensation will be payable as applicable on the date of the accident with interest as may be considered reasonable from time to time on the same pattern as in accident claim cases. If the amount so calculated is less than the amount prescribed as on the date of the award of the Tribunal, claimant will be entitled to higher of the two amounts. The present case being a case of a beneficial legislation, if two interpretations are possible, interpretation beneficial to the claimant has to be followed.

Definition of Passenger

“Passenger” as provided for in the proviso to Section 124A includes a railway servant on duty, and a person who has purchased a valid ticket for travelling by a train carrying passengers, on any date or a valid platform ticket and becomes a victim of an untoward incident.

The general is that any person dead or injured found on the railway premises has to be presumed to be a bona fide passenger so as to maintain a claim for compensation.

But the Supreme Court is of the opinion that mere presence of a body on the Railway premises will not be conclusive to hold that injured or deceased was a bona fide passenger for which claim for compensation could be maintained. However, mere absence of a ticket with such injured or deceased will not negative the claim that he was a bona fide passenger.

Application of concept of Strict Liability : concept of self-inflicted injury

Sections 124 and 124A of the Railways Act, 1989 provide that compensation is payable whether or not there has been wrongful act, neglect or fault on the part of the railway administration in the case of an accident of an “untoward incident”. This is referred to as the ‘no fault thoery’.

Exceptions to such compensation are enlisted in the proviso to Section 124A and include the following:

  1. Suicide or attempted suicide
  2. Self-inflicted injury
  3. Criminal act
  4. Act committed in a state of intoxication or insanity
  5. Any natural cause or disease or medical or surgical treatment unless such treatment becomes necessary due to injury caused by the said untoward incident

The Supreme Court dismissed the view that “negligence per se will not disentitle grant of compensation under the Railways Act, however, once the negligence becomes a criminal negligence and self-inflicted injury then compensation cannot be granted; and in its place held that

“the concept of ‘self-inflicted injury’ would require intention to inflict such injury and not mere negligence of any particular degree. Doing so would amount to invoking the principle of contributory negligence which cannot be done in the case of liability based on ‘no fault theory. Accordingly, we hold that the death or injury in the course of boarding or de-boarding a train will be an ‘untoward incident’ entitling a victim to the compensation and will not fall under the proviso to section 124A merely on the plea of negligence of the victim as a contributing factor.’”

 Rate of interest

The Supreme Court has ruled that in the absence of any specific statutory provision, interest can be awarded from the date of accident itself when the liability of the Railways arises up to the date of payment, without any difference in the stages. Legal position in this regard is at par with the cases of accident claims under the Motor Vehicles Act, 1988.

 

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

NATIONAL POLICY ON BIOFUELS, 2018

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The Union Cabinet headed by the Prime Minister Shri Narendra Modi approved National Policy on Biofuels, 2018 (“Policy”) on Wednesday, 16th May 2018.

Biofuels allow the use of surplus food grains, sugar beet and starch for production of ethanol to blend with petrol to cut oil imports by ₹4,000 crore in 2018. Therefore, the Policy expands the scope of raw material for ethanol production by allowing use of sugarcane juice, sugar containing materials like sugar beet, sweet sorghum, starch containing materials like corn, cassava, damaged food grains like wheat, broken rice, rotten potatoes unfit for human consumption for production of ethanol.

Salient Features of the Policy:

  1. The Policy categorizes biofuels as “Basic Biofuels” viz. First Generation (1G) bioethanol & biodiesel and “Advanced Biofuels” – Second Generation (2G) ethanol, Municipal Solid Waste (“MSW”) to drop-in fuels, Third Generation (3G) biofuels, bio-CNG etc. to enable extension of appropriate financial and fiscal incentives under each category.
  1. The Policy expands the scope of raw material for ethanol production by allowing use of Sugarcane Juice, Sugar containing materials like sugar beet, sweet sorghum, starch containing materials like corn, cassava, damaged food grains like wheat, broken rice, rotten potatoes, unfit for human consumption for ethanol production.
  1. Farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Taking this into account, the Policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee.
  1. With a thrust on Advanced Biofuels, the Policy indicates a viability gap funding scheme for 2G ethanol Bio refineries of Rs.5000 crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels.
  1. The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, used cooking oil, short gestation crops.
  1. Roles and responsibilities of all the concerned Ministries/Departments with respect to biofuels has been captured in the Policy document to synergize efforts.

Following are the benefits expected:

  1. Reduce Import Dependency: One crore litre of bio-ethanol saves Rs. 28 crore of foreign exchange (forex) on oil imports at current rates. The ethanol supply year 2017-18 is likely to see a supply of around 150 Crore litre of ethanol which will result in savings of over Rs.4000 crore of forex.
  1. Cleaner Environment: One crore litre of E-10 saves around 20,000 ton of CO2 For the ethanol supply year 2017-18, there will be lesser emissions of CO2to the tune of 30 Lakh ton. By reducing crop burning and conversion of agricultural residues/wastes to biofuels there will be further reduction in Green House Gas emissions.
  1. Health benefits: Prolonged reuse of Cooking Oil for preparing food, particularly in deep-frying is a potential health hazard and can lead to many diseases. Used Cooking Oil is a potential feedstock for biodiesel and its use for making biodiesel will prevent diversion of used cooking oil in the food industry.
  1. MSW Management: It is estimated that, annually 62 MMT of Municipal Solid Waste gets generated in India. There are technologies available which can convert waste/plastic, MSW to drop in fuels. One ton of such waste has the potential to provide around 20% of drop in fuels.
  1. Infrastructural Investment in Rural Areas: It is estimated that, one 100klpd bio refinery will require around Rs.800 crore capital investment. At present Oil Marketing Companies are in the process of setting up twelve 2G bio refineries with an investment of around Rs.10,000 crore. Further addition of 2G bio refineries across the Country will spur infrastructural investment in the rural areas.
  1. Employment Generation: One 100klpd 2G bio refinery can contribute 1200 jobs in Plant Operations, Village Level Entrepreneurs and Supply Chain Management.
  1. Additional Income to Farmers: By adopting 2G technologies, agricultural residues/waste which otherwise are burnt by the farmers can be converted to ethanol and can fetch a price for this waste if a market is developed for the same.

Moreover, farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Thus, conversion of surplus grains and agricultural biomass can help in price stabilisation.

Taruna Verma

Senior Associate

Salient Features of the Criminal Law (Amendment) Ordinance, 2018 and Glaring Drawbacks

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The Kathua rape incident resulted in the much awaited enhancement in severity of punishment for rape of minor girls by way of the Criminal Law (Amendment) Ordinance, 2018, promulgated on April 21, 2018. The Ordinance amends the following legislations in the manner as stated below:

AMENDMENTS TO INDIAN PENAL CODE (IPC), 1860:

Enhanced punishment for rape: Section 376 of the IPC, 1860, which deals with the offence of rape was earlier punishable with a rigorous imprisonment of at least seven years up to life imprisonment, along with fine. The Ordinance, 2018 has increased it to rigorous imprisonment of minimum ten years, extending upto life imprisonment, along with fine.

A new clause (3) has been added prescribingthe minimum punishment of twenty years to a person committing rape on a woman under 16 years of age, extending up to life imprisonment, along with fine.

New offences: The Ordinance introduces three new offences relating to rape of minors, and increases the penalty for one:

Section 376 AB: Rape of a girl below the age of 12 years attracts rigorous imprisonment of atleast 20 years extendable to life imprisonment, along with fine to meet medical expenses and rehabilitation cost of the victim, or, with death.

Section 376 DB: Gang rape of a girl below the age of 12 yearshas been made punishable with life imprisonment, along with fine, to meet medical expenses and rehabilitation cost of the victim, or, with death.

Rape of a girl below the age of 16 yearsattracts rigorous imprisonment of atleast 20 years extendable to life imprisonment, along with fine to meet medical expenses and rehabilitation cost of the victim, or, with death. Previously, rape of a girl below the age of 16 years was punishable with imprisonment of ten years extendable to life imprisonment, along with fine.

Section 376 DA: Gang rape of a girl below the age of 16 yearshas been made punishable with life imprisonment, along with fine, to meet medical expenses and rehabilitation cost of victim.

AMENDMENTS TO PROTECTION OF CHILDREN FROM SEXUAL OFFENCES ACT (POCSO), 2012:

ThePOCSO Act, 2012, makes the rape of minors punishable with atleast seven years or life imprisonment, along with a fine. For rape of minors below the age of 12 years or for gang rape of minors, the punishment is rigorous imprisonment of at least ten years or life imprisonment, along with fine. The Ordinance amends the POCSO Act, 2012 to state that for all such offences, the punishment which is higher between the POCSO Act, 2012 and IPC, 1860, shall apply.

AMENDMENTS TO CODE OF CRIMINAL PROCEDURE (CR.P.C.), 1973: 

Time-bound investigation: The Cr.P.C., 1973 under section 173 states that an investigation into rape of a child must be completed within three months. The Ordinance amends the section and reduces the time for completion of investigation from three months to two months extendable to all offences of rape (including rape, gang rape, and rape of minors under the age of 12 years and 16 years).

Appeal: As per the Ordinance, any appeal under section 374 or section 377 of the Cr.P.C., 1973 against a sentence related to rape cases must be disposed of within six months.

Anticipatory Bail: The Cr.P.C., 1973 lists conditions for grant of anticipatory bail. The Ordinance makes the provision of anticipatory bail not applicable to rape and gang rape of minor girls below 12 years and 16 years of age.

AMENDMENTS TO INDIAN EVIDENCE ACT, 1872:

Under the Evidence Act, in determining whether the act was consensual or not and the two-finger test that determines the past sexual experience or character of the victim is disregarded. This provision has been extended to the rape and gang rape of minor girls below 12 years of age and below 16 years of age.

 

All of the above amendments are requisite changes in the legislation for achieving the intended objective, however, the same are not free from flaws.

The Supreme Court of India has posed questions to the Government of India, including one very pertinent question, “Now that the punishment for rape of a minor and that of murder is death, how many of the perpetrators would leave their victims alive?” a question that seems impossible at the outset to be answered.

The Ordinance lacks in its scope in as much as it only relates to punishment for rape of minor girls, and does not cover boys or even males for that matter. There are enough accounts and evidence of sexual abuse inflicted on boys and even men, and the same should have been incorporated by the Ordinance.

Lastly, fast-tracking the investigation and awarding of sentence would certainly result in speedy justice to the victim, but it would also put many innocent lives at risk of death, lest they are implicated in false and fabricated cases.

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

Arbitration and Conciliation (Amendment Bill), 2018

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The Union Cabinet chaired by Prime Minister Shri Narendra Modi on Wednesday approved the Arbitration and Conciliation (Amendment) Bill, 2018 for introduction in the Parliament. The Amendment is intended to facilitate achieving the goal of improving the process of arbitration mechanism in a cost effective and time bound manner.

The Arbitration and Conciliation Act, 1996, as amended by the Arbitration and Conciliation (Amendment) Act, 2015 in order to make arbitration process user-friendly, cost-effective and ensure speedy disposal and neutrality of arbitrators. However, to give a boost to institutional, arbitration and to remove some practical difficulties in applicability of the Arbitration and Conciliation (Amendment) Act, 2015, a High Level
Committee (HLC) under the Chairmanship of Justice B. H. Srikrishna, Retired Judge, Supreme Court of India, was constituted by the Central Government.

The HLC submitted its Report on 30th July 2017 and has recommended for amendments in the Arbitration and Conciliation (Amendment) Act, 2015. The proposed amendments are as per the recommendations of the High-Level Committee.

Characteristics:-

  1. To facilitate speedy appointment of arbitrators through designated arbitral institutions by the Supreme Court or the High Court, without having any requirement to approach the court in this regard. It is envisaged that parties may directly approach arbitral institutions designated by the Supreme Court for International Commercial arbitration and in other cases the concerned High Courts.
  1. The amendment provides for creation of an independent body namely the Arbitration Council of India (ACI) which will grade arbitral institution and accredit arbitrators by laying down norms and take all such steps as may be necessary to promote and encourage arbitration, conciliation, mediation and other ADR Mechanism and for that purpose evolve policy and guidelines for the establishment., operation and maintenance of uniform professional standards in respect of all matters relating to arbitration and ADR mechanism. The Council shall also maintain an electronic depositor of all arbitral awards.
  1. The ACI shall be a body corporate.  The Chairperson of ACI shall be a person who has been a Judge of the Supreme Court or Chief Justice or Judge of any High Court or any eminent person. Further, the other Members would include an eminent academician etc. besides other Government nominees.
  1. It is proposed to amend  sub section (1) of section  29A by excluding International Arbitration from the bounds of timeline and further to provide that the time limit for arbitral award in other arbitrations shall be within 12 months from the completion of the pleadings of the parties.
  1. A new section 42A is proposed to be inserted to provide that the arbitrator and the arbitral institutions shall keep confidentiality of all arbitral proceedings except the award. Further, a new section 42B protects an Arbitrator from suit or other legal proceedings for any action or omission done in good faith in the course of arbitration proceedings.
  1. A new Section 87 has been proposed to be inserted to clarify that unless the parties agree otherwise the Amendment Act 2015 shall not apply to (a) Arbitral proceedings which have commenced before the commencement of the Amendment Act of 2015 (b) Court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Amendment Act of 2015 and shall apply only to Arbitral proceedings commenced on or after the commencement of the Amendment Act of 2015 and to court proceedings arising out of or in relation to such Arbitral proceedings.

 

IMAAD M. KHAN

Associate

US SANCTIONS HEAVILY HIT THE INDIA-RUSSIA TRADE AND DEFENCE TIES

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The United States of America (US) Government had published the Countering America’s Adversaries Through Sanctions Act (CAATSA) (Law) in August 2017 which authorizes the US President to impose sanctions with respect to a person which engages in a significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation, including the Main Intelligence Agency of the General Staff of the Armed Forces of the Russian Federation or the Federal Security Service of the Russian Federation. But the Law also allows the President to waive such sanctions in certain cases.

This Law was introduced owing to the rising tension between US and Russia including the alleged Russian interference in the 2016 U.S. Presidential Election, alleged Russian involvement in the Syrian civil war, etc.

India and other US allies, having trade relations with Russia, seem to have been adversely affected by the Law. Indian military uses Russian parts, hardware, supplies, maintenance help and other defence items, in particular state-of-the-art S-400 air missile defence system, for their ships, planes, etc. Moreover, India is currently in the advance stages of negotiations with Russia for five S-400 defence systems worth $ 4.5 billion (approximately). It is feared that India could face sanctions from US if it continues its defence ties and arms trade with Russia.

Owing to the fear of US sanctions, various Indian banks have recently blocked payments worth over $15 Million to Russia. As a result the entire arms trade of India with Russia has come to a halt.

Various experts have expressed concern over this move of the US and its adverse affects on India stating that India may seek waiver or exemption from these sanctions on the ground that India is reducing its dependence on Russian arms and hardware. According to a top defence official, it is also feared that the sanctions imposed on India may have a negative impact on the India-US arms trade and defence relations. Various officials and ex-officials of the US Government have commented in this regard stating that seventy per cent of the US military hardware is also Russian in origin and so US would not want to weaken its trade ties with India. But the Indian Government is yet to make any public statement in this regard.

 

Harini Daliparthy

Senior Legal Associate