SUPREME COURT REITERATES THE PRINCIPLES OF DOCTRINE OF SEPARABILITY OF ARBITRATION CLAUSE IN CONTRACTS

The #SupremeCourt has in a recent case of M/S. N.N. Global Mercantile Pvt. Ltd. Vs M/S. Indo Unique Flame Ltd. and Others passed a Judgment dated 11-01-2021 and reiterated the principles of #Doctrine of #Separability of #arbitration clauses/#agreements.

In this case, the Respondent No. 1 entered into a Contract for washing of coal with Karnataka Power Corporation Ltd. (KPCL) on 18-09-2015 (Principal Contract) and further, entered into a Sub-Contract for transportation of coal with the Appellant, M/s. N.N. Global Mercantile Pvt. Ltd. on 28-09-2015 (Sub-Contract). Soon thereafter, certain disputes arose between KPCL and the Respondent under the Principal Contract, which led to the invocation of Bank Guarantees furnished by the Appellant. Aggrieved by the invocation of Bank Guarantees by the Respondent, the Appellant filed a Suit against the Respondent and its Banker in the Commercial Court, Nagpur, thereby praying for a declaration that the Respondent is not entitled to invoke the Bank Guarantees as the Respondent had not allotted any work under the Sub-Contract and there were no invoices issued, etc, and as such the Respondent has not suffered any loss in order to justify the invocation of Bank Guarantees.

The Commercial Court passed an Interim Order dated 15-12-2017 and directed status-quo to be maintained with regard to the invocation of Bank Guarantees.

Aggrieved, the Respondent filed an Application under Section 8 of the Arbitration and Conciliation Act 1996 (the Act) seeking reference of disputes to arbitration, owing to the Arbitration Clause in the Sub-Contract. Here, the Appellant challenged the maintainability of Section 8 Application on the ground that the Clause of Bank Guarantee was a part of separate and independent Principal Contract, and the Principal Contract did not contain any arbitration clause.

The Commercial Court passed an Order dated 18-01-2018 and dismissed the Section 8 Application on the ground that the Arbitration Clause specified in the Sub-Contract did not cover Bank Guarantees. The Bank Guarantee was an independent contract. Further, that the jurisdiction of the Commercial Court is not ousted by the Arbitration Agreement as neither of the Parties had performed any work under the Sub-Contract.

Aggrieved, the Respondent filed a Civil Revision Petition before the Bombay High Court, where the High Court allowed the Respondent to file a petition under Article 226 and 227 of the Constitution of India 1950 (the Constitution), vide Order dated 09-07-2020.

Upon filing a Writ Petition, the Bombay High Court quashed and set aside the Order passed by the Commercial Court dated 18-01-2018, vide Judgment dated 30-09-2020. The Bombay High Court held that as there was an Arbitration Agreement existing between the Parties, the disputes have to be settled through arbitration, and not Civil Suit. Hence, the High Court held Section 8 Application filed by the Respondent in the Commercial Court and the Writ Petition filed before the High Court are maintainable.

Aggrieved by the Judgment dated 30-09-2020 passed by the Bombay High Court, the Appellant filed a Special Leave Petition before the Supreme Court.

One of the significant observations made by the Apex Court in this case is with regard to validity of arbitration agreement, in a case where the underlying contract is unstamped:

1- That arbitration clause/agreement is a distinct and separate agreement, independent from the underlying substantive commercial contract.

2- Thus, the invalidity of the underlying contract would not affect the validity of the Arbitration Agreement.

3- The arbitral tribunal is competent to hear and adjudicate objections and disputes pertaining to jurisdiction, validity and scope of the arbitration agreement, etc. It may be subject to judicial scrutiny by courts at a later stage of proceedings. For instance, challenge of jurisdiction of arbitrator can be made before the court under Section 16 (6) of the Act, after the final award has been passed. This would ensure minimal judicial intervention.

Section 16 (6) of the Act provides that “A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.”

4- This Section 16 gives statutory recognition to the Doctrine of Separability, i.e. an arbitration clause/agreement is distinct and separate from the principle contract. Section 16 (1) (a) of the Act states that “an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract

5- In this case, the Appellant contended that the Section 8 Application under the Act is not maintainable as the underlying Sub-Contract was an unstamped document and thus, could not be received in evidence. Therefore, the Arbitration Clause being a part of the Sub-Contract would also not be enforceable.

6- The Supreme Court considered the contention of the Appellant to the extent that the Sub-Contract was not stamped as per the requirements of Maharashtra Stamp Act 1958 (the Stamp Act), and hence, not admissible as evidence under Section 34 of the Stamp Act. But that would certainly not invalidate the Sub-Contract, as it would amount only to a deficiency, which can be cured on the payment of the requisite stamp duty.

Therefore, applying the aforesaid #Doctrine of #Separability to this case, the Apex Court held that the Arbitration Clause/Agreement would not be rendered invalid or unenforceable, even if the underlying Sub-Contract is rendered inadmissible in evidence. Hence, there is no legal bar on the enforceability of the Arbitration Agreement and the commencement of arbitration proceedings.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

SUPREME COURT GRANTS INTERIM STAY ON THE IMPLEMENTATION OF THE FARM LAWS

The #Farmers #Agitation that started on 09.08.2020 and continues till today against the three Laws, which are (1) Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (2) Essential Commodities (Amendment) Act, 2020 (3) Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 (‘Farm Laws’) was before the #SupremeCourt.

The 3-Judges Bench of the Supreme Court in the case of Rakesh Vaishanv and others v. Union of India and others (2021 SCC OnLine SC 18),  vide its Interim Order dated 12.01.2021 granted an Interim Stay on the implementation of Farm Laws until further orders.

The Supreme Court categorized various petitions against the Farm Laws into three categories. It describes the petitions in the following manner:

  • The Petitions, which challenge the constitutional validity of the Farm Laws.
  • The Petitions, which support the Farm Laws on the ground that these Laws are constitutionally valid and also beneficial to the farmers.
  • The Petitions, which are filed by the Individuals who are residents of the NCR, Delhi as well as neighbouring States, claiming that the agitation by the farmers and the consequent blockage of roads/highways leading to Delhi, infringes the fundamental rights of other citizens to move freely.

Evidently, the Supreme Court noted that no settlement was reached even after the several rounds of negotiations have taken place between the Government of India and the Farmer’s Bodies. The Supreme Court took serious cognizance of the situation on ground level and pointed out that the Agitation involves senior citizens, women, and children at the roads, exposing them to grave health hazards during the cold and Pandemic. Consequently, it has further resulted in a few deaths due to serious illness and also by way of suicide. The Supreme Court while considering the seriousness of the situation also observed that the Agitation has been carried out peacefully by the farmers and without any untoward incident.

The Supreme Court was informed by the learned Attorney General that the Farmers’ Bodies may take out a tractor rally on 26.01.2021 to disrupt the Republic Day Parade however the same was denied by the Counsel representing the farmers.

Therefore, view of this situation, the Supreme Court ordered for the constitution of a Committee of Experts in the field of agriculture to negotiate between the farmers and the Government of India. The Supreme Court while passing the Order dated 12.01.2021 further observed that a stay of implementation of all the three Farm Laws in view of the present circumstances “may assuage the hurt feelings of the farmers and encourage them to come to the negotiating table with confidence and good faith.”

The learned Attorney General objected the stay of implementation of laws on the ground that the Petitioners who approached this Court against the Farm Laws have not been able to show any provision which is detrimental to the farmers. He further contended that the laws enacted by the Parliament cannot be stayed by the Judiciary, when the there is a presumption in favour of the constitutionality of legislation.

The Supreme Court while appreciating the contentions observed that “this court cannot be said to be completely powerless to grant stay of any executive action under a statutory enactment.”

Thus, the Supreme Court after considering different views passed the Interim Order dated 12.01.2021 and stayed the implementation of the Farm Laws with an expectation that both the Parties will attempt to arrive at a fair, equitable and just solution to the disputes.

As a result, the Minimum Support System in existence before the enactment of the Farm Laws shall be maintained until further orders. It further added that the farmers land holdings shall be protected.

A Committee comprising of Farmers Bodies will be constituted for the purpose of listening to the concerns of the farmers relating to the Farm Laws and views of the Government. Thereafter, it will make its recommendations; submit a report before the Supreme Court in this regard within two months from the date of its first sitting, which will be held within ten days from the date of the Interim Order i.e., 12.01.2021.

Lakshmi Vishwakarma

Senior Legal Associate

The Indian Lawyer & Allied Services

SUPREME COURT HOLDS THAT INCORPORATING ONE SIDED AND UNREASONABLE CLAUSES IN A BUILDER BUYER’S AGREEMENT CONSTITUTES AN UNFAIR TRADE PRACTICE

The Three Judge Bench of the Hon’ble #SupremeCourt of India comprising of Justices Dr. Dhananjaya Y Chandrachud, Indu Malhotra and Indira Banerjee passed a Judgment dated 11-01-2021 in the case of Ireo Grace Realtech Pvt. Ltd. v. Abhishek Khanna & Others Civil Appeal No. 5785 of 2019 and held that incorporation of one-sided and unreasonable clauses in a #Builder Buyer’s #Agreement constitutes an unfair trade practice under the #ConsumerProtection Act, 1986 (Act).

In the present case, an apartment buyer (Respondent No.1) was allotted a 2BHK apartment in Tower C of “The Corridors” developed in Sector 67-A, Gurgaon, Haryana (Project). On 25-03-2014 the Developer (Appellant) handed over a copy of the Apartment Buyer’s Agreement with a construction linked payment plan to the flat buyers. On 12-05-2014, the Developer executed the Apartment Buyer’s Agreement in favour of Respondent No.1 for a total sale consideration of Rs.1,45,22,006/-.

On 27-12-2017 a consumer complaint was filed by Respondent No.1 in National Consumer Disputes Redressal Commission (NCDRC) wherein it was prayed that the Developer be ordered to refund the amount of Rs.1,44,72,364/- paid by the buyer along with interest @ 20% p.a. compounded quarterly till realization, and compensation for damages on account of harassment, mental agony and litigation charges. The main contention raised by the homebuyer was that the Appellant is guilty of misrepresentation of facts that all necessary approvals/pre-clearances with respect to the construction of the apartments had already been obtained from the office of the Director, Town and Country Planning, Haryana, and other civil authorities. Furthermore, the “Commitment Period” for handing over the possession of the apartments was 42 months, the same had expired on 22.01.2017 and the Grace Period had lapsed on 22.07.2017. However, the Appellant caused a delay in handing over the possession of the apartment till the date of filing of the complaint. The NCDRC after taking into consideration the arguments advanced by the Parties held that since the Appellant failed to deliver the timely possession of the apartments to the homebuyers, there was a deficiency in service on part of the Appellant and therefore complainants were entitled to refund of the amount along with appropriate compensation.

Aggrieved the Appellant filed an Appeal under Section 23 of the Act in the Hon’ble Supreme Court of India impugning the judgment passed by the NCDRC wherein the latter had ordered the Appellant to refund the amounts deposited by the buyers in the projectas the Appellant inordinately delayed in constructing and obtaining the Occupation Certificate of the apartments.

The Apex Court while deciding the matter formulated the following issues:

  1. “Determination of the date from which the 42 months period for handing over possession is to be calculated under Clause 13.3, whether it would be from the date of issuance of the Fire NOC as contended by the Developer; or, from the date of sanction of the Building Plans, as contended by the Apartment Buyers;
  2. Whether the terms of the Apartment Buyer’s Agreement were one sided, and the Apartment Buyers would not be bound by the same;
  3. Whether the provisions of the Real Estate (Regulation and Development) Act, 2016 must be given primacy over the Consumer Protection Act, 1986;
  4. Whether on account of the inordinate delay in handing over possession, the Apartment Buyers were entitled to terminate the agreement, and claim refund of the amounts deposited with interest.”

Taking into consideration the contentions of the Parties to the dispute, the Hon’ble Supreme Court of India held the following:

1- On issue No. (1) the Bench observed that as per the Haryana Fire Safety Act, 2009, it is mandatory for a Builder/Developer to obtain the Fire NOC before commencing the construction activity. The Court held that as per Clause 13.3 of the Apartment Buyer’s Agreement the period of 42 months has to be calculated from the date on which Fire NOC was issued and not from the date when the Building Plans were sanctioned.

2- On issue No. (2) the Court opined that the clauses mentioned in the Builder Buyer Agreement are completely one sided and favoured the Builder/Developer at every step and are thus prejudicial to the interests of the homebuyers. For the said issue, the Apex Court held that “The terms of the Apartment Buyer’s Agreement are oppressive and wholly one-sided, and would constitute an unfair trade practice under the Consumer Protection Act, 1986.”  

3- On issue No. (3) the Bench while relying upon the case of M/s Imperia Structures Ltd. v. Anil Patni and Anr (2020) 10 SCC 783  opined that “remedies under the Consumer Protection Act were in addition to the remedies available under special statutes. The absence of a bar under Section 79 of the RERA Act to the initiation of proceedings before a fora which is not a civil court, read with Section 88 of the RERA Act makes the position clear. Section 18 of the RERA Act specifies that the remedies are ―without prejudice to any other remedy available.”

4- The Court while deciding issue No. (4) divided the home buyers into two categories:

a) Flat Buyers whose allotments fall in Phase 1 of the project, where the Appellant-Developer has been granted the Occupation Certificate and offer of possession has been given to the Apartment Buyers. For Apartment Buyers falling under Category 1 it was held that allottees shall be given the possession of the flats. However, the Appellant is under an obligation to pay the Delay Compensation for the period of delay.

b) Flat Buyers whose allotments fall in Phase 2 of the project, where the Occupation Certificate has not been granted. For Apartment Buyers falling under Category 2 it was held that Appellant is under an obligation to refund the entire amount deposited by allottees, along with compensation and interest.

The Apex Court while rejecting the arguments advanced by the Appellant and dismissing the Appeal, directed that Respondent No. 1 shall be entitled to a refund of the entire amount along with Interest @ 9% S.I. p.a. within a period of 4 weeks from the date of the Judgment. Further, the Court ordered that in case the Appellant fails to comply with this direction, it shall be liable for payment of default interest @ 12% S.I. p.a. till the payment is made.

Suchitra Upadhyay

Associate

The Indian Lawyer & Allied Services

ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN INDIA

A #foreign arbitral #award refers to the decision of an #international #arbitral #tribunal which also includes interim awards made thereunder. In India, enforcement and execution of arbitral awards are governed both by the Code of Civil Procedure, 1908 and the Arbitration and Conciliation Act, 1996.

Under the Arbitration and Conciliation Act, 1996 (the Act), the primary framework for enforcement of foreign arbitral awards are provided for under Article 44 to Article 52 modelled on the lines of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention and Article 53- 60 of the Act based on the Geneva Convention on the Enforcement of Awards of 1927, also known as the Geneva Convention.

In order to effectively enforce an award, an execution petition has to be filed in the court having jurisdiction which will determine whether the award adheres to the requirements of the act.

The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court

  • Original award or a duly authenticated copy in the manner required by the country where it is made.
  • Original agreement or duly certified copy.
  • Evidence necessary to prove the award is a foreign award, wherever applicable.

The use of the word “shall” under Section 47 of the Act was interpreted as “may” in the case of PEC Limited vs AustBulk Shipping SDN BHD,2018 (Civil Appeal No. 4834, 2007) to mean that a party applying for enforcement of the award need not necessarily produce before the court a document mentioned therein “at the time of the application”. However, it was held that such an interpretation is restricted only to the initial stage of the filing of the application and not that thereafter.

Further, enforcement of a foreign award may be refused on the following grounds as enumerated under Section 48 of the Act. If:

  • The parties to the agreement were under some incapacity.
  • The agreement in question is not in accordance with the law to which the parties have subjected it, or under the law of the country where the award was made (especially in case of foreign awards).
  • There is a failure to give proper notice of appointment of arbitrator or arbitral proceedings or the party against whom the award was rendered was otherwise unable to present his case.
  • Award is ultra vires the agreement or submission to arbitration.
  • Award contains decisions on matters beyond the scope of submission to arbitration.
  • Composition of the arbitral authority or the arbitral procedure is ultra vires to the agreement.
  • Composition of the arbitral authority or the arbitral procedure is not in accordance with the law of the country where the arbitration took place.
  • The award (specifically a foreign award) has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which that award was made.
  • Subject matter of the dispute is not capable of settlement by arbitration under Indian law.
  • Enforcement of the award would be contrary to the public policy of India.

In the case of Renusagar v. General Electric Co., (1994 Supp (1) SCC 644) and Shri Lal Mahal v. Progetto Grano (2014) 2 SCC 433), the Supreme Court held that the conditions under which the foreign award can be interfered with are limited to include – fundamental policy of Indian law; or the interests of India; or justice or morality. It clarified that the scope of public policy has narrow connotation under Section 45. The Explanation 2 to the Provision codifies the parameters prescribed in Renusagar case (supra) to conclude that a contravention with the fundamental policy of Indian law does not allow the court to review the award on merits. Keeping up with the spirit, the Supreme Court in Vijay Karia v. Prysmian Cavi, (2020 SCC Online SC 177), analysed the elements of public policy defence available for denying enforcement of a foreign award. It held that the interpretation of the word “may” in Section 48(1) and (2) to connote the discretion with the court to enforce an award, must be exercised only if the resisting party is able to furnish proof based on the conditions mentioned in the Provision. Further, in the case of Government of India v Vedanta Ltd (Formerly Cairn India Ltd) and Others (Civil Appeal No 3185 of 2020),the Supreme Court heldthat the enforcement court cannot set aside a foreign award, even if the conditions under Section 48 of the Act are made out. The power to set aside a foreign award vests only with the court at the seat of arbitration since primary jurisdiction is exercised by the curial courts at the seat of arbitration.

Having said that there have been instances of diverting stand taken by Supreme Court, for example, in the case of NAFED v. Alimenta SA (2020 SCC Online SC 381) where the court went on to examine arbitral awards on merits despite it being against the spirit of Section 48.

The Indian Courts are stepping up to make India a more arbitration friendly destination. The endeavour should continue to be to maintain a “pro enforcement bias” which is the spirit of Article V of the New York Convention on which Section 48 of the Indian Arbitration and Conciliation Act is modelled.

Pooja

LLM candidate at National University of Singapore

Intern at The Indian Lawyer

SUPREME COURT HOLDS THAT A CONDITIONAL CONTRACT IS CONCLUDED WHEN THE CONDITION IS ACCEPTED ABSOLUTELY

Recently, the #SupremeCourt of India in the case of Padia Timber Company (P) Ltd. v. Visakhapatnam Port Trust (2021 SCC Online SC 1), vide its Judgment dated 05-01-2021 held that the #acceptance of a #conditionaloffer with a further #condition results in a concluded #contract, until the offerer absolutely accepts the further condition proposed by the acceptor. 

Facts: The Visakhapatnam Port Trust (‘Respondent’) issued a Tender for supply of Wooden Sleepers. Padia Timber Company (P) Ltd. (‘Appellant’) submitted its Offer with a specific condition that inspection of the Wooden Sleepers would have to be conducted only at the depot of the Appellant. It further deposited earnest money amount of Rs 75,000/- as per the terms of the Tender along with its quotation. However, the opening of the Tender was postponed for another date by the Respondent. As a result, the Appellant submitted its Revised Offer reiterating the same specific condition with respect to the inspection of the Sleepers. It further stipulated that in the event inspection would conduct at General Stores of the Respondent then the Appellant would charge 24% extra.

Thereafter, the Respondent had accepted the Offer of the Appellant and agreed that the Inspection Committee would inspect the Wooden Sleepers at the site of the Appellant. However, the Respondent imposed a further condition that the Appellant would have to transport the Wooden Sleepers to the General Stores of the Respondent by road at the cost of the Appellant and the final inspection would be made at the General Stores of the Respondent.

Consequently, the Appellant rejected the proposal of the Respondent and requested that the earnest money deposited by the Appellant must be returned, vide Letter dated 30.10.1990. On the same day, the Respondent issued the Purchase Order for the supply of the Wooden Sleepers. The Respondent also warned the Appellant that if supply was not made as per the Purchase Order then the Earnest Money Deposit of Rs 75,000 would be forfeited.

Thereafter, several correspondences were exchanged between the Respondent and the Appellant. In response to one of the Letters, the Appellant contended that there was no concluded contract between the Appellant and the Respondent. Therefore, the Appellant again requested for refund of the Earnest Money Deposit.

In this regard, the Respondent had filed a Suit for Damages for breach of contract against the Appellant before the Additional Senior Civil Judge, Visakhapatnam. The Appellant had also filed a Suit for Recovery of Earnest Money Deposit before the same Trial Court.

Trial Court: The Additional Senior Civil Judge, Visakhapatnam, vide its Order dated 31.03.2000 allowed the Suit filed by the Respondents for damages and dismissed the Suit filed by the Appellant for recovery. The Trial Court held that the Contract was enforceable till its completion or its abandonment. Accordingly, the rescission of the Contract and consequential forfeiture of Earnest Money Deposit was proper and within the terms of the Contract. It also held that the Appellant committed breach of its obligations under a concluded Contract, therefore the Respondent is entitled to damages as claimed.

The said Order of the Trial Court dated 31.03.2000 was challenged before the High Court of Judicature at Hyderabad in Appeal Nos. 2196 and 2197 of 2000.

High Court: While hearing the Appeals, the High Court of Judicature at Hyderabad, vide its Order dated 10.10.2006, upheld the Trial Court Order dated 31.03.2000 and findings thereof.

Being aggrieved by the High Court Order dated 10.10.2006 confirming the Order of the Trial Court dated 31.03.2000, the Appellant approached the Supreme Court, vide Civil Appeal No 7469/2008.

Supreme Court:

The Supreme Court observed that “With the greatest of respect, the High Court has cursorily dealt with the contentions of the Appellant and has not even discussed the cases that had been cited on behalf of the Appellant.

The Supreme Court discussed the Section 7 of the Indian Contract Act, 1872 which is related to -acceptance to be absolute in order to convert a proposal into a promise. It observed that the cardinal principle of the law of contract states that the offer and acceptance of an offer must be absolute. It can give no room for doubt. The offer and acceptance must be based or founded on three components i.e., certainty, commitment and communication.

The Supreme Court relied upon the following cases:

  • Haridwar Singh v. Bagun Sumbrui and Ors (AIR 1972 SC 1242), wherein it was held that an acceptance with a variation is no acceptance. It is, in effect and substance, simply a counter proposal which must be accepted fully by the original proposer, before a contract is made.
  • Union of India v. Bhim Sen Walaiti Ram [(1969) 3 SCC 146], a three-Judge Bench of Supreme Court held that acceptance of an offer may be either absolute or conditional. If the acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place.

Based on the aforesaid cases and provision of the law, the Supreme Court held that the Appellant submitted its Offer to the Respondent’s Tender with a condition, which was duly accepted by the Respondent however with a further condition. This further condition was not accepted by the Appellant. Therefore, the Contract between the Respondent and the Appellant could not be said to be a concluded contract. Thus, the Supreme Court held that the Appellant was not in breach and not liable to pay damages. The Appellant was entitled to refund of its Earnest Money deposited with the Respondent.

Lakshmi Vishwakarma

Associate

The Indian Lawyer & Allied Services

SUPREME COURT HOLDS THAT FIXING NOTIONAL INCOME FOR A HOMEMAKER IS IMPERATIVE FOR SOCIAL EQUALITY

The Three Judge Bench of the Hon’ble #SupremeCourt of India comprising of Justices NV Ramana, S Abdul Nazeer and Surya Kant passed a Judgment dated 05-01-2021 in the case of Kirti & Anr. Etc. v. Oriental Insurance Company Ltd. {Civil Appeal Nos. 19-20 of 2021 (Arising out of Special Leave Petition (C) Nos. 18728-29 of 2018)} and held that the #time #invested by a #homemaker in taking care of the #household must be recognized and valued and the notion that they do not add “#economicvalue” must be overcome.

In the present case, the Deceased Couple (Poonam and Vinod) was killed in a road accident on 12-04-2014. An FIR was registered under Sections 279 and 304 of the Indian Penal Code, 1860 (IPC). Subsequently, a Claim Petition was filed by the two-toddler daughters and the parents of the Deceased under Section 166 of the Motor Vehicles Act, 1988 (MV Act). The Insurance Company awarded a compensation of Rs. 6.47 Lakhs for the death of Deceased Poonam and Rs. 10.71 Lakhs for Deceased Vinod. Based on the evidences produced, the Motor Accident Claims Tribunal (Tribunal) held that the car-driver was guilty of rash driving and the Respondent-Insurer was under an obligation to award the compensation. As regards the amount of compensation, the Tribunal relied upon the age of the Deceased couple and awarded a compensation of Rs. 40.71 Lakhs for both Deceased to the Claimants.

The computation of compensation by the Tribunal was contested by the Respondent-Insurer before the High Court of Delhi (High Court), on the ground that the Tribunal erred in relying upon the minimum wage notified by the Government of NCT of Delhi as there was no proof that the Deceased Couple was employed in Delhi. The Respondent-Insurer inter alia contended that since the Deceased were a resident of Haryana, the minimum wage notified for the State of Haryana should be taken into consideration for the purpose of computing the compensation.

Agreeing to the contentions raised by the Respondent-Insurer and relying upon the lowest minimum wage fixed for unskilled workers in the State of Haryana, instead of Delhi, the High Court reduced the notional income for both the Deceased. Furthermore, future prospects were denied to both the Deceased and 1/3rd of Poonam’s income was deducted towards personal expenses. However, keeping in mind Poonam’s contribution towards household, 25% additional gratuitous income was added to her salary. Thus, the High Court vide Judgment dated 17-07-2017 reduced the amount of compensation and awarded a total of Rs. 22 lakhs as compensation to the Claimants.

Aggrieved, the three surviving Dependents of the Deceased (two minor daughters and father) filed an Appeal in the Hon’ble Supreme Court of India challenging the Judgment dated 17-07-2017 passed by the High Court whereby the compensation awarded to the Claimants was reduced from Rs. 40.71 lakhs to Rs. 22 lakhs.

Relying upon the contentions raised by the Parties to the dispute, the Apex Court opined that there are two different categories of situations where the Court determines the notional income of a victim. Under the first category of cases, the Court determines the notional income of the victim when she was employed, but the Claimants are unable to prove her actual income. In such a situation, the Court “guesses” the income of the victim by generally taking into consideration factors such as evidence on record, the quality of life being led by the victim and her family, the general earning of an individual employed in that field, the qualifications of the victim, etc. Under the second category of cases, the Court determines the income of a non-earning victim, such as a child, a student or a homemaker. In this context, the Bench noted that as per the 2011 Census, about 159.85 million women stated that “household work” was their main occupation, as compared to only 5.79 million men.

The Hon’ble Supreme Court held that a home maker undertakes a plethora of activities and a considerable amount of time and effort is dedicated by the women towards household work. A homemaker does many household chores such as preparing food for the entire family, managing the procurement of groceries and other shopping needs, cleaning and managing the house and its surroundings. She also undertakes works such as decorations, repairs, maintenance work, looking after the needs of children and aged members of the household, managing budgets etc. In rural households, a woman apart from doing other works also undertakes field activities such as sowing, harvesting and transplanting.

Further, the Apex Court held that “15. The issue of fixing notional income for a   homemaker, therefore, serves extremely important functions. It is a recognition of the multitude of women who are engaged in this activity, whether by choice or as a result of   social/cultural norms. It signals to society at large that the law and the Courts of the land believe in the value of the labour, services and sacrifices of homemakers. It is an acceptance   of   the   idea   that   these activities contribute in a very real way to the economic condition of the family, and the economy of the nation, regardless of the fact that it may have been traditionally excluded from economic analyses. It is a reflection of changing attitudes and mindsets and of our international law obligations. And, most importantly, it is a step towards the   constitutional vision of social equality and ensuring dignity of life to all individuals.”

Thus, the Bench opined that the contribution made by a homemaker cannot be neglected and in this regard made the following observations on calculating the notional income for homemakers and the grant of future prospects with respect to them.

  1. “Grant of compensation, on a pecuniary basis, with respect to a homemaker, is a settled proposition of law.
  2. Taking into account the gendered nature of housework, with an overwhelming percentage of women being engaged in the same as compared to men, the fixing of notional income of a homemaker attains special   significance. It becomes recognition of the work, labour and sacrifices of homemakers and a reflection of changing attitudes. It is also in furtherance of our nation’s international law obligations and our constitutional vision of social equality and ensuring dignity to all.
  3. Various methods can be employed by the Court to fix the notional income of a homemaker, depending on the facts and circumstances of the case.
  4. The Court should ensure while choosing the method, and fixing the notional income, that the same is just in the facts and circumstances of the particular case, neither assessing the compensation too conservatively, nor too liberally.
  5. The granting of future prospects, on the notional income calculated in such   cases, is a component of just compensation.”

Based on the aforesaid Guidelines, the Hon’ble Supreme Court awarded a compensation of Rs.33.20 lakhs to the Claimants. Further, the Apex Court ordered that the amount of compensation shall be paid within a period of two months with interest @ 9% p.a. from the date of the filing of the Detailed Accident Report i.e. 23-05-2014 and shall be appropriated as per the terms laid down by the Tribunal.

Suchitra Upadhyay

Associate

The Indian Lawyer & Allied Services

SUPREME COURT REITERATES PRINCIPLES OF EXERCISE OF WRIT JURISDICTION IN CASE OF ARBITRABLE DISPUTES

The #SupremeCourt has in a recent case of Bhaven Construction Vs Executive Engineer Sardar Sarovar Narmada Nigam Ltd. and Anr passed a Judgment dated 06-01-2021 and reiterated the principles of exercise of #writ #jurisdiction by #HighCourt in a case where the #dispute has to be resolved by #arbitration.

In this case, the Appellant and the Respondent No. 1 had entered into an Agreement dated 13-02-1991 regarding manufacture and supply of bricks. One of the terms of the Agreement was that in case of any dispute arising out of the Agreement, it would be settled by a sole arbitrator and that the arbitration would be conducted according to the Indian Arbitration Act, 1940 or any statutory modification thereof.

Thereafter, owing to certain disputes, the Appellant invoked Arbitration Clause and appointed the Respondent No. 2 as the Sole Arbitrator. But the Respondent No. 1 filed an Application under Section 16 of the Arbitration and Conciliation Act 1996 (the Act) before the Arbitrator and challenged the jurisdiction of the Arbitrator on the ground that the Arbitrator was appointed after expiry of 30 days period as fixed in the Agreement and that the arbitration was to be governed by the Indian Arbitration Act as amended by the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 (the Gujarat Act). But the Arbitrator rejected the Respondent No. 1’s Application and upheld its jurisdiction to adjudicate the dispute.

Aggrieved, the Respondent No. 1 filed a Special Civil Application under Article 226 and 227 of the Constitution of India 1950 (the #Constitution) before the High Court of Gujarat. But the Single Bench of the High Court dismissed the said Civil Application and held that the Respondent No. 1 can challenge the jurisdiction of the Arbitrator under Section 34 of the Act, after the arbitral award is passed.

Aggrieved, the Respondent No. 1 filed a Letters Patent Appeal before the High Court of Gujarat, which was allowed by the Division Bench of the High Court, vide Order dated 17-09-2012.

Thus, aggrieved, the Appellant filed a Special Leave Petition before the Supreme Court against the Impugned Order of the High Court of Gujarat dated 17-09-2012.

Issue: Whether arbitral process could be interfered under Article 226 (Power of High Courts to issue certain writs)/Article 227 (Power of superintendence over all courts by the High Court) of the Constitution, and under what circumstances?

The Apex Court herein made the following observations:

1- That the issue about applicability of Arbitration Act or Gujarat Act does not fall within the scope of writ jurisdiction. Any such issue of jurisdiction, interpretation of contracts, etc can be done by arbitral tribunal and later, by High Court in Section 34 proceedings.

2- That Section 34 of the Act provides that Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). The term ‘only’ denotes that the intention of the Legislature was to make the enactment a complete code and lay down the procedure in the enactment itself. However, the Supreme Court in various cases has held that a legislative enactment cannot curtail a person’s Constitutional right.

3- Further, the Apex Court held that High Courts may exercise the inherent power under Article 226/227 of the Constitution in an exceptional rarity and after taking into account the statutory policy. For instance, where the Court feels that one of the parties has been left remediless under the statute or ‘bad faith’ is shown on the part of the other party, in such cases, the High Court may exercise its discretion to allow judicial interference into the matter. This is because if the courts are allowed to interfere with the arbitral process beyond the ambit of the enactment, then the efficiency of the process will be diminished.

4- In this case, the Respondent No. 1 has not been able to prove any exceptional circumstance or bad faith on the part of the Appellant in order to invoke remedy under Article 226/227 of the Constitution.

5- Further, the Respondent No. 1 has already filed a Section 34 Petition before the High Court of Gujarat thereby challenging the Final Award, which is pending. Thus, the High Court should not have exercised its inherent powers to interfere with the arbitration proceedings at this stage.

6- That initially the Respondent No. 1 did not take legal recourse against appointment of Arbitrator and rather, submitted before the Sole Arbitrator to adjudicate the issues of jurisdiction, etc. Therefore, the Respondent No. 1 has only one remedy left, that is to challenge the Final Award under Section 34 of the Act. It has been noted that the Respondent No. 1 has indeed challenged the Final Award in Section 34 proceedings before the High Court, which is pending.

Therefore, as the Respondent No. 1 could not establish any exceptional circumstance requiring mandatory exercise of jurisdiction under Article 226/227 of the Constitution, the Supreme Court held that the High Court erred in exercising its jurisdiction under Article 226/227 of the Constitution. As a result, the Apex Court allowed the Appeal and set aside the Impugned Order of the High Court of Gujarat dated 17-09-2012.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

SUPREME COURT HOLDS THAT RELATIVES OF A MUSLIM HUSBAND CANNOT BE ACCUSED OF AN OFFENCE UNDER THE MUSLIM WOMEN (PROTECTION OF RIGHTS ON MARRIAGE) ACT, 2019

The Three Judge Bench of the Hon’ble Supreme Court of India comprising of Justices Dr. Dhananjaya Y Chandrachud, Indu Malhotra and Indira Banerjee passed a Judgment dated 17-12-2020 in the case of Rahna Jalal v. State of Kerela and Another {Criminal Appeal No 883 of 2020 (Arising out of SLP (Crl) No 5693 of 2020)} and held that under the provisions of #MuslimWomen (Protection of Rights on Marriage) Act 2019 (hereinafter Act), the relatives of the Muslim husband cannot be accused of an offence under the said Act.

In the present case, the marriage between the Second Respondent and Appellant’s son was solemnised on 14-05-2016. On 27-08-2020, a first information report (FIR) was lodged by the second Respondent complaining of offences under Section 498-A r/w Section 34 of the Indian Penal Code, 1860 (IPC) and the Muslim Women (Protection of Rights on Marriage) Act 2019. The allegation in the said FIR is that the Appellant’s son on 05-12-2019, at around 2:30 pm pronounced talaq three times at their house. Following this pronouncement, the Appellant’s son entered into a second marriage.

Thereafter, an Application for Anticipatory Bail under Section 438 of Code of Criminal Procedure, 1973 (CrPC) was moved by the Appellant and her son. A Single Judge of Hon’ble High Court of Kerala vide Order dated 02-11-2020 rejected the Application for Anticipatory Bail. There was no reason given as to why the prayer for Anticipatory Bail was rejected. Aggrieved the Appellant and her son moved the Hon’ble Supreme Court of India under Article 136 of the Constitution of India. The issue which arose before the Apex Court is whether the High Court of Kerala was justified in rejecting the Application for Anticipatory Bail which was moved by the Appellant.

Taking into consideration the contention of the parties, the Bench observed that under Section 3 of the Act, a pronouncement of talaq by a Muslim husband upon his wife has been rendered void and illegal and the same is punishable with an imprisonment for a term, which may extend to three years and shall also be liable to fine. Section 7(c) of the Act which provides that “no person accused of an offence punishable under this Act shall be released on bail unless the Magistrate, on an application filed by the accused and after hearing the married Muslim woman upon whom talaq is pronounced, is satisfied that there are reasonable grounds for granting bail to such person” applies to the Muslim husband. The Court held that Section 7(c) does not impose an absolute bar to the grant of bail and a Magistrate on satisfaction that “there are reasonable grounds for granting bail to such person” and upon hearing the married Muslim woman upon whom the talaq is pronounced, may grant bail.

The Apex Court held that “Thus, on a preliminary analysis, it is clear that the appellant as the mother-in-law of the second respondent cannot be accused of the offence of pronouncement of triple talaq under the Act as the offence can only be committed by a Muslim man.”

Further, the Hon’ble Supreme Court observed that while granting pre-arrest bail, there is no bar on granting Anticipatory Bail for an offence committed under the Act, however, the Court must hear the married Muslim woman who has made the complaint before rejecting or granting the Anticipatory Bail. Also, the Court after issuing notice to the married Muslim woman may grant ad-interim relief to the accused during the pendency of the Anticipatory Bail Application.

Allowing the Appeal, the Apex Court held that in the event of arrest, the Appellant who is the mother-in-law of the second Respondent shall be released on bail by the competent Court.

Suchitra Upadhyay

Associate

The Indian Lawyer & Allied Services

GOVERNMENT HAS NOTIFIED THE ELECTRICITY (RIGHTS OF CONSUMERS) RULES, 2020

On 31.12.2020, the Ministry of Power has promulgated Rules laying down the rights of power consumers in the country. Mr. R.K. Singh (the Hon’ble Minister), said that the implementation of these Rules shall ensure a time bound delivery of services such as new #electricityconnections, refunds and other services. He further added that wilful disregard to #consumer rights will result in levying penalties on service providers.

In exercise of the powers conferred by Section 176 of the Electricity Act, 2003 (Act 36 of 2003), the Central Government notified the Electricity (Rights of Consumers) Rules, 2020 (‘Rules’) further to amend the Electricity Rules, 2005, vide Notification No CG-DL-E-31122020-224061 and F. No. 23/05/2020-R&R.

The following are the key features of the Electricity (Rights of Consumers) Rules 2020:

1- The Rules have covered specific areas such as, rights of consumers and obligations of distribution licensees, release of new connection and modification in existing connection, metering arrangement, billing and payment, consumer as prosumer, compensation mechanism, grievance redressal mechanism, etc.

2- The Rules clarified that it is the duty of every distribution licensee to supply electricity on request made by an owner or occupier of any premises in line with the provisions of Act.

3- The Rules made the process of releasing of new connection and modification in existing connection more transparent, simple and time bound. The maximum time period of 7 days in metro cities and 15 days in other municipal areas and 30 days in rural areas.

4- The Rules states that no connection shall be given without a meter and a meter shall be the smart pre-payment meter. It also provides for provisions of testing of meters and rules related to replacement of defective or burnt or stolen meters.

5- The Rules notify that the prosumers will maintain consumer status and have the same rights as the consumer, they will also have right to set up renewable energy generation unit including roof top solar photovoltaic systems either as by himself or through a service provider.

6- The important part of the Rules which is Compensation Mechanism provides that the automatic compensation shall be paid to consumers for which parameters on standards of performance can be monitored remotely.  The standards of performance for which the compensation is required to be paid by the distribution licensee include, but are not limited to, the following, namely:

  • No supply to a consumer beyond a particular duration, to be specified by the Commission;
  • Number of interruptions in supply beyond the limits as specified by the Commission;
  • Time taken for connection, disconnection, reconnection, shifting;
  • Time taken for change in consumer category, load;
  • Time taken for change in consumer details;
  • Time taken for replacement of defective meters;
  • Time period within which bills are to be served;
  • Time period of resolving voltage related complaints; and
  • Bill related complaints.

7- The Rules also specify the provisions related to Grievance redressal mechanism –whereby it states that the Consumer Grievance Redressal Forum (CGRF) will include consumer and prosumer representatives. The consumer grievance redressal has been made easy by making it multi-layered and the number of consumer’s representatives have been increased from one to four.

For further information on the Rules, please click on the link below:

https://static.pib.gov.in/WriteReadData/userfiles/final%20-%20Copy%202.pdf

Lakshmi Vishwakarma

Associate

The Indian Lawyer & Allied Services

SUPREME COURT REITERATES THE GROUNDS FOR GRANT OF ANTICIPATORY BAIL

The Supreme Court has in a recent case of Dr Naresh Kumar Mangla vs Smt. Anita Agarwal & Ors. etc passed a Judgment dated 17-12-2020 and reiterated the grounds for grant of anticipatory #bail.

In this case, a Case Crime No. 0623 of 2020 was registered by the Appellant-Deceased’s Father against the Respondents-Accused, i.e., the Husband, Parents-in-Law, Brother-in-Law and Sister-in-Law of the Deceased, at Police Station Tajganj, District Agra for the following offences:

  1. Section 304-B of the Indian Penal Code 1860 (IPC) (Dowry death),
  2. Section 313 of IPC (Causing miscarriage without woman’s consent),
  3. Section 323 of IPC (Punishment for voluntarily causing hurt),
  4. Section 498A of IPC (Husband or relative of husband of a woman subjecting her to cruelty),
  5. Section 506 of IPC (Punishment for criminal intimidation),
  6. Section 3 of the Dowry Prohibition Act, 1961 (the 1961 Act) (Penalty for giving or taking dowry), and
  7. Section 4 of the 1961 Act(Penalty for demanding dowry).

It has been alleged in the FIR that the Respondents have time again misbehaved and physically assaulted the Deceased on account of dowry. It had also resulted in two miscarriages. Eventually, on 03-08-2020, when the Respondents again physically assaulted the Deceased, she was admitted in hospital, where she passed away on 06-08-2020. Thereafter, the spouse of the Deceased was taken into custody, and the Respondents- Accused filed Applications for Anticipatory Bail under Section 438 of the Code of Criminal Procedure 1973 (CrPC) on 10-08-2020.

The said Applications were dismissed by the Sessions Court, Agra. Thereafter, in Appeal before the High Court of Judicature at Allahabad (High Court), the Applications for Anticipatory Bail were allowed, vide Order dated 29-09-2020 on the ground that the allegations made in FIR were general in nature and that no specific role has been assigned to any of the Respondents regarding the alleged demand of dowry.

Aggrieved by the High Court dated 29-09-2020, the Appellant filed an Appeal before the Supreme Court. The Apex Court made the following observations in this case:

1- That anticipatory bail is granted under Section 438 CrPC, in anticipation of arrest and is therefore effective at the very moment of arrest. …. it is a pre-arrest legal process which directs that if the person in whose favour it is issued is thereafter arrested on the accusation in respect of which the direction is issued, he shall be released on bail.

2- That the following factors have to be taken into account, while considering an application for the grant of anticipatory bail:

i) the nature, gravity and seriousness of the allegation and the exact roles of the accused;

ii) the previous convictions, if any of the accused;

iii) the possibility of the accused fleeing from justice;

iv) the possibility of the accused repeating similar or other offences;

v) the purpose of making the allegations, i.e., whether to injure or humiliate the accused by having him arrested;

vi) the impact of grant of anticipatory bail on public;

vii) whether the grant of anticipatory bail would cause prejudice to the free, fair and full investigation;

viii) whether the arrest would cause unjustified detention, harassment, and humiliation to the accused;

ix) any likelihood or reasonable apprehension of tampering of the witnesses or threat to the complainant; etc

3- That arrest is only the last option. Anticipatory bail may be granted in exceptional circumstances, where the court opines that the accused has been falsely roped in the offence or that he would not misuse his liberty, etc.

4- But in the event that the court considering the bail application has not meticulously examined the evidence collected by the police or has not considered relevant material indicating prima facie involvement of the accused, etc, then the Sessions Court or the High Court would be justified in cancelling the bail.

5- In this case, the FIR consists of complete details about the allegations of demand of dowry, threatening calls, previous transactions involving payment of dowry to the Respondent(s), etc. Thus, grant of anticipatory bail to the Respondents would cause obstruction to the investigation.

6- Therefore, the High Court erred in allowing the Bail Applications, as it ignored material and relevant facts, which were a matter of investigation, such as transfer of funds to the Respondents, lack of external injuries on the body of the Deceased threatening calls made by the Respondents, etc.

Hence, the Supreme Court set aside the Order passed by the High Court allowing Bail Applications for Anticipatory Bail. Further, the Apex Court directed the Central Bureau of Investigation (CBI) to conduct investigation into Case Crime No. 0623 of 2020.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer