The Madras High Court has ruled that tax planning as opposed to tax evasion has legal sanction, and if a dealer plans his transactions in such a manner that he pays less tax, it is not open to the revenue to subject him to a conscience audit or moral assessment. The power to lift the veil has to be exercised with great care and caution.
Justice V Ramasubramanian on Friday allowing petitions by a registered dealer, challenging the orders of assessment passed by the Assistant Commissioner, Coimbatore, under the Central Sales Tax Act for assessment years 2001-02, 2002-03 and 2003-04.
Associated Cement Companies Limited, Coimbatore, claimed that the cement manufactured at Madukkarai was dispatched as stock transfer to its warehouses and depots in Kerala, Karnataka and Puducherry.
Thereafter, it was sold in the respective states after paying local sales tax there. The company claimed exemption on the turnover relating to branch/stock transfer.
Suspecting the petitioner’s claim, the Assistant Commissioner (AC) issued pre-assessment notices stating that the company was moving goods to states from the factory site itself to reach the ultimate buyers there.
The company filed Form ‘F’ declarations with proof of payment of taxes in other states. The AC passed orders for the assessment years on the ground that the petitioner had failed to file the other statements and records as stipulated in Central Sales Tax (Tamil Nadu) Rules.
Aggrieved, the present petitions were filed.
Setting aside the assessment orders, Mr Justice Ramasubramanian said the dealer had a factory in Tamil Nadu and claimed exemption in the state on stock transfer made to his branches in other states.
Another dealer having a factory in another state may make similar claim in that state on the basis of the stock transferred to a branch in Tamil Nadu and the tax paid here.
While the state was deprived of revenue in the former situation, it benefited in the latter. Justice Ramasubramanian said the AC had erred in arriving at an ad hoc conclusion without an inquiry under the Act that the transactions were inter-state sales, merely on account of the goods not getting unloaded at Palakkad but proceeding further in its journey to the buyer’s place.
The Judge remitted the matter back to the AC for an inquiry after which the official should complete assessment and pass an order.
Details of the case are:
W.P.Nos.4709 to 4711 of 2009 And M.P.Nos.1,1 and 1 of 2009
Associated Cement Companies Ltd vs. The Assistant Commissioner (CT)(FAC)& ors.
Thursday, June 4, 2009
Tuesday, June 2, 2009
Execution- simple objection -flagrant violation of the eviction decree
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6954 OF 2003
Sardar Estates -vs- Atma Ram Properties (P) Ltd
ORDER
This appeal furnishes a typical instance of a widespread malady which has infected the judicial system in the country, namely, the flagrant abuse of the process of the Court.
The respondent, which is the owner and landlord of premises no.13/46, Scindia House, Connaught Circus, New Delhi filed an eviction petition against the appellant, who is the tenant, before the Rent Controller, Delhi in 1981. That petition was decreed on 12.5.1993 on the ground of subletting. The appellant filed an appeal before the Rent Control Tribunal which was dismissed on 22.9.1998. Thereafter he filed a second appeal which was dismissed by the Delhi High Court on 31.1.2000. Against that order he filed an SLP in this Court which was dismissed as withdrawn by order dated 8.12.2000. He then filed a Review Petition before the Delhi High Court which was dismissed on 9.2.2001. Against that order the appellant filed another SLP in this Court which was dismissed on 9.4.2001. By that order he was directed to vacate the premises and handed over physical possession to the landlord on or before 31.10.2001 subject to the usual undertaking to be filed within four weeks. However, the appellant did not file the undertaking.
In execution proceedings the appellant filed an objection on 16.3.2001 which was rejected by the Executing Court on 14.9.2001. Against the order dated 14.9.2001 the appellant filed an appeal which was dismissed as withdrawn on 1.11.2001. He filed a fresh objection on 8.11.2001 before the Executing Court which was rejected on 5.7.2002. Against that order he filed a First Appeal before the Rent Control Tribunal which was dismissed on 20.7.2002. Against the order of the Rent Control Tribunal he filed a Second Appeal before the Delhi High Court which was dismissed on 10.9.2002 by the impugned judgment. Thereafter he filed the present appeal before us.
It was submitted before us by the learned counsel for the appellant that the eviction decree was in respect of the second floor of the property in question, and possession of the second floor had been handed over to the landlord in pursuance of the eviction decree, but the third floor was an independent premises for which no order of eviction had been passed.
The High Court has dealt with this aspect and has observed that some unauthorized construction had been made by the appellant on the open area above the second floor of premises no.13/46, Scindia House, New Delhi and this unauthorized construction cannot be said to be an independent flat.
Before the Rent Control Tribunal it had been submitted by the appellant that the premises which is still in his possession is flat no.14A which is not a part of premises no.13/46, Scindia House, New Delhi. However, this plea had been negatived by the order of the Rent Control Tribunal dated 20.7.2002 after a detailed discussion. It was observed in the said order that flat no.14A is a part of the tenanted premises and not a separate accommodation. The High Court in the impugned judgment has observed that this is a question of fact and cannot be gone into in Second Appeal. We agree with this view taken by the High Court.
It is evident that frivolous objections have been filed in the execution case which is an abuse of the process of the Court and a flagrant violation of the eviction decree against the appellant against which Appeals had been rejected and even SLP in this Court was dismissed.
It is evident that after the first round of litigation was over the tenant started a second round of litigation on frivolous grounds which were a flagrant abuse of the Court. This is a practice which has become widespread, and which the Court cannot approve off, otherwise no judgment will ever attain finality.
Hence, we dismiss this appeal and impose a cost of Rs.10,000/- (Rupees Ten Thousand only) on the appellant which shall be paid to the respondent within two months from today. The appellant shall also hand over the premises in question, which is in his possession, to the landlord within three months from today failing which he will be evicted by police force.
...............................J.
(Markandey Katju)
...............................J.
(H.L. Dattu)
New Delhi;
April 30, 2009
CIVIL APPEAL NO. 6954 OF 2003
Sardar Estates -vs- Atma Ram Properties (P) Ltd
ORDER
This appeal furnishes a typical instance of a widespread malady which has infected the judicial system in the country, namely, the flagrant abuse of the process of the Court.
The respondent, which is the owner and landlord of premises no.13/46, Scindia House, Connaught Circus, New Delhi filed an eviction petition against the appellant, who is the tenant, before the Rent Controller, Delhi in 1981. That petition was decreed on 12.5.1993 on the ground of subletting. The appellant filed an appeal before the Rent Control Tribunal which was dismissed on 22.9.1998. Thereafter he filed a second appeal which was dismissed by the Delhi High Court on 31.1.2000. Against that order he filed an SLP in this Court which was dismissed as withdrawn by order dated 8.12.2000. He then filed a Review Petition before the Delhi High Court which was dismissed on 9.2.2001. Against that order the appellant filed another SLP in this Court which was dismissed on 9.4.2001. By that order he was directed to vacate the premises and handed over physical possession to the landlord on or before 31.10.2001 subject to the usual undertaking to be filed within four weeks. However, the appellant did not file the undertaking.
In execution proceedings the appellant filed an objection on 16.3.2001 which was rejected by the Executing Court on 14.9.2001. Against the order dated 14.9.2001 the appellant filed an appeal which was dismissed as withdrawn on 1.11.2001. He filed a fresh objection on 8.11.2001 before the Executing Court which was rejected on 5.7.2002. Against that order he filed a First Appeal before the Rent Control Tribunal which was dismissed on 20.7.2002. Against the order of the Rent Control Tribunal he filed a Second Appeal before the Delhi High Court which was dismissed on 10.9.2002 by the impugned judgment. Thereafter he filed the present appeal before us.
It was submitted before us by the learned counsel for the appellant that the eviction decree was in respect of the second floor of the property in question, and possession of the second floor had been handed over to the landlord in pursuance of the eviction decree, but the third floor was an independent premises for which no order of eviction had been passed.
The High Court has dealt with this aspect and has observed that some unauthorized construction had been made by the appellant on the open area above the second floor of premises no.13/46, Scindia House, New Delhi and this unauthorized construction cannot be said to be an independent flat.
Before the Rent Control Tribunal it had been submitted by the appellant that the premises which is still in his possession is flat no.14A which is not a part of premises no.13/46, Scindia House, New Delhi. However, this plea had been negatived by the order of the Rent Control Tribunal dated 20.7.2002 after a detailed discussion. It was observed in the said order that flat no.14A is a part of the tenanted premises and not a separate accommodation. The High Court in the impugned judgment has observed that this is a question of fact and cannot be gone into in Second Appeal. We agree with this view taken by the High Court.
It is evident that frivolous objections have been filed in the execution case which is an abuse of the process of the Court and a flagrant violation of the eviction decree against the appellant against which Appeals had been rejected and even SLP in this Court was dismissed.
It is evident that after the first round of litigation was over the tenant started a second round of litigation on frivolous grounds which were a flagrant abuse of the Court. This is a practice which has become widespread, and which the Court cannot approve off, otherwise no judgment will ever attain finality.
Hence, we dismiss this appeal and impose a cost of Rs.10,000/- (Rupees Ten Thousand only) on the appellant which shall be paid to the respondent within two months from today. The appellant shall also hand over the premises in question, which is in his possession, to the landlord within three months from today failing which he will be evicted by police force.
...............................J.
(Markandey Katju)
...............................J.
(H.L. Dattu)
New Delhi;
April 30, 2009
Monday, June 1, 2009
all the ingredients of commission of an offence U/s 138 NI Act must be satisfied.
CRIMINAL APPEAL NO. 913 OF 2009 [Arising out of SLP (Crl.) No. 8059 of 2007]
Raj Kumar Khurana Versus State of (NCT of Delhi) and Anr.
Whether return of a cheque by the bank on the ground that it was reported lost by the drawer would attract the penal provisions contained in Section 138 of the Negotiable Instruments Act, 1881 (for short “the Act”)
A bare perusal of the section 138 of N. I. Act would clearly go to show that by reason thereof a legal fiction has been created. A legal fiction, as is well known, although is required to be given full effect, has its own limitations. It cannot be taken recourse to for any purpose other than the one mentioned in the statute itself.
The court must be satisfied that all the ingredients of commission of an offence under the said provision have been complied with.
The parameters for invoking the provisions of Section 138 of the Act, thus, being limited, we are of the opinion that refusal on the part of the bank to honour the cheque would not bring the matter within the mischief of the provisions of Section 138 of the Act.
Raj Kumar Khurana Versus State of (NCT of Delhi) and Anr.
Whether return of a cheque by the bank on the ground that it was reported lost by the drawer would attract the penal provisions contained in Section 138 of the Negotiable Instruments Act, 1881 (for short “the Act”)
A bare perusal of the section 138 of N. I. Act would clearly go to show that by reason thereof a legal fiction has been created. A legal fiction, as is well known, although is required to be given full effect, has its own limitations. It cannot be taken recourse to for any purpose other than the one mentioned in the statute itself.
The court must be satisfied that all the ingredients of commission of an offence under the said provision have been complied with.
The parameters for invoking the provisions of Section 138 of the Act, thus, being limited, we are of the opinion that refusal on the part of the bank to honour the cheque would not bring the matter within the mischief of the provisions of Section 138 of the Act.
Thursday, May 28, 2009
Indian Domestic Arbitration: A practical approach
Arbitration is a method of adjudication of dispute(s) / difference(s) between the parties by non-judicial process wherein arbitrator(s)/umpire(s) is appointed by the parties themselves under a contract whereby the parties agree for adjudication of such dispute(s)/difference(s) by way of arbitration proceedings
In India, laws/rules that govern the arbitration process are laid down in Arbitration and Conciliation Act, 1996. But the act itself does not give any right to any party unless parties have entered into an arbitration agreement/contract for adjudication of dispute(s)/difference(s) by way of arbitration. Section 2(1) (b) of the act says that an arbitration agreement means an agreement referred to in section 7. Section 7(1) further states that an arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. The act does not prescribe any formal form for arbitration agreement. It says that “an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement” like any other agreement- Section 7(2). But an arbitration agreement shall be in writing - Section 7(3). Here the term “writing” has special meaning that has been clarified in sub-section 4 of section 7 i.e.-
(4) An arbitration agreement is in writing if it is contained in
a) a document signed by the parties;
b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or
c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
“Other means of telecommunication” indicates that a record of the agreement by exchanging e-mails may also be taken into account since as per the Law Encyclopedia (applicable to United States law) telecommunication means the transmission of words, sounds, images, or data in the form of electronic or electromagnetic signals or impulses. Section 7 (5) further clarifies that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
Section 2(1) (a) of the act says that arbitration means any arbitration whether or not administered by permanent arbitral institution. Thus it is clear from the definition that the act recognizes every type of arbitration whether it is institutional or non-institutional. Institutional arbitration means an arbitration process conducted by an institute; whether it is permanent or not; for adjudication of dispute(s) / difference(s) between the parties following rules of proceeding already framed by the parties themselves, failing which its own rules after obtaining the consent of the parties to such rules at a preliminary meeting in arbitration proceeding. Non-institutional arbitration means an arbitration process conducted by a arbitral tribunal other than institute for adjudication of dispute(s) / difference(s) between the parties following rules of proceeding already framed by the parties themselves, failing which its own rules after obtaining the consent of the parties in this regard at a preliminary meeting in arbitration proceeding.
Section 2(1) (h) party means a party to an arbitration agreement. This definition is not an expressed one. It is an implied definition as it has not been clarified who can be a party to an arbitration agreement. Here the term “party” covers a living person competent to enter into an agreement/contract and juristic person as well since juristic person may also be a party to an agreement/contract after fulfilling the certain legal formalities. Thus here party means a person competent to enter into a contract as per Indian Contract Act.
Section 2 (1) (e) of the act defines arbitral tribunal. It says “Arbitral tribunal means a sole arbitrator or a panel of arbitrators.” Where arbitral tribunal is a panel of arbitrators; “the parties are free to determine the number of arbitrators, provided that such number shall not be an even number”-Section 10(1) of the act. Failing the determination of number of arbitrators, the arbitral tribunal shall consist of a sole arbitrator- Section 10 (2) of the act.
To be an arbitrator, no formal qualification has been prescribed in the act. Even nationality is also no bar. Parties have been given full authority to determine the qualification of the arbitrator. Section 11 (1) of the act says that a person of any nationality may be an arbitrator, unless otherwise agreed by the parties. It is the parties who have to determine the qualification of the arbitrator keeping in mind the nature of the dispute(s)/difference(s) that has arisen or may arise between them. Parties may agree upon the qualification at very initial stage when they enter into an arbitration contract/clause or after dispute(s)/difference(s) arose if earlier has not been agreed. It will be beneficial for the parties themselves to determine the qualification otherwise decision of the arbitrator i.e. arbitral award may be set aside where the adjudication of such dispute(s) / difference(s) requires a person having a technical knowledge.
Appointment of arbitrator: Priority has been given to the procedure framed by the parties for appointing the arbitrator(s). Section 11(2) of the act says that the parties are free to agree on a procedure for appointing the arbitrator(s). Where a party (ies) fails to act as required under that procedure, appointment of arbitrator(s) can be secured by taking recourse to “other means” if arbitration agreement/clause provides such “other means” for securing the appointment of arbitrator(s) Section 11(6)(a). The term “other means” has not been define anywhere in the act. In case arbitration agreement does not provide such “other means” for securing the appointment, aggrieved party (ies) may request the Chief Justice or any person or institution designated by him to take the necessary measure for securing the appointment Section 11(6)(a). Where, under an appointment procedure agreed upon by the parties, the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or a person, including an institution, fails to perform any function entrusted him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment Section 11(6)(b) & (c).
Section 11(5) provides both the procedure and limitation period if the parties have not agreed on a procedure for appointing the arbitrator(s) in arbitration with a sole arbitrator. It says that if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice of any person or institution designated by him.
Section 11(3) provides only procedure with three arbitrators if the parties have not agreed on a procedure for appointing the arbitrator(s). It says that each party shall appoint one arbitrator, and the two appointed arbitrators, shall appoint the third arbitrator who shall act as the presiding arbitrator. Further Section 11(4) provides a limitation period for such appointment. It clarifies that if a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made upon request of a party, by the chief justice or any person or institution designated by him.
Section 11(7) provides that a decision of the Chief Justice or the person or institution designated by him is final on the matter entrusted by sub section (4) or sub section (5) or sub section (6) of Section 11 whereas sub section (10) of it clarifies that the Chief Justice may make such scheme as he may deem appropriate for dealing with such matters.
The Chief Justice or the person or institution designated by him, in appointing arbitrator, shall have due regaled to (a) qualifications required of the arbitrator by the agreement of the parties and (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator Section 11(8).
What will happen if more than one request has been made under sub section (4) or subsection (5) or sub section (6)to the Chief Justices of different High Courts or their designates ? Section 11(11) answer it. It says that the Chief Justice or his designate to whom the request has been first made under the relevant sub section shall alone be competent to decide on the request.
Section 11(12) (b) clarify the term “Chief Justice”. It says Where the matters referred to in sub sections (4 ), (5 ), (7 ), (8 ), and (10 ) arise in any other arbitration, the reference to Chief Justice in those sub sections shall he construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub section (1 ) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief justice of that High Court.
Primary Duties of arbitrator: Sec.2 (d)” "arbitral tribunal" means a sole arbitrator or a panel of arbitrators.” When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing [to the concern authority only] any circumstances likely to give rise to justifiable doubts as to his independence or impartiality: Section 12(1).
MODE OF COMMUNICATION: Arbitrator should inform the parties to arbitration agreement about his appointment as an arbitrator. Procedure for written communication is given in section 3 of the act. It gives freedom to parties to agree upon any procedure for written communication during the arbitration proceedings what they feel proper and speedy for adjudication of their dispute(s)/difference even through e-mails but mode of communication must provide a record of such communication. Failing any agreed communication procedure any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address: Section 3(1)(a)
If none of the places of business, habitual residence or mailing address can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee’s last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it Section 3(1)(b). No substitute mode of service such as publication etc required.
The communication is deemed to have been received on the day it is so delivered Section 3(2).
Section 3(3) indicates that arbitrator is not a judicial authority so arbitration proceeding is not a judicial proceeding. It says “This section does not apply to written communications in respect of proceedings of any judicial authority” but it applies in arbitration proceedings. It confirms that arbitrator is not a judicial authority.
Duties of arbitrator: A & C Act 1996 imposes tremendous responsibilities upon Arbitral Tribunal to act in such a way that don’t give any rise to his independence or impartiality. When parties appear before the arbitrator in response of the notice, the arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub section (1) of section 12 unless they have already been informed of them by him: Section 12(2).
Grounds for challenge for appointment of arbitrator: If a party becomes aware about circumstances that give rise to justifiable doubts as to arbitrator’s independence or impartiality, or missing of the qualifications agreed to by the parties as mentioned in section 12(3), the party has only recourse to it is, to challenge the appointment of arbitrator(s) before arbitrator itself.
A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reason, of which he becomes aware after the appointment has been made: Section 12(4)
Procedure for challenging an arbitrator: The parties are free to agree on a procedure for challenging an arbitrator: Section 13(1)
Failing any agreement on a procedure for challenging the arbitrator, a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal: Section 13(2)
Unless the arbitrator challenged under sub section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge: Section 13(3)
If a challenge under any procedure agreed upon by the parties or under the procedure under sub section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award: Section 13(4)
Power and duties of arbitrator: A & C Act 1996 imposes mandatory obligations on Arbitral Tribunal to follow and give due respect to the contents of the arbitration agreement. Whatever has been written in the arbitration agreement regarding procedure to be followed, documents to be used as evidence, mode of communications to be used, place of arbitration, language etc in arbitration proceedings, arbitral tribunal is bound to follow the contents of the arbitration agreement. The parties (in arbitration proceedings) shall be treated with equality and each party shall be given a full opportunity to present his case Sec 18.
The whole purpose of enacting the A & C Act 1996 is to remove technical difficulties; faced by the parties in the court proceedings, from arbitration proceedings. That is why sec 19(1) says that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. The parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings Sec19 (2) but failing any agreement in this effect, the arbitral tribunal may conduct the proceedings in the manner it considers appropriate Sec19 (3).This power of the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence Sec 19(4). The tribunal should give reasons regarding the determination of admissibility, relevancy, materiality and weight of any evidence.
Section 16 of the act gives full competency to arbitral tribunal to rule on its own jurisdiction. ). But this competency is subject to courts’ supervision.
“Section 16-Competence of arbitral tribunal to rule on its jurisdiction.-
(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,----
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall he raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.”
Though the arbitral tribunal has been empowered to order interim measures but this power is subject to arbitration agreement. Section 17 says:
“17.Interim measures ordered by arbitral tribunal.-
(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute.
(2) the arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1)”
Thus from above discussion, one can easily understood that there is no codified rules that govern arbitration proceedings except mentioned in arbitration agreement/clause if any. It is, therefore, one should be very careful before entering into any arbitration agreement/ clause in any walk of life.
In India, laws/rules that govern the arbitration process are laid down in Arbitration and Conciliation Act, 1996. But the act itself does not give any right to any party unless parties have entered into an arbitration agreement/contract for adjudication of dispute(s)/difference(s) by way of arbitration. Section 2(1) (b) of the act says that an arbitration agreement means an agreement referred to in section 7. Section 7(1) further states that an arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. The act does not prescribe any formal form for arbitration agreement. It says that “an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement” like any other agreement- Section 7(2). But an arbitration agreement shall be in writing - Section 7(3). Here the term “writing” has special meaning that has been clarified in sub-section 4 of section 7 i.e.-
(4) An arbitration agreement is in writing if it is contained in
a) a document signed by the parties;
b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or
c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
“Other means of telecommunication” indicates that a record of the agreement by exchanging e-mails may also be taken into account since as per the Law Encyclopedia (applicable to United States law) telecommunication means the transmission of words, sounds, images, or data in the form of electronic or electromagnetic signals or impulses. Section 7 (5) further clarifies that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
Section 2(1) (a) of the act says that arbitration means any arbitration whether or not administered by permanent arbitral institution. Thus it is clear from the definition that the act recognizes every type of arbitration whether it is institutional or non-institutional. Institutional arbitration means an arbitration process conducted by an institute; whether it is permanent or not; for adjudication of dispute(s) / difference(s) between the parties following rules of proceeding already framed by the parties themselves, failing which its own rules after obtaining the consent of the parties to such rules at a preliminary meeting in arbitration proceeding. Non-institutional arbitration means an arbitration process conducted by a arbitral tribunal other than institute for adjudication of dispute(s) / difference(s) between the parties following rules of proceeding already framed by the parties themselves, failing which its own rules after obtaining the consent of the parties in this regard at a preliminary meeting in arbitration proceeding.
Section 2(1) (h) party means a party to an arbitration agreement. This definition is not an expressed one. It is an implied definition as it has not been clarified who can be a party to an arbitration agreement. Here the term “party” covers a living person competent to enter into an agreement/contract and juristic person as well since juristic person may also be a party to an agreement/contract after fulfilling the certain legal formalities. Thus here party means a person competent to enter into a contract as per Indian Contract Act.
Section 2 (1) (e) of the act defines arbitral tribunal. It says “Arbitral tribunal means a sole arbitrator or a panel of arbitrators.” Where arbitral tribunal is a panel of arbitrators; “the parties are free to determine the number of arbitrators, provided that such number shall not be an even number”-Section 10(1) of the act. Failing the determination of number of arbitrators, the arbitral tribunal shall consist of a sole arbitrator- Section 10 (2) of the act.
To be an arbitrator, no formal qualification has been prescribed in the act. Even nationality is also no bar. Parties have been given full authority to determine the qualification of the arbitrator. Section 11 (1) of the act says that a person of any nationality may be an arbitrator, unless otherwise agreed by the parties. It is the parties who have to determine the qualification of the arbitrator keeping in mind the nature of the dispute(s)/difference(s) that has arisen or may arise between them. Parties may agree upon the qualification at very initial stage when they enter into an arbitration contract/clause or after dispute(s)/difference(s) arose if earlier has not been agreed. It will be beneficial for the parties themselves to determine the qualification otherwise decision of the arbitrator i.e. arbitral award may be set aside where the adjudication of such dispute(s) / difference(s) requires a person having a technical knowledge.
Appointment of arbitrator: Priority has been given to the procedure framed by the parties for appointing the arbitrator(s). Section 11(2) of the act says that the parties are free to agree on a procedure for appointing the arbitrator(s). Where a party (ies) fails to act as required under that procedure, appointment of arbitrator(s) can be secured by taking recourse to “other means” if arbitration agreement/clause provides such “other means” for securing the appointment of arbitrator(s) Section 11(6)(a). The term “other means” has not been define anywhere in the act. In case arbitration agreement does not provide such “other means” for securing the appointment, aggrieved party (ies) may request the Chief Justice or any person or institution designated by him to take the necessary measure for securing the appointment Section 11(6)(a). Where, under an appointment procedure agreed upon by the parties, the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or a person, including an institution, fails to perform any function entrusted him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment Section 11(6)(b) & (c).
Section 11(5) provides both the procedure and limitation period if the parties have not agreed on a procedure for appointing the arbitrator(s) in arbitration with a sole arbitrator. It says that if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice of any person or institution designated by him.
Section 11(3) provides only procedure with three arbitrators if the parties have not agreed on a procedure for appointing the arbitrator(s). It says that each party shall appoint one arbitrator, and the two appointed arbitrators, shall appoint the third arbitrator who shall act as the presiding arbitrator. Further Section 11(4) provides a limitation period for such appointment. It clarifies that if a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made upon request of a party, by the chief justice or any person or institution designated by him.
Section 11(7) provides that a decision of the Chief Justice or the person or institution designated by him is final on the matter entrusted by sub section (4) or sub section (5) or sub section (6) of Section 11 whereas sub section (10) of it clarifies that the Chief Justice may make such scheme as he may deem appropriate for dealing with such matters.
The Chief Justice or the person or institution designated by him, in appointing arbitrator, shall have due regaled to (a) qualifications required of the arbitrator by the agreement of the parties and (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator Section 11(8).
What will happen if more than one request has been made under sub section (4) or subsection (5) or sub section (6)to the Chief Justices of different High Courts or their designates ? Section 11(11) answer it. It says that the Chief Justice or his designate to whom the request has been first made under the relevant sub section shall alone be competent to decide on the request.
Section 11(12) (b) clarify the term “Chief Justice”. It says Where the matters referred to in sub sections (4 ), (5 ), (7 ), (8 ), and (10 ) arise in any other arbitration, the reference to Chief Justice in those sub sections shall he construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub section (1 ) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief justice of that High Court.
Primary Duties of arbitrator: Sec.2 (d)” "arbitral tribunal" means a sole arbitrator or a panel of arbitrators.” When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing [to the concern authority only] any circumstances likely to give rise to justifiable doubts as to his independence or impartiality: Section 12(1).
MODE OF COMMUNICATION: Arbitrator should inform the parties to arbitration agreement about his appointment as an arbitrator. Procedure for written communication is given in section 3 of the act. It gives freedom to parties to agree upon any procedure for written communication during the arbitration proceedings what they feel proper and speedy for adjudication of their dispute(s)/difference even through e-mails but mode of communication must provide a record of such communication. Failing any agreed communication procedure any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address: Section 3(1)(a)
If none of the places of business, habitual residence or mailing address can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee’s last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it Section 3(1)(b). No substitute mode of service such as publication etc required.
The communication is deemed to have been received on the day it is so delivered Section 3(2).
Section 3(3) indicates that arbitrator is not a judicial authority so arbitration proceeding is not a judicial proceeding. It says “This section does not apply to written communications in respect of proceedings of any judicial authority” but it applies in arbitration proceedings. It confirms that arbitrator is not a judicial authority.
Duties of arbitrator: A & C Act 1996 imposes tremendous responsibilities upon Arbitral Tribunal to act in such a way that don’t give any rise to his independence or impartiality. When parties appear before the arbitrator in response of the notice, the arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub section (1) of section 12 unless they have already been informed of them by him: Section 12(2).
Grounds for challenge for appointment of arbitrator: If a party becomes aware about circumstances that give rise to justifiable doubts as to arbitrator’s independence or impartiality, or missing of the qualifications agreed to by the parties as mentioned in section 12(3), the party has only recourse to it is, to challenge the appointment of arbitrator(s) before arbitrator itself.
A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reason, of which he becomes aware after the appointment has been made: Section 12(4)
Procedure for challenging an arbitrator: The parties are free to agree on a procedure for challenging an arbitrator: Section 13(1)
Failing any agreement on a procedure for challenging the arbitrator, a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal: Section 13(2)
Unless the arbitrator challenged under sub section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge: Section 13(3)
If a challenge under any procedure agreed upon by the parties or under the procedure under sub section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award: Section 13(4)
Power and duties of arbitrator: A & C Act 1996 imposes mandatory obligations on Arbitral Tribunal to follow and give due respect to the contents of the arbitration agreement. Whatever has been written in the arbitration agreement regarding procedure to be followed, documents to be used as evidence, mode of communications to be used, place of arbitration, language etc in arbitration proceedings, arbitral tribunal is bound to follow the contents of the arbitration agreement. The parties (in arbitration proceedings) shall be treated with equality and each party shall be given a full opportunity to present his case Sec 18.
The whole purpose of enacting the A & C Act 1996 is to remove technical difficulties; faced by the parties in the court proceedings, from arbitration proceedings. That is why sec 19(1) says that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. The parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings Sec19 (2) but failing any agreement in this effect, the arbitral tribunal may conduct the proceedings in the manner it considers appropriate Sec19 (3).This power of the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence Sec 19(4). The tribunal should give reasons regarding the determination of admissibility, relevancy, materiality and weight of any evidence.
Section 16 of the act gives full competency to arbitral tribunal to rule on its own jurisdiction. ). But this competency is subject to courts’ supervision.
“Section 16-Competence of arbitral tribunal to rule on its jurisdiction.-
(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,----
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall he raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.”
Though the arbitral tribunal has been empowered to order interim measures but this power is subject to arbitration agreement. Section 17 says:
“17.Interim measures ordered by arbitral tribunal.-
(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute.
(2) the arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1)”
Thus from above discussion, one can easily understood that there is no codified rules that govern arbitration proceedings except mentioned in arbitration agreement/clause if any. It is, therefore, one should be very careful before entering into any arbitration agreement/ clause in any walk of life.
Wednesday, May 27, 2009
Summoning the arbitrator
Union Of India VS. Orient Engg. & Commercial Co. Ltd. & Anr.
Respondent No. 1 filed, under Order XVI Rules 1 and 2 read with s. 151, C.P.C., a list of witnesses to be summoned including the Arbitrator who made an award in a matter between the appellant and the respondent No. 1. The Registrar of the High Court in the routine course granted summons without satisfying himself as to the sufficiency of cause to summon the arbitrator as required under Order XVI Rule 3, C.P.C. An objection petition u/s. 151, C.P.C. filed before the learned Judge of the High Court against the orders of the Registrar was dismissed.
Allowing the appeal, the Court,
HELD : (1) It is not right that every one who is included in the witness list is automatically summoned, but the true rule is that if grounds are made out for summoning a witness, he will be called. The court must realise that its process should be used sparingly and after careful deliberation if the arbitrator should be brought into the witness box. If a party has a case of mala fides and makes out prima facie that it is not a frivolous charge or has other reasonably relevant matters to be brought out, the court may, in given circumstances, exercise its power to summon even an arbitrator because nobody is beyond the reach of truth or trial by court.
(2)Courts should bear in mind the reason behind s. 121 of the Evidence Act when invited to issue summons to an arbitrator. It will be very embarrassing and in many cases objectionable if every quasi-judicial authority or tribunal were put to the necessity of getting into the witness box and testify as to what weighed in his mind in reaching his verdict. The slightest attempt to get to the materials of his decision, to get back to, his mind and to examine him as to why and how he arrived at a particular decision should be immediately and ruthlessly excluded as unreasonable. When an arbitrator has given an award, if grounds justifying his being called as a witness are affirmatively made out, the court may exercise its powers-otherwise not.
In the instant case the court has not approached the question from the proper perspective and on the materials on record, there is no justification for the examination of the arbitrator.
Khub Lal v. Bishambhar Sahai A.I.R. 1925 Allahabad 103, approved.
[The Court left open to the High Court to issue-necessary Process on a fresh application stating why he wants to examine the arbitrator, if and when made by the respondent.]
Respondent No. 1 filed, under Order XVI Rules 1 and 2 read with s. 151, C.P.C., a list of witnesses to be summoned including the Arbitrator who made an award in a matter between the appellant and the respondent No. 1. The Registrar of the High Court in the routine course granted summons without satisfying himself as to the sufficiency of cause to summon the arbitrator as required under Order XVI Rule 3, C.P.C. An objection petition u/s. 151, C.P.C. filed before the learned Judge of the High Court against the orders of the Registrar was dismissed.
Allowing the appeal, the Court,
HELD : (1) It is not right that every one who is included in the witness list is automatically summoned, but the true rule is that if grounds are made out for summoning a witness, he will be called. The court must realise that its process should be used sparingly and after careful deliberation if the arbitrator should be brought into the witness box. If a party has a case of mala fides and makes out prima facie that it is not a frivolous charge or has other reasonably relevant matters to be brought out, the court may, in given circumstances, exercise its power to summon even an arbitrator because nobody is beyond the reach of truth or trial by court.
(2)Courts should bear in mind the reason behind s. 121 of the Evidence Act when invited to issue summons to an arbitrator. It will be very embarrassing and in many cases objectionable if every quasi-judicial authority or tribunal were put to the necessity of getting into the witness box and testify as to what weighed in his mind in reaching his verdict. The slightest attempt to get to the materials of his decision, to get back to, his mind and to examine him as to why and how he arrived at a particular decision should be immediately and ruthlessly excluded as unreasonable. When an arbitrator has given an award, if grounds justifying his being called as a witness are affirmatively made out, the court may exercise its powers-otherwise not.
In the instant case the court has not approached the question from the proper perspective and on the materials on record, there is no justification for the examination of the arbitrator.
Khub Lal v. Bishambhar Sahai A.I.R. 1925 Allahabad 103, approved.
[The Court left open to the High Court to issue-necessary Process on a fresh application stating why he wants to examine the arbitrator, if and when made by the respondent.]
Saturday, May 23, 2009
Minority share holders can be throne out
In a far-reaching decision, a division bench of the Bombay High Court has endorsed a special resolution of a company to reduce the share capital of a company on the basis of the identity of the person holding the shares. Majority shareholders can now throw out minority shareholders by effect a reduction of the capital held by minority shareholders alone.
Normally a reduction of capital is effected uniformly across all shareholders – not in a manner that picks and chooses specific shareholders who would cease to be shareholders. Since the proposed resolution sought to throw out minority shareholders alone as a consequence of the proposed reduction, a single judge had ruled that the proposal was inequitable. The division bench dealt with an appeal against the judgement of the single judge.
The provisions of Sections 100 to 105 of the Companies Act, 1956 (“the Act”) deal with reduction of capital. If a company’s Articles of Association permit reduction, the company could pass a special resolution (75 per cent vote by shareholders present and voting at a general meeting) approving reduction of capital, and then seek a court’s approval to effect the reduction.
The law entitles creditors to object to the proposal under certain conditions – logical, because shareholders normally stand last in queue when a company is wound up, and a reduction puts them ahead of the creditors.
There are other provisions in the Act based on which a shareholder could be taken out of a company. The provisions Sections 391-394 of the Act entail propounding of a scheme of arrangement or compromise whereby rights and obligations of shareholders and creditors could be altered, adjusted and modified in an extraordinary or unusual manner. Such sche-mes of arrangement too are subject to sanction of the high court, and once approved would bind the world at large including those dissenting to the scheme. Section 395 expressly deals with having to buy out dissenting minority shareholders who do not agree to a scheme approved by the majority.
However, in the instant case, the company’s proposal to reduce capital was in effect a proposal to squeeze-out the shareholders other than the promoters and divest them of shareholding.
The promoters were able to comfortably pass the special resolution. In lieu of the reduction, such shareholders would of course be paid money in terms of a fair value to be computed, but these shareholders would lose their right to hold shares although they were not willing sellers.
The division bench has ruled that the “special resolution which proposes to wipe out a class of shareholders after paying them just compensation” is not unfair or inequitable.
“In our opinion, once it is established that non-promoter shareholders are being paid fair value of their shares, at no point of time it is even suggested by them that the amount that is being paid is any way less,” the court observed. That an overwhelming majority of the non-promoter shareholders voted in favour of the resolution too weighed with the court, which held that “the court will not be justified in withholding its sanction to the resolution.”
The judgement opens up several interesting possibilities and propositions in relation to shareholder rights in India. The company in question was not a listed company – it had already been delisted.
Listed companies would require stock exchange approval for reduction of capital under the listing agreement, and it is unlikely that stock exchanges would approve such a transaction. However, for an unlisted company, regardless of whether a company is a public company or a private company, shareholders rights can be impacted severely.
Private equity investors holding small stakes without serious rights could easily be thrown out by management using such resolutions. In family-run companies, a segment of the family that holds a minority stake could get thrown by the rest of the family. All that one would need is a special resolution.
The core business issue involved here is not about whe-ther the price paid for the shares would be fair, but whether an owner of shares in India has a vested right to keep his property, or whether other shareholders can force him to divest his property.
For details judgment mail me at minturaj@gmail.com
Normally a reduction of capital is effected uniformly across all shareholders – not in a manner that picks and chooses specific shareholders who would cease to be shareholders. Since the proposed resolution sought to throw out minority shareholders alone as a consequence of the proposed reduction, a single judge had ruled that the proposal was inequitable. The division bench dealt with an appeal against the judgement of the single judge.
The provisions of Sections 100 to 105 of the Companies Act, 1956 (“the Act”) deal with reduction of capital. If a company’s Articles of Association permit reduction, the company could pass a special resolution (75 per cent vote by shareholders present and voting at a general meeting) approving reduction of capital, and then seek a court’s approval to effect the reduction.
The law entitles creditors to object to the proposal under certain conditions – logical, because shareholders normally stand last in queue when a company is wound up, and a reduction puts them ahead of the creditors.
There are other provisions in the Act based on which a shareholder could be taken out of a company. The provisions Sections 391-394 of the Act entail propounding of a scheme of arrangement or compromise whereby rights and obligations of shareholders and creditors could be altered, adjusted and modified in an extraordinary or unusual manner. Such sche-mes of arrangement too are subject to sanction of the high court, and once approved would bind the world at large including those dissenting to the scheme. Section 395 expressly deals with having to buy out dissenting minority shareholders who do not agree to a scheme approved by the majority.
However, in the instant case, the company’s proposal to reduce capital was in effect a proposal to squeeze-out the shareholders other than the promoters and divest them of shareholding.
The promoters were able to comfortably pass the special resolution. In lieu of the reduction, such shareholders would of course be paid money in terms of a fair value to be computed, but these shareholders would lose their right to hold shares although they were not willing sellers.
The division bench has ruled that the “special resolution which proposes to wipe out a class of shareholders after paying them just compensation” is not unfair or inequitable.
“In our opinion, once it is established that non-promoter shareholders are being paid fair value of their shares, at no point of time it is even suggested by them that the amount that is being paid is any way less,” the court observed. That an overwhelming majority of the non-promoter shareholders voted in favour of the resolution too weighed with the court, which held that “the court will not be justified in withholding its sanction to the resolution.”
The judgement opens up several interesting possibilities and propositions in relation to shareholder rights in India. The company in question was not a listed company – it had already been delisted.
Listed companies would require stock exchange approval for reduction of capital under the listing agreement, and it is unlikely that stock exchanges would approve such a transaction. However, for an unlisted company, regardless of whether a company is a public company or a private company, shareholders rights can be impacted severely.
Private equity investors holding small stakes without serious rights could easily be thrown out by management using such resolutions. In family-run companies, a segment of the family that holds a minority stake could get thrown by the rest of the family. All that one would need is a special resolution.
The core business issue involved here is not about whe-ther the price paid for the shares would be fair, but whether an owner of shares in India has a vested right to keep his property, or whether other shareholders can force him to divest his property.
For details judgment mail me at minturaj@gmail.com
Monday, March 30, 2009
Whether the appellants can directly approach this Court under Article 136 of the Constitution, against the orders of the District Court,
these appeals give rise to the following two questions:
(i) Whether the appellants can directly approach this Court under
Article 136 of the Constitution, against the orders of the District
Court, without approaching the High Court?
(ii) Even if the answer to the first question is in the negative, whether
leave having been granted by this Court, these appeals should be
considered and decided on merits?
Re: Question No. (i):
We therefore reiterate that though the existence of an alternative remedy by itself will not take away the jurisdiction of this Court under Article 136, this Court would not grant leave and entertain appeals against orders/judgments/decrees of the district court or courts sub-ordinate thereto, if remedy by way of appeal or revision to the High Court or other court or forum is available.
Re: Question No. (ii)
It is now well settled that the discretionary power vested in this Court under article 136 continues even after granting leave. Therefore, on hearing an appeal by special leave, this Court may refuse to go into merits, or even if it goes into merits, merely declare the law and refuse to interfere if interests of justice and/or facts of the case do not call for interference. If this Court finds that leave ought not to have been granted and that no prejudice will be caused, it may reject the appeal by special leave, reserving liberty to the appellant to pursue the alternative remedy before the High Court or other appropriate forum. In extreme cases, this Court may even revoke the leave already granted.
(i) Whether the appellants can directly approach this Court under
Article 136 of the Constitution, against the orders of the District
Court, without approaching the High Court?
(ii) Even if the answer to the first question is in the negative, whether
leave having been granted by this Court, these appeals should be
considered and decided on merits?
Re: Question No. (i):
We therefore reiterate that though the existence of an alternative remedy by itself will not take away the jurisdiction of this Court under Article 136, this Court would not grant leave and entertain appeals against orders/judgments/decrees of the district court or courts sub-ordinate thereto, if remedy by way of appeal or revision to the High Court or other court or forum is available.
Re: Question No. (ii)
It is now well settled that the discretionary power vested in this Court under article 136 continues even after granting leave. Therefore, on hearing an appeal by special leave, this Court may refuse to go into merits, or even if it goes into merits, merely declare the law and refuse to interfere if interests of justice and/or facts of the case do not call for interference. If this Court finds that leave ought not to have been granted and that no prejudice will be caused, it may reject the appeal by special leave, reserving liberty to the appellant to pursue the alternative remedy before the High Court or other appropriate forum. In extreme cases, this Court may even revoke the leave already granted.
Thursday, January 29, 2009
Proof of travel not required for claiming LTA: SC
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.993 OF 2005
COMMISSIONER OF INCOME TAX & ANR. ...APPELLANT (S)
VERSUS
M/S LARSEN & TOUBRO LTD. ...RESPONDENT(S)
WITH
CIVIL APPEAL NO. 992 OF 2005
O R D E R
A short question which arises for determination in these Civil Appeal(s) is –
whether the assessee(s) was under statutory obligation under Income Tax Act, 1961, and/or
the Rules to collect evidence to show that its employee(s) had actually utilized the amount(s)
paid towards Leave Travel Concession(s)/Conveyance Allowance?
It may be noted that the beneficiary of exemption under Section 10(5) is an
individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the Declaration to be submitted by an employee(s).
For the above reasons there is no merit in the Civil Appeals and the same are
dismissed with no order as to costs.
....................J.
[ S.H. KAPADIA ]
New Delhi, ....................J
January 21, 2009 [ AFTAB ALAM ]
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.993 OF 2005
COMMISSIONER OF INCOME TAX & ANR. ...APPELLANT (S)
VERSUS
M/S LARSEN & TOUBRO LTD. ...RESPONDENT(S)
WITH
CIVIL APPEAL NO. 992 OF 2005
O R D E R
A short question which arises for determination in these Civil Appeal(s) is –
whether the assessee(s) was under statutory obligation under Income Tax Act, 1961, and/or
the Rules to collect evidence to show that its employee(s) had actually utilized the amount(s)
paid towards Leave Travel Concession(s)/Conveyance Allowance?
It may be noted that the beneficiary of exemption under Section 10(5) is an
individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the Declaration to be submitted by an employee(s).
For the above reasons there is no merit in the Civil Appeals and the same are
dismissed with no order as to costs.
....................J.
[ S.H. KAPADIA ]
New Delhi, ....................J
January 21, 2009 [ AFTAB ALAM ]
Wednesday, January 21, 2009
beyond the reference
If the arbitrator decides a dispute which is beyond the scope of his reference or beyond the subject-matter of the reference or he makes the award disregarding the terms of reference or the arbitration agreement or terms of the contract, it would be a jurisdictional error beyond the scope of reference; he cannot clothe himself to decide conclusively that dispute as it is an error of jurisdiction which requires to be ultimately decided by the Court.
Beyond the scope of reference
If the arbitrator decides a dispute which is beyond the scope of his reference or beyond the subject matter of the reference or he makes the award disregarding the terms of reference or the arbitration agreement or terms of the contract, it would jurisdictional error beyond the scope of reference, he cannot clothe himself to decide conclusively that dispute as it is an error of jurisdiction which requires to be ultimately decided by the court
Saturday, January 17, 2009
territorial jurisdiction issue
Both the appellant Board, having its base and operation at Jaipur and the respondent Company, having its registered office and manufacturing unit at Calcutta entered into an agreement having following clause:
"30.....The contract shall for all purposes be construed according to the laws of India and subject to jurisdiction of only at Jaipur in Rajasthan Courts only..........."
Somehow the disputes arose between the parties. The respondent company approcached the Hon'ble High Court at Calcutta. Somehow matter came before Hon'ble Supreme Court. Hon'ble Court referring its earlier judgments confirm the view expressed in Hanil Era Textiles Ltd. v. Puromatic Filters (P) Ltd. [(2004) 4 SCC 671], it was held by this Court that where two or more courts have jurisdiction under the Code, it is permissible to have an agreement between the parties restricting the place of suing to any one of them and if such restriction is placed in the agreement, the same cannot be said to be contrary to public policy and does not contravene Section 28 of the Contract Act. It was however, made clear that such restriction cannot be made and the parties cannot by agreement confer jurisdiction on a court which otherwise it does not possess under the Code.
"30.....The contract shall for all purposes be construed according to the laws of India and subject to jurisdiction of only at Jaipur in Rajasthan Courts only..........."
Somehow the disputes arose between the parties. The respondent company approcached the Hon'ble High Court at Calcutta. Somehow matter came before Hon'ble Supreme Court. Hon'ble Court referring its earlier judgments confirm the view expressed in Hanil Era Textiles Ltd. v. Puromatic Filters (P) Ltd. [(2004) 4 SCC 671], it was held by this Court that where two or more courts have jurisdiction under the Code, it is permissible to have an agreement between the parties restricting the place of suing to any one of them and if such restriction is placed in the agreement, the same cannot be said to be contrary to public policy and does not contravene Section 28 of the Contract Act. It was however, made clear that such restriction cannot be made and the parties cannot by agreement confer jurisdiction on a court which otherwise it does not possess under the Code.
Friday, October 31, 2008
the matter in respect of which the respondent sought reference to arbitration was "excepted matter" in terms of
the following principlesrelating to "Excepting matters" as under :- "1. These appeals by the grant of Special Leave pertains to the effect of the usual `excepted clause' vis-`-vis the arbitration clause in a Government contract. While it is true and as has been contended, that the authorization of the arbitrators to arbitrate, flows from the agreement but the High Court in the judgment impugned thought it fit to direct adjudication of `excepted matters' in the agreement itself by the arbitrators and hence these appeals before this Court. 2. At the outset, it is pertinent to note that in the usual Government contracts, the reference to which would be made immediately hereafter, there is exclusion of some matters from the purview of arbitration and a senior officer of the Department usually is given the authority and power to adjudicate the same. The clause itself records that the decision of the senior officer, being the adjudicator, shall be final and binding between the parties - this is what popularly known as `excepted matters' in a Government or Governmental agencies' contract. 3. `Excepted matters' obviously, as the parties agreed, do not require any further adjudication since the agreement itself provides a named adjudicator - concurrence to the same obviously is presumed by reason of the unequivocal acceptance of the terms of the contract by 11 the parties and this is where the courts have found our lacking in its jurisdiction to entertain an application for reference to arbitration as regards the disputes arising therefrom and it has been the consistent view that in the event the claims arising within the ambit of excepted matters, question of assumption of jurisdiction of any arbitrator either with or without the intervention of the court would not arise; the parties themselves have decided to have the same adjudicated by a particular officer in regard to these matters; what are these exceptions however are questions of fact and usually mentioned in the contract documents and forms part of the agreement as such there is no ambiguity in the matter of adjudication of these specialized matters and termed in the agreement as the excepted matters....."
Wednesday, October 22, 2008
REQUIREMENT OF rule 4 order 37 cpc
Where on an application, more than one among the specified reliefs
may be granted by the Court all such reliefs must be claimed in one application. It
is not permissible to claim such reliefs in successive petitions as it would be
contrary to the letter and spirit of the provision. That is why where an application
under Rule 4 of Order 37 is filed to set aside a decree either because the defendant
did not appear in response to summons and limitation expired, or having appeared,
did not apply for leave to defend the suit in the prescribed period, the Court is
empowered to grant leave to defendant to appear to the summons and to defend the
suit in the same application. It is, therefore, not enough for the defendant to show
special circumstances which prevented him from appearing or applying for leave
to defend, he has also to show by affidavit or otherwise, facts which would entitle
him leave to defend the suit. In this respect, Rule 4 of Order 37 is different from
Rule 13 of Order 9.”
Indeed, an application under Order 37 Rule 4 CPC differs vis-a- vis an
application under Order 9 Rule 13 CPC for the reason an application under Order
37 Rule 4 CPC is a composite application determination whereof, if in favour of
the applicant, results in not only the ex-parte decree being set aside but leave to
defend being granted to the party concerned. It is for this reason law requires that
the defendant, in addition to show special circumstances which prevented him/her
from appearing, must additionally disclose facts entitling him/her to obtain leave to
defend.
may be granted by the Court all such reliefs must be claimed in one application. It
is not permissible to claim such reliefs in successive petitions as it would be
contrary to the letter and spirit of the provision. That is why where an application
under Rule 4 of Order 37 is filed to set aside a decree either because the defendant
did not appear in response to summons and limitation expired, or having appeared,
did not apply for leave to defend the suit in the prescribed period, the Court is
empowered to grant leave to defendant to appear to the summons and to defend the
suit in the same application. It is, therefore, not enough for the defendant to show
special circumstances which prevented him from appearing or applying for leave
to defend, he has also to show by affidavit or otherwise, facts which would entitle
him leave to defend the suit. In this respect, Rule 4 of Order 37 is different from
Rule 13 of Order 9.”
Indeed, an application under Order 37 Rule 4 CPC differs vis-a- vis an
application under Order 9 Rule 13 CPC for the reason an application under Order
37 Rule 4 CPC is a composite application determination whereof, if in favour of
the applicant, results in not only the ex-parte decree being set aside but leave to
defend being granted to the party concerned. It is for this reason law requires that
the defendant, in addition to show special circumstances which prevented him/her
from appearing, must additionally disclose facts entitling him/her to obtain leave to
defend.
Service of notice/summons U/O 37 CPC
O. 37 CPC specifically provides that in a suit under O. 37 CPC, the plaintiff shall together with the summons under Rule 2, serve the defendant with a copy of the plaint and annexure thereto. Thus where only summons have been affixed without affixing copy of the plaint and annexures thereto, the service is not in accordance with the provisions of O. 37 Rule 3 (1) CPC and this would be a sufficient ground to set aside the decree. The same view is taken by another bench of this Court in the case of New Bank of India Vs. M/s Master Steel Marketing Co.-1995 III AD (Delhi) 957. It was a case of the substituted service. It was held that where only copy of summons was published without publishing copy of the plaint and annexures there to, the service was not in accordance with law.
ORDER 37 RULE 3 (4 & 5) of C P C.
The question as to whether leave to defend a suit can be granted or not is within the discretionary powers of the High Court and it does not appear to us that such discretion has been exercised erroneously or with any irregularity which warrants interference by this Court.
it is now well established as a principle of law that even if a wrong order is passed by a Court having jurisdiction to pass an order in such cases, the revisional Court will not interfere with such an order unless a jurisdictional error is pointed out and established by the person who questions such order.
In the instant case, the High Court did not lack jurisdiction to pass an order with regard to the subject matter of dispute, though the order itself may be incorrect. There is, therefore, little scope for this Court to interfere with.
it is now well established as a principle of law that even if a wrong order is passed by a Court having jurisdiction to pass an order in such cases, the revisional Court will not interfere with such an order unless a jurisdictional error is pointed out and established by the person who questions such order.
In the instant case, the High Court did not lack jurisdiction to pass an order with regard to the subject matter of dispute, though the order itself may be incorrect. There is, therefore, little scope for this Court to interfere with.
Whether quashing of FIR/criminal proceedings/complaint be allowed
The question whether a F I R under Sections 420/468/471/34/120-B IPC can be quashed either under Section 482 of the Code of Criminal Procedure or under Article 226 of the Constitution, when the accused and the complainant have compromised and settled the matter between themselves ?
We, accordingly, allow the appeal and set aside the order of the High Court and quash the criminal proceedings pending before Court.
We, accordingly, allow the appeal and set aside the order of the High Court and quash the criminal proceedings pending before Court.
Saturday, October 18, 2008
MODE OF SERVICE
Admittedly, notice under Section 138B of theNegotiable Instruments Act was sent to therespondents through registered post and under acertificate of posting on their correct address of therespondents. The High Court had quashedproceeding on the ground that although noticethrough registered post and also under certificate ofposting were sent by the appellant/ complainant tothe respondents but because of the endorsement ofthe postal peon, the service could not be said tohave been effected. In our view, the High Court wasnot justified in holding that service of notice couldnot be found to be valid. In K.Bhaskaran vs.Sankaran Vaidhyan Balan & Anr. [1999 (7) SCC510], it has been held that the context of section138B of the Negotiable Instruments Act invites aliberal interpretation favouring the person who hasthe statutory obligation to give notice under the Actbecause he must be presumed to be the loser in thetransaction and provision itself has been made in 3 his interest and if a strict interpretation is asked forthat would give a handle to the trickster chequedrawer. It is also well settled that once notice hasbeen sent by registered post with acknowledgmentdue in a correct address, it must be presumed thatthe service has been made effective. We do not findfrom the endorsement of the postal peon that thepostal peon was at all examined. In V. Raja Kumarivs. P. Subbarama Naidu & Anr. [2004 (8) SCC 774],again this Court reiterated the same principle andheld that the statutory notice under Sections 138and 142 of the Negotiable Instruments Act, 1881sent to the correct address of the drawer butreturning with the endorsement must be presumedto be served to the drawer and the burden to showthat the accused drawee had managed to get anincorrect postal endorsement letter on thecomplainant and affixed thereof have to beconsidered during trial on the background facts ofthe case.
Thursday, October 16, 2008
arbitration clause
This appeal is directed against the Judgment and order for appointment of an Arbitrator on the ground that no Arbitration Clause was in existence between the parties.
It was held by the learned Addl. District Judge, that since the photocopy of the proposed agreement bears the signature of only the appellant and not that of the PGI, it could not be held that an arbitration agreement was executed between the parties and since there was no signature of the PGI on the said agreement, which was sent after signature of the appellant, remained only as an offer.
We may reiterate that in this case admittedly the documents which are on record apparently show supply of the material by the appellant to the PGI and acceptance thereof by the PGI in pursuance of the tender enquiry by them wherein tender of the appellant containing the arbitration clause was admittedly accepted by the PGI. Accordingly, we hold that arbitration agreement did exist and, therefore, dispute between the parties would be referred to an
Arbitrator for decision.
Therefore, considering the above aspects of the matter in this case, we must come to this conclusion that although no formal agreement was executed, the ender documents indicating certain conditions of contract contained an arbitration clause. It is also an admitted position that the appellant gave his tender offer which was accepted and the appellant acted upon it.
It was held by the learned Addl. District Judge, that since the photocopy of the proposed agreement bears the signature of only the appellant and not that of the PGI, it could not be held that an arbitration agreement was executed between the parties and since there was no signature of the PGI on the said agreement, which was sent after signature of the appellant, remained only as an offer.
We may reiterate that in this case admittedly the documents which are on record apparently show supply of the material by the appellant to the PGI and acceptance thereof by the PGI in pursuance of the tender enquiry by them wherein tender of the appellant containing the arbitration clause was admittedly accepted by the PGI. Accordingly, we hold that arbitration agreement did exist and, therefore, dispute between the parties would be referred to an
Arbitrator for decision.
Therefore, considering the above aspects of the matter in this case, we must come to this conclusion that although no formal agreement was executed, the ender documents indicating certain conditions of contract contained an arbitration clause. It is also an admitted position that the appellant gave his tender offer which was accepted and the appellant acted upon it.
Monday, October 6, 2008
Insurance — whether a dispute raised by an insured, after giving a full and final discharge voucher to the insurer, can be referred to arbitration
When a contract contains an arbitration clause and any dispute in respect of the said contract is referred to arbitration without the intervention of the court, the Arbitral Tribunal can decide the following questions affecting its jurisdiction: (a) whether there is an arbitration agreement; (b) whether the arbitration agreement is valid; (c) whether the contract in which the arbitration clause is found is null and void and if so whether the invalidity extends to the Arbitration clause also.
It follows therefore that if the respondent before the Arbitral Tribunal contends that the contract has been discharged by reason of the claimant accepting payment made by the respondent in full and final settlement, and if the claimant counters it by contending that the discharge voucher was extracted from him by practicing fraud, undue influence, or coercion, the arbitral tribunal will have to decide whether the discharge of contract was vitiated by any circumstance which rendered the discharge voidable at the instance of the claimant. If the arbitral tribunal comes to the conclusion that there was a valid discharge by voluntary execution of a discharge voucher, it will refuse to examine the claim on merits, and reject the claim as not maintainable.
In what circumstances, a court will refuse to refer a dispute relating toquantum to arbitration, when the contract specifically provides forreference of disputes and differences relating to the quantum toarbitration?
a three Judge Bench of this Court culled out the following general principles as to when arbitration agreements operate and when they do not operate:
Thursday, July 31, 2008
maintenance under Section 125 of the Code
Three questions arise for our consideration;
(i) whether interim maintenance could be awarded in absence of specific express provision in the Code;
(ii) whether the applicant-wife and her daughter are entitled to maintenance from the date of the order passed by the Family Court or from the date of application made by them under Section 125 of the Code; and
(iii) what could be the amount of maintenance which could be awarded by the
Court.
Court.
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