1. Supreme Court: Saves Trees

The Supreme Court has stopped printing out additional hard copies of judgments since February 1, 2015 to circulate internally and elsewhere as well as doing away with paper cause lists. Normally 80 copies of all judgments have been made automatically for the records of the editorial branch of the Court, which have now reduced to less than 20.

Judges and others have now been downloading copies of judgments from the Supreme Court’s website, rather than request hardcopies for “contingent/miscellaneous requirements”, as per the relevant notice. Infact, all cause lists have now been getting disseminated by e-mail instead of paper from February 1, 2015 . It is relevant to point out here that Supreme Court will be saving more than Rs. 5 crores in a financial year by not printing cause lists.

Suggestion: As most of the members of AIFTP are not getting “AIFTP New letters” and/or AIFTP Journals on regular basis, Hon’ble Members of Executive Council of AIFTP, may like to get motivation from the Supreme Court decision, by sending AIFTP News Letters and/or AIFTP Journals to the Members on their emails instead of sending printed copy, of the same and/or in addition, just to save trees and unproductive cost on AIFTP.

2. National Tribunal Act, 2005 (NTT)

NTT was challenged, it being the ultimate encroachment on exclusive domain of superior Courts of Record in India. In alternative, various provisions of NTT were also challenged being unconstitutional. Transfer Case (C) No. 150 of 2006 Madras Bar Association v. Union of India & Ors. and other petitions have been decided by the Supreme Court by holding that entire NTT enactment as unconstitutional.
The conclusions of the judgment dated 25-9-2014 are reproduced below:-

“(i) The Parliament has the power to enact legislation, and to vest adjudicatory functions, earlier vested in the High Court, with an alternative Court/Tribunal. Exercise of such power by the Parliament would not per se violate the “basic structure” of the Constitution.

(ii) Recognised Constitutional conventions pertaining to the Westminster model, do not debar the legislating authority from enacting legislation to vest adjudicatory functions, earlier vested in a superior Court, with an alternative Court/Tribunal. Exercise of such power by the Parliament would per se not violate any Constitutional convention.

(iii) The “basic structure” of the Constitution will stand violated, if while enacting legislation pertaining to transfer of judicial power, Parliament does not ensure, that the newly created Court/Tribunal, conforms with the salient characteristics and standards, of the Court sought to be substituted.

(iv) Constitutional conventions, pertaining to constitutions styled on the Westminster model, will also stand breached, if while enacting legislation, pertaining to transfer of judicial power, conventions and salient characteristics of the Court sought to be replaced, are not incorporated in the Court/Tribunal sought to be created.

(v) The prayer made in Writ Petition (C) No.621 of 2007 is declined. Company Secretaries are held ineligible, for representing a party to an appeal before the NTI.

(vi) Examined on the touchstone of conclusions (iii) and (iv) above, Sections 5, 6, 7, 8 and 13 of the NTI Act (to the extent indicated hereinabove), are held to be unconstitutional. Since the aforesaid provisions, constitute the edifice of the NTI Act, and without these provisions the remaining provisions are rendered ineffective and inconsequential, the entire enactment is declared unconstitutional.” (Source 2014(11) Scale 166).

3. Foreign Lawyers in India

Should foreign lawyers be allowed to come toIndia for short visits to advise clients or participate in international arbitration proceedings? The Central Government, which is yet to clarify its position on this matter, may have to decide where it stands with the Supreme Court to hear an appeal against the
Madras High Court ruling that allowed foreign lawyers to work in India for limited durations.

The Union Government had been asked for its view but let it to the Bar Council of India (BCI), the top regulatory body for the country’s lawyers, to take a call on the issue.

The Madras High Court had in its February, 2012 ruling stated that
there was no bar of foreign law firms or lawyers visiting India for short periods and giving legal advice to clients. The High Court had also exempted BPOs from the preview of BCI Rules as the Advocates Act, which only allow Indian citizens with domestic law degrees to enroll as lawyers.

BCI is vehemently opposed to the entry of foreign lawyers and law firms in any form unless it is of a reciprocal basis. It has appealed against the High Court decision, which also allows foreign firms to carry out backend pre-litigation work such as researching and drafting. BCI is also opposed to BPOs and LPOs, as these cause revenue losses to the exchequer, according to it. It has urged the Court to direct the Tamil Nadu Government to ban foreign legal firms from undertaking any litigation, non-litigation or commercial work in India.

Opposing this view are law firms from the UK, US, Canada, Australia, Singapore along with some multinational BPOs. The Union Government has been seeking to make India more attractive destination as it is keen on drumming up overseas investment as part of efforts to revive the economy and put it back on a high growth path.

Overseas legal firms opposed to the BCI appeal have suggested that putting a stop to foreign lawyers may not help in this regard. “This issue also would affect a growing Indian economy if FDI is restricted for lack of confidence from corporate and multinationals trying to invest here”, they said in a submission.

They also said that there is no bar, on foreign lawyers flying in and out on advising clients of non-Indian law or even international commercial arbitration, pointing out that the country would lose out as an arbitration venue in the event of any such prohibition. Acting on the BCI’s pleas, the Supreme Court had in a July 4, 2014 interim order asked the
Reserve Bank of India not to allow any foreign law firm to open liaison offices in India. No work, litigious or non-litigious, could be carried out by foreign law firms unless it was in conformity with the BCI Rules and the Advocates Act, it said.

The case has been pending since then for a final hearing. At least six foreign law firms – Clifford Chance, Linklaters, Ashurst, Bird & Bird and Eversheds and Clyde and Co. have formally opposed the appeal in written submissions filed through their respective advocates.

They have urged the Supreme Court to dismiss the BCI appeal on the ground that they do not have offices in the country and do not give any evidence of domestic law to clients in India. They have also argued that
neither the Advocates Act 1961, nor the Bar Council Rules, governs the practice of foreign law.
They have also said that there is no statutory prohibition barring the foreign lawyers from appearing in international commercial arbitration proceedings conducted in India. They have said that lawyers/partners of their firms enter the country to handhold clients and to advise them only on non-Indian law in their transactions in view of the globalisation economy and not to appear before any local Court or Tribunal.

4. Coimbatore Lawyers barred from practice

The statutory Bar Council took an unprecedented step of placing five practising advocates under suspension for professional misconduct. The five lawyers, two of them women, were restrained from practising in Courts, Tribunals and any such forums inIndia, either in their names or in any assumed name, for a period of three years under Section 6(l)(d) of the Advocates Act, 1961 or until the disposal of the disciplinary proceedings initiated by the Bar Council of Tamil Nadu and Puducherry. They have been charged with conducting fake Courts in the name of ‘arbitral tribunal’ in Coimbatore, and passing orders.

In its order last month, the disciplinary committee of the Bar Council told the five advocates – P. R. Shanmugam, K. Rajaram, V. Jayalakshmi, R. D. Vijay Anand and N. Kausalya Devi – that being members of the legal profession, they had indulged in illegal activities in a calculated manner for financial gain. They have overstepped their limits knowingly, and committed. serious misconduct and earned a bad reputation to the advocates’ community among the public, the Council said.

The Bar Council of Tamil Nadu and Puducherry had received a complaint from the Coimbatore Bar Association seeking necessary action against fake arbitrators who conducted fake Courts and passed awards. The ‘arbitral tribunals’ were functioning without any sanction or permission or recognition from the High Court or the Supreme Court or by any other competent authority, it said. Following the complaint, the Council had taken note of the issue, and issued prohibitory orders against the five advocates, restraining them from practising before any legal forum.

When they were called upon to offer explanation, Shanmugam had sent a reply saying he had intimated registrars of the Supreme Court and the Madras High Court about the Tribunal. They did not object to the functioning of the Tribunal, he said, adding that he was a member of the Indian Council of Arbitration and International Centre for Alternative Dispute Resolution (ICADR).

Advocate Rajaram appeared before the committee and explained that he had done everything lawfully in the matter of passing awards. Jayalakshmi told the committee that she was appointed by the All India and Overseas Arbitration Committee, functioning at KRS Building at Saibaba Colonv in Coimbatore, and that she was paid Rs. 750 to Rs. 1,500 as remuneration to conduct the ‘arbitration proceedings’. Vijaya Anand clarified that he did not pass any illegal arbitration award and requested the committee to discharge him from the proceedings. Kausalya Devi had argued before the committee that the signature found in the awards passed was not hers, and added that someone had misused her signature and name.

Coimbatore Bar Association President P. Nandakumar and Secretary M. Loganathan, who appeared before the council, were cross-examined by counsel of the five advocates. A disciplinary committee of the Bar council, comprising its Chairman K. Ranganthan and members K. Rajarajan and M. Ram Prabakar, found all the five lawyers guilty of misconduct, and ordered their immediate suspension from the Bar for a period of three years from December 3, 2014. (Source: Times of India)

5. Kolkata International Arbitration Centre (KIAC)

The Government of West Bengal will soon set up a fast-track arbitration centre in Kolkata to facilitate speedy settlement of commercial disputes. The proposal comes on the back of the Centre’s decision to introduce an ordinance that seeks to settle commercial disputes through arbitration for their speedy resolution.

Debashis Sen, Principal Secretary of the State Government’s Urban Development Department, said to the media persons that commercial disputes in India took years to get resolved – a factor that prevented domestic and foreign investors to make fresh investments.

“We are shortly coming up with the Kolkata International Arbitration Centre (KIAC), where the arbitration officer would solve all disputes brought to his notice within nine months… this will speed up the industrial investment in Bengal,” as told by Sen.

“We have decided to set up an international arbitration centre at Rajarhat. The objective is to offer infrastructure where the arbitrator can hold Tribunals and consult legal assistance so that the disputes can be settled within nine months,” Sen added.,

Sen said the State is suffering from lack of foreign investments primarily because grievances are not being addressed within a given timeline.

“Efforts were made to speed up the redressal process but no time frame was there previously. In practice, the disputes dragged on for years. Last month, the Central Government introduced an ordinance whereby the arbitrator would have to decide the case within nine months,” he said. Sen said the State Government has set up a consulting committee to expedite the process for the construction of KIAC.

“Tomorrow (Sunday) a team from Bengal is going to Delhi to discuss about KIAC with the Centre,” he said.

The Centre, proposed to be set up in Rajarhat will have all modern facilities including separate air-conditioned rooms for consulting and arbitration. (Source: Business Standard)

6. Commercial Courts – A step in the right direction

Amid complaints of delays and pendency of 16,884 commercial cases in five High Courts –Delhi, Mumbai, Calcutta, Madras and Himachal Pradesh, settling such “High-Value” disputes may become easier and cheaper if Government accepts a draft Law Commission Bill to set up commercial Courts in the country.

The institution of such Courts has been seen stepping stone to reforming the civil justice system in India and will also accelerate economic growth, increase foreign investment and make India an attractive place to do business. Even the Government plans to amend the Arbitration & Conciliation Act, 1996 to make it mandatory for an arbitrator presiding over commercial dispute to settle case within nine months.

The Law Commission under the Chairmanship of former Justice Mr. A.P. Saha in its draft “Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill 2015” to the Law Ministry has suggested special commercial Courts for the speedy disposal of “high-value commercial suits”, “streamlined procedure” to be adopted for the conduct of cases in the Commercial Division and in the Commercial Court by bringing in “substantial” changes in the Code of Civil Procedure, 1908 (CPC) to improve the efficiency and reduce delays.

In fact, the recommendations of Law Commission to set up commercial courts as a step in the right direction, one that will not only curtail the overstretched litigation but also propel foreign investments. I feel the exercise will be fulite if such Courts are not manned by experts who are equipped to handle commercial and related matters. Commercial disputes fall under a distinct and separate category and require different mindset, expertise and commercial principles. A robust dispute resolution mechanism is a must for the all-round development of an economy.

The Government should follow the parameters laid down by the Supreme Court in the
National Tax Tribunal case for appointment of members to the specialised Tribunals/Commercial Courts and rather avoid obliging bureaucrats with post/retirement jobs. The said senior lawyer also says “The Government should bring in for a fixed tenure young minds who are not only familiar with latest business developments but are also well conversant with business laws. To attract them, the best brains should be given good emoluments in order to keep them motivated”. Unless and until the experts or specialists selected for members of the Tribunal are properly trained and sensitised to commercial principles, the whole purpose will lose its relevance.

Thus, to ensure effective alternate system, these commercial Courts should be manned by commercial experts who can demonstrate clarity of knowledge and understand all commercial issues besides efficiency in disposal of matters, otherwise delays only act as a disincentive to foreign investors.

A commercial dispute is being defined in the draft legislation in the Law Commission’s Report, which includes disputes arising from agreements ranging from those of shareholders, franchising, joint venture agreements, subscription and investment agreements in the service industry to technology, intellectual property and insurance. The definition also clarifies that disputes of such agreements with the Central and State Governments and bodies performing public functions would still constitute a commercial dispute. (Source: The Financial Express).

7. India: Role in International Arbitration

Judicial proceedings need to be streamlined to reduce the backlog in Indian Courts, says President of International Court of Justice Peter Tomka. He feels India also has an important role to play in international arbitration arena by co-operating closely with the Netherlands based Permanent Court of Arbitration.

The top jurist said that judicial proceedings in India need to be streamlined to reduce the backlog as this not only takes a toll on individuals but also on the system.

“Judicial proceedings (in India) need to be streamlined. Measures should be taken to enhance the efficiency of judicial system but these measures depend on national particularities,” Tomka told on the sidelines of an event here.

He was asked about the ways to reduce the huge pendency of cases here. “India certainly can play more active role in the field of International arbitration and one of the ways to improve the standing is to co-operate closely with the Permanent Court of Arbitration in Hague which has agreement and co-operation with several countries,” he said.

According to him, by working and co-operating closely with the Permanent Court of Arbitration at Hague, which has agreement with several countries, “India can improve its standing worldwide”.

Tomka, who was among the seven Arbitrators in the Indus Waters Kishenganga arbitration case between India and Pakistan in 2013, and a member of the Permanent Court of Arbitration since 1994, said all recent steps taken here and aimed at accelerating the arbitration proceedings and managing the process need to be welcomed.

“Certainly arbitration is being perceived and conceived as an efficient way of settling the disputes provided the parties are agreed to arbitration and all steps which aim at accelerating the arbitration proceedings and managing the process needs to be welcomed,” he said.

He was responding to the recent amendments brought in by the Indian Government in Arbitration and Conciliation Act with one making it mandatory for a judge presiding over commercial disputes to settle cases within nine months and the other putting a cap on arbitrator’s fee.

Lauding India’s role in strengthening the international institutions including the ICJ, Tomka said that it was among the first few Asian countries which has been recognising its jurisdiction since its inception.

“India has been recognising its jurisdiction for almost 70 years and has been party in several cases in the past. ICJ has benefited a lot from the presence of distinguished Indian international law lawyers and judges. “Since its inception in 1945, we have four Indian Judges and ICJ has benefited a lot from their judicial philosophies and knowledge of International law. But the fact which is to be commended the most is India has been among the few Asian countries which are subject to the jurisdiction of the ICJ through a declaration,” he said.

8. International Arbitration for infra development disputes

The Government plans to allow resolution of disputes in infrastructure development through arbitration in neutral place like Singapore, London and Malaysia, a step aimed at increasing the confidence of foreign investors in putting money in a sector that is key to economic growth but is struggling due to funds shortage.

The Government will insert a clause allowing arbitration in a neutral city while signing public private partnerships (PPP) and other infrastructure contracts, people with knowledge of the matter said. India is likely to invite investments over the next two to three years in projects in power, coal roads and transport and water supply. All the new PPP contracts are set to have the arbitration clause. Singapore is already a favourite place for Indian companies to arbitrate disputes.

India needs hundreds of billion dollars to fix its creaky infrastructure such as highways, ports, power plants and shortage facilities, as well as build new ones. According to experts, inadequate infrastructure is shaving off as much as two percentage points from the country’s gross domestic product.

While the Government is trying to channel more funds to the sector, investors have become extremely cautious because of past experience. Since 2006, around 50% of the total inbound private-equity investment has been to the infrastructure sector, including in roads, power and real estate.

These project and businesses have seen undue delays because of slow Government approvals; changing and ambiguous policies and problems over land acquisition. Currently, to resolve disputes over PPP projects, the Government appoints one of its own employees who isn’t connected to the disputes as an arbitrator. This mechanism isn’t effective, say legal experts.

“In the infrastructure sector, there have been lot of problems in the past and investors are steering away due to this. The step to include arbitration clause as a neutral country like Singapore or London would give confidence to investor, “Said Yogen Vaidya, partner, fraud investigation and dispute services, at Ernst & Young. According to Vaidya, the arbitration clause at a neutral territory has already become a norm in private contracts in the country.In PPP also it could result in better dispute resolution, he added.

Meanwhile, some State-run firms have also stated including clause for international arbitration in ‘their new agreements, say industry trackers. Companies like Oil & Natural Gas Corp. and Gammon India have arbitration clause and the venue as Singapore, said Ameet Mehta, managing partner of Solids Lex, a Mumbai-based law firm. “A lot of the island nation’s laws are established on the basis of the Indian Penal Code and they are culturally compatible of neutral,” said Mehta.

Industry experts say most private companies and their foreign investors are flocking to Singapore when they need to resolve disputes. As much as a quarter of the arbitration cases filed in Singapore involve at least one Indian party, they say.
(Source: The Economic Times)

9. Supreme Court: Oil Ministry and RIL on ONGC

The Supreme Court sought response from the Oil Ministry, Reliance Industries and BG on a plea by ONGC over reimbursement of royalties and taxes in the Panna, Mukta and Tapti (PMT) gas fields, jointly operated by the three firms.

The Supreme Court in May last year while allowing a plea by RIL and its partner BG Exploration and Production had held that only British Courts had the jurisdiction over the ongoing arbitration between the companies and the Oil Ministry over the farmer’s demand for reimbursement of royalties and taxes paid by them for the PMT gas fields.

Besides, the Supreme Court ruled that any final arbitral award can be challenged only in the British Courts, but substantive Indian arbitration laws will have to be applied by the foreign Courts.

Seeking clarification of the Supreme Court’s judgment with regard to change of juridical seat of the arbitration, ONGC said the Supreme Court had allowed the RIL’s plea-
“on the erroneous basis that there had been an amendment to the Production Sharing Contracts. (PSCs) entered into between the parties, and that the juridical seat was shifted to London by consent of the parties.”

“This is factually incorrect, the correct facts are that the venue was shifted to Paris with the consent of all parties, for which the PSCs were amended. That there has been no further amendment to the PSC shifting the venue back from Paris to London, as has been erroneously recorded in the said judgment,” the application stated. According to ONGC, it had not consented to the juridical seat of the arbitration being at London. “In fact, London could not have been the venue, let alone, juridical seat of the arbitration, as B. G. Exploration and Production India Ltd is controlled by British Gas which is based in England.”

Seeking impleadment in the appeal, ONGC further submitted that its 40% participating interest in the PSC would be seriously prejudiced if the jurisdiction of the Indian Courts are ousted to test the validity of the award passed by the arbitration Tribunal. Supreme Court by conferring jurisdiction on the English Courts, has ousted the jurisdiction of the Indian Courts to entertain any applications that may be available as per the governing law of the contract.

The ONGC said that its rights were “vitally and crucially affected by the May 28, 2014 judgment which has far reaching implications for enforcement purposes particularly as London is not a neutral venue as one of the three parties is based in London”. It has been submitted in the application that the English Courts would exercise jurisdiction over the current dispute by applying English law for deciding challenge to the arbitral award under this arbitration.

HIGH COURT OF DELHI

10. Customs – Section 112 of the Customs Act, 1962 (Penalty – Imposition – Abatement of Smuggling – Cross – examination)

Issue: Quantum of Smuggling of silk as declared weight varied drastically in several past consignments, liability assessed based on average weight metre ratio, along with baggage weight on basis of vehicle capacity.

Held: There was application of mind to available material – figures worked out were acceptable as accused were not able to show any intrinsic inaccuracy – Issue concerned past clearances for which no other documents were available, it was reasonable/acceptable methodology, results whereof were not far from truth, though they cannot be absolutely exact – Section 112 of Customs Act, 1962.

Issue: Abatement of Smuggling
– Main person not caught and there was no corroboration by him – Non-official abettors were absent- However, connecting materials and interconnection between those involved in smuggling and impugned persons, brought out in adjudication proceedings through statements under Section 108 of Customs Act, 1962 and corroborated by call detail records

Held: Absence of goods or fact that in earlier instances they were cleared without dispute, or even after payment of differential duty, could not detract from finding of abetment/culpability of those who played key roles in fulfilment of such conspiracies- It was case of unavailability. Payment of differential duties on particulars dates and record of entry of those involved in smuggling racket, corroborated and established the allegations – Section 112.

Issue: Notices on main culprits/Foreign Nationals
– Notices served personally on main culprits/foreign national, but they were issued and published in a known manner.­

Impugned accused were issued notice and there was clear evidence of their culpability.

Held: Customs Authorities were entitled to proceed, impose penalties and make adverse orders against impugned accused – Section 112 of Customs Act, 1962.

Issue: Cross-examination – Denial of opportunity of witnesses whose depositions were relied on – However, accused were implicated not on basis of evidence of those witnesses only, but also other materials which explained chain of circumstances to prove allegations against them, and for which they did not have any reasonable explanation – Also, accused had not sought cross-examination for over five years, though they were aware that statements were to be used during proceedings that had been put to them in SCNs.

Held: Accused were not prejudiced by denial of cross-examination and principles of natural justice were not violated. Law did not insist on impossible threshold of proof to establish allegations in Customs proceedings. If on probabilities statutory authorities can establish evasion, legal standards were adequately met with.
[Source: 2015(319)E.L.T. 450(Del.)]

[Source: Article published in Souvenir of National Tax Conference held at Darjeeling on 18th and 19th April, 2015.]

Rahul Kaushik
Advocate