Appointment of women as judges in India

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September 11, 2021

This article has been written by Gaurav Agrawal and Durgeshwari Paliwal pursuing BA.LLB from Institute of Law Nirma University, Ahmedabad

Table of Contents

Introduction

To call women the weaker sex is libel; it is man’s injustice to women. If by strength is meant moral power, then women are immeasurably man’s superior.

– Mahatma Gandhi

The move by the Supreme Court collegium to appoint nine judges including three women judges has been laudatory. With this move, the working strength of Apex Court rises from 24 judges to 33 judges out of the sanctioned strength of 34 judges with one vacancy remaining. The three women judges elevated to the Apex Court are Justice Hima Kohli (Chief Justice, Telangana High Court), Justice B.V Nagarathna (Judge, Karnataka High Court) & Justice Bela M. Trivedi (Judge, Gujarat High Court). There is a glimmer of hope for India to see its first Woman Chief Justice of India.

As per the seniority, Justice Nagarathna is in line to become the first women Chief Justice of India in September 2027. However, Justice Vikram Nath (Chief Justice, Gujarat High Court) who is also elevated to the Apex Court is also in line to become Chief Justice of India in February 2021 and he would be succeeded by Justice Nagarathna who would have a tenure of over a month to head the judiciary. It is still unclear if the current recruitment procedure of judges takes gender diversity into account. A single occurrence of multiple women judges being nominated for judicial positions does not necessarily imply that gender is now a factor in judicial selections. It is only the collegium’s final conclusion and not the parameters of appointment that are known to the public.

The appointment of women is made nearly after three years as it was in 2018 when Justice Indira Banerjee was elevated to the Apex Court. After the retirement of Justice Indu Malhotra in March 2021, Mrs Justice Banerjee was the lone women judge in the Apex Court. Justice Indu Malhotra during her farewell ceremony quoted that “Women should not be taken as a mere token.” The move must not be over-exaggerated as it is paying mere lip service to what has been deserved by women. Since the inception of the Supreme Court in 1950, only eight women judges had been elevated to the Supreme Court. It was only in 1989, Justice Fathima Beevi (Judge, Kerala High Court) became the first woman judge to be elevated to the Apex Court. This raises some serious questions as to why it took 40 years for the Apex Court to get its first women to judge, why is it that only eight women judges had been appointed to the Apex Court since its inception, why women had not been given equal stand in the Indian Judiciary & legal profession as a whole, why there is no quota for women in the Indian Judiciary.

It is apparent that the legal profession has always been dominated by males since time immemorial. History is itself evidence that the inclusion of women in the Indian legal profession wasn’t an easy achievement for them in such a patriarchal structure of Indian society. It was Cornelia Sorabji who opened the gateway for Indian women to join the legal profession. In the present era, there are so many young women practising and joining this noble profession but even today the bounds of patriarchy have held them from getting equal and fair representation. Women have an equal and significant role to play in the adjudication of justice and for the transformation of the legal profession. So, they must be given equal opportunities as their male counterparts to show their legal aptitude and skills.

But as opposed to this, they face discrimination and challenges in various forms which hinder them to reach higher levels in the profession. Gender biases are one of the major forms of discrimination that is deeply rooted in our Indian legal culture. According to India Justice Report 2019, Women account for 28% in the lower judiciary, but this falls to 12% at the High Court level. In addition to this, data collated from CLAT 2015 results show that only 45.4% of national law school aspirants taking CLAT in 2015 were women.

However, the situation is quite better now compared to a few decades ago as there are so many women law aspirants entering law colleges and universities and also there are many young women practising advocates in the lower courts but as we move to higher courts the situation for women is still grim. From 1950 to 2020, there were 247 judges in the Apex Court out of which only eight were women and besides this, out of sanctioned strength of 1098 High Court judges, 829 judges are permanent and the remaining 269 sanctioned for additional judges. Out of these all, at present, there are only 78 women judges in these different High Courts, with 13 in the Madras High Court, eight in the Bombay High Court, seven in the Punjab and Haryana High Court, six each in the Delhi and Karnataka High Court and five each in the Gujarat and Kerala High Court.

Going by the available figures, women account for 7% of judges in 25 High Courts. It is not that women are not competent or meritorious or they have a lack of legal expertise, it is the patriarchal mindsets and the prevalent gender biases which are stopping women to reach higher levels. According to senior advocate Pinky Anand, “Women in litigation have it harder as they have to face clients, lawyers and judges, most of whom are male, on a daily basis. In a way, they have to confront gender bias at several levels. If a woman raises her voice to make a point, she is discerned to be cantankerous, not assertive. At times, this perception overshadows her merit and results in her being labelled aggressive.”

Besides this, women working as litigators have trade-offs between the management of their household and management of their professional life. The Maternity Benefit Act, 1961 (No. 53 Of 1961) does not apply to courts because of which women don’t have a standard 12 weeks maternity leave and also given the cumbersome structure of legal practice, leaving the place of work haunts them as when they return to work, they have to face mocking and criticizing remarks. Moreover, sexual harassment of women lawyers is also not uncommon in the court premises. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 fails to take into account courts under the aegis of the term “workplaces” and besides this when it comes to female advocates there is no employer-employee relationship in the courts. These kinds of lacunae in the legislation that are enacted for protecting women fail to secure the interest of women working in the legal domain.

However, in 2013 the Apex Court constituted the “Gender Sensitization and Internal Complaints Committee (GSICC)” under Hon’ble Justice Ranjana Prakash Desai, Judge, Supreme Court of India as Chairperson along with nine other judicial officers as members for the redressal of sexual harassment at Supreme Court of India precincts. Contrary to this, most High Courts do not even have an internal committee to redress complaints of sexual harassment of women in the court premises. Even if some of them have a system to look after such complaints, the systems are not functioning effectively.

In addition to this, a survey conducted by an independent legal think tank, Vidhi Centre for Legal Policy revealed the pathetic conditions of toilets in the court complexes. In a report on “Building Better Courts” which presents and analyses the gaps in the courts’ infrastructure, it has said that 15 per cent of the 16,000 court complexes did not have washrooms for women. At a time, when India is discussing so much about hygiene and sanitation facilities for women in rural areas and villages, sanitation facilities for women in court premises are a contrast.

Besides all these challenges, the interference of politics in judicial appointments cannot be ignored. Also, whenever any senior women lawyer is recommended by the collegium, the High Court Bar Associations go on strike for the mere reason that the concerned women lawyer didn’t practice in their respective High Courts. Such hindrances serve as a deadlock for women to reach higher levels in the profession.

There is a famous saying that “Injustice anywhere is a threat to justice everywhere.” This phrase can be aptly applied to the subject of our discussion. Injustice to women in the legal profession breeds injustice to all the aggrieved women of the country who knock on the doors of courts for justice. No one can understand a woman better than any other woman. It usually happens in our Indian courts that pleadings made by a female lawyer against her male counterpart get less attention if the presided judge is a male judge which is clear gender-based discrimination.

Why is it that women have not yet been given equal standing in the Indian Judiciary?

Representation of women in Higher Judiciary: “Suppose I tell you that ‘there is a nurse coming’ and if a man arrives instead of a woman, you will still keep looking,” said Justice Prabha Sridevan, a retired judge of Madras High Court.

The statement was made with reference to the inbuilt gender stereotype present in society, which makes it harder for a woman to sustain a position dominated by a man and vice versa. The legal profession is considered one of the elite professions meant for men, especially when it comes to the judiciary. Legal education was impenetrable for women in the past due to various societal reasons, yet few women who entered into it faced several difficulties. Thus, the Judicial appointments resulted in male supremacy. However, now with equal access to education, the number of women opting for the legal profession is on a rise. There are meritorious and eligible women that deserve elevation to the higher judiciary.

The ubiquitous diversity factor is prevalent in higher Judiciary in India, this raises questions on “why not enough women in the judiciary at higher levels?”. There is no dearth of women candidates but these women are not considered for the said position by the collegium. Even if the collegium considers them, the male supremacy in the bar association creates the deadlock. “Judiciary does not take cognizance of women representation”, said Mahalakshmi Pavani, senior advocate, Supreme court of India. They expressed the struggle women face to enter the higher judiciary.

“I guess lack of faith and belief in the abilities of women is still rooted in society and in the male psyche and we prefer to have their token presence, especially in the higher judiciary, for the sake of symbol rather than their equal participation,” said justice Gyan Sudha Misra in an interview. Quoting J. Gyan Sudha, I wish to draw your attention to the discrimination faced by women. Even after securing the higher position, they are subjected to ignorance irrespective of their ability to outperform. This shows the appointment of women is not enough unless we keep faith in them and ensure equal participation.

The determining steps were recently taken by the Apex Court to overcome the under-representation of women. It would be the first time we will be having 4 women Judges in Apex Court. We need to realize that the presence of women Justices on courts is a constitutional good as it helps promote new types of creativity and fosters social and juridical/constitutional plurality. The Supreme court of land must instil gender diversity in higher judicial appointments, for effective functioning.

Landmark judgements that realised equal representation of women

Bebb Vs. Law Society[1914] paved the way for women to enter into the legal profession, it was for the first time that women fought for their rights to pursue a career of choice. The four brave women challenged the unsuccessful legal action to appear in the examination to become solicitors, they argued that ‘women’ were ‘persons’ within the meaning of the Solicitor’s Act 1843.

M/s PLR Projects Pvt Ltd v. Mahanadi Coalfields Ltd demanded steps to achieve a gender-balanced judiciary. The Supreme court Women Lawyers Association moved to the top court, seeking fair representation of women in the higher judiciary. They highlighted the abysmally low percentage of women in constitutional courts. They were of the view that parity of sexes in every institution must be the goal of a modern progressive society. And if the association accepts the suggestions, it would pave the way for meritorious women practising in SC to be elevated to the High Court in Judicial positions.

Promising statements were made in both the above-mentioned cases but the result was not to the point. In Bebb Vs. Law Society gender neutral definition was included in clauses of Solicitors Act as against biased one, But the demands were quashed. Similarly, in M/s PLR Projects Pvt Ltd v. Mahanadi Coalfields Ltd, the bench refused to pass any order for ensuring any affirmative action for fulfilment of the demand.

Recommendations

Gender-neutral parenting

The first and foremost thing required is to change the patriarchal mindsets of Indian society. Until and unless we unlearn the stereotypes and change the mindsets, gender discrimination against women will be inevitable. It is thus essential to promote gender-neutral parenting so that future generations free themselves from the bonds of patriarchy.

Overhauling the judicial selection procedure

There is a dire need for the reformation of the judicial selection procedure and ensure fair representation of women in the Indian Judiciary. A more diverse judiciary would increase public confidence and instil greater support from its citizens. Increasing the number of women and ethnic minorities in the judicial system would also encourage people from different groups to aspire to become judges.

Reservation quota for women in the Indian Judiciary

There must be a minimum 33% reservation quota for women in the judiciary and this quota must be followed strictly as it would ensure equal representation of women & would also provide a fair opportunity for them to reach higher levels in the profession.

Conclusion

It is high time for the Indian judiciary to free themselves from the bonds of patriarchal notions and give women the positions in the legal domain they actually deserve. Aiming for gender parity in the courts is a vital aim, and a favourable attitude towards this goal, if not complete devotion, would go a long way towards women’s empowerment in India.

References

Mishra, Saurabh Kumar. “Women in Indian Courts of Law: A Study of Women Legal Professionals in the District Court of Lucknow, Uttar Pradesh, India.” E-Cadernos CES, no. 24, Dec. 2015. journals.openedition.org, https://doi.org/10.4000/eces.1976.
Ganz, Kian. “Fewer Women Make It to Ranks of CLAT Toppers.” Mint, 16 June 2015, https://www.livemint.com/Politics/5DaJAy52ZXZouIThDTYK3I/Fewer-women-make-it-to-ranks-of-CLAT-toppers.html.
NETWORK, LIVELAW NEWS. President Notifies Appointment of Nine Supreme Court Judges Including 3 Women. 26 Aug. 2021, https://www.livelaw.in/top-stories/president-notifies-appointment-of-nine-supreme-court-judges-including-3-women-180323.
https://www.galgotiasuniversity.edu.in/pdfs/7-Gender-biased-battleground-or-Smooth-pathway-Challenges-for-Women-Legal-Professionals-in-21st-Century-India-Prashna-Samaddar.pdf

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Corporate Insolvency Resolution Process (CIRP) under Section 7 and Section 9 of the Code

By

Shoronya Banerjee

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September 11, 2021

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This article has been written by Naresh Kumar Nagar, pursuing the Certificate Course in National Company Law Tribunal (NCLT) Litigation from LawSikho.

Table of Contents

Introduction

The Insolvency regime in India is dealt and administered under the Insolvency and Bankruptcy Code, 2016 ( ‘the Code’). The procedures under the Code can be used to restructure a corporate entity and its finances, failing which there are provisions in the Code that seek to maximise realisations for the creditors. The discussion in this article is restricted to the Corporate Insolvency Resolution Process (CIRP) under Section 7 and Section 9 of the Code whereby the financial creditors and operational creditors respectively are entitled to move an application for resolution of insolvency against a corporate entity.

Overview about CIRP under the Code

Insolvency, in relation to CIRP under the Code, is a situation where a corporate entity is not able to pay off its debt liabilities when they become due for payment. It could also be a situation where the market value of the assets of an entity fails to measure up to the market value of the liabilities and thereby leading altogether too negative equity in case of all liabilities occasion to be due at any given time.

The CIRP, under the Code, is an expedient devised to protect an apparently insolvent but potentially viable entity from liquidation. The Code provides a mechanism to make the diverse creditors act in unison by bringing them under an overarching, compulsory, and collective process. This type of compulsory and collective process against the corporate debtor has been envisaged under Section 7 and Section 9 of the Code with a view to resolving the potential insolvency of the entity while maintaining the entity as a going concern.

Further, an automatic moratorium under the insolvency resolution process under the Code precludes individual creditor action for collection of dues; and the court oversees a structured negotiation amongst the creditors while deputing a resolution professional to operate the corporate entity. The creditors may agree on a settlement of old debts and interests in exchange for the new ones. However, if the creditors fail to reach a consensus the court may confirm a resolution plan, provided a given majority of creditors agree to it. The dissenting creditor may, nevertheless, be allowed to receive commensurate amounts as per the priority established under the Code.

Enactment of the IBC Code

Prior to the ushering in of the Code, the corporates/companies were being governed under the Companies Act, 2013; and the issues and aspects related to corporate sickness had to be handled by the High courts. The industrial sickness of the non-corporate entities Like partnership firms, individuals, HUF, etc. is still being handled under Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920. These, however, will be transferred to the Debt Recovery Tribunals (DRTs) when the Code is extended to them. These archaic provisions did not serve their purpose and have to be replaced by the Code.

The Insolvency and Bankruptcy Code 2016 ( the Code) is a consolidating Act and is complete and comprehensive with regard to the subject matter it deals with. The judicial decisions in other Acts including the provisions of the Companies Act 2013 or NCLT Rules, in general, would have no bearing on the matters which fall under the ambit of the Code.

The Scheme of the Code, in a nutshell, is that in the event of default by an entity or enterprise in payment of its dues, the control of the affairs of the entity would come in the hands of the committee of creditors (hereinafter referred to as the COC) of financial creditors though the work would be managed by the insolvency professional to be appointed by the adjudicating authority. The insolvency resolution proceedings are to be concluded within the time-bound manner as per the Code so that the entity or enterprise could be salvaged as a going concern and the precious resources are not wastefully depleted.

Initiation of CIRP

Who can initiate CIRP?

The insolvency resolution process against the corporate debtor can be started under Section 7 and Section 9 by the financial creditor and operational creditor respectively in case there happens to be a default in payment of the debt they have advanced.

What is the criterion for initiation of CIRP?

Section 4 of the Code prescribes the criterion for initiation of CIRP to be a minimum default of Rupees One Lakh to be committed by the corporate entity when it becomes due. This Criterion has further been enhanced for time being to Rupees One Crore in light of prevailing restrictions during the COVID-19 pandemic.

Who is the adjudicating authority?

The adjudicating authority for the purpose of insolvency resolution of corporate debtors has to be the National Company Law Tribunal (NCLT) constituted under Section 408 of the Companies Act, 2013. This has been provisioned under Section 5(1) of the Code.

What are the prerequisites for filing an application for CIRP under Sections 7 and 9 of the Code?

There have been different sets of requirements for the financial creditors and operational creditors for launching corporate insolvency resolution proceedings under Section 7 and Section 9 respectively as described under:

An application under Section 7 of the code requires a financial creditor to establish that:

there has been a financial debt;
the financial debt has become due for payment;
default has been committed in respect of the debt;
a fee of Rs. 25000/- has to be paid with the application.

An application under Section 9 of the Code requires the operational creditor to establish that:

there has been an operational debt;
the operational debt has become due for payment;
default has been there in respect of the debt;
there is no pre-existing dispute about the existence of debt; and
demand notice has been served on the corporate debtor;
a fee of Rs. 2000/- is required to be paid with the application.

Appointment of Interim Resolution Professional (IRP)

An ‘Interim Resolution Professional (IRP’)[7] is required to be appointed at the time of admitting the application for insolvency resolution of the corporate debtor in accordance with Section 16 of the Code. However, the name of an IRP is to be proposed by the Financial Creditor in the application itself to be filed under Section 7 of the Code; and whereas there is no such requirement for the operational debtor filing application under Section 9 of the Code. The adjudicating authority directs the Insolvency and Bankruptcy Board of India (IBBI) to appoint a resolution professional for the purpose of the application filed by the operational creditor under Section 9 of the Code.

Progression of CIRP After the date of admission of the application

The CIRP is to be completed within a period of 330 days from the date on which the application has been admitted by the adjudicating authority as per Section 12 of the Code. This date is deemed as an insolvency commencement date.
An Interim Resolution Professional (IRP) gets appointed at the time of admission of application as per Section 16 of the Code, and a moratorium is also pressed into effect under Section 14 of the Code pausing all pending or contemplated legal action against the corporate debtor for recovery of debts.
The IRP makes a public announcement under Section 15 of the Code about the launching of the CIRP against the corporate debtor and calls for the proof of claims by the creditors immediately after he assumes the charge under Section 13 of the Code.
The IRP constitutes a Committee of Creditors (COC) within a period of thirty days from the date of commencement of CIRP.
The IRP holds the first meeting of the COC within seven days of his appointment, and a regular Resolution Professional (RP) gets appointed in the very first meeting itself.
A registered valuer gets appointed by the RP within a period of seven days from the date of his appointment which however should not be delayed beyond forty-seven days since the date of commencement of CIRP in terms of Regulation 27 of the Insolvency and Bankruptcy Board of India ( Insolvency Resolution Process for Corporate persons) Regulations, 2016 ( hereinafter referred to as CIRP Regulations).
A document called ‘Information Memorandum’ comprising all material information about the corporate debtor gets prepared by the RP for submission to the COC within fourteen days of his appointment which however is not to be delayed beyond fifty-four days from the commencement date.
The RP invites an Expression of Interest (EOI) for a resolution plan within seventy-five days from the insolvency commencement date.
The RP provisionally shortlists the resolutions applicants within ten days from the last date for receipt of the Expression of Interest (EOI); and also verifies and confirms as to whether the resolution applicant is qualified under Section 29A of the Code.
RP releases a Request for Resolution Plan (RFRP) immediately after the finalisation of the list of resolution applicants.
The resolution applicants submit the resolution plans within thirty days from the date on which RFRP was issued.
The COC selects the most appropriate resolution plan and submits the same before the adjudicating authority for final approval at least fifteen days from the deadline prescribed for completion of the CIRP.
The adjudicating authority either accepts or rejects the resolution plan after due consideration and scrutiny of the same.
The adjudicating authority passes an order for liquidation of the corporate debtor if:

No resolution plan is received from the COC; or
Adjudicating authority rejects the resolution plan; or
COC decides to liquidate the corporate debtor by 66% vote share.

Withdrawal of application for initiation of CIRP

The application which has been filed under the Code for starting CIRP can be withdrawn either before or after its submission to the adjudicating authority. Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 provides for the withdrawal of the application before admission of the same by the adjudicating authority.

Moreover, an application, which has already been admitted by the adjudicating authority, may be allowed to be withdrawn by the adjudicating authority if an application is made to that effect with the approval of ninety percent voting share of the Committee of the Creditors (COC) as provided under Section 12 A of the Code.

Furthermore, the Hon’ble NCLAT in Janak Goyal v. Satyendra Jain, Company Appeal (AT)(Ins)No.202 of 2019, held that if the matter between the parties gets settled, the application may be dismissed as having been withdrawn.

The application for withdrawal is to be made in Form FA as per the guidelines provided in Regulation 30A of the CIRP Regulations. The application, in accordance with Regulation 30A, as such would have to be moved through the resolution professional. A bank guarantee would have to be given with the application for the estimated expenditure incurred or about to be incurred by the resolution professional.

After the grant of approval by the Adjudicating Authority for withdrawal of the application, the applicant would have to deposit the exact amount, expended by the resolution professional, in the bank account of the corporate debtor within three days failing which the bank guarantee shall have to be invoked and encashed for the purpose.

Conclusion

The brooding concern under the Code has perceptibly been the fact that merely an inability to satisfy the fixed obligation, may not, per se, be definitively indicative of a corporate entity’s economic failure. The Code as such earnestly envisions to espouse the cause of entrepreneurship and progressive innovations. The resolution plans to be envisaged during CIRP ought to aim at promoting and supporting entrepreneurship by ensuring the availability of necessary credit facilities to the corporate entity while balancing the inter se interests of all the stakeholders.

The basic priority of the Code is to provide support and succour to the stressed corporate debtors for securing their revival and reorganisation. The reorganisation is to be speedily brought about within a statutory timeline so as to avoid the erosion of the value of the assets of corporate entities.

The dissolution or liquidation of a corporate entity has to be the last resort. The Code as such is beneficial legislation striving for the rehabilitation and revival of businesses thereby strengthening and buttressing the Indian economy itself in the long run.

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Recent arbitration trends of India : are we heading towards becoming an international hub

By

Diva Rai

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September 11, 2021

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This article is written by Himanshu Mahamuni, a student of Government Law College, Mumbai. This article briefly analyses the trends in India towards becoming an international arbitration hub and the steps taken by the government for the initiative in comparison with global arbitration hubs.

Introduction

Arbitration is one of mode of Alternate Dispute Resolution. The Arbitration and Conciliation Act, 1996 was codified and passed as a law in 1996 based on United Nations Commission on International Trade Law (UNCITRAL), model law on International Commercial Arbitration. Due to overburdening of judiciary and costly and time consuming process arbitration is seen as a form of quick and affordable dispute resolution alternative.

India is seen as one of the most attractive manufacturing hub over the world. As more and more international businesses attempt entering vast potential of Indian market, to avoid cumbersome legal proceedings, inclusion of arbitration clause are adopted in the contracts. This growth in arbitration should’ve resulted in increased arbitration practice in India. However seat for arbitration is likely to be preferred outside India over Indian seat due to inferior standards compared to arbitration seats at international institutes such as Singapore, Hong Kong, Geneva, etc. According to the SIAC’s 2020 annual report, SIAC hit all time high record of 1080 new cases filing, not so surprisingly among top foreign users at SIAC the first is India with whopping 690 cases. This shows shyness of Indian businesses and preference of choosing foreign institutes over Indian Institutes.

Various steps are being taken towards making India an International hub of arbitration. However, these steps are slow and insufficient. Some of the issues which act as a speed breaker in the process are addressed below.

Issues

Difficulty in Enforcement of Foreign Arbitral Award

Foreign Arbitral Awards are dealt under second part of the 1996 Act. Section 44 of the Arbitration and Conciliation Act, 1996 defines a Foreign Award as an arbitral award on the differences relating to the matters considered as commercial under the law in force in India. For the awards to be of binding nature and enforceable they should in force in relation to the under New York Convention or Geneva Convention.

Even after getting the award in the favour of one party from international centres it may have to face a appeal trail in Indian courts to get it enforced. Recently in the case of Amzon vs Future Retail, Amazon had to wait to enforce the Singapore Emergency arbitrator’s order restraining the Rs 24,731 crore deal due to verdict from the Supreme court of India.

According to section 48 pf the 1996 Act there are seven conditions enlisted on which the courts can refuse to enforce foreign awards in India on submission of proof by the other party for the same, namely-

Any party was under some incapacity.
Either party was not given proper notice.
The decision given is beyond the scope of the Arbitration.
The composition of tribunal was not in accordance of the parties.
The award is not yet binding or set aside or suspended.
The subject- matter is incapable of settlement by arbitration.
The award is contrary to the public policy of India.

Terms like public policy are not explicitly explained in the act making it arbitrary. Although judgements by courts have attempted on clarifying it but it is still not enough. In India, courts have a lot of control upon whether foreign awards are to be implemented or not. Ultimately rigorous and sluggish process of enforcement of awards discourages the foreign investors.

International Centre for Settlement of Investment Disputes (ICSID) and India

ICSID was established in 1966 by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). ICSID is one of the few international arbitration institution which facilitates settlement of disputes between the Investor and the state through arbitration.

India, along with other developing nations have abstained from enlisting in the ICSID convention. India is reluctant to be signatory of the ICSID because of mainly two reasons, first the Convention’s rules for arbitration are inclined in favour of the developed countries and, second even in case of infringement India’s public policy, there is no chance to the Indian Court for the review of an award. As India is not a party there is no obligation upon India to enforce BIT awards under ICSID. As a result India has terminated 58 of existing Bilateral Investment Treaties (BIT), only 6 are succeeded and 13 are ongoing on joining of model BIT.

Investors search for assurance while drafting arbitration agreement as enforcement of foreign award is a tough job in India. ICSID convention provides the support for enforcement of award. Article 26 of the ICSID exhausts any local administrative or judicial remedies as a condition of its consent to arbitration under this Convention to the parties. It will reduce the judicial intervention which is seen problematic in the arbitration scenario in India.

Crippled state of Arbitral Council of India

The Arbitration Council of India (ACI) was a reforming structure added through 2019 Amendment Act by the Central Government. ACI functions to promote and encourage the ADR mechanism by framing policies, grading the institutions, holding training regarding arbitration and various other functions for promotion of arbitration. The amendment seems welcoming but the issue lies inside the details.

Composition of council mentioned in Section 43C provides the members who shall be included in the council. The appointment mainly consists of secretaries of various department of government and ex-officio members in the central government. The Council sought to be independent from government interference acting as an independent body governing arbitration issues. But this formation might give rise to the influence of certain parties and nepotism in further appointments. It is to be noted that this is same council is to be given authority to grade of grading various arbitral institution in India. The Supreme Court and the High Court are given power to designate arbitral institution. The respective court may have to refer to the recommendations graded by the ACI. This may give rise to biased grading system due to lack of transparency.

Unavoidable Judicial Intervention in Arbitration

The Arbitration & Conciliation (Amendment) Act, 2019 (“the 2019 Amendment”) bought one of the major change i.e. the introduction of Section 87 and deleted section 26 in the Arbitration Act. The newly inserted Section 87 of the Arbitration Act provided that the 2015 Amendment would be applicable retrospectively, the arbitral proceedings which commenced on or before the Cutoff Date of Oct. 23, 2015 and to such court proceedings which emanate from such arbitral proceedings. Section 26 of the 2015 Amendment expressly provided that the section would apply to arbitral proceedings which commence on or after the date of commencement of the 2015 Amendment i.e., October 23, 2015.

Hon’ble Supreme Court came as a saviour against the section 87 bought by 2019 amendment in the case of Hindustan Construction Company Ltd. Vs Union of India. SC struck down the insertion of Section 87 of the 1996 act ruling that the provision was manifestly arbitrary and abolished the central government’s argument of the section is retrospective in nature under article 14 of the Constitution of India. The Court noticed that the introduction of Section 87 would increase judicial intervention of court in the arbitration proceedings and result in a delay of disposal of arbitration proceedings, which defeats the very object of the Arbitration Act, 1996, going against the 2015 Amendment Act. Further court clarified section 26 of the 2015 amendment that the Supreme Court had decided in the case of BCCI vs. Kochi Cricket Board section 26, unless otherwise decided, will have prospective effect. Thus, the court held that there would be no automatic stay even in cases where challenge was filed prior to the commencement date as a result the position in BCCI superseded for applicability over amended section 87.

Such unnecessary amendment to certain sections forces unavoidable Judiciary intervention. These amendments act as one step forward and two step backward. It brings us back to the start with no progress.

Lack of Proper Law Making

The Arbitration and Conciliation (Amendment) Act, 2021 bought about changes in the Section 36 of the 1996 Act. According to section 36 the award debtor was allowed to file an application to set the award aside under The 1996 Act. In clarification to the 2015 amendment it was decided that there would be no automatic stay on an application to set aside the arbitral award. But the amendment bought about changes which alters it. The amendment introduced that, where the Court is satisfied that a prima facie case is made out that, — the arbitration agreement or contract which is the basis of the award; or the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award. Further the explanation added that, the amendment to Section 36(3), will have retrospective effect and apply to all cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015.

Now scope of “fraud” and “corruption” are not explicitly determined under CPC, 1908 and in the 1996 Act for a staying order. This would violate the very purpose of opting for arbitration as a method of dispute resolution, i.e., minimal judicial intervention as enshrined under Section 5 of the Act to avoid the ordeals of a traditional litigation process. It would require critical observation and interpretation by the Court, especially due to addition of retrospective element to the act. The amendment might get misused to delay the award making it unenforceable and affect the rights of award holder. This may discourage the parties to go for arbitration, as the parties will eventually have to face the proceedings of the court to seek relief.

Comparison with leading International Arbitration Councils

With increase in adoption and understanding of ADR all over the world, there are few international arbitration institutions which have grown as a prominent choice. They are namely London Court of International Arbitration (LCIA), International Court of Arbitration (ICC), Singapore International Arbitration Centre (SIAC), Hong Kong International Arbitration Centre (HKIAC) and many other. In this part we will be analyzing how these institutes developed themselves as primary preference for dispute resolution via arbitration. There are stark differences in the practices of these international institutions as compared to that of India’s, some of them are listed below-

For rapid resolution parties who cannot wait for formation of arbitration tribunal usually opt for emergency arbitration and appoint an emergency arbitrator. The 1996 Act have made provisions for Fast Track Procedure which directs arbitration tribunal to make the decision within six months but from the date arbitral tribunal enter upon reference. This means that there are not any provisions undertaken by Central Government to govern Emergency Arbitrator and Emergency Arbitration.

Whereas LIAC, ICC, HKIAC have made provisions for appointment of emergency arbitrator to conduct arbitration proceedings along with costs incurred and special fees to be paid for the proceeding. SIAC on the other hand provides for both expedite formation of Arbitral tribunal as well as the Emergency Arbitrator including other provisions required regarding the same.

As we’ve discussed above, there’ve been a plethora of loopholes and lots of control of courts over challenge of arbitration award in India. Getting an award enforced is not an easy task especially a foreign award in India. On the other hand Foreign institutes such as HKIAC have strictly limited the judicial intervention allowed only in certain limited circumstances such as error of law or displays apparent bias.
These international institutes have different dedicated Acts framed for international arbitrations from previous Arbitration Acts. Law are been made in very precise manner leaving no scope of vagueness or arbitrariness. For instance SIAC have clarified the scope of public policy and its arbitrability in its International Arbitration Act and a whole section dedicated to arbitration over Intellectual Property Rights. LCIA is also have been proactive adopting the new digital era with inclusion of laws such as Data Protection in order to protect the physical and electronic information shared in the arbitration
Along with well-structured laws these institutes are also equipped with well infrastructure, updated norms and filled with arbitrators with high caliber. These international arbitration institutes conduct time to time conferences, hold training, perform research, release reports and also conduct various courses building future arbitrators. There are dedicated professional bodies such as Chartered Institute of Arbitrators (CIARB) which provide training and courses or professional knowledge to develop young arbitrators.

Way ahead

Although amendments to the 1996 Act have proved to be disastrous year after year there are certain positive steps taken by the government to improve the situation of arbitration in India. One of the initiative of the government is making India the hub of International commercial Arbitration and the setting up of an independent Arbitration Centre. A high level Committee headed by Justice BN Krishna was constituted for the study. This committee bought out the concept of an Arbitration Council of India in the 2019 Amendment to compete with the international arbitration institutions. Although ACI is at a nascent stage to become international hub but it is considered as a welcoming step from the government. There are very less Arbitration Centre in India and just handful that can be considered as tier 1 firms compared to countries having developed arbitration culture such as Singapore. The role of ACI has increased drastically to bring positive reforms in arbitration in India by grading the institutions, holding training and workshop and establishing a firm foundation of arbitration to become an international hub and gaining confidence of foreign parties.

Cabinet has approved the New Delhi International Arbitration Centre Bill (NDIAC), 2019 in quest of making India the hub of International Arbitration. The government claims its benefits will impact as-

Institutionalized arbitration.
Quality experts being available in India and also an advantage in terms of cost incurred.
It will facilitate India becoming a hub for institutional arbitration.

NDIAC is aimed to be competing with the international arbitration institutions provided the facilities as enshrined in its objective. It is surely a visionary step towards changing arbitration scenario.

Another amendment which bought positive change with it was 2021 amendment. 2021 amendment omitted eighth schedule, which was bought by the 2019 act. Eighth Schedule provided the qualification, experience and norms for accreditation of arbitrators and provided list of individual to be appointed as arbitrator. By eighth Schedule a foreign scholar or foreign-registered lawyer or a retired foreign officer was out rightly disqualified to be an arbitrator under the 2019 Amendment. Choice of candidates as their potential arbitrators was limited by nationality, and not by their qualification to act as international arbitrator. Thus by omitting the eighth schedule government has cleared their intention to the international arbitrators.

ICC, UNCITRAL rules have framed the laws in cohabitation with the ICSID conventions while still having control over the laws governing the arbitration proceedings. By signing BITs government brings FDI into the country. India must welcome these reluctant investors to invest in the country. Its time India must rethinks its position on ICSID convention and encourage safety of the foreign investors. It will be a critical step if India wants to consider its position as an International hub.

Conclusion

India is still far away from becoming an international Hub of Arbitration but the slow steps are better than nothing. SIAC was established in the year 1991, few years back of making of India’s arbitration Act in 1996. New competent amendments with the assistance of the enactment of legislation can fix the current situation. It will take time to bring India’s arbitration system at par with international Standards. Especially with the newly formed ACI and to be formed NDIAC it will be curious to see how things unfold.

References

Arbitration and Conciliation Act, 1996 (https://legislative.gov.in/sites/default/files/A1996-26.pdf)
Arbitration & Conciliation (Amendment) Act, 2015 (http://www.egazette.nic.in/WriteReadData/2015/166406.pdf)
Arbitration & Conciliation (Amendment) Act, 2019 (https://egazette.nic.in/WriteReadData/2019/210414.pdf)
Arbitration & Conciliation (Amendment) Act, 2021 (https://egazette.nic.in/WriteReadData/2021/224958.pdf)
London Court of International Arbitration (https://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2020.aspx#:~:text=5.3%20All%20arbitrators%20shall%20be,or%20outcome%20of%20the%20arbitration.)
International Court of Arbitration (https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/#top)
Singapore International Arbitration Centre (https://sso.agc.gov.sg/Act/IAA1994#xv-)
Hong Kong International Arbitration Centre (https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations/hong-kong)

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Need for creation of additional courts for disposal of cases under Section 138 of the Negotiable Instruments Act

By

Diva Rai

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September 11, 2021

0

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This article is written by Ankita Sengupta of the School of Law, KIIT University. This article briefly highlights the reasons behind the delay in disposing of cheque dishonour cases and the steps taken by the Supreme Court of India to overcome it.

Table of Contents

Introduction

Section 138 of the Negotiable Instruments Act, 1881 deals with the protection of the drawee of a cheque from being harassed unnecessarily by making this act a punishable offence. Recently in April 2020 the Supreme Court of India in a suo moto case examined and stated the various reasons as to why there is a need for speedy disposal of cheque bounce cases. In March 2020, the Supreme Court took cognizance of a large number of cheque bounce cases under Section 138 of the NI Act, 1881(hereinafter referred to as “The Act”) and in April 2021 after talking to various persons of stature like the Chief Justice of High Courts and it issued directions for speedy trial of these cases. This article discusses the various reasons and steps taken by the Supreme Court to curb this problem.

Overview of Section 138 of the Negotiable Instruments Act

The requirement of Section 138 of the Act is essential to protect the innocent drawee of a cheque when the cheque bounces due to insufficient funds in the account of the holder. This section was inserted in the 1989 amendment made in the Negotiable Instrument Act,1881 thus holding the account holder criminally liable and making it a punishable offence. Many business transactions are carried out via cheques wherein to keep cheques from getting dishonoured because of any ill intention of the drawer, this Section has been inserted.

A cheque would only attract Section 138 of the Act when the post-dated cheque becomes effective from the date mentioned on the face of the cheque. Prior to this it only remained as a bill of exchange. This was clarified by the Supreme Court in the case of Ashok Yeshwant Badave v. Surendra Madhavrao Nighojakar, (2001) 3 SCC 726.

The ingredients required for a complaint to be filed under Section 138 of the Act are as follows:

The cheque has been drawn by the drawer for payment of money to be discharged of existing legal debt or liability.
Must be presented before the bank within 3 months of the effective date mentioned on the face of the cheque.
The cheque must be returned to the drawee unpaid either because of insufficient funds or it exceeds the amount mentioned.
The Drawee must draft a notice to the drawer informing about the cheque bounce within 30 days from the recipient of information from the bank regarding the amount remaining unpaid.
The Drawer upon receipt of the notice fails to make payment of the amount within 15 days.

On failure of payment within 15 days of the receipt of the notice, the drawee can start prosecution by way of a criminal or civil suit. In the case of MSR Leathers v. S. Palaniappan, (2013) 10 SCC 568 it was held by the Supreme Court that prosecution of accused on the basis of a fresh cause of action arising out of the subsequent presentation of cheques by the drawee even when the original cause of action becomes time-barred due to non fulfilment of payment by the drawer is valid. Thus, a complaint when made in writing can be taken up for cognizance by the trial court within a period of one month from the first cause of action and subsequent causes of action.

Amendments made for speedy disposal of cases

The legislature after noticing that Section 138 is not being able to deal expeditiously with the cases dishonouring of cheque, introduced Section 143 to 147 in the Negotiable Instrument Act vide Amendment 2002 for speedy disposal of cases through summary trial. But no uniform order of disposal has been followed by any magistrate of trial courts. This happened despite the statutory provision and direction of the Supreme Court in the case of Indian Banking Association v. Union of India (2014) 5 SCC 590 to completely dispose of such cases within a stipulated time of 6 months.

The Negotiable Instrument Act,1881 has been time and again amended to bring more changes to enhance quicker disposal of cases as well as to retain the trust of the people in NI. The courts in India are facing the colossal problem of unsolved cases under Section 138 for a long time. To solve this the legislature introduced Section 143A and Section 148 in the NI Act through the Negotiable Instrument (Amendment) Act, 2018.

With the introduction of these two important Sections, the legislature wished to see speedy disposal of cases and a drop in the number of pending cases under Section 138 of the Act. Section 143A of the Act is introduced to direct the drawer of the cheque to pay interim compensation to the drawee at the time of pendency of the case. The Quantum of the interim compensation can be 20% of the amount payable to the drawee. This gives a structure to the case when the case has been pending before the trial court and the accused seeks not guilty. Whereas Section 148 of the Act was introduced giving power to the appellate court in case of appeals to order a payment of 20% of the fine or compensation awarded by the trial court, convicting the accused. This payment will be in addition to the 20% already paid to the complainant. This safeguards the complainant even though the case is on trial and the sessions court or the appellate court is yet to announce final judgment on the same.

The reason behind overloading of cases despite the amendments

There is a steady increase in the number of complaints being filed under Section 138 of the Act but the rate of disposal of cases is lagging. According to the preliminary report submitted by the Amici Curiae on 11.10.2020, more than 30% of the criminal cases which are pending constitute pending cheque bounce cases, which remain undisposed under Section 138. Because of this, the pendency in criminal cases is also increasing.

The Amici Curiae in its report has identified seven major issues that are mentioned by the State governments and Union Territories. The reasons are as follows:

Service of Summons

Once the complainant (drawee) has filed a criminal case against the accused (drawer) under Section 138 of the Act and has given statements in the box, the magistrate if deemed necessary can summon the accused to appear before the court. Notwithstanding anything contained in the Code of Criminal procedure, 1973, a person can be summoned under Section 144 of the Negotiable Instrument Act,1881 by the magistrate by directing a copy of the summon at the place of the accused. This practice has caused immense delay because of reasons like unavailability of the accused at the time of the summoned date or the resistance of the accused to appear.

Conversion of summary trial to summons trial

The general norm of a trial of cases under Section 138 of the Act is summary trial and inclusion of summons trial is an exception. The power to convert a summary trial to a summons trial lies under Section 262-265 of the Code of Criminal Procedure,1973 (hereinafter referred to as “Code”)with the Magistrate of the court if he deems that a requirement of punishment of more than 1 year is necessary after recording substantial reasons for the same. This has caused trials to be converted unnecessarily without proper reasoning by the magistrates to be converted into summary trials. This conversion has caused delays in the speedy disposal of cheque bounce cases in the country.

Confusion between Section 145 of the Act and Section 202 of the CrPC

Section 202 of the Code of Criminal Procedure, 1973 mandates the magistrate to conduct an inquiry to justify the issue in the process. If the accused resides outside the jurisdiction of the court, the magistrate under Section 202 of the code of Criminal Procedure, 1973 shall make an inquiry as held in the case of Vijay Dhanuka & Ors. v. Najima Mamtaj & Ors. (2017) 3 SCC 528.

However, this point has been subjected to contrary views in other cases. Section 145 of the Act allows evidence by the complainant to be submitted by the medium of an affidavit and examination done under Section 202 of the Code. This had created confusion and led to differences in conduct by the magistrate in such cases thus leading to a delay.

Single Trial for Multiple Offences

Section 219 of the Code illustrates that when a person commits more than one offence under Section 138 of the Act within a period of 12 months then a maximum of three cases can be tried jointly in the court. If such is the case when an accused commits a series of offences pertaining to one act of larger conspiracy such offences can be jointly tried under Section 220(1) of the code.

In the case of Vani Agro Enterprises v. State of Gujarat & Ors. (2000) 1 SCC 285 the court tried four offences jointly of an accused who committed such offences under Section 138 of the Act as per Section 219 of the code. This was allowed by the court but needs legislative amendment to try multiple offences of the same nature committed by an accused under 12 months.

Mediation

Cases brought under Section 138 of the Act lack a pre-litigation mediation clause. A pre-litigation mediation would release the burden of the court but it hasn’t been implemented yet which has caused a delay in the disposal of such cases.

The recent take of the Supreme Court in the matter

A division bench of the Supreme Court consisting of the chief justice of India S.A Bobde and Justice DL. Nageswara Rao, concerned with a large number of cases under Section 138 of the Act pending in the courts decided to undertake a suo moto case. This came after Makwana Mangaldas Tulsidas vs The State Of Gujarat, Special Leave Petition (Criminal) No. 5464 of 2016 pertaining to cheque bounce was pending since 2005. Thus, a suo motu writ petition was registered by the Supreme court – “In Re: Expeditious Trial of Cases under Section 138 of N.I. Act 1881”. The court assigned Amici Curiae to the case and issued notices to various Institutions like the RBI, Government, Registrar general of High courts etc to provide information and suggestions to the Amici Curiae for the betterment of the laws.

The Supreme Court has, therefore, after the Preliminary Report being submitted issued guidelines and directions to the High Courts and Trial courts of the country to effectively deal with the pendency of the Cheque Bounce cases.

Suggestions recommended by the Supreme Court

Taking into view the importance of the issues addressed, the matter was referred to a 5 judge constitutional bench. So the bench after examining the reasons for the delay in disposing of cases issued these important guidelines to accelerate the disposal and hearing of such cases:

For the service of summons, under Section 146 of the Act, the bank shall issue dishonour slips against the accused wherein the intimate details of the accused such as mobile number, email ID and postal address will be disclosed. Summons in the electrical form like SMS, Whatsapp shall be made effective thereon. It necessitates the creation of a Nodal Service Agency by the Union of India, Reserve Bank of India and Indian Banks Association for effective e-platform summon service.
Due care needs to be taken by the magistrate while converting summary trials to summon trials. It should not be done mechanically without providing reasons for such conversion. The High courts should issue practice directions to the trial courts to record coherent reasons before converting cases under Section 138 of the Act from summary trial to summons trial.
Evidence on behalf of the complainant shall be taken on affidavit. The Supreme Court held that in view of Section 145 of the Act, Section 202 (2) of the code is not applicable to witnesses already on oath. The magistrate can take evidence through an affidavit and the physical presence of a witness is not required.
The legislature shall make suitable amendments in the Negotiable Instruments Act,1881 for the insertion of provision of one trial for multiple offences committed by an accused within 12 months.
Consider delivery of summons in one complaint related to a transaction to be deemed service for other complaints referring to the same transaction. Thus the apex court has directed High courts to issue practice summons to trial courts.
The Supreme Court observed the decision of this court in the case of K. M. Mathew v. State of Kerala & Anr. (1992) 1 SCC 217 held that a trial court has no inherent authority to reconsider or rescind an order issuing summons/process.
If the complainant is awarded to the satisfaction of the court, the trial court has no authority to dismiss the accused. The Supreme Court outlawed the decision held in Meters and Instruments Private Limited and Another v. Kanchan Mehta (2018) 1 SCC 560 which conferred power on the magistrate under Section 143 of the act to discharge the accused if the complainant is reimbursed according to the satisfaction of the court.

A welcome judgment by the Supreme Court

The Supreme Court has taken the decision to constitute a committee consisting of Hon’ble Mr. Justice R.C. Chavan, former Judge of the Bombay High Court, as the Chairman to consider the various suggestions made by the Amici Curiae and draw upon reasons of delay of cases under Section 138 of the N.I Act. The Committee is further instructed to consider the necessity for the development of additional courts to hear complaints filed under Section 138 of the Act.

This decision of the Supreme Court will likely throw light on the delay prospects of the cheque bounce cases as well as constitute methods to overcome those delays. The committee shall work on any other issue relating to the expeditious disposal of cases under Section 138 and take into consideration the other suggestions put forward by the amici curiae.

Conclusion

The Supreme Court of the country has taken precisely correct decisions of the revamping of the approach towards the disposal of cases under Section 138 of the Act. The Indian judicial system is already burdened with humongous pending cases and the setting up of additional courts for this particular matter would take the burden off the criminal courts of India which would increase the quality of justice being delivered. Thus, the apex court has taken all the necessary and change worthy decisions to improve this sector of the Indian Judiciary system. Further,it has issued its interest and decision under Article 141 of the Indian Constitution, thus binding all the courts in India to follow its guidelines which would surely make a difference in the rate of case disposal under Section 138 of the N.I Act.

References

https://main.sci.gov.in/supremecourt/2020/9631/9631_2020_31_501_27616_Judgement_16-Apr-2021.pdf (Judgement order)

https://www.livelaw.in/pdf_upload/pdf_upload-383612.pdf (preliminary report)

In Re: Expeditious Trial of Cases U/S 138 of N.I. ACT, 1881 – A Welcome Judgment

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Model Tenancy Act, 2021 : a tool to enhance India’s rental marketplace

By

Oishika Banerji

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September 11, 2021

0

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This article has been written by Aditya Saurabh pursuing the Diploma in Business Laws for In-House Counsels from LawSikho.

Table of Contents

Introduction

In India, adequate housing has been a problem for a long time. The elimination of physical insufficiency of housing, which includes homelessness, overcrowding, and insufficient space, as well as slum redevelopment, has been a major concern of Indian housing policies, with rental housing facilities emerging as the most viable alternative. Despite the exponential rise of population, many homes remain vacant, indicating reluctance on the part of property owners to rent out their properties for fear of repossession and overstaying by tenants, as well as a fear on the side of tenants of paying high rent.

Each state has its set of rent control laws that manage the rental housing market; nevertheless, the current laws have failed to address, let alone remove, the scarcity. According to the 2015 proposed rental housing policy, these laws resulted in lower rental yields and increased litigation, discouraging landlords from investing in rental units.

The Model Tenancy Act, 2021 (“MTA Act”) was approved by the Union Cabinet on 2nd June 2021, with a novel approach to reviving the inactive possibility of the rental market and the real estate sector by legally structuring the rental housing market to utilise the potential of vacant houses and eliminating lack of trust between the parties through balanced provisions. As a result, exploitative behaviours are no longer tolerated. ‘The Model Tenancy Act’ is a model law that the states or the union territories can use to create their own laws because ‘land’ is a state list subject matter under point 18, list ii of schedule seven of the constitution; where states and union territories have the choice of adopting the law, amending it for adoption, or not adopting it at all.

Need for the Model Tenancy Act, 2021

In India, self-owned housing is residence to 95 percent of rural households, while rental housing is mostly an urban phenomenon. Between 1951 and 2011, India’s urban population increased sixfold, accounting for 31 percent of the country’s overall population as of 2011. By 2036, this is expected to increase to 40%. However, between 1961 and 2011, the proportion of people living in urban rental housing fell from 58 percent to 27 percent.

The proposed ‘National Urban Rental Housing Policy’ from 2015 claimed that there is a substantial housing scarcity in urban areas, which cannot be solved by house ownership. The urban housing deficit was predicted to reach 1.9 crore units in 2012 by a technical group researching the issue. Rental housing was thus considered a vital strategy to solve informality and shortages, as per the economic survey (2017-18), because it allows for mobility and affordability for low-income sectors who may not be able to purchase housing.

Rental housing today continues to be regulated by state governments using a variety of legislative mechanisms, including rent control laws. These regulations set a rental cap and place restrictions on evictions to prevent landlords from charging extravagant rents and to ensure affordable homes. Furthermore, existing rent control legislation in several states lack an efficient and time-bound dispute resolution framework and are skewed in favour of tenants leading to increased litigation. Rent control laws, according to the 2015 draft Policy, inhibit private investment in rental units.

As a result, a large portion of the rental demand had to be met through alternate means, such as leave and licence agreements and informal leases. The initial version of the Model Tenancy Act was released in 2015, and Tamil Nadu was the first state to implement it. However, 20 states, including Karnataka, Maharashtra, and West Bengal, still have rent control laws in place as of 2021.

In order to curb these challenges, the Union Cabinet recently passed The Model Tenancy Act, 2021, which aims to provide a quick adjudication process for dispute settlement, regulate the renting of properties, and protect the interests of landlords and tenants. The Model Act seeks to assure affordability, formalisation, and increased private involvement in the rental housing industry, among other things. In the face of sustained governmental cooperation and initiative, the Model Tenancy Act has the ability to maximise the rental return by dissolving the age-old price structure of rental housing and leaving space for negotiating the conditions of the agreement.

Key features of MTA, 2021

Applicability

MTA applies to residential, commercial, and properties for the use of educational institutions (including vacant land), however it does not apply to hotels, lodging houses, dharamshalas, inns, or industrial properties. Furthermore, unless otherwise agreed to by the parties and informed to the rent authority, MTA will not apply to premises owned or promoted by the Government or local authority; premises owned by a company, university, or organisation and let out to its employees as part of a service contract; and premises notified by the Government in this regard from time to time. Furthermore, the Model Tenancy Act will take effect prospectively and will not impact existing tenancies.

Tenancy Agreements

All tenancy arrangements must have a written rental agreement, according to the model tenancy law. This agreement must be informed to the rent authority by both the landlord and the tenant within two months of the tenancy started. The tenancy shall be valid for the period agreed upon and stipulated in the tenancy agreement between the landlord and the tenant.

The Rent Authority must provide a unique identification number to the parties and upload the details of the tenancy agreements on its website within seven working days of receiving the information regarding the execution of the tenancy agreement and the relevant documents. The terms of the agreement will be binding on the parties’ successors, and the agreement will expire at the end of the time period mentioned in the agreement.

Role of Rent Authority, Rent Court and Rent Tribunal

As per the MTA Act a Rent Authority is required to be appointed, which would be an officer with at least the rank of Deputy Collector who would be appointed by the District Collector or District magistrate with the State Government’s or Union Territory Administration’s prior authorisation. Within three months of its appointment, the rent authority must set up a digital platform in the local vernacular language or the language of the State/Union Territory to allow for online document submission. The Rent Authority has the authority to bring legal action in cases involving disputes over rental agreements, rent revisions, correct repair and maintenance, and the withholding of necessary supplies or services.

According to the MTA, Rent Courts will be established, with the Additional Collector or Additional District Magistrate, or an officer of similar status, appointed by the District Collector with the State Government’s or Union Territory Administration’s prior authorisation. Any person who is dissatisfied with the Rent Authority’s decision may file an appeal with the Rent Court, which must issue a decision within 60 days of receiving the complaint. Following the physical establishment of Rent Courts in India, civil courts will no longer have jurisdiction over issues relating to rented housing.

The Rent Tribunal, which will be a District Judge or Additional District Judge chosen by the State Government/Union Territory Administration in collaboration with the jurisdictional High Court, will hear appeals from the Rent Court’s orders. The Rent Tribunal’s decision is final, and there is no right of appeal or reconsideration. The MTA states that the Rent Courts and Tribunal will not be constrained by the Civil Procedure Code of 1908, but will instead be guided by the ideology of natural justice and have the authority to determine their own procedure.

Time-Bound Dispute Adjudication Mechanism

To ensure rapid dispute resolution, the MTA establishes certain timeframes for adjudicating issues between the parties. According to the MTA, the rent court or rent tribunal must seek to resolve disputes within 60 days (90 days for certain specific disputes) of the date of receipt of the application or appeal, and may not grant more than three adjournments at the request of a party during the proceedings unless there is a reasonable and sufficient reason.

Furthermore, in cases where the tenant has given up possession of the premises without the landowner’s consent or has continued to misuse the premises despite receiving a cease-and-desist notice from the landowner, the MTA requires the rent court and tribunal to resolve the dispute within 30 days of receipt of the application.

Rent Deposit

The MTA contains no provisions relating to a monetary ceiling on rents, enabling the parties to negotiate and mutually decide the details of the agreement, with rent payments accepted by the landlord or agent with a signed rent receipt at the end of the month or year, and for virtual and digital payments, the bank affirmation held as definitive evidence.

If the landowner refuses to take such payment or provide a receipt in that regard for two months in a row, or if the tenant is unable to determine to whom the rent is payable, the MTA permits the tenant to deposit the rent and/or additional charges with the rent authority. The latter is especially important in situations when the lessor has passed away and the person who is entitled to the rent is unknown. In such cases, the rent authority will decide who will pay the rent and give instructions to that effect.

The increase in rent will only come into effect after the landlord has given the tenant three months’ notice of the proposed changes. The landlord is not allowed to raise the rent during the tenancy. If a tenant fails to send a notice of tenancy termination, he is presumed to have agreed to the new terms proposing the rent increase.

Security Deposit

The amount of advance security deposit is limited by MTA to two months’ rent for residential uses and six months for non-residential reasons. On the day the owner takes ownership of the premises from the tenants, the security deposit will be refunded to the tenant.

Conditions for extended Tenancy period

The tenant can ask for a tenancy renewal or extension from the landlord. If a tenancy time has finished and not been renewed, or if the tenant fails to depart the premises at the conclusion of such tenancy, the tenant will be liable for increased rent. If the tenant fails to evacuate the premises at the end of the tenancy or upon an order terminating the tenancy, he will be responsible to pay twice the monthly rent for the first two months and then four times the monthly rate until the owner reclaims the premises.

Rights and Duties of Tenants and Landlords

The Act prohibits the tenant from subletting the premises or any portion of the premises, unless the landlord and the tenant agree to a supplementary agreement, the contents of which must be sent to the rent authority within two months of the sub-tenancy agreement’s signing.

Both the tenant and the landlord are responsible for the upkeep and repair of the premises. The act’s second schedule also specifies the division of obligations for premise maintenance between tenants and landlords. In the event that the tenant fails to make repairs, the landlord may do so and take the cost of the repairs from the security deposit.

The Act prohibits the landlord from denying any essential supply or service in the premises inhabited by the tenant, and if this occurs, the tenant may file a complaint with the rent authority, which, after investigating the situation, may issue an interim order initiating the restoration of the services.

The Act prohibits the tenant from making structural changes to the premises unless the conditions of the lease agreement allow for such changes in exchange for a higher rent.

The tenant cannot be evicted by the landlord throughout the life of the tenancy agreement, unless there is a stipulation in the agreement that states otherwise or there is a legitimate requirement of land by the landlord or the landlord’s heirs in the event of the landlord’s death. The tenant, but at the other side, is required to offer a month’s notice to end the tenancy.

The Rent Courts have the authority to evict a tenant on the basis of the tenant’s unwillingness to pay rent, the tenant’s ongoing misuse of the premises despite the landlord’s notice to stop, or the tenant’s uninvited structural modifications without the landlord’s authorization, among other reasons, where an application has been made by the landlord to the rent courts.

Issues and challenges before MTA, 2021

It is necessary to examine the provisions of the ‘Model Tenancy Act, 2021’, because the Act, despite its well-intentioned efforts to develop a law that would eradicate all existing rental housing issues, falls short in some areas.

These areas are:

Prospective operation of the Act

The MTA is prospective in nature, meaning it only applies to new lease agreements and has no bearing on existing leases. In layman’s terms, this means that existing rental agreements will be exempt from the MTA’s jurisdiction. As a result, the scope of implementation will be limited.

For instance: The pagdi system that was legalised by the Maharashtra Rent Control Act of 1999, gave tenants co-ownership and inheritance rights once they rented a property by paying a principal amount and took the property for a particular period of time. Thereafter they continued to pay a monthly rent that was often significantly less than the market rate. More than 7.5 lakh properties in Mumbai are believed to have been rented out using the pagdi system today. The MTA, if accepted by Maharashtra, will be prospective in nature, meaning it will not affect homes that are now rented out under the pagdi system.

Excluding informal tenants

The MTA’s current standards are designed to address formal rental space while excluding informal tenants. The recommended registration systems, as previously stated, are unlikely to appeal to the informal rental market, particularly among lower-income groups. There is no penalty for failing to register an agreement, and all following provisions apply solely to agreements that have been registered. As a result, the informal rental market will be completely ignored. To address all types of rental accommodation, the MTA’s scope and coverage should be expanded.

Adaptation of provisions by the States/Union Territories

The MTA, 2021 is only a model law that is not legally enforceable and is open to adoption by states and union territories, which might take years to fully implement if left to the states. Furthermore, states/UTs may choose not to follow the provisions because they must enact new legislation or change existing rental laws to meet their specific needs. Previously, in the case of the ‘Real Estate (Regulation and Development) Act of 2016’, once the central act was notified, the States either reduced numerous key elements or chose not to give effect to the central act’s mandatory provisions.

Reducing flexibility for the parties

The MTA aims to achieve a balance in the tenant-landlord relationship by defining the rights and responsibilities of both parties. It does, however, set a limit on how much a tenant can pay as a security deposit to the landlord. In addition, a suggested framework for the rental agreement provides specifics on who is responsible for repairs and maintenance. These specifications, if formalised, may limit the flexibility with which tenancy agreements are framed.

Affecting the right to privacy

The MTA mandates that all landlords and tenants submit a rental agreement to the rent authority along with a defined form. Both the tenant and the landlord must provide their Aadhaar numbers on the form, as well as self-attested copies of the card. This may be in violation of the Puttaswamy verdict from 2018, which specifies that the Aadhaar card or number can only be required for expenditure on a subsidy, benefit, or service provided by the Consolidated Fund of India. Because these are not required for registering a tenancy agreement, making the Aadhaar number necessary may be in violation of the Supreme Court ruling.

After filing a rental agreement, tenants and landlords would be given a unique identification number, according to the Model Act. The agreement’s details, as well as other documents, will be posted on the Rent Authority’s website. It’s unclear whether the parties’ personal information, such as their PAN and Aadhaar numbers, which must be given with the agreement, will also be made public. If these are shared on the internet, it may infringe on the parties’ right to privacy. The right to privacy has already been declared a fundamental right by the Supreme Court.

Complex institutional framework

The MTA lacks a clear institutional framework and is plagued by a slew of overlapping and perplexing processes. It proposes the establishment of a rent authority, whose primary function would be to register lease agreements, which is still done by sub-registrars under the ‘Registration Act of 1908’. Why the MTA creates a new mechanism and distinct authority rather than changing the old one is puzzling.

With the introduction of a rent court and a rent tribunal sitting in appeal over the court, the multiplicity of authorities persists, however the rent authority is given congruent powers with the court. As a result, the Act calls for the establishment of a complicated grievance resolution system; which would necessitate funding, committed effort, and human resources, all of which could deter states from quickly implementing it.

No time-bound dispute redressal for certain disputes

The MTA’s preamble aims to develop a quick adjudication procedure for tenancy-related conflicts. The MTA establishes deadlines for resolving instances involving eviction and rent payment. In certain cases, however, timelines have not been established. For example, there is no time limit set for the rent authority to resolve a dispute over the withholding of basic services or the modification of rent, among other things.

Equitable market access is still a dream

The MTA does not do enough to ensure that tenants have equal access to the market. While the requirement of a “digital platform in the local vernacular language” may be meant to make registration easier, it is unclear how it would address gaps in digital literacy and access, particularly in the informal sector. In addition to requiring irrelevant documentation such as Aadhaar and PAN (regardless of the amount of rent), the form for registering agreements creates extra paperwork. The requirement of vernacular language may also operate against migrant tenants.

Apart from these procedural flaws, the MTA also fails to adequately protect tenants from renting discrimination, which is frequent among unmarried couples, bachelors, religious minorities, non-vegetarians, transgender people, dalits, and sexual minorities. It’s critical to solve this because a socially inclusive housing market is the only way to ensure that everyone has appropriate access to rental homes.

In addition, the vast majority of rental dwelling spaces are acquired through middlemen. The role of intermediaries in a deal is not defined under the Act. Furthermore, the MTA makes no mention of the MTA’s overriding effect on current legislation on tenancy, lease under the TPA, or licence under the Indian Easements Act, 1882 in order to achieve the MTA’s goals.

Conclusion

Over the last few decades, a dramatic change from a desire for ownership to a need for accessibility has resulted in the growth of rental housing as the most realistic and practical option. Despite the increased reliance on rental housing, the market has yet to see an expansion in the amount of money invested. The ‘Model Tenancy Act of 2021’ aims to close that gap by formalising the rental housing sector and establishing a standard legislative framework targeted at reducing housing shortages and increasing rent yields.

The MTA also ensures that any disputes that may arise throughout the tenancy time are resolved more efficiently and quickly. The law also protects the interests of both tenants and landlords in tenancies, and it outperforms its predecessor in a number of ways. The government hopes that after the states and Union Territories implement this legislation, it would increase private engagement in rental housing, alleviate the massive housing shortage across all income categories, reduce homelessness, and revitalise the ailing rental housing market.

Despite its commendable aspects, the law’s success, like those of other model policies, remains largely questionable. The lack of institutional backing, enough resources, and devoted efforts, the states’ prerogatives, combined with their likely refusal to adopt the policy, could diminish it’s effectiveness. The lack of investor interest in the housing sector could potentially be deadly to the law’s aim of a “Housing for All” strategy.

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How much arbitral fee shall be considered as ‘exorbitant’ and ‘unreasonable’

By

Rachit Garg

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September 11, 2021

0

This article has been written by Adv. Aditi Lakhanpal.

Table of Contents

Introduction

Arbitration is considered as one of the effective mechanisms to adjudicate a dispute due to its efficacious, speedy, and cost-effectiveness. Administration and the judiciary have been working to stimulate it, specifically commercial arbitration, for the reason being that it would add to ease of doing business by boosting financiers’ confidence. Nevertheless charging of unreasonable and exorbitant remuneration by the arbitrators is absolutely in contradiction of the very object of the Arbitration under the Arbitration Act.[1]

Arbitration and Conciliation (Amendment) Act, 2015 came into force, inter alia amending Section 11 of the Act particularly Section 11(14) that empowers the High Court about the framing of appropriate rules to ascertain fees of arbitrators for arbitration which are being conducted under the Jurisdiction of such High Court, whether the same is court-appointed or whether the same is an ad hoc arbitration.[2]

High Courts may take into account the Fourth Schedule which is specifically inserted in the Act, concerning model fee structure which contemplates curtailing the practice of unilateral fixation of exorbitant fees in all kinds of arbitrations. It is pertinent to note that the said amendment is not applicable in the cases of International Commercial Arbitration and Institutional Arbitration. Hereof, the purpose behind such an amendment can be obtained from the 246th Law Commission Report.[3]

The said Report deliberates that in an attempt to make arbitration a cost-effective mechanism there is requisite of some mode to streamline the remuneration for Arbitrators. In this regard, it is imperative to refer Amendment Act of 2019 which makes it obligatory for the appointing authority to fix remuneration of the Arbitrator as per Schedule IV.[4]

The intent of ‘fees’ in the arbitration regime

It is most unfortunate that these days arbitration has become merely a money-spinning business. Arbitrators fix their fee without having any regard whatsoever as to its genuineness or whether disputant parties can afford the same. Therefore, in such a scenario it becomes quite imperative to understand the basic intent of paying fees to Arbitrators.

The mere purpose behind paying remuneration to Arbitrators is for their services they have rendered; to appreciate for all the efforts they have put in to adjudicate the dispute. In this regard, it is relevant to refer the case titled as Amiraj Construction Co. vs State Of Maharashtra And Ors [5] wherein Bombay High Court observed that:-

“The arbitrators must remember that they are not there to make money but they are to render their services to the State as a matter of public cause. The idea is that as far as possible, in such matters, the Government should not waste public money and time in costly litigations, and instead avail of the cheaper and easier method of resolving disputes by arbitration. If the Arbitrators do not bring in a sense of service and dedication, but only have a mercenary approach, such arbitrations become a luxury which the public exchequer cannot afford, being ultimately a drain on the public at large.”

The very intent of paying fees to Arbitrators is reflected in case Ariba India Private Ltd vs M/S Ispat Industries [6] wherein Delhi High Court held that:-

“The institutions of arbitration, just like the courts, are created with the litigant, i.e. consumer of justice being the central figure. It is to provide judicial service to the litigating public, to preserve law and order in the society, that the courts have been established and all other alternate dispute resolution modes, including arbitration, have been evolved. Just like the courts have not been created for the benefit of the Judges and the support staff, similarly, the arbitrations are not conducted to advance the cause of the learned arbitrators.”

Fixation of ‘unreasonable’ and ‘exorbitant’ fees by arbitrators

As per the Amendment Act, 2015, Rs.30,00,000/ is the upper ceiling for the entirety of the fee payable to the Arbitrators and in the case of Sole Arbitrator, the fees would be Rs. 30,00,000 + 25% of 30,00,000 (7,50,000) = Rs.37,50,000/. [5]

Accordingly, where three Arbitrators adjudicate the arbitration proceedings, having a claim of more than 50,00,00,000, remuneration payable to each Arbitrator individually would be Rs 10,00,000/-. However, where it is adjudicated by Sole Arbitrator, then he would be entitled to 37, 50,000/-. [7]

Despite the legislature mandate, the fixing of unreasonable and exorbitant fees by the Arbitrators has phenomenally crept in the arbitration consequently thwarting the growth of arbitration as an effective dispute resolution mechanism. The Arbitrators are exploiting the disputant parties and misconstruing the legislative mandate. There have been cases where Arbitrators charged hefty fees resulting in an amount that is equivalent to the amount involved in the dispute. According to the 246th Law Commission Report, the major drawback of arbitration mechanisms, particularly ad-hoc arbitration is exorbitant remuneration fixed by the Arbitrators.

The Commission has also placed reliance on a judgment titled Union of India v. Singh Builders Syndicate [8] wherein the Supreme Court addressed the issue of unreasonable and exorbitant remuneration charged by the Arbitrators. The Court deliberated that no doubt the arbitration process becomes quite expensive when retired judges are appointed as arbitrators. Furthermore, there have been numerous sittings, particularly in ad-hoc arbitration and fixing of excessive remuneration for every sitting, with several add-ons, devoid of any upper limit, have several times occasioned in the cost of arbitration approaching or is over and above the amount involved in the dispute or the amount of the award. In addition to this Court even highlighted the fear of the disputant parties upon a denial to pay the arbitrary fee that may prejudice their case.[9]

Relevance of IV Schedule in fixing fees of arbitrators

The Fourth Schedule has been specifically inserted in the Act which intends to curb the practice of unilateral fixation of excessive fees in all kinds of arbitrations. The said intent is specified in the Note to the amendment to Section 11(14) in 246 the Law Commission Report, which provides as under –”NOTE: There have been instances where arbitrators are known to charge excessive fees. An indicative fee schedule is therefore provided in the 6th Schedule. The High Courts are given liberty to frame their own rules in this regard.”

The relevance of Schedule IV in determining the fees of arbitrators can be better elucidated under the following two scenarios:-

Where Arbitrator is appointed by Court

Considering a situation where the arbitrator is appointed by a court, then remuneration payable to Arbitrator shall abide by rates stipulated in Schedule IV, and the same was affirmed by Court in the case titled Kumar & Kumar Associates v. Union of India[10].

Nevertheless, the verdict pronounced in DSIIDC Ltd. v. Bawana Infra Development (P) Ltd[11] was contrary to aforementioned judgment and explicitly observed that where the arbitrator is appointed by the court under Section 11 of the Act, in absence of rules framed by the High Court under Section 11(4), the Fourth Schedule is merely guiding in nature.

Interestingly, the Rajasthan High Court passed a ruling titled Doshion (P) Ltd. v. Hindustan Zinc Ltd[12] wherein arbitrary fees of Rs 75,00,000/ as fixed by the Arbitrator was opposed by the Petitioner. Petitioner contended that the fee of the Arbitrator must be fixed as per the rates stipulated in Schedule IV.

In this regard, even the High Court notified that Schedule IV is to be followed. Regardless of aforesaid, the Arbitrator reduced Rs 20,00,00/ and subsequently charged Rs 55,00,000. Besides charging unreasonable and exorbitant fees, the Arbitrator conducted proceedings ex-parte and concluded the matter for final arguments. High Court categorically held that charging a fee over and above the rates stipulated in Schedule IV amounts to de facto disqualification under Section 14(1)(a) of the Arbitration & Conciliation Act, 1996 warranting the mandate of the arbitrator to be terminated thereunder.

After 2015, the Arbitration & Conciliation Act was again amended in the year 2019 concerning the fixation of fees in the arbitration regime. As per the 2019 Amendment Act, both Supreme Court and High Court have been empowered to designate arbitral institutions that shall not only appoint arbitrators but also fix remuneration of appointed arbitrators as per rates stipulated in IV Schedule of the Act. Further, where no arbitral institution is being designated then in such a scenario, the Chief Justice of the concerned High Court may maintain a panel of arbitrators in lieu of adjudicating disputes between the parties. Consequently, Schedule IV is binding is such arbitration proceedings.

Where Arbitrator is appointed by parties

Supreme in NHAI & Ors v Gayatri Jhansi Roadways Limited & Ors [13] while overruling the verdict of Delhi High Court [14], expressly held that Schedule IV is not mandatory in ascertaining the fees as fixed by the disputant parties themselves. A similar view was upheld in Gammon Engineers[15] wherein the Supreme Court again reiterated that Schedule IV was not binding and the arbitral tribunal will be bound by the fees fixed by the agreement between the disputant parties.

Similar findings were arrived at by the Delhi High Court in Paschimanchal Vidyut Vitran Nigam Limited v. IL & FS Engineering and Construction Company Limited [16] wherein Court concluded that the Court has no role to play in fixing fees for the arbitral tribunal in those situations where disputant parties themselves agree upon the fees payable to the arbitrators.

From the aforementioned verdicts, it is apparent that prominence is given to an agreement made between the disputant parties. However, the problem arises when the fee structure is not agreed between the parties. Henceforth this calls for a more streamlined approach to ascertain the fees of the Arbitrators.

Interpretation to expression ‘sum in dispute’ and ‘cost’

It has been perceived that certain avaricious arbitrators fix arbitrarily and unreasonably separate fees for claims and counterclaims. Nevertheless, it is prima facie from the intent of the legislature that expression “sum in dispute” includes both “claims” and “counterclaims” and thus charging separate remuneration for claim and counterclaim would not only make arbitration process expensive but will also amount to a violation of the fundamental right to right to access to justice.

Concerning the expression “sum in dispute,” it is imperative to refer to the observations made in Delhi State Industrial Infrastructure Development Corporation Ltd. (DSIIDC) v Bawana Infra Development [8] wherein Delhi High Court categorically held that ‘Sum in dispute’ shall include both claim and counterclaim amounts. If the Act intended to have the Arbitral Tribunal exceed the ceiling limit by charging separate remuneration for claim as well as counterclaim amounts, then it would have stated so in Schedule IV.

In addition to the above, it is also pertinent to note Section 31(8) read with Section 31A that elucidates that the expression “costs” take account of fees and expenses of arbitrators. The proviso to Section 38(1) is applicable only in those states of affairs when the Arbitral Tribunal is not to fix its fee in consonance with the Fourth Schedule to the Act.

In this regard, reliance is placed on the case titled Gayatri Jhansi Roadways Limited[17] wherein Supreme Court held that “The change in the language of section 31(8) read with Section 31A which deals only with the costs generally and not with arbitrator’s fees is correct in law. It is true that the arbitrator’s fees may be a component of costs to be paid but it is a far cry thereafter to state that section 31(8) and 31A would directly govern contracts in which a fee structure has already been laid down by the parties”

Different fees charged by different arbitral tribunals

Charging of different fees by various arbitral tribunals is another significant aspect associated with the charging of unreasonable and exorbitant fees by arbitrators. Interestingly, Delhi International Arbitration Center fixes fees for arbitrators in consonance with IV Schedule. However, Mumbai Centre for International Arbitration has its own slab for fixing fees of arbitrators with a ceiling of Rs 8.5 Crores. Thus considering the factum of arbitrary fees being fixed by various Arbitral Tribunals under different heads, Section 11(14) is to be read with the IV Schedule in this regard, prescribing ad valorem fees with a ceiling of Rs.30.00 lakhs in case the amount in dispute surpasses Rs. 20 crores.

This issue has been remarkably addressed by Bombay High Court in ruling titled Vestas Wind Technology India … vs M/S. Inox Renewables Limited [18] wherein the court held that “It would be more appropriate if uniform fees can be introduced in the provisions of the Arbitration and Conciliation Act, 1996 in case of arbitral proceedings held without the intervention of the Courts, appointment of arbitral Tribunal under Sections 9 or 11 of the Arbitration and Conciliation Act, 1996 or under Section 89 of the Code of Civil Procedure, 1908 or any other proceedings between the parties where an arbitration agreement is arrived at for the first time, or Arbitral Tribunal appointed by Institutions. Unless uniform fees in the aforesaid proceedings are prescribed and the Rules under Section 11(14) are framed, the problem of exorbitant fees and other charges in the arbitration proceedings would continue.”

Author’s opinion

Merely because the claim in dispute or award is large, why should Arbitrators think that they can fix unreasonable and exorbitant fees? Likewise, if the arbitration is empanelled with retired judges why should fees be fixed as per status?

Courts have time and again acknowledged the fact that some greedy Arbitrators have turned the arbitration regime into a profitable business and have undeniably taken certain effective decisions to make arbitration proceedings affordable. In the past also Courts have condemned endeavor of the Arbitrator of fixing arbitrary fees and same is prima facie from the case titled

Amiraj Construction Co. vs State Of Maharashtra And Ors [19] Bombay HC held that if in any arbitration, the arbitrators fix unreasonable and/or unconscionable fees and attempt to overestimate their bills by producing expenses which are apparently not genuine; such demeanor is liable to be considered as misconduct within the meaning of the Arbitration Act. Consequently, such conduct amounts to unfair exploitation of the situation itself.

In this regard, it is imperative to put reliance on judgment titled Sanjeev Kumar Jain vs. Raghubir Saran Charitable Trust and Ors. [20]

“The remedy for the healthy development of arbitration in India is to disclose the fee structure before the appointment of arbitrators so that any party who is unwilling to bear such expenses can express his unwillingness. Another remedy is Institutional Arbitration where the arbitrator’s fee is pre-fixed. The third is for each High Court to have a scale of arbitrator’s fee suitably calibrated regarding the amount involved in the dispute. This will also avoid different designates prescribing different fee structures. By these methods, there may be a reasonable check on the fees and the cost of arbitration, thereby making arbitration, national and international, attractive to the litigant public. Reasonableness and certainty about total costs is the key to the development of arbitration. Be that as it may.”

In addition to these judicial pronouncements, certain holistic measures need to be incorporated as to curtail the charging of arbitrary, unilateral and disproportionate remuneration by the Arbitrators and also to restore the confidence of the disputant parties in arbitration. Certain comprehensive measures that can be incorporated in the arbitration process are:-

Arbitrators should fix the fees as minimum as possible and it should be absolutely reasonable. The Arbitrators must bear in mind that they are not there to generate profits nonetheless their prime duty is to render their services to impart justice. If the Arbitrator fails to instill a sagacity of service and perseverance, but merely have a mercenary outlook, then arbitration proceedings would become expensive which would ultimately discourage the parties to not go for it. Therefore Arbitrators must remember that just like the courts have not been established for the benefit of the Judges likewise, the arbitrations are not created to advance the cause of the learned arbitrators.[21]
In case any government servant is appointed as Arbitrator, who is still in service, then such an Arbitrator should not be paid any fees for the arbitration apart from any expenses such as traveling incurred by him. He is entitled to remuneration only which is fixed for his being a government servant. While retired arbitrators should strictly adhere to model schedule fees or fees as fixed by the concerned High Court whatsoever the case may be. It has been observed that fees in the case of retired judges are fixed in consonance of their established reputation, legal knowledge, and wisdom. Nevertheless, such an endeavor not only defeats the very object of the Act but also erodes the faith of disputant parties in arbitration.
The model schedules of fees are based on the fee roster fixed by the Delhi High Court International Arbitration Centre, which are over five years old. Therefore, such schedules of fees must be revised and updated after every three-four years so that they continue to stay genuine.
To absolutely resolve this ‘hearing-based fees’ issue, the only solution one can deliberate upon is not a legal one, but an ethical one. The onus falls on lawyers to advise their clients to opt for institutional arbitration. For the reason being that, it’s the lawyers who formulate and negotiate the arbitration agreement and therefore they must not only have their client’s best interests in mind but also save them from the clutches of greedy arbitrators.
Parties are expected to be vigilant while drafting their arbitration clause. They can predetermine the remuneration of the Arbitrator according to their agreement, which will save them from agreeing to exorbitant costs of arbitration proceedings. Where parties have no consensus over the fees fixed in such arbitration, then there should be certain fair and reasonable model fee structure for fixation of fees even in ad hoc arbitrations conducted under the jurisdiction of the concerned High Court.

To sum up, access to justice is a facade of right to life as enshrined under Article 21 of the Constitution of India. Such an endeavor of charging unreasonable and exorbitant remuneration for adjudicating a dispute effortlessly violates the provisions of Article 21. The spirit of access to justice lies in the fact that it is affordable and reachable to the disputants. Henceforth, to preserve the right to access to justice the adjudicatory mechanism must be reasonable and fair enough to instill the faith of disputants in arbitration mechanisms.

References

[1] Arbitration and Conciliation Act, 1996

[2] Arbitration and Conciliation (Amendment) Act, 2015.

[3] Law Commission of India, Report No. 246, “Amendments to the Arbitration and Conciliation Act, 1996”, (August 2014).

[4] Arbitration and Conciliation (Amendment) Act, 2019.

[5] 1987 (3) BomCR 607.

[6]2011(3) Arb LR 163(Delhi)

[7] Punjab State Power Corporation Limited v. Union of India Civil Writ Petition No. 3962 of 2017, judgment dated 21-07-2017

[8] (2009) 4 SCC 523

[9] (2009) 4 SCC 523

[10] 2016 SCC OnLine Pat 9476

[11] 2018 SCC OnLine Del 9241

[12] S.B. Civil Writ No.6074/2018

[13] SCC OnLine Del 10285

[14] 2017 SCC OnLine Del 10285

[15] National Highways Authority of India v. Gammon Engineers and Contractor Pvt. Ltd SCC OnLine Del 10183

[16] O.M.P.(I) (COMM.) 356/2017

[17] CIVIL APPEAL NO. 5384 OF 2019

[18] ARBITRATION PETITION NO.1088 OF 2015

[19] Supra Note 5.

[20] (2012 ) 1 SCC 455

[21] Supra note 6.

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Can Indian courts arrest ships in foreign seated maritime arbitrations

By

Sneha Mahawar

-

September 11, 2021

0

Arbitration-1200x800-1-1 — Image source: https://blog.ipleaders.in/significance-choosing-seat-arbitration-comparative-analysis/

This article is written by Pranjali Aggarwal of the University Institute of Legal Studies, Panjab University, Chandigarh. This article focuses on the Admiralty Act, 2017, its development, and can Indian courts arrest the ships that are covered under foreign seated arbitration.

Table of Contents

Introduction

Maritime trade is prospering day by day and is a crucial revenue-generating source for India. The disputes may arise in Maritime trade because of the diversity of activity related to the affairs of the sea: the financing, building, sale, and acquisition of ships, the deployment, related to cargo, freight, and other contractual relationships related to ships. To resolve these disputes parties either file a suit under Admiralty law or go for Maritime Arbitration either within India or in foreign seated arbitration. Jonathan Wood, the Singapore-based consultant, elucidated the difference between courts and arbitration: “Courts can do without arbitration, but arbitration cannot do without the courts. Nowadays being an easy system for redressal, parties opt for arbitration rather than litigation, and because of the globally linked world many contracts have clauses that decide the foreign bench for arbitration, and thus an interplay of Admiral law and Arbitration law can lead to disputes.

Admiralty law, 2017

There was a need for an exhaustive statute that covers all the aspects of admiralty jurisdiction under its realm. Thus, to ensure smooth functioning of maritime trade and for this purpose, steps were taken to enact the Admiralty Act, 2017 in India. On November 21, 2016, the Minister of State for Shipping, Mr. Mansukh Mandaviya introduced the Admiralty (Jurisdiction and Settlement of Maritime Claims) Bill, 2016 in Lok Sabha with the main objective to consolidate all the existing laws and create a single statute. The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 came into force on 9th August 2017 and it repealed all the obsolete laws of the British era. The admiralty jurisdiction that was only restricted to High Courts of Bombay, Calcutta, and Madras now extended to the High Courts of Karnataka, Gujarat, Orissa, Kerala, and Hyderabad after the enactment of the Act, and the Central Government can extend the jurisdiction of any other High Court by notification.

The position before the codification of the Admiralty Law

The Maritime jurisprudence in India was primarily based on the customs and practices that were followed by people involved in the maritime trade and these formed the foundation for the codified statutes in India. In the cases of arrest of the ships when there is foreign seated arbitration, the Supreme Court relied on the International Convention Relating to the Arrest of Sea-Going Ships, 1952, and the International Convention on the Arrest of Ships (ICAS),1999.

Article 2(3) of the 1999 Convention

This Article of the ICAS,1999 lays down an explicit provision for the law of arrest of ships and it allows the arrest of a ship in order to obtain security by any court irrespective of the fact that there is a clause in the contract that will be adjudicated in other state or the dispute is to be managed under any other law.

In simple words, it allows the parties to involve the right in rem in cases of foreign seated arbitrations.

In the case of M.V. Elisabeth versus Harwan Investment and Trading Pvt. Ltd (1993), it was held by the Honorable Supreme Court that the High Courts of India have a better status to try the matters arising within India and they have inherent and plenary powers to try and decide the matters that fall under its jurisdiction. And in case there is any dichotomy while interpreting, or any provision is not sufficient to serve justice then in those cases the principles of justice, equity and good conscience are to be adhered to. After this pronouncement, the International Convention on Maritime Laws was applied in India’s common law as there was no statute in India exclusively dealing with all aspects of maritime.

The Arbitration and Conciliation Act, 1996

The Arbitration and Conciliation Act, 1996 is based on the UNCITRAL (The United Nations Commission on International Trade Law) Model of law. It was enacted to achieve the following objects:-

Minimize supervisory role played by the courts in the arbitration process
Ensure the finality and enforcement of any arbitral award as if it was the decree of the court.

Intervention by Indian courts in cases of foreign arbitration

The Indian courts had limited power to intervene in the cases of foreign arbitration that is:-

To refer a matter to foreign arbitration as provided under Section 45
At the stage of enforcement of award as under Section 48

But the scope of intervention by the Indian courts in the foreign arbitrations was expanded by the Supreme Court and now the power of courts widened as Part I of the Act (which helps in deciding the seat of arbitration) was made applicable to both foreign arbitrations and foreign awards unless there is any provision that expressly bars the jurisdiction as decided in the case of Bhatia International v Bulk Trading SA(2002). but this decision was overruled in the case of Bharat Aluminium Co v Kaiser Aluminium Technical Service, Inc (BALCO) (2012). In the BALCO judgment, it was laid down that the Indian Courts cannot grant interim relief in the cases of foreign seated arbitrations and as a result, could not arrest ships to obtain security for the maritime claims.

In the case of Rushab Ship International LLC versus M.V. Eagle(2014), the Honorable Bombay High Court relied on the precedence laid down in the BALCO judgment and it was held that Indian Courts do not have any power to pass interim orders in the cases of foreign seated arbitration and thus no order of arrest of ships can be passed in this case.

The Amendment of 2015 in the Arbitration and Conciliation Act, conferred the power over Indian Courts under Section 9 of the Act to provide interim relief in the matters of foreign seated arbitration.

Issues pertaining to arrest of ships subject to foreign seated arbitration

The Admiralty Act deals with the conflicts or issues related to both the aspects -maritime Claims and maritime Lien. Under provisions of the Admiralty Act, the actions that can be taken care of are of two types-‘in rem’ and ‘in personam’.

The action in rem is brought against the ship itself or the cargo or freight whereas the action in personam deals with invoking action against an individual or a company (in some cases they can be the beneficial owner of the ship also). Earlier there was no lucid parameter to distinguish these two aspects. Before codification of Admiral Law, there were several judicial pronouncements like the Golden Progress case, MV Prapti case (2007) that held that arrest of a ship is permitted as it is based on common law and is done to secure maritime claims even though the matter falls under both Arbitration and Admiralty Suit.

JS Ocean Liner v. MV Golden Progress

This case was decided by the Bombay High Court and it differentiated the action in rem and action in personam i.e. whether the nature of an application under Arbitration Act is distinct from an admiralty action for arrest of a vessel. In this case, the Court stated that the right to arrest the ship is right in rem whereas the application filed (as per Section 9) against the individual under Arbitration law is right in personam. Thus, the Indian courts can arrest the ships despite the fact that there exists an agreement for foreign seated arbitration between the parties.

In the MV Monchegorsk case(1999) also, the Court held that proceedings in personam do not impose the restriction to admiralty actions in rem.

This scenario was based before the codification of Admiralty law and when the common law principles were adhered to. In the Admiralty Act of 2017, there is no explicit provision that deals with the power of courts to arrest ships in cases of foreign seated arbitrations. This poses a question that whether the order of arrest of ships that are subject to the foreign seated arbitrations is within the ambit of Admiralty law as two provisions deal with this issue-the Arbitration and Conciliation Act, 1996 (Section 5); and The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.

The present position after the enactment of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.

This question was answered by the Bombay High Court in the appeal case of Altus Uber.

In the above-mentioned case, there was an application filed in London for arbitration proceedings and the same claim was instituted by the plaintiff in admiralty proceedings of India concerning bareboat charter.

The Court held that the Admiralty Act, 2017 does not negate the law laid down under the Golden Progress Case. It only lays down a test for which allows a party to arrest a ship upon its satisfaction. The learned judge is of the opinion that the Admiralty Act is silent in the case where the arbitration proceeding can also be filed and thus no procedure is laid down in the Act regarding the arrest of the ships if the arbitration proceedings are already in progress or are yet to begin. So the Court relied on the Golden Progress case that granted the power to the Admiralty Courts to arrest a ship for security.

The case was appealed and the Honorable Division Bench upheld the decision of the Ld. Single Judge court and even laid down some clarifications related to this aspect that are:

The arbitration claim and maritime claim are two different aspects irrespective of the fact that the claims in both cases are similar. This is because the redressal approach followed under both is extremely different.
The courts in deciding such matters should draw a distinction based on ‘action in rem‘ and ‘action in personam‘, this will be in consonance with the provision of Section 5 of the Admiralty Act, 2017 as the party will not be subject to the bar under this section
If the claim is to be made under Arbitration Act, all the requisites provided under Admiralty Act, 2017 are to be satisfied.

Thus, in this case, the Honorable Division Bench relying on the common law principles as laid down in various judicial pronouncements stated that the arrest of the ship as security is allowed and is valid, while there is ongoing or pending foreign seated arbitrations but all the conditions of Admiralty Act, 2017 are to be met with.

Conclusion

The Indian courts have allowed the arrest of ships in order to provide relief to the aggrieved party. And this principle has been followed in various judicial pronouncements even before the codification of the Admiralty law in India. This consistent approach was followed in the codified statute. The inception of The Admiralty Act has made the clear demarcations between in personam and in rem actions and even laid down the provisions of the arrest of the ship. Section 5 of the Admiralty Law deals with ‘Arrest in rem’, according to which the admiralty courts have the power to order the arrest of any vessel within its territorial jurisdiction as the security in the cases of a maritime claim. And the action in personam can be taken against the people within the territorial jurisdiction of the court.

The power vested with the court is unlimited unless there is an express provision that restricts the power of the court. If any claim against a foreign ship and its owner falls under the jurisdiction of any High Court then the claimant can avail all the remedies against them as available under this Act unless any provision explicitly bars the jurisdiction of the court. The court in the exercise of such power can pass interlocutory orders for arrest and attachment before judgment in the interest of justice. A similar view is being followed by the foreign states such as the U.K., U.S.A., and Canada, thus it shows that Indian law conforms with the International law.

References

https://www.livelaw.in/columns/can-indian-courts-arrest-ships-in-foreign-seated-maritime-arbitrations-165368?infinitescroll=1

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Crime films and criminology’s approach towards them

By

Sneha Mahawar

-

September 11, 2021

0

This article is written by Oishiki Bansal, a student of Symbiosis Law School, Noida. The article discusses the growing trend of crime films and the approach of criminologists towards them.

Table of Contents

Introduction

The trend of watching films based on crime has been growing at a rapid pace. The filmmaking industry has become a powerful medium to represent stories based on crime, both fictional and non-fictional. According to criminologists, all those films whose central theme is a crime and their repercussions on society come under the domain of crime films. The relation between crime films and society can be defined according to the two perspectives, on one hand, the crime films communicate about the society from where they have been fashioned, and on the other hand, they have an effect on society, law, culture, justice, etc and provide an interpretation of the reality of the society.

Criminology’s approach towards crime films provides a series of theoretical and methodological repercussions. It also supplements the academic knowledge such as the forms of teaching the research methods to be used, ways to tackle crime, etc.

History of crime films

The interest in crime by the filmmaking industry and its audience has always been a global phenomenon. In 1935, when the research was conducted by Dale on cinematic content, it was observed that crime was the most loved genre in films after ‘love’. In the study on American film industries, it was analyzed that almost 4000 American films were categorized as crime films in the 1920s. Further, the interest in crime films can be traced back to the silent films era where it was found that over 200 films were crime films.

The contribution of crime films to the British film industry was about 26 percent from the 1930s to the 1980s. In 1997 a study by Allen et al. provided that in almost half of the films in the British industry including the European and American films, crime was the central part of the story.

The first American film, The Great Train Robbery(1903) was based on the crime of robbery and violence. Not only the film industry but people were attracted to the compelling stories relating to crime written by great authors like Conan Doyle, Charles Dickens, Sue, Zola, etc. The Musketeers of Pig Alley (1912) by D. W. Griffith is said to be the first gangster film under the crime films category. This film portrays another side of New York which deals with the dangerous sides of the metropolis and depicts the social contradictions of the society.

The European filmmaking industry also saw a great contribution to crime films since early 1900. The Cycle of Fantômas film (1913–1914) is set on the streets of Paris about the life of an evil thief who is uncatchable. Through this movie, a symbol of rebellion against social norms has been shown.

The different genres of crime films and their growth

Gangster films

Lights of the New York (1928) was the first all-talking full-length feature film in the American filmmaking industry. The central theme of the movie was bootlegging. This movie was based on gangster culture providing a threat to American tradition in two ways, firstly providing a mythical representation to urbanization and secondly, an ambivalent approach to immigration. The actors who played the role of gangsters in these movies were all second-generation immigrants like Italians, Jewish, Irish, etc. The era of the 2000s was said to be the richest decade for gangster film in the category of crime films history. Gangster films, combined with the west, were Hollywood’s most represented genre. The 1930s saw the rise of movies like The Public Enemy (1931), Little Caesar (1931), and Scarface (1932), The Doorway to Hell (1930) preceded by more literary excavations based on detectives and gangsters. These films emphasized the criminal nature in a very clean, classic, and realistic way. The gangster was condemned to punishment after a massive failure, this tragic experience was inculcated in the expression of individualism. The films under this genre were an expression of the disagreement between the individual men, women, and groups as well as a society as a whole. The struggle of the society was depicted in the form of conflict between the law and order and the dominant norms of the society.

The filmmaking industry of other nations was also largely focusing on the presumed separation of evil and good as depicted in the gangster films. ‘M’ (1931), a masterpiece given by the German filmmaking industry featured how the mind of a criminal work, the symbiotic relationship between a criminal and police, how crimes are organized in German cities, and lastly heart-drenching trial scenes. Le Deuxieme Souffle, 1966; La Haine, 1996 of the French cinema Get Carter, 1971; The Long Good Friday; 1982 of the British cinema Pixote, 1981 of the Brazilian cinema Kismet, 1943; Satya, 1998 of the Indian cinema Battles without Honor and Humanity, 1973; Sonatine; 1998 of the Japanese cinema has also left an impact on the appearance of gangsters in the crime films and its impact on the society, law, and order, justice, etc.

Film noir

The 1940s marked the introduction of film noir. These films highlighted the fundamental theme of the representation of crime-fighters and crime. The key element of such movies was the uncertainty of good and evil, crime and law, etc. Film-noir provided a mixture of the fictional and real landscape which contributed to the social imagination. It recognized the aesthetic version of the society conveyed by the ethical vision. The word “noir” is derived from the french culture which came after the post-war period of the 1940s and became a thriller in the Hollywood industry. The film Dixon, 2009 featured the environment which was affected by fear and disillusionment of pre and post-war time eras. The Third Man, 1949 included the theme of how a troubled veteran was forced to choose the path of crime during the tension of the cold war. Movies like Kiss Me Deadly, 1955; Christopher, 1997; Muller, 1998 featured the themes of nuclear bomb threats, tough and forlorn life of individuals which force them on becoming criminals. The classic era of film noir included movies like The Maltese Falcon (1941), Touch of Evil (1958), Schrader (1972), The Big Sleep (1946), Double Indemnity (1944), The Postman Always Rings Twice (1946), etc.

Police and detective films

The detective and the police films were structured around a crime whose investigation was the responsibility of a detective or the police. These movies were often inspired by the work of literature on detective stories. At present, the main character can also be portrayed as an amateur who works under a professional detective. Movies like Lott, 2006; Pautz, 2016; Gates, 2006 have provided the different roles of detectives and police as the central character.

Courtroom films

The trial scene is the heart of a courtroom film. The trial in a case is understood as a public rite and not just as a procedure by law. The cinematic representation of the courtroom was designed to strengthen the moral and political values and order that underlie society. The success of movies like Greenfield & Robson, 2010 was because of the precise legal procedure that was followed and the drive to encourage debate on social and moral issues. Films like M (1931), The Ox-Bow Incident (1943), and Death and the Maiden (1995), where the trial takes place outside the real courtroom play an important role in the study of criminology. In the movie Silbey, (2001) the courtroom was shown as a legal ceremonial process that provides an opportunity to all to witness the truth of the crime and court proceedings. The movie also represents the process of arriving at a verdict after the various phases of investigation and restructuring of truth.

The representation of lawyers has best illustrated the dispute of positive and negative figures in the justice system. Movies like Body Heat (1981), The Firm (1993), and The Devil’s Advocate (1997) featured the involvement of honest and righteous lawyers as compared to the lawyers in the 1950s film who worked for law firms and were unscrupulous, corrupt, and cynical. However, the contradiction between the ideal administration and justice process and the reality of the same process is often implicit in courtroom movies.

Prison films

One of the most popular categories under crime films is the prison setting. The French movie A Man Escaped (1957), the Spanish movie Cell 211 (2009) have featured the prison settings in a very prominent manner. The films like Execution of Czolgosz with Panorama of Auburn Prison (1901) have reproduced the prison setting in a very exact manner. The first part involves outside of the Auburn prison and the second part of the movie reproduces the execution scene in the prison. The category of prison movies concerns the criminologists and criminology students as the execution of the punishment of criminals is hidden and obscured in contemporary societies. The movies like Crime School (1938), Angels with Dirty Faces (1938) have shown the prison as the place that provides apprenticeship for criminals while movies like Birdman of Alcatraz (1962), Resistance, (2011) provides the self-incriminating image of prison.

Criminological research on crime films

The perspective given by the crime films has fallacies to a great extent and is a largely inaccurate description of the law and order in society. Therefore it is important to understand the contrast in the representation of criminal justice by the media and the reality behind criminal justice. It is important to discuss the evolution of criminality and its impact on society with the correct accuracy from the criminologist’s point of view. The image created by the media through the crime films is not a reflection but mere refraction that is created by the forces of political and economic influence.

Criminologist’s approach towards crime films provides us with an important theoretical and methodological repercussion. By analyzing the crime films the criminologists provide us with better insights into the key elements and fundamentals of academic knowledge. They inform us about how crime can be tackled, the discipline and research method that can be used, and also the teaching method of criminal codes to be revised. Observing the crime genre in filmmaking can help us better understand the law, justice, crime, and how society works in general. It emphasizes the role of technology and scientific development in the field of criminal law. The study of the complex relationship between metropolises and criminals, the psychological behaviour of individuals who are impacted by the loneliness and competition in the big cities. Analyzing all these things also helps us in segregating urban civilization from violence.

The role of media in popularising the films related to the crime genre needs to be reviewed and the perspective needs to be changed. The methodological and theoretical tools should be adapted and sharpened for providing accuracy. A multifaceted approach should be adopted towards crime films so that the crime cinema can be studied with other criminological, sociological, and psychological aspects.

Causes and consequences of cinematic representation of crime

It has been widely acknowledged that what we see impacts us more than what we read. We have always been told that a person learns from his/her surrounding environment. Similarly, a thriller movie that is based on the crime genre impacts the viewer more than what a novel does. Anurag Kashyap, Sriram Raghavan, and Ram Gopal Verma are some of the notable directors of crime films in the Bollywood industry. Films and dramas like Gangs of Wasseypur, Raman Raghav 2.0, Black Friday, Johnny Gaddar, Satya are some of the classics in the crime genre. Substantially, there have been cases where it has been found that the audience has been influenced to commit crime after watching the dark comedy. In films like Joker, the audience gets happy only when the joker kills people and cheers when he commits those gruesome murders. The making of movies based on the real-life incidents of serial killers or taking inspiration from them sometimes influences the audience to commit a crime.

For instance, in 2016 where the accused abducted a Snapdeal employee who was just 24 and then helped her by resolving the problems that the accused created himself. Later the accused asked the girl to marry her and told her “Are you going to make a friend or enemy”. The accused later confessed to the police that he was inspired by Shah Rukh Khan’s movie Darr(1993).

Similarly, after getting inspired by Akshay Kumar’s movie Special 26 (2013), a group of armed robbers claimed themselves to be CBI officers and conducted a raid at the Hyderabad branch of Muthoot Finance. They took 40kg of gold and also all the CCTV cameras to destroy the evidence. However, we should not forget that the movie Special 26 was itself inspired by a real-life incident that occurred in 1987 by Opera House Heist at the Mumbai branch of Tribhovandas Bhimji Zaveri (TBZ) Jewellers.

Munna Bhai M.B.B.S a 2003 film loved by every kind of Bollywood film watchers, has influenced more than a dozen crimes where the students have tried to impersonate themselves and send a proxy candidate in exams or used the Bluetooth technology to cheat in the exams. The accused kidnapped a 15-year-old boy, a classmate of his, and asked for a ransom of about 50,000 rupees, and later killed that boy, confessed that he was so inspired by the character played by Vivek Oberoi in the movie Shootout at Lokhandwala (2007) that he used to watch the video of him murdering the boy every day and used to copy mannerisms of Vivek Oberoi in the said movie.

Not only Indian films have influenced people to commit crimes but also this trend is seen in every industry. Crimes, where the children are reported as accused, have often confessed that they were influenced by the 1991 American film Child’s Play 3. After the case of James Holmes who killed almost 12 people and wounded 70 people by opening tear gas at the theatre of Aurora in Colorado, it has been contested whether the movies and comics like Batman and other like productions by Marvel and D.C influence the people to commit a crime or not.

Committing a crime is always seen from the perspective of psychology, the environment, condition, or circumstances that lead a person to choose the option of crime. The film industry’s motive is not to influence anyone to commit a crime, nevertheless, the audience sometimes gets inspired by the characters played in the movies. Here, the importance of criminology and criminal psychology comes into play. The work of criminologists is to understand the circumstances which lead a person to commit a crime and try to find a roadmap to provide alternatives to such environmental stimuli. The crime genre film industry has contributed to a certain extent to the increase in crime, however, it’s upon the viewer’s discretion how to perceive the portrayal of a partially or fully fake scenario. Everything in films is pre-decided and controlled but one cannot do such a thing in real- life.

Conclusion

The growing trend of films in the genre of crime has impacted in both negative and positive ways. The study of criminology needs to include analyzing crime films from a different perspective. The contrast between the criminal justice system as shown in crime films and realities need to be reduced and a more accurate and better image should be provided to the general public.

Reference

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=956914

https://www.researchgate.net/publication/270275606_Twists_and_turns_that_Documentaries_followed_in_India

https://www.researchgate.net/publication/319242002_Crime_Films

https://www.researchgate.net/publication/341706708_Performativity_of_rape_culture_through_fact_and_fiction_An_exploration_of_India’s_Daughter_and_Anatomy_of_Violence

http://eprints.lse.ac.uk/1007/1/AUDIENCEP.pdf

https://oxfordre.com/criminology/view/10.1093/acrefore/9780190264079.001.0001/acrefore-9780190264079-e-30

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All you need to know about the FDI Policy in Korea

By

Oishika Banerji

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September 11, 2021

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This article has been written by Srishti Saxena pursuing the Diploma in Business Laws for In-House Counsels from LawSikho.

Table of Contents

Introduction

A Foreign Direct Investment (FDI) is an investment made by a firm or an individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets in a foreign company. “When a Foreign company invests more than 10% or holds more than 10% stake in any of the companies outside their country, this refers to FDI.” Why do we encourage FDI? Here are some good reasons,

(i). To stimulate economic development,

(ii). To increase employment opportunities,

(iii). Development of human resources,

(iv). Increase in Exports,

(v). Exchange rate stability,

(iv). Improves Capital Flow, (Provision of Finance and Technology, etc.)

FDI is like a channel between Countries. This has recently taken a huge toll to promote Foreign Direct Investments in India, the government has taken many initiatives to improve ease of doing business and relaxing FDI norms, which has given positive results.

The reason for interest in FDI is the concern it raises about the causes and consequences of foreign ownership. The views on this issue are so diverse, falling between the extreme of regarding FDI as symbolizing new colonialism or imperialism, and the other extreme of viewing it as something without which the host country cannot survive. Foreign Direct Investment in countries shows an ambivalent attitude towards FDI. Inward FDI is said to have negative employment effects, retard home-grown technological progress, and worsen the trade balance. Substantial foreign ownership often gives rise to concern about the loss of sovereignty and compromise of national security. Outward FDI is sometimes blamed for the export of employment, and for giving foreigners access to domestic technology. While we are on the topic of FDI, we will notice how the norms for Korea changed with respect to Foreign Direct Investments.

National Policy with regard to FDI

Korea, after facing a huge downfall understood many different aspects of FDI and therefore, made astounding changes. Foreign Investments took a turn in Korea decidedly after the financial crisis of 1997, this was caused due to the government failure in two major policy areas: exchange rate policy and industry policy which resulted in the huge shift from a rigid and restricted policy to an open door, supporting policy to attract foreign investments. There were steps taken to update the FDI system to draw more foreign investments. One of the major changes was, from seeking approval from the Ministry of Finance and Economy to initiating a foreign investment shifted to investing freely as long as the investments are duly reported in accordance with the Foreign Investment Promotion Act (FIPA) or the Foreign Exchange Transaction Act (FETA).

Laws applicable with respect to FDI

International investments seek a huge amount of legal framework to work in good capacity and cater a safe place for the foreign investors to invest, with this comes to a great responsibility on national security to keep things in check. There are several dos and don’ts that have to be followed, with respect to the FDI. As explained above, FIPA applies to cases where foreign investment is limited on the grounds of national security and public order. FIPA also dictates :

There are certain sectors that are prohibited for foreigners to invade or invest in (e.g., postal services business, central bank, nuclear generation business, newspaper publication business, radio broadcasting business).
Foreign investors are allowed to invest within a permitted range unless the sales of the prey company do not exceed 1% of the total sales excluding the restricted businesses mentioned in the first point.
The Minister of Trade, Industry, and Energy has the authority to limit the foreign investments on the basis of national security, after reviewing with the Foreign Investment Committee.

Sectors and industries under scrutiny

As mentioned and discussed above, there are several sectors that are prohibited and confined to foreign direct investments. Till the time the investments are duly reported, foreign investments can be carried forward easily. Moreover, with an exception for investing in defense industry companies, it is only permitted if the Minister of Trade, Industry, and Energy authorizes it after reviewing it with the Minister of Defence. Additionally, the Korean government issues the Integrated Public Announcement of foreign investment stating certain restrictions for the foreign investors, because of this if any statutes apply then the investment is directly restricted even if it is not covered under FIPA.

How does the law treat the terms “foreign investment” and “foreign investor”?

Under the FIPA, an individual who comes with a foreign nationality, an entity with the grounds of foreign law, an agency that works on behalf of the foreign investors, the organization that has day to day work related with the investments processing on the international grounds is subjectively known as “foreign investment”. Whereas, on the other hand, the term “foreign investor”, is someone who is actively taking part and holding stocks, etc., or has contributed according to FIPA, and the term “foreign-invested company” signifies an organization invested by a foreign investor.

Essentials one needs to consider while investing in South Korea

South Korea has an efficient education system which results in a highly-skilled workforce.
Research and Development capabilities.
Advanced infrastructure and dominance in advanced technology.
Growth in the banking sector and investment.
The willingness of consumers to spend on quality products
Strong shipping and air cargo services.

Issues with jurisdiction

To move forward with investing in a foreign space, one should have the information of the legalities that will come with it. Korea Trade-Investment Promotion Agency (“KOTRA”) was set up within Korea to encourage and support the foreign investors to do business in Korea providing them the required information and consultation services to help enhance the FDI to enhance the level of Korea. As mentioned above, when a transaction consists of Foreign Investment, the FIPA applies and comes into the picture whereas, on the other hand with any other foreign currency or cross-border transactions, FETA applies. It is mandatory to file under the FIPA and FETA, without any filing fee as a plus point. As a responsible Foreign investor, it is important to report all the foreign investments under the FIPA or record all the acquisition of securities under the FETA, without any negligence. Points covered in the Foreign Investment Report under the FIPA will include the following:

An application consisting of the acceptance report on foreign investment is known as inter alia.
The Identity proof documents of the investor (certificate of business registration).
There shall be no such documents or statements that will contradict the foreign investment and the documents provided are satisfactory with the circumstances.
For any exceptional requirement, the documents can vary.
Documents comprising the value of the target can be also required.

Moreover, if a foreign investor acquires shares of equity interests in a Korean-based company, the investor should duly report the acquisition of securities in accordance with the FETA, which initially includes, Inter alia, documents related to identical parties and other important documents to back up itself.

Conclusion & analysis

The most important thing to keep in mind before investing in Korea is to follow the principle, that foreign investment can be made easily, with the compulsion of reporting and registering the securities under FIPA. The principle stands still in the case where there are certain sectors that are prohibited for investing to protect the national security and there is no room for any discretion that should be exercised by the authorities. The Minister of trade, Industry, and Energy are the decision-makers and keep national security in mind. In case an investment poses a national security risk, the Minister of trade, industry, and energy can call it off and prohibit the foreign investment, reverse the transfer of stocks, etc, or grant more of an exceptional, conditional approval. Korea’s aim towards foreign direct investment is a consequence of the country’s highest economic development over the years. Korea is known for new technologies for information and communication. However, lack of transparency is still a major concern. In 2020, Doing Business has ranked South Korea as the 5th country with a highly developed environment for business purposes. Therefore all the policies are intact and aiming towards the growth as well as the national security of Korea. We can appreciate how freely and conveniently the Korean government has made logical choices for the investors to enter into the regime of FDI. I believe that FETA and FIPA are absolutely appropriate to the point concerning the Foreign Direct Investment and Korea should continue with these terms as long as it is benefitting them and bringing the growth home.

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Sachin Kumar v. Delhi Subordinate Service Selection Board : necessity of fairness in public service examination

By

Sneha Mahawar

-

September 11, 2021

0

Landmark judgments — Image source - https://bit.ly/3yBUAPX

This article is written by Bhavyika Jain, a student at Symbiosis Law School, NOIDA. This article deals with the necessity of fairness in public service examination in light of the case of Sachin Kumar vs. Delhi Subordinate Service Selection Board.

Table of Contents

Introduction

The case Sachin Kumar vs. Delhi Subordinate Service Selection Board (2021) deals with the cancellation of the examinations of Tier-I and Tier-II which were held in 2009 by the Delhi Subordinate Service Selection Board by the Delhi High Court for the recruitment of head clerk. The ruling of the Central Administrative Tribunal was affirmed resulting in the cancellation of the examinations.

Facts of the case

The Delhi Subordinate Services Selection Board had published an advertisement on the 26th December 2009, inviting applications for various posts including the post of head clerk/ Grade-II (Delhi Administrative Selection Services) for filling 231 vacancies in the Services Department- II, Government of N.C.T of Delhi. Out of 62,056 applications received 61,179 applications were found to be eligible. The scheme of the examination comprised of:

Tier I examination for a duration of 2.5 hours comprising 200 marks, which is conducted as a preliminary evaluation of candidates for the main examination.
The shortlisted candidates were eligible for the Tier- II descriptive examination of 200 marks for 2.5 hours.

The examination was conducted after a period of almost 5 years on 29th June 2014. More than half of the candidates were from 22 pin codes of Delhi out of the total 609 pin codes.

Various complaints were received by the Delhi Subordinate Service Selection Board regarding serious irregularities, including:

Leakage of question papers,
Mass cheating,
Allotment of common examination centers, and
Rooms to family members and impersonation of members, in the conduct of the Tier-I examination.

However, the results were declared on 21st October 2014. The shortlisted 2415 candidates appeared for the Tier-II examination on 29th March 2015. The results of the main examination were released on 15th July 2015.

Several complaints between 30 July 2015 and 1st February 2016 regarding alleged irregularities in the conduct of both Tier I and Tier II examinations resulted in the constitution of a Committee by the Deputy Chief Minister of Delhi. The Committee comprising the Director (vigilance) and District Magistrate (East) enquired into the complaints regarding the irregularities in the Tier- I and Tier- II examinations.

The Committee’s report on 10th September 2015 and 18th September 2015 opined that the allegations of mass cheating and impersonation during the conduct of the examinations were credible. The Committee recommended cancellation of the examination at the stage of declaring the Tier-I result and referred the entire matter to the Economic Offences Wing/Crime Branch of Delhi Police for a thorough investigation. Following the recommendations, the Deputy Chief Minister via a notification on 15 March 2016 cancelled the selection process.

Aggrieved by the failure of the DSSSB, three candidates filed an application before the Central Administrative Tribunal contending that allegations regarding the irregularities were made by unsuccessful candidates who were scheming to get another chance to write the examination. The Tribunal issued a directive to set aside the cancellation order and continue with the appointment process of successful candidates after a thorough investigation by the Anti- Corruption Bureau (ACB).

Appeals were filed by the DSSSB and the Government of Delhi under Article 226 of the Indian Constitution before the High Court of Delhi along with intervention petitions by candidates who had not initially participated in the tribunal proceedings. The candidates claimed that they had been successful in clearing the selection process and would be adversely affected if the High Court of Delhi upheld the cancellation of the examination.

After the High Court ratified the decision of the Tribunal, the petitioners approached the Supreme Court. Special leave petitions under Article 136 of the Constitution were filed by people who had neither participated in the Tribunal nor in the High Court proceedings.

Issues raised

Following issues were raised before the Supreme Court:

Whether the High Court’s ruling was correct?
Is it possible to allow the DSSSB and the Delhi Government to file appeals?
Whether the examination cancellation notice can be upheld?

Relevant legal provisions

Article 14 of the Constitution talks about equality before the law and equal protection of the laws within the territory of India.
Article 15 prohibits discrimination on the basis of caste, sex, place of birth, religion, etc.
Article 16 of the Constitution mandates equality of opportunities in matters of public employment.
Article 136 deals with the mechanism of special leave to appeal by the Supreme Court of India.
Article 226 of the Constitution provides writ issuing powers to the high courts of the country.

Arguments raised by the parties

Arguments raised by the plaintiff

The counsel for the applicants argued that the directive of the Tribunal to prohibit the DSSSB from cancelling the examination process was legitimate and fair. It was contended that six successful candidates who had approached the Tribunal and the High Court should not be made to appear for the Tier- II examinations once the cancellation order of the results has been overruled. It was argued that the DSSSB in its own recommendation had mentioned that there was no systematic flaw or irregularity in the selection process. A fair and reasonable process of selection to posts of public employment is a fundamental requirement under Article 16(1) and Article 14 of the Constitution. The applicants urged the Court to ensure that the benefit of the order setting aside the cancellation of the selection process be extended to all candidates who had not approached the Tribunal initially. Thus, in order to create parity, the recruitment process must be continued for all candidates who have been found to be free of committing any wrongdoing.

Arguments raised by the defendant

The Additional Solicitor General of India appearing on behalf of the DSSSB contended that the entire selection process was rigged. The occurrence of serious irregularities and fraud in the conduct of the examinations makes it difficult to ascertain the credibility of the marks obtained by the candidates. Since there were no feasible solutions to this conundrum, the cancellation of the entire process was the only viable option. The counsel for the petitioners argued that the grant of relief by the Tribunal was unreasonable. The Tribunal and the High Court of Delhi had failed to pay heed to the deficiencies noticed in the selection process.

Judgment

While deliberating the nature of the present case, the Court opined that the irregularities in the present case were not isolated individual acts of malpractice or usage of unfair means but systemic irregularities that raise serious questions regarding the legitimacy of the entire selection process. The Court stressed that the issue was not seeking the identification of the tainted candidates but the substantiality of the evidence in support of malpractices found by the Committee. A fair and reasonable selection process is a fundamental requirement under Article 14 and Article 16(1) of the Indian Constitution. Hence, where it is possible to segregate the untainted from the tainted, an effort must be made to make sure that no unfair imposition of wrong-doing is made against the innocent. Article 14 would be violated if the innocent are treated like the wrong-doers while cancelling the entire selection process. Hence subject to judicial supervision, the decisions of the recruitment body must be upheld to ensure that such decisions are in accordance with the law and preserve the sanctity of the process of selection.

The Supreme Court further criticized the delay of almost five years in the conduct of the examination. The main reason behind the small proportion of candidates appearing for the examination in comparison with the number of applications made was due to the issuance of admit cards in the electronic form without any notification of such measures in the examination advertisement. Since the admit cards were supposed to be delivered by post and the candidates cannot be expected to keep updates of the examination process over such a long time, the sudden decision to issue admit cards electronically instead of sending them by post creates a system of major inequality. Furthermore, the majority of the candidates who appeared for the examination belonged to a particular area of Delhi. The whole marks list was found to be dominated by a particular section of the society. These glaring irregularities were due to the administrative failure of the DSSSB. The absence of randomization resulted in family members and close relatives being seated in the same examination room. Allegations of impersonation and leakage of question papers were found to be credible.

In light of these circumstances, the Court upheld the notification for cancellation of the examinations. The DSSSB was ordered to take adequate measures to ensure that there is no recurrence of such instances that erode the credibility and public faith in the recruitment process. The authorities were directed to undertake a comprehensive exercise to revise the safeguards and procedures of the selection process within a period of two months. The Court also mandated an age relaxation to be provided to candidates who will appear for the new examination.

Ratio decidendi

While adjudicating on the special leave petitions under Article 136, the Supreme Court relied on its decisions taken with respect to the grounds on which examinations processes may be cancelled. The Court recognized that in some cases the authority responsible for conducting the examination or selection process may cancel the entire process due to a systematic failure that taints the entire process. In light of such circumstances, it is extremely difficult to rely on a fact-finding investigation of individual malpractices or the usage of unfair means. The difficulty of separating the tainted from the untainted candidates and denial of equal access of opportunities to every candidate erodes the credibility of the examination and necessitates a cancellation. The Court also opined that in some cases the participants are themselves responsible for the irregularities in the selection process. It is prudent to exclude the wrongdoers from the others and allow the selection process to be continued for the untainted successful candidates.

The Apex Court relied on its decision in Bihar School Examination Board v Subhas Chandra Sinha & Ors (1970), where a three-judge Bench of the Supreme Court had opined the cancellation of examination without giving every candidate a chance to represent themselves due to the massive scale of irregularities in the conduct of the annually secondary school examination held at a particular center in a district of Bihar. It was unviable to hold a detailed inquiry and examine individual cases to ascertain the untainted ones. This infeasibility check was also used in the case of Madhyamic Shiksha Mandal, MP vs Abhilash Shiksha Prasar Samiti (1997) In the case of Kumari Anamica Mishra vs UP Public Service Commission (1989), Allahabad, the Apex Court overruled the examination authority’s decision to cancel the recruitment to the posts in the educational services of the State of Uttar Pradesh. It was held that since there were no systemic failures in the written test and an issue arose only with respect to the interview of successful candidates, the same can be remedied by just vitiating the initial interview process and conducting a fresh round of interviews of all eligible candidates. The small scale of mistakes with regard to the input of data in a database management system could be remedied without cancelling the entire process. A similar stance was taken in the case of Union of India v Rajesh P U Puthuvalinkathu (2003)

Conclusion

The dispute hinges on whether or not the cancellation of the examinations was a justified action. The current case rests on a review of the Tribunal’s and the High Court’s findings for their legality. The verdict of the aforementioned bodies was upheld by the Supreme Court. The necessity that a public entity act in a fair and reasonable manner drives the selection process. The choices of the recruiting body are thus susceptible to judicial review, subject to the well-established concept that the recruiting authority must have some discretion to make decisions in line with the law that is best suited to maintain the purity of the process.

References

https://www.lawyersclubindia.com/Judiciary/sachin-kumar-ors-v-delhi-subordinate-service-selection-board-dsssb-ors-2021-whether-cancellation-of-tier-i-and-tier-ii-examinations-was-justifiable-5065.asp

http://www.legalservicesindia.com/law/article/1865/23/Recruitment-To-Public-Services-Must-Command-Public-Confidence-SC

https://www.scconline.com/blog/post/2021/03/05/recruitment-to-public-services-must-command-public-confidence-supreme-court-upholds-cancellation-of-dsssb-head-clerk-selection-process-in-light-of-systematic-irregularities/

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