Newsletter ARBITRATION AND CONCILIATION ACT, 1996 APRIL, 2023 SCRUTINY OF CLAIMS SHOULD BE DONE PRIMA FACIE The Hon’ble Supreme Court, in the case of NTPC Ltd vs. M/s SPML Infra Ltd, has held there should be only prima facie scrutiny of facts to examine the non-availability of a claim, while exercising jurisdiction under Section 11(6) of the A&C Act. This test is to screen and strike down ex-facie meritless and dishonest litigation. The present case has arisen against the application filed by the Respondent SPML for constituting an arbitral tribunal. The parties herein entered into a Settlement Agreement, which recorded that there were no subsisting issues that is pending between the parties. The Hon’ble High Court of Delhi had referred the parties to arbitration under Section 11(6) of the A&C Act, which was held erroneous by the Supreme Court as it concluded that the allegations of coercion and economic duress as alleged by the Appellant were not bona fide in nature and hence the claims sought were raise as an afterthought. It further held that the High Court should exercise restricted and limited review to check and protect parties from being forced to arbitrate. The Supreme Court relied on the settled law laid down in Vidya Drolia and Ors. vs. Durga Trading Corporation ((2021) 2 SCC 1, wherein it was held that the screening of frivolous litigation should be done by the arbitral tribunal itself as it’s the first authority preferred to decide and determine all questions of arbitrability. Read More... WHETHER ARBITRAL TRIBUNAL CAN PASS AN ORDER OF ATTACHMENT BEFORE JUDGMENT The High Court of Delhi in the matter of M/s Promax Power Ltd vs. M/s Tahal Consulting Engineers India Pvt Ltd ruled that power of a tribunal to attach before award is not specifically set out in Sections 9 and 17 of the A&C Act, therefore only be exercised where the parties can establish  the existence of a strong prima facie case and that the alleged activities were for dissipation of assets or removal of assets before the tribunal. The Respondent had moved an application under Section 17 of the A&C Act before the Arbitral Tribunal seeking securitising of its claim amount, which was dismissed by the Arbitral Tribunal holding that under Order 38 Rule 5 of CPC the Petitioner did not need to secure the entire claim amount. When an appeal was filed under Section 37(2)(b) of the A&C Act against the order of the Arbitral Tribunal, the High Court of Delhi held that order of the Arbitral Tribunal had to be tested on the limited grounds of perversity, arbitrariness and a manifest illegality only. While the tribunal may not be strictly bound by the principles of Order 38 Rule 5 of CPC, the power to attach could not be invoked merely because the claimant is found to have a just or valid claim upon a prima facie evaluation. The Supreme Court found that the Respondent had failed to satisfy the tests and therefore there was no justification for passing an order of attachment. Read More... WHETHER AN ARBITRATION AGREEMENT BE VALID WITHOUT STAMPING AND REGISTRATION? A 5 judges constitutional bench have decided the issue in M/s. N.N. Global Mercantile Pvt. Ltd. v. M/s. Indo Unique Flame Ltd. And Ors by a 3:2 majority that an instrument containing an arbitration clause, which is exigible to stamp duty but is not stamped cannot be said to be an enforceable contract under S. 2(h) of the Contract Act and not enforceable under S 2(g) of the Contract Act, therefore, could not exist in law. It was further held that an arbitration agreement under Section 7 of the A&C Act attracts stamp duty and if it is not stamped or insufficiently stamped it cannot be acted upon in view of Section 35 of the Stamp Act unless following impounding and paying requisite duty, necessary certificate is provided under Section 42 of the Stamp Act. In the present matter, the court impounded the work order contract, which had an arbitration clause and it was alleged as unstamped before High Court. The matter was heard by a three-bench Judge, which referred to this Constitutional Bench that observed that ordinarily the invalidity of the main agreement may not affect the Arbitration clause but an Arbitration agreement contained as a clause in the main contract is a separate agreement would be of no avail in a case where both the arbitration clause and main agreement are exigible to stamp duty. Justice Rastogi had a dissenting view and held that an arbitration agreement whether unstamped/ insufficiently stamped at the pre-referral stage is an enforceable document for the purposes of appointment of an Arbitrator under Section 11(6A) of the A&C Act. Justice Roy was of the opinion that the examination of stamping and impounding need not be done at the threshold by a court, at the pre-reference stage under Section 11 of the A&C Act. They held that such deficiency was a curable defect and would not render the arbitration agreement void. Read More... SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 CAN BANK  FORFEIT ITS AUCTION DEPOST WITH NO NOTICE TO BIDDER OF CHALLENGE PENDING AGAINST SALE OR NOT? In the case of Mohd. Shariq v Punjab National Bank and Others, the Hon’ble Supreme Court bench consisting of Justice Ajay Rastogi and Justice Bela M. Trivedi held that in the present circumstances where an the auction purchaser was not informed regarding the proceedings pending before DRT at the time of auction or even thereafter, the Rule 9(5) of SARFAESI Rules cannot be applied as committing a simple default. The bank herein had initiated recovery proceedings against its Borrower, and issued notice. The Appellant had the highest bid in the auction and deposited earnest money and 25% of the bid amount. Parallelly, the Borrower challenged the auction notice before the DRT, where the Bank was permitted to proceed with the auction but to keep confirmation of the sale in abeyance until further orders. The Appellant filed a writ petition before the Hon’ble High Court of Uttarakhand to withhold the initiations re-auction proceedings by the Bank as the balance amount was not paid by the Appellant. The High Court set aside the re-auction notice and directed the Bank to execute the deed in favour of the Appellant, who was further directed to deposit the balance amount. This was upheld in the Division Bench Appeal which directed the Bank to return the bid amount and granted liberty to the appellant to initiate independent proceedings before the competent forum for  the recovery of the forfeited amount by the bank. The Appellant approached the Supreme Court which was of the view that since there was no dispute to the auction purchaser’s right to recovery of forfeited amount therefore, there is no reason that the Appellant be relegated to avail other remedial mechanisms for recovery of the undisputed amount. Read More... CODE OF CRIMINAL PROCEDURE, 1973 CAN THERE BE FURTHER INVESTIGATION ONCE A FINAL CLOSURE REPORT HAS BEEN FILED? The bench of Justices Surya Kant and J B Pardiwala in the Supreme Court matter State Through Central Bureau of Investigation v Hemendhra Reddy & Anr. held that Section 173(8) of the CrPC permits further investigation, and even dehors any direction from the court, it is open to the police to conduct proper investigation, even after the court takes cognizance of any offence on the strength of a police report earlier submitted. In this case, the CBI had filed a detailed chargesheet against the Respondents, who moved a petition for quashing the same. The High Court quashed the entire prosecution of CBI against on the ground that the Special Court had no jurisdiction/power to grant permission to conduct further investigation. On appeal, the Supreme Court remarked the order passed by the Ld. Magistrate as a judicial order whereby final report under Section 173 was accepted and held that there is no need for recalling, reviewing or quashing the said order for carrying out further investigation under Section 173(8) of the CrPC. Read More... HINDU MARRIAGE ACT, 1955 DIVORCE CAN BE GRANTED UNDER CRUELTY IF MARRIAGE HAS BROKEN DOWN IRRETRIEVABLY In the matter of Shri Rakesh Raman vs Smt. Kavita, the Hon’ble Apex Court has held that under the ground of divorce , that is, cruelty, the marriages broken down irretrievably, can be dissolved.  The Court opined that "continuation of this marriage would mean continuation of cruelty, which each now inflicts on the other". The Supreme Court took into consideration the recommendation made in the matter of Naveen Kohli v. Neelu Kohli (2006) 4 SCC 558 and 71st and 217th reports of the Law Commission of India,  that a marriage, which has de facto broken down, needs to be de jure recognised as such by the law. In this present matter, a married couple lived together for four years and now had been living apart for almost 25 years. As there were several cases filed by them against each other, the Family Court had dissolved the marriage on the ground of cruelty, which the Hon’ble High Court of Delhi reversed. The Supreme Court upheld the family court decision and further held that in the given circumstances, the marriage had broken down beyond repair with so much bitterness between the parties that it had to be read as cruelty under Section 13(1)(ia) of the HM Act. Hence, the decree of divorce was passed. Read More... OTHER RELEVANT JUDGMENTS PASSED BY VARIOUS COURTS UNDER VARIOUS LAWS RIGHT OF PUBLICITY NOT ABSOLUTE A Single Judge in Hon’ble High Court of Delhi in the matter Digital Collectibles PTE Ltd And Ors. v. Galactus Funware Technology Private Limited and Anr. has observed that the use of celebrity names or images for lampooning, satire, parodies, art, scholarship, music,  academics, news or similar uses are permissible as a facet of the right of freedom of speech and expression under Article 19(1)(a) of Constitution of India and that it would not infringe a celebrity’s right of publicity. In this matter, the Plaintiff’s website “Rario”, a digital collectible platform using exclusively licensed Digital Player Cards as NFTs, sought interim relief against an allegedly similar application “Striker.” The nature of business of both parties are similar. The suit alleged that the defendants used the Digital Player Cards with NFTs which included artistic drawings of the plaintiff, thus indulging in the act of infringement and breaching their right of publicity. The High Court dismissed the application and held that the plaintiff cannot claim exclusive rights over the use of NFT technology as it is freely available. The Court further held that on-field performances by OFS platforms is protected by the right to freedom of speech and expression under Article 19(1)(a) of the Constitution of India and it extends to commercial speech as well. Therefore, such publicly available information could not be the subject matter of an exclusive license by the player in favour of a third party, thus does not infringe the right to publicity. Thus, in absence of a specific legislation, the right to publicity cannot be an absolute right in India.. Read More... PROCEEDINGS WILL NOT GET INVALIDATED DUE TO VACANCY OR DEFECT IN THE COMPOSITION OF CCI The Hon’ble High Court of Delhi in Alliance of Digital India Foundation v. Competition Commission of India and Ors. has held that it is clear that any adjudicatory process wherein there is a vacancy or any defect in the constitution of CCI, it would not invalidate its proceedings. Upon being allegedly aggrieved by the non-compliance/violation of impugned order of CCI, the petitioner approached the High Court seeking reliefs as the adjudication was at a standstill. The High Court opined that when Section 15 of the Competition Act uses the word “or”, it clearly indicated that the same ought to be read disjunctively hence as a saving clause in regard to a situation where a vacancy or a defect in constitution of the CCI would arise. Therefore, merely defect or a vacancy in the in the constitution of the CCI would not take away the jurisdiction of a statutory authority like CCI to adjudicate proceeding before it as there is no minimum number of members to constitute a valid quorum. Hence, there is no impediment, legal or otherwise, in directing the CCI to take up the applications under Section 42 of the Act. Read More... WHETHER REGISTERED LEASE DEED CAN BE AMENDED BY WRIT COURT UNDER ARTICLE 226? A Division Bench of the Hon’ble Supreme Court consisting of Justice Ajay Rastogi and Justice Bela M. Trivedi recently held in Gwalior Development Authority & Anr. v. Bhanu Pratap Singh, that a lease deed which is compulsorily registered under Section 17 of the Registration Act cannot be open to be altered or amended even by the High Court in exercise of its jurisdiction under Article 226 of the Constitution.The respondent under Article 226 of the Constitution filed a writ against the appellants to execute the lease deed for the remaining area of the total land in addition to the lease earlier executed in favour of the respondent. The division bench of Hon’ble High Court of Madhya Pradesh at Gwalior directed the appellants to execute the lease deed in favour of the respondent for the subject area to which an Appeal was filed and allowed before this Court. The Supreme Court held that the transaction had attained finality and undue indulgence being shown to the respondent in extending the benefit to deposit the instalment in the tender document. Exercise of such power was held as clear abuse of discretion being violative of Section 14 of the Constitution. Read More... ORGAN DONATION DOES NOT REQUIRE THE CONSENT OF SPOUSE, IF WITHHELD FOR IRRELEVANT REASONS In Prasanna Laxmikant Joshi and Anr. v. State of Maharastra and Ors., the division bench of the Hon’ble High Court of Bombay comprising Justices Gautam Patel and Neela Gokhale held that under the Transplantation of Human Organs and Tissues Act, 1994 there is no provision where the consent of a spouse is required to ab able to donate organ, especially when the spouse had been withholding consent for extraneous reasons. This petition was filed for a kidney transplant of a senior citizen suffering from renal failure, and requiring dialysis daily. A suitable donor was found, but the wife of donor claimed that the donor had borderline diabetes cholesterol and triglycerides, despite the donor getting a clean bill of health from medical authorities. The High Court set aside the orders of the Regional Authorisation Committee and appellate authority who mandated the requirement of spousal consent for organ donation of the donor. The Court held, on consent, that as long as there was a willing donor and a willing recipient, no question arose of a consent of a near relative. The marital issues of the donor and his wife cannot be allowed to infringe the petitioner’s fundamental right to life of under Article 21. Read More...   NEW DELHI X -3, Green Park Main, New Delhi, 110016, Telephones: +91 11 2652 0041-42 For further / specific information, please contact us at: info@tandonandco.com Disclaimer: The contents of this newsletter are intended for information purposes only, and parts of this newsletter are based on news reports and have not been independently verified. The newsletter is not in the nature of a legal opinion or advice. 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