Newsletter ARBITRATION AND CONCILIATION ACT, 1996 MAY, 2023 WHETHER NEGOTIATIONS BETWEEN PARTIES WILL NOT POSTPONE THE CAUSE OF ACTION The Division Bench of the Hon’ble Supreme Court, in the matter of M/s. B and T AG v. Ministry of Defence, held that the mere negotiations will not postpone the “cause of action” for the purpose of limitation since the Legislature has already prescribed a limit of three years for the enforcement of a claim and that this statutory time period cannot be defeated on the ground that the parties were negotiating. The dispute arose in relation to alleged wrongful encashment of bank guarantee and wrongful imposition of liquidated damages after alleged delay in the supply of goods beyond the contractual time period. Under the Section 11 of Arbitration and Conciliation Act, 1996 petition filed by the petitioner for appointment of arbitrators, the Hon’ble Court deliberated as to what was the ‘breaking point’ at which any reasonable party would abandon efforts to settle the dispute at hand. The Hon’ble Court observed that cause of action becomes important for the purposes of calculating the limitation period for bringing an action. It is imperative that a party realises when a cause of action arises. If a party simply delays sending a notice seeking reference under the Act 1996 because they are unclear of when the cause of action arose, the claim can become time-barred even before the party realises the same. The Hon’ble Court concluded that the petition was hopelessly time barred as negotiating in anticipation of some amicable settlement would not save the period of limitation.The Division Bench of the Hon’ble Supreme Court, in the matter of M/s. B and T AG v. Ministry of Defence, held that the mere negotiations will not postpone the “cause of action” for the purpose of limitation since the Legislature has already prescribed a limit of three years for the enforcement of a claim and that this statutory time period cannot be defeated on the ground that the parties were negotiating. The dispute arose in relation to alleged wrongful encashment of bank guarantee and wrongful imposition of liquidated damages after alleged delay in the supply of goods beyond the contractual time period. Under the Section 11 of Arbitration and Conciliation Act, 1996 petition filed by the petitioner for appointment of arbitrators, the Hon’ble Court deliberated as to what was the ‘breaking point’ at which any reasonable party would abandon efforts to settle the dispute at hand. The Hon’ble Court observed that cause of action becomes important for the purposes of calculating the limitation period for bringing an action. It is imperative that a party realises when a cause of action arises. If a party simply delays sending a notice seeking reference under the Act 1996 because they are unclear of when the cause of action arose, the claim can become time-barred even before the party realises the same. The Hon’ble Court concluded that the petition was hopelessly time barred as negotiating in anticipation of some amicable settlement would not save the period of limitation. Read More... SPECIFIC RELIEF ACT, 1963 WHETHER CANCELLATION OF AN INSTRUMENT UNDER SECTION 31 IS NOT AN ACTION IN REM The Hon’ble Supreme Court in M/S Asian Avenues Pvt. Ltd. v. Sri Syed Soukat Hussain relied upon the findings of a three bench judgment of the Hon’ble Supreme Court titled Deccan Paper Mills Company Limited v Regency Mahavir Properties & Ors., which held that it is impossible to hold that an action instituted under Section 31 of the Specific Relief for cancellation of an instrument is an action in rem. The issue between the parties pertained to method of dispute resolution in the matter of cancellation of a Development Agreement, which contained an arbitration clause. The Ld. Single Bench of the Hon’ble Supreme Court set aside the impugned judgment of the High Court and restored the judgment passed by the trial court which directed the dispute to be referred to arbitration and there is no application of Section 31 of the Specific Relief Act. Read More... SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 CAN A STAY BE GRANTED WHEN ON AUCTION HAS BEEN TAKEN BY THE BORROWER  SECTION 13(8) A writ petition under Article 226 of the Constitution of India titled G. Vikram Kumar v. State Bank of Hyderabad and Ors ,was filed challenging the issuance of e-auction notice pursuant to action initiated by the Bank in exercise of their powers under Section 13(4) of the SARFAESI Act, before the Hon’ble Supreme Court. Since Respondent 3 (borrower) took a loan from Respondent 2 and was unable to repay the loan, an auction was held for the same. The Appellant was a declared successful bidder and made 25% payment of the bid amount on date of e-auction itself. The Respondent filed a writ petition before the High Court challenging the e-auction. Neither the fact that the auction has already taken place was not disclosed in the petition nor was the Appellant made a party to the case. The Hon’ble Supreme Court quashed the stay of auction granted by the High Court as it held that to challenge any steps taken by the Bank under Section 13(4) of the SARFAESI Act, the aggrieved party has a remedy under the SARFAESI Act by way of appeal under Section 17 of the SARFAESI Act to approach the DRT, which was an available alternative statutory remedy. The Hon’ble Supreme Court held that there was a material error in the order made by the High Court by allowing the writ petition as the borrower did not invoke 13(8) and did not agree to clear the entire dues therefore, it is debatable whether Section 13(8) shall apply in favour of a person who is merely an agreement to the sale holder or a borrower who is ready and willing to pay an entire debt. Hence, it was directed that full payment of the auction sale consideration by the Appellant and interest from the date of auction to be paid, till the actual amount is paid. Read More... CAN THERE BE AN EXEMPTION SALES TAX UNDER DOCTORINE OF LEGITIMATE EXPECTATIONS? The Hon’ble bench consisting of M.R. Shah, J. and Krishna Murari, J. gave a split verdict on the application of the doctrine of legitimate expectations on the grant of sales tax exemption, in the matter of M/s. K.B. Tea Product Pvt. Ltd. v. Commercial Sales Tax Officer, Siliguri & Ors. before the Hon’ble Supreme Court. The appellant had established a small-scale industrial unit for manufacturing blended tea, relying on the incentive provided under the amended State Scheme of Incentives for Cottage and Small-Scale Industries, 1999 of exemption from payment of sales tax for a specified period upon the purchase of raw materials required for carrying the manufacturing activity in said units. This provision was amended in 2001 Act and the words “blending of tea” was omitted from the definition of “manufacture” given under the Act. Thereafter, the Appellant was ceased to be a manufacturer and hence, was no longer entitled to a sales tax exemption. This action was first challenged in the Tribunal where it was rejected and this decision of the Tribunal was affirmed by the High Court. An appeal was filed in the Supreme Court in which the appellant claimed that the right to exemption cannot be taken away on the grounds of legitimate expectation as well as promissory estoppel. The bench concurred on the opinion that exemption cannot be granted as a matter of vested right. Further, M. R. Shah, J. also held that the doctrine of legitimate expectation cannot be applied to sale tax exemption. However, Krishna Murari, J. held that this doctrine flows from the doctrine of the rule of law and binds that authority in making fair and consistent policy decisions. It was held that a legitimate expectation was created by the authorities which was then taken away by the policy decisions without providing any justification or explanation. Therefore, the authority must be held accountable. Read More... PREVENTION OF MONEY LAUNDERING ACT, 2002 WHETHER FILING OF CHARGESHEET FOR PREDICATED OFFENCES BE A GROUND FOR GRANTING BAIL TO ACCUSED? The Hon’ble Supreme Court in the matter of Directorate of Enforcement v. Aditya Tripathi held that the fact that a chargesheet has been filed for predicate offences cannot be a ground for granting bail on scheduled offences under PMLA, 2002. In the present case, bail was granted by the High Court of Telangana for offences under IPC, Information Technology Act, 2000 and PMLA, 2002. The Hon’ble Supreme Court allowed the appeal filed by the ED and quashed the decision of the High Court of releasing the accused on bail on the ground of filing of the charge sheet. The Hon’ble Court held that merely because other accused were discharged or acquitted cannot be a ground to grant bail. Further, it was also held that the investigation for predicate offences and investigation by ED for scheduled offences are different and distinct. That the High Court did not take the rigour of Section 45 or the seriousness of offences alleged against the accused into consideration. Read More... WHETHER RIGHT TO CHOOSE GENDER IDENTITY FALLS UNDER THE AMBIT OF INTEGRAL PART OF ONE’S IDENTITY The Rajasthan High Court in Chinder Pal Singh v. The Chief Secretary, Govt. of Rajasthan & Ors. held that the right to choose gender identity is integral to one’s personality and forms the basis of self-determination, dignity and freedom. The appellant was born as a female but at the age of 32 years, he underwent a sex reassignment surgery and hormonal therapy to become male. However, the service records mentioned the status as female. When he made an application for changing his gender and name, it wasn’t altered even after a delay of three years. Therefore, this petition was made before the High Court. The Hon’ble Court relied on the Supreme Court decision passed in National Legal Services Authority v. Union of India and statute in the Transgender Persons (Protection of Rights) Act, 2019 and Rules 2020 and held that transgenders have the right to self-perceived gender identity and protection of fundamental rights under Articles 14, 15, 19 and 21 of the Indian Constitution. Hence, it was held that the Appellant could, therefore, get his name and gender changed in the service record. If the right to self-perceived identity is denied to an individual who underwent surgery before the enactment, it would defeat the purpose of the legislation. Read More... HINDU MARRIAGE ACT, 1955 AND CONSTITUTION OF INDIA CAN ‘IRRETRIEVABLE BREAKDOWN OF MARRIAGE’ BE A GROUND FOR DIVORCE? The Hon’ble Supreme Court had effectively disposed of the matter of Shilpa Sailesh v Varun Sreenivasan wherein marriage of the parties was dissolved by granting divorce by mutual consent with the two judges’ bench exercising jurisdiction under Article 142 of the Constitution of India. In view of the conflicting ratio judgments of the Apex Court on applicability of their power and jurisdiction under Article 142, this matter was referred to a three judges’ bench. The Constitutional Bench concluded that the Hon’ble Court could depart from the procedure as well as the substantive laws, as long as the decision is exercised based on considerations of fundamental general and specific public policy. While deciding whether to exercise discretion, the Hon’ble Court must consider the substantive provisions as enacted and not ignore the same. It was further held that in view of settlement between the parties, the Hon’ble Court had the discretion to dissolve the marriage by passing a decree of divorce by mutual consent, without being bound by the procedural requirement to move the second motion and could exercise of power under Article 142(1) of the Constitution of India to dissolve the marriage on the ground of its irretrievable breakdown. The Hon’ble Court is required to be satisfied that the facts established show that the marriage has completely failed and there is no possibility that the parties will cohabit together, and continuation of the formal legal relationship is unjustified. 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. They may not encompass all possible regulations and circumstances applicable to the subject matter and readers are encouraged to seek legal counsel prior to acting upon any of the information provided therein. 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