Read More: Pee Empro Exports Private Limited v United India Insurance Company Limited
Simran Singh
New Delhi, June 15, 2023: The Delhi High Court, while dealing with a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 in terms of the Arbitration Clause incorporated in the Standard Fire and Special Perils Policy, opined that if there was a valid existing arbitration agreement between the parties, and there was denial of the existence of any arbitrable dispute by one of the parties and refusal to appoint an arbitrator then the Court, in line with the letter and spirit of the Arbitration Act as well as the doctrine of kompetenz-kompetenz, should lean towards referring the matter to arbitration. Therefore, in the facts and circumstances of this case, the Court referred the dispute raised herein to an Arbitral Tribunal.
The Single Judge Bench of Justice Chandra Dhari Singh noted that the arbitration clause vis-a-vis classes 13 pertained to the resolution of disputes arising out of the contract, and thus was in accordance with the Doctrine of Severability. The arbitration clause would be deemed as a separate and severable clause and the arbitration agreement would subsist even after the contract between the parties had extinguished which had also been statutorily recognised under Section 16(1) of the Arbitration Act.
The Bench further reiterated that in view of the clear legislative mandate of the Arbitration Act, and the Doctrine of Severability and kompetenz-kompetenz principle, it was the Arbitral Tribunal which was the preferred first authority to adjudicate all questions of non-arbitrability and the Court had merely been conferred with the power of ‘second look’ with regards to the same.
In the matter at hand, the said policy was valid from 01-11-2017 to 31-10-2018. Due to an electric short circuit, a fire broke out in the premises of the petitioner on 13-06-2018, which caused considerable loss and damage. The same was claimed as Rs. 11,47,67,511/-. Accordingly, the respondent had appointed a surveyor to assess the damage caused, subsequent to which a consent letter dated 23-01-20202 was agreed upon by the petitioners to accept their loss being assessed at Rs.9,81,00,000/-. However, the claim amount of Rs.8,38,10,920/- was released by the respondent on 15-09-2022.
Aggrieved by the deficiency in the claim granted, the petitioner invoked arbitration in terms of clause 13 contained in the said policy and accordingly sent an arbitration notice dated 20-09-2022, calling upon the respondent to suggest names of the arbitrator and to appoint them by mutual consent, and to resolve the dispute pertaining to the claim. Thereafter, the respondent sent a reply dated 26-10-2022, denying the existence of any arbitrable dispute between the parties and refused to appoint an arbitrator. Hence, the present petition.
The issue for consideration before the Court was whether the instant dispute could be referred to arbitration notwithstanding the ‘Discharge Voucher’ given by the petitioner.
The Bench perused clause 13 of the policy which pertained to arbitrability of dispute between the parties in the instant case which provided that once the respondent company had accepted its liability, any dispute or difference arising qua the quantum to be paid under this policy would independently of all other questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties. Therefore, the Court stated that there existed a valid arbitration agreement between the parties and the question of quantum of claim was expressly stated in the agreement as one that could be decided in the course of arbitration.
The Bench referred to a catena of cases wherein it was held that an arbitration agreement that was embedded within a contract would always be considered as separate and severable clause, and despite a reference being made by the court, the arbitrator was free to decide on their jurisdiction including the existence of the arbitration agreement in accordance with the kompetenz-kompetenz principle, which had been recognised under Section 16 of the arbitration Act.
The Court answered the question of whether an Arbitral Tribunal was competent to rule on its own jurisdiction on the kompetenz-kompetenz principle, including on the existence or validity of the arbitration agreement which was no longer res integra, in affirmative. It had further laid down that the very purpose of the kompetenz-kompetenz principle was to minimise judicial interference in arbitral proceedings.
The Bench stated that the Clause 13 of the Policy between the parties contained a valid arbitration agreement, and neither of the parties had disputed the validity and existence of the arbitration clause. Therefore, it was concluded that the arbitration agreement between the parties under Clause 13 was deemed to be in existent and a separate agreement under the Doctrine of Severability, and the arbitration agreement would not have extinguished along with the contract between the parties.
Further, the Court stated that the issue with regard to whether the petitioner’s claims would be maintainable on account of the Discharge Voucher that had been submitted by the petitioner must be adjudicated by the Arbitral Tribunal, in accordance with the judicial mandate of the amendments to the Arbitration Act which purported to minimise judicial intervention in arbitration proceedings and the same would also be in accordance with the kompetenz-kompetenz principle.
The Bench opined that the Court’s power while hearing a Section 11 petition was to test whether or not a valid arbitration agreement existed on the basis of the facts and law. Only when the Court was certain that a valid arbitration agreement did not exist or that the subject matter was not arbitrable, then a referral may be refused, and this was strictly applicable to a very limited category of cases. However, if there was even the slightest doubt, the rule was to refer the dispute to arbitration, and otherwise, it would encroach upon what was essentially a matter to be determined by the tribunal.
The Court stated that a close reading of the clause 13 revealed that only when the respondent company had accepted its liability, any dispute or difference arising qua the quantum to be paid under this policy would be independently of all other questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties. “In the instant case, the existence of liability has not been disputed by the Respondent Company, therefore, prima facie the dispute regarding the quantum of claims can be determined by an arbitrator. This is more so since there exists a valid arbitration agreement between the parties and the question of quantum of claim is expressly stated in the agreement as one that can be decided in the course of arbitration.”
The Court had observed that“It is also clear that the issues pertaining to the quantum of claim that is accruable to the Petitioner and whether the Petitioner’s claims would be maintainable on account of the Discharge Voucher are to be decided by the Arbitral Tribunal under the kompetenz-kompetenz principle and any decision by this Court would be deemed as going into the merits of the dispute, which is not at all warranted under law. Thus, these issues are not being dealt with in the instant petition under Section 11(6) of the Act.”
Accordingly, the Court appointed a sole Arbitrator to adjudicate the disputes between the parties which had arisen under the said Policy, who would ensure the compliance of Section 12(1) of the Arbitration Act.
Read More: Raju v State of Kerala
Simran Singh
New Delhi, June 15, 2023: The Kerala High Court while dealing with the case wherein the father (appellant-convict) had challenged his conviction passed by the Trial Court for sexually abusing and beating up his minor daughter, now major, with dangerous weapons, partly allowed the appeal, affirming the conviction of the appellant-convict and modifying the sentence for the offence punishable under Section 376(2)(f) of the Indian Penal Code, 1860 (IPC) to rigorous imprisonment for a period of 20 years, instead of imprisonment for the remainder of his natural life.
“Having regard to the social background of the parties and having regard to the fact that there would be more heinous crimes than the one involved in this case, we deem it appropriate to modify the sentence imposed on the accused for the offence punishable under Section 376(2)(f) of the IPC to rigorous imprisonment for a period of 20 years, instead of imprisonment for the remainder of his natural life,” said a Division Bench of Justice P.B. Suresh Kumar and Justice C.S. Sudha
In the matter at hand, the appellant challenged his conviction for the offences punishable under Sections 323, 324, 376(2)(f) and 376(2)(n) of the Indian Penal Code, 1860 (IPC) and Section 23 of the Juvenile Justice (Care and Protection of Children) Act, 2000 (JJ Act, 2000).
It was the case of the prosecution that the appellant-convict used to beat his daughter with dangerous weapons while she was a juvenile and had committed rape on her at their residence on several occasions right from her childhood and that the last occurrence of sexual assault took place on 30.08.2013.
On an appraisal of the evidence on record, the Trial Court had found the appellant-convict guilty of offences punishable under Sections 376(2)(f) and 376(2)(n) of IPC and Section 23 of the JJ Act, 2000.
The appellant-convict was accordingly convicted and sentenced to undergo imprisonment for the remainder of his natural life and to pay a fine of Rs.1,00,000/- and in default of payment of fine, to undergo simple imprisonment for two years for the offence punishable under Section 376(2)(f) of IPC. The appellant-convict was also sentenced to undergo rigorous imprisonment for 10 years and to pay a fine of Rs.1,00,000/- . and in default of payment of fine, to undergo simple imprisonment for 2 years for the offence punishable under Section 376(2)(n) of IPC. He was also sentenced to undergo rigorous imprisonment for 6 months for the offence punishable under Section 23 of the JJ Act, 2000.
The issue for consideration before the Court was:
- Whether the prosecution had established the guilt of the appellant-convict under Sections 376(2)(f) and 376(2)(n) of IPC and Section 23 of JJ Act, 2000?
- Whether the sentence imposed on the appellant-convict was proportionate to the gravity of the guilt established?
The Bench stated that in order to prove the accusation of sexual assaults committed on the victim, the prosecution had only the evidence of the victim. “It is trite that a conviction could be found on the testimony of a prosecutrix alone in a case under Section 376 of IPC and no doubt, the evidence of the prosecutrix in such cases was of a sterling quality, unless there are compelling reasons for seeking corroboration.”
The Bench referred to the case of Rai Sandeep v. State (NCT of Delhi) which had stated that a sterling witness was a witness whose evidence was natural and consistent with the case of the prosecution qua the appellant-convict and such witnesses, under no circumstances, would give room for any doubt as to the factum of the occurrence and the evidence would have co-relation with each and every one of other supporting material, including expert opinions. It was also held in the said case that such evidence would also satisfy the test applied in cases involving circumstantial evidence, viz, there should not be any missing link in the chain of circumstances to hold the appellant-convict guilty of the offence. “…the version of such witnesses on the core spectrum of the crime should remain intact while all other attendant materials, namely, oral, documentary, and material objects should match the said version in material particulars.”
The Bench was of the view that the evidence tendered by the vicim appeared to be natural and consistent with the case of the prosecution and the core spectrum of the crime remained intact throughout the cross-examination. “PW1 has not given room for any doubt as to the material particulars deposed by her especially in relation to the sexual assaults committed on her by the appellant-convict. The evidence tendered by her has co-relation with each and every other supporting evidence, including the expert opinion given by the doctor who examined her.”
The Bench, therefore, stated that the victim could certainly be regarded as a sterling witness and the Trial Court was justified in holding that the appellant-convict was guilty of the offences punishable under Sections 376(2)(f) and 376(2)(n) of IPC and Section 23 of the JJ Act, 2000.
The Bench disagreed with the case of the appellant-convict that the victim had not complained about the alleged sexual assaults till she attained the age of 19 years thus, her evidence needed to be scrutinised with caution. It was stated that a child who was subjected to sexual assault by her father, not disclosing the same to anyone during her childhood was of no reason to think that what was spoken to by her at a matured age was false. The Bench concluded that no daughter would depose against her own father in a manner in which the victim in the case on hand had deposed, for a flimsy reason that the appellant-convict used to scold her for showing reluctance to go to school.
The Bench stated that there was no merit in the argument by the appellant-convict that there was a delay in lodging the First Information Report and that the said delay was fatal to the case of the prosecution. “As it is well settled, the delay in lodging the First Information Report will not be fatal, if the same is satisfactorily explained. Going by the materials on record as narrated in the preceding paragraphs, we are of the view that the delay in lodging the First Information Report in the case on hand, has been satisfactorily explained by the prosecution.”
The Court further disagreed with the contention of the appellant-convict that the FSL Report did not show any seminal plasma or stains even under ultra violet examination on the Mat which the appellant-convict had allegedly sexually assaulted the victim and therefore, the accusation was false. The Bench stated that the argument was flimsy in nature.
The Bench considered another argument raised by the appellant-convict that the churidar top of the victim contained semen and human spermatozoa, and the same could not be proved as that of the appellant-convict. It was held that the prosecution could have surely attempted a DNA examination of the semen and human spermatozoa found on the cloth, but, merely for the reason that the same was not done, the Court could not reject the prosecution case, especially when there was overwhelming evidence to hold that the appellant-convict was guilty of the offences alleged.
The Court noted that the appellant-convict objected on the conduct of the prosecution in not bringing on record the report of the chemical analyst on the vaginal swab and smear which created a serious doubt as to the genuineness of the case of the prosecution that the victim was subjected to recent sexual assaults. It was stated that the evidence tendered by the victim coupled with the evidence tendered by the doctor who had conducted the medical examination, established beyond reasonable doubt the case of the prosecution, and merely on account of the fact that the vaginal swab and smear were taken for chemical analysis and its report had not been brought on record, the prosecution case could not be rejected. The court was also of the view that there was no merit in the argument advanced by the appellant-convict that non-examination of the brother of the victim was fatal to the prosecution case.
“We have perused meticulously the various decisions cited by the learned counsel for the appellant-convict and we find that those are all decisions rendered purely on the facts of those cases having regard to the general principles highlighted therein and the said decisions may not have any application on the facts of the present case.”
The Bench while dealing with the second issue at hand vis-a-vis whether the sentence imposed was proportionate to the gravity of the guilt established, the Court stated that the Constitutional Courts were empowered to modify the punishment within the punishment provided for in the IPC for specified offences. The Court deemed it appropriate to modify the sentence imposed on the appellant-convict for the offence punishable under Section 376(2)(f) of the IPC to rigorous imprisonment for a period of 20 years, instead of imprisonment for the remainder of his natural life.
Read Order: Arya Samaj Safdarjung Enclave v. CIT(E) Civic Centre, Minto Road, New Delhi
Chahat Varma
New Delhi, June 15, 2023: Considering it a bonafide mistake, the Delhi bench of the Income Tax Appellate Tribunal has allowed Arya Samaj Safdarjung Enclave (assessee) to file a fresh Form 10A for registration under Section 12A(1) (ac) of the Income Tax Act.
In the matter at hand, the assessee filed an application for registration under Section 12A(1) (ac) of the Income Tax Act. However, the assessee inadvertently selected the wrong form (Form 10AB) instead of Form 10A while filing the application. As a result, the Commissioner of Income Tax (Exemptions) [CIT(E)] rejected the application for registration on the grounds of wrongly uploading the Form.
The Tribunal noted that the assessee had filed a signed Form 10A along with a submission dated 22.09.2022. In the submission, the assessee acknowledged that it was a bona fide mistake on their part to select Form 10AB instead of Form 10A. They requested the CIT(E) to accept the Form 10A for their registration application.
Thus, the Tribunal deemed it appropriate to condone the delay in filing the correct Form 10A. The Tribunal held that if the fresh Form 10A is filed, the CIT(E) shall consider the application filed under Section 12A (1) (ac) of the Income Tax Act on its merits and decide it in accordance with the law, without raising the issue of limitation.
Read Order: Smit Singapore Pte. Ltd v. Dy. Commissioner of Income Tax International Taxation Circle–4(2)(1), Mumbai
Chahat Varma
New Delhi, June 15, 2023: In a recent ruling, the Mumbai bench of the Income Tax Appellate Tribunal has held that the receipts generated from the time charter services provided by Smit Singapore (appellant) for the vessel 'Smit Borneo' to Boskalis Offshore Contracting BV in India was not taxable as royalty under Article 12(4) of the India - Singapore Double Tax Avoidance Agreement (DTAA).
Factual matrix of the case was that the assessee, a Singapore-based company operating in the maritime sector, was primarily involved in salvage, wreck removal, environment protection, and consultancy services. In the year under consideration, the assessee generated revenue through its contract with Boskalis Offshore Contracting BV (BOC BV) related to the charter of the vessel named Smit Borneo. The assessee chartered the vessel, Smit Borneo, along with its crew to BOC BV. BOC BV, in turn, had a contract with BG Exploration and Production India Ltd for conducting specific activities related to the exploration and extraction of mineral oils in the Tapti Gas Field.
During the assessment proceedings, the assessee, who declared a total income of Rs. Nil and claimed a refund of Rs. 1,25,41,070, was asked to provide reasons as to why the receipts from BOC BV should not be considered taxable as royalty. The assessee contended that since the vessel along with the crew was used by the assessee for rendering services to BOC BV, it cannot be held as being in the nature of contract of hiring equipment by BOC BV from the assessee and should not be taxable as royalty under the Income Tax Act. However, the Assessing Officer held that the consideration received by the assessee was in the nature of royalty, since control and ‘use’ or ‘right to use’ had been passed on to BOC BV by the assessee.
The bench comprising of Amarjit Singh (Accountant) and Sandeep Singh Karhail (Judicial) noted that the Co-ordinate bench in assessee’s own case in Smit Singapore Pte Ltd v. Deputy Commissioner of Income Tax (I.T.) - 4(2)(1), Mumbai [LQ/ITAT/2020/5762], had ruled that the receipts earned by the assessee from the hire of the vessel, Smit Borneo, on a time charter basis to Leighton India Contractors Private Limited, were not considered as royalty under Article 12 of the India-Singapore DTAA.
The bench held that nothing had been brought on record to show that during the entire operation, navigation and management of the vessel, it was not in exclusive control and command of the assessee.
Thus, the bench upheld the plea of the assessee and deleted the addition in respect of receipts on hire of vessel on a time charter basis.
Read Order: Sanjeeva Prasad Ponnapula v. Dy. C.I.T Central Circle 3(2) Hyderabad
Chahat Varma
New Delhi, June 15, 2023: The Hyderabad bench of the Income Tax Appellate Tribunal has ruled that taxing the sale proceeds in the hands of the assessee as the GPA holder, when they had already been taxed in the hands of M/s Trinity Infraventures for previous assessment years, would result in double taxation.
In the matter at hand, it was contended by the assessee that the transfer of land in different survey numbers was done by the assessee in his capacity as a ‘General Power of Attorney holder’ and not as the actual owner. Therefore, it was submitted that the income arising from the transfer of these properties by the assessee, who acted solely as a GPA holder, should not be taxed in the assessee's hands.
The order of the CIT (A) in assessee’s own case for the same A.Y. in the first round of litigation was brought to the attention of the bench, wherein the CIT (A) had observed that the appellant was only GPA holder in respect of the property and the capital gains arising out of the transaction was not assessable in appellant’s hands.
The bench opined that if the company which had received the payments from the buyers at the instance of the assessee, had already paid taxes on account of the sale of the properties, then, there was no question of taxing the same in the hands of the assessee.
Consequently, the Tribunal decided to restore the issue to the Assessing Officer's file for reconsideration.
Read Order: In Re: M/s. India Japan Lighting Private Limited and others
Chahat Varma
New Delhi, June 15, 2023: The Maharashtra Authority for Advance Rulings has recently ruled that the 'LED socket assembly' intended to be imported by M/s. India Japan Lighting Private Limited, should be classified under Heading 8512 and specifically under sub-heading ‘8512 9000’. Furthermore, the ruling stated that the product was eligible for Nil basic custom duty under the India-Japan Free Trade Agreement, as per the Notification No. 69/2011-Cus, dated 29.7.2011.
The applicant had submitted that they intended to import 'LED socket assembly' for the manufacture of Front Fog Lamp specifically for automobile applications. The applicant sought advance ruling on the classification of subject goods.
The single-member bench noted that the 'LED Socket Plug Assembly' was a combination of LED assembly with associated circuitry and a fixture designed for an anti-fog lamp for vehicles. It was further observed that this assembly needed to be combined with other parts such as a lens, inner lens, holder, filter, adjusting screw assembly, and body in order to create a complete fog lamp for automobiles. According to the CTH 8512, this heading encompassed electrical lighting or signaling equipment specifically used for cycles or motor vehicles. It included various types of headlamps, including lamps equipped with dimming or dipping attachments, as well as diffused driving lamps and anti-fog lamps.
The bench also observed that entry at serial number 656 in the notification granted eligibility for nil basic custom duty under the India-Japan Free Trade Agreement, provided a valid Country of Origin (COO) Certificate was produced for all goods falling under heading 8512 90 of the Customs Tariff Act, 1975.
Read Order: In Re: M/s. Brightpoint India Pvt. Ltd and others
Chahat Varma
New Delhi, June 15, 2023: The Maharashtra bench of the Authority for Advance Rulings has ruled that the 'Interactive Display System (ViewBoard)' should be classified under Heading 8471, specifically under sub-heading 84714190 as 'Other automatic data processing machines: Comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined'.
M/s. Brightpoint India Pvt. Ltd. (applicant), engaged in the distribution of Information Technology and Telecommunication products, had sought advance ruling on the classification of 'Interactive Display System (ViewBoard)’.
The Authority determined that the subject goods, based on their working and features, were not merely units of automatic data processing (ADP) machines or ADP machines presented in the form of systems. Instead, they were considered to be ADP machines themselves.
“As the machines under consideration do not have a keyboard, they appear to be classifiable as other ADP machines under 2nd one-dash subheading. Subheading 847141 covers other ADP machines; comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined. For the machines under consideration, the LED screen satisfies the requirement for output and the touchscreen satisfies the requirement for input apart from the CPU inbuilt into the device. Therefore, the subject goods appear to be classifiable under subheading 847141 and more specifically under subheading 84714190,” observed the Authority.
The Authority held that the subject goods were capable of performing plethora of functions independently on standalone basis and these devices were much more than mere display devices. In fact, display was only one of the features of the goods and cannot be construed to be its only function, much less its principal function.
The Authority also noted the subject goods satisfied all the conditions laid down under Note 6(A) of Chapter 84, thereby validating the expression ‘automatic data processing machine’.
Read Order: M/s. J and T Gems and Jewellery Pvt. Ltd., Bhubaneswar v. The Dy. Commissioner of State Tax, BBSR and others
Chahat Varma
New Delhi, June 14, 2023: The Orissa High Court has held that Mr. M.K. Pradhan, Deputy Commissioner of State Tax, Enforcement Unit, was granted the power and authority by the Joint Commissioner of State Tax, Enforcement Range, to conduct the search and seizure operation at the premises of M/s. J and T Gems and Jewellery Pvt. Ltd. (petitioner). The court held that Mr. Pradhan acted within his competency when he passed the order of demand, and imposed a penalty and fine under Section 130 of the Odisha Goods and Services Tax Act (OGST Act)/Central Goods and Services Tax Act (CGST Act).
Factual matrix of the case was that the petitioner contended that the same officer, Mr. Pradhan, who conducted the search and seizure, passed the demand order and imposed penalties and fines on the petitioner. The petitioner argued that Mr. Pradhan had no authority to pass the final order and that he acted as the judge of his own cause. Therefore, the petitioner sought the intervention of the court in this matter.
The division bench of Justice B.R. Sarangi & Justice M.S. Raman rejected the contention that Mr. Pradhan, who conducted the search and seizure operation and passed the order of demand, cannot be a judge of his own cause. The bench stated that this principle was not applicable in the present case because the order was passed under Section 130 of the OGST/CGST Act. The bench noted that if the order had been passed under Section 73 or Section 74 of the Act, the situation might have been different.
“In view of the fact that the order impugned is appealable one, this Court disposes of the writ petition giving liberty to the petitioner to pursue its remedy before the appropriate authority, if it is so advised,” further added the court.
Read Order: M/s Classic Decorators V. Commissioner (Appeals-I) Central Excise/GST, Delhi & Anr
Chahat Varma
New Delhi, June 14, 2023: The Delhi High Court has rejected the contention raised by M/s. Classic Decorators (petitioner) regarding the pre-deposit requirement for their appeal. The court stated that the pre-deposit amount, which was 7.5% of the total demand, was not a large sum and that there was no allegation or evidence presented that the pre-deposit requirement had made the appellate remedy illusory or hindered the petitioner from availing the same.
Brief facts of the issue were that the petitioner was aggrieved by an order, whereby its appeal against an order-in-original was not entertained for want of necessary pre-deposit. The petitioner then filed a writ petition under Article 226 of the Constitution of India, seeking relief. However, the writ petition was disposed of on the ground that the petitioner had an alternative and effective remedy available to them. The petitioner submitted that based on the observations made by the court in the previous order, the petitioner's appeal should have been entertained by the Appellate Authority without insisting on a pre-deposit.
The bench of Justice Vibhu Bakhru and Justice Amit Mahajan said, “We find no ground to interfere with the impugned order dated 04.05.2022. We clarify that if the petitioner makes the pre-deposit within a period of two weeks from today, the Appellate Authority shall consider the petitioner’s appeal on merits.”
Read Order: M/s. Balaji Enterprises V. Principal Additional Director General, Directorate General of GST Intelligence
Chahat Varma
New Delhi, June 14, 2023: The High Court of Delhi has permitted M/s. Balaji Enterprises (petitioner) to operate their bank accounts without any hindrance, as the provisional attachment orders had ceased to be operative by efflux of time, by virtue of Section 83(2) of the Central Goods and Services Tax Act (CGST Act).
The petitioner had filed the petition, challenging the provisional attachment order issued by the respondents, which included the attachment of the petitioner's bank account with IndusInd Bank, New Delhi. The petitioner argued that that the order was passed without any reason to believe that such an order was necessary for protecting the interest of the Revenue. In addition, the petitioner's counsel argued that the order goes beyond its scope by attaching the bank accounts of the petitioner's immediate family members and related entities, and submitted that no such powers were available under Section 83 of the CGST Act.
Considering the submissions put forth by the respondents, which stated that the provisional attachment order had ceased to be operative as one year had passed since its issuance, the High court directed that the petitioner should not face any hindrance in operating their bank accounts due to the impugned order.
The petitioner had also submitted a list of fifteen bank accounts, which were provisionally attached by separate orders issued on 20.04.2022. The respondent’s counsel stated that these attachment orders had also ceased to be operative due to the passage of time, as per Section 83(2) of the CGST Act.
In light of this information, the High court directed the concerned banks not to impede the operation of the bank accounts due to the provisional attachment orders issued on 20.04.2022.
Read Order: The Deputy Commissioner of Income Tax and others v. South Eastern Coalfields Ltd and others
Chahat Varma
New Delhi, June 14, 2023: The Raipur bench of the Income Tax Appellate Tribunal has held that the indispensable requirement on the part of the Assessing Officer (AO) to put the assessee to notice as regards the specific charge contemplated under Section 271(1)(c) of the Income Tax Act, viz. ‘concealment of income’ or ‘furnishing of inaccurate particulars of income’ or both of the said defaults was not merely an idle formality, but was a statutory obligation, which had not been discharged in the present case as per the mandate of law.
The present cross-appeals were filed by the assessee and the revenue, against the orders passed by the CIT(Appeals), which in turn arose from the orders passed by the AO under Section 271(1)(c) of the Income Tax, Act, for the respective assessment years.
The assessee, a subsidiary of Coal India Limited, was engaged in the activities related to development of mines and extraction of coal from various mines under its control and earned income from coal sales. The AO saddled the assessee with a penalty for concealment of income and furnishing of inaccurate particulars of income, that were upheld by the CIT(Appeals).
The assessee argued that the AO had not specified the specific default for which the penalty was imposed in the show cause notices issued under Section 274 read with Section 271 of the Income Tax Act. The assessee contended that due to the AO's failure to indicate the specific default, the penalty imposed under Section 271(1)(c) of the Act could not be sustained and should be vacated.
The bench of Arun Khodpia (Accountant) and Ravish Sood (Judicial) remarked that the AO's use of ‘OR’ as a conjunction between the two defaults (concealment of income and furnishing of inaccurate particulars) failed to clearly communicate to the assessee the specific defaults for which the penalty was being imposed. This ambiguity left the assessee guessing about the exact default(s) for which the penalty was being sought.
The bench relied on the Supreme Court's judgment in the case of Dilip N. Shroff v. Joint Commnr. Of Income Tax, Mumbai & Anr [LQ/SC/2007/766], where it was observed that the expressions ‘concealment of particulars of income’ and ‘furnishing of inaccurate particulars of income’ had different connotations.
Thus, the bench held, “the penalty under Sec. 271(1)(c) of Rs. 8587.95 lac imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained.”
Time for judiciary to introspect and see what can be done to restore people’s faith – Justice Lokur
Justice Madan B Lokur, was a Supreme Court judge from June 2012 to December 2018. He is now a judge of the non-resident panel of the Supreme Court of Fiji. He spoke to LegitQuest on January 25, 2020.
Q: You were a Supreme Court judge for more than 6 years. Do SC judges have their own ups and downs, in the sense that do you have any frustrations about cases, things not working out, the kind of issues that come to you?
A: There are no ups and downs in that sense but sometimes you do get a little upset at the pace of justice delivery. I felt that there were occasions when justice could have been delivered much faster, a case could have been decided much faster than it actually was. (When there is) resistance in that regard normally from the state, from the establishment, then you kind of feel what’s happening, what can I do about it.
Q: So you have had the feeling that the establishment is trying to interfere in the matters?
A: No, not interfering in matters but not giving the necessary importance to some cases. So if something has to be done in four weeks, for example if reply has to be filed within four weeks and they don’t file it in four weeks just because they feel that it doesn’t matter, and it’s ok if we file it within six weeks how does it make a difference. But it does make a difference.
Q: Do you think this attitude is merely a lax attitude or is it an infrastructure related problem?
A: I don’t know. Sometimes on some issues the government or the establishment takes it easy. They don’t realise the urgency. So that’s one. Sometimes there are systemic issues, for example, you may have a case that takes much longer than anticipated and therefore you can’t take up some other case. Then that necessarily has to be adjourned. So these things have to be planned very carefully.
Q: Are there any cases that you have special memories of in terms of your personal experiences while dealing with the case? It might have moved you or it may have made you feel that this case is really important though it may not be considered important by the government or may have escaped the media glare?
A: All the cases that I did with regard to social justice, cases which concern social justice and which concern the environment, I think all of them were important. They gave me some satisfaction, some frustration also, in the sense of time, but I would certainly remember all these cases.
Q: Even though you were at the Supreme Court as a jurist, were there any learning experiences for you that may have surprised you?
A: There were learning experiences, yes. And plenty of them. Every case is a learning experience because you tend to look at the same case with two different perspectives. So every case is a great learning experience. You know how society functions, how the state functions, what is going on in the minds of the people, what is it that has prompted them to come the court. There is a great learning, not only in terms of people and institutions but also in terms of law.
Q: You are a Judge of the Supreme Court of Fiji, though a Non-Resident Judge. How different is it in comparison to being a Judge in India?
A: There are some procedural distinctions. For example, there is a great reliance in Fiji on written submissions and for the oral submissions they give 45 minutes to a side. So the case is over within 1 1/2 hours maximum. That’s not the situation here in India. The number of cases in Fiji are very few. Yes, it’s a small country, with a small number of cases. Cases are very few so it’s only when they have an adequate number of cases that they will have a session and as far as I am aware they do not have more than two or three sessions in a year and the session lasts for maybe about three weeks. So it’s not that the court sits every day or that I have to shift to Fiji. When it is necessary and there are a good number of cases then they will have a session, unlike here. It is then that I am required to go to Fiji for three weeks. The other difference is that in every case that comes to the (Fiji) Supreme Court, even if special leave is not granted, you have to give a detailed judgement which is not the practice here.
Q: There is a lot of backlog in the lower courts in India which creates a problem for the justice delivery system. One reason is definitely shortage of judges. What are the other reasons as to why there is so much backlog of cases in the trial courts?
A: I think case management is absolutely necessary and unless we introduce case management and alternative methods of dispute resolution, we will not be able to solve the problem. I will give you a very recent example about the Muzaffarpur children’s home case (in Bihar) where about 34 girls were systematically raped. There were about 17 or 18 accused persons but the entire trial finished within six months. Now that was only because of the management and the efforts of the trial judge and I think that needs to be studied how he could do it. If he could do such a complex case with so many eyewitnesses and so many accused persons in a short frame of time, I don’t see why other cases cannot be decided within a specified time frame. That’s case management. The second thing is so far as other methods of disposal of cases are concerned, we have had a very good experience in trial courts in Delhi where more than one lakh cases have been disposed of through mediation. So, mediation must be encouraged at the trial level because if you can dispose so many cases you can reduce the workload. For criminal cases, you have Plea Bargaining that has been introduced in 2009 but not put into practice. We did make an attempt in the Tis Hazari Courts. It worked to some extent but after that it fell into disuse. So, plea bargaining can take care of a lot of cases. And there will be certain categories of cases which we need to look at carefully. For example, you have cases of compoundable offences, you have cases where fine is the punishment and not necessarily imprisonment, or maybe it’s imprisonment say one month or two month’s imprisonment. Do we need to actually go through a regular trial for these kind of cases? Can they not be resolved or adjudicated through Plea Bargaining? This will help the system, it will help in Prison Reforms, (prevent) overcrowding in prisons. So there are a lot of avenues available for reducing the backlog. But I think an effort has to be made to resolve all that.
Q: Do you think there are any systemic flaws in the country’s justice system, or the way trial courts work?
A: I don’t think there are any major systemic flaws. It’s just that case management has not been given importance. If case management is given importance, then whatever systematic flaws are existing, they will certainly come down.
Q; And what about technology. Do you think technology can play a role in improving the functioning of the justice delivery system?
I think technology is very important. You are aware of the e-courts project. Now I have been told by many judges and many judicial academies that the e-courts project has brought about sort of a revolution in the trial courts. There is a lot of information that is available for the litigants, judges, lawyers and researchers and if it is put to optimum use or even semi optimum use, it can make a huge difference. Today there are many judges who are using technology and particularly the benefits of the e-courts project is an adjunct to their work. Some studies on how technology can be used or the e-courts project can be used to improve the system will make a huge difference.
Q: What kind of technology would you recommend that courts should have?
A: The work that was assigned to the e-committee I think has been taken care of, if not fully, then largely to the maximum possible extent. Now having done the work you have to try and take advantage of the work that’s been done, find out all the flaws and see how you can rectify it or remove those flaws. For example, we came across a case where 94 adjournments were given in a criminal case. Now why were 94 adjournments given? Somebody needs to study that, so that information is available. And unless you process that information, things will just continue, you will just be collecting information. So as far as I am concerned, the task of collecting information is over. We now need to improve information collection and process available information and that is something I think should be done.
Q: There is a debate going on about the rights of death row convicts. CJI Justice Bobde recently objected to death row convicts filing lot of petitions, making use of every legal remedy available to them. He said the rights of the victim should be given more importance over the rights of the accused. But a lot of legal experts have said that these remedies are available to correct the anomalies, if any, in the justice delivery. Even the Centre has urged the court to adopt a more victim-centric approach. What is your opinion on that?
You see so far as procedures are concerned, when a person knows that s/he is going to die in a few days or a few months, s/he will do everything possible to live. Now you can’t tell a person who has got terminal cancer that there is no point in undergoing chemotherapy because you are going to die anyway. A person is going to fight for her/his life to the maximum extent. So if a person is on death row s/he will do everything possible to survive. You have very exceptional people like Bhagat Singh who are ready to face (the gallows) but that’s why they are exceptional. So an ordinary person will do everything possible (to survive). So if the law permits them to do all this, they will do it.
Q: Do you think law should permit this to death row convicts?
A: That is for the Parliament to decide. The law is there, the Constitution is there. Now if the Parliament chooses not to enact a law which takes into consideration the rights of the victims and the people who are on death row, what can anyone do? You can’t tell a person on death row that listen, if you don’t file a review petition within one week, I will hang you. If you do not file a curative petition within three days, then I will hang you. You also have to look at the frame of mind of a person facing death. Victims certainly, but also the convict.
Q: From the point of jurisprudence, do you think death row convicts’ rights are essential? Or can their rights be done away with?
A: I don’t know you can take away the right of a person fighting for his life but you have to strike a balance somewhere. To say that you must file a review or curative or mercy petition in one week, it’s very difficult. You tell somebody else who is not on a death row that you can file a review petition within 30 days but a person who is on death row you tell him that I will give you only one week, it doesn’t make any sense to me. In fact it should probably be the other way round.
Q: What about capital punishment as a means of punishment itself?
A: There has been a lot of debate and discussion about capital punishment but I think that world over it has now been accepted, more or less, that death penalty has not served the purpose for which it was intended. So, there are very few countries that are executing people. The United States, Saudi Arabia, China, Pakistan also, but it hasn’t brought down the crime rate. And India has been very conservative in imposing the death penalty. I think the last 3-4 executions have happened for the persons who were terrorists. And apart from that there was one from Calcutta who was hanged for rape and murder. But the fact that he was hanged for rape and murder has not deterred people (from committing rape and murder). So the accepted view is that death penalty has not served the purpose. We certainly need to rethink the continuance of capital punishment. On the other hand, if capital punishment is abolished, there might be fake encounter killings or extra judicial killings.
Q: These days there is the psyche among people of ‘instant justice’, like we saw in the case of the Hyderabad vet who was raped and murdered. The four accused in the case were killed in an encounter and the public at large and even politicians hailed it as justice being delivery. Do you think this ‘lynch mob mentality’ reflects people’s lack of faith in the justice system?
A: I think in this particular case about what happened in Telangana, investigation was still going on. About what actually happened there, an enquiry is going on. So no definite conclusions have come out. According to the police these people tried to snatch weapons so they had to be shot. Now it is very difficult to believe, as far as I am concerned, that 10 armed policeman could not overpower four unarmed accused persons. This is very difficult to believe. And assuming one of them happened to have snatched a (cop’s) weapon, maybe he could have been incapacitated but why the other three? So there are a lot of questions that are unanswered. So far as the celebrations are concerned, the people who are celebrating, do they know for certain that they (those killed in the encounter) were the ones who did the crime? How can they be so sure about it? They were not eye witnesses. Even witnesses sometimes make mistakes. This is really not a cause for celebration. Certainly not.
Q: It seems some people are losing their faith in the country’s justice delivery system. How to repose people’s faith in the legal process?
A: You see we again come back to case management and speedy justice. Suppose the Nirbhaya case would have been decided within two or three years, would this (Telangana) incident have happened? One can’t say. The attack on Parliament case was decided in two or three years but that has not wiped out terrorism. There are a lot of factors that go into all this, so there is a need to find ways of improving justice delivery so that you don’t have any extremes – where a case takes 10 years or another extreme where there is instant justice. There has to be something in between, some balance has to be drawn. Now you have that case where Phoolan Devi was gangraped followed by the Behmai massacre. Now this is a case of 1981, it has been 40 years and the trial court has still not delivered a judgement. It’s due any day now, (but) whose fault is that. You have another case in Maharashtra that has been transferred to National Investigating Agency two years after the incident, the Bhima-Koregaon case. Investigation is supposedly not complete after two years also. Whose fault is that? So you have to look at the entire system in a holistic manner. There are many players – the investigation agency is one player, the prosecution is one player, the defence is one player, the justice delivery system is one player. So unless all of them are in a position to coordinate… you cannot blame only the justice delivery system. If the Telangana police was so sure that the persons they have caught are guilty, why did they not file the charge sheet immediately? If they were so sure the charge sheet should have been filed within one day. Why didn’t they do it?
Q: At the trial level, there are many instances of flaws in evidence collection. Do you think the police or whoever the investigators are, do they lack training?
A: Yes they do! The police lacks training. I think there is a recent report that has come out last week which says very few people (in the police) have been trained (to collect evidence).
Q: You think giving proper training to police to prepare a case will make a difference?
A: Yes, it will make a difference.
Q: You have a keen interest in juvenile justice. Unfortunately, a lot of heinous crimes are committed by juveniles. How can we correct that?
A: You see it depends upon what perspective we are looking at. Now these heinous crimes are committed by juveniles. Heinous crimes are committed by adults also, so why pick upon juveniles alone and say something should be done because juveniles are committing heinous crimes. Why is it that people are not saying that something should be done when adults are committing heinous crimes? That’s one perspective. There are a lot of heinous crimes that are committed against juveniles. The number of crimes committed against juveniles or children are much more than the crimes committed by juveniles. How come nobody is talking about that? And the people committing heinous crimes against children are adults. So is it okay to say that the State has imposed death penalty for an offence against the child? So that’s good enough, nothing more needs to be done? I don’t think that’s a valid answer. The establishment must keep in mind the fact that the number of heinous crimes against children are much more than those committed by juveniles. We must shift focus.
Q: Coming to NRC and CAA. Protests have been happening since December last year, the SC is waiting for the Centre’s reply, the Delhi HC has refused to directly intervene. Neither the protesters nor the government is budging. How do we achieve a breakthrough?
A: It is for the government to decide what they want to do. If the government says it is not going to budge, and the people say they are not going to budge, the stalemate could continue forever.
Q: Do you think the CAA and the NRC will have an impact on civil liberties, personal liberties and people’s rights?
A: Yes, and that is one of the reasons why there is protest all over the country. And people have realised that it is going to happen, it is going to have an impact on their lives, on their rights and that’s why they are protesting. So the answer to your question is yes.
Q: Across the world and in India, we are seeing an erosion of the value system upholding rights and liberties. How important is it for the healthy functioning of a country that social justice, people’s liberties, people’s rights are maintained?
A: I think social justice issues, fundamental rights are of prime importance in our country, in any democracy, and the preamble to our Constitution makes it absolutely clear and the judgement of the Supreme Court in Kesavananda Bharati and many other subsequent judgments also make it clear that you cannot change the basic structure of the Constitution. If you cannot do that then obviously you cannot take away some basic democratic rights like freedom of assembly, freedom of movement, you cannot take them away. So if you have to live in a democracy, we have to accept the fact that these rights cannot be taken away. Otherwise there are many countries where there is no democracy. I don’t know whether those people are happy or not happy.
Q: What will happen if in a democracy these rights are controlled by hook or by crook?
A: It depends upon how much they are controlled. If the control is excessive then that is wrong. The Constitution says there must be a reasonable restriction. So reasonable restriction by law is very important.
Q: The way in which the sexual harassment case against Justice Gogoi was handled was pretty controversial. The woman has now been reinstated in the Supreme Court as a staffer. Does this action of the Supreme Court sort of vindicate her?
A: I find this very confusing you know. There is an old joke among lawyers: Lawyer for the petitioner argued before the judge and the judge said you are right; then the lawyer for the respondent argued before the judge and the judge said you’re right; then a third person sitting over there says how can both of them be right and the judge says you’re also right. So this is what has happened in this case. It was found (by the SC committee) that what she said had no substance. And therefore, she was wrong and the accused was right. Now she has been reinstated with back wages and all. I don’t know, I find it very confusing.
Q: Do you think the retirement age of Supreme Court Judges should be raised to 70 years and there should be a fixed tenure?
A: I haven’t thought about it as yet. There are some advantages, there are some disadvantages. (When) You have extended age or life tenure as in the United States, and the Supreme Court has a particular point of view, it will continue for a long time. So in the United States you have liberal judges and conservative judges, so if the number of conservative judges is high then the court will always be conservative. If the number of liberal judges is high, the court will always be liberal. There is this disadvantage but there is also an advantage that if it’s a liberal court and if it is a liberal democracy then it will work for the benefit of the people. But I have not given any serious thought onthis.
Q: Is there any other thing you would like to say?
A: I think the time has come for the judiciary to sit down, introspect and see what can be done, because people have faith in the judiciary. A lot of that faith has been eroded in the last couple of years. So one has to restore that faith and then increase that faith. I think the judiciary definitely needs to introspect.
‘A major issue for startups, especially during fund raising, is their compliance with extant RBI foreign exchange regulations, pricing guidelines, and the Companies Act 2013.’- Aakash Parihar
Aakash Parihar is Partner at Triumvir Law, a firm specializing in M&A, PE/VC, startup advisory, international commercial arbitration, and corporate disputes. He is an alumnus of the National Law School of India University, Bangalore.
How did you come across law as a career? Tell us about what made you decide law as an option.
Growing up in a small town in Madhya Pradesh, wedid not have many options.There you either study to become a doctor or an engineer. As the sheep follows the herd, I too jumped into 11th grade with PCM (Physics, Chemistry and Mathematics).However, shortly after, I came across the Common Law Admission Test (CLAT) and the prospect of law as a career. Being a law aspirant without any background of legal field, I hardly knew anything about the legal profession leave alone the niche areas of corporate lawor dispute resolution. Thereafter, I interacted with students from various law schools in India to understand law as a career and I opted to sit for CLAT. Fortunately, my hard work paid off and I made it to the hallowed National Law School of India University, Bangalore (NSLIU). Joining NLSIU and moving to Bangalorewas an overwhelming experience. However, after a few months, I settled in and became accustomed to the rigorous academic curriculum. Needless to mention that it was an absolute pleasure to study with and from someof the brightest minds in legal academia. NLSIU, Bangalore broadened my perspective about law and provided me with a new set of lenses to comprehend the world around me. Through this newly acquired perspective and a great amount of hard work (which is of course irreplaceable), I was able to procure a job in my fourth year at law school and thus began my journey.
As a lawyer carving a niche for himself, tell us about your professional journey so far. What are the challenges that new lawyers face while starting out in the legal field?
I started my professional journey as an Associate at Samvad Partners, Bangalore, where I primarily worked in the corporate team. Prior to Samvad Partners, through my internship, I had developed an interest towards corporate law,especially the PE/VC and M&A practice area. In the initial years as an associate at Samvad Partners and later at AZB & Partners, Mumbai, I had the opportunity to work on various aspects of corporate law, i.e., from PE/VC and M&A with respect to listed as well as unlisted companies. My work experience at these firms equipped and provided me the know-how to deal with cutting edge transactional lawyering. At this point, it is important to mention that I always had aspirations to join and develop a boutique firm. While I was working at AZB, sometime around March 2019, I got a call from Anubhab, Founder of Triumvir Law, who told me about the great work Triumvir Law was doing in the start-up and emerging companies’ ecosystem in Bangalore. The ambition of the firm aligned with mine,so I took a leap of faith to move to Bangalore to join Triumvir Law.
Anyone who is a first-generation lawyer in the legal industry will agree with my statement that it is never easy to build a firm, that too so early in your career. However, that is precisely the notion that Triumvir Law wanted to disrupt. To provide quality corporate and dispute resolution advisory to clients across India and abroad at an affordable price point.
Once you start your professional journey, you need to apply everything that you learnt in law schoolwith a practical perspective. Therefore, in my opinion, in addition to learning the practical aspects of law, a young lawyer needs to be accustomed with various practices of law before choosing one specific field to practice.
India has been doing reallywell in the field of M&A and PE/VC. Since you specialize in M&A and PE/VC dealmaking, what according to you has been working well for the country in this sphere? What does the future look like?
India is a developing economy, andM&A and PE/VC transactions form the backbone of the same. Since liberalization, there has been an influx of foreign investment in India, and we have seen an exponential rise in PC/VA and M&A deals. Indian investment market growth especially M&A and PE/VC aspects can be attributed to the advent of startup culture in India. The increase in M&A and PE/VC deals require corporate lawyersto handle the legal aspects of these deals.
As a corporate lawyer working in M&A and PE/VC space, my work ranges from drafting term-sheets to the transaction documents (SPA, SSA, SHA, BTA, etc.). TheM&A and PE/VC deal space experienced a slump during the first few months of the pandemic, but since June 2021, there has been a significant growth in M&A and PE/VC deal space in India. The growth and consistence of the M&A and PE/VC deal space in India can be attributed to several factors such as foreign investment, uncapped demands in the Indian market and exceptional performance of Indian startups.
During the pandemic many businesses were shut down but surprisingly many new businesses started, which adapted to the challenges imposed by the pandemic. Since we are in the recovery mode, I think the M&A and PE/VC deal space will reach bigger heights in the comingyears. We as a firm look forward to being part of this recovery mode by being part of the more M&A and PE/VC deals in future.
You also advice start-ups. What are the legal issues or challenges that the start-ups usually face specifically in India? Do these issues/challenges have long-term consequences?
We do a considerable amount of work with startupswhich range from day-to-day legal advisory to transaction documentation during a funding round. In India, we have noticed that a sizeable amount of clientele approach counsels only when there is a default or breach, more often than not in a state of panic. The same principle applies to startups in India, they normally approach us at a stage when they are about to receive investment or are undergoing due diligence. At that point of time, we need to understand their legal issues as well as manage the demands of the investor’s legal team. The majornon-compliances by startups usually involve not maintaining proper agreements, delaying regulatory filings and secretarial compliances, and not focusing on proper corporate governance.
Another major issue for startups, especially during fund raising, is their compliance with extant RBI foreign exchange regulations, pricing guidelines, and the Companies Act 2013. Keeping up with these requirements can be time-consuming for even seasoned lawyers, and we can only imagine how difficult it would be for startups. Startups spend their initial years focusing on fund-raising, marketing, minimum viable products, and scaling their businesses. Legal advice does not usually factor in as a necessity. Our firm aims to help startups even before they get off the ground, and through their initial years of growth. We wanted to be the ones bringing in that change in the legal sector, and we hope to help many more such startups in the future.
In your opinion, are there any specific India-related problems that corporate/ commercial firms face as far as the company laws are concerned? Is there scope for improvement on this front?
The Indian legal system which corporate/commercial firms deal with is a living breathing organism, evolving each year. Due to this evolving nature, we lawyers are always on our toes.From a minor amendment to the Companies Act to the overhaul of the foreign exchange regime by the Reserve Bank of India, each of these changes affect the compliance and regulatory regime of corporates. For instance, when India changed the investment route for countries sharing land border with India,whereby any country sharing land border with India including Hong Kong cannot invest in India without approval of the RBI in consultation with the central government,it impacted a lot of ongoing transactions and we as lawyers had to be the first ones to inform our clients about such a change in the country’s foreign investment policy. In my opinion, there is huge scope of improvement in legal regime in India, I think a stable regulatory and tax regime is the need for the hour so far as the Indian system is concerned. The biggest example of such a market with stable regulatory and tax regime is Singapore, and we must work towards emulating the same.
Your boutique law firm has offices in three different cities — Delhi NCR, Mumbai and Bangalore. Have the Covid-induced restrictions such as WFH affected your firm’s operations? How has your firm adapted to the professional challenges imposed by the pandemic-related lifestyle changes?
We have offices in New Delhi NCR and Mumbai, and our main office is in Bangalore. Before the pandemic, our work schedule involved a fair bit of travelling across these cities. But post the lockdowns we shifted to a hybrid model, and unless absolutely necessary, we usually work from home.
In relation to the professional challenges during the pandemic, I think it was a difficult time for most young professionals. We do acknowledge the fact that our firm survived the pandemic. Our work as lawyers/ law firms also involves client outreach and getting new clients, which was difficult during the lockdowns. We expanded our client outreach through digital means and by conducting webinars, including one with King’s College London on International Treaty Arbitration. Further, we also focused on client outreach and knowledge management during the pandemic to educate and create legal awareness among our clients.
‘It’s a myth that good legal advice comes at prohibitive costs. A lot of heartburn can be avoided if documents are entered into with proper legal advice and with due negotiations.’ – Archana Balasubramanian
Archana Balasubramanian is the founding partner of Agama Law Associates, a Mumbai-based corporate law firm which she started in 2014. She specialises in general corporate commercial transaction and advisory as well as deep sectoral expertise across manufacturing, logistics, media, pharmaceuticals, financial services, shipping, real estate, technology, engineering, infrastructure and health.
August 13, 2021:
Lawyers see companies ill-prepared for conflict, often, in India. When large corporates take a remedial instead of mitigative approach to legal issues – an approach utterly incoherent to both their size and the compliance ecosystem in their sector – it is there where the concept of costs on legal becomes problematic. Pre-dispute management strategy is much more rationalized on the business’ pocket than the costs of going in the red on conflict and compliances.
Corporates often focus on business and let go of backend maintenance of paperwork, raising issues as and when they arise and resolving conflicts / client queries in a manner that will promote dispute avoidance.
Corporate risk and compliance management is yet another elephant in India, which in addition to commercial disputes can be a drain on a company’s resources. It can be clubbed under four major heads – labour, industrial, financial and corporate laws. There are around 20 Central Acts and then specific state-laws by which corporates are governed under these four categories.
Risk and compliance management is also significantly dependent on the sector, size, scale and nature of the business and the activities being carried out.
The woes of a large number of promoters from the ecommerce ecosystem are to do with streamlining systems to navigate legal. India has certain heavily regulated sectors and, like I mentioned earlier, an intricate web of corporate risk and compliance legislation that can result in prohibitive costs in the remedial phase. To tackle the web in the preventive or mitigative phase, start-ups end up lacking the arsenal due to sheer intimidation from legal. Promoters face sectoral risks in sectors which are heavily regulated, risks of heavy penalties and fines under company law or foreign exchange laws, if fund raise is not done in a compliant manner.
It is a myth that good legal advice comes at prohibitive costs. Promoters are quick to sign on the dotted line and approach lawyers with a tick the box approach. A lot of heartburn can be avoided if documents are entered into with proper legal advice and with due negotiations.
Investment contracts, large celebrity endorsement contracts and CXO contracts are some key areas where legal advice should be obtained. Online contracts is also emerging as an important area of concern.
When we talk of scope, arbitration is pretty much a default mechanism at this stage for adjudicating commercial disputes in India, especially given the fixation of timelines for closure of arbitration proceedings in India. The autonomy it allows the parties in dispute to pick a neutral and flexible forum for resolution is substantial. Lower courts being what they are in India, arbitration emerges as the only viable mode of dispute resolution in the Indian commercial context.
The arbitrability of disputes has evolved significantly in the last 10 years. The courts are essentially pro-arbitration when it comes to judging the arbitrability of subject matter and sending matters to arbitration quickly.
The Supreme Court’s ruling in the Vidya Drolia case has significantly clarified the position in respect of tenancy disputes, frauds and consumer disputes. It reflects upon the progressive approach of the court and aims to enable an efficient, autonomous and effective arbitration environment in India.
Law firms stand for ensuring that the law works for business and not against it. Whatever the scope of our mandate, the bottom line is to ensure a risk-free, conflict-free, compliant and prepared enterprise for our client, in a manner that does not intimidate the client or bog them down, regardless of the intricacy of the legal and regulatory web it takes to navigate to get to that end result. Lawyers need to dissect the business of law from the work.
This really involves meticulous, detail-oriented, sheer hard work on the facts, figures, dates and all other countless coordinates of each mandate, repetitively and even to a, so-called, “dull” routine rhythm – with consistent single-mindedness and unflinching resolve.
As a firm, multiply that effort into volumes, most of it against-the-clock given the compliance heavy ecosystem often riddled with uncertainties in a number of jurisdictions. So the same meticulous streamlining of mandate deliverables has to be extrapolated by the management of the firm to the junior most staff.
Further, the process of streamlining itself has to be more dynamic than ever now given the pace at which the new economy, tech-ecosystem, business climate as well as business development processes turn a new leaf.
Finally, but above all, we need to find a way to feel happy, positive and energized together as a team while chasing all of the aforesaid dreams. The competitive timelines and volumes at which a law firm works, this too is a real challenge. But we are happy to face it and evolve as we grow.
We always as a firm operated on the work from anywhere principle. We believed in it and inculcated this through document management processes to the last trainee. This helped us shut shop one day and continue from wherever we are operating.
The team has been regularly meeting online (at least once a day). We have been able to channel the time spent in travelling to and attending meetings in developing our internal knowledge banks further, streamline our processes, and work on integrating various tech to make the practice more cost-effective for our clients.
Right to Disclosure – Importance & Challenges in Criminal Justice System – By Manu Sharma
Personal liberty is the most cherished value of human life which thrives on the anvil of Articles 14 and 21 of the Constitution of India (“the Constitution”). Once a person is named an accused, he faces the spectre of deprivation of his personal liberty and criminal trial. This threat is balanced by Constitutional safeguards which mandate adherence to the rule of law by the investigating agencies as well as the Court. Thus, any procedure which seeks to impinge on personal liberty must also be fair and reasonable. The right to life and personal liberty enshrined under article 21 of the Constitution, expanded in scope post Maneka Gandhi[1], yields the right to a fair trial and fair investigation. Fairness demands disclosure of anything relevant that may be of benefit to an accused. Further, the all-pervading principles of natural justice envisage the right to a fair hearing, which entails the right to a full defence. The right to a fair defence stems from full disclosure. Therefore, the right of an accused to disclosure emanates from this Constitutional philosophy embellished by the principles of natural justice and is codified under the Code of Criminal Procedure, 1973 (“Code”).
Under English jurisprudence, the duty of disclosure is delineated in the Criminal Procedure and Investigations Act, 1996, which provides that the prosecutor must disclose to the accused any prosecution material which has not previously been disclosed to the accused and which might reasonably be considered capable of undermining the case for the prosecution against the accused or of assisting the case for the accused, except if such disclosure undermines public interest.[2] Fairness ordinarily requires that any material held by the prosecution which weakens its case or strengthens that of the defendant, if not relied on as part of its formal case against the defendant, should be disclosed to the defence.[3] The duty of disclosure under common law contemplates disclosure of anything which might assist the defence[4], even if such material was not to be used as evidence[5]. Under Indian criminal jurisprudence, which has borrowed liberally from common law, the duty of disclosure is embodied in sections 170(2), 173, 207 and 208 of the Code, which entail the forwarding of material to the Court and supply of copies thereof to the accused, subject to statutory exceptions.
II. Challenges in Enforcement
The right to disclosure is a salient feature of criminal justice, but its provenance and significance appear to be lost on the Indian criminal justice system. The woes of investigative bias and prosecutorial misconduct threaten to render this right otiose. That is not to say that the right of an accused to disclosure is indefeasible, as certain exceptions are cast in the Code itself, chief among them being public interest immunity under section 173(6). However, it is the mischief of the concept of ‘relied upon’ emerging from section 173(5) of the Code, which is wreaking havoc on the right to disclosure and is the central focus of this article. The rampant misuse of the words “on which the prosecution proposes to rely’ appearing in section 173(5) of the Code, to suppress material favourable to the accused or unfavourable to the prosecution in the garb of ‘un-relied documents’ has clogged criminal courts with avoidable litigation at the very nascent stage of supply of copies of documents under section 207 of the Code. The erosion of the right of an accused to disclosure through such subterfuge is exacerbated by the limited and restrictive validation of this right by criminal Courts. The dominant issues highlighted in the article, which stifle the right to disclosure are; tainted investigation, unscrupulous withholding of material beneficial to the accused by the prosecution, narrow interpretation by Courts of section 207 of the Code, and denial of the right to an accused to bring material on record in the pre-charge stage.
A. Tainted Investigation
Fair investigation is concomitant to the preservation of the right to fair disclosure and fair trial. It envisages collection of all material, irrespective of its inculpatory or exculpatory nature. However, investigation is often vitiated by the tendencies of overzealous investigating officers who detract from the ultimate objective of unearthing truth, with the aim of establishing guilt. Such proclivities result in collecting only incriminating material during investigation or ignoring the material favourable to the accused. This leads to suppression of material and scuttles the right of the accused to disclosure at the very inception. A tainted investigation leads to miscarriage of justice. Fortunately, the Courts are not bereft of power to supervise investigation and ensure that the right of an accused to fair disclosure remains protected. The Magistrate is conferred with wide amplitude of powers under section 156(3) of the Code to monitor investigation, and inheres all such powers which are incidental or implied to ensure proper investigation. This power can be exercised suo moto by the Magistrate at all stages of a criminal proceeding prior to the commencement of trial, so that an innocent person is not wrongly arraigned or a prima facie guilty person is not left out.[6]
B. Suppression of Material
Indian courts commonly witness that the prosecution is partisan while conducting the trial and is invariably driven by the lust for concluding in conviction. Such predisposition impels the prosecution to take advantage by selectively picking up words from the Code and excluding material favouring the accused or negating the prosecution case, with the aid of the concept of ‘relied upon’ within section 173(5) of the Code. However, the power of the prosecution to withhold material is not unbridled as the Constitutional mandate and statutory rights given to an accused place an implied obligation on the prosecution to make fair disclosure.[7] If the prosecution withholds vital evidence from the Court, it is liable to adverse inference flowing from section 114 of the Indian Evidence Act, 1872 (“Evidence Act). The prosecutor is expected to be guided by the Bar Council of India Rules which prescribe that an advocate appearing for the prosecution of a criminal trial shall so conduct the prosecution that it does not lead to conviction of the innocent. The suppression of material capable of establishment of the innocence of the accused shall be scrupulously avoided. [8]
C. Scope of S. 207
The scope of disclosure under section 207 has been the subject of fierce challenge in Indian Courts on account of the prosecution selectively supplying documents under the garb of ‘relied upon’ documents, to the prejudice of the defence of an accused. The earlier judicial trend had been to limit the supply of documents under section 207 of the Code to only those documents which were proposed to be relied upon by the prosecution. This view acquiesced the exclusion of documents which were seized during investigation, but not filed before the Court along with the charge sheet, rendering the right to disclosure a farce. This restrictive sweep fails to reconcile with the objective of a fair trial viz. discovery of truth. The scheme of the code discloses that Courts have been vested with extensive powers inter alia under sections 91, 156(3) and 311 to elicit the truth. Towards the same end, Courts are also empowered under Section 165 of the Evidence Act. Thus, the principle of harmonious construction warrants a more purposive interpretation of section 207 of the code. The Hon’ble Supreme Court expounded on the scope of Section 207 of the Code in the case of Manu Sharma[9] and held that documents submitted to the Magistrate under section 173(5) would deem to include the documents which have to be sent to the magistrate during the course of investigation under section 170(2). A document which has been obtained bona fide and has a bearing on the case of the prosecution should be disclosed to the accused and furnished to him to enable him to prepare a fair defence, particularly when non production or disclosure would affect administration of justice or prejudice the defence of the accused. It is not for the prosecution or the court to comprehend the prejudice that is likely to be caused to the accused. The perception of prejudice is for the accused to develop on reasonable basis.[10] Manu Sharma’s [supra] case has been relied upon in Sasikala [11] wherein it was held that the Court must concede a right to the accused to have access to the documents which were forwarded to the Court but not exhibited by the prosecution as they favoured the accused. These judgments seem more in consonance with the true spirit of fair disclosure and fair trial. However, despite such clear statements of law, courts are grappling with the judicial propensity of deviating from this expansive interpretation and regressing to the concept of relied upon. The same is evident from a recent pronouncement of the Delhi High Court where the ratios laid down in Manu Sharma & Sasikala [supra] were not followed by erroneously distinguishing from those cases.[12] Such “per incuriam” aberrations by High Court not only undermine the supremacy of the Apex Court, but also adversely impact the functioning of the district courts over which they exercise supervisory jurisdiction. Hopefully in future Judges shall be more circumspect and strictly follow the law declared by the Apex Court.
D. Pre-Charge Embargo
Another obstacle encountered in the enforcement of the right to disclosure is the earlier judicial approach to stave off production or consideration of any additional documents not filed alongwith the charge sheet at the pre-charge stage, as the right to file such material was available to the accused only upon the commencement of trial after framing of charge.[13] At the pre-charge stage, Court could not direct the prosecution to furnish copies of other documents[14] It was for the accused to do so during trial or at the time of entering his defence. However, the evolution of law has seen that at the stage of framing charge, Courts can rely upon the material which has been withheld by the prosecutor, even if such material is not part of the charge sheet, but is of such sterling quality demolishing the case of the prosecution.[15] Courts are not handicapped to consider relevant material at the stage of framing charge, which is not relied upon by the prosecution. It is no argument that the accused can ask for the documents withheld at the time of entering his defence.[16] The framing of charge is a serious matter in a criminal trial as it ordains an accused to face a long and arduous trial affecting his liberty. Therefore, the Court must have all relevant material before the stage of framing charge to ascertain if grave suspicion is made out or not. Full disclosure at the stage of section 207 of the code, which immediately precedes discharging or charging an accused, enables an accused to seek a discharge, if the documents, including those not relied upon by the prosecution, create an equally possible view in favour of the accused.[17] On the other hand, delaying the reception of documents postpones the vindication of the accused in an unworthy trial and causes injustice by subjecting him to the trauma of trial. There is no gainsaying that justice delayed is justice denied, therefore, such an approach ought not to receive judicial consent. A timely discharge also travels a long way in saving precious time of the judiciary, which is already overburdened by the burgeoning pendency of cases. Thus, delayed or piecemeal disclosure not only prejudices the defence of the accused, but also protracts the trial and occasions travesty of justice.
III. Duties of the stakeholders in criminal justice system
The foregoing analysis reveals that participation of the investigating agency, the prosecution and the Court is inextricably linked to the enforcement of the right to disclosure. The duties cast on these three stakeholders in the criminal justice system, are critical to the protection of this right. It is incumbent upon the investigating agencies to investigate cases fairly and to place on record all the material irrespective of its implication on the case of prosecution case. Investigation must be carried out with equal alacrity and fairness irrespective of status of accused or complainant.[18] An onerous duty is cast on the prosecution as an independent statutory officer, to conduct the trial with the objective of determination of truth and to ensure that material favourable to the defence is supplied to the accused. Ultimately, it is the overarching duty of the Court to ensure a fair trial towards the administration of justice for all parties. The principles of fair trial require the Court to strike a delicate balance between competing interests in a system of adversarial advocacy. Therefore, the court ought to exercise its power under section 156(3) of the Code to monitor investigation and ensure that all material, including that which enures to the benefit of the accused, is brought on record. Even at the stage of supply of copies of police report and documents under section 207 of the Code, it is the duty of the Court to give effect to the law laid down by the Hon’ble Supreme Court in Manu Sharma (supra) and Sasikala (supra), and ensure that all such material is supplied to the accused irrespective of whether it is “relied upon” by the prosecution or not.
IV. Alternate Remedy
The conundrum of supply of copies under section 207 of the code abounds criminal trials. Fairness is an evolving concept. There is no doubt that disclosure of all material which goes to establish the innocence of an accused is the sine qua non of a fair trial.[19] Effort is evidently underway to expand the concept in alignment with English jurisprudence. In the meanwhile, does the right of an accused to disclosure have another limb to stand on? Section 91 of the Code comes to the rescue of an accused, which confers wide discretionary powers on the Court, independent of section 173 of the Code, to summon the production of things or documents, relevant for the just adjudication of the case. In case the Court is of the opinion that the prosecution has withheld vital, relevant and admissible evidence from the Court, it can legitimately use its power under section 91 of the Code to discover the truth and to do complete justice to the accused.[20]
V. Conclusion
A society’s progress and advancement are judged on many parameters, an important one among them being the manner in which it administers criminal justice. Conversely, the ironic sacrilege of the core virtues of criminal jurisprudence in the temples of justice evinces social decadence. The Indian legislature of the twenty first century has given birth to several draconian statutes which place iron shackles on personal liberty, evoking widespread fear of police abuses and malicious prosecution. These statutes not only entail presumptions which reverse the burden of proof, but also include impediments to the grant of bail. Thus, a very heavy burden to dislodge the prosecution case is imposed on the accused, rendering the right to disclosure of paramount importance. It is the duty of the Court to keep vigil over this Constitutional and statutory right conferred on an accused by repudiating any procedure which prejudices his defence. Notable advancement has been made by the Apex Court in interpreting section 207 of the Code in conformity with the Constitutional mandate, including the right to disclosure. Strict adherence to the afore-noted principles will go a long way in ensuring real and substantial justice. Any departure will not only lead to judicial anarchy, but also further diminish the already dwindling faith of the public in the justice delivery system.
**
Advocate Manu Sharma has been practising at the bar for over sixteen years. He specialises in Criminal Defence. Some of the high profile cases he has represented are – the 2G scam case for former Union minister A Raja; the Religare/Fortis case for Malvinder Singh; Peter Mukerjee in the P Chidambaram/ INX Media case; Devas Multimedia in ISRO corruption act case; Om Prakash Chautala in PMLA case; Aditya Talwar in the aviation scam case; Dilip Ray, former Coal Minister in one of the coal scam cases; Suhaib Illyasi case.
**
Disclaimer: The views or opinions expressed are solely of the author.
[1] Maneka Gandhi and Another v. Union of India, (1978) 1 SCC 248
[2] S. 3 of the Criminal Procedure and Investigations Act, 1996
[3] R v. H and R v. C, 2004 (1) ALL ER 1269
[4] R v. Ward (Judith), (1993) 1 WLR 619 : (1993) 2 ALL ER 577 (CA)
[5] R v. Preston, (1994) 2 AC 130 : (1993) 3 WLR 891 : (1993) 4 ALL ER 638 (HL), R v. Stinchcome,
(1991), 68 C.C.C. (3d) 1 (S.C.C.)
[6] Vinubhai Haribhai Malaviya and Others v. State of Gujarat and Another, 2019 SCC Online SC 1346
[7] Sidhartha Vashishth alias Manu Sharma v. State (NCT of Delhi), (2010) 6 SCC 1
[8] R. 16, part II, Ch. VI of the Bar Council of India Rules
[9] Manu Sharma, (2010) 6 SCC 1
[10] V.K. Sasikala v. State, (2012) 9 SCC 771 : AIR 2013 SC 613
[11] Sasikala, (2012) 9 SCC 771 : AIR 2013 SC 613
[12] Sala Gupta and Another v. Directorate of Enforcement, (2019) 262 DLT 661
[13] State of Orissa v. Debendra Nath Padhi¸(2005) 1 SCC 568
[14] Dharambir v. Central Bureau of Investigation, ILR (2008) 2 Del 842 : (2008) 148 DLT 289
[15] Nitya Dharmananda alias K. Lenin and Another v. Gopal Sheelum Reddy, (2018) 2 SCC 93
[16] Neelesh Jain v. State of Rajasthan, 2006 Cri LJ 2151
[17] Dilwar Balu Kurane v. State of Maharashtra, (2002) 2 SCC 135, Yogesh alias Sachin Jagdish Joshi v. State of Maharashtra, (2008) 10 SCC 394
[18] Karan Singh v. State of Haryana, (2013) 12 SCC 529
[19] Kanwar Jagat Singh v. Directorate of Enforcement & Anr, (2007) 142 DLT 49
[20] Neelesh, 2006 Cri LJ 2151
Disclaimer: The views or opinions expressed are solely of the author.
Validity & Existence of an Arbitration Clause in an Unstamped Agreement
By Kunal Kumar
January 8, 2024
In a recent ruling, a seven-judge bench of the Supreme Court of India in its judgment in re: Interplay between arbitration agreements under the Arbitration & Conciliation Act 1996 and the Indian Stamp Act 1899, overruled the constitutional bench decision of the Supreme Court of India in N. N. Mercantile Private Limited v. Indo Unique Flame Ltd. & Ors. and has settled the issue concerning the validity and existence of an arbitration clause in an unstamped agreement. (‘N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III’)
Background to N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III
One of the first instances concerning the issue of the validity of an unstamped agreement arose in the case of SMS Tea Estate Pvt. Ltd. v. Chandmari Tea Company Pvt. Ltd. In this case, the Hon’ble Apex Court held that if an instrument/document lacks proper stamping, the exercising Court must preclude itself from acting upon it, including the arbitration clause. It further emphasized that it is imperative for the Court to impound such documents/instruments and must accordingly adhere to the prescribed procedure outlined in the Indian Stamp Act 1899.
With the introduction of the 2015 Amendment, Section 11(6A) was inserted in the Arbitration & Conciliation Act 1996 (A&C Act) which stated whilst appointing an arbitrator under the A&C Act, the Court must confine itself to the examination of the existence of an arbitration agreement.
In the case of M/s Duro Felguera S.A. v. M/s Gangavaram Port Limited, the Supreme Court of India made a noteworthy observation, affirming that the legislative intent behind the 2015 Amendment to the A&C Act was necessitated to minimise the Court's involvement during the stage of appointing an arbitrator and that the purpose embodied in Section 11(6A) of A&C Act, deserves due acknowledgement & respect.
In the case of Garware Wall Ropes Ltd. v. Cosatal Marine Constructions & Engineering Ltd., a divisional bench of the Apex Court reaffirmed its previous decision held in SMS Tea Estates (supra) and concluded that the inclusion of an arbitration clause in a contract assumes significance, emphasizing that the agreement transforms into a contract only when it holds legal enforceability. The Apex Court observed that an agreement fails to attain the status of a contract and would not be legally enforceable unless it bears the requisite stamp as mandated under the Indian Stamp Act 1899. Accordingly, the Court concluded that Section 11(6A) read in conjunction with Section 7(2) of the A&C Act and Section 2(h) of the Indian Contract Act 1872, clarified that the existence of an arbitration clause within an agreement is contingent on its legal enforceability and that the 2015 Amendment of the A&C Act to Section 11(6A) had not altered the principles laid out in SMS Tea Estates (supra).
Brief Factual Matrix – N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.
Indo Unique Flame Ltd. (‘Indo Unique’) was awarded a contract for a coal beneficiation/washing project with Karnataka Power Corporation Ltd. (‘KPCL’). In the course of the project, Indo Unique entered into a subcontract in the form of a Work Order with N.N. Global Mercantile Pvt. Ltd. (‘N.N. Global’) for coal transportation, coal handling and loading. Subsequently, certain disputes arose with KPCL, leading to KPCL invoking Bank Guarantees of Indo Unique under the main contract, after which Indo Unique invoked the Bank Guarantee of N. N. Global as supplied under the Work Order.
Top of FormS
Subsequently, N.N. Global initiated legal proceedings against the cashing of the Bank Guarantee in a Commercial Court. In response thereto, Indo Unique moved an application under Section 8 of the A&C Act, requesting that the Parties to the dispute be referred for arbitration. The Commercial Court dismissed the Section 8 application, citing the unstamped status of the Work Order as one of the grounds. Dissatisfied with the Commercial Court's decision on 18 January 2018, Indo Unique filed a Writ Petition before the High Court of Bombay seeking that the Order passed by the Commercial Court be quashed or set aside. The Hon’ble Bombay High Court on 30 September 2020 allowed the Writ Petition filed by Indo Unique, aggrieved by which, N.N. Global filed a Special Leave Petition before the Supreme Court of India.
N. N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. – I
The issue in the matter of M/s N.N. Global Mercantile Pvt. Ltd. v. M/s Indo Unqiue Flame Ltd. & Ors. came up before a three-bench of the Supreme Court of India i.e. in a situation when an underlying contract is not stamped or is insufficiently stamped, as required under the Indian Stamp Act 1899, would that also render the arbitration clause as non-existent and/or unenforceable (‘N.N. Global Mercantile Pvt. Ltd. v. Indo Flame Ltd. – I’).
The Hon’ble Supreme Court of India whilst emphasizing the 'Doctrine of Separability' of an arbitration agreement held that the non-payment of stamp duty on the commercial contract would not invalidate, vitiate, or render the arbitration clause as unenforceable, because the arbitration agreement is considered an independent contract from the main contract, and the existence and/or validity of an arbitration clause is not conditional on the stamping of a contract. The Hon’ble Supreme Court further held that deficiency in stamp duty of a contract is a curable defect and that the deficiency in stamp duty on the work order, would not affect the validity and/or enforceability of the arbitration clause, thus applying the Doctrine of Separability. The arbitration agreement remains valid and enforceable even if the main contract, within which it is embedded, is not admissible in evidence owing to lack of stamping.
The Hon’ble Apex Court, however, considered it appropriate to refer the issue i.e. whether unstamped instrument/document, would also render an arbitration clause as non-existent, unenforceable, to a constitutional bench of five-bench of the Supreme Court.
N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II
On 25 April 2023, a five-judge bench of the Hon’ble Supreme Court of India in the matter of N. N. Mercantile Private Limited v. Indo Unique Flame Ltd. & Ors. held that (1) An unstamped instrument containing an arbitration agreement cannot be said to be a contract which is enforceable in law within the meaning of Section 2(h) of the Indian Contract Act 1872 and would be void under Section 2(g) of the Indian Contract Act 1872, (2) an unstamped instrument which is not a contract nor enforceable cannot be acted upon unless it is duly stamped, and would not otherwise exist in the eyes of the law, (3) the certified copy of the arbitration agreement produced before a Court, must clearly indicate the stamp duty paid on the instrument, (4) the Court exercising its power in appointing an arbitration under Section 11 of the A&C Act, is required to act in terms of Section 33 and Section 35 of the Indian Stamp Act 1899 (N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II).
N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III
A seven-judge bench of the Supreme Court of India on 13 December 2023 in its recent judgment in re: Interplay between arbitration agreements under the Arbitration & Conciliation Act 1996 and the Indian Stamp Act 1899, (1) Agreements lacking proper stamping or inadequately stamped are deemed inadmissible as evidence under Section 35 of the Stamp Act. However, such agreements are not automatically rendered void or unenforceable ab initio; (2) non-stamping or insufficient stamping of a contract is a curable defect, (2) the issue of stamping is not subject to determination under Sections 8 or 11 of the A&C Act by a Court. The concerned Court is only required to assess the prima facie existence of the arbitration agreement, separate from concerns related to stamping, and (3) any objections pertaining to the stamping of the agreement would fall within the jurisdiction of the arbitral tribunal. Accordingly, the decision in N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II and SMS Tea (supra) was overruled, by the seven-judge bench of the Supreme Court of India.
Kunal is a qualified lawyer with more than nine years of experience and has completed his LL.M. in Dispute Resolution (specialisation in International Commercial Arbitration) from Straus Institute for Dispute Resolution, Pepperdine University, California.
Kunal currently has his own independent practice and specializes in commercial/construction arbitration as well as civil litigation. He has handled several matters relating to Civil Law and arbitrations (both domestic and international) and has appeared before the Supreme Court of India, High Court of Delhi, District Courts of Delhi and various other tribunals.
No Safe Harbour For Google On Trademark Infringement
By Mayank Grover & Pratibha Vyas
October 9, 2023
Innovation, patience, dedication and uniqueness culminate in establishing a distinct identity. A trademark aids in identifying the source and quality, shaping perceptions about the identity's essence. When values accompany a product or service's trademark, safeguarding against misuse and infringement becomes crucial. A recent pronouncement of a Division Bench of the Delhi High Court dated August 10, 2023 in Google LLC v. DRS Logistics (P) Ltd. & Ors. and Google India Private Limited v. DRS Logistics (P) Ltd. & Ors. directed that Google’s use of trademarks as keywords for its Google Ads Programme does amount to ‘use’ in advertising under the Trademarks Act and the benefit of safe harbour would not be available to Google if such keywords infringe on the concerned trademark.
Factual Background
Google LLC manages and operates the Google Search Engine and Ads Programme, while, Google India Private Limited is a subsidiary of Google that has been appointed as a non-exclusive reseller of the Ads Programme in India. The Respondents, DRS Logistics and Agarwal Packers and Movers Pvt. Ltd. are leading packaging, moving and logistics service providers in India.
On 22.12.2011, DRS filed a suit against Google and Just Dial Ltd. under provisions of the Trademarks Act, 1999 (‘TM Act’) inter alia seeking a permanent injunction against Google from permitting third parties from infringing, passing off etc. the relevant trademarks of DRS. The core of the dispute revolved around Google’s Ads Programme. DRS claimed that its trade name 'AGARWAL PACKERS AND MOVERS' is widely recognized and a 'well-known' trademark. Use of DRS’s trademark as a keyword diverts internet traffic from its website to that of its competitors and they were entitled to seek restraint against Google for permitting third parties who are not authorized to use the said trademark. DRS further argued that Google benefits from these trademark infringements. This practice involved charging a higher amount for displaying these ads, constituting an infringement of their trademarks. Whereas, Google contended that the use of the keyword in the Ads Programme does not amount to ‘use’ under the TM Act notwithstanding that the keyword is/or similar to a trademark. Thus, the use of a term as a keyword cannot be construed as an infringement of a trademark under the TM Act, and being an intermediary, it claimed a safe harbour under Section 79 of the Information Technology Act, 2000. (‘IT Act’).
In essence, the dispute between the parties was rooted in DRS’s grievance concerning the Ads Programme. The Learned Single Judge vide judgment dated 30.10.2021interpreted relevant provisions of the TM Act and drew on multiple legal precedents to arrive at the decision that DRS can seek protection of its trademarks which were registered under Section 28 of the TM Act and issued directions to investigate complaints alleging the use of trademark and/or to ascertain whether a sponsored result has an effect of infringing a trademark or passing off.
Being aggrieved, Google LLC and Google Pvt. Ltd. filed appeals before the Division Bench. Google LLC argued that the Single Judge’s findings were erroneous and the directions issued were liable to be set aside. Google India claimed that it doesn’t control and operate the Search Engine and the Ads Programme making it unable to comply with the directions passed in the impugned judgment.
Analysis & Decision of Court
The Division Bench found Single Judge’s rationale for assessing trademark infringement through keywords and meta-tags valid. Meta-tags are a list of words/code in a website, not readily visible to the naked eye. It serves as a tool for indexing the website by a search engine. If a trademark of a third party is used as a meta-tag, the same would serve as identifying the website as relevant to the search query that includes the trademark as a search term. The use of keywords in the Ads Programme also serves similar purpose. The Division Bench was unable to accept that using a trademark as a keyword, even if not visible, would not be considered trademark use under the TM Act.
Google placed heavy reliance on the decisions rendered by Courts across jurisdictions of United Kingdom, United States of America, European Union, Australia, New Zealand, Russia, South Africa, Canada, Spain, Italy, Japan and China; in the cases of Google France SARL and Google Inc. v. Louis Vitton SA & Ors.[1], Interflora Inc. v. Marks & Spencer Plc.[2], and L’Oreal SA v. eBay International AG[3] in support of the contention that the use of trade marks is by the advertiser and not by Google. However, the Division Bench rejected Google’s passive role; highlighting its active involvement in recommending and promoting trademark keywords for higher clicks in its Ads Programme. Division Bench referred to a few judicial decisions rendered in the United States of America that captured the essence of the controversy for perspective, concluding that Google actively promotes and encourages trademarks associated with major goods and services, rather than having a passive role.
It was held that the contention that the use of trademarks as keywords, per se constitutes an infringement of the trademark is unmerited; the assumption that an internet user is merely searching the address of the proprietor of the trademark when he feeds in a search query that may contain a trademark, is erroneous.
The Doctrine of 'Initial Interest Confusion' addresses trademark infringement based on pre-purchase confusion. The doctrine is applied when meta-tags, keywords, or domain names cause initial confusion similar to a registered trademark. If users are misled to access unrelated websites, trademark use in internet advertising may be actionable and reliance was placed on US precedents. Referring to Section 29 of the TM Act, it was directed that Section 29 does not specify the duration for which the confusion lasts but, even if the confusion is for a short duration and an internet user is able to recover from the same, the trade mark would be infringed and would offend Section 29(2) of the TM Act.
It was held that the Ads Programme is a platform for displaying advertisements. Google, being an architect and operator of its own programme makes it an active participant in the use of trademarks and determining the advertisements displayed on search pages. Their use of proprietary software makes them utilize trademarks and control the distribution of information related to potentially infringing links, ultimately leading to revenue maximization. Hence, a substantial link exists between Google LLC and Google India, rendering it impossible for Google India to deny its role in operating the Ads Programme. It was further held that Google sells trademarks as keywords to advertisers and encourages users to use trademarks as keywords for ads. It is contradictory for Google to encourage trademark use while claiming data belongs to third parties for exemption. After 2004, Google changed policies to boost revenue and subsequently, introduced a tool that searches effective terms, including trademarks. Google's active involvement in its advertising business and online nature does not necessarily qualify it for benefits under Section 79 of the IT Act. The Division Bench agreed with the view of the Single Judge that Google would not be eligible for protection of safe harbour under Section 79(1) of the IT Act, if its alleged activities infringe trademarks.
Conclusion
This is a seminal decision governing (and rather, restricting) the operations of intermediaries and redefining the jurisprudence of safe harbour under the IT Act. The decision is well-reasoned and establishes a significant precedent for safeguarding trademarks by uniquely holding Google accountable under its Ads Programme. The same will prevent usage of tradenames as a third-party trademark in keyword search or metatags by advertisers on Google’s search engine. While keywords and meta-tags have different levels of visibility, their purpose is similar i.e. advertising and attracting internet traffic. The use of trademarks as meta-tags by a person who is neither a proprietor of the trademark nor permitted to use the same leads to confusion amongst public at large due to the automated processes of search engines and consequently, constitutes trademark infringement.
About the Authors: Mayank Grover is a Partner and Pratibha Vyas is an Associate at Seraphic Advisors, Advocates & Solicitors
[1] C-236/08 to C-238/08 (2010) [2011] All ER (EC) 41
[2] [2014] EWCA Civ 1403
[3] 2C- 324/09 (2010)
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