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3 Feb

SC: The Amount Received from the Auction Purchaser Cannot be Appropriated Against Pre-Deposit Contemplated Under the Section 18 of the SARFAESI Act, 2002

Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) mandates that the borrower deposits fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less, with the Appellate Tribunal, as a condition precedent for filing an appeal against the order of the Debt Recovery Tribunal before the Debt Recovery Appellate Tribunal. The question is how to determine the ‘debt due’? The amount of ‘debt due’ may be different at different stages of procedure contemplated for recovery of debt, 50% of which amount the borrower is required to deposit as pre-deposit under Section 18 of the SARFAESI Act. For instance, a dispute may arise when steps are taken under Section 13(2)/13(4) against the secured assets or when the secured assets are under notice of sale or when the assets have already been sold. So the amount of debt due may vary from the amount that is mentioned in the notice under Section 13(2) of the SARFAESI Act to the amount mentioned in the sale certificate.

In an appeal filed by the auction purchasers, a similar question arose for consideration of the Supreme Court i.e. whether, while calculating the amount to be deposited as predeposit under Section 18 of the SARFAESI Act, 50% of which amount the borrower is required to deposit as pre-deposit. Secondly, in a situation where the secured assets have been auctioned and the amount is received from the auction purchaser, whether while calculating the amount of “debt due”, the amount deposited by the auction purchaser on purchase of the secured assets is required to be adjusted and/or appropriated towards the amount of pre-deposit to be deposited by the borrower under Section 18 of the SARFAESI Act?

There were two set of appeals. In the first set of appeals, Sidha Neelkanth Paper Industries Private Limited was the principal borrower who availed the credit facility extended by the Andhra Bank. Immovable properties were mortgaged by the guarantors and by the borrower to secure the said cash credit facility. On the borrower failing to repay the loan, the account was declared as a Non Performing Asset. Andhra Bank after issuing notice under Section 13(2) of the SARFAESI Act, calling upon the borrower to pay the outstanding amount of Rs. 16.61 lakhs, initating measures under Section 13(4) of the SARFAESI Act and taking possession of one of the mortgaged properties, being property bearing No. 170, Deepali, Pitampura, Delhi-110034, the mortgaged properties were put to auction. Despite several resistance and litigations from the principal borrower, the auction was conducted on 05.12.2018 and one M/s Tejswi Impex Pvt. Ltd. (auction purchaser) was the successful highest bidder for an amount of Rs. 12.5 crores. The entire amount was deposited and a sale certificate came to be issued in favour of the auction purchaser on 19.12.2018.

The borrower filed an appeal before the DRAT challenging one order passed by the DRT dismissing the application filed by the borrower praying that the Bank/assignee be restrained from proceeding with the auction. The DRAT directed the borrower to comply with the requirements of making a pre-deposit under Section 18 of the SARFAESI Act which was challenged before the High Court. The High Court directed the DRAT to hear the appeal on merits by observing that on realising the amount of Rs. 12.5 crores against the debt of Rs. 16.61 crores, it can be said that more than 50% of the debt due is secured/recovered and therefore the requirement of making a predeposit under the second proviso to Section 18 of the SARFAESI Act can be said to have been met.

The DRAT disposed of the appeal vide order dated 1.8.2019 with a direction to the DRT to dispose of the main Securitization Application within a period of three months. Subsequently, vide order dated 05.10.2019, the DRT dismissed SA No. 264/2013 filed by the borrower. Against the said order, the borrower and the owner of the mortgaged property filed an appeal under section 18 of the SARFAESI Act. The borrower sought waiver of the statutory pre-deposit under Section 18 of the SARFAESI Act, relying on the earlier order of the High Court. The DRAT allowed the waiver of the statutory pre-deposit by observing that the amount already realised by selling the mortgaged property/secured property is required to be adjusted towards the pre-deposit and/or the same can be said to be a deposit of 50% of the amount as pre-deposit, as envisaged under Section 18 of the SARFAESI Act.

The secured creditor/assignee filed the writ petition before the High Court. The High Court partly allowed the said writ petition preferred by the secured creditor/assignee by directing that the borrower is required to deposit 50% of the remaining 4.1 crores being debt due (after deducting/adjusting Rs. 12.5 crores realised/recovered by selling the mortgaged property). The High Court has also observed that it shall be open to DRAT to reduce the said predeposit amount to 25%, after recording reasons in writing for the said reduction. The High Court held that pre-deposit contemplated under the second proviso of Section 18 of the SARFAESI Act, 2002 is mandatory in nature and cannot be waived by the learned DRAT and any amount that has been repaid by the borrower and/or recovered by a secured creditor after filing of the petition under Section 17, shall stand to the benefit of the borrower while computing the ”amount of debt due” under the second proviso to Section 18 of the SARFAESI Act, 2002.”

In another set of appeals, the DRAT held that as the bank had already recovered the debt by selling the mortgaged property and there was no remaining amount of debt due, the requirement of pre-deposit was satisfied and the borrower/appellants were not required to tender any amount towards discharging the condition of pre-deposit for entertaining the appeal under Section 18 of the SARFAESI Act. The High Court also held that the amount realised on deposit of the sale consideration by the auction purchaser is required to be appropriated and/or adjusted towards the amount of pre-deposit required to be deposited by the borrower under Section 18 of the SARFAESI Act.

The relevant part of the Section 18 of the SARFAESI Act is as follows:

“18. Appeal to Appellate Tribunal.—(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal [under section 17, may prefer an appeal along with such fee, as may be prescribed] to an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal. [Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower:] [Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent. of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less:”

The Court first went into the analysis of whether the “debt due” under Section 18 of the SARFAESI Act would include the liability + interest. By the combined reading of Section 18, & 2(ha) of the SARFAESI Act and section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993, the Court concluded that “debt” means any liability inclusive of interest which is claimed as due from any person. The Court then went on to observe that an appeal under Section 18 of the SARFAESI Act is permissible against the order passed by the DRT under Section 17 of the SARFAESI Act only and only when the “borrower” has deposited with the Appellate Tribunal fifty percent of the amount of “debt due” from him, as claimed by the secured creditors or determined by the DRT, whichever is less. Next question is meaning and determination of ‘debt due’. The Court explained that in case steps taken under Section 13(2)/13(4) against the secured assets, the ‘debt due’ shall be amount is mentioned in the notice under Section 13(2) of the SARFAESI Act. When the challenge to the sale of the secured assets, the amount mentioned in the sale certificate shall be the ‘debt due’. However, where both, namely, steps taken under Section 13(4) against the secured assets and also the auction sale of the secured assets are under challenge, in that case, the “debt due” shall mean any liability (inclusive of interest) which is claimed as due from any person, whichever is higher.

The Court was of the opinion that If the words used in the second proviso to Section 18 of the SARFAESI Act are “borrower has to deposit”, it is not appreciable how the amount deposited by the auction purchaser on purchase of secured assets can be adjusted and/or appropriated towards the amount of pre-deposit, to be deposited by the borrower. It is the “borrower” who has to deposit the 50% of the amount of “debt due” from him. At the same time, if the borrower wants to appropriate and/or adjust the amount realised from sale of the secured assets deposited by the auction purchaser, the borrower has to accept the auction sale. In other words, the borrower can take the benefit of the amount received by the creditor in an auction sale only if he unequivocally accepts the sale. In a case where the borrower also challenges the auction sale and does not accept the same and also challenges the steps taken under Section 13(2)/13(4) of the SARFAESI Act with respect to secured assets, the borrower has to deposit 50% of the amount claimed by the secured creditor along with interest as per section 2(g) of the Act 1993 and as per section 2(g), “debt” means any liability inclusive of interest which is claimed as due from any person. Therefore the concluded that where the borrower challenges the auction sale, thereafter it will not be open for the borrower to pray to use the sale proceeds received from the sale of the secured properties to be adjusted/given credit in an application for waiver of pre-deposit.

29 Jan

Whether Cinema Theatres Can Prohibit Movie Goers From Bringing Eatables Inside Cinema Halls

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CommonMan

Nearly all, who have watched movies in theatre, know that food is prohibited inside theatres. This is usually aimed at encouraging in-house sale of food in cinema halls. The food is sold at exorbitant prices. There are at the cinemas notices pasted outside the hall prohibiting carrying outside food and security personnel search the belongings of every cinema goer with a view to enforce the prohibition. In the event that movie goers are found in possession of eatables, they are asked to leave the food behind.

Two advocates in Jammu and Kashmir filed a PIL against cinema owners on this issue before the Hon’ble High Court of J&K. The contention of the Petitioners mainly hinged on the fact that Jammu and Kashmir Cinemas (Regulation) Rules 1975 framed under Jammu and Kashmir Cinematograph Act,1989 for regulating public exhibitions by means of Cinematographs, does not include prohibition with respect to carrying food. The food sold inside the cinema halls is at a high price and the prohibition results in cinema goers being compelled to purchase junk food and water from theatre premises. Then there can be viewers who may be accompanied by infant and elders with special dietary requirements or viewers who are, say diabetic for instance. According to the Petitioners, the act of cinema owners imposing such restriction on food tantamount to violation of the right to choice of food, including the right not to eat junk food and right to good health, which comes under the purview of Article 21 of the Constitution of India.

The Hon’ble High Court of Jammu and Kashmir gave a verdict in favour of the Petitioners directing the multiplexes and cinema halls owners of the State of J&K not to prohibit cinema goers/viewers henceforth from carrying his/her own food articles and water inside the theatre.

When the judgment was challenged before the Hon’ble Supreme Court, the Court went into the analysis of Article 19(1)(g) of the Constitution which recognizes the right of citizens to practice any profession, or to carry on any occupation, trade or business subject to the reasonable restrictions as prescribed under Article 19(6) of the Constitution. The Court referred to the judgment in Alagaapuram R. Mohanraj v. T.N. Legislative Assembly (2016) 6 SCC 82 to add that the right under Article 19(1)(g) of the Constitution includes all activities which enable citizens to generate economic benefits and earn a livelihood.

As a foremost observation, the Court stated that none of the laws framed by the State Government including Jammu and Kashmir Cinemas (Regulation) Rules 1975, Cinematograph Act 1952, the Cinematograph (Certification) Rules 1983 and, the Jammu and Kashmir Cinematograph Act 1989 contain a rule compelling the owner of a cinema theatre to allow a movie goer to bring food or beverages from outside within the precincts of the theatre or includes any provision which requires theatre owners to permit movie goers to carry food and beverages of their own into the cinema hall. The Court found that “legislature’s omission of a provision requiring the cinema owner to allow eatables and beverages to be brought from outside is significant”. Further, the Court observed that cinema theatres are private properties of the owners which entitles them to imposed certain terms and conditions so long as they do not prejudice public interest, safety and welfare. Since a cinema owner is running a business, he has the freedom to determine the terms to make his business economically viable and further to maximise his profitability. The condition to not allow bringing food in the theatre premises is well within the right conferred by the Constitution and is also not contrary to public interest, safety or welfare.

The Court further appreciated the fact that cinema halls are no longer a place solely for exhibiting cinematographic films but offers a bundle of entertainment where provision of food also forms a part and adds to the profitability of business. Although the Petitioners have contended that the food being sold in the theatres is junk food and thus unhealthy and at the same time sold at exorbitant price, the Court observed that it being part of the commercial decision, the cinema owners have the liberty to decide the menu of the food being sold in their theatre along with the price of the items being served in their premises.

Movie goers on the other hand have the choice of not purchasing/consuming the food being sold at the theatre if it is not to their liking. The purchase of a movie ticket in no way compels the movie goer to purchase and consume the food at the theatre. In other words, “they are not being prevented from exercising their right to choice of food.” The Court therefore, concluded that “Whether or not to watch a movie is entirely within the choice of viewers. If viewers seek to enter a cinema hall, they must abide by the terms and conditions subject to which entry is granted. Having reserved the right of admission, it is open to theatre owners to determine whether food from outside the precincts of the cinema hall should be permitted to be carried inside.”

The Court then went on to further understand the concept of unequal bargaining power as explained in the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly (1986) 3 SCC 156 and whether this would apply in the case before them. The judgment in Central Inland Water assesses whether the parties have unequal bargaining power relative to one another and lays down when a contractual term or a contract is unfair, unreasonable or unconscionable. The Court summarised that a contract (or a term in a contract) can be said to be unfair or unreasonable if it is one-sided or devoid of any commercial logic. The Court explained that commercial logic of prohibiting movie goers from carrying their own food to the cinema hall is to stimulate and boost a vital aspect of the business – the sale of food and beverages and any restriction on that in the likes of what the Petitioners have been seeking shall prejudice the economic activity of the business owners. The viewers are bound by the conditions of entry in the cinemas in the same way as visitors who are prohibited to take pictures in museums or audience who are banned from recording live performances etc. The Court therefore found the judgment of the High Court in excess of the jurisdiction conferred on the High Courts under Article 226 of the Constitution. The Court held that the High Court was not justified in issuing a direction prohibiting theatre owners from disallowing food and beverages to be brought in by persons entering a movie theatre who enter it for viewing a film. The Court, however, requested the cinema owners to look at the movie goers with chronic diseases who may have received dietary instructions from doctors or are under dietary restrictions due to medical conditions on case to case basis.

25 Jan

Applicability of Section 29A of the Arbitration Act on International Commercial Arbitration post 2019 Amendment

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Arbitration

In one of the critical steps towards making arbitration an expeditious alternative dispute resolution process, it was in 2015 that the timelines for winding up arbitration proceedings, within a stipulated time period of 12 months from the date arbitral tribunal enters upon reference, was first introduced in Indian arbitration regime vide new Section 29 A of Arbitration and Conciliation Act, 1996 (“Arbitration Act”). While the timelines were made applicable to both domestic and international arbitrations in India in 2015, its applicability was limited to domestic arbitrations alone vide an Amendment Act in 2019. The issue, whether the 2019 amendment would apply to arbitrations pending when the Amendment Act 2019 came into effect, or in other words whether the amendment is retrospective in nature, arose in several disputes and since been addressed by various High Courts including Hon’ble Delhi High Court.

One such dispute has been recently decided by the Hon’ble Supreme Court in TATA Sons Pvt Ltd (Formerly TATA Sons Ltd) v. Siva Industries and Holdings Ltd & Ors [Miscellaneous Application No 2680 of 2019 in Arbitration Case (Civil) No 38 of 2017 decided on 05.01.2023]. In this matter, a sole arbitrator was appointed by the Supreme Court under section 11(6) of the Arbitration Act since one of the respondents was a foreign party and thus, it was an international commercial arbitration in terms of Section 2(1)(f) of the Arbitration Act. The arbitrator entered upon the reference on 14 February 2018. On 21 March 2018, a preliminary case management meeting was held between the parties and the arbitrator at which the parties agreed to a six months extension (expiring on 14 August 2019), if the arbitral proceedings could not be completed within a period of twelve months commencing from the date the arbitral tribunal entered reference.

During the pendency of the arbitral proceedings, the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 was initiated against the first respondent and consequently proceedings came to a suspended halt on account of moratorium. During the period of moratorium, the original period of one year and the extension of six months expired. Tata Sons, therefore, moved an application for further period of six months after the moratorium ceases to exist in the light of section 29A of the Arbitration Act as amended in 2019. CIRP came to an end on 3 June 2022. The application, therefore, sought that arbitration proceedings may be allowed to continue without any need for an extension of the term of the Ld. Sole Arbitrator or alternatively, if Hon’ble Court is of the opinion that the amended Section 29A (following the 2019 Amendment) is inapplicable to the arbitration proceedings, then allow the extension of the time limit within which arbitrator is to render an award in the arbitration proceedings between the parties by a period of 1 year.

The Court went into the analysis of Section 29A of the Arbitration Act and its evolution. When the section was introduced in 2015, it stipulated that the award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Post amendment in 2019 (w.e.f. 30.08.2019), the new section 29A(1) stipulated that “The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23: Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.”

Essentially the argument of the applicant was that as a result of the amendment of Section 29A, the period of 12 months prescribed for making an award from the date of completion of the pleadings has ceased to apply to an international commercial arbitration and the amendment being of a procedural nature, the amended provision would apply to the arbitral proceedings in the present case. The Court appreciated the mandatory nature of the provisions under Section 29A(1) prior to the amendment and their application to all arbitrations conducted under the Act, domestic or international commercial by underlining the importance of expression “shall”. The Court observed that after the amendment, the expression “in matters other than an international commercial arbitration” makes it abundantly clear that the timeline of twelve months which is stipulated in the substantive part of Section 29A(1), as amended, does not apply to international commercial arbitrations. The proviso further reaffirms that the award in the matter of an international commercial arbitration “may be made as expeditiously as possible” and that an “endeavour may be made to dispose of the matter within a period of 12 months” from the date of the completion of pleadings. Therefore while the mandate to deliver the arbitral award within the period of 12 months is mandatory for domestic arbitration, it is directory in case of international commercial arbitration.

The applicant had also argued that even if the court is of the opinion that section 29A excludes the mandate in case of international commercial arbitration, sub-section (3) and (4) were not excluded and the parties may mutually agree to extend the period by six months. In order to decide the issue, the Court went into the reasons why the report dated 30 July 2017 of the Committee chaired by Justice B N Srikrishna carries specific recommendation to the effect that international commercial arbitrations may be left outside the purview of the timelines provided in Section 29A. The Committee indicated that generally the international arbitration institutions, with their own machinery for case management, have in place the timelines for conducting international arbitrations and that they did not require the monitoring of timelines by the intervention of the court. The Committee further recorded that in other jurisdictions, timelines for arbitral proceedings are usually agreed by the parties themselves in accordance with the nature and complexity of the dispute.

On aspect of applicability of the 2019 amendments to Section 29A to the present case, the Court referred to section 26 of the 2015 Amendment Act which clarified that “[n]othing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”

The Court observed that no provision equivalent to section 26 of the 2015 Amendment Act with regard to the prospective application of the amendments was chalked under the Amendment Act of 2019. Further, the removal of the mandatory time limit for making an arbitral award in the case of an international commercial arbitration does not confer any rights or liabilities on any party and is remedial in nature (unlike original Section 29A which despite being procedural in nature created new obligations in respect of a proceeding which had already commenced since it laid down a strict timeline for rendering an arbitral award for the first time in the framework of the Arbitration Act [Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd[1]]). Accordingly, the Court held that Section 29A should be applicable to all pending arbitral proceedings as on the effective date i.e., 30 August 2019. The Court agreed with the decision of Hon’ble Delhi High Court in the matter of ONGC Petro Additions Ltd. vs Ferns Construction Co. Inc.[OMP (Misc) (Comm) 256/2019] wherein it was held that there is no strict time line prescribed to the proceedings which are in nature of international commercial arbitration as defined under the Act, seated in India. The Court, accordingly, held that the sole arbitrator in the present case would be acting within his domain and jurisdiction to decide upon any further extension of time beyond what is originally stipulated in the case management meeting.

It is therefore, made clear beyond any doubt that the timelines stipulated under Section 29A of the Arbitration Act for concluding arbitration proceedings are not only inapplicable in case of international commercial arbitrations, the amendment in 2019 being procedural in nature is retrospective and shall be applicable to all the proceedings pending at the time the amendment came into effect.

[1] (2018) 6 SCC 287

22 Jan

Right to File Affidavits/Additional Evidence in the Proceedings under Section 34 of the Arbitration Act

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Arbitration

It has been well established by catena of judgments that proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act“) are summary in nature and therefore, the scope of enquiry in any proceedings under Section 34 of the Act has been restricted to consider the grounds exhaustively mentioned in Section 34(2) or Section 13(5) or Section 16(6) in order to determine whether to set aside an award that has been challenged under section 34 of the Arbitration Act. The thumb rule is that an application for setting aside an arbitral award would not ordinarily require anything beyond the record that was before the Arbitral Tribunal.

In the matter of Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited and Anr[1] the Court had held that framing of issues is not required as the proceedings are summary in nature. However, at the same time the Court indicated that according to section 34(2) of the Arbitration Act, an opportunity to the aggrieved party has to be afforded to prove existence of any of the grounds and allowed the applicant in the case to file affidavits of the applicant’s witnesses as “proof” and granted the respondent-defendant an opportunity to place their evidence by affidavit. The Court further went on to add that “Where the case so warrants, the court permits cross-examination of the persons swearing to the affidavit”.

In the matter of Emkay Global Financial Services Limited v. Girdhar Sondhi[2] it was clarified thatsince after 2015 amendments to the Arbitration Act, the proceedings under section 34 have become time bound, the thumb rule of summary proceeding shall be followed and only if there were matters not contained in the record before the arbitrator, and would be relevant for determining issues arising under Section 34(2)(a), only then they may be brought to the notice of the Court by way of affidavits filed by both parties. The Court further added that cross-examination of persons swearing to the affidavits should not be allowed unless absolutely necessary.

Since, clearly an exception has been carved out to the thumb rule, howsoever narrow, the question is how and when this exception be applied by the courts. When is it ‘absolutely necessary’ to cross examine? In a subsequent matter[3], the Apex Court further clarified the position by holding that if there is any exceptional circumstance wherein parties are required to adduce evidence in the form of an affidavit, the party must indicate on what point the party intends to adduce evidence along with disclosing specific documents or evidence that would be required to be produced. There must be specific averments in the affidavit as to the necessity and relevance of the additional evidence sought to be adduced which would be beyond the record that was before the arbitrator.

Recently, on a strong exceptional basis, the Apex Court in the matter of M/s Alpine Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal and Others[4] allowed a party to file affidavits/additional evidence in the proceedings under section 34 of the Arbitration Act and further permitted second party to cross-examine and/or produce contrary evidence. In this case, the award passed by the arbitrator was ex-parte. The respondent assailed the award under section 34 of the Arbitration Act along with the application to adduce additional evidence. The application was declined by the Court while relying on Section 34(2)(a) of the Act, as amended in the year 2019, by which expression “furnish proof” in section 34(2)(a) came to be substituted with the expression “establish on the basis of record of arbitral tribunal”. The Court explained in the following words: “the said amendment intended to limit the scope of judicial review under Section 34 of the Act only in exceptional circumstances enumerated under Section 34(2)(a) of the Act on the basis of the record available and even if the grounds urged relate to section 34(2)(b) of the Act, the applicants cannot have a right to produce additional evidence”. The order of the Court was challenged by way of writ petition before the High Court which allowed the petition and permitted the respondent to adduce the evidence while relying on judgment in Fiza Developers.

The said judgment by the Hon’ble High Court was challenged before the Hon’ble Supreme Court. The Court foremost observed that arbitration proceedings commenced and even the award was declared by the arbitral tribunal in the year 1998, i.e., prior to section 34(2)(a) came to be amended and therefore, pre-amendment of section 34(2)(a) shall be applicable according to which an arbitral award could be set aside by the Court if the party making an application “furnishes proof” and the grounds set out in section 34(2)(a) and section 34(2)(b) are satisfied.

The Court, therefore, applied the ratio in the judgments in Fiza Developers, Emkay Global and Canara Nidhi, and held that “if there are matters not containing such records and the relevant determination to the issues arising under section 34(2)(a), they may be brought to the notice of the Court by way of affidavits filed by both the parties”. The Court observed that whereas the arbitral tribunal in the matter had passed the decree for specific performance of the contract/agreement subject to the amalgamation of the plots, the respondents, by way of application, had sought to place on record the communication from the appropriate authority by which the application for amalgamation of the plots was rejected. The case of the respondents was thus, in view of the refusal of the permission by the appropriate authority to amalgamate the plots, the case fell under section 34(2)(b), namely, that the dispute was not capable of settlement under the law for the time being in force and that the arbitral award was in conflict with the Public Policy of India, namely, against the relevant land laws. Since the event of refusal to amalgamate the plots was subsequent to the passing of the award, the same was not forming part of the record of the arbitral tribunal. Further, the award of the arbitral tribunal being an exparte award, no evidence was before the arbitral tribunal on behalf of the respondents.

According to the Court, therefore, the affidavit thus disclosed specific document and the evidence required to be produced, thus establishing a strong exceptional case to permit the respondents to file affidavits/adduce additional evidence. However, despite the Courts observation that “the cross-examination of the persons swearing in to the affidavits should not be allowed unless absolutely necessary as the truth will emerge on the reading of the affidavits filed by both the parties,” no separate reasoning was provided by the Court for allowing cross-examination in the matter. The Court plainly added that, “at the same time, the appellant also can be permitted to cross-examine and/or produce contrary evidence.”

It is pertinent to note that as it appears, the permission to adduce additional evidence has been granted because the pre-amendment position of law has been applied. This was because not only were the proceedings commenced before the amendments, the award was also delivered prior to the amendments. After the amendment in 2019, the section does away with the requirement of furnishing proof under Section 34(2)(a) of the Arbitration Act. The phrase “party making the application furnishes proof” has been substituted with the words “establishes on the basis of the Arbitral Tribunal’s record that.” Further, the proceedings under section 34 before the Court has been made time bound.

[1] (2009 ) 17 SCC 796

[2] (2018) 9 SCC 49

[3] The judgment in Canara Nidhi Limited vs. M. Shashikala Civil Appeal Nos. 7544-7545 of 2019 further affirms the position.

[4] [CIVIL APPEAL NO. 73 OF 2023 decided on 19.01.2023]

19 Dec

Does Municipal Corporation of Delhi has Accountability Towards Delhi Government or Central Government

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CommonMan

Recently, Aam Aadmi Party won by thumping majority bagging a 134 out of a total of 250 councillors seat in Delhi Municipal Corporation elections, with BJP confined to 104. Immediately after few days of election results, spokesperson of the Delhi unit of BJP Praveen Shankar Kapoor said that the Municipal Corporation of Delhi (MCD) has no accountability towards the Delhi government or the Vidhan Sabha of the city. Instead, after the amendment in the Delhi Municipal Corporation Act, 2022, the MCD is now under the Central Government or its representative Lieutenant Governor. This is a brief attempt, therefore, to look into the amendments that have been introduced in the Delhi Municipal Corporation (Amendment) Act, 2022 (“2022 Amendments”) and determine whether and what changes have been introduced in the legislation so as to shift the weight and answerability of MCD to the Centre.

The Amendment Act, 2022 was passed on 18^th April, 2022 by the assent of the President of India. The foremost important change that has been introduced is unification of Municipal Corporations in Delhi. It replaces the three municipal corporations under the Delhi Municipal Corporation Act, 1957 with one Corporation named the Municipal Corporation of Delhi. The Amendment Act further changed the following (in sections 1, 3A, 5, 6, 32A, 55, 56, 57, 193, 330A and 499, for the word “Government”, wherever it occurred, the words “Central Government” was substituted):

Total number councillor seats were decreased from 272 to maximum of 250;
The Amendment Act omits the provision for a Director of Local Bodies who was appointed to assist the Delhi government;
The Act empowered Central Government to appoint a Special Officer to exercise powers of the Corporation until the first meeting of the Corporation is held after the commencement of the Act;
The Act introduced obligatory functions of the new Corporation to establish an e-governance system for citizen services on anytime-anywhere basis for better, accountable, and transparent administration; and
The Act omits the provision regarding the condition of employment of a sweeper employed for doing house scavenging of a building where there is a requirement to provide a reasonable cause or a 14 day notice before discontinuing his service.

Along with the changes as stated above, the Amendment Act further empowers Central Government, in place of the Delhi Government, to decide matters which were under the Delhi Government as per amendments introduced in 2011. These included: (i) total number of seats of councillors and number of seats reserved for members of the Scheduled Castes, (ii) division of the area of corporations into zones and wards, (iii) delimitation of wards, (iv) matters such as salary and allowances, and leave of absence of the Commissioner, (v) sanctioning of consolidation of loans by a corporation, and (vi) sanctioning suits for compensation against the Commissioner for loss or waste or misapplication of Municipal Fund or property.

Above all, the Act now mandates that the Commissioner will exercise his powers regarding building regulations under the general superintendence and directions of Delhi government. As per section 330A:

330A. General superintendence, etc., of the Central Government.–Notwithstanding anything contained in any other provision of this Act, the Commissioner shall exercise his powers and discharge his functions under this Chapter, under the general superintendence, direction and control of the Central Government. It is therefore, to an extent clear that there is a sea change that has been brought by the latest amendments to the MCD Act wherein the answerability lies to the Central Government instead of Delhi Government as it was for the last 11 years.

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