Seat theory and Lex Arbitri in Int. Commercial Arbitration

Article By Snigdha Roy,University Of Dhaka

Prospects of Seat theory or Localization:

The traditional Seat theory equates to Lex Arbitri and Lex Loci Arbitri. It has given a strong assumption that arbitration shall be governed by the law of the seat of the arbitration without giving the choice of law to the parties or Tribunal.[1] The reasoning behind this traditional approach is quite complicated. The seat of arbitration plays a significant role as there exists a relation between the jurisdiction of a seat and arbitration itself. Where the arbitration is supposed to take place, the state should provide a legal body to execute the arbitration procedure properly. The court of the seat has exclusive authority to control the legal effects of any acts within its jurisdiction.[2] So, it is essential to administer an award to a certain jurisdiction for its enforcement. Any legal power can only be exercised within a certain jurisdiction or under a certain system of national law. Therefore, arbitration within a territory cannot be executed without a touch of national law. Where the arbitrator is unfamiliar with the applicable law, the court of the seat is considered the most ‘competent and effective’ authority over Tribunal.[3] So, the arbitration ad hoc or Institutional cannot escape from the law of the seat of arbitration. However, Seat theory also ensures the enforcement and recognition of arbitral awards by granting nationality to them. NYC provides the grounds for enforcing and recognition of arbitral awards by referring to the law of the seat of arbitration or the law of the place where the award was made.[4] By this NYC expressly showed a territorial relation between the seat and Lex arbitri. This convention also gives priority to comply with the law of the seat.

Besides, Seat theory defines that a whole arbitration procedure will execute in a single country but today arbitration takes place in more than one country, sometimes outside the chosen seat. Seat theory also discourages the party autonomy as the applicable law chosen by the parties is affected by the law of the seat. Nowadays, the Seat theory narrows the freedom of the party by allowing too much intervention of domestic courts, contrary to recent developments in arbitration law.[5] Therefore, the traditional approach limits the party autonomy and empowers the local courts to an extent.

Enforcement of arbitral awards: A return to the Lex Loci Arbitri

NYC demonstrates grounds on which foreign awards can be recognized and enforced. Yet award can be refused to enforce if respondent satisfies any of the exclusive grounds referred in Article V of the New York Convention.[6] The grounds for refusal of enforcement can be divided into two groups: Firstly, inconsistency with arbitration agreements, the relevant grounds of the NYC are a violation of due process and public policy of the enforcing state.[7] Secondly, the ground relates to the validity of arbitration agreement which attracts the complexity of choice of law. In the era of a traditional approach, the national court will apply its own Private International Law rules to determine the applicable law and also ascertained the governing law of the arbitration agreement. Now the question can be raised whether such Private International Law influences the refusal of enforcement of an arbitral award. Because Private International Law rules fluctuate from country to country.[8] Hence, enforcement of the arbitral award has relied on the Private International Law of the enforcing state.

Article V(1)(a) of the NYC provides that an award may be refused when the parties of the agreement are “under some incapacity” or there is an “invalid agreement”. In this issue, which law will be applicable to determine the capacity of the party and the validity of an agreement- is very disputed and unclear. Even in common law, system lacks a clear choice of law rule.[9] There are many established views that the applicable law can be a law of the domicile or the law of the contracting state.[10] It is also stated that the arbitration agreement is governed by the law of the place where the award was made in the absence of the party’s choice. Thus, the private International Law of origin country (where the award made) is applicable as governing law of the arbitration agreement. Therefore, if the private International Law of every state influences the applicable law to the arbitration agreement, it is obvious that enforcement of an award will depend on the private international law of enforcing state.

Article V(1)(c) of the said convention refers that an award can be refused to enforce where the Tribunal acts more than its jurisdiction. The enforcing state is under a duty to interpret the terms of the agreement whether the given award was by following the terms of an agreement or not. For this, the enforcing state needs to determine a governing law of the agreement. National courts, therefore, have to follow the Private International Law. Usually, most of the national law provides that the governing law will be the law explicitly chosen by the parties.[11] Complex situation arises when the parties are not subjected to any applicable law to the arbitration agreement. Common law provides two steps to determine the governing law of the arbitral agreement; firstly, the closest connection with disputes, Secondly, the conflict of law rules. The conflict of law rules differs from jurisdiction to jurisdiction. So, the different national courts determine different governing laws of certain arbitration agreements. Similarly, the closest connection test may happen with different outcomes. Thus, to enforce an award that is beyond the matter of arbitration agreement widely depends on the particular jurisdiction.

Again, Article V(1)(d) of the Convention mentioned other grounds to refuse recognition and enforcement of an arbitral award. An enforcing court may refuse to enforce an award where the composition of the arbitral tribunal was not under the terms of the agreement or in the absence of such arbitration agreement not in accordance with Lex Loci Arbitri. However, this article of this convention encourages the party autonomy principle as it gives priority first to the arbitration agreement, later law of the Seat. This Article also attracts the Geneva Convention, which requires that the composition of the arbitral tribunal and arbitral procedure should be both by following per the parties agreement and the law of the arbitral seat.[12] This Article is related to the choice of law problems and the enforcing states required to understand the intention of the parties. The said convention requires the choice of law for arbitration agreement and such choice of law necessarily attracts the Private International Law. As every Private International Law is different so the enforcement of an award under NYC has become less certain. Hence, coming back to the Lex Loci Arbitri is the best way in the problem of choice law for enforcing the award.

Mandatory Law and Public Policy

Although party autonomy is recognized worldwide, it is not absolute. Because parties can exercise autonomy power complying with the mandatory provision and public policy. The applicable law will also be influenced by such mandatory rules, like, an arbitration proceeding can be declared a violation of public policy. Since the mandatory rules and public policy fluctuate from country to country, the idea of party autonomy is restricted by mandatory provisions and public policy of Lex Arbitri. If the choice of law does not conflict with the said provisions, then parties are free to exercise their autonomy. Where parties decide to settle the dispute separately without abiding by the mandatory rules and public policy, the award will end with unenforceability.

Is the Delocalized theory completely out of reach of the Lex Loci Arbitri?

Delocalized arbitration does not follow the notion that International Commercial Arbitration has a forum and is governed by the law of the forum.[13] In SA Coppee Lavalin NV v Ken-Ren Chemicals and Fertilizers Ltd.[14] described delocalized arbitration as “a self-contained juridical system, by its very nature separate from national systems of law”.[15] It is also well established that unlike the judges the arbitrators are not bound to follow the conflict of law rules rather take into account the common intention of the parties.[16]

The different national legal system has different rules of arbitration which causes complexity; to avoid such unwanted interference of the legal system, parties choose to delocalize the arbitration. Nevertheless, this idea is discouraged in common law, and it is also argued that arbitral proceedings must be connected with any municipal system of law.[17]Without the touch of any legal system a proper arbitrationis impossible. Several issues relating to the arbitration agreement, like, the validity of the arbitration agreement or enforcing the arbitral award need to go through legal proceedings. The delocalize theory has come from the party autonomy. Party autonomy is also followed some legal systems. “National court may exist without arbitration, but arbitration certainly cannot exist without national court”.[18]So, only the national court can give legal effect to any action whereas the arbitrator is unable to bind any party. The arbitration will not be completed without the intervention of the national court even though the party’s intent to delocalize the arbitration for avoiding legal procedures. Delocalize arbitration is not completely out of the reach of Lex Loci Arbitri. Despite, delocalize arbitration proceedings is still ambiguous and not universally accepted the award.

Conclusion

In conclusion, the procedural law in the arbitration can be determined by four steps test. The mandatory provisions of the Lex Loci Arbitri will be the first choice of law. So, the law of the seat shall prevail. Beneath the level agreements of the parties which shall not in conflict with the mandatory provisions of the Lex Loci Arbitri. This can be either Arbitration rules that the parties agreed upon or specific agreements made by the parties which could again be derogations from the arbitration rules that the parties have agreed upon. It is an interesting question whether there are mandatory provisions within the Arbitration rules of certain arbitral situations. In this regard, I am of opinion that this is not the case in practice. However, this can mean that the parties could in theory derogate from those provisions but the arbitral institutions will probably reject to administer those arbitrary proceedings conducted under such rules. Underneath this level, the provisions of the Lex Loci Arbitri will govern questions that are not governed by agreements of the parties. So, questions not governed by the arbitration rules or very specific agreement of parties, will go back to the Lex Loci Arbitri.

Apart from the traditional approach, arguments favor the delocalization theory particularly where the seat of arbitration merely is the venue of the arbitration. Usually, the seat of arbitration is unrelated to the parties as well as to the subject of the contract. Therefore, it might seem odd that the public policy or the mandatory provisions of arbitration law of that country should influence the arbitral award or the arbitral proceedings. Yet at the current stage, it is just a matter of fact that most national laws or Lex Loci Arbitri will have an influence on the arbitration proceedings as well as the arbitral award. Therefore, the Arbitral Tribunal should take into account the law of the seat of arbitration, mandatory provisions as well as its public policy consideration.

As International Conventions had imposed limitations on national arbitration law so the Private International Laws are becoming more arbitral friendly. By this International parties are attracted by such national laws and select the most appropriate law as governing law of arbitration and the law that belongs to the country will be the seat of arbitration. Altogether, the arbitral seat plays a very significant role in Arbitration. So, to avoid unwanted complexities choice of the seat should perhaps be select carefully by professionals. Getting a neutral and fair award mostly depends on the choice of the seat of arbitration. Arbitral institutions like ICC and LCIA provides arbitration clause which can be an option to adopt such rules for parties to get a fair, easy, and neutral settlement.

To sum up, national jurisdictions function in an international character in International Commercial Arbitration. Besides, International Conventions and principles give a legacy to the arbitration agreement and impose restrictions on a state to make more arbitration-friendly litigation. On the other hand, before choosing a seat of arbitration parties must know the state’s Lex Loci Arbitri. By this, there will be fewer chances of conflict of rules. Moreover, Lex Loci arbitri does not prevent the scope of party autonomy rather it gives ample application to other law. But there is no solid direction to determine and select applicable law. Perhaps, it is out of the parties’ capacity to decide which law will be appropriate for the subject matter. It is better to find a balance between parties and arbitrators. Still, there remains ambiguity how the applicable law will be determined in the absence of a choice of law. In this regard, I want to mention Article 28(2) of UNCITRAL Model Law which provided that the arbitrator will decide by following per under Private International Law. Therefore, the parties are not deprived of getting their expected fair and neutral award. [1]Belohlavek AJ, “Seat of Arbitration and Supporting and Supervising Function of Courts” [2015] Czech (& Central European) Yearbook of Arbitration 26.

[2]Good R, ‘The Role of the Lex Loci Arbitri in International Commercial arbitration” (2001)17 Arbitration International 23.

[3]Chen W-J, “Determining “Appropriate” Procedural Rules of International Commercial Arbitration and Its relationship with the law governing arbitral procedure: In the Perspective of Enforcement Under the New York Convention (2009) Contemp. Asia Arbitration 158.

[4] New York Convention (1958), Art. 5

[5]Secretariat’s Guide, p. 199

[6]Albert Jan van den Berg, The New York Convention of 1958 (Kluwer)

[7]See Art. V(1)(b) & V(2)(b) of The New York Convention

[8]Peter Stone, EU Private International Law (Edward Elgar, 2nd Ed. 2010) at p 3; Garry Born, International Civil Litigation in the United States Courts (Kluwer, 3rd Ed,1996) at p 492.

[9]Halsbury’s Laws of Singapore vol. 6(2) (Lexisnexis,2009) at para 75.370

[10]Sotomayer v De Barros (1877) LR 3 PD at 5, Baindail v Baindail (1946) p 122 at 128

[11]Gary Born, International Commercial Arbitration: Commentary and Materials (Kluwer, 2001) at pp 2153-2163

[12]Van den Berg, supra, note 23 at 323

[13]Julian Lew, “Achieving the Dream: Autonomous Arbitration?” in Arbitration Insight: Twenty Years of the Annual Lecture of the Schoolof International Arbitration (Kluwer, 2007) at p 455

[14] [1995] 1 AC 38

[15]SA Coppee Lavalin NV v Ken-Ren Chemicals and Fertilizers Ltd [1995] 1 AC 38

[16](1964) 13 ICLQ 1011

[17]Bank Mellat v Helliniki Techniki SA

[18]A. Redfern & Martin Hunter, with Nigel Blackbay & Constantine Partasides, Law and Practice of InternationalCommercial Arbitration (6 th Ed. OUP 2015)

Odisha v. Andhra Pradesh: Contempt of Court?

The State Government of Odisha has approached the apex court for initiating contempt proceedings against the State of Andhra Pradesh. The proceedings are the consequence of a border dispute. The former has alleged the latter of violating the existing state of affairs by taking over certain villages belonging to itself as agreed upon between the two, more than 50 years ago. The advocate presenting the case before the Chief Justice termed it as a grave constitutional crisis.

The villages in question are that of Kotia group and the same were the subject matter of a former suit filed by the Odisha Government in 2006. However, the suit was dismissed as it was considered non-maintainable under Article 131 of the constitution that vests the Supreme Court with original jurisdiction over any dispute arising between the states or between the center and state. Nevertheless, the order passed by the Court in the matter, recorded the earlier undertaking given by both the states in 1968 to maintain status quo. It is the violation of this undertaking agreed upon with the consent of both States, mentioned in the order that gives rise to the contempt petition. The AP government is not only alleged of taking over the three Gram Panchayats but also of holding elections in these territories in the near future. Odisha claims that the villages have always been under its administrative control and that it has undertaken several developmental activities in the region over the years. It further relies upon the Electoral Rolls prepared by the Election Commission of India to argue that the voters of these villages fall within Koraput Constituency of Odisha.

“Contempt” literally means disrespect or disgrace. The judiciary of India that is the Indian legal System hold an important position in law. The legal system of India is based on the Rule of Law which means that the law is supreme. To protect the justice system, laws on contempt of court have been made wherein the Supreme Court under Articles 129 and the High Court under Article 215 have been given the powers to adjudicate and punish for contempt.

In accordance to the Contempt of Court Act, 1971 section 2(a) there are two types of contempt :- Civil and Criminal contempt of court. Criminal contempt is when there is obstruction of judicial proceedings or scandalizing judicial proceedings whereas Civil contempt of court is when there is willful disobedience of any judgement, decree, writ, etc. made by the judge as in the present case the accused has been accused with.

The petition seeking urgent listing was agreed to be heard by the Court today i.e. 12th February, 2021.

PIL Dismissed Challenging The Validity of Sedition

The Apex Court on Tuesday dismissed a plea challenging the colonial law of Sedition provided under S. 124-A of the Indian Penal Code. A group of advocates was heard by a 3 judge bench presided by Chief Justice of India, SA Bobde. The provision reads as follows:

S. 124A. Sedition.- Whoever by words, either spoken or written, or by signs, or by visible representation, or otherwise, brings or attempts to bring into hatred or contempt, or excites or attempts to excite disaffection towards, the Government established by law in India, shall be punished with imprisonment for life, to which fine may be added, or with imprisonment which may extend to three years, to which fine may be added, or with fine. 

The petitioners in their plea contended that this draconian law of the British era was put to unlawful and indiscriminate use in recent years especially against media, students, and women. They further contended that continuance of this provision without adequate safeguards as provided under The Unlawful Activities (Prevention) Act, 1967 (UAPA) is unreasonable and unwarranted. Thus, praying that the said provision needs to be re-examined with the changing circumstances in accordance with the tests of proportionality, necessity and arbitrariness and struck down as it stands in violation of the fundamental rights enshrined under Article 19 (1) (a) which states all citizens shall have the right to freedom of speech and expression and Article 21 – Protection of Life and Personal Liberty, of the Constitution.

The plea also alternatively sought directions to the Government to instruct their respective Heads of Police and D.G.Ps to ensure that the laws declared by the Hon’ble Court in Kedar Nath and Balwant Singh cases are strictly followed.In the Balwant Singh case (1995) the court ruled that merely shouting slogans, “Khalistan Zindabad”, does not amount to sedition. In the Kedar Nath case (1962) the Court observed that penalization of sedition is a constitutionally valid restriction on the right to freedom of expression only when the words are intended to disturb public peace by violence.

Nevertheless, in the present case, it dismissed the plea of the advocates following the precedent laid down in Kusum Ingots case which states that a statute cannot be challenged without cause of action. Thus, the plea was set aside by the Court for want of a concrete case.

Delhi Development Authority v D.C. Sharma

Appeal No. 205 of 2010

Facts Of The Case

There was an ad published by the petitioner (Delhi Development Authority/DDA) under the Expandable Housing Scheme in 1996. The respondent (DC Sharma) paid a sum of Rs. 15,000 according to the terms and conditions of the scheme as published by the petitioner. The respondent was allotted a flat in Narela, Delhi, and was communicated through a letter. All the details of the flat regarding the amount was mentioned in the letter. Again, the respondent submitted another Rs. 15,000 as the confirmation money to the petitioner. The respondent informed the petitioner via a letter saying he has changed his residential address and all official communication must be done via the new mentioned address. He also added that the respondent is a government servant, and to secure a loan from his department he needs the official mortgage permission. Later on, even after visiting the office of the petitioner, no communication was made to the respondent. The respondent filed an RTI to seek information regarding the same. After this preliminary inquiry, the respondent received a letter from the petitioner saying that the flat was allotted to someone else over time. The respondent aggrieved by the letter filed a consumer complaint under the District Consumer Dispute Redressal Forum, New Delhi.

Issue:

1. Whether the act was done by DDA, a statutory authority was against public interest or not?
2. Whether the respondent deserves hefty compensation from the petitioner for harassing him for more than 18 years or not?

Judgment:

The Hon’ble court held the petitioner is liable for unfair trade practices and causing impalpable harassment of the respondent and imposed punitive damage amounting to Rs. 5,00,000/- on the petitioner and other amounts. The court considered that the petitioner’s claim is baseless and is trying to distract the court from the misdemeanor of the authorities. It is a way of covering up the negligence of public officials tormenting the respondent for over ten years. The act commissioned by DDA was against the public at large and hence the damages incurred should be taken from the pockets of dishonest officials who are taking advantage of this “meritless litigation”. The appeals of DDA were dismissed and the impugned order of state commission was upheld.

Conclusion:

This case embarks upon the importance of Section 21 of the Right to Information Act. The Hon’ble court saw through the delinquencies of the statutory department and provided relief to the aggrieved party. The public officials are supposed to help the aggrieved party and not take advantage of them by performing negligent acts at cost of the general public.

Human Rights Commission- Its Binding Decisions on the Government

On 12 October, 1993 The National Human Rights Commission (NHRC) of India was established under the Protection of Human Rights Act (PHRA), 1993. It is constituted to proactively promote and protect human rights in India. Section 2(1)(d) of the PHRA defines Human Rights as the rights relating to life, liberty, equality and dignity of the individual guaranteed by the Constitution or embodied in the International Covenants and enforceable by courts in India.

Recently, a full bench of the Madras High Court consisting of Justices SVaidyanathan,V Parthiban and M Sundar ruled that the orders and decisions given by the Human Rights Commission under S. 18 Protection of Human Rights Act, 1993 are binding in nature making them mandatory for the government and the State to follow. The ruling was pronounced in the landmark case Abdul Sathar v. The Principal Secretary to Government.

The judgement mentioned that the recommendations of the Commission were to be treated as adjudicatory orders, legally and immediately enforceable. The judgement further states that if the concerned Government or authority fails to implement the recommendation of the Commission within the time stipulated under Section 18(e) of the Act, the Commission can approach the Constitutional Court under Section 18(b) of the Act for enforcement by seeking issuance of appropriate writ, order or direction. In cases where the State is aggrieved by the decision of the commission, its only remedy is seeking judicial review by the Courts. It further empowers the Commission, based on its findings, in cases of violation of human sights by a public servant, to recommend the State government to undertake any of the following measures-

First, was to pay compensation to the complainant or victim or the families of the complainant and victims. Secondly, to initiate proceedings for prosecution or such other suitable action against the concerned person or persons and lastly to take such further action as the commission may think fit.

The judges were of the opinion that there was a need of introducing statutory changes so that the above mentioned act becomes an independent law aiding the human rights commission in accomplishing and effectively enacting the recommendations. Due to the absence of inbuilt provisions in the act, their anxiety was that the act could be trifled with thereby suggesting suitable amendments. 

The main purpose of this is to ensure that the commission must not lose its independence, being a high judicial body and become subordinated to the executive and further, ensure that the recommendations of the Commission are not to be construed as recommendatory, open to acceptance or non-acceptance by the government.

Karnataka Power Transmission Corp v Ashok Iron Works Private Ltd.

Civil Appeal no. 1879 of 2003

Facts:

The respondent (Ashok Works Pvt Ltd) applied to the appellant (Karnataka Power Transmission Corporation or KPTC) for the supply of electricity. The KPTC failed to comply and the respondent filed a complaint with Karnataka high court. Later agreeing to the court order the respondent paid extra monetary demand but the KPTC failed to supply the electricity. The respondent filed a consumer complaint claiming damages but the KPTC argued that it is a commercial unit and not a consumer and hence the claim is invalid. The district court ordered in favor of the appellant but the Ashok works appealed to the state commission that held the complaint valid stating that the respondent is a consumer. The KTPC appealed in the supreme court of India arguing on two factors:

Issues:

• Whether Ashok works, a private company is a consumer under section 2(1)(d) of the Consumer Protection Act or not? and a person under Section 2(1)(m)
• Whether the dispute between both the parties comes under the ambit of Service as defined under section 2(1)(o) of the same act or not?

Judgment:

The court held that the term “person” in the act is not restrictive but it is exhaustively interpreted as “including them”. The provision hence is inclusive and not exclusive. The court stated that the legislature deliberated not to exclude a juristic person like a company, it should involve both corporate and incorporated companies. It was held that a private company is within the meaning of section 2(1)(d) read with Section 2(1)(m).

The court differentiated that ‘supply of electricity’ is not a sale under section 2(1)(d) but is a form of service under section 2(1)(o). So KTPC not supplying the electricity constitutes deficiency of services and compensation claimed by the respondent is valid.

Conclusion

The Hon’ble court interpreted the terms “person” and “service” to provide justice to the company. Private companies can now fall under the definition of a “person” under the act. This interpretation enables companies to file a complaint under The Consumer Protection Act and claim damages for the deficiency of services.

Insider Trading

Insider trading means possession and misuse of unpublished price sensitive information (UPSI) relating to the securities of the listed companies by the privileged few for their personal gains before the information is published and comes to the notice of investors. Possession of such vital information places them in a position advantageous to them compared to the others in the share market while evaluating the risks involved in the investment. Thereby for the interest and betterment of the civilians insider trading needs to be prohibited.

Keeping this in mind, in the year 1992, Securities and Exchange Board of India (SEBI) formed SEBI (Insider Trading) Regulation, 1992. After the introduction of the Regulation Act, in 2002 it amended and rechristened the regulation to SEBI (Prohibition of Insider Trading), 1992 and finally in the year 2015 it was thoroughly and exhaustively amended to SEBI (Prohibition of Insider Trading) Regulation, 2015 which was applicable from 1st April, 2019.

Rakesh Agrawal v. Securities Exchange Board of India is one of the landmark judgments relating to insider trading. The facts of the case were that Rakesh Agrawal was the managing director of ABS Company Pvt. Ltd. The company was in negotiation with a German company. Rakesh had UPSI of the German company. It was alleged that Rakesh’s brother-in-law had purchased shares of ABS Company and had given it to the German company as an open offer which in turn aided ABS. The 51% of shares that were owned by the German Company were not public, thus, making ABS an insider. SEBI then directed that ABS had violated Section 3 and 4 of SEBI Act and Rakesh was ordered to give Rs. 34 lakhs and SEBI also directed the criminal proceedings against him under section 24 of the SEBI Act. However, when he approached the court, it was concluded that since, he had worked in the best interest of the company the tribunals order was taken back.

Similarly in SEBI v. Sameer C Arora a case of 31st March 2004, Mr. Arora was accused of insider trading. He was prohibited from investing and taking active part in securities market for a period of 5 years. However due to the absence of sufficient evidence the appellate court set aside the order of the tribunal.

One of the largest cases of India in insider trading is Indiabulls insider trading case. In this case, the executive director was accused of unlawfully making Rs. 87 lakhs by trading in Indiabulls, the venture, when having UPSI. The husband and wife both were accused of being insiders and making profit out of the information. The SEBI, then ordered that a Strict Criminal Action be taken against the venture and the husband along with his wife had to give Rs. 87.4 Lakhs both jointly or severally. It was also added that without the prior SEBI permission no debts should be taken.

Largest number of cases of insider trading was in the year 2020-2021 as compared to previous years. In recent days Mr. Kishore Biyani, CEO of the Future Group, along with a few others was found guilty of insider trading. They were hence by SEBI barred from the securities market for one year along with which they had to pay a penalty of more than Rs. 20 Crore. Hopefully, the latest amendments and stringency of the regulation will bring more awareness to the people and prevent them from conducting, or being a part of illegal activities such as insider trading.

Stringency in the Indian Bail System

Conditional release of a person accused of a crime pledged for the appearance in court on a due date is known as bail. There are three kinds of bail in India. Regular bail, interim bail and lastly anticipatory bail. Regular bail is when a person accused is in police custody after which bail is applied for under section 437 and 439 of the Criminal Procedure Code (CrPC). Interim Bail is granted for a short period of time before the regular or anticipatory bail is granted and anticipatory bail is granted under section 438 of the CrPC by either the sessions Court or the High Court when a person feels that he might be arrested of a non-bailable offence committed by him.

Different Acts have various other restrictions while granting a bail intern making bail under one act more stringent than the other. For instance, UAPA – Unlawful Activities (Prevention) Act, 1976 covers bail under section 43D (5) and Narcotic Drugs and Psychotropic Substances Act (NDPS), 1985 covers it under Section 37. In accordance to UAPA bail cannot be granted if there are reasonable grounds to prove that the accusation against the accused is in its first appearance that is prima facie true. However, Section 37 of NDPS says that bail cannot be granted even if there are strong reasons to believe that the accused may not be guilty and is least likely to commit any offence when granted bail. This thereby makes laws relating to bail in NDPS more stringent than UAPA. Considering the harsh conditions for bail and its effects on constitutional rights the court has made speedy trials to protect the innocent people.

National Investigation Agency vs Zahoor Ahmad shah Watali is one of the case laws where there was sufficient reason to believe that the accusation on the accused was prima facie true thereby applying Sec 43D (5) of UAPA the bail was denied. Another case proving importance of Speedy trial is Union of India v. K.A Najeeb. A 3-judge bench of the Apex Court on Monday granted bail to one of the accused of the 2010 Palm Chopping Case, K.A Najeeb. He has been accused of offences under the Indian Penal Code, Explosive Substances Act, and UAPA. The court held that Section 43D (5) of UAPA will not act as a bar to the ability of Constitutional Courts to grant bail on the ground of violation of Fundamental Right to Speedy Trial envisaged under Article. 21 of the Constitution. The court also observed that the National Investigation Agency (NIA) had failed to take any step towards screening the 276 witnesses and that the accused has already spent more than five years in imprisonment. The charges themselves were framed on 27.11.2020.

The court further observed that the rigorous use of S. 43D (5) will meltdown where there is no likelihood of trial being completed within a reasonable time and the period of incarceration already undergone has exceeded a substantial part of the prescribed sentence. Thus, the court in the exercise of its appellate jurisdiction upheld the decision of grant of bail of the Kerala High Court imposing additional conditions.

Patel Engineering Ltd. v. North Eastern Electric Power Corp Ltd.

Special Leave Petition (C) Nos. 3584-85 of 2020 

Facts of the case

A dispute arose between the petitioner (North Eastern Electric Power Corporation Ltd.) and the respondent (Patel Engineering Ltd.) regarding a works contract in three packages and each package contained a separate arbitration clause and three arbitration awards were awarded in the disputed case. The respondent, in this case, filed three applications challenging the three arbitral awards awarded under Section 34 of the Arbitration and Conciliation Act before the Additional Deputy Commissioner (Judicial). However, the applications were rejected and the three arbitral awards were upheld. The respondent then filed three appeals under Section 37 of the Act before the High Court in an arbitration appeal and the court allowed the respondent’s appeal. Aggrieved by the common judgment, the petitioner challenged the judgment by filing three SLPs and the hon’ble court dismissed the SLPs stating that the court is not inclined to interfere in the matters. After the dismissal, a review petition was filed because the high court’s decision “suffered from error apparent on the face of the record as it had not taken into consideration the amendments made by the act.”

Issues:

1. Whether setting aside three arbitral awards by the hon’ble high court was justified or not?
2. Whether the 2015 amendment which came into force on 23/10/2015 would be applicable or not?

Judgment

The Supreme court held that the award accorded suffered from vices and while granting it the sole arbitrator had taken irrelevant factors into account ignoring the crucial facts. The awards granted were dated 23/09/2016 which was after the amendment came into force so it would be applicable. The supreme court upheld the judgment of the high court and stated that the “test of patent illegality” was rightly applied.

 Conclusion

The arbitral award should consider all the terms of the contract and the views of parties into consideration. If an arbitral award is granted that no reasonable minded person could have given then it will be considered against the “public policy” of India and can be set aside by the Hon’ble court. There should not be unjust enrichment on the cost of the other party, if so the court has the right to interfere.

Pre-natal Sex Determination : An alarming surge in India

Pre-natal sex determination is the practice of determining the sex of the foetus before birth through ultrasonography. Various countries have adopted this practice, but in a few countries such as India, this practice has led to female foeticide, i.e., determining the sex of the foetus and undergoing an abortion in case the sex of the foetus turns out to be female. Now there are various stereotypical reasons which pave the ways for female foeticide, some of the reasons that are unfortunately believed and accepted by some Indians are: having a girl child is a burden as they have to pay dowry while getting her married, girl child won’t carry the family name, a girl child may bring shame to the family by eloping, etc. These beliefs and mentality of the people is the prime reason for an alarming increase of female foeticide in India.

The Government of India, to address this issue has enacted the Pre-natal Diagnostic Techniques (Regulation and Prevention of Misuse) Act, 1994 (PNDT Act). According to section 5(1) of this Act, no person can conduct a pre-natal diagnosis without the concerned pregnant woman’s consent, and even if the diagnosis has been conducted according to section 5(2), “No person including the person conducting pre-natal diagnostic procedures shall communicate to the pregnant woman concerned or her relatives or any other person the sex of the foetus by words, signs or in any other manner“. Most importantly section 6 of the PNDT Act prohibits conducting pre-natal diagnostic techniques to determine the sex of a foetus. Further section 23 of this Act provides for imprisonment for a term which may extend to three years and with fine which may extend to ten thousand rupees and on any subsequent conviction, with imprisonment which may extend to five years and with fine which may extend to fifty thousand rupees in case of violation of the provisions of the PNDT Act.

Even after all the enactments, guidelines, punishments, etc. given for determining the sex of the foetus, surveys show that female foeticide is still on the rise. In the year 2016, a global study on female infanticide by Asian Centre for Human Rights gave a report titled “Female Infanticide Worldwide: The case for action by the UN Human Rights Council”, which places India in the 4th place in having the highest female foeticide with a sex ratio of 112 males/100 females. Apart from this in the year 2020, a United Nations report stated that 4.6 lakh females were missing at birth in India each year from 2013 to 2017.

Bringing the ban of pre-natal sex determination to light, in the recent judgment of Rekha Sengar v. State of Madhya Pradesh, Justice Mohan M. Shantanagoudar, Vineet Saran and Ajay Rastogi dismissed the Special Leave Petition stating the prenatal sex determination to be a grave offence and having a serious effect on the society at large. In the present case, the accused approached the Apex Court for the grant of Bail. The petitioner was charged under certain relevant provisions of the Indian Penal Code, Medical Termination of Pregnancy Act, 1971, and under the provisions of the Pre-Conception and Pre-Natal Diagnostic Techniques (Regulation and Prevention of Misuse) Act, 1994 (PC&PNDT Act). The bail was rejected by the Sessions Court as well as the High Court of Madhya Pradesh. There was the existence of a prima facie case which was the major reason for turning down the bail petition. The investigation team has seized the ultrasound machine with no registration or license, adopter and gel used in sex determination, and other medical instruments used during an abortion and sex determination from the residence of the accused, which forms the evidence for prima facie case. In the said judgment, the Coram referred to the legislative history of the PC & PNDT Act. 

The bench also mentioned it in the case of Voluntary Health Association of India v. the State of Punjab, (2013) while pronouncing the judgment. It observed, “The unrelenting continuation of this immoral practice, the globally shared understanding that it constitutes a form of violence against women, and its potential to damage the very fabric of gender equality and dignity that forms the bedrock of our Constitution are all factors that categorically establish prenatal sex determination as a grave offence with serious consequences for the society as a whole.” The court while dismissing the petition stated that no leniency should be given at all in these issues and to eradicate gender discrimination and sex determination, such strict measures are very important. The bench by this judgment has put forward a step to dismiss gender inequality.