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Sidharth Sethi | Seminar on ‘Landscape of Arbitration and Mediation in Turkey and India’

Sidharth Sethi was invited as a Speaker in an International Seminar on Arbitration and Mediation held at Ankara, Turkey on 1 June 2024.

In his address, Sidharth spoke about the below aspects having a bearing on effectiveness and efficiency of arbitrations.

  • Measures which arbitration institutions and users must adopt to encourage efficiency;
  • Role of Indian courts in arbitration – striking a balance between judicial intervention and autonomy in arbitration proceedings;
  • Factors influencing choice of seat; and
  • Collaboration between institutions, governments, judiciaries, counsels, and law students to develop best practices for international arbitration.

This conference was co-organised by the Union of Chambers and Commodity Exchanges of Turkey’s Mediation and Dispute Resolution Centre (“TOBBUYUM”) and the Asia Pacific Centre for Arbitration and Mediation (“APCAM”), in association with the Ministry of Justice, Government of Turkey.

The other distinguished speakers on the panel were:

  • Hon’ble Mr. Justice Surya Kant, Judge, Supreme Court of India;
  • Dr. Ibrahim Nihat Bayar, Secretary General of TOBB Arbitration;
  • Prof. Dr. Bilgin Tiryankioglu, TOBBUYUM Med-Arb Board President;
  • Prof. Dr. Banu Sit Kosgeroglu, TOBBUYUM Med-Arb Board Member;
  • Dr. Eda Manav Ozdemir, Head – International Arbitration and ADR, General Directorate of Law and Legislation.

 

The session was moderated by Ms. Iram Majid, Advocate and Executive Director, APCAM. The attendees included various sitting and former judges of courts in Turkey, leading arbitrators and mediators, senior lawyers, and Ministers and officers from the Ministry of Justice, Turkey.

Kerala High Court Rules: Property Acquired Before commission of Scheduled Offence Not ‘Proceeds of Crime’ Under PMLA, Invalidates Attachment

Judge's gavel resting on a wooden table with a neutral background.

JSA successfully represented Petitioner in an important judgement wherein, the Kerala High Court held that property acquired prior to commission of the scheduled offence will not constitute “proceeds of crime”. Consequently, provisional attachment of such property under Section 5 of the Prevention of Money Laundering Act, 2002 (“PMLA”) is unjustified.

The scheduled offence was under Section 406/420/34 of the Indian Penal Code, 1860 (“IPC”). An FIR was registered on the allegations of cheating and inducing people to raise funds under the guise of fraudulent schemes. The Petitioner was not named in the FIR. On the strength of the FIR and scheduled offence therein, the Enforcement Directorate registered an ECIR and Petitioner was summoned to join the investigation. Subsequently, debit freeze orders were passed with respect to Petitioner’s bank accounts under Section 17 of the PMLA.

The Petitioner filed a writ petition challenging the debit freeze order. During pendency of the writ petition, Enforcement Directorate passed provisional attachment order under Section 5 PMLA and attached the Petitioner’s bank accounts as well as his residential property. Accordingly, an amended writ was filed challenging the provisional attachment under Section 5. It was contended that the Petitioner’s immovable property was acquired in the year 2004. However, the predicate offence is alleged to have been committed between 27.01.2021 to 14.11.2022.

Relying on the Supreme Court’s judgement of Vijay Madanlal Choudhary and Ors.  v.  Union of India (2022) SCC Online 929 and Pavana Dibbur v. Directorate of Enforcement (2023) SCC Online 1586, it was contended that property in question had no link with the predicate offence. Considering the rival contentions, the Hon’ble High Court held the following:

  1. Proceeds of crime will not include property which has been acquired prior to predicate offence.
  2. Such attachment of property will not be justifiable considering constitutional and provisions of fairness and reasonableness.
  3. If the attachment is to be affected to the extent of the monetary worth of a property which was not derived out of the predicate offence, then PMLA mandates that the property derived out of such criminal activity be taken out of India or is held outside the country.

 

In so far as the attachment of bank accounts is concerned, the Petitioner was relegated to alternate remedy under PMLA.

Enforcement Directorate provisionally attached property of the Petitioner which has no connection with the “proceeds of crime” and was acquired much prior to commission of scheduled offence.

The JSA Team was lead by Partners – Mr. Manish Jha and Kumar Kislay and instructed by External Counsel Mr. Abhijeet Pandey.

JSA successfully advised and represented State Bank of India before the NCLAT, New Delhi, in an appeal by a suspended director of Advantage Overseas Private Limited, challenging the admission order under Section 7 of the IBC, 2016

Judge's gavel resting on a wooden table with a neutral background.

The National Company Law Appellate Tribunal, New Delhi (“NCLAT”), vide order dated 13 May 2024, has dismissed an appeal filed by Mr. Maneesh Kumar Singh (the “Appellant”), a suspended director of Advantage Overseas Private Limited (“AOPL”). This appeal was filed against an order dated 10 November 2023, passed by the National Company Law Tribunal, Mumbai (“NCLT”). Vide the said order, the NCLT had admitted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), filed by the State Bank of India (“SBI”), thereby initiating the corporate insolvency resolution process against AOPL.

In the appeal, the Appellant’s primary arguments were two-fold. First, the Appellant contended that the NCLT incorrectly held that the date of default fell outside the period prescribed under Section 10A of the IBC. Second, the Appellant contended that the NCLT incorrectly held that the petition was filed within the period of limitation.

Re Section 10A of IBC: While affirming the NCLT’s decision, the NCLAT concluded that the date of default fell outside the period prescribed under Section 10A of the IBC and noted the following:

  • Originally, AOPL committed default on 08 August 2018, which is prior to the period prescribed under Section 10A of the IBC.
  • SBI initiated proceedings before the Debt Recovery Tribunal, Jabalpur (“DRT”) under Section 19 of the Recovery of Debt Due to Banks and Financial Institutions Act, 1993, for recovery of the amount in default.
  • Subsequently, SBI and AOPL entered into a One Time Settlement (“OTS”) on 05 September 2020. As per the OTS, SBI had the right to cancel the OTS if any agreed installment was not received within the approved period. Upon cancellation, the entire dues would become payable to SBI.
  • In June 2021, SBI and AOPL jointly filed an application before the DRT for a consent decree in terms of the OTS. On 26 April 2022, the DRT acknowledged the OTS and, in its judgement recorded that ‘in the event of failure to adhere to the terms of the OTS, the entire outstanding amount would be payable’.
  • It was not in dispute that SBI vide letter dated 02 January 2023 had communicated to AOPL that the OTS between the parties had failed.

The NCLAT reaffirmed its findings in the case of Raghavendra Joshi v. Axis Bank Limited & Anr., 2023 SCC OnLine NCLAT 498, wherein it was held that when a default by the corporate debtor occurs prior to the period prescribed under Section 10A of the IBC and the debt is subsequently acknowledged, Section 10A cannot be invoked. Relying on Raghavendra Joshi (Supra) and considering the actions of AOPL after the default in March 2021—such as filing a DRT application, grant of undertaking, consent decree by DRT and final recall notice —the NCLAT held that the default date was correctly determined by the NCLT to be outside the period prescribed under Section 10A of the IBC.

Re issue of limitation: The NCLAT held that the date of default was 08 August 2018. AOPL submitted OTS proposals on 11 March 2020 and 05 May 2020. SBI filed the Section 7 petition on 13 March 2023, which is within three years from the submission of the OTS proposal. The OTS proposals submitted by AOPL were clearly an acknowledgement of the debt, allowing SBI to benefit from Section 18 of the Limitation Act, 1963. The NCLAT thereafter relied upon the decision of the Hon’ble Supreme Court of India in Kotak Mahindra Bank v. A. Balakrishnan, (2022) 9 SCC 186, and held that since the consent decree was passed by the DRT on 26 April 2022, the three-year period for filing the Section 7 petition would commence from that date. Consequently, the NCLAT upheld the NCLT’s finding that the Section 7 petition was not time-barred.

This case assumes importance because the NCLAT has reaffirmed two crucial points: (i) Section 10A of the IBC cannot be invoked when the default occurred before the period prescribed under this provision, and when the debt was subsequently acknowledged by the corporate debtor; and (ii) the limitation period for filing a petition under Section 7 of the IBC is extended if the debt has been acknowledged by the corporate debtor in its balance sheet or in a settlement proposal sent to the financial creditor.

Our Disputes Team Comprised Partner – Varghese Thomas, Divyam Agarwal and Fatema Kachwalla, Principal Associate – Pallavi Kumar, Senior Associate – Ahsan Allana, Associate – Mayank Ratnaparkhe.

JSA successfully represented T.P. Kirnali Limited (a group company of Tata Power) before Maharashtra Electricity Regulatory Commission, in obtaining Change in Law compensation due to increase in rate of GST and Basic Customs Duty

By an Order dated 21.05.2024, Hon’ble Maharashtra Electricity Regulatory Commission (“MERC”) held that T.P Kirnali Limited was impacted due to increase in rate of Goods and Services Tax and Basic Customs Duty and is accordingly entitled for a total compensation of Rs. 15.48 Crores along with Carrying Cost. MERC has further held that:

  • Any Change in Law relief would be governed by provisions of the PPA and is to be decided by MERC. A developer’s undertaking to not claim increase in project cost or upward revision of tariff for period of extension of Scheduled Commercial Operation Date (“SCOD”), pursuant to MNRE Office Memorandums dated 12.05.2021 and 29.06.2021, cannot be held against the developer. MNRE in its subsequent Office Memorandums dated 15.09.2021 and 03.11.2021 has clarified that such undertaking is limited to developer not claiming termination of PPA or increase in project cost for reasons other than Change in Law for the period of extension granted. [Para 17-17.5 @ Pg. 18-20]
  • Invoices towards supply of service raised post commissioning of project are also eligible for Change in Law relief, provided such invoice are raised within 30 days from the date of supply of such service. [Para 19-19.5 @ Pgs. 21-22]
  • MSEDCL’s claim of Safeguard Duty cannot be allowed since the developer has not financially gained due to non-levy of Safeguard Duty. Notification No. 1 of 2018 dated 30.07.2018 clearly provided that there would be no Safeguard Duty after 29.07.2020. In the present case, commissioning of the Project would have been beyond 29.07.2020, for which no Safeguard Duty was applicable. This was factored into the bid accordingly. [Para 20.3 @ Pg. 23]
  • Carrying cost is allowed at the rate of 1.25% plus SBI MCLR per annum on the compensation amount from the date of payment till date of Order. [Para 22.5 @ Pg. 26]
  • MSEDCL to choose between payment of compensation on lumpsum or per unit basis. This decision is to be communicated to the developer within a month of the Order. [Para 23-24 @ Pgs. 26-27]

MERC in a progressive Order rightly followed settled jurisprudence on Change in Law compensation by granting relief for impact on account of increase in GST and BCD. It disregarded extraneous submissions of MSEDCL to restrict compensation due to the developer. T.P. Kirnali’s undertaking dated 09.09.2021 to not claim increase in project cost or upward revision of tariff for period of extension of Scheduled Commercial Operation Date, was also rightly not held against its claim of Change in Law, since such undertaking only came in context of specific MNRE Office Memorandums. The undertakings required by these Office Memorandums have later been clarified to not be in context of Change in Law. In a progressive measure, MSEDCL has been afforded the opportunity at the outset to elect between lumpsum payment or a staggered payout should MSEDCL choose to save on carrying cost.

T.P. Kirnali Limited was advised and represented by JSA team consisting of Partner – Kunal Kaul and Senior Associate Samikrith Rao. The matter was argued by Mr. Kunal Kaul.

Our Disputes Team Comprised Partner – Kunal Kaul, Senior Associate – Samikrith Rao

JSA represented CPIPL against an application for rejection of its suit for non-compliance with pre-suit mediation provisions under the Commercial Courts Act, 2015

JSA represented Chemco Plastic Industries Private Limited (CPIPL / the Plaintiff) against an application for rejection of its suit for non- compliance with pre-suit mediation provisions under the Commercial Courts Act, 2015.

By an order dated 10 June 2024 (“Order”), a single judge of the Bombay High Court dismissed an application filed under Order VII Rule 11 of the Code of Civil Procedure, 1908 (“Application”) seeking rejection of a Commercial IP Suit for infringement of trademark (“Suit”) on the ground that Chemco Plastic Industries Private Limited had failed to comply with the mandatory provisions of Section 12-A of the Commercial Courts Act, 2015 (“Act”).

The Bombay High Court thus delivered its first decision on the interplay between seeking urgent interim relief in IPR matters and the applicability of Section 12-A of the Act.

The Plaintiff had filed the Suit for an injunction restraining M/s. Chemco Plast (“Defendant”) from infringing its registered trademark. The Defendant filed the Application inter alia contending that the Suit cannot contemplate any urgent interim relief as the Suit has been filed 8 years after the Plaintiff became aware of the cause of action. The Plaintiff also contended that – (i) the Plaint did in fact contemplate urgent interim relief; (ii) the question of alleged delay is of no relevance as any enquiry in that regard would require the court to go into the merits of the case, which could not be done at this stage; and (iii) in IPR matters the rights of consumers are relevant and the urgency is in the context of protecting the public at large from confusion likely to be created by the impugned mark.

The Hon’ble Court agreed with the contentions of the Plaintiff and dismissed the Application holding that –

  • While considering whether a plaint deserves to be rejected for non-compliance with Section 12-A of the Act, the court necessarily undertakes a limited exercise to appreciate the plaint, documents, and facts to assess whether the plaint “contemplates” urgent interim relief.
  • The court is not expected to enter into the merits of the matter and therefore shall not enquire into any delay in filing a suit. Delay and its effect on entitlement for interim relief are not relevant for the limited enquiry of finding as to whether on the basis of the material on record, the plaintiff can contemplate urgent interim relief.
  • In cases pertaining to IPR infringement, the cause of action arises on each occasion that the impugned mark is used by the defendant.
  • The Plaintiff in the present case has contemplated urgent interim relief while filing the Suit and the same cannot be rejected as being barred by Section 12-A of the Act.

Our Disputes Team Comprised Lead Partner – Farhad Sorabjee, Partner – Pratik Pawar, Principal Associate – Siddhesh Pradhan, and Associate – Meher Mistri

Hon’ble High Court of Uttarakhand allows Industries Association of Uttarakhand to make payment of 50% of the enhanced Minimum Wages during the pendency of the Writ Petition

JSA represented Industries Association of Uttarakhand (“IAU”) in a Writ Petition filed challenging the vires of twenty-four (24) Notifications dated 15.03.2024 (“Impugned Notifications”) issued by the Government of Uttarakhand revising the rates of minimum wages for fifty-seven (57) scheduled employments in the State of Uttarakhand.

IAU is an association having membership of over 700 industrial units across six (6) districts in Uttarakhand. It was IAU’s case that:

  • Impugned Notifications were issued post haste, contrary to the statutory regime (Section 5, 7 and 9 of the Minimum Wages Act, 1948) governing how revisions can be legally implemented and without complying with statutorily imposed minimum notice with agenda to Advisory Committee and Board (Rule 12 of the UP Minimum Wages Rules, 1952).
  • Process followed was a premeditated decision enforced through a sham meeting making a mockery of legislative intent behind the notice and agenda and consultation of stakeholders prescribed by law.
  • In the meeting convened to welcome members without agenda, allegedly full evaluation of data, including inflationary impact on minimum wages and comparative assessment with other states, was completed and hustled though an overnight Advisory Committee meeting on 11.03.2024 and Advisory Board meeting on 12.03.2024.
  • Constitution of Advisory Committee and Advisory Board was flawed as there was no equal representation of the employers and employees.
  • Impugned Notifications are fundamentally flawed and destructive of the legislative intent that revision of minimum wages must be done after due consultation and consideration of representatives of the employers and employees. No enquiry or investigation or due consideration of relevant material was reflected from records of Advisory Committee and the Advisory Board and the GoU.

The Hon’ble High Court of Uttarakhand by Order dated 11.06.2024 while issuing Notice in the Writ Petition was pleased to allow IAU to make payment of 50% of the enhanced Minimum Wages during the pendency of the Writ Petiiton. The order protects the Association and its members from any coercive actions by the Government of Uttarakhand, subject to them making payment of the 50% of the enhanced Minimum Wages.

This would have wide implications on the entire array of Shops and establishments, Industries in manufacturing, trading, Hospitality and all other sectors under which the employees are covered by the Minimum Wages Act.

Our Disputes Team Comprised Joint Managing Partner – Amit Kapur, Partner – Anupam Varma, Principal Associate – Aditya Gupta and Associate – Sahil Arora.

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