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JSA Prism | Dispute Resolution | March 2024

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Supreme Court lays down two-pronged test for considering issue of limitation for appointment of arbitrators; suggests Parliament should amend ‘unduly long period’ available for seeking arbitrators’ appointment

In the recent decision of Arif Azim Co. Ltd. v. Aptech Ltd.[1] , the Hon’ble Supreme Court of India (“Supreme Court”) held that while considering the issue of limitation at the stage of appointment of arbitrators, courts should satisfy themselves on first, whether the petition seeking arbitrators’ appointment is barred by limitation, and second, whether the claims sought to be arbitrated are ex facie dead and barred by limitation. The Supreme Court held that courts may refuse to appoint an arbitrator if either of these questions are answered against the party seeking appointment.

In the facts of the case, the Supreme Court concluded that both, the Petitioner’s claims and its petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), were not barred by limitation. However, the Supreme Court observed that the period of 3 (three) years available for seeking appointment of an arbitrator is an unduly long period, which goes against the spirit of the Arbitration Act. Accordingly, the Supreme Court suggested that the Parliament should consider amending the Arbitration Act to prescribe a specific period of limitation for approaching courts for appointment of arbitrators.

Brief Facts

The parties’ relationship: On March 21, 2013, the petitioner and the respondent executed various franchise agreements, whereby the Petitioner was granted a non-exclusive license to set up a training centre in Kabul, Afghanistan for imparting training in relation to content and courses developed by the Respondent.

Additional work: Later, in 2016, the Indian Council for Cultural Relations, Delhi (“ICCR”) selected the respondent for providing a short-term english training course to Afghans who had been selected for admission in Indian universities. This course was also implemented and provided by the petitioner in Kabul in 2017.

The ‘breaking point’: Thereafter, disputes arose between the parties. On March 20, 2018, the Respondent called upon the Petitioner to pay amounts outstanding on account of royalties under the franchise agreements. In its response dated March 23, 2018, the petitioner called upon the respondent to make payments for the additional course provided by the petitioner at the respondent’s behest in 2017. On March 28, 2018, the respondent stated that the reason for the payments being delayed was that it had not received the corresponding payments from the ICCR, and once again called upon the petitioner to make the royalty payments under the franchise agreements.

Legal notice: Ultimately, the petitioner issued a legal notice on August 26, 2021, calling upon the respondent to pay dues for the additional ICCR course provided by the petitioner.

Notice invoking arbitration: The parties participated in a round of mediation proceedings, which failed in 2022. After the failure of mediation, the Petitioner invoked arbitration through notice dated November 24, 2022. In this notice, the petitioner called upon the respondent to pay its outstanding dues and appointed its nominee arbitrator. Since the respondent failed to appoint its own nominee arbitrator, the Petitioner filed a petition under Section 11(6) of the Arbitration Act on April 19, 2023, before the Supreme Court.

Issues

After hearing the parties, the Supreme Court framed 2 (two) issues for consideration:

Whether the Limitation Act, 1963 (“Limitation Act”) is applicable to a petition under Section 11(6) of the Arbitration Act. If yes, whether the present petition was barred by limitation.
Whether the court may refuse to make a reference under Section 11 of the Arbitration Act where the claims were ex facie and hopelessly time barred.

Findings

Issue (1): Proceeding on the premise that the issue of limitation is of threshold importance and ought to be decided at the pre-reference stage, the Supreme Court found that:
- Since neither Section 11(6) of the Arbitration Act nor the Schedule to the Limitation Act prescribe any period of limitation for seeking appointment of arbitrators, the same would fall under Article 137 (i.e. the residual provision) of the Limitation Act, and parties would have a period of 3 (three) years from when the right to apply accrues.
- Courts are not bound to appoint arbitrators unless the mechanism prescribed under Section 11(6) (which inter alia provides for invocation of arbitration through a notice) is exhausted. However, once the procedure laid down under Section 11(6) of the Arbitration Act is exhausted by the party and the application passes all other tests of limited judicial scrutiny, the court becomes duty-bound to appoint an arbitrator. In terms of Hohfeld’s Scheme of Jural Relations, a claimant’s ‘right to apply’ for appointment of arbitrators is correlated with the court’s ‘duty to appoint’ arbitrators, both of which would arise only after the steps contemplated by Section 11(6) of the Arbitration Act are completed.
- Therefore, the limitation period for appointing an arbitrator would commence after a valid arbitration notice was issued, and the opposing party fails or refuses to make an appointment as per the procedure agreed between the parties.
- In the facts of the case, the petitioner invoked arbitration through notice dated November 24, 2022 (delivered on 29 November 2022). The respondent failed to nominate its arbitrator by December 28, 2022. The petitioner would, thus, have a period of 3 (three) years from December 28, 2022 to apply for appointment of arbitrators under Section 11(6) of the Arbitration Act.
Issue (2): At the outset, the Supreme Court observed that there are 2 (two) kinds of issues that may be raised at the stage of appointment of arbitrators under Section 11(6) of the Arbitration Act:
- First, ‘jurisdictional issues/objections’ – issues pertaining to the power and authority of the arbitrators to hear and decide a case, such as objections as to competence of arbitrators, existence or validity of the arbitration agreement, absence of parties’ consent to submit disputes to arbitration, and scope of the arbitration agreement.
- Second, ‘admissibility issues/objections’ – issues as to the nature of the claim, failure to fulfil procedural requirements or pre-arbitration steps, and issues of limitation.

Finding that though the issue of limitation is one of admissibility, the Supreme Court held that it is the duty of courts to prima facie examine and reject non-arbitrable or dead claims, so as to protect the opposing party from being drawn into a time-consuming and costly arbitration process.

After conducting an extensive analysis of various decisions,[2] the Supreme Court found that:

Mere failure to pay may not give rise to a cause of action. However, once a party asserts its claim and the opposing party denies the claim or fails to reply, the cause of action will arise after such denial or failure.
It is important to find the ‘breaking point’ at which a reasonable party would have abandoned efforts at arriving a settlement and contemplated invocation of arbitration. This breaking point would be the date on which cause of action can be said to have commenced.
In the facts of the case, the rights of the petitioner can be said to have been crystallised on March 28, 2018, when the respondent failed to make payment towards the additional ICCR course provided by the petitioner.
In ordinary circumstances, the petitioner would have a period of 3 (three) years from March 28, 2018, i.e., by March 27, 2021 for raising its claims. However, in terms of the directions passed in Suo Motu Civil Writ Petition No. 03/2020, the time period between March 15, 2020 –February 28, 2022 would stand excluded for the purposes of limitation, and the balance period of limitation available to the petitioner on March 15, 2020 would become available from March 1, 2022. Taking this into account, the period of limitation available to the Petitioner was to end on March 13, 2023.
Arbitration is deemed to have commenced when one party to the arbitration agreement serves on the other a notice requiring the appointment of an arbitrator – the issuance/ service of such notice is determinative of the commencement of the arbitral proceedings.
In the present case, the arbitration notice was received by the Respondent on November 29, 2022, well within the time period available to the Petitioner for raising its claims. Therefore, the claims cannot be said to be ex facie time barred or dead as on the date of commencement of arbitration.

JSA Analysis and Conclusion

This judgment consolidates the law on limitation applicable for seeking appointment of arbitrators. After conducting an exhaustive analysis of precedent, it reiterates that: (a) the ‘breaking point’ between the parties would be considered as the date of commencement of the cause of action for raising claims; (b) arbitral proceedings may be commenced within a period of 3 (three) years from the ‘breaking point’; (c) the date of service of the arbitration notice would be considered as the date on which arbitral proceedings commenced; and (d) where the opposing party fails or refuses to comply with the arbitration notice, another period of 3 (three) years from the date of such failure or refusal would be available to the claimant for seeking appointment of arbitrator(s).

Significantly, the Supreme Court also notes that applications for appointment of arbitrator(s) are governed by the 3 (three) year period provided by the residual provision under the Limitation Act only because of a legislative vacuum. The Supreme Court rightly observes that this period is unduly long and goes against the spirit of the Arbitration Act, one of the prime objections of which is speedy resolution of disputes. Accordingly, the Supreme Court has suggested that the Parliament should consider introducing amendments for prescribing a specific period of limitation for filing applications under Section 11 of the Arbitration Act. We feel this suggestion is quite welcome and aligned not only with the stated legislative intent of the Arbitration Act, but also the commercial interests of private parties. If the suggestion of the Supreme Court is implemented by the Parliament, a number of negligent litigants could be weeded out, and precious judicial time could be used only for adjudication of genuine interests and disputes.

This Prism has been prepared by:

Divyam Agarwal
Partner

Pallavi Kumar
Principal Associate

Aniket Aggarwal
Associate

For more details, please contact [email protected]

[1] 2024 SCC OnLine SC 215

[2] SBP & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618; Geo Miller & Company Private Limited v. Chairman, Rajasthan Vidyut Nigam Utpadan Nigam Limited, (2020) 14 SCC 643; BSNL v. Nortel Networks India, (2021) 5 SCC 738; Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1; NTPC Ltd. v. SPML Infra Ltd., (2023) 9 SCC 385; Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, (1988) 2 SCC 338; Milkfood Ltd. v. GMC Ice Cream, (2004) 7 SCC 288.

Tags Dispute Resolution, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Parliament of India, Supreme Court

The Interplay Between International Arbitration and Insolvency Proceedings: Indian Perspective

The interplay of insolvency and arbitration laws has been a topic of jurisprudential discussion and scholarship24 for some time now. Insolvency and arbitration are fundamentally conﬂicting regimes. Their co-existence has been best described by the US Courts as a ‘conﬂict of near polar extremes’ as bankruptcy exerts an inexorable pull towards centralization of dispute resolution, while arbitration advocates a decentralised approach.

In India too, the insolvency and arbitration regimes are separately codiﬁed. While the (Indian) Arbitration & Conciliation Act, 1996 (“Arbitration Act”) has been in force for much longer, the Insolvency and Bankruptcy Code, 2016 (“IBC”) is more recent and has replaced and consolidated the insolvency laws in India.

Please refer to the below document to read the full article by Dheeraj Nair and Vishrutyi Sahni, published in SIAC India Newsletter, 4th Edition.

To read further details, click here or refer to the below document.

Tags Arbitration, IBC Code, Insolvency, JSA, Leading Law Firm, Leading Lawyers

In the absence of contrary indications, ‘venue’ is ‘seat’: Delhi High Court reiterates

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In the recent decision of Axalta Coating Systems v. Madhuban Motors[1], the Hon’ble High Court of Delhi (“Delhi HC”) while allowing a petition under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) reiterated that in the absence of any other contrary indicia, the ‘venue’ mentioned in the arbitration clause would amount to the ‘seat’ of the arbitral proceedings. In the facts of the case, the Delhi HC found that the provision for exclusive jurisdiction of the courts at New Delhi, coupled with the provision designating New Delhi as the venue, clearly evinced the parties’ intention to anchor the arbitral proceedings in New Delhi, which would thus be the seat of arbitration.

Brief Facts

The disputes raised by Axalta Coating Systems (“Petitioner”) arose out of a supply agreement. After a demand raised by the Petitioner under the supply agreement was rejected by Madhuban Motors (“Respondent”), the Petitioner invoked arbitration under the supply agreement. Since the parties failed to agree on the appointment of the sole arbitrator, the Petitioner approached the Delhi HC under Section 11 of the Arbitration Act.

The sole issue of contention before the Delhi HC was whether it had the requisite jurisdiction to appoint the sole arbitrator.

The Petitioner argued that the Delhi HC had jurisdiction, since (a) the supply agreement provided for exclusive jurisdiction of courts at New Delhi; and (b) the arbitration clause provided that “the venue for the arbitration proceedings shall be New Delhi, India”.

Contesting the jurisdiction of the Delhi HC, the Respondent contended that in the absence of a specifically designated ‘seat’, the competent court to exercise powers under Section 11 of the Arbitration Act would be the court in whose jurisdiction the cause of action had arisen. It was further contended that the Delhi HC would not have jurisdiction since no part of the cause of action arose in Delhi. Reliance was placed inter alia on the Hon’ble Supreme Court’s decision in Ravi Ranjan Developers v. Aditya Kumar Chatterjee[2].

In rejoinder, the Petitioner submitted that where the designation of a place as the venue had the effect of anchoring the arbitral proceedings to that place, such a venue would really be the seat of arbitration. Reliance was placed inter alia on Reliance Infrastructure v. Madhyanchal Vidyut Vitran Nigam[3] and Sikka Motors v. Hyundai Motor India[4].

Findings

The Delhi HC found that it had the requisite jurisdiction to entertain the petition under Section 11 of the Arbitration Act and appointed a sole arbitrator for resolution of disputes.

The decision of the Delhi HC was guided by the following principles:

The Hon’ble Supreme Court in BGS SGS Soma v. NHPC Ltd.[5] found that in the absence of any other contrary indicia, the ‘venue’ mentioned in an arbitration clause would amount to the ‘seat’ of arbitral proceedings.
As per the Hon’ble Supreme Court in Mankastu Impex v. Airvisual Ltd.[6], the determination of what the parties intended to be the ‘seat’ should be made “from other clauses in the agreement and the conduct of the parties”.

Applying the above principles, the Delhi HC distinguished the Hon’ble Apex Court’s decision in Ravi Ranjan Developers (supra) that the Respondent had relied upon. The Delhi HC noted that in Ravi Ranjan Developers (supra), the contract merely provided that “the sitting of the said Arbitral Tribunal shall be at Kolkata”, apart from which, there were no other contractual clauses to demonstrate the intention of the parties. The Delhi HC also noted that the case of Ravi Ranjan Developers (supra) had also been distinguished in the cases of Reliance Infrastructure (supra) and Sikka Motors (supra), which the petitioner had relied upon.

Therefore, the Delhi HC concluded that:

The decision in Ravi Ranjan Developers (supra) proceeded on its own facts. There, the arbitration agreement was not supplemented by any other provision, which was not the case in the present matter.
Since the parties had agreed to subject all disputes to the exclusive jurisdiction of courts at New Delhi, and since the parties had agreed that the venue for the arbitration will be New Delhi, the parties’ intention was for New Delhi to be designated not only as the place for some of the hearings (i.e., as the venue) but as “the place where the arbitration proceedings would be conducted as a whole”.
The language used signified that the parties intended to anchor the arbitral proceedings to New Delhi, which would be the seat of arbitration.
There was no other significant indicia in the arbitration agreement to suggest that the ‘venue’ stipulated was merely a convenient place for meeting for arbitration.
Thus, the Delhi HC had the territorial jurisdiction to entertain and decide the Section 11 petition.

JSA Analysis and Conclusion

Where the contract specifically provides for a seat of arbitration, it is settled that courts at the seat alone would exercise supervisory jurisdiction over the arbitration, and that the jurisdiction of courts in other places would be ousted, even if part or the whole of the cause of action arose outside the place designated as seat. However, where such an express provision is not agreed in the contract, the issue of determining the seat causes controversy.

The decision in Axalta Coating Systems (supra) follows a spate of decisions holding that in the absence of a specifically prescribed ‘seat’ of arbitration, the place agreed as the ‘venue’ would also be the ‘seat’, even if the contract confers exclusive jurisdiction to courts at a different place[7] (though in Axalta Coating Systems (supra), there was no conflict between the exclusive jurisdiction clause and the designation of venue). However, another line of decisions endorses the diametrically opposite view, holding that the designation of venue would be controlled and superseded by the exclusive jurisdiction clause.[8]

In view of the seemingly endless divergence of opinion on the issue, in spite of jurisprudence and scholarship on the topic being ubiquitous, it would be apposite for the Hon’ble Supreme Court to once again intervene and settle the law on the point. We feel that a clarification on what constitutes “significant contrary indicia” under the tests laid down by BGS SGS Soma (supra) would be decisive in clearing much, if not all, of the existing confusion.

This Prism has been prepared by:

Divyam Agarwal
Partner

Aniket Aggarwal
Associate

For more details, please contact [email protected]

[1] 2024:DHC:1104

[2] 2022 SCC OnLine SC 568

[3] 2023 SCC OnLine Del 4894

[4] 2022 SCC OnLine Del 1187

[5] 2020 4 SCC 234

[6] 2020 5 SCC 399

[7] Raman Deep Singh v. Crown Realtech, 2017 SCC OnLine Del 11966; Global Credit Capital v. Krrish Realty, 2018 SCC OnLine Del 9178; Cinepolis India v. Celebration City Project, 2020 SCC OnLine Del 301; Mayank Agrawal v. Jaiprakash Associates, 2021 SCC OnLine Del 4445; Reliance Infrastructure v. Madhyanchal Vidyut Vitran Nigam, 2023 SCC OnLine Del 4894; Vasudev Garg v. Embassy Commercial Projects, 2023 SCC OnLine Del 6977; Damodar Valley Corpn. v. BLA Projects, 2023 SCC OnLine Cal 3769; Balapreetham Guest House v. Mypreferred Transformation and Hospitality, 2021 SCC OnLine Mad 1126.

[8] Virgo Softech v. National Institute for Electronics, 2018 SCC OnLine Del 12722; Spentex Industries v. Louis Dreyfus Commodities, (2019) 258 DLT 138; Kush Raj Bhatia v. DLF Power, 2022 SCC OnLine Del 3309; Cravants Media v. Jharkhand State Cooperative Milk Producers Federation, 2021 SCC OnLine Del 5350; Meenakshi Nehra v. Wave Megacity, 2022 SCC OnLine Del 3744; Homevists Décor v. Connect Residuary, 2023 SCC OnLine Cal 1405; Aseem Watts v. Union of India, 2023 SCC OnLine Raj 1462.

Tags Delhi HC, Dispute Resolution, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates

Sidharth Sethi | Panel Discussion | Future-proofing Investments: Trends in Arbitration | New Delhi

Sidharth Sethi was invited by the Indian Institute of Arbitration & Mediation (“IIAM”) for a panel discussion on “Future-proofing Investments: Trends in Arbitration”.

The other distinguished speakers on the panel were:

Hon’ble Mr. Justice Sudhanshu Dhulia, Judge, Supreme Court of India
Hon’ble Mr. Justice S.R. Bhat, Former Judge, Supreme Court of India
Mr. Avnit Singh Arora, Director, Ministry of Law and Justice, Government of India
Mr. Friedrich Rosenfeld, Partner at Hanefeld, Paris and Global Adjunct Professor of Law at NYU, Paris
Mr. Tejas Karia, Partner & Head, Arbitration at Shardul Amarchand Mangaldas, New Delhi
Mr. Anil Xavier, President, IIAM and Chairman, Asia Pacific Centre for Arbitration and Mediation (“APCAM”).

The session was moderated by Ms. Iram Majid, Director, IIAM and Executive Director, APCAM, and explored various nuances of investment treaty arbitrations.

Tags Arbitration, Dispute Resolution, Disputes, JSA, Leading Law Firm, Leading Lawyers

JSA successfully defended PepsiCo India Holdings Pvt. Ltd. in appeals at the Supreme Court

JSA successfully represented and defended PepsiCo India Holdings Private Limited before the Supreme Court of India in appeals filed by the State of Uttar Pradesh challenging the judgement of Allahabad High Court quashing FIRs registered under the provisions of the Indian Penal Code, 1860 (“IPC”) and Prevention of Food Adulteration Act, 1954 (“PFA”) for alleged offences of food adulteration.

The FIRs which were the subject matter of the Appeals were registered under the IPC and PFA/ Food Safety and Standards Act, 2006 (“FSS Act”) against PepsiCo (and its officials) for alleged offences of food adulteration after the enactment of the FSS Act. The High Court of Allahabad, vide judgment dated September 08, 2010, quashed the FIRs after considering the intent, purposes and the scheme of the FSS Act and holding that FSS Act would have an overriding effect on all food related laws including the PFA and consequently, invocation of Section 272 and 273 of IPC concerning food adulteration was bad in law.

The central issue before the Supreme Court of India in these appeals was “whether after enactment of a special legislation i.e., FSS Act being complete code on subject matter of “food” with a comprehensive procedure and inbuilt safeguards, the FSS Act will override the provisions of general law i.e., IPC?”

The Supreme Court, while upholding the High Court’s judgment, held as follows:

There are very exhaustive substantive and procedural provisions in the FSS Act for dealing with offences concerning unsafe food.
Section 89 of the FSS Act gives the Act an overriding effect in respect of any other law for the time being in force. This is not limited to food-related laws but other laws as well.
When the offences relating to food-adulteration under the IPC i.e., Sections 272 and 273 are made out, the same would also attract Section 59 of the FSS Act. The penalties under Section 59 of the FSS Act are more stringent, when compared to IPC.
Section 59 of the FSS Act will override the provisions of Section 272 and 273 of IPC by virtue of the overriding provision in the FSS Act (i.e. Section 89 of the FSS Act).

The judgment is of prime significance to the food industry as there was a tendency to invoke the provisions of IPC instead of the FSS Act. This judgement will be a huge relief to the food industry as the local police will not be able to invoke Sections 272 and 273 of IPC for offences related to food.

PepsiCo was represented by JSA both before the Supreme Court of India and before the High Court of Allahabad.

Our Disputes Team Comprised Lead Partner – Dheeraj Nair, Partner – Kumar Kislay, Senior Associate – Avni Sharma, and Associate – Ridhima Sharma.

Tags Dispute Resolution, Disputes, FMCG, JSA, Leading Law Firm, Leading Lawyers, Legal Updates

JSA Prism | Dispute Resolution | February 2024

Please click here to download the Prism as PDF.

A suit cannot be decreed solely on the basis of the defendant’s failure to file a written statement without the plaintiff proving its own case.

A 3 (three) judge bench of the Hon’ble Supreme Court of India (“Supreme Court”) in Asma Lateef & Anr. vs Shabbir Ahmad & Ors.[1] has inter alia held that Order VIII Rule 10, Code of Civil Procedure, 1908 (“CPC”) is not a mandatory provision and a court is not bound to pass a judgment in favour of the plaintiff merely because the defendant has failed or neglected to file his written statement. It is only on being satisfied that none of the several defendants have filed their written statement(s) and there is no fact which needs to be proved on account of deemed admission, could the court proceed to pass a judgment / decree against the defendant who has not filed a written statement.

Brief Facts

The case at hand dealt with a civil suit[2] instituted by Asma Lateef and another (“Appellants”) under Section 38 of the Specific Relief Act, 1963 (“Specific Relief Act“) praying for a permanent injunction against Shabbir Ahmad and others (“Respondents/Original Defendant”) from interfering with the Appellants’ peaceful possession of the suit property. Thereafter, one of the Respondent / Original Defendant – Kazmi filed his written statement before the trial court contending that the suit was not maintainable as the same was barred in view of Section 41(h) of the Specific Relief Act. Pertinently, it is to be noted that no written statement was filed on behalf of the other 2 (two) Respondents / Original Defendants.

In view of the subsequent death of the Respondent / Original Defendant – Kazmi, the suit against him stood dismissed as abated. The Appellants thereafter moved an application before the trial court under Order VIII Rule 5 and 10 of the CPC for pronouncement of judgment against the remaining 2 (two) Respondents / Original Defendants, which was allowed by the trial court by its order dated August 5, 1991.

As purported decree holders, the Appellants filed an execution application[3] before the executing court and prayed for interim reliefs to restrain the Respondents from interfering with the suit property, which was granted vide interim order dated January 16, 1998. Thereupon, the Respondents filed objections under Section 47 of CPC submitting that the order dated August 5, 1991, was neither a ‘judgement’ nor a ‘decree’, and therefore was not capable of execution. The objections were duly allowed by the executing court, resulting in the dismissal of the execution application. The revision application filed by the Appellants against the order of dismissal by the execution court was considered and found merit in by the revisional court, which directed the execution court to proceed with the execution of the decree.

Aggrieved by the order of the revisional court, the same was challenged by the Respondents before the Hon’ble Allahabad High Court (“Allahabad HC”) under Article 227 of the Constitution of India[4], which led to the Supreme Court quashing the order of the revisional court and relegating of the parties for adjudication before the appropriate forum.

The Appellants thereafter filed the special leave petition before the Supreme Court challenging the judgement and order of the Allahabad HC.

Issues

Whether the order dated August 5, 1991, suffered from a jurisdictional error so grave that the decree drawn up subsequently is incapable of execution by the executing court and an objection that it is inexecutable was available to be raised under Section 47 of the CPC by the Respondents.

Analysis and Findings

The Supreme Court after appreciating the submissions advanced by the parties, extensively analysed the scheme of Order VIII Rule 10 of the CPC and the scope and nature of Section 47 of the CPC. Accordingly, the Supreme Court inter alia observed as follows:

Scheme of Order VIII Rule 10 of the CPC:
- After noticing the procedure as laid down in Order VIII Rule 10 of the CPC, wherein if a party fails to present a written statement within the stipulated time, the court may pronounce the judgment against such party, the Supreme Court clearly held that the same is permissive in nature and not a mandatory provision. The same was buttressed by a plain reading of the provision, which provides for 2 (two) alternatives in a case where no written submission has been filed by a respondent.
- Therefore, if the law laid down made it mandatory to render a judgment against a party that has failed to file its written statement, the second alternative of ‘making such order in relation to the suit as it (the court) thinks fit’ would be rendered otiose. Reliance was placed upon Balraj Taneja vs Sunil Madan,[5] in which the Supreme Court ruled that a court need not pass a mechanical judgment merely relying on the plaint when no written statement is forthcoming from the respondent.
- Furthermore, the Supreme Court observed that the power under Order VIII Rule 10 of the CPC ought to be invoked with care, caution, and circumspection, and only in cases were none of several defendants have filed their written statements. Moreover, if the plaint itself consists of disputed questions of fact, it would be advisable to avoid passing a judgment in favour of such plaintiff without due consideration to the evidence adduced and submissions made.
Objections to maintainability and jurisdiction:
- Coming to the issue framed, the Supreme Court went on to deal with the objections raised under Section 47 of the CPC by the Respondents and whether the same were tenable and good in law. As Section 47 of the CPC mandates that an executing court must determine all questions arising between parties to a suit, the Supreme Court by relying on Vasudev Dhanjibai Modi vs Rajabhai Abdul Rehman,[6] held that an executing court can dismiss an execution application if the decree put to execution is unmistakably found to suffer from an inherent lack of jurisdiction, rendering it a nullity in the eye of law.
- Furthermore, by quoting the full-bench judgment of the Calcutta High Court in Hirday Nath Roy v Ramachandra Barna Sarma,[7] the Supreme Court opined that it is no longer res integra that a court must not only have the jurisdiction in respect of the subject matter of the dispute, but also the jurisdiction to grant relief that is sought for. The obvious position of law that emerges from the discussion is that a civil court must determine the issue of jurisdiction at the commencement and not at the conclusion of the enquiry.
- Although not directly pertaining to the case at hand, the Supreme Court also observed that at the stage of considering the question of grant of interim relief, if the opposing party raises a point of maintainability thereof, the court ought to record at least a prima facie satisfaction that the suit before it is maintainable and not barred by law.
- Therefore, it would be improper for a court to abstain from recording its prima facie satisfaction that it has the requisite jurisdiction, yet proceed to grant protection pro tem assuming that the point of maintainability would be decided as a preliminary issue under Order XIV Rule 2 of the CPC. Nevertheless, the Supreme Court carved out an exception for extraordinary situations where forming an opinion on maintainability may take time and non-grant of protection could lead to irreversible consequences.
  In light of the discussion above, the Supreme Court while upholding the order of the Allahabad HC, held that the trial court had no authority to decree the suit against the Respondent under Order VIII Rule 10, CPC for non-submission of their written statements.

JSA Comment

By way of this judgment, the Supreme Court has comprehensively laid down the scheme under Order VIII Rule 10 of the CPC and has clarified that the mere non-filing of a written statement by the defendant would not automatically entitle a plaintiff to have a decree drawn up in its favour, without proving its own case (by leadings relevant evidence).

The judgment also reaffirms the settled principle that a plaintiff’s case must ‘stand on its own legs’ and that a court must apply its judicial mind and satisfy the requirements of Order XX Rule 4(2) read with Section 2(9) of the CPC while pronouncing a ‘judgment’.

By holding that the issue of maintainability must be prima facie decided before granting any relief, the Supreme Court has ensured that the interest of all the interested parties is safeguarded.

This Prism has been prepared by:

Varghese Thomas
Partner

Ahsan Allana
Senior Associate

Kabir Saund
Associate

For more details, please contact [email protected]

[1] Civil Appeal No.9695 of 2013.

[2] Original Suit No. 58 of 1990.

[3] Execution Application No. 58 of 1997.

[4] Civil Misc. Writ Petition No. 15236 of 2009.

[5] (1999) 8 SCC 396.

[6] (1970) 1 SCC 670.

[7] 1920 SCC OnLine Cal 85.

Tags Allahabad High Court, Dispute Resolution, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Supreme Court

Singapore is the most preferred jurisdiction for arbitration and mediation

How pertinent and relevant was it for you to attend this ADR Symposium in Mauritius?

I was invited to speak on the panel on mediation law, and I am the chair of the disputes practice of a very large law firm called JSA (Editor’s note: in India). It was very interesting for me to speak on mediation because I have recently handled quite a number of mediations, and I am very focused and excited about the new ways that mediation could end disputes. I like to attend these conferences and speak about the values and how mediation could be used as a way of resolving disputes.

Why should we favour mediation when there are courts of law?

You go to mediation for two reasons essentially. The first one is that you save time, while the courts will take much longer. Secondly, you will save on costs because the time spent is less in mediation. Now, when you go to court, you are in a situation where you are fighting with your counterparty. Sometimes, business relations end because of the fight. In mediation, you are exploring the possibility of settling your differences. It’s not a dispute. This is very important in mediation. If you are transacting with a party for several years and happen to go to court at some stage, that relationship gets disrupted. In mediation, there is a possibility that you may not disrupt that relationship, and you might also consider settling it by giving in for a little more or a little less. This is the advantage.

Please click here to or refer to the below document to read the full Q&A session of Farid Karachiwal, published in Bizweek.

Tags Arbitration, J Sagar Associates, JSA, JSA Law Firm, Leading Law Firm, Leading Lawyers, Mediation Law, Q&A

A missed opportunity

India recently got its first standalone legislation on mediation as an independent alternative dispute resolution mechanism. However, the Government of India (GoI) promulgated the Mediation Act without incorporating United Nations Convention on International Settlement Agreements Resulting from Mediation, also called the Singapore Convention on Mediation (Singapore Convention) despite criticism of such departure during the consultation stage.

This article discusses the departure and if it was warranted, or whether India missed its host at global recognition and parity in the field of mediation.

Please click here or refer to the below document to read the full article by Dheeraj Nair, Vishrutyi Sahni and Ridhima Sharma, published in Financial Express.

Tags Government of India, JSA, Leading Law Firm, Leading Lawyers, Mediation Act

JSA successfully represents PepsiCo in setting aside the revocation of its registration for its potato variety

JSA successfully represented PepsiCo India Holdings Private Limited before a Division Bench of the Delhi High Court, in setting aside the revocation of PepsiCo’s registration for its potato variety FL 2027 under the Protection of Plant Varieties and Farmers Rights Act, 2001 (“PPVFRA”). The FL 2027 variety is used for the manufacture of Lay’s potato chips.

PepsiCo’s registration was challenged by Ms. Kavitha Kuruganti, a farmers’ rights activist, on various grounds under Section 34 of the PPVFRA before the Protection of Plant Varieties and Farmers Rights Authority (“Authority”). These grounds pertained to alleged deficiencies in PepsiCo’s application for registration and that the grant of registration was against public interest.

The Authority had in December 2021 revoked PepsiCo’s registration. PepsiCo had challenged the matter before a Single Judge of the Delhi High Court and succeeded in getting several findings of the Authority set aside. However, the Ld. Single Judge upheld the revocation of PepsiCo’s registration.

Before the Division Bench, PepsiCo challenged the Ld. Single Judge’s order as also the Authority’s order revoking its registration. Ms. Kavitha Kuruganti also appealed to challenge the findings of the Ld. Single Judge in PepsiCo’s favour.

The Division Bench allowed PepsiCo’s appeal and dismissed Kavitha Kuruganti’s appeal, setting aside the orders passed by the Ld. Single Judge and the Authority.

Our Disputes Team Comprised Lead Partner – Dheeraj Nair and Principal Associate – Anjali Anchayil.

Tags Delhi High Court, Disputes, JSA, Leading Law Firm, Leading Lawyers, Matter

IBC | Annual Compendium 2023

This compendium consolidates all the relevant notifications and circulars pertaining to IBC, which has been circulated during the calendar period from January 2023 till December 2023.

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