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Unsettling the balance: analysing the Import of section 167(2) OF CRPC.

The debate around the interpretation of Section 167(2) of the Code of Criminal Procedure, 1973 (“CrPC”), as regards timing of police custody has reawakened since the Supreme Court in V. Senthil Balaji vs. State represented by Deputy Director & Ors.[1]; 2023 SCC Online SC 934(“Senthil Balaji Case”), sought to re-examine the position. In the course of assessing the import of Section 167(2) of CrPC, the Supreme Court has raised doubts on the otherwise settled position of law laid down in the Central Bureau of Investigation vs. Anupam J. Kulkarni[2];(1992) 3 SCC 141, later concurred by a Full Bench of the Supreme Court in Budh Singh vs. State of Punjab; (2000) 9 SCC 266. The Supreme Court has referred the matter to the Chief Justice of the Supreme Court for appropriate orders to form a larger bench.

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Course Correction – The Vidarbha judgment clarified

In the blog post titled ‘Vidarbha Aftermath’, the decision of the Supreme Court of India (“Supreme Court”) in Vidarbha Industries Power Limited v. Axis Bank Limited[1] (“Vidarbha”) was discussed and analysed. Based on the Vidarbha judgment, the National Company Law Appellate Tribunal (“NCLAT”) and various National Company Law Tribunals (“NCLT/Adjudicating Authority”) had taken divergent views and interpretations on the power of the Adjudicating Authority to reject an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”).

However, the Supreme Court on May 11, 2023, in M. Suresh Kumar Reddy v. Canara Bank[2] (“Suresh Kumar”), issued a few clarifications that made it clear that the pre-Vidarbha period principles continue to apply even today.

Brief facts in the Suresh Kumar judgment:

The Respondent – Canara Bank had extended a secured overdraft facility and several bank guarantees to Kranthi Edifice Private Limited (“Corporate Debtor”). The Corporate Debtor sought for extension of the bank guarantees which was rejected by the Respondent Bank. Thereafter, the Respondent Bank called upon the Corporate Debtor to pay the entire outstanding amount that was due. Upon the failure of the Corporate Debtor to make payment, the Respondent Bank initiated corporate insolvency resolution process (“CIRP”) under Section 7 of the Code against the Corporate Debtor before the NCLT, Hyderabad (“Application”).

The NCLT, Hyderabad admitted the Application on June 27, 2022. Aggrieved by the order of the NCLT, Hyderabad, the Appellant – a suspended director of the Corporate Debtor, filed an appeal before the NCLAT, Chennai, which was rejected on September 5, 2022. Thereafter, the Appellant filed a civil appeal before the Supreme Court under Section 62 of the Code.

Contentions taken:

The Appellant mainly contended that repeated efforts were made to enter into a one-time settlement by the Corporate Debtor, which were not acceded to by the Respondent Bank. The default occurred due to the Respondent Bank refusing to extend the bank guarantees, therefore, the Respondent Bank is responsible for triggering the default. Further, considering the Vidarbha judgment, even if debt[3] and default[4] were established, the Adjudicating Authority can refuse to admit the Application.

The Respondent Bank relied on the order in the review petition filed against the Vidarbha judgment[5] (“Review Petition”), which clarified that the Vidarbha judgment was based on peculiar facts. Moreover, it was submitted that the judgment of the Supreme Court in E.S. Krishnamurthy v. Bharath HiTecch Builders Private Limited[6] (“E.S Krishnamurthy”)is to be followed, which holds that once the Adjudicating Authority is satisfied that there is a financial debt[7] and default has occurred, it is bound to admit an application under Section 7 of the Code.

The Finding:

While dismissing the appeal, the Supreme Court referred to the judgments passed in Innoventive Industries Limited v. ICICI Bank[8] (“Innoventive Industries”) and E.S. Krishnamurthy[9] (which has followed the principles laid down in Innoventive Industries) and held that once the Adjudicating Authority is satisfied that the default has occurred, there is hardly any discretion left with it to refuse the admission of an application under Section 7 of the Code.

The Supreme Court analysed the definition of ‘default’ under Section 3(12) of the Code and held that even non-payment of a part of a debt, which is due and payable, would amount to a default on the part of the corporate debtor. The Supreme Court held that only if the Adjudicating Authority finds that there is a debt, but it has not become due and payable, the application under Section 7 of the Code can be rejected. Otherwise, there is no ground available to the Adjudicating Authority to reject an application filed under Section 7 of the Code.

More importantly, the Supreme Court held that “…the decision taken in the Vidarbha judgment cannot be read and understood as taking a view which is contrary to the view taken in Innoventive Industries and E.S Krishnamurthy. The view taken in the case of Innoventive Industries still holds good” (emphasis added).

Conclusion:

The Suresh Kumar judgment concludes the debate which arose due to the Vidarbha judgment on the discretion of the Adjudicating Authority to reject an application under Section 7 of the Code. The Vidarbha judgment provided an avenue to the corporate debtors to develop innovative arguments as a defence to the application filed under Section 7 of the Code. The Suresh Kumar judgment re-enforces the position that prevailed pre-Vidarbha where the principles laid down in Innoventive Industries and E.S. Krishnamurthy have been reiterated. Further, the action to now amend the Code insofar as to clarify this lacunae is effectively rendered moot considering the Suresh Kumar judgment.

[1] (2022) 8 SCC 352 (Supreme Court, decided on July 12, 2022).

[2] Civil Appeal No. 7121 of 2022 (Supreme Court, decided on May 11, 2023).

[3] Section 3(11), IBC.

[4] Section 3(12), IBC.

[5] Axis Bank Limited v. Vidarbha Industries Power Limited., 2022 SCC OnLine SC 1339 (Supreme Court, decided on September 9, 2022).

[6] (2022) 3 SCC 161 (Supreme Court, decided on December 14, 2021).

[7] Section 5(8), IBC.

[8] (2018) 1 SCC 407 (Supreme Court, decided on August 31, 2017).

[9] See supra note 5.

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Arbitrability of IP Disputes – A Step Forward?

Arbitration as a means of resolving commercial disputes has progressively become the default mechanism around the world, including in India. However, the public policy exception may be invoked to make certain subject matter inarbitrable. This article deals with one of these putatively inarbitrable areas in India: intellectual property and the reasoning of the Indian courts to render intellectual property disputes inarbitrable.

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EXISTENCE AND VALIDITY OF AN ARBITRATION CLAUSE: A DEEP DIVE INTO THE CHANGING PERSPECTIVE ON THE COURT’S INTERVENTION AT THE PRE-ARBITRAL STAGE: PART-II

Duro revalidated in Mayavati Trading

The Supreme Court in a three-Judge Bench decision of Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman[i] (“Mayavati Trading”), considered the impending omission of Section 11(6A) of the Act vide the Amendment Act of 2019. It was conclusively stated that Section 11(6A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in Duro. The Supreme Court also expressly overruled Antique Exports, recognising that its reasoning relied on the pre-amended position, i.e., before Amendment Act of 2015 introduced Section 11(6A).

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[PART I]

The question of the Court’s intervention at the time of constitution of an arbitral tribunal underwent a seminal shift in India in 2016. This shift was brought about by the insertion of Section 11(6A)[i] in the Indian Arbitration and Conciliation Act, 1996 (“Act”) through the Arbitration and Conciliation (Amendment) Act, 2015, No. 3 of 2016 (“Amendment Act of 2015”). The introduction of Section 11(6A) limited the Court’s role at the juncture of appointment of arbitrators. The Courts sole task now was to determine whether an arbitration agreement ‘existed’ or not. Thus, inquiries  related to ‘validity’ of an arbitration agreement were to be decided by an arbitral tribunal itself,  which had the powers to rule on its own jurisdiction under Section 16 of the Act (a provision conforming to the UNCITRAL Model Law on International Commercial Arbitration, 1985).

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CONSTRUCTION ARBITRATION AND THE NUMBERS GAME: AN ANALYSIS OF THE DELHI HIGH COURT’S RECENT DECISION IN SATLUJ V. JP

A civil construction dispute is invariably a smorgasbord of contentious issues like price escalation, variation in quantities and/or costs, force majeure events and technical hindrances. Given the complex nature of a construction dispute and the claims involved, arbitration is increasingly becoming the preferred choice of parties as an ADR mechanism because of the flexibility and effectiveness it offers. However, the arbitrator(s) in such disputes must wear the hat of a legal interpreter, economist and a mathematician, a vocation few will be envious of.

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The Hon’ble Delhi High Court in M/s Arupri Logistics Pvt. Ltd v Shri Vilas Gupta & Ors.[i], has held that an arbitral tribunal, in the absence of any specific power to implead, does not have the authority or jurisdiction to implead parties to arbitral proceedings. The power to implead cannot be inferred from Sections 16, 17 or 19 of the Arbitration and Conciliation Act, 1996 (“the Act”). Further, the arbitral tribunal does not have any residual inherent powers under the Act either, which enables it to implead third parties in the interest of justice. The Hon’ble Court noted that the arbitral tribunal owes its origin principally to well recognised and identifiable sources such as the agreement between the parties, institutional rules or national statutes, therefore, the parties or the tribunal cannot vest itself with powers that are otherwise reserved to be exercised by courts and judicial institutions.

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Not Always Beneficial To Make It To The “Hall Of Fame”: Dissecting Delhi High Court’s Decision In Microsoft V. Zoai

In a unique fact scenario, the sole arbitrator, in a domain name dispute between parties, named himself in the “Hall of Fame” for giving a particular type of decision in such disputes. Upon challenge to the arbitral award passed, the Hon’ble High Court of Delhi exercised its powers under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) and set it aside.

This article examines the reasoning given by the Hon’ble High Court to determine what would constitute a reasonable apprehension of bias, and the implications of a court setting aside arbitral awards on grounds of bias when an arbitrator has the “propensity” to pass certain types of orders.

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Delhi HC’s Margo V. Railtel Order - Analysing Impartiality in Arbitrator Appointments Blog

As with any legal proceeding, an arbitrator’s impartiality and independence is the bedrock of a fair and valid arbitration proceeding. In its recent decision in the case of Margo Networks Pvt Ltd & Anr. v. Railtel Corporation of India Ltd (“Margo v. Railtel”),[1] the Hon’ble High Court of Delhi exercised its powers under Section 11 of the Arbitration and Conciliation Act, 1996 (“Act”), with the intention to highlight the importance of appointing arbitrators in a manner that is unbiased and does not favour any one party.

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Priority Of Dues Under SARFAESI - Bombay High Court Reiterates

In a significant order passed on June 28, 2023, in the case of Ronak Industries vs. Assistant Commissioner Central Excise & Customs & Ors.[1] (“Ronak Industries Case”), the Bombay High Court has upheld the priority of dues of secured creditors as laid down under Section 26-E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”). To pass the order, the Bombay High Court has relied on its previous decision in Jalgaon Janta Sahakari Bank Ltd. and Anr. Vs Joint Commissioner of Sales Tax Nodal 9, Mumbai and Anr.[2] and the decision of the Supreme Court in  ICICI Bank Ltd. vs. SIDCO Leathers Ltd.[3]and held that the dues of a secured creditor, upon registration of the charge with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (“CERSAI”), would rank in priority to the dues of the department of the Government.

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