India – Litigation Snapshots.

1 May, 2016

 

Mauritius recognized as a Reciprocal Territory under the Arbitration and Conciliation Act, 1996 

 

By a notification issued by the Ministry of Law and Justice of the Government of India (‘Notification’), the Republic of Mauritius has been recognized as a reciprocal territory for enforcement of foreign awards under Section 44(b) of Part II of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’). This Notification has retrospective effect from October 11, 1960. Consequently, an arbitral award passed, where the seat of arbitration is Mauritius, will now be enforceable in India under Sections 46, 47 and 49 of the Arbitration Act. 

 

LCIA India to close from June 1, 2016 

 

 

The Indian Chapter of the London Court of International Arbitration (‘LCIA India’) has announced that it will be closed with effect from June 1, 2016. The key impact of the closure will be as under:

 

1. existing cases that are already registered with LCIA India will continue to be administered as per the LCIA India Rules, and will be administered by the London Office after June 1, 2016;
2. references that are made pursuant to agreements that were concluded prior to June 1, 2016 will also be administered by the London Office in accordance with the LCIA India Rules; and
3. for contracts concluded after June 1, 2016, if the parties agree to arbitrate as per LCIA India Rules, a reference made under such contract will not be accepted for administration, unless the parties agree to arbitrate as per the LCIA (UK) Rules. 

 

Madras & Calcutta High Courts deliver contrary rulings in respect of the prospective applicability of the Arbitration and Conciliation (Amendment) Act, 2015 

 

In the January 2016 edition of Inter alia…, we had reported that the Arbitration Act has been amended by the Arbitration and Conciliation (Amendment) Act, 2015 (‘Amending Act’). Section 26 of the Amending Act provides that its provisions will not apply to any arbitral proceedings initiated under Section 21 of the Arbitration Act, prior to the commencement of the Amending Act, unless otherwise agreed to by the parties. The term ‘arbitral proceedings’ has not been defined in the Amending Act or the Arbitration Act. The Madras High Court (‘Madras HC’) and the Calcutta High Court (‘Calcutta HC’) have recently delivered conflicting rulings on whether the prospective applicability of the Amending Act would apply also to Court proceedings arising out of such arbitral proceedings.

 

Prior to the Amending Act, filing an application to set aside an arbitral award under Section 34 of the Arbitration Act operated as an automatic suspension on execution of the award under Section 36 of the Arbitration Act. The Amending Act, however, provides that such filing would no longer automatically stay execution of the arbitral award, unless the Court orders stay of execution on an application made for that specific purpose. In New Tirupur Area Development Corporation Ltd. v. M/s Hindustan Construction Co. Ltd.8, proceedings were filed under Section 34 of the Arbitration Act to set aside an arbitral award and contended that filing an application requesting stay of execution was not required, as the arbitration proceedings had commenced prior to the Amending Act.

 

In its judgement dated February 3, 2016, the Madras HC analyzed Section 85 of the Arbitration Act (repeal and saving) that applied “in relation to arbitral proceedings…” and the judgement of the SC in this regard in Thyssen Stahl Union GMBH v. Steel Authority of India Ltd9 (‘Thyssen Case’). Section 85 was enacted, inter alia, in the context of the substitution of the (Indian) Arbitration Act, 1940 (‘Old Act’) with the Arbitration Act. In that context, SC in the Thyssen Case, had held that Section 85 would cover court proceedings due to the usage of the words “in relation to” in Section 85, and therefore the Arbitration Act would not apply to pending Court proceedings under the Old Act. Distinguishing the judgment in Thyssen Case, the Madras HC held that since Section 26 of the Amending Act did not use the term “in relation to” with respect to pending arbitral proceedings, the Amending Act would apply to pending Court proceedings.

 

However, the Calcutta HC in Electro Steel Casting Limited v. Reacon (India) Pvt. Ltd10 has delivered a contrary ruling. Dealing with a similar question relating to enforcement under Section 36 of the Arbitration Act, the Calcutta HC in its judgement dated January 14, 2016 held that “Since the subject arbitration commenced much prior to coming into force of the Amendment Act, nothing in it applies to the subject arbitration.”

 

The judgement of the Madras HC is in line with the emphasis in recent years on the need to expedite arbitration proceedings in India in order to make it an attractive hub for international commercial arbitrations, and to put parties to terms if an arbitral award is challenged. If the divergent view taken by the Calcutta HC eventually prevails, it would, to a large extent, render ineffective the emphasis on expeditious arbitration timelines as contemplated by the Amending Act. 

 

SC holds that Chairman, Managing Director and Executive Directors of a Banking Company are ‘Public Servants’ for the Prevention of Corruption Act, 1988 

 

In a recent case of Central Bureau of Investigation of India, Bank Securities & Fraud Cell v. Ramesh Gelli and Others11 a two judge bench of SC held that employees of a private banking company are public servants and can be prosecuted under the provisions of the Prevention of Corruption Act, 1988 (‘PCA’). SC relied on Section 46A of the Banking Regulation Act, 1949 (‘Banking Regulation Act’), which provides that a Chairman appointed on a whole time basis, managing director, director, auditor, liquidator, manager and any other employee of a banking company is deemed to be a “public servant” for the purposes of Chapter IX, i.e., Sections 161 to 171 of the Indian Penal Code, 1860 (‘IPC’). Chapter IX of the IPC deals with ‘Offences by or relating to Public Servants’.

 

SC reasoned that Sections 161 to 165A of the IPC, that deal with penalties on public servants for corruption, were deleted from IPC and introduced into Sections 7 to 12 of the PCA. However, no corresponding amendments were made to Section 46A of the Banking Regulation Act, which continued to refer to Chapter IX of the IPC. In this background, SC relied on the ‘Objects and Reasons’ to PCA, as well as the definition of ‘public servant’ and ‘public duty’ under the PCA and concluded that the legislative intent was to retain the wide scope of the definition of ‘public servant’.Applying this reasoning,SC held that in this case,the chairman and managing director, and executive director, respectively, of Global Trust Bank, a private bank, were public servants within the meaning of PCA. However, SC clarified, vitally, that distinctions between holders of private office and public office ought to be maintained and that the mere performance of public duties by the holder of any office does not make such person a ‘public servant’ as defined in Section 2(c) of PCA. 

 

7 Manu Narang & Anr v. The Lt. Governor, Government National Capital Territory of Delhi & Ors., 226(2016)DLT1 

8  New Tirupur Area Development Corporation Ltd. v. M/s Hindustan Construction Co. Ltd., Application No. 7674 of 2015 in O.P. No. 931 of 2015.

9  Thyssen Stahl Union GMBH v. Steel Authority of India Ltd., 1999 (9) SCC 334.

10  Electro Steel Casting Limited v. Reacon (India) Pvt. Ltd., Application No. 1710 of 2015 decided on January 14, 2016.

11 Bank Securities & Fraud Cell v. Ramesh Gelli and Others, Writ Petition (Criminal) no. 167 of 2015.