Constitutional Law Conference

School of Law, Christ University is organizing a two day National Conference on the “INDIAN CONSTITUTION IN THE 21^ST CENTURY: A CONCEPTUAL AND CONTEXUAL AUDIT to be held on the 24^th and 25^th of February, 2011. The Conference is broadly structured around four themes namely:

•   Reframing the Constitution: Is it really a need of the hour?
•   National Security and Constitutional Challenges
•  Development and Constitutional Challenges
•  Challenges to the Functions of the Organs of the State

The Conference brings a unique opportunity to share and explore new ideas, concerns and suggestions among academicians, practitioner, policy makers and students. So far the conference has received an overwhelming response in that there are over fifty papers that are expected to be presented on the conference days.

Programme Details:

The first day of the conference will see participation of eminent jurists, academicians and practitioners such as Justice Santosh Hedge, Former Judge, Supreme Court of India, Justice P.P. Naolekar. Former Judge, Supreme Court of India, Prof. V.S. Mallar, Chair Professor (M.K.Nambiar Chair on Constitutional Law) at NLSIU, Shri Uday Holla, Senior Advocate, Supreme Court of India and Shri Aditya Sondhi, Advocate, Supreme Court of India.

The second day of the conference will see presentations by several academicians and students across the country. Leading scholars working in this domain will be moderating each of the sessions on the second day.

Contact

Practitioners, academicians, policy makers and students are invited to register as delegates. The conference brochure is available at http://www.christuniversity.in/msgdisplay.php?id=5&f=2.  Further details will be made available on request. Interested readers can contact the Conference Organizing Committee at conference2011@law.christuniversity.in

Registration Fee

For academicians	750 INR
For two delegates	1000 INR
For students	500 INR

   

   

Indowind Energy v. Wescare: The Unintended Fallout

Justice Raveendran's decision, in Indowind Energy v. Wescare (I) Ltd. & Anr., AIR 2010 SC 1793, is one which is, without doubt, a well-reasoned opinion in respect of Section 7 of the Arbitration and Conciliation Act, 1996, so long as the frame of reference is the facts of the case itself. From a practitioner's perspective, however, the decision has had some unintended consequences, and is today used extensively by Respondents in Section 11 proceedings under the Arbitration Act seeking to question the existence of an arbitration agreement.

The decision in Indowind states - "It is not in dispute that there can be appointment of an arbitrator if there was any dispute between Wescare and Subuthi. The question is when Indowind is not a signatory to the agreement dated 24.2.2006, whether it can be considered to be a 'party' to the arbitration agreement. In the absence of any document signed by the parties as contemplated under Clause (a) of Sub-section (4) of Section 7, and in the absence of existence of an arbitration agreement as contemplated in Clauses (b) or (c) of Sub-section (4) of Section 7 and in the absence of a contract which incorporates the arbitration agreement by reference as contemplated under Sub-section (5) of Section 7, the inescapable conclusion is that Indowind is not a party to the arbitration agreement. In the absence of an arbitration agreement between Wescare and Indowind, no claim against Indowind or no dispute with Indowind can be the subject- matter of reference to an arbitrator. This is evident from a plain, simple and normal reading of Section 7 of the Act."

This insistence on a signature becomes problematic in a different fact situation. Take, for instance, a scenario where party X enters into an agreement with a Consortium consisting of party A and B. Even the agreement states that A is entering into the Agreement on behalf of the Consortium, with A and B being jointly and severally liable to the extent of their interest in the Consortium. The Consortium is, however, not a separate legal entity in law. In such a scenario, given the language in the decision of Indowind, party B, arrayed as Respondent in a Section 11 petition, may take the objection that it was not a signatory to the agreement, and hence was not a "party" to the arbitration agreement. Commercially, this becomes even more problematic for party X when party A (the signatory) is a foreign party and party B is an Indian party, as X, to actually benefit from the litigation, has only two options:-

i. File a parallel suit against B to the extent of B's liability.

ii. In the event of a favourable award against A, go to A's country of incorporation and attempt to enforce the award in entirety, leaving it to A and B to apportion liability.

In my view, the situation becomes worse if B, for instance, has a hand in the breach of the agreement, as opposed to a situation where A is the Operator and the only person responsible for taking steps under the agreement with X. In this situation, even A has the opportunity to wriggle out of arbitration, by using the ratio in Sukanya Holdings v. Jayesh H. Pandya, (2003) 5 SCC 531, wherein it is stated that a cause of action cannot be bifurcated such that part of it is decided by an arbitral tribunal, and part of it is decided in a civil suit. While Sukanya Holdings was in the context of an application made under Section 8 of the Arbitration and Conciliation Act, 1996, some may argue that the principal can be extrapolated in deciding the arbitrability of a dispute in proceedings under Section 11 of the Arbitration and Conciliation Act.

I feel, therefore, that the principle enunciated in Indowind needs to be clarified and extended to the effect that a non-signatory to an arbitration agreement is deemed to be a signatory where, either expressly or impliedly, the party actually signing the agreement is representing such other party (either as agent or otherwise) for the purpose of the contract.

Contractually Restricting Interim Reliefs

Certainty, as to the result is the hallmark of any commercial document. For e.g., in the event of A the result would be B. Perhaps this is one of the prime reasons why today we see elaborate contracts, running into several clauses. Some of the terms incorporated in these contracts, are matters which traditionally vests within the discretionary domain of the judiciary (albeit a few statutory guidelines). For e.g., grant of interim/equitable relief, specific performance etc. The question therefore is how far are these terms valid in law or in other words will these terms be given effect to by the courts. In this post and subsequent posts I will make an attempt to examine this question.

 One such clause was called into question before the Bombay High Court in BCCI v. KPH Dream CricketPrivate Limited (15.12.2010). The clause in question was Clause 21.6 of the franchisee agreement which reads as under:

 “ BCCIIPL (but not the Franchisee) shall have the right to bring an action seeking injunctive or other equitable relief before the Courts of Mumbai if it reasonably believes that damages may not be an adequate remedy for the breach by the Franchisee of this Agreement."

The clause stipulates that the franchisee will have no right to bring an action seeking interim injunction even if it reasonably believes that damages may not be an adequate relief. It is to be noted that the dispute between the parties was to be settled arbitration. So, what was effectively sought to be restrained through the aforementioned clause was the franchise's right to approach the court under S. 9 of the Arbitration and Conciliation Act, 1996 (at the very least that was sought to be restrained). The Bombay High Court refused to give effect to the clause 21.6 and stayed the termination under S. 9 of the Act and held as under:

“ However, in our view, it would be wholly destructive of the underlying principles of Section 28 of the Contract Act to allow a party to assert that the effect of a contractual term is to prohibit access to the Court in a petition under Section 9 of the Arbitration and Conciliation Act 1996 for obtaining suitable injunctive relief even if, damages were not to provide an adequate recompense. The Court would not readily adopt such a construction of Clause 21.6 and indeed if it were to do so, there would be serious questions in regard to validity of Clause 21.6. A construction must therefore be placed on Clause 21.6 which makes business sense. After all, the franchise agreement reflects a business understanding between parties to a commercial document. When the Court construes a commercial document, the effort must be to give business efficacy to a commercial understanding between the parties. We decline to read Clause 21.6 as enabling BCCI to successfully set up the defence that the remedy of injunctive relief under Section 9 is barred even if the franchisee is able to establish that damages would not provide an adequate remedy”- para. 27

It is sufficiently clear that the Bomaby High Court refused to give effect to Clause 21.6. However, it is respectfully submitted that the reasoning of the court is not entirely clear as one cannot reasonably conclude whether such as clause is:

(a) invalid, as it falls foul of section 28 of the Indian Contract Act, 1872 or;

(b) It is not invalid in law, but in light of the commercial understanding between the parties it does not mean what the BCCI argues it to mean i.e. the franchisee is barred from approaching the court under S. 9 of the Arbitration Act, 1996.

If the reasoning of the court is based on (a) then such a clause would be invalid in all circumstances. However if the reasoning of the court is based on (b) then such a clause would be valid if pressing commercial reasons are shown in this behalf. In my view, the correct reasoning is one based on clause (a) i.e. Clause 21.6 and all such clauses are invalid in law.

Who is in Control! Is it mere shareholding that matters?

The hypothesis that a shareholder who holds a large percentage of shares in a corporation is actually in control of that corporation has been a subject matter of great discussion. The fundamental jurisprudence of company law is that a company is a separate legal entity i.e. it is distinct from its members. Further, the ownership and control does not ordinarily vest in the same hands. Whereas , it is the shareholders who  are technically the so called "owners" of the company, it is ultimately the board of directors who in essence control the day to day affairs of the company. The reasoning for the above conclusions can be deduced by examining several provisions of the Companies Act and judicial pronouncements related thereto [ which, I shall explore in a later post].

However, in the backdrop of the above, the Bombay High Court has made an interesting observation in BCCI v. Jaipur IPL Cricket Pvt. Ltd. ( Arbitartion Appeal No. 30472 of 2010). Here is the relevant extract:

 "As I observed in my judgment dated 8.3.2010 in KPH Dream Cricket Pvt. Ltd. versus Board of Control for Cricket in India, Arbitration Petition (Lodging) No.1303 of 2010, control is a matter of substance and not of form. A person can hold shares without any control over them or the voting rights in respect thereof. Conversely, a person can exercise control over shares, including the voting rights in respect thereof without being a registered holder thereof. The question therefore is whether the said owners in fact controlled the shares of the respondent at all material time (emphasis mine)."- Para. 32 

Thus it is safe to say that as per the above observation of the Bombay High Court, in essence who is in control of the company is a question of fact. I shall explore the correctness of this finding in a subsequent post.          

Interpretation of the Constitution: The New Way Forward

Here is an interesting observation by the Supreme Court in a recent case of CPIO, Supreme Court of India v. Subhash Chandra Agrawal dated 26.11.2010. The observation is of great significance in our times. Here are the relevant extracts from the judgement:

"13. The Constitution is fundamentally a public text--the monumental character of a Government and the people-- and Supreme Court is required to apply it to resolve public controversies. For, from our beginnings, a most important consequence of the constitutionally created separation of powers has been the Indian habit, extraordinary to other democracies, of casting social, economic, philosophical and political questions in the form of public law remedies, in an attempt to secure ultimate resolution by the Supreme Court. In this way, important aspects of the most fundamental issues confronting our democracy finally arrive in the Supreme Court for judicial determination. Not infrequently, these are the issues upon which contemporary society is most deeply divided. They arouse our deepest emotions. This is one such controversy. William J. Bennan, Jr. in one of his public discourse observed:

We current Justices read the Constitution in the only way that we can: as twentieth-century Americans. We look to the history of the time of framing and to the intervening history of interpretation. But the ultimate question must be, what do the words of the text mean in our time? For the genius of the Constitution rests not in any static meaning it might have had in a world that is dead and gone, but in the adaptability of its great principles to cope with current problems and current needs. What the constitutional fundamentals meant to the wisdom of other times cannot be the measure to the vision of our time. Similarly, what those fundamentals mean for us, our descendants will learn, cannot be the measure to the vision of their time. This realization is not, I assure you, a novel one of my own creation. Permit me to quote from one of the opinions of our Court, Weems v. United States 217 U.S. 349, written nearly a century ago:

Time works changes, brings into existence new conditions and purposes. Therefore, a principle to be vital must be capable of wider application than the mischief which gave it birth. This is peculiarly true of constitutions. They are not ephemeral enactments, designed to meet passing occasions. They are, to use the words of Chief Justice John Marshall, "designed to approach immortality as nearly as human institutions can approach it." The future is their care and provision for events of good and bad tendencies of which no prophesy can be made. In the application of a constitution, therefore, our contemplation cannot be only of what has been, but of what may be.

14. The current debate is a sign of a healthy nation. This debate on the Constitution involves great and fundamental issues. Most of the times we reel under the pressure of precedents. We look to the history of the time of framing and to the intervening history of interpretation. But the ultimate question must be, what do the words of the text mean in our time?"

Copyright vs. Copyrighted Article: Guest Post

( This article is contributed by Megha Mishra. Megha is a final year Charted Accountant Student and is also working as an analyst at PriceWaterHouseCoopers. Needless to state that the views expressed here are personal)

 Payment made for the use of software has been, for sometime now an area of ambiguity and has attracted a lot of controversy. There are various judicial precedents which have held time and again, that the payment made for purchase of “off- the- shelf” software is not a payment for ‘royalty’. However, in a recent ruling in M/s Gracemac Corporation v. ADIT, the Delhi ITAT has held that consideration for the sale/ purchase of “off-the-shelf” software is treated as Royalty.

This ruling in Gracemac is a significant departure from the position laid down by the Indian courts in several cases like Tata Consultancy Services , Motorola Inc, Sonata Information Technology v ACIT, and others, wherein a distinction was drawn between ‘copyright’ and ‘ copyrighted article’. However, in Gracemac, the ITAT held that the term ‘copyrighted article’ has not been defined either in the Income Tax Act, 1961 or under the copyright Act, 1957; the term ‘copyrighted article’ had originated in the US Regulations and then found its way into the OECD commentary. Further, the ITAT observed that the term ‘copyrighted article’ was independently defined only for the sake of drawing out a meaning for the same; hence there was/is no need in importing the expression’ copyrighted article’ for the interpretation of the term ‘royalty’. Alternatively, the Tribunal also stated that as per the definition of the term ‘royalty’ in section 9(1)(vi) of the Income Tax Act,1961, a copyright subsists in a computer programme and therefore any sale of software amounts to ‘royalty’.

However, in my opinion, when a license to use the generalized software is issued by the owner to the end user, the payment made for the same should not be treated as a ‘royalty’, since the end user does not get the right to commercially exploit the said software. Thus, as also held in various judicial precedents, the sale of ‘off-the-shelf’ software should be treated as sale of an article and not as royalty.

Industry Jargon Explained

In this blog, we would be giving links to articles in business newspapers / websites which explain industry terminology. Often, as law students and law industry practitioners, we are not aware of several terms that are used in the day-to-day life of business. Hence, we would be giving links to articles in the newspapers on commonly used terms in the industry but of which law students are generally not aware.

moneycontrol.com on Net Asset Value in Mutual Funds

Business Line on contractual terms in Health Insurance Policies
In the above article, terms such as the "sum assured", "benefits", conditions such as exclusion of alternative therapies from the cover of insurance, exclusion of cover for organ transplants are explained.

Business Line on How to Arrive at the Enterprise Value
Enterprise Value is the index used to compare two firms (in the economic sense) in the same sector. The article explains how to calculate enterprise value, combination of enterprise value and other comparison systems, and the limitations of using enterprise value in the comparison of firms.

Business Line on Non-Compete Fee
The issue of Non-Compete Fee became famous because of the proposed acquisition of Cairn India by Vedanta. This article explains what a Non-Compete Fee is and briefly maps the legal position pertaining to it. [the latest news on the Cairn-Vedanta deal can be accessed from here.]

Extend Transfer Pricing Laws to Domestic Transactions: Suggests the SC

In CIT v. Glaxo Smithkline, the Supreme Court has suggested/recommended the Ministry of Finance and the CBDT to look into the prospect of extending the transfer pricing laws to "domestic transactions" involving "related parties". The Judgement and a summary is available here.

I shall explore this possibility in a later post.

Rights of a Patient

Dr. Shaila Shenoy in this article in the Hindu writes on the rights of the patient. She lists, among other things, the following as the rights of a patient:

• Right to know the identity of the doctor treating the patient
• Right to know the probable diagnosis
  
• Right to know the probable treatment
• Right to be informed of the possible financial implications of the proposed treatment
• Right to demand transfer to another facility
• Right to accept or refuse treatment after being informed of the risks
• Right to be informed before research protocol is initiated and to refuse to be a part of it
• Right to demand photocopy of the patient's entire medical records.

Following are some of the randomly googled articles that might be of interest on this topic.

Informed Consent and the Anesthesiologist
Doctrine of Informed Consent and the Patient: Different Aspects
Informed Consent Process
Informed Consent and Clinical Trials
Seeking patients' consent: The ethical considerations
Patients' Rights

The Nobel Peace Price and Politics

According to the Nobel prize website, the '[t]he Nobel Peace Prize 2010 was awarded to Liu Xiaobo "for his long and non-violent struggle for fundamental human rights in China".' The Frontline (Volume 27, Number 22, Oct 23-Nov 5, 2010) carries an article by John Cherian on the selection of the Chinese dissident Liu Xiaobo for the 2010 Nobel Peace Prize. Cherian gives a few examples of controversial nobel peace prizes including those to Henry Kissinger, Barack Obama (2009), Menachem Begin (1978). Cherian points out that during the cold war, the "dissidents in Eastern Europe" were given the Nobel Prize. He also states that even the Nobel Prize for Literature has not been without controversy on a similar issue. Do check out the Frontline article from here. An interesting novel, The Prize, by Irving Wallace, is based on the Nobel Prize.