May 27, 2020

The Principles of The Law of Liquidated Damages under Indian Laws

Let us first learn Law relating to Liquidated damages in India. Section 73 in The Indian Contract Act, 1872 Compensation for loss or damage caused by breach of contract.—When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. —When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.” Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract.—When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. —When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.” Explanation.—In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account. Section 74 in The Indian Contract Act, 1872 74 Compensation for breach of contract where penalty stipulated for:- [When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. Explanation. — A stipulation for increased interest from the date of default may be a stipulation by way of penalty.] (Exception) — When any person enters into any bail-bond, recognizance or other instrument of the same nature or, under the provisions of any law, or under the orders of the  [Central Government] or of any  [State Government], gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, […]

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September 14, 2021

WHETHER UNSTAMPED ARBITRATION AGREEMENT IS EXECUTABLE? THE CONCEPT OF SEPARABILITY OF THE ARBITRATION CLAUSE/AGREEMENT FROM THE UNDERLYING CONTRACT

Here we will discuss the following issues: (i) Whether an arbitration agreement contained in an unregistered (but compulsorily registrable) instrument is valid and enforceable? (ii) Whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable? (iii) Whether there is an arbitration agreement between the parties and whether an Arbitrator should be appointed? What is an Arbitration Agreement? Its provided in Section 7 of the Arbitration Act, 1996. It reads as under: Arbitration agreement.—(1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in— (a) a document signed by the parties; (b) exchange of letters, telex, telegrams or other means of telecommunication 1 [including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. Section 17 of Registration Act provides for compulsory Registration: https://indiankanoon.org/doc/561156/ ( click on the link for detailed provision.) Section 49 of the said Act lays down the effect of the non-registration of documents. https://indiankanoon.org/doc/1768154/ ( click on the link for detailed provision.) Section 49 makes it clear that a document which is compulsorily registrable, if not registered, will not affect the immovable property comprised therein in any manner. It will also not be received as evidence of any transaction affecting such property, except for two limited purposes. First is as evidence of a contract in a suit for specific performance. The second is as evidence of any collateral transaction which by itself is not required to be effected by a registered instrument. A collateral transaction is not the transaction affecting the immovable property, but a transaction which is incidentally connected with that transaction. The question is whether a provision for arbitration in an unregistered document (which is compulsorily registrable) is a collateral transaction, in respect of which such unregistered document can be received as evidence under the proviso to section 49 of the Registration Act. English Law Views on distinct identity and separation of Arbitration Clause: Lord Wright in his opinion stated that: “An arbitration agreement is a collateral to the substantial stipulations of the contract. It is merely procedural and ancillary, it is a mode of settling disputes, though the agreement to do so is itself subject to the discretion of the court.” Lord MacMillan in his opinion stated that “It survives for the purpose of measuring the claims […]

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September 11, 2021

UNDER INDIAN LAW ONLY SIGNATORIES TO THE AGREEMENT INVARIABLY PROPER PARTIES TO THE ARBITRATION AGREEMENT? DOES INTERNATIONAL PRINCIPLES  OF “GROUP OF COMPANIES” APPLY TO INDIAN ARBITRATION ?

Provisions of Law discussed: Now let us first see what does Act mean by an Agreement and what is format of an Arbitration Agreement? Arbitration Act,1996 7 Arbitration agreement. — (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in— (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. PARITIES TO ARBITRATION: 8.Power to refer parties to arbitration where there is an arbitration agreement.—1 [(1)A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.] (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof: 2 [Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.] (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. PART II ENFORCEMENT OF CERTAIN FOREIGN AWARDS CHAPTER I  New York Convention Awards Power of judicial authority to refer parties to arbitration.—Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908),a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one […]

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September 9, 2021

EMERGENCY ARBITRATION, WHETHER VALID IN INDIA UNDER ARBITRATION ACT,1996?

This interesting issue came up before Delhi High Court in Amazon.Com Nv Investment vs Future Coupons Private Limited & ors passed on 18 March, 2021 Three important questions arose for consideration before Delhi High Court :- What is the legal status of an Emergency Arbitrator i.e. whether the Emergency Arbitrator is an arbitrator and whether the interim order of the Emergency Arbitrator is an order under Section 17 (1) and is enforceable under 17(2) of the Arbitration and Conciliation Act? Observed: Section 2(8) of the Indian Arbitration Act 1996 expressly provides that where Part I of the Indian Arbitration Act 1996 refers to an ―agreement of the parties‖, such agreement shall include the arbitration rules referred to in the parties’ agreement. In this way, the Indian Arbitration Act 1996 provides that any arbitration rules agreed to by the parties are incorporated into the arbitration agreement. Unless expressly excluded, it is trite that the parties cannot resile from the terms of their arbitration agreement, including their agreement to allow either party to request the appointment of an emergency arbitrator. Further, Section 17 of the Indian Arbitration Act 1996, which empowers an arbitral tribunal to grant interim reliefs, does not preclude or intimate that parties cannot agree to institutional rules which allow recourse to emergency arbitration. In the absence of a mandatory prohibition contained in the Indian Arbitration Act 1996 or public policy constraints, the parties may agree to any arbitral procedure. Whether the Emergency Arbitrator misapplied the Group of Companies doctrine which applies only to proceedings under Section 8 of the Arbitration and Conciliation Act? Held The Indian Arbitration Act 1996, does not preclude parties from agreeing to arbitrate under institutional rules that allow either party to request appropriate reliefs from an emergency arbitrator. The Respondents’ references to the 246th Law Commission Report do not assist its submissions on this issue in a meaningful way. It is just as plausible that Parliament, in its wisdom, did not consider it necessary to amend the Indian Arbitration Act 1996 to make a specific reference to emergency arbitrators because it was legally unnecessary – that is to say, it might have been an instance of the Law Commission making a suggestion to gild the lily. There was no need for statutory recognition if the courts and case law did not find this a problematic issue. Indeed, given the prevalence, even then, in the employment and use of this useful procedure internationally, this is likely to have been the case. It is also noteworthy that the power to appoint an emergency arbitrator is currently recognized in a number of domestic Indian arbitration institution rules, including (a) the Delhi International Arbitration Centre of the Delhi High Court; (b) the Mumbai Centre for International Arbitration; and (c) the Madras High Court Arbitration Centre, all of which include, under their rules, provisions for emergency arbitration and set out the appointment process, applicable procedures, and timing as well as the powers of an emergency arbitrator. Emergency Arbitrators are recognised under the Indian Arbitration Framework The Claimant rightly asserts that the Respondents’ insistence that the notion of emergency arbitration is […]

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August 12, 2021

QUESTION AS TO WHETHER CHILDREN FROM A SECOND MARRIAGE OF A HINDU DIED INTESTED WOULD HAVE A SHARE IN THE ANCESTRAL PROPERTY AN ANALYSIS OF JUDGMENT REFERRED TO LARGER BENCH

To understand the question, we must know the law. Preliminary: Point to be considered about Second Marriage is a person is in relation without taking divorce and is not a widower, than what is stated herein is applicable. If Second Marriage is legal than children born out of wedlock have equal rights that of first marriage. Hindu Law: This is pertaining to Hindu succession and testator who died without making a WILL. Such succession is governed by Hindu Succession Act,1956. Who is Hindu? According to Hindu Succession Act it applies to : (a) to any person, who is a Hindu by religion in any of its forms or developments including a Virashaiva, a Lingayat or a follower of the Brahmo, Prarthana or Arya Samaj; (b) to any person who is a Buddhist, Jaina or Sikh by religion; and (c) to any other person who is not a Muslim, Christian, Parsi or Jew by religion unless it is proved that any such person would not have been governed by the Hindu law or by any custom or usage as part of that law in respect of any of the matters dealt with herein if this Act had not been passed. The  Explanation says.—The following persons are Hindus, Buddhists, Jainas or Sikhs by religion, as the case may be:— (a) any child, legitimate or illegitimate, both of whose parents are Hindus, Buddhists, Jainas or Sikhs by religion; (b) any child, legitimate or illegitimate one of whose parents is a Hindu, Buddhist, Jaina or Sikh by religion and who is brought up as a member of the tribe, community, group or family to which such parent belongs or belonged; (c) any person who is a convert or re-convert to the Hindu, Buddhist, Jaina or Sikh religion. It also applies to the members of any Scheduled Tribe within the meaning of clause (25) of Article 366 of the Constitution unless the Central Government, by notification in the Official Gazette, otherwise directs and  included a person who, though not a Hindu by religion, is, nevertheless, a person to whom this Act applies by virtue of the provisions contained in this section. Pondicherry: this Act shall apply to the Renouncants of the Union territory of Pondicherry.” [Regulation 7 of 1963, sec. 3 and First Sch. (w.e.f. 1-10-1963).] (a) “agnate”—one person is said to be an “agnate” of another if the two are related by blood or adoption wholly through males; (c) “cognate” — one person is said to be a cognate of another if the two are related by blood or adoption but not wholly through males; (d) the expression “custom” and “usage” signify any rule which having been continuously and uniformly observed for a long time, has obtained the force of law among Hindus in any local area, tribe, community, group or family: Provided that the rule is certain and not unreasonable or opposed to public policy; and Provided further that in the case of a rule applicable only to a family it has not been discontinued by the family; (e) “full blood”, “half blood” and “uterine blood”— (i) two persons are said to be […]

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August 9, 2021

ABOUT STRIKING DOWN OF 97TH AMENDMENT TO THE CONSTITUTION

Part IXB under the chapter heading ‘The Co-operative Societies’. The Constitution 97th Amendment Act was passed by the requisite majority of the Lok Sabha on 27.12.2011 and the Rajya Sabha on 28th December,2011. The Presidential assent to the aforesaid Amendment followed on 12th January, 2012 and the said Amendment was published in the Official Gazette of India on 13th January,2012, coming into force with effect from 15th February,2012. The 97th Constitutional Amendment was challenged in the matter of Rajendra N Shah v. Union of India 2013 (2) G.L.R.  1698    and the Gujarat High Court allowed the said Public Interest Litigation by declaring that the Constitution 97th Amendment Act, 2011 inserting part IXB containing Articles 243ZH to 243ZT is   ultra vires the Constitution of India for not taking recourse to Article 368(2). The important question raised in these petitions and decided by a division bench of the Gujarat High Court by its judgment dated 22nd April,2013 is whether Part IXB is non est for want of ratification by half of the States under the proviso to Article 368(2). The  judgment of the High Court has declared that the said constitutional amendment inserting Part IXB is ultra vires the Constitution of India for want of the requisite ratification under Article 368(2) proviso, which however will not impact amendments that have been made in Article 19(1)(c) and in inserting Article 43B in the Constitution of India. That is formation of Associations and States endeavor to promote voluntary associations under Directive Principles. The amendment was carried out in The Maharashtra Co-operative Societies Act, 1961 in consonance with the provisions of 97th Constitutional Amendment which came into effect from 12th January, 2012. The Maharashtra Co-operative Societies Amendment Act came into effect from 13th August, 2013. New Model bye-laws came into force from September 2014, duly approved by the Commissioner for Co-operation and Registrar, C.S., Maharashtra State, Pune. The overall enforcement and application of the old Bye-Laws are the same with certain modifications to be in consonance and in agreement of the 97th amendment to the Constitution of India. NOW LET US SEE GIST OF THE AMENDMENTS UNDER 97th CONSTITUTIONAL AMENDMENTS : The Constitution of India is amended by 97th Constitution of Amendment and inserted Part IXB to the Constitution of India, a Chapter relating to the Co-operative Societies. Article 243ZH to 243ZT is inserted by this Amendment Act of 2011 with effect from 15th February 2012. A Chapter defines various terms. Authorized person in Article 243ZH(a). Article 243ZH(b) defined the terms Board and it means the Board of Directors or the Governing body of the Society by whatever name called to whom the control of management of the affairs of the Society is entrusted. Article 243ZH(c) defined the terms Co-operative Society and it means a Society registered or deemed to be registered under any law relating to the Co-operative Societies for the time being in force. Article 243ZH(d) defined the terms Multi-state Co-operative Society and it means whose object is not confined to one State and is registered or deemed to be registered under the law for the time being in force relating to such […]

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