Monthly Archives: November 2014

Arbitration Agreement —Inoperative or Incapable of Being Performed

Redfern and Hunter on International Arbitration (5th Edition) published by the Oxford University Press has explained the meaning of these words “inoperative or incapable of being performed” used in the New York Convention, thus:
“At first sight it is difficult to see a distinction between the terms ‘inoperative’ and ‘incapable of being performed’. However, an arbitration clause is inoperative where it has ceased to have effect as a result, for example, of a failure by the parties to comply with a time-limit, or where the parties have by their conduct impliedly revoked the arbitration agreement. By contrast, the expression ‘incapable of being performed’ appears to refer to more practical aspects of the prospective arbitration proceedings. It applies, for example, if for some reason it is impossible to establish the arbitral tribunal.”
Albert Jan Van Den Berg, in an article titled “The New York Convention, 1958—An Overview” published in the website of ICCA ( referring to Artcile II(3) of the New York Convention, states:
“The words ‘null and void’ may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue influence.
The word ‘inoperative’ can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties.
The words ‘incapable of being performed’ would seem to apply to those cases where the arbitration cannot be effectively set into motion. This may happen where the arbitration clause is too vaguely worded, or other terms of the contract contradict the parties intention to arbitrate, as in the case of the so-called co-equal forum selection clauses. Even in these cases, the courts interpret the contract provisions in favour of arbitration.”
The book Recognition and Conferment of Foreign Arbitral Awards: A Global Commentary on the New York Convention by Kronke, Nacimiento, et al (ed.) (2010) says:
“Most authorities hold that the same schools of thought and approaches regarding the term null and void also apply to terms inoperative and incapable of being performed. Consequently, the majority of authorities do not interpret these terms uniformly, resulting in an unfortunate lack of uniformity.
The term inoperative refers to cases where the arbitration agreement has ceased to have effect by the time the court is asked to refer the parties to arbitration. For example, the arbitration agreement ceases to have effect if there has already been an arbitral award or a court decision with res judicata effect concerning the same subject-matter and parties. However, the mere existence of multiple proceedings is not sufficient to render the arbitration agreement inoperative. Additionally, the arbitration agreement can cease to have effect if the time-limit for initiating the arbitration or rendering the award has expired, provided that it was the parties’ intent no longer to be bound by the arbitration agreement due to the expiration of this time-limit.
Finally, several authorities have held that the arbitration agreement ceases to have effect if the parties waive arbitration. There are many possible ways of waiving a right to arbitrate. Most commonly, a party will waive the right to arbitrate if, in a court proceeding, it fails to properly invoke the arbitration agreement or if it actively pursues claims covered by the arbitration agreement.”
Thus the arbitration agreement does not become “inoperative or incapable of being performed” where allegations of fraud have to be inquired into and the court cannot refuse to refer the parties to arbitration as provided in Section 45 of the Arbitration and Conciliation Act, 1996 on the ground that allegations of fraud have been made by the party which can only be inquired into by the court and not by the arbitrator. N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 and Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406 were decisions rendered in the context of domestic arbitration and not in the context of arbitrations under the New York Convention to which Section 45 of the Act applies. In the case of such arbitrations covered by the New York Convention, the court can decline to make a reference of a dispute covered by the arbitration agreement only if it comes to the conclusion that the arbitration agreement is null and void, inoperative or incapable of being performed and not on the ground that allegations of fraud or misrepresentation have to be inquired into while deciding the disputes between the parties. World Sport Group (Mauritius) Ltd. V. MSM Satellite (Singapore) PTE Ltd., (2014) 11 SCC 639.

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Public Interest Litigation – Meaning of

Black’s Law Dictionary defines public interest as follows:
“Public Interest.—Something in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected. It does not mean anything so narrow as mere curiosity or as the interests of the particular localities, which may be affected by the matters in question. Interest shared by citizens generally in affairs of local, State or National Government.”
Advanced Law Lexicon defines ‘Public Interest Litigation’ as under:
“the expression ‘PIL’ means a legal action initiated in a Court of Law for the enforcement of public interest or general interest in which the public or a class of the community has pecuniary interest or some interest by which their legal rights or liabilities are affected.”
The Council for Public Interest Law set up by the Ford Foundation in USA defines “Public Interest Litigation” in it’s Report of Public Interest Law, USA, 1976, as follows:
“Public interest law is the name given that has recently been given to efforts providing legal representation to previously unrepresented groups and interests. Such efforts have been undertaken in the recognition that ordinary market place for legal services fails to provide such services to significant segments of the population and to significant interests. Such groups and interests include the proper environmentalists, consumers, racial and ethnic minorities and others.”
The Apex Court in the case of People’s Union for Democratic Rights v. Union of India, (1982) 3 SCC 235, has observed that the public interest litigation is a co-operative or collaborative effort by the petitioner, the State or Public Authority and the Judiciary to secure observance of Constitutional or basic human rights, benefits and privileges upon the poor, downtrodden and vulnerable sections of the Society.
Public interest litigation means a litigation to espouse Public Interest. Hon’ble Supreme Court in Janta Dal v. H.S. Chowdhary, AIR 1993 SC 892, held that ‘Public Interest’ does not mean mere curiosity. Prakash Chand Srivastav v. State of U.P., 2014 (3) ESC 1665.

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Appointment—Regularisation of

The Constitution Bench in Secretary, State of Karnataka v.Uma Devi, (2006) 4 SCC 1, has held that illegal appointments cannot be asked to be regularized as that would amount to violating the fundamental right of equal opportunity of employment to those who have been denied such opportunity. The Constitution Bench decision has overruled dozens of earlier decisions taking a view otherwise so as to show sympathy in favour of those who got or managed their appointments illegally, i.e., without complying the requirement of equal opportunity of employment to all others, came to the office on account of their individual resources and managing continuance for quite some time or long time, then claim a substantive right on the basis of long tenure, they have managed to continue. In other words, the incumbent comes to the office by virtue of a pick and choose method, usurps office by back door or whatever other term one may use, despite obviously it being short of compliance of requirement of Article 16(1) of the Constitution of India, but having maintained such benefit to continue for quite some time which normally has the support of appointing authorities also, the beneficiary comes to claim a sense of sympathy on the basis of such long continued usurpation of office. In other words, a violator of law claims a substantive right for having violated law continuously for quite a long time with regard to a public office.
In the matter of appointment there is no principle of adverse possession but a plea somewhat similar thereto many a times is raised that since one has continued to work for quite long time, now he should be allowed to stay in the office for rest of tenure otherwise his family would suffer. A situation is created where sympathy is sought not in favour of victims, i.e., those who were denied right of equal opportunity of employment but in favour od those who have violated law, contravened it, breached it with impunity and have continued to do so for quite some time, and now, boldly and blatantly claim a kind of right to retain such benefit of breach of law, for all times to come, and for that purpose, various pleas in the name of equity, sympathy, compassion etc., are raised and pleaded. Many a times, such claim has found favour in the Courts of Law. Fortunately, the Constitution Bench, after having a retrospect of all earlier authorities, has taken a clear stand against such kind of favour shown to those who have come in public office, by denying right of equal opportunity to others. The Court in unequivocal terms has observed that any favour shown to such violators would be a misplaced sympathy.
Regularisation Rules, if any, is an attempt to give a cover to such illegal appointments and therefore, may have to be tested on the anvil of Constitutional validity under Article 14 and 16(1) of the Constitution. Devi Prasad Misra v. State of U.P., (2014) 3 UPLBEC 2436.

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Filed under Employment Law, Regularisation of Appointment

Shop and Establishment

As per Concise Oxford English Dictionary, 11th Edition (Revised), the term “shop” has been given the following meaning:
Shop.—a building or part of a building where goods or services are sold.
According to Wharton’s Law Lexicon, 14th Edition (1993), a “shop” has been said to mean: a place where things are kept for sale, usually in small quantities, to the actual consumers.
According to Black’s Law Dictionary, 7th Edition (1999), the term “shop” has been stated to mean: A business establishment or place of employment; a factory, office or other place of business.”
According to Words and Phrases, Permanent Edition, Vol. 39, the term “shop” has been stated to mean, inter alia, the following:
“The word shop means a room or building in which the making, preparing, or repairing of any article is carried on or in which any industry is pursued; the place where anything is made; the producing place or source. State v. Sabo, 140 NE 499: 108 Ohio St 200 (1923)
Worcester defines a shop as a place, building or room in which things are sold; a store. Salomon v. Pioneer Coop. Co., 21 FLA 374: 58 Am Rep 667 (1885).
According to Corpus Juris Secundum, Vol. LXXX, the term shop has been explained as follows:
“The word shop appears to be derived from the old high German ‘schopf’ or ‘scopf’which meant a building without a front wall. It is a term of various significance, and has many definitions, and it may have different meanings when used with different texts. In it’s popular sense, as well as it’s legal meaning, the term shop is not confined to a store, and it may include both a store and a workshop.
The word shop may denote a place where goods are sold, a place, building or room in which things are sold and expressing this concept, the term is defined as meaning a place kept and used for the sale of goods; a place where goods are sold for retail.”
From the above it can be said that a “shop” is a place of business or an establishment where goods are sold for retail. However, it may be noted that the definitions as given in the dictionaries are very old and may not reflect, with complete accuracy, what a “shop” may be referred to as in the present day.
In Hindu Jea Band v. ESI Corporation, (1987) 2 SCC 101, it is observed that a “shop” would be a place where services are sold on a retail basis. In International Iron Ore and Fertilizers (India) (P) Ltd. V. ESI Corporation, (1987) 4 SCC 203, the Hon’ble Apex Court stated that a “shop” would be a place where the activities connected with buying and selling of goods are carried on. In Cochin Shipping Company v. ESI Corporation, (1992) 4 SCC 245, the Court observed that a “shop” must be held to be a place where commercial activity of buying and selling of merchandise takes place. In ESI Corporation v. R.K. Swamy, (1994) 1 SCC 445, the Court extended the meaning of a “:shop” to include even sale of services.
Therefore, certain basic features of a “shop” may be culled out from the above. It can be said that a “shop” is a business establishment where a systematic or organized commercial activity takes place with regard to sale or purchase of goods or services and includes an establishment that facilitates the above transaction as well.
In view of the fact that an “establishment” has been found to be a place of business and further that a “shop” is a business establishment, it can be said that a “shop” is indeed covered under, and may be called a subset of, the term “establishment”. Royal Western India Turf Club Limited v. ESI Corporation, (2014) 9 SCC 657.

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Horse Racing – Is Entertainment Business

As per Concise Oxford English Dictionary, 11th Edition (Revised), the word “entertainment” has been assigned the following meaning:
“entertainment. – the action of providing or being provided with amusement or enjoyment>and event or performance designed to entertain.”
According to Black’s Law Dictionary, 7th Edition (1999), the term “entertain” means, inter alia:
“entertain.-(2) To amuse or please”
According to Words and Phrases, Permanent Edition, Vol. 14-A, the term “entertainment” has been held to mean, the following:
“Entertainment denotes that which serves for amusement and ‘amusement’ is defined as a pleasurable occupation of the senses or that which furnishes it, as dancing, sports or music. Young v. Broadwater County High School, 4 P 2d 725 : 90 Mont 576 (1931).
According to Corpus Juris Secundum, Vol. XXX, the term “entertainment” has been explained as follows:
“Entertainment.—The second meaning of the term is a diverting performance, especially a public performance, as a concert, drama or the like; a source or means of amusement; instruction or amusement afforded by anything seen or heard, as a spectacle, a play etc.; mental enjoyment or that which amuses or diverts; that which serves for amusement; also the act of providing gratification or diversion. The term has been held to include recreational activities, such as games, sports plays and dancing.”
Therefore it can be safely concluded that “entertainment” is an activity that provides with amusement or gratification. Further, it would include public performances, including games and sports.
As observed in K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226 that:
“Horse Racing is an organized institution. Apart from a sport, it has become a huge public entertainment business.”
Therefore, it can be said that horse racing is indeed a form of entertainment. Bangalore Turf Club Ltd. V. Regional Director, ESI Corporation, (2014) 9 SCC 657.

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Expression – Relative of the Husband

The expression “relative of the husband” has been used in Section 498-A I.P.C. While interpreting the said expression, the Hon’ble Apex Court in U. Suvetha v. State, (2009) 6 SCC 757 held it to mean a person related by blood, marriage or adoption. In the absence of any statutory definition, the term ‘relative’ must be assigned a meaning as is commonly understood. Ordinarily it would include father, mother, husband or wife, son, daughter, brother, sister, nephew or neice, grandson or granddaughter of an individual or the spouse of any person. The meaning of the word ‘relative‘ would depend upon the nature of the Statute. It principally includes a person related by blood, marriage or adoption.
The expression “relative of the husband” further came up for consideration in Vijeta Gajra v. State, (2010) 11 SCC 618 and while approving the decision in U. Suvetha v. State, (2009) 6 SCC 757, it was held that the word relative would be limited only to the blood relations or the relations by marriage. It was held as under:
“Relying on the dictionary meaning of the word ‘relative’ and further relying on P. Ramanatha Aiyar’s Advanced Law Lexicon (Vol. 4, 3rd Edn.), the court went on to hold that Section 498-A IPC being a penal provision would deserve strict construction and unless a contextual meaning is required to be given to the Statute, the said Statute has to be construed strictly. On that behalf the court relied on the judgment in T. Ashok Pai v. CIT, (2007) 7 SCC 162. A reference was made to the decision in Shivcharan Lal Verma v. State of M.P., (2007) 15 SCC 369. After quoting from various decisions, it was held that reference to the word ‘relative’ in Section 498-A IPC would be limited only to the blood relations by marriage.”
It is a well known rule of construction that when the legislature uses the same words in different parts of the Statute, the presumption is that those words have been used in the same sense, unless displaced by the context. Hence, the expression “relative of the husband” in Section 304-B IPC would mean such persons, who are related by blood, marriage or adoption. State of Punjab v. Gurmit Singh, (2014) 9 SCC 632.

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Appointment of Arbitrator – Limitation

The time limit for filing a petition for appointment of an Arbitrator under Section 11 of the Act has not been provided either under the Act or under the Limitation Act specifically. The request to the Chief Justice or his designate by way of application would fall within the definition of “application” contained in Section 2(b) of the Limitation Act, 1963. Therefore, the Article 137 of the Limitation Act comes into play and the limitation for seeking appointment of an Arbitrator under Section 11 would be three years from the date when the right to apply accrues.
The observations of the Hon’ble Apex Court in S.B.P. and Company v. Patel Engineering Limited, (2005) 8 SCC 618, as explained and clarified in Indian Oil Corporation Ltd. V. S.P.S. Engineering Limited, (2011) 3 SCC 507, makes it clear that the Chief Justice or his designate is competent to decide if the claim sought to be resolved by arbitration is stale or dead or is long time barred though it is not imperative upon him to enter into the said exercise. It can be left to be decided by the Arbitral Tribunal if it appears to be slightly overtime. However, where the claim is evidently and patently dead or long time barred and does not involve entry into disputed questions of fact or evidence, the court may refuse it to refer to arbitration. Thus, it is only in case where there is a genuine dispute regarding limitation and the claim is slightly beyond time that the matter should be left to be adjudicated by the Arbitral Tribunal but not where the claim is apparently barred by limitation. Sureka International v. Union of India, 2014 (5) AWC 5106.

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Expression Void – Has Many Facets

The expression void has many facets. One type of void acts, transactions, decrees are those which are wholly without jurisdiction, ab initio void and for avoiding the same no declaration is necessary, law does not take any notice of the same and it can be disregarded in collateral proceeding or otherwise. The other type of void act, e.g., may be transaction against a minor without being represented by a next friend. Such a transaction is a good transaction against the whole world. So far as the minor is concerned, if he decides to avoid the same and succeeds in avoiding it by taking recourse to appropriate proceeding, the transaction becomes void from the very beginning. Another type of void act may be which is not a nullity but for avoiding the same a declaration has to be made. Voidable act is that which is a good act unless avoided, e.g., if a suit is filed for a declaration that a document is fraudulent and/or forged and fabricated, it is voidable as the apparent state of affairs is the real state of affairs and a party who alleges otherwise is obliged to prove it. If it is proved that the document is forged and fabricated and a declaration to that effect is given, a transaction becomes void from the very beginning. There may be a voidable transaction which is required to be set aside and the same is avoided from the day it is to be set aside and not any day prior to it. In cases where legal effect of a document cannot be taken away without setting aside the same, it cannot be treated to be void but would be obviously voidable. Ganga Prasad v. Ram Das, 2014 (5) AWC 4508.

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Filed under Civil Law, Voidable

Arbitration – Jursidiction for Raising a Challenge

A perusal of Section 42 of the Arbitration and Conciliation Act, reveals a clear acknowledgement by the Legislature, that the jurisdiction for raising a challenge to the same arbitration agreement, arbitration proceeding or arbitrable award, could most definitely arise in more than one court simultaneously. To remedy such a situation Section 42 of the Arbitration Act mandates, that the court wherein the first application arising out of such a challenge is filed, shall alone have the jurisdiction to adjudicate upon the dispute(s), which are filed later in point of time. The above Legislative Intent must also be understood as mandating, that disputes arising out of the same arbitration agreement, arbitral proceeding or arbitral award, would not be adjudicated upon by more than one court, even though jurisdiction to raise such disputes may legitimately lie before two or more courts. State of Maharashtra v. Atlanta Ltd., (2014) 11 SCC 619.

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Non-Arbitrable Dispute – Referred to an Arbitrator

Arbitration arises from a contract and unless there is a specific written contract, a contract with regard to arbitration cannot be presumed. Section 7 (3) of the Arbitration and Conciliation Act clearly specifies that the contract with regard to arbitration must be in writing. If a non-arbitrable dispute is referred to an arbitrator and even if an issue is framed by the arbitrator in relation to such a dispute, there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the arbitrator. It is not open to the arbitrator to decide the issues which are not arbitrable and the award, so far as it relates to disputes regarding non-arbitrable disputes is concerned, is bad in law. Harsha Constructions v. Union of India, (2014) 9 SCC 246.

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