• Marbury v. Madison

    By P.G. Rajagopalan, Advocate, Ernakulam

    25/08/2008

    Marbury v. Madison

    (By P.G. Rajagopalan, Advocate, Ernakulam)

     

    Lawyers and Judges quote, Chief Justice Marshall in Marbury v. Madison: “It is, emphatically, the province and duty of the judicial department, to say what the law is. Those who apply this rule to particular cases, must of necessity expound and interpret that rule. If two laws conflict with each other, the courts must decide on the operation of each. So, if a law be in opposition to the constitution; if both the law and the constitution apply to a particular case, so that the court must either decide the case, conformable to the law, disregarding the constitution, or conformable to the constitution, disregarding the law, the court must determine which of these conflicting rules govern the case; this is of the very essence of judicial duty. If then, the courts are to regard the constitution and the constitution is superior to any ordinary act of the legislature, the constitution, and not such ordinary act, must give the case to which they both apply” and state that this is the case in which the United States Supreme Court for the first time held the right of judicial review and that the act of legislature and executive can be invalidated by the courts. But most of the lawyers and judges might not have read the decision as such or known that political intrigue, historical setting and bias of the Judge involved in the case. Most of them might have read the passage from either text books or decisions which quoted this passage.

     

    Marshall was the Secretary of States, of the President John Adams. Marbury was appointed by out going President at the end of his term in office; he was one of the group of Federalists to whom judicial position was given as a political patronage. Marshall as Secretary of States affixed the seal of the United States, but the warrant was not delivered due to the extreme hurry in the office of the Secretary of States. Jefferson won a land slide victory over John Adams. Jefferson’s Secretary of States, Madison took possession of the office. John Adams nominated Marshall as Chief Justice in January 1801 and took his oath of office on 4-2-1801. Marshall continued to act as Secretary of States through March 3, 1801, to the end of Adam’s term (See Gunther: Constitutional Law, 1985 Ed., Ch.I, S.1 page 10 to 11) . The motion for writ of mandamus was supported by an affidavit of James Marshall, brother of the Chief Justice Marshall.

     

    It is to deliver this controversial warrant appointing Marbury as District Federal Judge, the Supreme Court was moved on the original side under a congressional legislation, the Judiciary Act of 1789.

     

    Jefferson was of the view that the Courts have no jurisdiction to issue a mandamus against President or his Secretary and no law can be invalidated by the Supreme Court. The position of the Supreme Court at that time was weak when compared with Executive and Legislature. John Jay, the first Chief Justice resigned the post to contest for election as Governor of New York. Alexander Hamilton declined the post to renew his law practice and political activities. These incidents show the low prestige of the U.S. Supreme Court at that time. Therefore, if a mandamus was issued it would not have been carried out; and the Supreme Court would have emerged as fatally wounded from a direct clash with the Executive. Marshall was between the horns of a dilemma. He escaped through the horns of dilemma advoitly and that was considered as a political victory by some persons.

     

    The first part of the Judgment deals with the question whether a mandamus could be issued against Secretary of States and if so whether this is a fit case for issuance of the mandamus. Marshall asserted that a mandamus could be issued and this is a fit case for issuance of such mandamus. Then he took up the point whether the U.S. Supreme Court has got original jurisdiction in the matter under S.13 of the Judiciary Act, 1789. Marshall held that Judiciary Act which empowers original jurisdiction is unconstitutional. The scheme of United States Constitution does not empower the Congress to confer an original jurisdiction and hence it is invalid. The judicial review was invoked to refuse the relief which Marbury had sought for. Obviously Marbury would not have contended for the position. Madison did not enter appearance and show cause against issuance of mandamus. Thus Marshall while asserting the judicial review of Legislative and executive action declined to give relief on the ground that the Supreme Court has no original jurisdiction. Jefferson could not have complained because no mandamus was issued and at the same time court has asserted the right of judicial review. Bernard Schwartz in his Tagore Law Lecturer, Some Makers of American Law, says: “From a strategic point of view, a better case could not have been chosen for declaration of the power which has ever since been considered the palladium of the American Constitutional structure. Since the Courts’ decision denied relief, there was nothing to execute, nothing which would bring on a direct conflict with Jefferson Administration. More than that, the assertion of the greatest of all judicial powers was made in a case that ostensibly denied authority to the court.” 

     

    The judicial review of Legislative and Executive action is firmly established in American Constitutional jurisprudence. As far as India is considered the question is only academic, the Constitution of India recognises the judicial review by empowering the Supreme Court and the High Courts under Arts.32 and 226 of the Constitution such a right.

     

    But then, the lucid and clear exposition of law was appreciated by one and all. It is not as if that the judiciary was invalidating legislative action for the first time, in colonial countries local legislations were struck down as opposed to Parliamentry legislation of the United Kingdom. It may be interesting to note Madison who introduced Bill of Rights as amendment to the constitution observed “independent tribunals of Justice will consider-themselves in a peculiar manner the guardian of those right”. Alexander Hamilton who took active part in framing the Constitution and getting it ratified wrote: “The interpretation of the law is the proper and peculiar province of the Courts. A Constitution is, infact, and must be regarded by the Judges as a fundamental law. It therefore belongs to them to ascertain its meaning as well as the meaning of any particular act proceeding from the legislative body. If there should happen to be an irreconcilable variance between the two, that which has the superior obligation and validity ought, of course, to be preferred to the statute, the Constitution ought to be preferred to the statute, the intention of the people to the intention of their agents”. (See Gabriel: Selections from Fedaralist Papers (1954) Ed). Bernard Schwartz in his Tagore Law Lecture gave tribute to foresight of Marshall and said: “Had Marshall not confirmed review power at the outset in his magisterial manner, it is entirely possible it would never have been insisted upon, for it was not until 1857 that the authority to invalidate a federal statute was not exercised by the U.S.Supreme Court”. A later President, James A.Garfield said: He (Marshall) found a skeleton and he clothed it with flesh and blood”.

     

    Books consulted:-

    1)The Justices of the United States Supreme Court 1789 to 1969. Their lives and Major opinions. Vol.1.

    2)Bernard Schwartz. Some Makers of American Law. (Tagore Law Lectures).

    3)Gunther: Constitutional Law. 1985 Ed.

    4)Ronald D.Rotunda: Modern Constitutional Law Cases and Notes. 3rd Ed. 1990.

    5)Hamilton, Madison and Jay on the Constitution (Selections from the Federalist Paper; Edited by Ralp H.Gatried Liberal Art Press. 1954. 

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  • My First Appearance

    By T.P. Kelu Nambiar, Sr. Advocate, High Court, Ernakulam

    11/08/2008
    T.P. Kelu Nambiar, Sr. Advocate, High Court, Ernakulam

    My First Appearance

    (By T.P. Kelu Nambiar, Senior Advocate, High Court of Kerala)

     

    I  find myself with something to tell you at the age of 82 (pushing),  from my ‘antique collection’. Let me tell you of a biginner’s luck, a story within a tale. Let me tell you of a Judge who did not maul a raw junior Advocate; of a Judge who never suffered from shoot-out phobia;  of a Judge who never was a repellant of junior Lawyers; of a Judge who was not a whip-cracking adventurer; of a Judge who never indulged in harsh response to counsel’s arguments; who never was a “finger-happy’ Judge, who never issued a gag order on the advocate; who never allowed any ‘special protocol’ audience to any lawyer.

     

    I was enrolled as Advocate, in the High Court of Judicature at Madras, on the 19th day of July 1954, before the Division Bench,  comprising the Hon’ble Mr .Justice P.V.Rajamannar, Chief Justice, (under whose tenure as Chief Justice, the Madras High Court’s foot-print expanded),  and the Hon’ble Mr.Justice N.Rajagopala Aiyangar, later, Judge of the Supreme Court of India.

     

    On the evening of that day, my Senior, Advocate Sri. Ayilliath Achuthan Nambiar, entrusted me with a case file of a Civil Miscellaneous Appeal, and said: 

     

    “This C.M.A. is posted for admission hearing tomorrow before Mr. Justice N.Somasundaram. You appear, You may study the facts of the case. But don’t you worry. You may not have to argue on merit. When the case is called, stand up and submit:

     

    “My Lord, this appeal is against an order of remand”. That’s all.  It will be admitted,  and notice and interim stay ordered. You may not find any difficulty”.

     

    Was it that simple to my complicated and confused mind and shivering frame at that stage. To my Senior, a lawyer with a price band, advocasy was like piano to Beethoven.    My Senior further explained and told me that in those days,  in the Madras High Court,  all CMAs, under S.104 read with O.43 R.1 (u), of the Code of Civil Procedure, were automatically admitted and stay ordered.  I understood the point, but could not unshackle the inner paradox.

     

    I studied the brief in the night. The simple facts and features of the case looked simple and straight-forward.  Moreover, it was not necessary, according to my Senior, to narrate them at the admission stage. But the second part was difficult;  that is,  to remember to say: “My Lord, this appeal is against an order of remand”. I repeated it several times almost the whole night, to reduce it to a cilche. I felt like preparing for a quiz Olympiad. The C.M.A. was my first sleep-depriving brief.

     

    The next day:

    I was seated in the front row of Court VI. I felt as though I was waiting to ascend  Mount M.K. Nambiar. The C.M.A. was item number 13 in the Cause List for admission.  I was afraid of No.13,  just as I was of Friday and the black cat. Our office para-legal assistant Sri.Krishnan, experienced, efficient and intelligent, was standing behind me. By the time ten items were over, my mouth was becoming drier and drier, and I felt,   if I were to stand up, my legs would be tottering. I felt like living dangerously. I was wondering why I chose to be a lawyer.

     

    From behind me, Sri.Krishnan said: “This is our case”. I stood up, feeling as if the ground beneath my feet was ablaze, and said:  ‘My Lord, this appeal is against an order of remand’. Mr. Justice Somasundaram: “Remand ?,  you said. Yes. Notice and interim stay”.    That was my big moment; my first tryst with advocacy, which, my Senior used to say, is wireless connectivity.

     

    What a stupendous success. I came out of the court hall with Sri.Krishnan. Outside, Sri.Krishnan told me:  “Good. But, thank God, the Judge did not hear you fully.    The Judge only heard the last word  ‘remand’, because no other word was audible to him. But, I heard you say:  “My Lord, this order is against an appeal of remand”. Don’t you worry. I shall not disclose this to the Senior”.

     

    Thus ended the bits and pieces of my first advocacy. The order in the CMA was a great escape for me.

     

    This aged lawyer still continues, not for pride alone;  he still enjoys the colours of his sound. He remembers this day that age. In those days there was quality co-operation between the Bench and the Bar. The Bar and the Bench represented all virtues. The legal profession was not an out-post of judiciary. In that age, there was no import of the so-called ‘enriched advocacy’; advocacy was not commercial gold dust. In those days, there was no privileged devotees of Judges; and advocacy was not shajan on stringe. Everybody knew that the greatest idols were made of clay. Today, every lawyer holds a glass half-full only. Nobody remembers that advocacy is an open-book examination, not memorised essays. A lawyer today is an Internet Explorer. I hold the view that class-room black-board is far better than desktop, laptop, or cell-top culture. A lawyer today adopts sandwich method of advocacy. These are days of ‘missile’ advocacy, by brief-harvesting lawyers.   Nobody seems to realise that advocacy is not  ‘Vodafone ta ka dhi mi “.

     

    This writer continues, from beginner, feeling as above, to ‘day trader’,  as now, feeling pride that he holds certificates of Graduation arid Post-Graduation,  in Arts and Law,  signed by no less a person than Vice-chancellor (of the then University of Madras) Dr.Arcot Lakshmanaswamy Mudaliar, and had the privilege of appearing before that great Chief Justice, Chief Justice Sri.P.V.Rajamannar,  of the High Court of Judicate at Madras. With this huge ago, and contentment that I have done more than expected, and got more than expected, I live on, not caring to know ‘how old is too old’, and how safe is the next generation legal profession. Why not I enjoy a holiday everyday. Would anybody tell me ‘how much is too much’; and could I, a lawyer,  have a life beyond labels. 

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  • The Full Bench Decision in Southern Structurals Ltd. v. K.S.E. Board, 2008 (1) KLT 105 (F.B.) So far as it overrules Afcon’s case, 2007 (1) KLT 196 Requires Reconsideration

    By K.L. Varghese, Advocate, Ernakulam

    28/07/2008
    K.L. Varghese, Advocate, Ernakulam

    The Full Bench Decision in Southern Structurals Ltd. v. K.S.E. Board, 

    2008 (1) KLT 105 (F.B.) So far as it overrules Afcon’s case,

     2007 (1) KLT 196 Requires Reconsideration

     

    (By K.L. Varghese, Advocate, Ernakulam)

     

    In Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (2007 (1) KLT 196) a learned single Judge of our High Court (Hon’ble Mr. Justice R.Basant) had occasion to consider the question “does the law, even after the introduction of amended S.89 into the Code of Civil Procedure permit, tolerate or enable the court to compulsorily refer the parties to arbitration even without their consent and against  their volition?”. The answer was in the affirmative, of course with a caution against indiscreet references. 

     

    The judgment running about 75 paragraphs spanning 32 pages of KLT, though dictated in the open court, was after argument on number of days and lot of research on a point without much of precedents.   Before narrating the facts and expressing own opinion, the learned Judge in para. 2 had put in black and white thus, “When the question was raised initially ……...,  it was considered ridiculous and blasphemous that the court can even think of having such a  power.  Having heard the counsel in detail, I am satisfied that the question deserves to be considered in depth”.   The encomium expressed in the penultimate paragraph of the judgment makes out that the learned Judge had applied his mind. Moulding ten contentions out of the many scattered ones presented and with an analytical study of the subject with reference to two Law Commission reports, Justice Malimath Committee report and almost century old reference from Mustill & Boyd on Commercial Arbitration referring to Common Law Procedure Act then in force in England apart from the decisions of the Supreme Court and our High Court then available and considering the background compelling the Parliament to amend Civil Procedure Code and reincorporate S.89 into C.P.C. and so on, would definitely evince that it was after much deliberations at the Bench and  loud thinking, the learned Judge has come to his conclusion. However, the matter has been taken to the Supreme Court and is now pending consideration in S.L.P. (C) No. 760 of 2007. In the meanwhile, the said decision was referred to in Southern Structurals Ltd. v. K.S.E. Board (2008 (1) KLT 105 (F.B.)) before the Full Bench probing into the question whether “a Writ Petition can be maintained to enforce arbitration without arbitration clause”, notwithstanding the fact that the decision in Afcon’s case is purely on the scope of S.89 of C.P.C. and the question raised was “whether S.89 does permit, tolerate or enable the court to compulsorily refer the parties to arbitration even without their consent and against their volition”.  The Full Bench has overruled the decision in Afcon’s case. In all sense of humility I should say, a glance at the Full Bench decision shows that regarding Afcon’s case there was no proper deliberations before the Court on the point and it seems, the Court  was not aware that the said decision had been pending consideration by the Supreme Court.  

     

    When I read the notification of the Civil Procedure (Alternative Dispute Resolution) Rules, 2008 which appears in 2008 (2) KLT Kerala Statutes P. 17. I thought, I have to share my views with others, since I strongly feel that the Full Bench decision, so far as it overrules Afcon’s case, requires reconsideration.

     

    In R.5 of the Civil Procedure (Alternative Dispute Resolution)  Rules, 2008, with regard to the procedure for reference by the court to the different modes of settlement, under sub-rules (f) and (g) arbitration is considered as one of the modes of settlement of the disputes. Sub-rule (f) stipulates that ‘where there are more than two sets of parties having diverse interests and some of them opt and agree to resolve the dispute between them by arbitration ……….  they shall apply to the court within 30 days of the direction  under cl.(b) of R.3 (where under court has to formulate the terms of settlement, give them to the parties to submit their observations and reformulate the terms of a possible settlement and direct the parties to opt for one of the modes of settlement of disputes outside the Court)  and court shall, within 30 days refer the matter for settlement in the manner agreed by the parties’, if the court is of opinion that it is possible.  Sub-r.(g) which follows and has much significance is extracted hereunder which is self speaking:

     

    “(g) Where there is no consensus among the parties as to the mode of settlement, the court shall, after affording to the parties an opportunity of hearing, persuade the parties to arrive at a consensus as to the mode of settlement and if the parties are not able to arrive at a consensus as to the mode of settlement, consider whether the matter can be referred for decision by arbitration, if one of the parties is willing for settlement by arbitration as provided under cl.(f) above”.    (emphasis supplied)

     

    Coming back to Afcon’s case, not much of intellectual exercise is required to understand that the pith and substance of the decision is in tune with the spirit of sub-rr.(f) and (g) of R.5 of Civil Procedure (Alternative Dispute Resolution) Rules, 2008.

     

    True, there can be divergent opinions as to whether the decision of the Single Bench is correct or the Full Bench is correct, but the fact remains, unless Full Bench decision is reversed so far as it overrules Afcon’s case or clarified, courts will find it difficult to exercise the power under sub-r.(g) of R.5 of Civil Procedure (ADR) Rules, 2008.  

     

    The reasons compelling me to think in this line are the following:

    1. I fail to understand why Afcon’s case was quoted by the learned counsel for the petitioner (that too apparently a designated senior counsel) before the Full Bench to support his contention. How the reasonings rendered by the learned Single Judge relating to scope of S.89 of C.P.C. and its power to compel recalcitrant party to go for arbitration in a case filed before a Civil Court under C.P.C. would lend support to Writ Petitioner to canvas the point regarding the power of the High Court under Art.226 of the Constitution remains obscure. Evidently, the Full Bench has negatived the contention relying on Travancore Devaswom Board v. Panchamy Pack (P) Ltd. (2005 (1) KLT 690 (SC)) which governs the point of law and is binding on all under Art. 141 of the Constitution.  In such circumstances there was no warrant for referring to Afcon’s case at all for support on the point in question.  Moreover, the Full Bench has expressly stated, “We are not called upon to examine the scope of S.89 of the Code of Civil Procedure in this case”. If so, how the Full Bench could hold that the said decision in Afcon’s case is no more good law also remains obscure.  Of course, Full Bench has referred to Supreme Court decision in Jagdish Chander v. Ramesh Chander & Ors. ((2007) 5 SCC 719). A glance at the said decision shows that it is only obiter. Para 10 of the said decision shows that the Apex Court was dealing with cl.16 of a partnership agreement requiring the partners to “ mutually decide the dispute” or “refer the dispute to arbitration” . Referring to  S.11 of the Arbitration and Conciliation Act, the court  said that ‘though the power under S.11 has been held to be judicial power, the proceedings relate only to appointment of Arbitral Tribunal and disputes are not before the Chief Justice and therefore S.89 C.P.C. has no application’. It is in that context Court said,

     

      “ ……. It should not also be overlooked that even though S.89 mandates courts to refer pending suits to any of the several alternative dispute resolution processes mentioned therein, there cannot be a reference to arbitration even under S.89 of C.P.C., unless there is a mutual consent of all parties, for such reference……” 

     

    It may be pointed out in this context that the above said decision conflicts with another decision in Sukanya Holdings (P) Ltd. v. Jayesh Pandya & Anr. ((2003) 5 SCC 53) of a bench of equal strength which held in para.18 thus:

     

    “In our view, S.89 C.P.C. cannot be resorted to for interpreting S.8 of the Act as it stands on a different footing and it would be applicable even in cases where there is no arbitration agreement for referring the dispute for arbitration”.          (emphasis supplied) 

     

    Naturally it requires an authoritative pronouncement by a larger bench. Besides, the decision in Afcon’s case is pending consideration before the Apex Court. 

     

    2.   The statement of objects and reasons for bringing out the C.P.C. Amendment Act 1999 inter alia states, “with a view to implement the 129th Report of the Law Commission of India and to make conciliation scheme effective, it is proposed to make it obligatory for the court to refer the dispute after the issues are famed for settlement either by way of arbitration, conciliation, mediation, judicial settlement or through Lok Adalat.  It is only after the parties fail to get their disputes settled through any one of the alternate dispute resolution methods that the suit shall proceed further in the court in which it was filed;”  (emphasis supplied) The intention behind the amendment does not require any explanation; suffice to say, arbitration is also envisaged as an effective mechanism of ADR at par with the three other modes. 

     

    3. Apart from the 129th and 163rd Reports of the Law Commission referred to in Afcon’s case (in para. 37), the Law Commission of India, 176th Report 2001 is also eloquent in this context which reads as under: 

     

    “S.89 empowers the Court to refer matters to arbitration if the Court thinks that a settlement is possible.  This power under S.89 does not depend on the agreement of parties. On the other hand, the 1996 Act deals with reference to arbitration under an arbitration agreement.  As and when the provisions of S.89 come into force, the reference by the Court will be governed by the provisions of the present Act, 1996, so far as may be, as provided in S.89 itself”. (emphasis provided). The Report is self speaking. 

     

    4. The finding of the Full Bench reading ….”Code of Civil Procedure deals with procedure matters dealing with a mechanism for enforcement of substantial rights. Procedural provision cannot be allowed to take away substantive provisions of law” ….seems to be overlooking the following salient points:

     

    (a) It is the same C.P.C. which under S. 9 confers power on  courts to try all civil suits  subject to the restrictions under Ss. 10, 11 and the like.

     

    (b) It is the same Code which provides substantive right to the citizen to approach the Civil Court for enforcing his rights and confers power on court to summon the opposite party and compel him to face the trial if he raises dispute to the plaint claim.

     

    (c) It is the same Code which confers power on the court to pass judgment binding on the parties and execute the same, whether the loosing party likes it or not.

     

    (d) It is the same Code which provides right of appeal to the aggrieved party.

     

    (e) The same Code confers power on the court  to award interest and powers for coercive steps like injunction, attachment, arrest and detention to compel the recalcitrant party to obey the rule of the court and also empowers court to award compensation to such party if such power is occasioned to be misused and opposite party is unnecessarily troubled.

     

    (f) It is the same Code which confers vast interim powers on the court to meet any situation while dealing with the suit,  for  ends of justice

     

    (g) Such powers of the court binds the State and Central Government also because of the provisions of the same Code.

     

    It is therefore clear that if the Code of Civil Procedure can confer jurisdiction on courts for the above matters there is no reason why the same code cannot confer jurisdiction upon the court to refer the parties to arbitration in fit cases even if there is no arbitration clause, as is now clear from the Rules mentioned above. In this context, it is apposite to refer to the decision of the apex court in Vareed Jacob v. Sosamma Geevarghese & Ors. (2004 (2) KLT 649 (SC)) which unambiguously states, “The Civil Procedure Code, 1908 applies to all proceedings in courts of civil jurisdiction, subject to any special or local law or any special jurisdiction under any other law for the time being in force. The main feature of the Code is its division into two parts. The main body of the Code consists of sections which create jurisdiction while the rules indicate the manner in which the jurisdiction has to be exercised”.   (emphasis supplied)

     

    5. There is a finding by the Full Bench reading …”When a special law like the Arbitration and Conciliation Act, 1996 dealing with arbitration provides for a form of adjudication of certain matters, procedure like C.P.C. cannot make any inroad to the special statute and Court must resist the temptation to impose anything on an unwilling party especially when dispute is purely a private dispute, however strongly court feels the dispute be resolved at the earliest using alternate dispute resolution mechanism. ……………Arbitration agreement is entered into between the parties only if they mutually agree to refer the dispute for arbitration.  “Meeting of minds”, consensus of ad idem is a prerequisite factor before referring a matter to arbitration”. This observation, I am afraid, is ignoring the following aspects:

     

    (i) There are special statutes like Co-operative Societies Act, Indian Telegraph Act, providing for arbitration (as dealt with in Afcon’s case in para 34 of KLT). Arbitration is provided under S.18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 also.  The very fact that there are statutes prescribing for statutory arbitration ‘notwithstanding likes and dislikes of the parties’, for which also the Arbitration and Conciliation Act, 1996 is applicable (See S.2(4) of the Arbitration and Conciliation Act, 1996 and S.18(3) of the MSMED Act also) which shows that ‘mutual consent’ which was once considered to be a pre-requisite for arbitration, cannot now be said to be a mandatory requirement for all arbitrations.

     

    (ii) If Micro, Small and Medium Enterprises Development Act, 2006 can confer on the Council functioning under the said Act power ‘to take up the issue for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act shall then apply notwithstanding likes and dislikes of the parties (also refer Asiatic Rubro Complex v. K.M.S.E.F.C., 2008 (2) KLT 264), naturally the question arises why legislature cannot confer the same power on court of law under S.89 of CPC. If that is possible under the Micro, Small and Medium Enterprises Development Act, definitely it should be possible under the provisions of C.P.C. as well. Of course I have seen decisions to the effect that the Code of Civil Procedure deals with procedural matters and not with substantive rights. However, in view of the recent pronouncement of the Supreme Court in Vareed Jacob’s case (supra), old decisions should pave way for the new one. 

     

    (iii) Once reference is made to arbitration under S.89 the application of the provisions of C.P.C. stops there and Arbitration and Conciliation Act, 1996 takes over which is clear from S.89(2)A of C.P.C. This also shows that if ‘mutual consent’ is the criterion for arbitration, the incorporation of S.89 has no place at all in the Code (though the constitutional validity of the Act was upheld by the Supreme Court in Salem Advocate Bar Association’s case (2002 (3) KLT 920 (SC)) because such mutual consent will enable court to make a reference even without the support of S.89.   

     

    It is in the above background sub-r.5(f) and (g) of Civil Procedure (Alternative Dispute Resolution) Rules, 2008 which apparently has the Full Court concurrence and approval of the State Government, assume importance. If it is meant that sub-r.(g) has to be enforced by the courts, the finding of the Full Bench overruling Afcon’s case has to be reconsidered.  

     

     I may also point out that even though S.89 was incorporated into the Code in 1999 and years have passed, how far we could utilize the machinery for resolving the disputes instead of waiting at the corridors of civil courts lamenting on the fate of the litigants who are forced to wait, everybody should think about. I am also conscious of the fact that there can be challenge against the very sub-r.(g) of R.5 on the ground that those rules run against the Full Bench decision in Southern Structural’s case (supra). All that I have to say is, it is easy to destruct but not so easy to construct as the good old saying goes. At the same time, I should also hasten to add that the age old apathy towards arbitration and arbitral awards is getting vanished because of the safeguards provided by the Arbitration and Conciliation Act, 1996.  A glance at the Act clearly indicates that unlike in the earlier Acts, importance is given to party autonomy in fixing the procedures to be followed and sufficient safeguards for the litigant to ensure a fair and speedy remedy. The statutory duty under S.11 of the Act to appoint independent and impartial arbitrator duly qualified as stipulated in the agreement, bounden duty of the arbitrator to disclose to the parties circumstances which would give rise to justifiable doubts about his independence or impartiality (S.12), challenge procedure providing sufficient safety valves under S.13,  competence of arbitral tribunal to rule on its jurisdiction (S.16), power of arbitrator for ordering interim measures for  protection of the subject matter of the dispute (S.17), duty of the arbitral tribunal to treat parties equally giving full opportunity to present their case (S.18), party autonomy to fix procedure to be followed by the arbitral tribunal  (S.19), party autonomy to fix place of arbitration and language (Ss.20 and 22), parties’ choice to insist for oral hearing or written proceedings or presentation of evidence or oral argument and duty of the arbitrators to give sufficient advance notice of hearing (S.24), steps to be adopted in case of default of a party (S.25), facility for appointment of experts (S.26) and court assistance which could be sought for in case of need of evidence from third parties (S.27),  mandatory requirement of giving speaking award unless parties agree (S.31), provisions for correction and interpretation of award or additional award (S.33) etc. would convince everybody, I hope, that there is no room for any anxiety in the arbitral proceedings or its outcome which always would facilitate quick justice, quality justice and inexpensive justice which are paramount concerns of every one.

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  • Curtailing the Powers of I.T.A.T - A Sad Paradox

    By Dale P. Kurian, Advocate, High Court of Kerala, Ernakulam

    28/07/2008

    Curtailing the Powers of I.T.A.T - A Sad Paradox

    (By Dale P. Kurian, Advocate, High Court of Kerala)

     

    Recently, the third proviso to sub-s. (2A) of S.254 of the Income Tax Act, 1961 substituted clause 46 of the Finance Act, 2008 to provide that the Income Tax Appellate Tribunal (I.T.A.T.) cannot grant stay of demand in respect of appeal pending consideration before it beyond 365 days, even if the delay in disposing of the appeal is not attributable to the assessee.

     

    A suave reading of the third proviso itself manifests its inequity, unfairness and unreasonableness showing that a taxpayer could be made to suffer even when he is not a contributory to the delay in the disposal of appeal by the Tribunal. This tantamounts to imparting unfairness in judicial functioning. The object sought to be achieved by such an exercise also do not seem legitimate as it aids confiscation of the tax demand, pending judicial consideration.

     

    Introduction

     

    The Tribunal is the second level appellate authority under the Act, against the order of the assessing officer (hereinafter ‘A O’). The first appeal against such assessment orders lie with the C.I.T. (A), whose order is appealable before the Tribunal. In making tax assessments, AOs make additions and treat many receipts as income, which the assessee need not necessarily treat to be so. Thus, huge demands get precipitated, much beyond the paying capacities of the assessees. A demand so raised is usually stayed by the departmental authorities till the appeal is disposed of by the C.I.T. (A). If the AO’s order gets confirmed by the C.I.T.(A), then the assessee will have to file appeal before the Tribunal with an application for stay of demand till the disposal of appeal by it.

     

    The proposed amendment is aimed at limiting this power of the Tribunal to grant stay up to 365 days only. The Tribunal is conceived as a judicial body. Its independence is palpably evident from the fact that it is set up to function under the Ministry of Law and Justice and not under the Ministry of Finance which administers direct and indirect central taxation and the related topics in the country. The Hon’ble Supreme Court, in the case cited I.T.A.T. v. V.K. Agarwal and reported in (1999) 235 I.T.R. 175 had recognized the aspects. The Tribunal may not be a court, but a specialized judicial body. The Hon’ble court later in its decision in M.K. Mohammed Kunhi’s case, ruled that the statutory appellate powers under S.254 of the I.T. Act conferred on the Tribunal, by necessary implications carry with them a duty in proper cases to make such orders for staying recovery proceedings pending in appeal before the Tribunal as are called for. Such implied power is an adjunct of and flows from the substantive power to entertain or hear the appeal conferred on the Tribunal. This was at a time when the Income Tax Act was totally silent on those powers while entertaining S.254 jurisdiction by the Tribunal. That being the legal position, this power cannot be regulated by placing restraints on the exercise of such power.

     

    History

     

    Dehors these Supreme Court rulings, the central legislature had been making efforts to curtail the Tribunal’s power in the matter of grant of stay. The Finance Act, 2001, through provisos to sub-s.(2A), provided that the Tribunal can grant stay only for six months.

     

    The Hyderabad Bench of the Tribunal had held that the Tribunal, under the provisos, can grant stay in six-monthly instalments if the appeal could not be disposed of. It is to counteract this decision, that the Finance Act, 2007 - originally added three provisos to provide that at the most, the period of stay could be 365 days only. This amendment was challenged before the Bombay High Court. The Hon’ble Court held that the power to grant stay or interim relief, being inherent or incidental, is not defeated by the provisos to sub-s.(2A).

     

    The third proviso has to be read as a limitation on the power of the Tribunal to continue interim relief in cases where the hearing of the appeal has been delayed for acts attributable to the assessee. It cannot mean that a construction be given that the power to grant interim relief is denuded even if the acts attributable are not of the assessee but of the Revenue or the Tribunal itself. The power of the Tribunal, therefore, to continue interim relief is not overridden by the language of the third proviso to S.254(2A). The Tribunal has the power to extend the period of stay on good cause being shown and on the Tribunal being satisfied that the matter could not be heard and disposed of for reasons not attributable to the assessee.

     

    Present

     

    Now, the present amendment is intended to counteract the Bombay High Court’s decision saying that the Tribunal cannot grant stay beyond 365 days even if the appeal cannot be disposed of for reasons for which the assessee cannot be held responsible.

     

    Even ex facie, such an amendment seems unreasonable. There could be many reasons beyond the control of the assessee - such as non-availability of members to constitute the Bench, non-production of records from the side of the I.T. Department, illness of the members of the Tribunal or the departmental representative, etc - on account of which, it may not have been possible to dispose of the appeal within 365 days. It cannot stand the test of ordinary reason, as also the test of the above SC judgments as to why the assessee should suffer in such situation. 

     

    The Government’s approach in the matter of grant of stay by the Tribunal is wholly unreasonable and logically also for the reasons discussed in paragraph -- supra. Placing of such restraints on the tribunal indicates distrust of the Government on an independent Judicial body like the Tribunal which is the creation of the income tax statute itself. This really constitutes a sad paradox.

     

    The challenge

     

    Now, going back, as already discussed, in the Mohd. Kunhi’s decision (supra), the Supreme Court has already ruled that right of appeal is a substantive right. It is a remedy vested under the statute. Being so, the power of stay is inherent and incidental. If the Appellate Tribunal is made entirely helpless in the matter of stay of recovery, the entire purpose of the appeal would be defeated if later, the orders of the lower departmental authorities are set aside thus making the appellate jurisdiction illusory or even a mockery. Only when a strong prima facie case is made out, that the Tribunal will consider whether or not to stay the recovery of proceedings and on what condition a stay will be granted in the most deserving cases. The entire purpose of the statutory remedy (not of stay alone) will be frustrated by allowing the recovery proceedings to continue during the pendency of appeal.

     

    The amendment made, is only to be challenged to be struck down by the writ courts holding that it would not be possible, on one hand, to hold that there is a vested right of appeal which is substantive in character with a power to grant ad-interim stay and on the other hand, that though such a power has been diligently exercised once, there is no power to continue or extend the same for any reason whatsoever (even though it is not the fault of the assessee), simply because the Tribunal has been divested with the power to extend the stay. 

     

    A reading of the issue per contra would not only be wholly unreasonable and violative of Art. 14 of the Constitution, which stands for equality before law and equal protection by all laws but also be violative of the directive principles of State policy which conceive the country to be in a particular way - a purely welfare State. The second tier appellate remedy before the Tribunal is a vested right by the statute. A fee is collected on a slab basis for entertaining the appeal. A further fixed fee is collected on for considering the plea of stay of demand. This fee constitutes the necessary quid-pro-quo in rendering a service in reciprocation to the fee paid. Matter being so, in the context of an appeal filed by the assessee, if it is prescribed a suave, arbitrary power to the other side to get the appeal delayed somehow, and get the demand enforced, then it will surely be in violation of Art.14. There is no question of classification in litigation matters where both sides are to be treated equal. If at all be there, such a classification must clear the twin tests of intelligible differentia and nexus, which can never be possible.

     

    Trite, a directive principle cannot be implemented through writ jurisdiction. But an action which can initiate or catalyse the violation of directive principles can be challenged to be restrained. Art. 39A is introduced in the year 1976 by the Constitution (42nd Amendment) Act, 1976. It says that it shall be the endeavor of the State to secure that the operation of the legal system promotes justice, on the basis of equal opportunity. Art 37 which opens Part IV provides that the provisions contained in that Part shall not be enforceable by any court, but the principles therein are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws. So, the amendment which potentially violates Art. 39A is to be struck down. 

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  • Demand For A Bench At Trivandrum

    By Anzil Zacharia, Advocate, Pathanamthitta

    23/06/2008
    Anzil Zacharia, Advocate, Pathanamthitta

    Demand For A Bench At Trivandrum

    (By Anzil Zacharia, Advocate, Pathanamthitta)

     

    This is with reference to (i) the opinion of a former Advocate General of Kerala that the advice of Chief Justice of the High Court regarding establishment of a bench away from the principal seat of the High Court is unsurpassable (ii) the opinion of IP. Kelu Nambiar, Sr. Advocate that the view of the former Advocate General does not have the backing of any constitutional or statutory provision (vide 2008 (1) KLT Journal 57)

     

    The Sr. Advocate further said that when the State Government expressed its opinion that there should be a permanent bench at Trivandrum it "has to persuade the Central Government to accept their view and act accordingly". His criticism of the view of the former Advocate General went to the extent of castigating him that it "is not fair and proper to venture views without properly studying the aspect concerned".

     

    While analyzing the legal provisions of any statute it is advisable to advert to the interpretations made by the Supreme Court or even by the High Court, if available, on such provisions. No statutory provision can be understood de-hors the interpretations placed on such provision by the constitutional courts. If interpretation .has emanated from decision of the Supreme Court, its binding effect is as provided in Art. 141 of the Constitution.

     

    In the year 2000, the Federation of Bar Associations in Karnataka approached the Supreme Court for a writ of mandamus to be issued to the Union of India for establishing a permanent bench of Karnataka High Court at a suitable place in the northern part of the State. The Supreme Court then considered the scope and ambit of S.51(2) of the States Organization Act 1956, which reads thus:-

     

    "The President may, after consultation with the Governor of a new State and the Chief Justice of the High Court for that State, by notified order, provide for the establishment of a permanent Bench or Benches of that High Court at one or more places within the State other than the principal seat of the High Court and for any matters connected therewith".

     

    The Apex Court made the following observations in that case regarding the value of the opinion of the Chief Justice envisaged in the aforesaid sub section. "As the Chief Justice of the High Court concerned is the important consultee in the matter of establishment of a Bench of the High Court, he being the head of that High Court, has to form an opinion when it is required during such consultation process. Normally the Chief Justice will not be guided by any political or parochial considerations. When he gives the opinion it is the opinion of the High Court and not merely his personal opinion"

     

    On the question whether President of India can act contrary to the opinion of the Chief Justice of the High Court, learned Judges of the Supreme Court observed thus:-

     

    "The High Court is the best suited machinery to decide whether it is necessary and feasible to have a Bench outside the principal seat of that High Court. If the High Court does not favour such establishment, it is pernicious to dissect a High Court into different regions on the ground of political or other considerations. So it is out of the question to decide for establishment of a Bench outside the principal seat of a High Court contrary to the opinion of the Chief Justice of that High Court which has been formed after considering the views of his colleague Judges"             (underlining supplied).

     

    Willy-nilly, the above observation has to be followed for understanding the ambit of S.51 (2) of the Sates Re-organization Act 1956.

     

    In my opinion the statement made by the former Advocate General of Kerala was in accordance with the constitutional and statutory provisions as interpreted by the Supreme Court of India.

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