Constitutional Dimensions of Spoils System

in Public Employment under the State

 (By O.V.Radhakrishnan, Senior Advocate, High Court of Kerala)

‘Spoils System’ known in popular parlance as ‘patronage system’ is the system of spoils-sharing.  Spoils-sharing is a system prevalent where the leaders of the ruling party considered it their exclusive right in giving public office and Government positions to its supporters, friends and relatives as a reward for their working towards victory and the exercise of such power was within their exclusive imperium.  The spoils system was a common feature in the United States during 17th and 18th Centuries. In State of Bihar v. Upendra Narayan Singh¹ the Supreme Court has referred to the despotic practice of the spoils system. It was Jefferson who implemented the spoils system to a large extent and Jackson brought it to its full development as an engine of party warfare in the United States.  A brief idea of the phenomenon of spoils system is obtained from a few observations of the Supreme Court in Upendra Narayan Singh’s case:

“The phrase ‘spoils system” was derived from the statement of Senator W.L.Marcy of New York, in a speech in the Senate in 1832.  Speaking of the New York politicians, he said: “They see nothing wrong in the rule that to the victor belong the spoils of the enemy.”  By 1840, the spoils system was widely used in local, State and Federal Governments.  As a result of this, America fell far behind other nations in civil service standards of ability and rectitude.”

“When William Henry Harrison became President in 1841, the practice of appointing political followers reached its pinnacle.  As the Government grew, a serious need for qualified workers developed.  After the Civil War, pressure started building up for reforms in recruitment to civil services.  The gross scandals of President Ulysses S.Grant’s administration lent credence to the efforts of reforms George W. Curtis, Dorman B. Eaton and Carl Schurz.  In 1871, Congress authorised the President to make regulations for appointment to public services and to constitute Civil Service Commission for that purpose.  However, this merit system ended in 1875 because the Congress failed to provide funds for the same.” “In 1881, a spurned office-seeker shot and killed President James A. Garfield.  His death provoked further public outcry for civil service reform and paved way for passage of a Bill introduced by Senator George H. Pendleton of Ohio.  His Bill became the Civil Service Act of 1883 and re-established the Civil Service Commission.  The Act rendered it unlawful to fill various federal offices by the spoils system.  Since then, much has been done to avoid the evils of the system.  Federal civil service legislation has been greatly expanded.  Many Municipalities and States have made training and experience as a condition precedent for appointment to public offices.” 

“In the territories of India ruled by Britishers also a large chunk of jobs went to the faithfuls of Britishers who were considered fit for serving British interest.”

   Spoils system was blocking the progress and excellence of administration of the Government.  The spoils system inevitably brought out incompetence and maladministration debilitating the efficient functioning and crippling effective discharge of the business of the Government. The Founding Fathers of our Constitution taking into account the menace of spoils system which fostered the evil on a large scale, placed broad-spectrum ban on spoils system in the public employment to guard against the danger of denial of equality of opportunity in matters of appointment to any office under the State.

Great safety standards are constitutionally inscribed in Article 16(1) to protect equality of opportunity in matters of public employment from the virus of spoils system.  Article 16(1) issues a positive command that there shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State which is the strongest safeguard against denial of equality of opportunity in public employment.  Equal protection means the right to equal treatment in similar circumstances both in the privileges conferred and in the liabilities imposed².  Article 16(1) is a positive constitutional command to banish spoils system which inevitably blighted the opportunity for appointments to any office or of any other employment under the State.  The concept of equality and equal protection of the laws guaranteed by Article 14 encompasses social and economic justice in a political democracy.  Article 14 lays down the general rule of equality and Article 16(1) is an incident of the general concept of equality enshrined in Article 14 in the matter of appointment and employment under the State.  The Government is not entitled to pick and choose from amongst a number of candidates offering themselves for employment under the Government.  It further guarantees a “right to be considered” on merit for the post.  Recruitment shall commence by open advertisement so as to enable all eligible persons to compete for selection on merit.  Recruitment must be carried out on the basis of merit system and not on political loyalties or practising nepotism by parties in power to strive to meet the highest standards of excellence in a service or post in which he or she gets appointment.

Reservation in appointments in favour of backward class of citizens in accordance with Article 16(4) as a positive facility and opportunity to such class to improve excellence in a service or post is an instance of classification permitted by Clause (1) of Article 16. Article 16(4) softened the rigour of legal equality and gave practical content of equality to provide distributive justice in favour of unequals to hold an office or post under the State in the democratic governance. It is a protective discrimination in favour of the disadvantaged segments of the society. It is a transitory measure to subserve and elongate constitutional objective and public policy of socio-economic justice as envisaged in Article 16(4) and Article 335 read with Articles 14 and 16(1) as also Article 38 and Article 46 and of all other cognate provisions of the Constitution. 

Services under the Union and the States are included in Chapter I Part XIV of the Constitution.  Article 309 relates to recruitment and conditions of services of persons serving the Union or a State. The recruitment and conditions of service of persons appointed to public services and posts in connection with the affairs of the Union or a State are to be regulated by Acts of the appropriate Legislature subject to the provisions of the Constitution.  The Proviso under the Article empowers the President or the Governor of a State to make rules regulating the recruitment and the conditions of service of persons appointed to such services and posts until provision in that behalf is made by or under an Act of the appropriate Legislature and any rules so made shall have effect subject to the provisions of any such Act. 

Chapter II of Part XIV of the Constitution relates to Public Service Commission.

Article 315 mandates that there shall be a Public Service Commission for the Union and a Public Service Commission for each State.  Under Article 320 (1) of the Constitution, it shall be the duty of the Union and the State Public Service Commissions to conduct examination for appointment to the services of the Union and the services of the State respectively. The examinations conducted by the Public Service Commission can be selective or competitive in nature.  It has been now settled that the best method of assessing the merit of candidates by open examination is to combine written test with an interview or viva voce test.  The ranked list is prepared in the order of merit and each one of the candidate included in the ranked list stands on a separate level of competence as compared with another.

Consultation with the Union Public Service Commission or the State Public Service Commission, as the case may be, is mandatory on all matters relating to methods of recruitment to civil services and for civil posts, on the principles to be followed in making appointments to civil services and posts and in making promotions and transfers from one service to another and on the suitability of candidates for such appointments, promotions or transfers under Article 320 (3)(b) of the Constitution.  It shall be the duty of a Public Service Commission to advise on any matter so referred to them and on any other matter which the President, or, as the case may be, the Governor of the State, may refer to them.  Our Constitution has spread protective umbrella for securing and reassuring equality before the law in matters of public employment.  Any action based on patronage system or spoils-sharing inconsistent with Part III and Article 320 of the Constitution is prohibited and is unconstitutional.  Article 320 tailored as it is to the job seeker’s concerns, meets the practical desiderata and assures salutary merit system in public services. Necessarily, and perforce, equal opportunity of appointment to a post or office is available to all citizens and constitutionally entitles them to consider their claims for employment/appointment to an office or post on merit basis.  Spoils system or patronage system which results in serious and atrocious consequences is prohibited by force of the constitutional command combined in Articles 14, 16(1) and 320 of the Constitution of India. 

It is quite clear that merit system received accreditation and confirmation under the Constitution. Article 320 of the Constitution provides an effective machinery displacing nepotistic recruitment policy for ensuring merit system in public employment which is jealously guarded in the Constitution.

In Supreme Court Advocates-on-Record Association v. Union of India³ a Constitution Bench of the Supreme Court held:

“It is necessary to appreciate that the Constitution does not envisage the “spoils system” (also known as the “patronage system”) wherein the political party which wins an election gives Government positions to its supporters, friends and relatives as a reward for working towards victory and as an incentive to keep the party in power.”

“It would be of utmost importance therefore, to shield judicial appointments from any political-executive interference to preserve the “independence of the judiciary” from the regime of the spoils system.  Preserving primacy in the judiciary, in the matter of selection and appointment of Judges to the higher judiciary would be a safe way to do so.”  It has been reasserted therein that “The expectation from the judiciary to safeguard the rights of the citizens of this country can only be ensured by keeping it absolutely insulated and independent from the other organs of governance. In our considered view, the present status of the evolution of the “civil society” in India does not augur the participation of the political-executive establishment in the selection and appointment of Judges to the higher judiciary, or in the matter of transfer of Chief Justices and Judges of one High Court to another.” 

Another facet of the unconstitutional dimension of public employment under the State is the policy of seeking Police report on the political faith of candidates for appointment and acting upon it, if the report reveals the political faith, beliefs, association and the past political activity of the candidate for public employment.  Article 16(2) of the Constitution brings out what is guaranteed under Article 16(1) in a negative form.  Article 16(2) prohibits discrimination on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, for employment or office under the State.  The word ‘only’ after the word ‘grounds’ shows that clause (2) of Article 16 applies only where a citizen is ineligible for a certain public employment solely on the ground of his religion, race etc., mentioned in clause (2) and not on ground outside the categories of grounds specifically mentioned therein.Inevitably, denial of employment on grounds other than those mentioned in Article 16(2) falls outside the discrimination prohibited by clause (2).  Necessarily, in a case where employment is denied on the ground of political faith or on past political activities, the fundamental right guaranteed under Article 16(2)  of the Constitution is unavailing.  In that context, the Supreme Court condemned the policy of acting on Police report based on the political faith, beliefs, association and the past political activity of the candidate for public employment as introducing ‘McCarthyism’ into India which is obnoxious to the whole philosophy of our Constitution.

 ‘McCarthyism’ is the practice of making accusations of subversion or treason, especially when related to communism⁴. The term refers to U.S. Senator Joseph McCarthy (R-Wisconsin).  The practice has its origin in the period in the United States known as the Second Red Scare, lasting from the late 1940s through the 1950s.⁵   It was characterized by heightened political repression and a campaign spreading fear of communist influence on American Institutions and of espionage by Soviet agents.⁶  ‘McCarthyism’ began its decline due to the stiff opposition from the U.S. Supreme Court led by Chief Justice Earl Warren⁽⁶⁾⁽⁷⁾ and helped to bring to an end to ‘McCarthyism’ as a result of the series of rulings of the Warren Court.^(8)(9)(10)

In State of M.P. V. Ramashanker Raghuvanshi¹¹ the Supreme Court was dealing with a case where the termination of the services of a teacher founded on a report made by the Superintendent of Police that the teacher was not a fit person to be entertained in Government service as he had taken part in ‘RSS and Jan Sangh activities’.  The Supreme Court expressing its jural concern about the devastating results of such a policy, contextually posed the question ‘Is public employment reserved for “the cringing and the craven” in the words of Mr.Justice Black of the United States Supreme Court?’ and held:

“We think it offends the Fundamental Rights guaranteed by Articles 14 and 16 of the Constitution to deny employment to an individual because of his past political affinities, unless such affinities are considered likely to affect the integrity and efficiency of the individual’s service.  To hold otherwise would be to introduce ‘McCarthyism’ into India.  ‘McCarthyism’ is obnoxious to the whole philosophy of our Constitution.  We do not want it.”

“We are not for a moment suggesting that even after entry into government service, a person may engage himself in political activities.  All that we say is that he cannot be turned back at the very threshold on the ground of his past political activities.  Once he becomes a government servant, he becomes subject to the various rules regulating his conduct and his activities must naturally be subject to all rules made in conformity with the Constitution”.

A resume of the discussion leads to the logical conclusion that although there is no express provision in any statute or rules, regulation and by-law prohibiting spoils system, to follow ‘merit system’ in matters of public employment is a constitutional imperative which is non-negotiable.  Resort to spoils system on any pretext or for any ostensible goal is unconstitutional and impermissible.  Likewise, much to the constitutional consternation about non-inclusion of ‘political faith’ in Article 16(2) as a ground of discrimination for rendering a citizen ineligible for employment or office under the State, it emerges as pronounced inequality meted out to citizens when political authoritarianism, through denial of employment to public services for their past political activities, holds the fundamental rights of citizens guaranteed under Articles 14 and 16(1) of the Constitution to ransom for political reasons.  Such a practice, if and when adopted would offend equality of opportunity in matters of public  employment and its concomitant right to livelihood guaranteed under Articles 14, 16(1), 19(1)(g) and 21 of the Constitution and would fall within the mischief of ‘McCarthyism’ which is anathema to and is tabooed by our Constitution.

Destined to Die in Custody

Father Stan Swamy -- Victim of Judicial Apathy

(By P.Rajan, Advocate, Thalassery)

Tribal activist, Octogenarian, Fr.Stan Swamy’s death in a Mumbai hospital as an under-trial prisoner is a rare but disturbing example of antagonism of the investigating agency coupled with insensitive approach of the judicial system. He was arrested under the Unlawful Activities(Prevention) Act in October 2020 in connection with the Bhima Koregaon case from Ranchi and ever since he was in jail, suffering from multiple age-related ailments besides parkinson’s disease. The trial court had turned down his request for bail presumably following the rigor of provision for granting bail under the UAPA Act supported by the apex court’s judgment of 2019 in Zahoor Ahmad Shah Watali case (2019 (2) KLT OnLine 3012 (SC). The High Court also was reluctant to give him relief of liberty, subjected to extended detention. Strangely, due to denial of basic requirements by the jail authorities, even to consume liquid food, he had to approach the High Court for a straw and sipper, as his health was deteriorating.

The fact that his advanced age and frail frame caused untold physical hardships and difficulties for his remand life were evidenced by successive medical reports. Prosecution as often do, opposed his request for release was denied by the Court and it had failed to apply its judicial mind as the plea for bail was mainly on humanitarian grounds. There are few others also languishing in jail in the same crime aged more than sixty, suffering from multiple health issues exacerbated by prolonged incarceration.

The Supreme Court’s judgment delivered in 2019 under the UAPA Act is worrisome as same is the recent case law on the subject by the top court, to be followed by the lower courts. This decision has made a new a doctrine to say an accused charged under the UAPA Act must be in custody throughout the period of trial, till the final verdict, even if the charge appears to be suspicious, eventually proved to be groundless. Across the country dissenting voices,protests, of late are on the increase so also registration of cases under the UAPA Act or under the Indian Penal Code, of Sedition. Dilution of the rigor of the provision of bail under the UAPA Act is the prerogative of the executive, change is a wishful thinking but the case law declared by the Supreme Court can be subjected to reconsideration, as rampant misuse of draconian laws are on the rise due to extraneous considerations without considering the legal requirements to register crimes leading to arrest of the suspects, leading to prolonged incarceration.

Section defining Sedition, 124A I.P.C. is British made meant to apply at the will and pleasure of the then Rulers against us when freedom movements across the country were routine. But UAPA Act is promulgated after independence being used at the drop of a hat due to political reasons even. 

It is known to all that Fr.Swamy was the voice of voiceless, stood up for those who were denied justice, mainly to the backward class. Denial of fundamental rights to the backward class, upbringing of the downtrodden was the sole motto  of the father all along his five decades’dedicated service to the under privileged. There are several under trial prisoners in different states, charge sheeted under the provisions of UAPA Act and even Keralite Abdul Nazer Mahdani with prosthetic limb is behind the bars in Bangalore, awaiting final verdict for long. In all such cases the express bar for bail defined under section 43D(5) of the UAPA applied by the Court holding that proof of innocence is the duty of the accused even when request for bail is made. Period of remand might be more than the maximum jail sentence on conviction, in certain cases unless after few years of jail life bail is granted to the accused. Courts should be considerate while considering request for bail as filing of charge sheet is no proof of guilt. There is no law in the land like victim’s compensation scheme to the solace of the accused persons who remained in prison for years and finally found to be innocent of the charges. As the Bombay High Court on hearing the death of Fr.Swamy from the Bar expressed shock, needless to say that anguish was ephemeral. Personal liberty is paramount and courts should be guided by the principle of law based on constitutional mandate- bail is the rule especially to the aged and ailing, jail is an exception, charge or allegation what may- speedy trial and timely verdict is a distant dream in the largest republic of the world, even now.  The inspiring words due to stressful days in prison, of  Sri.Swamy – We will still sing in Chorus – a caged bird also can sing should not fall on deaf ears.

                  You can force the people to obey

                   You can’t force them to understand

                                                                         -- Confucius

Electronic Filing: Towards an Inclusive Legal Profession

(By Thulasi K. Raj, Advocate, High Court of Kerala)

In early May 2021, the High Court of Kerala notified the Electronic Filing Rules for Courts (Kerala), 2021. The Rules have prescribed for electronic filing of cases, by dispensing with physical filing to a great extent. According to Rule 10, exemption from e-filing can be sought in certain circumstances, for example due to privacy reasons or when the size of the files is too large.Rule 5 prescribes procedure for filing and Rule 6 provides for digital signature. The Rules lay down detailed procedure regarding filing and service of notice through electronic means.

The Rules are criticized by many and I propose to argue why the critique is misconceived. The first objection against E-filing Rules is that the Rules have a disproportionate impact on elder lawyers who are less familiar with technology than the young. It is said that while young lawyers can easily adopt to the new technology, the others will not be. This objection, however, overlooks the demands of a pandemic and fast-changing technology. There was a time in the profession when stenographers were unfamiliar with the computer and used typewriters for typing and printing pleadings. At an earlier time, causelists were not available online. But soon thereafter,when digital technology embraced the legal profession as well, adjustments and compromises were made to make the system efficient and useful. The virtues of e-filing such as efficiency, swiftness, reduction of paper waste, easy and ready access to files and comprehensive database must be acknowledged.

The problem of unfamiliarity is inherent in any new proposal. For example, when the High Court adopted video conferencing for hearings, there was an initial hesitation. However, this was largely overcome in time with training, practice and assistance from technically proficient persons. Likewise, more training facilities and assistance of technically proficient personnel must be extended to lawyers who find it difficult to adopt to the technology. There must be special training sessions for clerks who have been conducting physical filing so far, so that their livelihood will not be in jeopardy. These proposals are made with a view to making the E-filing system more accessible, inclusive and equitable.

The second objection against E-filing is the ‘irrelevance argument.’ The objection is that not only lawyers based in Kochi, but lawyers from any part of the State will be easily able to file pleadings and the ‘relevance’ of High Court lawyers will be lost. This is unfortunately a narrow-minded view. The legal profession must always aspire to be more inclusive rather than exclusionary. Clients choose lawyers on the basis of very many factors including familiarity, talent, success rate etc. If a lawyer has the necessary talent, hard work and determination to succeed in the profession, it is likely that they will make their own space. Confining the benefits of filing to a certain limited classwithinlawyers is not the way to achieve relevance in the profession. There are ethical and legal ways to do it. Excluding many people from the purview of the system and reserving filing to a select fewis discriminatory. It puts persons from rural backgrounds or with less financial resources unable to reside permanently in Ernakulam at a disadvantage.

The third objection against the digital system is that lawyers who are one of the stakeholders were not heard before adopting the Rules. We must bear in mind that the Rules are adopted at a time when the nation is facing an unprecedented pandemic. The Rules were necessary to ensure some mechanism is in place for filing of cases. Filing could not have been suspended for an indefinite time until comprehensive hearings were made. The adoption of the Rules was necessitated by these circumstances. Even if there is substance in the objection of non-hearing, resisting E-filing altogether is not the solution for an alleged procedural irregularity. Lawyers can mobilise efforts, in collaboration with the High Court to familiarise themselves with the Rules. Suggestions must be made as to making the portal user friendly and enhancing usability. Problems in the functioning of the portal can be adequately pointed out to rectify them. The efforts must be towards this direction.

The fourth objection against E-filing is that of access. It is said that lawyers are not equipped with scanners or a well-functioning internet for a smooth transition to E-filing. These are, however, not problems created by E-filing, but larger issues of economic resources, mobility and digital access. Many of these problems can be reduced – if not eliminated- with adequate measures. For example, lawyers could mobilise to identify those needing financial assistance and enable voluntary contribution for devices or digital technology. The idea is to identify the potential problems and move towards resolving them instead of opposing e-filing.

Now, this is not to say that the E-filing system is free from problems. It does suffer from drawbacks, just like any other form of digital technology. The portal is often non-operative and takes several minutes to load. It does not contain a provision for clerks to create accounts and file cases. The Rules must expand the scope of E-filer currently confined to advocates and parties to include clerks. The interface could be more user friendly. However, all these problems are curable if properly considered. Lawyers can identify surrounding issues associated with e-filing and the system must be continuously reformed on the basis of suggestions.

I have argued that both legally and ethically, there is potential in the E-filing Rules to make both access to justice and to the legal profession diverse and inclusive. The continued opposition to E-filing serves no meaningful purpose. Physical filing at a time of pandemic might put the clerks and lawyers at imminent risk. The Kerala High Court belongs to everybody. Let us keep it that way. That is what the law requires. That is also what decency demands.

Jaleel v. Muhammed Shafi(2021(3) KLT 167) Needs Re-visitation

(By K.Ramakumar, Senior Advocate, High Court of Kerala)

Maintaining greatest respect to the eminent and knowledgeable Judges constituting the Division Bench that decided Jaleel v. Muhammed Shafi reported in 2021(3) KLT 167, I am of the humble opinion that it needs re-visitation. 

A Minister in the Cabinet of a State is appointed by the Governor of the State under Article 164 of the Constitution of India.  Ministers shall hold office during the pleasure of the Governor.  That a Minister is a public servant cannot any longer be disputed in view of the authoritative pronouncement of the Supreme Court in Karunanidhi’s case.  Nevertheless is a Minister holding a post? Obviously not.  No constitutional functionary is holding a post but a prestigious position of privilege, power and responsibility.  Holding of a “post” arises only in a service.  For instance, our Hon’ble Judges do not hold a post but a position envisaged under the Constitution of India.  Their pay and allowances are prescribed under the Schedules to the Constitution of India and their removal, is not akin to the removal from a post.  It is therefore, clear that a Minister in a State Cabinet is not a person holding a post.

The Kerala LokAyukta, 1999 provides for appointment and functions of authorities for making enquiries into any action taken by or on behalf of the Government of Kerala relatable to matters specified in List II or List III of the VIIth Schedule to the Constitution of India.  Section 14 of the Kerala LokAyukta Act provides that where, after investigation into a complaint the LokAyukta or an UpaLokAyukta is satisfied with the complaint involving an allegation against the public servant is substantiated and that the public servant concerned should not continue to hold the post held by him,the LokAyukta can make a declaration to that effect.  The pertinent question therefore, that arises is can it apply to a person, who does not hold a post, and the complaint is in respect of actions taken by or on behalf of the Government of Kerala.  My respectful submission is since a Minister does not hold a “post” and his actions are collectively taken on behalf of the Government of Kerala, any direction by the LokAyukta that he shall vacate the office, is beyond the provisions of the Kerala LokAyukta Act.  The significance and the import of the word “post” and the wordings in the preamble of the Act that action taken by or on behalf of the Government of Kerala clearly in my humble submission restrict the power of the LokAyukta to suggest or recommend the resignation of a Minister appointed by the Governor under Article 164 of the Constitution of India.

The facts of the case decided by the Division Bench need no reiteration. A Minister in the Kerala Cabinet was accused of favouring an applicant to a post in a State owned Corporation.  When a controversy was raked up it appears the person concerned resigned the post. Nevertheless a complaint was made before the Lok Ayukta that there was corruption in the action of the concerned Minister. The Lok Ayukta therefore, found that there was an allegation which stood established. It however, omitted to notice that there was no grievance to the complainant as the appointee had already vacated the office when objections were raised.  It may be noted that the Government of Kerala had passed an order on 08.10.2018 making the appointment.  This can only be after the Cabinet approved the appointment as the post involved was that of a General Manager.  In the report a clear finding has been entered by the LokAyukta that the Chief Minister also was a party to the approval of the appointment. 

Surprisingly in the declaration made by the LokAyukta purportedly under Section 14 of the Act it was confined only to the Minister concerned and not a word is stated about the Chief Minister.  This, in my humble and respectful submission,militates against the wording in the preamble of the Act that is mainly concerned with the action taken by or on behalf of the Government of Kerala.  In the report by the LokAyukta there is no clear indication that the aforesaid words of great import, have been considered with due application of mind.  The significance and expression of the word “post” also has not been taken note of by the LokAyukta.  A constitutional functionary cannot be relegated to the position of a holder of a “post”.

The aforesaid crucial issue does not appear to have been examined by the Division Bench as well.  The interplay of Sections 12 and 14 also does not appear to have received the attention it deserved from the Hon’ble Division Bench. 

The conclusions of the Division Bench regarding findings of facts and the scope of judicial review under Article 226 of the Constitution of India are unexceptionable and irrefragable.  With great respect to the Hon’ble Judges their view represents the correct position in law.

However, the observations in para 21 of the judgment that a declaration under Section 14 of the Kerala LokAyukta Act could be submitted only after an investigation, if right, it must necessarily follow that the investigation shall not be reduced to a formal enquiry but requires a detailed probe as an elected representative of the people will have to vacate his office based on the investigation.  Such an investigation cannot be a formal enquiry as found by the Division Bench but should be a full-fledged one like in the nature of a criminal complaint as it involves the credibility, prestige and acceptability of an elected representative.  I am afraid the view of the Division Bench that the expression “investigation” in the Act contemplates only a formal enquiry, is beset with very serious consequences to holders of constitutional positions.  Under the Constitution as already pointed out above, only the Governor can direct a Minister to resign and I respectfully repeat my doubt whether a Minister, who is not holding a “post” can be directed by the Lok Ayukta to vacate the office at all.

Since the provisions of the Kerala LokAyukta Act, 1999 will ever remain green, current and relevant in public life, a correct and complete interpretation of its provisions is warranted.

I would therefore, humbly submit that the decision needs a second look. Trust my views are not just critical but also didactic.

A Case for Arbitration in Disputes Relating to
Intellectual Property Rights

(By P.B.Krishnan & Dhanya Prasad, Advocates, High Court of Kerala)

Subject Matter Arbitrability

When a matter is referred to or is proposed to be referred to arbitration, a significant question that arises for determination is whether the subject matter of the dispute is arbitrable or not. “Arbitrability determines the point at which the exercise of contractual freedom ends and the public mission of adjudication begins.” ¹ ‘Arbitrability’ refers to the ability of a dispute to constitute the subject matter of arbitration.² Subjective Arbitrability is the determination of capacity of a person to enter into an arbitration agreement or become party to an arbitration proceeding. Objective Arbitrability focuses on the subject matter of the dispute and answers the question whether the dispute is capable of being settled by arbitration or may have to be exclusively addressed by the Courts.

Unless the issue involved in the dispute is found to be an arbitrable subject matter under domestic law, the arbitral tribunal cannot engage in adjudication of the lis. Nor can the arbitral award that may follow be enforced. Certain disputes are categorised as ‘non-arbitrable’ by Statute or by the Courts in different jurisdictions. The rationale for such classification is public policy, premised on the fact that disputes having public consequences and importance are to be heard by Courts. This is an extension of the principle that arbitration are private law proceedings. The issue of arbitrability across jurisdictions has arisen in matters like Intellectual Property Rights, Fraud, Competition law, Torts, Criminal Matters, Labour Disputes, Property disputes, Consumer Disputes and Insolvency issues. Attempts continue to be made in various jurisdictions, through judicial pronouncements or otherwise, to promote Arbitration even in areas classified as non-arbitrable in the past.

Arbitrability of Disputes in the Indian context

The Arbitration and Conciliation Act, 1996 makes provision for domestic arbitration and international commercial arbitration seated in India and a separate part laying down the procedure for enforcement of foreign arbitral awards. The Act, while defining Arbitration agreement, provides that parties can submit to arbitration all disputes which may arise between them in respect of a defined legal relationship, whether contractual or not.³   The Act also provides that while dealing with applications for setting aside of an arbitral award⁴  or at the time of considering enforcement of a foreign award⁵  the Courts may refuse the same on the ground that the subject matter of the dispute is not capable of settlement by arbitration under the law in the force or that the award is in conflict with the public policy of India. The Act does not however enumerate categories of disputes that are non-arbitrable.

The concept of subject matter arbitrability was the focus of the decision of the Supreme Court in Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd.⁶  The subject matter was the enforcement of a mortgage by sale of the property. While dismissing the application under Section 8 of the Act to refer the matter to arbitration, the Supreme Court discussed the concept of Arbitrability in detail and held that the subject matter should be tried only by the Court and not an arbitral tribunal. The Court observed that adjudication of certain disputes may be reserved by the Legislature exclusively for public forum on the ground of public policy or may be excluded from the purview of private forum by necessary implication. The Court also classified certain disputes relating to criminal offences, matrimonial disputes, guardianship matters, insolvency and winding up matters, testamentary matters and eviction or tenancy matters, as non-arbitrable. The list is stated to be illustrative and not exhaustive. The decision has since been followed consistently by the Courts and the category of non-arbitrable disputes has been expanded.⁷  

In August 2020, the Supreme Court discussed earlier decisions on arbitrability of disputes to determine arbitrability of serious allegations of fraud and held as follows:

”...The first test is satisfied only when it can be said that the arbitration clause or agreement itself cannot be said to exist in a clear case in which the court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all. The second test can be said to have been met in cases in which allegations are made against the State or its instrumentalities of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case by a writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain”.⁸

In December 2020, the Supreme Court, while adjudicating on the arbitrability of Landlord-Tenant disputes under Transfer of Property Act, 1882, laid down a fourfold test for determining non-arbitrability of disputes. All disputes which (1) relate to actions in rem, (2) affect third party rights, (3) relate to sovereign and public interest functions of the State, and (4) declared to be non-arbitrable by a statute, were to be held as non-arbitrable subject matters. The Supreme Court has included grant and issue of patents and registration of trademarks under the category of non-arbitrable disputes.⁹

It is thus evident that the last word is still not out on what is non arbitrable under Indian law. However, the legal principles based on which such a determination can be made have been laid down. A list of non arbitrable disputes is given as illustration in some of these pronouncements.

Disputes relating to Intellectual Property Rights

According to the WIPO, Intellectual Property (IP) is creation of the mind which is granted protection by law. Intellectual Property Right refers to the right of ownership over an intangible property in the form of inventions, artistic works, designs, symbols etc. which enables the owner with a protection from unauthorised use by others and enables the owner to earn recognition or financial benefit for their invention or creation.¹⁰   The objective behind granting IP Rights is to confer protection to the owner from unauthorised access or use by others. Intellectual Property Rights include Patents, Trademarks, Copyright, Geographical Indications, Industrial designs and Trade Secrets. Patent is granted for any invention and the term invention refers to a new product or process involving an inventive step and capable of industrial application.¹¹  Copyright is an Intellectual Property Right that subsists in classes of works like original literary, dramatic, musical and artistic works, cinematograph films and sound recordings.¹² Trademark means a mark which is capable of being represented graphically and capable of distinguishing the goods or services of one person from those of others and includes shape of goods, packaging and combination of colours.¹³

Disputes may arise with respect to various aspects of Intellectual Property Rights. These may be broadly classified into disputes arising out of contractual relationships and disputes which are not associated with any contract but related to rights granted by the State. The former class includes issues of IP infringement, passing off, transfer, licensing, fixation of royalty rates that may arise out of License agreements, Joint Venture agreements, Business acquisition agreements, Employment contracts etc.¹⁴  The latter class refers to disputes relating to the validity and ownership of IP rights or registrations granted by the State in accordance with the IP statutes in force in the country. On registration of an IP, since the State bestows exclusivity for use and exploitation on an entity or a person by shutting the public from free access to the same, disputes challenging the validity of these rights are a matter of Public impact and therefore fall under the purview of public policy concern of the State.¹⁵

Arbitrability of Intellectual Property Right related Disputes in other jurisdictions

The legislative framework as well as judicial decisions of various jurisdictions are not uniform on the arbitrability of disputes in Intellectual Property Rights matters. While one view allows arbitration, especially on contractual matters, the other view bars arbitration on the ground that the subject matter entail public policy concerns as well as rights in rem.

In the United States, Courts refused to allow arbitration of matters such as patent validity and enforceability. However, in the 1983 the United States Congress enacted a statute with specific reference to Patents and made all Patent matters arbitrable.¹⁶  All issues relating to patent validity and infringement could be arbitrated by way of agreement between the parties. However, Trademark and Copyright related disputes do not have statutory sanction for arbitration. Judicial decisions have sometimes found such disputes also to be arbitrable.¹⁷

In the European Union, it has been provided by a Regulation that disputes dealing with existence or validity of a registered Intellectual Property Right are not arbitrable.¹⁸ In England, there is no specific bar on arbitration. The issue has been decided by the Courts, often taking a pro arbitration approach except in cases of questions of title and infringement of intellectual property.¹⁹  The French Intellectual Property Code allows arbitration of patent matters, specifically questions concerning ownership and entitlement of patents. The Code also allows for arbitration of trademarks. In Switzerland, all forms of Intellectual Property Rights Disputes including validity and infringement of IP are arbitrable²⁰ making it one of the most arbitration friendly jurisdictions for International Commercial Arbitration in such matters.

Arbitrability of Intellectual Property Right related Disputes in India

In the pre-Booz Allen era, the issue did not receive much judicial attention. In 1990, the Delhi High Court in the case of Mundipharma Ag v. Wockhardt ²¹, while dealing with an issue of infringement of copyright, dismissed the plea for arbitration and found that:

“.....If reference is made to Chapter XII of the Copyright Act, 1957 relating to civil remedies in case of infringement of copyright; every suit or other civil proceedings arising under that Chapter in respect of Infringement of copyright in any work or the infringement of any other right conferred by that Act have to be instituted in the district court having jurisdiction. This would mean that in case where copyright in any work is infringed the remedies by way of injunction damages, accounts and otherwise as are or may be conferred by law for the infringement of such a right, cannot be subject-matter of arbitration.”

In Ministry of Sound International Ltd. v. Indus Renaissance Partners,²²  while dealing with a license agreement to use copyrights and trademarks, the Delhi High Court held that disputes relating to breach of confidentiality or infringement of intellectual property rights can be a subject matter of arbitration. On registration of an IP like patent, trademark or copyright, what is vested in the owner is an exclusive right over the invention or original work which protects the owner from unauthorized access, use or exploitation. The Supreme Court held that Intellectual Property Right is a right against the whole world or a right in rem²³ making it a non-arbitrable subject matter.

In the Post Booz Allen²⁴  era, the test laid down by the Supreme Court in that case have been applied and a decision as to arbitrability has been taken on a case-to-case basis. While a few cases have followed the approach of caution, there have been decisions allowing arbitration. In Suresh Dhanuka v. Sunita Mohapatra²⁵, the Supreme Court allowed request for arbitration of a matter of trademark infringement which was covered under a deed of assignment. A methodology was developed to determine arbitrability. The first test was to look at the nature of the rights in question. Broadly, disputes involving rights in rem (exercisable against the world at large) were required to be adjudicated by courts and public tribunals and not amenable to arbitration. On the other hand, disputes relating to rights in personam (interest protected solely against specific individuals) are amenable to arbitration. The Court also observed that the rule was not inflexible and found that subordinate rights in personam arising out of rights in rem were arbitrable. While explaining this aspect, the Court relied on the example of rights under patent licences being arbitrable though the validity of the underlying patent may not be arbitrable.²⁶  The second aspect considered was whether there was any specific forum for which an exclusive jurisdiction is granted by the legislature. In that case the subject matter would be considered non arbitrable. This test was reaffirmed by the Supreme Court in 2016 in the case of A. Ayyasamy v. A. Paramasivam where it is observed that disputes relating to patent, trademarks and copyright are non-arbitrable.²⁷

On applying the tests relating to arbitrabilty of disputes to the subject matter of Intellectual Property Rights, the issue arises with respect to the satisfaction of the first condition stated in Booz Allen. But, as stated in that decision itself this is not an inflexible rule and there may be circumstances when rightsin personam arising out of contracts involving intellectual property rights may be referred to arbitration. The High Courts have rendered conflicting views on this issue.  In Steel Authority of India Ltd. v SKS Ispat & Power Ltd. & Ors,²⁸  the Bombay High Court had before it a claim for damages for trademark infringement and passing off. The Court found that the dispute did not arise out of the contract between the parties that contained the arbitration clause. It was held that the relief against infringement and passing off, by their nature did not fall within the jurisdiction of an arbitrator. The difficulties in reconciling and applying the correct legal position is evident from the view taken by the Bombay High Court in two cases decided in 2016. Both cases related to Copyright. In Eros International Media Limited v. Telemax Links India Pvt.Ltd,²⁹ the Court upheld the arbitration clause and allowed a dispute relating to licensing of Copyrights to be referred to arbitration. A distinction was drawn between disputes which arise out of contracts and those which are non-contractual.

“Commercial disputes can be referred to private forum by parties to agreement and no question arises of those disputes being non arbitrable as such actions are always in personam.”

The Court opined that specification of a competent court for infringement and passing off actions under the Copyright Act, 1957 and Trademarks Act, 1999 cannot be inferred as an ouster of jurisdiction of arbitral tribunal. It was held that:

“As between two claimants to a copyright or a trade mark in either infringement or passing off action, that action and that remedy can only ever be an action in personam. It is never an action in rem. In trade mark law it is true that the registration of a mark gives the registrant a right against the world at large. But an infringement or passing off action binds only the parties to it. This applies equally to copyright actions.”

However, in Indian Performing Right Society Limited (IPRS) v. Entertainment Network³⁰ , the Court took a restrictive view while dealing with the issue of arbitrability of disputes relating to infringement of Copyright as well as refund of royalty. This decision was rendered on an application for setting aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. The Court relied on the decisions in Booz Allen³¹ , Mundipharma AG³² and Steel Authority of India Ltd³³  to hold that matters of copyright were not arbitrable as the claims were in the nature of an action in rem and would not only bind the parties but also third parties. The court also observed that failure of a party to raise the issue of arbitrability during the arbitration proceedings would not amount to waiver under Section 4 of the Act and does not prevent the party from raising the same by way of application under Section 34 of the Act.

In Deepak Thorat v. Vidli Restaurant,³⁴  a dispute relating to breach of a negative covenant clause in a trademark license agreement, the Court found the subject matter to be arbitrable as the issue to be considered by the arbitrator was relating to something agreed between the parties and therefore the order of the arbitrator would not be one in rem. This was clearly in accordance with the decision in Eros International.³⁵  In M/S Impact Metals Ltd v. M/S MSR India Ltd.³⁶ , the Court did not look into the nature of right involved in the dispute but found the matter to be arbitrable on the ground that Copyright disputes were not included in the category of non-arbitrable disputes laid down by the Supreme Court in Booz Allen.

The Madras High Court dealt with the issue of arbitrability of Intellectual Property Right disputes in the case of Lifestyle Equities C.V. v. QD Seatoman Designs Pvt. Ltd. The Court distinguished between right in rem and right in personam relying on the cases of Booz Allen and Ayyasamy and observed that patent license maybe arbitrable but validity of the underlying patent may not be arbitrable.³⁷  Though a two-fold test has been laid down by the Supreme Court to look into the arbitrability of subject matter on a case-to-case basis, the subsequent decisions of the High Courts have not been uniform  in determining the nature of Intellectual Property Right disputes that can be referred to arbitration.

In Conclusion

The Arbitration and Conciliation Act, 1996 does not enumerate non arbitrable disputes. The concept has been developed through judicial pronouncements.The list of non arbitrable disputes available is not exhaustive. In this scenario, it has become hazardous to take disputes relating to Intellectual Property Right to Arbitration. Courts are constrained to limit arbitration on grounds of public policy, third party involvement, in rem claims and existence of special forum

.

In order to determine the arbitrability of disputes relating to Intellectual Property Right, it is essential to look into multiple factors such as nature of rights involved (in rem or in personam), existence of specific forum for adjudication and public policy considerations. Disputes that arise out of contracts containing clauses on subsidiary rights relating to Copyright, Trademark or Patent may be amenable to Arbitration as the order of the arbitrator will only determine the rights between the parties involved and therefore be in personam. This will not offend public policy or have an adverse effect on public good. On the other hand, adjudication of disputes questioning the grant or validity of registration of Intellectual Property Right by an arbitrator or a private tribunal may not be desirable. Such disputes involve rights in rem which are vested by the State in exercise of its sovereign power and is inextricably connected to the public policy of the state.

A statutorily prescribed dispute resolution forum is a sine qua non for stakeholder confidence in the legal system. Arbitrabilty of the dispute ought not to be left to a case by case assessment by the judicial system.   A party, who secures an Arbitral award in a dispute relating to Intellectual Property Rights, should not be told at a later stage by a Court (on a motion made to set aside or enforcement of the award)  that the award is without jurisdiction as the dispute was not arbitrable in the first place. There is also a possibility that the case may start out, before an Arbitral Tribunal as being about rights in personam and at a later stage the underlying grant or validity of registration of Intellectual Property Rights itself has to be directly or collaterally challenged by one of the parties.  This would lead to parallel litigation before the Arbitral Tribunal and the Court, an undesirable course for dispute resolution.

India is in the nascent stage of developing a liberal arbitration regime. In the fast-developing business world and increasing cross border transactions and commercial contracts, arbitration has attained the status of the most preferred form of dispute resolution mechanism. The arbitration clauses are in most cases broadly worded, intended to take in all potential disputes between the parties.  Parties opt for this alternate dispute redressal mechanism due to various factors such as certainty as to forum, speedy resolution, expert knowledge about technical matters, party autonomy, flexibility and most importantly confidentiality. Confidentiality is the most significant advantage of arbitration of IP disputes since the parties would prefer to keep the Intellectual Property Right related information out of the public domain.

The Arbitration and Conciliation Act, 1996 is being amended from time to time. It is hoped that the concept of non arbitrable disputes will come to be enumerated by Statute. In that process, it is further hoped that attention is bestowed on disputes regarding to Intellectual Property Right, balancing the interest of the parties to an arbitration agreement as well as public interest.

Foot Notes

1.   Carbonneau and Janson, Cartesian Logic and Frontier Politics: French and American Concepts of Arbitrability, 2 Tul Journal of International and Comparative Law, 193 (1994).

2.   Alexis Mourre, Arbitrabiliy of Antitrust Law from the Europe and US Perspectives, in 1 EU AND US Antitrust Arbitration: A Handbook Of Practitioners1, 3 (Gordon Blanke& Philip Landolt eds., 2011).

3.   The Arbitration and Conciliation Act, No. 26 of 1996, Section 7.

4.   Id, Section 34(2)(b).

5.   Id, Section 48(2).

6.   Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011 (2) KLT SN 76 (C.No. 96) SC = 2011 (5) SCC 532).

7.   Kingfisher Airlines Limited v. Prithvi Malhotra Instructor, 2013 (7) Bom C.R. 738 regarding labour disputes; Jayesh Shah v. Kaydee Family Trust, Arbitration Application 278 of 2012 regarding Trust disputes;A. Ayyasamy v. A Paramasivam (2016 (4) KLT OnLine 2302 (SC) = (2016) 10 SCC 386) enumerating non-arbitrable matters.

8.   Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited. (2020 (4) KLT OnLine 1164 (SC) = 2020 SCC Online 656).

9. Vidya Drolia v. Durga Trading Corporation (2020 (6) KLT OnLine 1025 (SC) = 2020 SCC Online SC 1018, ¶ 46).

10.  https://www.wipo.int/about-ip/en/.

11. The Patents Act, No.39 of 1970, Section 2(1)(m); S.2(1)(j).

12. The Copyright Act, No.14 of 1957, Section13.

13. The Trademarks Act, No.47 of 1999, Section 2(1)(zb).

14. Marc Blessing, Arbitrability of Intellectual Property Disputes, 12 Arbitration International 197 (1996).

15.  Julam D.M.Lew, Loukas A Mistelis and Stefan M Kroll, Comparative International Commercial Arbitration, 32 Kluwer Law International 187 (2003).

16. Federal Arbitration Act, 35 U.S.C., § 294 (a).

17.  Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191 (7th Cir.1987).

18. EC Regulation 44/2001 Art. 22(4); Simms, Arbitrability of Intellectual Property Disputes in Germany, 15 Arb Int 193 (1999).

19. Roussel-Uclaf v. Searle & Co., [1978] 1 Lloyds Rep. 225.

20. Decision dated December 15. 1975 published in the Swiss Review Of Industrial Property And Copyright, 36-38 (1976).

21. Mundipharma Ag v. Wockhardt, ILR 1991 Delhi 606.

22. Ministry of Sound International Ltd. v. Indus Renaissance Partners, 156 (2009) DLT 406.

23. Vikas Sales Corporation and Anr. v. Commissioner of Commercial Taxes (1996 (1) KLT OnLine 983 (SC) = AIR 1996 SC 2082).

24. Supra note 6.

25. Suresh Dhanuka v. Sunita Mohapatra (2012 (1) KLT SN 45 (C.No. 47) SC = AIR 2012 SC 892).

26. Mustill and Boyd in their 2001 Companion Volume to the 2nd Edition of Commercial Arbitration, Page 73.

27. A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386, ¶ 9; O.P. Malhotra & Indu Malhotra, The Law & Practice of Arbitration and Conciliation,(3^rd edn., 2014).

28.  Steel Authority of India Ltd. v SKS Ispat & Power Ltd. & Ors, Notice of Motion (L) No. 2097 of 2014 in Suit No. 673 of 2014, decided on 21st November 2014.

29.Eros International Media Limited v. Telemax Links India Pvt Ltd., 2016 (6) Bom.CR 321.

30. Indian Performing Right Society Limited (IPRS) v. Entertainment Network, Bombay High Court, 31 August 2016, in Arbitration Petition No. 341 of 2012.

31. Supra Note 6.

32. Supra Note 19.

33. Supra Note 26.

34. Deepak Thorat v. VidliRestaurant (2017 SCC OnLine Bom.7704, ¶ 7).

35. Supra Note 27.

36. M/S Impact Metals Ltd v. M/S MSR India Ltd. (AIR 2017 AP 12).

37. Lifestyle Equities CV v. QD Seatoman Designs Pvt. Ltd,13 October 2017 in O.S.A.Nos.216 and 249 of 2017, ¶ 5(p).