Article Category: Dispute Resolution

Authored by Rahul P Jain, Khushboo Rupani and Mahafrin Mehta

Arbitration is an alternate dispute resolution mechanism voluntarily chosen by the parties to get their civil/commercial disputes adjudicated upon. It is a well-settled law that an Award passed by an arbitral tribunal can be enforced in the same manner as a Decree passed by an Indian Court. It is pertinent to note that the Arbitration and Conciliation Act, 1996 (A&C Act) does not prima facie exclude a category of disputes which are to be treated as non-arbitrable. However, in case of certain categories of disputes, the Courts refuse to refer the parties to arbitration under Section 8 of the A&C Act.

A license is a personal right granted to a person to do something upon immovable property of the grantor i.e. the Licensor and does not amount to the creation of interest in the property itself. It is purely a permissive right to use and occupy the immovable property and is personal to the grantee i. e the Licensee. It creates no duties and obligations upon the persons making the grant and is, therefore, revocable except in certain circumstances expressly provided.

Section 52 of the Indian Easement Act, 1882 (Act) defines License as:

“Where one person grants to another, or to a definite number of other persons, a right to do or continue to do, in or upon immovable property of the grantor, something which would, in the absence of such rights, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license.”

The essential features of a license are a license is not connected with the ownership of land/property but creates only a personal right or obligation; A license cannot be transferred or assigned; License is purely permissive right, express or implied, and not by adverse exercise or in any other way; It only legalizes a certain act which would otherwise be unlawful and does not confer any interest in the property itself in or upon or over which such an act is allowed to be done.

As per the amended Section 41 of the Presidency Small Causes Court Act, 1882 (PSCC Act), the small causes court shall have exclusive jurisdiction to try all suits/proceedings between a licensor and licensee, or a landlord and tenants, relating to the recovery of possession of any immovable property and/or to the recovery of the license fee or charges or rent. However, the same will not be applicable to suits/proceedings arising out of certain Acts i.e Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, the Bombay Government Premises (Eviction) Act, 1955, the Bombay Municipal Corporation Act, the Bombay Housing Board Act, 1948.

The Courts have recognized a distinction between disputes involving rights in rem and those involving rights in personam. It ruled that disputes concerning rights in personam may be decided by a private forum such as an arbitral tribunal but those concerned with rights in rem should be decided by a public court.

The case of A. Ayyasamy v. A. Paramasivam carved out the following two categories of disputes which may not be subject to arbitral proceedings: (i) Disputes falling within the exclusive jurisdiction of a special court under a special statute; and, (ii) Disputes which are generally considered by the courts as appropriate for decision by public fora, for instance, disputes pertaining to rights in rem.

Typically, disputes between Licensor and Licensee under L&L Agreement are in the following areas:

• Damage caused to the premises, fittings or misuse thereof & Delay in payment of rent & Unpaid dues and utility bills:

In the matter of Himangni Enterprises v Kamaljeet Singh Ahluwalia, the Hon’ble Supreme Court dismissed the argument that the Delhi Rent Act, 1995, was not applicable to the dispute by virtue of Section 3(1) (c) of the A&C Act and hence it could be referred to arbitration. The Court ruled that the mere preclusion of the application of the Delhi Rent Act did not mean that the A&C Act would automatically apply to the dispute. In such a situation, the rights of the parties would be governed by the Transfer of Property Act, 1882. Further, in the event the exemption in Section 3(1) (c) ceased to apply, the Act would become applicable to the premises. The Court placed its reliance on Natraj Studios (P) Ltd. (supra) and Booz Allen (supra) and ruled that it has already been established that tenant-landlord disputes are non-arbitrable.

However, recently in the matter of Vidya Drolia v. Durga Trading Corp, the Hon’ble Supreme Court has referred the question of arbitrability under the Transfer of Property Act to the Larger Bench, holding that judgment in Himangni Enterprises is required to relook. It observed that there is nothing in the TP Act that shows that a dispute as to the determination of lease cannot be decided by arbitration. It was noted that grounds u/s.111 whether r/w s.114 or 114A can be raised before an arbitrator.

• Eviction Proceedings and recovery of possession:

While the law is clear on disputes arising above are governed by special statutes such as the Rent Control Act e.g. In Maharashtra, Section 24 of the Maharashtra Rent Control Act 1999 governs such dispute and as such the jurisdiction to entertain such disputes lie before the Competent Authority. As per Section 44 of the Maharashtra Rent Control Act 1999, the order passed by the Competent Authority is non-appealable and only a revision is allowed before State Government.

In the matter of Natraj Studios (P) Limited Vs. Navrang Studios, a landlord had filed a suit for eviction in the Small Causes Court, Bombay, and the tenant had filed an application under Section 8 of the A&C Act based on the arbitration clause contained in the L&L Agreement between the parties. The Hon’ble Supreme Court rejected the said application filed by the tenant and held, that the suit filed by the landlord for an eviction, was maintainable. It was further held that the disputes of such nature cannot be referred to the arbitrator. The relationship between the parties is that of licensor-landlord and licensee-tenant and the dispute between them relating to the possession of the licensed premises, therefore, the Small Causes Court alone has the jurisdiction and the arbitrator has none to adjudicate upon the dispute between the parties.

In Booz Allen & Hamilton Inc v SBI Home Finance Limited a Division Bench of the Hon’ble Supreme Court laid down a range of disputes to be non-arbitrable including ‘eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction’.

In Central Warehousing Corporation v Fortpoint Automotive Pvt. Ltd, it was held by the Hon’ble Bombay High Court that Section 5 of the A&C Act cannot affect the laws for the time being in force by virtue of which certain disputes may not be submitted to arbitration, as stipulated in Section 2(3) of the said Act¹²  and that Section 41 of the Act of 1882 falls within the ambit of Section 2(3). Thus, even if the Licence Agreement contains the Arbitration Agreement, the exclusive jurisdiction of the Small Causes Court under Section 41 of the PSCC Act is not affected. An Arbitration Agreement in such cases would be invalid and inoperative on the principle that it would be against public policy to allow the parties to contract out of the exclusive jurisdiction of the Small Causes Courts.

• Premature termination of rent agreement or mutual termination of the agreement:

In the matter of Ashok Thapar v. Tarang Exports (P) Ltd, Hon’ble Bombay High Court has held that an Arbitration Clause survives even when the Leave and Licence Agreement was mutually terminated. After analyzing SMS Tea Estate (P) Ltd. v. Chandmari Tea Co. (P) Ltd.  and Magma Leasing and Finance Ltd. v. Potluri Madhavilata, It was held that once parties have intended to refer their dispute to the Arbitrator, then any dispute relating to such agreement must necessarily go to Arbitrator, even if agreement containing such a clause gets terminated by mutual consent.

• Return or forfeiture of security deposit:

A dispute arising on account of the above and if the L & L Agreement contains an Arbitration clause then the same can be invoked and the recovery of a security deposit under a Leave and License Agreement can be procced with. In absence of an Arbitration clause in the L & L Agreement, then a Summary Suit under Civil Procedure Code, 1908 is a step available to the Licensee.

In A.S Patel Trust & Ors. Vs. Wall Street Finance Ltd, the Bombay High Court was of the view that any proceedings filed for recovery of the security deposit is not an action in rem but is action in personam and thus Section 41 of the PSCC Act will not be applicable and an Arbitrator will have the jurisdiction to adjudicate upon the subject dispute.

In the matter of RMC Readymix (I) Pvt. Ltd. Vs. Kanayo Motwani, the Hon’ble Bombay High Court has held that a claim for refund of the security deposit as stipulated under an L&L Agreement will not be covered under the provisions of Section 41(1) of the PSCC Act and a summary suit can be filed for the same.

Resolving disputes through alternate dispute mechanisms, such as arbitration are preferred options over litigation in India, especially property-related disputes which have a reputation to continue for years, even decades. Although arbitration agreements are held to be binding over the parties to such agreements, they are held to be void when a statute gives exclusive jurisdiction to a forum to try certain disputes. However, resolving disputes in courts continues to be a prolonged process, and parties in dispute will have to wait for many years for the outcome. Thus, these judgments put to rest the much-debated issue of the validity of arbitration clauses in the L&L Agreement.

Authored by Rahul P Jain, Khushboo Rupani and Mahafrin Mehta

Being time efficient, procedural, and enforceable, arbitrations as a means of dispute resolution has gained traction in the past two decades across the globe. Having an arbitration clause in commercial contracts, arbitration has become the preferred mechanism for resolving commercial disputes, especially in cross border transactions. In this note, we shall focus on the execution/enforcement of foreign Arbitral Awards in India. For the execution of a foreign award, the successful party has to move an application (a single application shall hold good for enforcement as well for the execution of foreign award) by way of a petition to the court of competent jurisdiction for the enforcement of the award and if the court is satisfied that the award is enforceable then, the foreign award can be proceeded to be executed just like a decree of the court by virtue of the objective laid down in the Arbitration & Conciliation Act, 1996 (Arbitration Act) itself, which states that every final arbitral award shall be enforced in the same manner as a decree of the court. The execution of a decree is governed by Order 21 of the Code of Civil Procedure, 1908.

Section 44 of the Arbitration Act defined a foreign award as an award passed in foreign countries, which are signatories to either the New York Convention or the Geneva Convention; and the Government of India has issued a notification in the official Gazette declaring the said foreign country to be the territory to which the above conventions applied. It is to be noted that a notification under section 44 (b) is passed by the Government of India’s on its satisfaction that reciprocal provisions have been made in the country in which the award is passed.

Section 47 of the Arbitration Act provides that every application for the enforcement of a foreign award under the act shall be accompanied with the original award or the copy of the award as authenticated as per the requirement of the country in which it is made; the original arbitration agreement or a copy of arbitration agreement; And any evidence that is necessary to prove that the award that is rendered is foreign in nature; In case the award is in the local language of the country in which the award is made then an English translation of the award is to be accompanied with the application. The translation is to be verified by the consulate of the country in which it is made.

Section 48 of the Arbitration Act list out the conditions when the Foreign Award cannot be enforced, which include arbitration agreement was not valid under the law to which parties to the agreement were subjected to and parties were not under some legal incapacity in the country in which the said award is made; party to arbitration was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or the party was unable to present the case; the same deal with the differences not contemplated in the submission to arbitration or contains decision on matters beyond the scope of submission to arbitration; the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made; the subject-matter of the difference is not capable of settlement by arbitration under the law of India; the enforcement of the award would be contrary to the public policy of India. If the award is not subject to any of the above conditions, then the Court would order for execution of the said Award.

The limitation period for enforcement of a foreign award would be the limitation period for execution of decrees, as is provided under Schedule I- item 136 of Limitation Act, 1963 i.e., twelve years from when the decree or order becomes enforceable or where the decree or any subsequent order directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods, when default in making the payment or delivery in respect of which execution is sought, takes place: Provided that an application for the enforcement or execution of a decree granting a perpetual injunction shall not be subject to any period of limitation.

Considering the above we can say that there exists is a thorough procedure for the enforcement of foreign arbitral awards in India. To enforce a foreign award effectively and expeditiously in India the award holder should get the award certified by a court in whose jurisdiction the Arbitration took place (i. e competent court). In the first stage, the Court may have to decide about the enforceability of the award having regard to the requirement of the said provisions. Once the court decides that foreign award is enforceable it can suo-moto proceed to take further effective steps for execution of the same. There arises no question of making the foreign award as a rule of court/decree again. It can be said that our legal system has a well-established procedure for the enforcement of foreign awards in India.

Authored by Rahul P Jain, Maaz Hashmi, Khushboo Rupani and Mahafrin Mehta

The expression ‘execution’ means enforcement or implementation of the order or judgment passed by the Court. A Decree means an operation or conclusiveness of a judgment and the execution of a Decree is complete when the decree-holder gets satisfied as to its enforcement against the judgment-debtor i.e. receiving of the awarded amount or property, as the case may be. It is the medium by which a decree-holder compels the judgment-debtor to carry out the mandate of the Decree. To take the benefit of a decree, execution proceedings – an Application under Order XXI of the Code of Civil Procedure, 1908 (CPC) have to be filed before the appropriate court/authority within 12 years from the date of Decree.

Different types of Decrees include Preliminary Decree, Final Decree, Partly Preliminary and Partly final, Consent Decree, Ex-parte Decree, Decree passed in appeal, Decree on a compromise petition, and Conditional Decree – Decree with inbuilt conditions forming part of the Decree. The general rule as laid down under Section 38 of CPC is that ‘the Decree may be executed either by the court which passed it or by the court to which it is sent for execution. The words ‘Court which passed the Decree’ includes courts which passed the Decree (court of the first instance) and courts of the first instance in appellate Decree. The executing court cannot question the validity of a Decree or entertain an objection as to the legality or otherwise of the Decree. It must take the Decree as it stands and executes it according to its terms. The executing court must abide by the directions contained in the Decree.

It is true that an executing court cannot question the Decree and has to execute the Decree as it stands, however, this principle has no operation when the objection is based on the effect of the provision of the Act, which deprived the party of his proprietary rights. In these circumstances, the executing Court can refuse to execute the Decree holding that, it has become inexecutable on the account of change in the law. There are, however, some cases where the executing court can go behind the Decree such as Nullity of Decree, Ambiguous Decree and Decree made without jurisdiction. Once the Decree is obtained, depending on the nature of the case, the Decree-holder can choose its mode of execution of the Decree under Section 51 – 54 of the CPC.

The procedure of Execution (Approximate timelines)

• A written application is to be filed in the court that originally passed the decree or the court to which it has been transferred for execution. It shall contain all the essential information such as suit number, name of parties, date of the decree, any appeal preferred or pending, amount due, name of the person against whom execution is sought, and most importantly the mode in which the assistance of the court is required. On filing the Application a lodging number is given for raising of defects – Time limit three weeks from the filing of Application, defects are raised by the registry.
• On raising of defects, the Decree holder must remove all defects and get the same certified by the registry – Time limit one week from raising of the defect by the registry.
• After the executing court has satisfied itself that all defects if any have been cured in the application and has provisionally evaluated, without prejudice to the right of the parties, the correct amount for the execution of the decree concerning the value of the immovable property, it finally gives a number to the Application for further movement. On obtaining of a final number to the Application, process or a show-cause notice is issued by the registry to the judgment debtor, only if, the execution petition is filed after 2 years of the passing of the decree, or is against a legal representative or assignee or receiver where DH is declared to be insolvent – Time limit two weeks from date of the final number.
• Where the person to whom notice is issued under rule 22 does not appear or does not show cause to the satisfaction of the court why the Decree should not be executed, the court shall order the Decree to be executed, by the issuance of Warrant of Sale and/or Warrant of Attachment. Where such person offers an objection to the execution of the decree, the court shall consider such objection and make such order as it thinks fit – Time limit is about four weeks to eight weeks for the hearing to take place and decision of the registry.
• Once after the court has decided upon the claims or objections (if any), raised by the judgment debtor, against the execution of a decree, the DH shall move an application requesting attachment of immovable property preceding the sale. Though sale can take place without attachment, this shall further help in protecting the interests of the Decree Holder – Time limit is about two weeks from the decision on claims/objection if any and/or final numbering of the Application, whichever is applicable.
• Once the Warrant of Attachment is issued, the same be drawn in writing and posted at a conspicuous place adjacent to the immovable property in question, and also at collector’s office if the said property is a land paying revenue to the government. Besides affixing Warrant of Attachment, it shall be publicly proclaimed with the beating of drums and other means. – The time limit is two weeks from the issuance of the Warrant of Attachment.
• Based on the report submitted by the bailiff of Sheriff office, the registry shall issue a Warrant of Sale order in the name of the bailiff to publicly auction as per the details mentioned in the warrant on the date and place specified and report back to court with an endorsement certifying how sale has been executed or the reason why it has not been executed. – The time limit is two weeks from the submission of the report.

Execution of Foreign Decrees in India:

A foreign Decree or judgment needs to be conclusive in nature. Section 13 of the CPC lays down the test for conclusiveness of a foreign judgment or decree, which says that a foreign judgment would be conclusive in all cases except the following:

• When a court of competent jurisdiction has not pronounced it
• When it has not been pronounced on the merits of the case
• When it has been based on a wrong view of international law or a refusal to recognize the law of India in cases in which such law is applicable
• When the proceedings carried out while obtaining the judgment are opposed to natural justice
• When such a judgment has been obtained by fraud
• When it sustains a claim that had been based on a breach of any law in force in India

Thus, a foreign judgment or Decree shall have to pass the seven tests mentioned above. Otherwise, such foreign judgment or Decree cannot be enforced in India as it will not be regarded as conclusive if it fails any of these tests.

There can be various challenges that can come in the ways for executing a Decree smoothly. The challenges that can be faced by the Decree holder are as follows:

• Obstructionist proceedings: The provisions contained in Sections 51 to 74 of the CPC deal with the substantive law relating to the execution of a Decree. The numerous rules of Order XXI of the CPC take care of different situations, providing effective remedies not only to the Decree holder, auction purchaser, and Judgment-debtors but also to obstructionists claiming independent rights, title, and interest in the property. If a third-party is effected by the execution of a Decree, such a third party can make an application to the executing Court to resolve its grievances.
• Defect in the process of the execution: There can be procedural defects as the application is not properly filed or some details are missed. These are curable defects and the same can be rectified failing which the decree cannot be executed.
• Defect in serving the Notice under Order XXI Rule 22: The Notice should be sent to the person against whom the decree is to be executed only if the application for execution is filed after 2 years from the decree. It is mandatory to send a notice as it is a show-cause notice whereby a date is fixed as the person against whom the decree is to be executed should explain as to why the decree should not be executed against him. The notice has to be properly served on the party against whom the decree has to be executed failing which the execution cannot proceed.

It can be summarized that Order XXI of the CPC is an independent code in itself and it not only provides a procedure to be followed by the decree-holder to get the fruits of the Decree but also gives an opportunity to the judgment debtor or the third party/ objection petitioner, to raise the grievances or objection in the execution proceeding itself.

Authored by Chinmay J Mirji and Charitha V

The last few years has witnessed a significant hike in the number of frivolous criminal complaints being filed to settle civil disputes. Majority of civil disputes related to family inheritance, partitions, property, will execution, disputes between two companies or disputes resulting from a contract between two parties – the general tendency is to lodge a criminal complaint against the opposite party in addition to the filing of civil suits or initiation of arbitration proceedings.

This mechanism of settling civil disputes has been increasingly used for recovery of the alleged outstanding amount payable by one party to another in the course of business transaction bound by contracts. The delay in adjudication of civil disputes has led to converting civil disputes into criminal cases. Further, the quick relief offered by a criminal prosecution as opposed to a civil dispute encourages the litigant to initiate false and vexatious proceedings.

This growing trend of converting pure civil disputes into criminal cases has drawn flak from the courts of India and the same has been upheld by the Hon’ble Apex Court. A summary of the judgments passed by the Hon’ble Apex Court is set out below:

• Govind Prasad Kejriwal Vs. State of Bihar & Anr: In the judgement dated January 31, 2020, the apex court has observed that ‘It cannot be disputed that while holding the inquiry under Section 202 of CrPC, the Magistrate is required to take a broad view and a prima facie case. However, even while conducting/holding an inquiry under Section 202 of CrPC, the Magistrate is required to consider whether even a prima facie case is made out or not and whether the criminal proceedings initiated are an abuse of process of law or the Court or not and/or whether the dispute is purely of a civil nature or not and/or whether the civil dispute is tried to be given a colour of criminal dispute or not. As observed hereinabove, the dispute between the parties can be said to be purely of a civil nature. Therefore, this is a fit case to quash and set aside the impugned criminal proceedings.’ Therefore, the underlying principle observed by the Hon’ble apex court is that filing a criminal complaint to settle civil disputes is nothing but an abuse of process of law and the Court.
• The Commissioner of Police & Ors Vs Devender Anand & Ors: The Hon’ble apex court vide order dated August 8, 2019 has observed that ‘Even considering the nature of allegations in the complaint, we are of the firm opinion that no case is made out for taking cognizance of the offence under Section 420/34 of IPC. The case involves a civil dispute and for settling a civil dispute, the criminal complaint has been filed, which is nothing but an abuse of the process of law.
• M/S Indian Oil Corporation Vs M/S Nepc India Ltd. And Ors: The Hon’ble apex court vide order dated July 20, 2006 has concurred with its order passed in the matter of G. Sagar Suri v. State of U.P, that, ‘it is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law.’ The bench comprising of Justice H.K. Sema and Justice R V Raveendra while deciding an appeal filed by Indian Oil Corporation, challenging an order of the Madras High Court quashing criminal cases filed by it against NEPC India have sent out a clear warning that ‘Any effort to settle civil claims and disputes which does not encompass any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged.’ . Further, the bench has observed that ‘While no one with a legitimate cause or grievance should be prevented from seeking remedies in criminal law, a complainant who initiates or persists with a prosecution being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable at the end of such misconceived criminal proceedings.’
• Binod Kumar Vs. State of Bihar: The Hon’ble apex court reiterated the principle of law that criminal proceedings are not to be used as a shortcut for civil remedies and since no case of cheating is made out in any of the FIRs, the petitions are allowed and FIRs was quashed.

The conclusions drawn from all the above-mentioned judgements, essentially stipulates that courts have time and again deprecated the initiation of false criminal proceedings in cases having the elements of a civil dispute. Despite several warning and judgements passed by the Hon’ble apex court against using criminal complaints as a weapon to settle civil disputes, there has been no change in the number of criminal cases being filed. However, it becomes essential to not let such frivolous criminal complaints act as a bargaining weapon to attain a speedy settlement or to get the desired results. Criminal complaints are not to be used as a means to intimidate people to achieve their goals of settling civil disputes. It becomes the duty of the counsels to help uphold the principle of natural justice in the view of the judgements passed by the Hon’ble apex court and make sure that civil disputes given the colour of criminal offence should be quashed and the guilty must be held accountable for abusing the process of law and the courts.