2010- The “Judicial” Review

2010 may be known as the year of scandals and law enforcement in India faces arguably its biggest challenge. I am hoping that this time next year, my review will be centred around how successfully this challenge has been met. For the purpose of the 2010 review, however, while the scandals inevitably find their way into this piece of mine, there are many other issues that are of equal importance.

I realize that attempting to prepare an exhaustive list of legal developments in 2010 is an exercise in futility. Given the space restraints I face, not only will it not do justice to these developments, it will also put to sleep any reader who is not deeply passionate about the law. I have therefore decided to identify and briefly analyze what I believe are the most eventful and influential “legal” events of 2010.

The Legislative development of the year

2010 has seen the Indian Government take two important measures to further the commercial law reform which was initiated in 2009.

a. The Commercial Division of High Court Bill, which is based on the 188^th Law Commission Report and which was passed by the Lok Sabha towards the end of 2009, was referred by the Rajya Sabha to the Select Committee on Personnel, Public Grievances, Law and Justice. The Bill, which was a reaction to criticism by foreign Courts and media of the delays occurring before Indian Courts, sought to expedite adjudication of commercial disputes of value of Rs. 5 crores or above- under the proposed Act commercial disputes are to be resolved within a time span of one year.

While majority of the members of the Select Committee gave the green signal, there were a couple of opinions within the Select Committee that might adversely impact the passing of the Bill.

First, it was suggested that the Act, if passed, would result in numerous cases which are now being filed before the District Courts being transferred before the Commercial Division of High Courts, resulting in an overload of cases in the High Court.

Second, it was argued that the Act, if passed, may violate the right to equality guaranteed by Article 14 of the Constitution of India as the Act would result in treating people seeking to resolve disputes of larger values differently from those seeking to resolve disputes of lower value.

In my view, both these criticisms are unfounded. In reality, most commercial disputes of such large value do not get resolved at the District Court level and go up on appeal before the High Court. Hence the case load before the High Court is not going to increase drastically because of the proposed Act. This Act would also meet the constitutional challenge- the Legislature has the discretion to classify disputes based on its value in order to meet a policy objective, i.e. to expedite adjudication of high value commercial disputes.

b. The Law Ministry issued a Consultation Paper suggesting amendments to the Arbitration and Conciliation Act, 1996 to address, among others, the problem of excessive judicial interventions in arbitrations- both domestic and international. The Consultation Paper proposes among other things, that Indian Courts will not have jurisdiction to interfere (except for providing interim relief) where the arbitration is conducted outside India. i.e. where the “place of arbitration” is  outside India; Indian Courts cannot appoint an arbitrator or set aside the award. Furthermore, in cases of “Commercial Disputes of specified value” as defined in the Commercial Division of High Courts Bill, this power would stand automatically delegated to an arbitral institution. Moreover, a fixed time frame (of sixty days) for processing applications for appointment of arbitrators has also been specified.

While some of the proposed amendments address the main problems faced by arbitration in India, a few of the amendments are potentially controversial and could result in more litigation. (For a more detailed analysis refer to two of my previous posts.)

The “social and political” case law of the year

It was a no-brainer to decide which case would qualify under this head- the Ayodhya verdict. The political statements preceding this judgment and the media debates set the tone for a perfect “settlement-judgment” that too in a case where the parties had failed to settle after attempting to do so for a period spanning decades.

The majority of the judges of the 3 judge bench of the Allahabad High Court (Justices Khan and Agarwal) held that the land should be divided into three equal parts and be divided between the Hindus, Muslims and the Nirmohi Akhara (since this housed the Hindu place of prayer even when the mosque existed). The rationale of the equal division between the Hindus and Muslims was that neither could prove their title to the disputed land and that both have been in joint possession of the disputed land at different times. It would therefore follow that they be granted joint title to the land. It was however clarified that the portion below the central dome where at present the idol in the makeshift temple was kept would be allotted to the Hindus.

There were subtle differences in the reasoning adopted by the two majority judges and interested readers may see the following link for more details.

http://rjbm.nic.in/

While some aspects of the legal reasoning are questionable, this was possibly the only decision that would not have caused communal unrest in the country.

The commercial case law of the year

The decision with the foremost commercial impact this year, in my view, is the decision of the Bombay High Court in Vodafone International Holdings v. Union of India. The Bombay High Court held that transfer of an Indian entity by one non-resident company to another will give rise to an incidence of capital gains tax in India. The High Court took the view that the capital gains arose out of the transfer of a capital asset that was situated in India and hence gave rise to capital gains tax in India. The nexus with India was established by the fact that what were being transferred were not merely the shares of the Indian entity but associated rights including the right to control the company, the right to use the Hutch brand etc.

A detailed analysis of this analysis can be found in the following links:

http://indiacorplaw.blogspot.com/2010/09/vodafone-international-holdings-v-union.html

http://indiacorplaw.blogspot.com/2010/09/some-thoughts-on-vodafone-judgment-case.html

Unless this decision is reversed by the Supreme Court, Vodafone could find its pockets lighter by $ 1.7 billion.

The question of the year

The success of Nira Radia as a “lobbyist” has raised concerns similar to those raised in USA in the late 1800’s and early 1900’s. The debate in USA came to an end when it was declared that lobbying was part of the “right to petition” and consequently, in 1995, the Lobbying Disclosure Act was enacted requiring lobbyists to register with the Government and make certain disclosures. The disclosures were made more stringent with the enactment of the Legislative Transparency and Accountability Act of 2006. Consequently, lobbyists are supposed to submit detailed reports on their activities and these reports are made available to the public. Lobbyists are also prohibited from doling out gifts to the legislators. USA has therefore succeeded in eradicating some of the harmful effects of lobbying by legitimizing lobbies.

The question that has arisen post the Radia saga is whether India should follow the US model and attempt to minimize the impacts of this inevitable evil? Would legitimization of lobbies and controlling some of their activities lead to elimination of the worst harms caused by lobbyists? These questions are likely to form part of media and legislative debates in 2011- I personally believe that we need to adopt the US model.

Judicial scandal of the year

Though not in the same league as the scandal in 2009 relating to Justice P.D.Dinakaran (and fortunately so) the recent controversy relating to the inaction taken by the then Chief-Justice of India (Justice K.G.Balakrishnan) (“CJI”) pursuant to a report sent by the then Chief-Justice of the Madras High Court (Justice H.L. Gokhale) informing the CJI about a Cabinet Minister (A.Raja), attempting to influence one of the judges of the Madras High Court (Justice Raghupathi), shows that something is rotten in the judiciary. Justice Gokhale claims that he attached with his report, a copy of the letter sent to him by Justice Raghupathi, which mentioned the name of A.Raja with details of how the Minister tried to influence him. Justice Balakrishnan on the other hand says that nothing about the Minister was mentioned. Clearly, there is a contradiction in the versions of the judges involved.

Quote of the year

“If I had to live my life all over again, as a lawyer, and the brief came to me and I had foreknowledge of everything that later came in, I would not have accepted the case. I think I was described along with others as a fallen angel. I am no angel, of course, but nor am I a devil. But fallen angel would perhaps sum up what others thought of this whole episode.”

- Fali Nariman, in his autobiography “Before Memory Fades”, on the one brief he regrets accepting (Bhopal Gas tragedy)

The Criticaltwenties Law and Judiciary team takes this opportunity to wish you all a happy new year.