Scope of Section 45 of the Arbitration and Conciliation Act, 1996

Introduction

A Division Bench of the Supreme Court (“SC”) comprising of Justice A.K. Patnaik and Justice Ibrahim Kalifulla have ruled that the ongoing dispute between World Sport Group (Mauritius) Limited (“WSG”) and MSM Satellite (Singapore) Pte. Limited (“MSM”) will be decided by Arbitration proceedings to be held at Singapore. The SC while deciding so also set aside the judgment of the Bombay High Court wherein the Bombay High Court had injucted (stopped) WSG from continuing arbitration proceedings against MSM.

Brief Facts 

The dispute relates to the grant of media rights for the Indian Premier League (“IPL”) by the Board of Control for Cricket in India (“BCCI”) to WSG and MSM.

MSM was granted media rights for IPL by BCCI in the Indian Sub-Continent and WSG was granted media rights for IPL by BCCI for the rest of the world.

Thereafter, WSG and MSM entered into an agreement, whereby MSM was to pay Rs. 425 Crores to WSG and acquire global rights to broadcast the IPL - The Agreement provided for a dispute resolution clause – “disputes would be resolved by arbitration by the International Chamber of Commerce (“ICC”) to be held at Singapore”.

Thereafter Board of Cricket Control in India (“BCCI”) wrote to MSM stating that WSG had no role to play in the execution of the Contract and hence the facilitation fee of Rs. 425 Crores was to be paid to BCCI.

Thereafter MSM rescinded the Agreement on the ground that the agreement was voidable on grounds of misrepresentation and fraud by WSG.

Pursuant to the recession, WSG sought to invoke the arbitration clause in the Agreement and as a counter blast of WSG’s notice - MSM filed a suit in the High Court of Bombay for a declaration that the Agreement was voidable and that WSG was not entitled to invoke arbitration clause in the Agreement.

The Suit was dismissed by a single judge of the High Court of Bomaby but allowed in appeal by a Division Bench.

Thereafter WSG approached the Supreme Court against the Division Bench order.

Contentions

MSM had contended that WSG did not have any right to relinquish or to facilitate the procurement of Indian subcontinent media rights for the IPL from BCCI and no facilitation services could have been provided by WSG. Thus MSM claimed that the said representation by WSG which formed the basis for the Agreement was false and accordingly, the Deed was voidable at the option of MSM.

MSM further contented that the arbitration agreement was inoperative or incapable of being performed as allegations of fraud could be enquired into by the court and not by the arbitrator.

Decision

“This ground of challenge to the Facilitation Deed does not in any manner affect the arbitration agreement contained in Clause 9 of the Facilitation Deed, which is independent of and separate from the main Facilitation Deed and does not get rescinded as void by the letter dated 25.06.2010 of the respondent. The Division Bench of the Bombay High Court, therefore, could not have refused to refer the parties to arbitration on the ground that the arbitration agreement was also void along with the main agreement.”

On MSM’s contention that the arbitration agreement was inoperative or incapable of being performed as allegations of fraud could be enquired into by the court and not by the arbitrator, the Court held that,

“...the arbitration agreement does not become “inoperative or incapable of being performed” where allegations of fraud have to be inquired into and the court cannot refuse to refer the parties to arbitration as provided in Section 45 of the Act on the ground that allegations of fraud have been made by the party which can only be inquired into by the court and not by the arbitrator.”

Conclusion

The SC has very rightly held that a court in the context of a foreign arbitration would be obliged to refer parties to arbitration unless the arbitration agreement itself was found to be null and void, inoperative or incapable of being performed as outlined in Section 45 of the Arbitration and Conciliation Act, 1996 (Act). The decision is significant as it formulates precise guidelines based on which Indian Courts can refuse to refer parties to arbitration under Part II of the Act.

Note:    As the disqualifications in Section 45 were not satisfied in the present matter the Court held that the HC should not have interfered with the arbitration.

The dispute will now have to be submitted to ICC for arbitration to be held in Singapore.

SUPREME COURT INTERPRETS SECTION 24 (2) OF THE RIGHT TO FAIR COMPENSATION AND TRANSPARENCY IN LAND ACQUISITION AND REHABILITATION AND RESETTLEMENT ACT, 2013

INTRODUCTION

A three judge bench comprising of Justice R.M. Lodha, Justice Madan B. Lokur, and Justice Kurian Joseph of the Hon’ble Supreme Court of India (hereafter referred to as “the SC”) while interpreting section 24(2) – (specifically true meaning of the expression “compensation has not been paid”) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (hereafter referred to as “the 2013 Act”) which came into effect on January 01, 2014 have held as under:

We are of the view, that for the purposes of Section 24(2), the compensation shall be regarded as “paid” if the compensation has been offered to the person interested and such compensation has been deposited in the court where reference under Section 18 can be made on happening of any of the contingencies contemplated under Section 31(2) of the 1894 Act. In other words, the compensation may be said to have been “paid” within the meaning of Section 24(2) when the Collector (or for that matter Land Acquisition Officer) has discharged his obligation and deposited the amount of compensation in court and made that amount available to the interested person to be dealt with as provided in Sections 32 and 33.

BRIEF FACTS

The Municipal Commissioner, Pune (hereafter referred to as “the Commissioner”) Municipal Corporation (hereafter referred to as “PMC”) made a proposal on August 06, 2002 for acquisition of lands admeasuring 43.94 acres (hereafter referred to as “the said land”) for development of “Forest Garden”, the same was duly approved by the Standing Committee and thereafter sent to the Collector, Pune.

The Collector sanctioned the proposal and on February 20, 2003 and forwarded the same to Special Land Acquisition Officer, Pune for further action.

The notification under Section 4 of the Land Acquisition Act, 1894 (hereafter referred to as “the 1894 Act”) was published in the official gazette on September 30, 2004 and pursuant to the said publication, notices under Section 4(1) of the 1984 act were served upon the landowners / interested persons.

Thereafter the declaration under Section 6 of the 1984 act was published in the official gazette on December 26, 2005 and the same was also published at the site and on the notice board of the Office of Talaltti on February 02, 2006.

Following the notices under Section 9 of the 1984 act, the Special Land Acquisition Officer on January 31, 2008 made the award to acquire the land under Section 11 of the 1894 Act.

RELEVANT SECTIONS

Section 24 of the 2013 Act –

(1) Notwithstanding anything contained in this Act, in any case of land acquisition proceedings initiated under the Land Acquisition Act, 1894

(a) Where no award under section 11 of the said Land Acquisition Act has been made, then, all provisions of this Act relating to the determination of compensation shall apply; or

(b) Where an award under said section 11 has been made, then such proceedings shall continue under the provisions of the said Land Acquisition Act, as if the said Act has not been repealed.

      

      (2) Notwithstanding anything contained in sub-section (1), in case of land acquisition proceedings initiated under the Land Acquisition Act, 1894, where an award under the said section 11 has been made five years or more prior to the commencement of this Act but the physical possession of the land has not been taken or the compensation has not been paid the said proceedings shall be deemed to have lapsed and the appropriate Government, if it so chooses, shall initiate the proceedings of such land acquisition afresh in accordance with the provisions of this Act:

Provided that where an award has been made and compensation in respect of a majority of land holding has not been deposited in the account of the beneficiaries, then, all beneficiaries specified in the notification for acquisition under section 4 of the said Land Acquisition Act, shall be entitled to compensation in accordance with the provisions of this Act.

Section 31 of 1894 Act – Payment of compensation or deposit of same in Court

(1) On making an award under section 11, the Collector shall tender payment of the compensation awarded by him to the persons interested entitled thereto according to the award, and shall pay it to them unless prevented by some one or more of the contingencies mentioned in the next sub-section.

(2) If they shall not consent to receive it, or if there be no person competent to alienate the land, or if there be any dispute as to the title to receive the compensation or as to the apportionment of it, the Collector shall deposit the amount of the compensation in the Court to which a reference under section 18 would be submitted:

There is amendment in Maharashtra – Nagpur City in Section 31 whereby in Sub Section (1) after the words compensation and in Sub Section (2), after the words, “the amount of compensation”, the words “and costs if any” have been inserted.

LEGAL ISSUES

Whether the said acquisition shall be deemed lapsed because the award under Section 11 of the 1894 Act is made more than five years earlier to the commencement of 2013 Act?

Whether it be said that deposit of the amount of compensation in the government treasury is equivalent to the amount of compensation paid to the landowners/persons interested?

ARGUMENTS ADVANCED

The landowners argued that by virtue of Section 24(2) of the 2013 Act, the said acquisition shall be deemed to have been lapsed because the award under Section 11 of the 1894 Act is made more than five years prior to the commencement of 2013 Act and no compensation has been paid to the owners nor the amount of compensation has been deposited in the court by the Special Land Acquisition Officer.

PMC on the other hand argued that the award was made by the Special Land Acquisition Officer on January 31, 2008 strictly in terms of 1894 Act and on the very day the landowners were informed about the quantum of compensation for their respective lands.

Notices were also issued to the landowners to reach the office of the Special Land Acquisition Officer and receive the amount of compensation and since they neither received the compensation nor made any request to make a reference to the District Court under Section 18, the compensation amounting to Rupees Twenty seven crores (INR. 27,00,00,000.00/-) was deposited in the government treasury.

PMC humbly submitted that there was no default on the part of the Special Land Acquisition Officer or the government and, hence, the acquisition proceedings have not lapsed.

Further PMC also relied upon Section 114 of the 2013 Act and it is argued that the concluded land acquisition proceedings are not at all affected by Section 24(2) and the only right that survives for the landowners is to receive the compensation.

ANALYSIS OF PAST PRECEDENT

Nazir Ahmad v. King Emperor; [A.I.R. 1936 Privy Council 253(2)]

The Privy Council while discussing the powers of the state have held that it is settled proposition of law that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden.

Ivo Agnelo Santimano Fernandes and Others v. State of Goa and Another; [(2011) 11 SCC 506]

The SC while deciding the deposit of compensation by the state while relying upon the earlier decision in Prem Nath Kapur v. National Fertilizers Corpn. of India Ltd.; [(1996) 2 SCC 71] has held that the deposit of the amount of compensation in the state’s revenue account is of no avail and the liability of the state to pay interest subsists till the amount has not been deposited in court.

DECISION OF THE COURT  

The SC while taking note of the admitted position that award was made on January 31, 2008 and notices to receive the compensation were issued to the landowners and upon their failure to receive the compensation, the amount of Rupees Twenty seven crores (INR. 27,00,00,000.00/-) was deposited in the government treasury observed that - "It is clear that the award pertaining to the subject land has been made by the Special Land Acquisition Officer more than five years prior to the commencement of the 2013 Act. It is also admitted position that compensation so awarded has neither been paid to the landowners / persons interested nor deposited in the court. The deposit of compensation amount in the government treasury is of no avail and cannot be held to be equivalent to compensation paid to the landowners / persons interested".

We have, therefore, no hesitation in holding that the subject land acquisition proceedings shall be deemed to have lapsed under Section 24(2) of the 2013 Act.

CONCLUSION

The SC has once again come to the rescue of the common man by checking the abuse of power by the officers of the state and their failure to follow standard procedure as provided for under the relevant legislation. This decision by the SC will ensure that the state and its officers irresponsible conduct is taken into account and they be not allowed to reap windfall gains by circumventing or not strictly following the provided procedure.

Interpretation accorded to Section 24 of the 2013 act is welcome and will go a long way in standardizing the procedure / process relating to land acquisition in the country and also ensure that the procedure for acquisition of land as provided for in the 2013 act is rightfully followed both in letter and spirit.