Weekly Legal Updates ( 10 December to 16 December 2023)

Weekly Legal Updates main objective is to update the legal knowledge of law students, lawyers, academicians and other professionals. If we do not update our legal knowledge regularly, our knowledge become redundant.

Article 370 abrogation in J-K constitutionally valid: Supreme Court backs Centre in landmark verdict

The Supreme Court on Monday upheld the Centre’s decision to abrogate Article 370, which granted special status to the erstwhile state of Jammu and Kashmir. The Supreme Court also directed the Election Commission of India to hold Jammu and Kashmir assembly elections by September 30, 2024.

Chief Justice of India DY Chandrachud, writing the judgment for himself and Justices Gavai and Surya Kant, said Article 370 of the Constitution was a temporary provision and the president has the power to revoke it. 

The Supreme Court ruling can be seen as a big boost for Prime Minister Narendra Modi and the Bharatiya Janata Party ahead of the 2024 Lok Sabha elections. Jammu and Kashmir lost its special status in August 2019 under Article 370 of the Constitution, months after the BJP won elections by a landslide and the prime minister made good on a key election pledge.

The Supreme Court was hearing petitions challenging a series of legislative and executive orders to scrap the special status of the erstwhile state of Jammu and Kashmir and split it into union territories, including Ladakh. Since then, the Jammu and Kashmir administration had restricted the movement of people, curbed internet connectivity and arrested local political leaders.

CJI Chandrachud reading out the judgment said every decision taken by the Centre on behalf of a state under proclamation can’t be subject to a legal challenge and it will lead to the administration of the state to a standstill.

The Supreme Court said it has held that Article 370 was a temporary provision.

” The proclamation of Maharaja stated that the Constitution of India will supersede. With this, the para of Instrument of Accession ceases to exist….Article 370 was an interim arrangement due to war conditions in the State. Textual reading also indicates that Article 370 is a temporary provision,” the court said.

The court also mentioned that the argument of petitioners that the Union government cannot take actions of irreversible consequences in the state during Presidential rule is not acceptable.

“We have held that the state of Jammu and Kashmir did not retain an element of sovereignty when it joined the Union of India. We have arrived at this conclusion for the following reasons. First paragraph eight of the instrument of acession executed by Maharaja Hari Singh provided that nothing in the instrument would affect the continuance of the sovereignty of the Maharaja in and over the state,” CJI Chandrachud said.

The CJI further noted that on November 25, 1949, a proclamation was issued for the State of Jammu and Kashmir by “Yuvraj Karan Singh”.

“The declaration on this proclamation, that the Constitution of India would not only supersede all other constitutional provisions in the state, which were inconsistent with it, but also abrogate them, achieves what could have been attained by an agreement of merger. With the issuance of the proclamation, paragraph of the instrument of acession ceases to be of legal consequence. The proclamation reflects the full and final surrender of sovereignty by Jammu and Kashmir through its sovereign ruler to India ” the CJI added.

The Supreme Court said, “The declaration issued by the President exercises the power and clause 3 of Article 370 is a culmination of the process of integration. Thus, we do not find that the President’s exercise of power under Clause 3 of Article 370 was malafide. We hold the exercise of Presidential Power to be valid.”

The court also noted that Article 370 was meant for the Constitutional integration of Jammu and Kashmir with the Union and it was not for disintegration and the President can declare that Article 370 ceases to exist.

“Concurrence of the State government was not required to apply all provisions of the Constitution using Article 370(1)(d). So, the President of India taking the concurrence of the Union government was not malafide,” the court noted.

On September 5, the top court had reserved its verdict after hearing the arguments for 16 days. The Centre had defended its decision to abrogate Article 370, saying there was no “constitutional fraud” in repealing the provision that accorded special status to the erstwhile state of Jammu and Kashmir.

Attorney General R Venkataramani and Solicitor General Tushar Mehta appeared for Centre.

Senior advocate Kapil Sibal, appearing on behalf of the petitioners, had opened the arguments, saying Article 370 was no longer a “temporary provision” and had assumed permanence post the dissolution of the Constituent Assembly of Jammu and Kashmir.

(Courtesy:- Hindustan Times, 11 December 2023)

Seven-judge bench overrules SC’s judgment on stamping of arbitration agreement

A seven-judge Constitution bench on Wednesday overruled the Supreme Court’s judgment in April, which held that an arbitration clause is void and not enforceable in law if the agreement is unstamped or insufficiently stamped.

By 3:2, the majority verdict in April said that a court could go into the aspects of stamping and other compliances before the arbitrator is appointed. This judgment in the NN Global case triggered concerns over delays in the appointment of arbitrators by adding one more layer of scrutiny, besides being seen as contrary to India’s pro-arbitration stance.

Setting aside the verdict, the larger bench, led by Chief Justice of India Dhananjaya Y Chandrachud, on Wednesday declared that agreements that are not stamped or insufficiently stamped are not rendered void or void ab initio or unenforceable if arbitration agreement prima facie exists between parties.

Although an unstamped or insufficiently stamped agreement is inadmissible in evidence under the Stamp Act, the bench added in its unanimous judgment, it is a curable defect in the law, and therefore, non-stamping or improper stamping does not result in the instrument becoming invalid.

The bench, which also comprised justices Sanjay Kishan Kaul, Sanjiv Khanna, Bhushan R Gavai, Surya Kant, JB Pardiwala and Manoj Misra, clarified that objection as to stamping does not fall for determinations under sections 8 or 11 of the Arbitration Act when a court has to refer parties to an arbitral tribunal. “The concerned court must examine whether the arbitration agreement prima facie exists. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal.”

Experts welcomed the verdict. “It is a landmark verdict that will boost the arbitration ecosystem of India. By removing the cloud over the uncertainty that the previous judgment had ushered in, today’s judgment has not only upheld the legislative intent of the Arbitration Act but also the salutary doctrines of party autonomy, separability as well as the doctrine of kompetenz by approving arbitrators’ power to decide upon their jurisdiction,” said Kunal Vajani, joint managing partner at law firm Fox & Mandal. Vajani is also a Court Member (India), the International Court of Arbitration.

Alipak Banerjee, leader, International Dispute Resolution and Investigations Practice at the Nishith Desai Associates emphasised that the Wednesday ruling will promote India as an international arbitration hub. “The April judgment caused confusion and uncertainty. Several matters where arbitration had been invoked and proceedings were underway hit a roadblock as the parties were being directed to regularise the agreement by paying the deficit stamp duty while the stamp collector had lack of guidance on how to deal with such agreements. Now, the issue stands settled.”

In its judgment on Wednesday, the court underscored that the Arbitration Act is a special law and that one of its objectives was to minimise the supervisory role of courts in the arbitral process. “Courts may only examine whether an arbitration agreement exists on the basis of a prima facie standard of review. The nature of objections to the jurisdiction of an arbitral tribunal on the basis that stamp duty has not been paid cannot be decided on a prima facie basis,” said the bench. It added any such scrutiny by courts at the threshold will defeat the legislative intent underlying the Arbitration Act.

Citing the relevant provisions of the Stamp Act, the court pointed out the statute characterises non-payment of stamp duty as a curable defect. “The Stamp Act itself provides for the manner in which the defect may be cured and sets out the detailed procedure for it. It bears mentioning that there is no procedure by which a void agreement can be cured.”

The seven-judge bench noted that its judgment does not allow the law to be flouted because the arbitral tribunal continues to be bound by the provision of the Stamp Act, including those relating to its impounding and admissibility, and challenges to the position and jurisdiction of arbitrators.

It delivered its ruling on a curative petition moved against the April judgment. The issue was referred to the larger bench by the top court on September 26, citing the “limitless uncertainty in the area of arbitration” triggered by its previous ruling.

The April judgment came while deciding a bundle of judgments since 2011, taking divergent views on the enforceability of arbitration clauses contained in unstamped or insufficiently stamped agreements. This judgment, by 3:2 majority, relied on the 1899 Indian Stamps Act that required certain agreements to be compulsorily registrable or chargeable to stamp duty when it held that a court could go into the aspects of stamping and other compliances before the arbitrator is appointed.

According to the majority view, a court is bound to examine the instrument at a pre-appointment stage, and if it is found to be unstamped or insufficiently stamped, the instrument is to be impounded at that stage, declaring the arbitration agreement to be void.

The two other judges on the bench, comprising the minority, flagged concerns that the view taken by the majority in the judgment has the propensity of frustrating the objective of the Arbitration and Conciliation Act, as scrutiny on the stamp duty at the threshold can stall the process and will lead to procedural complexity and delay in litigation before courts.

The judgment in the curative plea was reserved on October 12 with the bench expressing its doubt on the correctness of the April ruling. At the time, the seven-judge bench observed that stamping has nothing to do with the validity of an agreement, adding that provisions of the Contract Act will make it clear that any lacuna in the stamping of an agreement does not render the document invalid but can only impact its admissibility as evidence and consequently, its enforceability.

During the proceedings in October, the court clarified that its scope of reviewing the matter will confine to the stage and the correct forum for deciding the validity and enforceability of an arbitration agreement

(Courtesy:- Hindustan Times, 13 December 2023)

Supreme Court says being a nominee in share doesn’t grant inheritance rights

The Supreme Court has ruled that ownership of financial instruments like shares and debenture certificates should pass to the successor through legal or testamentary means, rather than to the nominee.

In a December 14 judgment, a bench of justices Hrishikesh Roy and Sanjay Karol said being a nominee in a share/debenture certificate doesn’t automatically grant inheritance rights. The ownership of these instruments is decided by the deceased’s will or succession laws in India, which may include the Hindu Succession Act or the Indian Succession Act, Moneycontrol reported.

The court decision came in a family disagreement, where the father granted shares and debentures to one son in his will. The other son, listed as the nominee in the documents, opposed this decision, claiming his ownership as the beneficial owner based on his nominee status.

The court said the ownership of shares and debentures relies on the deceased’s will or succession laws. The Companies Act of 1956 and 2013 intend nominees to assist in transferring shares, not to become successors, the ruling said.

The ruling, thus, made clear that a nominee isn’t the actual owner of the asset but holds it in a fiduciary role for the benefit of legal heirs, determined by a will or relevant succession laws.

A nominee is a temporary custodian appointed by the asset owner until succeeded by legal heirs, without absolute title to the asset.

The rights of a nominee are subordinate to those of a beneficiary under a will, with the will taking precedence over nomination.

(Courtesy:- Hindustan Times, 15 December 2023)

Supreme Court issues directions for places of worship in Manipur

The Supreme Court on Friday put its focus on the restoration of places of worship in Manipur, which has been overrun by ethnic violence between the Meitei and Kuki communities since early May, directing a high-powered committee of retired judges to frame a proposal for the identification and rebuilding of such places that were burnt down or razed during the riots.

A bench, led by Chief Justice of India Dhananjaya Y Chandrachud, ordered the Manipur government to furnish to the committee within two weeks a comprehensive list of identification of the places of worship that were burnt down, destroyed or encroached upon during the mayhem in the northeastern state that has so far claimed at least 175 lives.

Cognisant that the pleas before it claimed the destruction of churches as well as temples during the violence, the court made it clear that the identification would cover places of worship across all religious denominations.

The bench, which also comprised justices JB Pardiwala and Manoj Misra, added the state authorities shall also apprise the judges’ committee, headed by former J&K high court chief justice Gita Mittal, of the steps being taken to protect such places of worship from further dangers and encroachment, as well the current state policy of restoration.

“Based on the response, the committee should frame a proposal for the way forward, including restoration of such religious places. We clarify the committee will take a comprehensive view, including dealing with supervening circumstances and encroachment and occupation of such places,” it added.

“The next report shall have recommendations which will be taken into account while issuing orders of this court on the next date of the hearing,” the bench said.

The top court also took note that it will be on a winter break for the next 15 days, further recording in its order that the state government and the DGP will co-ordinate with the committee so that interim orders of the committee could be implemented without further delays.

During the hearing, the bench also recorded an assurance of solicitor general Tushar Mehta and additional solicitor general Aishwarya Bhati that necessary steps will be taken to ensure that persons housed in relief camps due to the riots in the state, are able to attend ceremonies and prayers on the occasion of Christmas.

The assurance was recorded after senior advocate Huzefa Ahmadi, representing the Meitei Christian Churches Council, requested that there should be some place where people in the sState could congregate to celebrate Christmas and observe other religious observances.

S-G Mehta, however, raised concerns saying congregation of a community at this time may pose law and problems. At this, the bench refrained from passing any order and only recorded the law officers’ assurance.

During the hearing, the court also directed the Manipur government to bring out a proposal or response regarding the rehabilitation of those whose homes were destroyed in the violence. “The proposal be also kept in front of the Committee for recommendations in this regard,” it added.

The court, while hearing a clutch of petitions relating to the ethnic strife in Manipur, had in August set up the committee of retired judges, comprising justices Mittal, Shalini P Joshi (former Bombay high court judge) and Asha Menon (former Delhi high court judge), on the efficacy of rescue, relief and rehabilitation measures.

(Courtesy:- Hindustan Times, 16 December 2023)

Over 5 crore court cases pending, government tells Lok Sabha

Over 10,000 cases were added to the Supreme Court’s pendency list in the last five months, which has increased from 69,766 cases as on July 1 to 80,040 on December 1. It had taken three years previously, from March 2020 to July 2023, to add 10,000 cases to the SC pendency.

Law minister Arjun Ram Meghwal told Lok Sabha on Friday that the 25 high courts had more than 61.7 lakh cases pending while district and subordinate courts had over 4.4 crore cases, taking
the total pendency in all courts in the country to over 5 crore cases. “Assignment of cases to judges and their disposal lies within the exclusive domain of the judiciary. The central government has no
direct role in the matter,” Meghwal said, responding to a member’s query. He said the government has been making constant efforts to provide an ecosystem for faster and efficient disposal of cases by the judiciary.

The number of court halls has increased from 15,818 as of June 2014 to 21,507 as of November 2023 and residential units increased from 10,211 to 18,882. Over the past decade, all courtrooms are digitally connected, besides substantial increase in the sanctioned and working strength of the judiciary.

(Courtesy:- The Times of India, 16 December 2023)

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