Monthly Archives: April 2016

Amendments made to the Arbitration And Conciliation Act, 1996

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The Indian President on 23rd Day of October, 2015 promulgated an ordinance to amend the Arbitration and Conciliation Act, 1996. This Ordinance is aimed mainly to ease the the business for foreign investors based in India. Some of the important amendments which has been brought by the Parliament are as follows:
A. Section 2(1)(e) of the Act, Court has been amended and now the definition of “court” has been divided into 2 parts. The “Court” as per the Arbitration and Conciliation Act, ( except that of international commercial arbitration) means the Principal Civil Court of original jurisdiction in a District, and includes the High Court in exercise of its ordinary civil jurisdiction, and for the purpose of International Commercial Arbitration “court” means the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court.
B. A Proviso has been inserted to section 2(2) except where an agreement is made to the contrary which states that the Sections 9, 27, 37(1)(a) and 37(3) of the Arbitration and Conciliation Act shall apply to International Commercial Arbitrations, even if the place of arbitration is outside India, so long as the arbitral award made or is to be made in such place is enforceable and recognised under the provisions of Part II of the said Act;
C. Section 7(4)(b) has also been amended to the effect that after the words “or other means of telecommunication”, the following words has been added “including communication through electronic means”.
D. Section 8(1) has also been amended to the effect that when any action in an issue / matter which is the subject to any Arbitration Agreement and is brought before a judge, shall, even if there is any judgment, decree or order of the Hon’ble Supreme Court of India or any other Court, on an application made by a person who is a party to an arbitration agreement or any other person who is claiming through or under him, shall, refer the parties for the arbitration,unless prima facie it finds that valid Arbitration Agreement is not in existence. Proviso has been appended to Section 8(2) which provides that if an Arbitration agreement in original or its certified copy is not available with a party who applies and has been kept by another party then the party so applying can also get a petition filed praying the Hon’ble Court to ask the other party to produce the Original Arbitration Agreement or its Certified copy.
E. Section 9 has also been amended to the effect that Clause (2) and (3) has also been inserted which stipulates that once Hon’ble Court has ordered for the interim measures as provided under Section 9 (1), then the proceedings of the Arbitration shall has to start within a period of 90 days from the date of Court’s order or within such time as the Hon’ble Court orders. It has also been expressed that once the Arbitral tribunal ahs been constituted then the Hon’ble Court shall not entertain any application as a protection of interim measure, unless the Hon’ble Court finds that the Circumstances so exist through which the remedy under section 17 cannot be availed.
F. Section 11 has been amended too, wherever the words “the Chief Justice or any person or institution designated by him” occur are replaced / substituted by these words “the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court”. It has also been provided under Section 11(3) that whenever an application is brought by a party with regard to an appointment of an Arbitrator then it shall be disposed off as quickly as possible and every effort shall be made to dispose of the application within a period of 60 days from the date of notice effected on the other party.
G. Section 12 is amended to the effect of disclosure in detail of the circumstances of the appointment as an arbitrator. Schedule 5 is also appended to the said Act which enumerates the rules for the determination if the situation exists which may give rise to justifiable doubts with respect to the arbitrator’s independent or his impartial nature. Schedule 6 has also been added which enumerates the form in which such disclosure should be made by an Arbitrator with respect to his independence or his Impartiality. Section 12(5) in co-existence with the 7th Schedule has also been added which enumerates that if a person has any sort of relationship either with the party or his counsel or with respect to the subject-matter of the issue, and falls under any of the said categories as provided in the 7th schedule which shall render the Arbitrator ineligible with respect to his appointment.
H. Section 17 has been amended / substituted to the effect that whenever parties claims interim measures from the Arbitrator then the interim measures so decided shall be taken / deemed as it is an order of the Hon’ble Court and shall be enforceable under the CPC in the like manner as an order of the Hon’ble Court.
I. Section 29-A has also been inserted to the effect that the Arbitrator / Arbitral Tribunal shall pronounce the award within a period of Twelve Months, from the date of entering into reference. The said time can be further extended for a period only of six months but it shall be with the consent of the parties. It has also been enumerated that if the award is not made within the said time i.e., 12 months or within the extended time then the Arbitration proceedings has to stop unless the Hon’ble Court has before or after the expiry of the said period extended the tenure of the Arbitration Proceedings.
J. Section 29 B has also been added to the effect that the parties to resolve their dispute by means of fast track may dispense with the Oral Hearings and the matter may be decided by the Arbitral Tribunal only by means of Written Pleadings i.e., Claim, Reply, Documents and Written Arguments but the same should be an agreed / consented between the parties in written and this can happen at any stage of the proceedings either before the commencement of the proceedings or after the proceedings of the Arbitration has begun.
K. Section 34 is now more clear and has been amended to the effect that an award will be in conflict with the public policy of India, only if-
(i) The making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or
(ii) It is in contravention with the fundamental policy of Indian law (Explanation 2 provides that the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute) ; or
(iii) It is in conflict with the most basic notions of morality or justice.
Explanation (2A) has also been added to the effect that an arbitral award which has arisen out of the Arbitrations which is not an International Commercial Arbitration, may also be set-aside by the Hon’ble court, if the Hon’ble court finds that the award is vitiated by patent illegality appearing on the face of the award except that it shall not be set aside only on the ground of an erroneous application of law or by re-appreciation of evidence.
L. Section 37(1) has also been amended which provides that an appeal may also lie against an order refusing to refer the parties to arbitration under Section 8 of the said Act.
M. Schedule 4 is also added which provides the sample / model fees of Arbitral Tribunal / Arbitrator which should be in accordance with the amount in dispute.
Comment:-
The said amendment has seriously laid down the step to bring the standard of the country’s arbitration in parity with the International Arbitration and by getting such amendments the Country’s Arbitration will be cheaper and will also be expedited. Al the important pronouncement as laid down by the Judicial authorities has been taken into consideration while bringing in the said amendment and the difference created by the conflicting Judicial Pronouncements has been set-aside.
The contents of this document do not reflect the views / position of Azaad & Co and the contents must not be relied until and unless it has been compared with the said Acts and legal opinion has been taken on it.

Instrument / Document where Stamp-Duty has been insufficiently paid

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Indian Stamp Act is a vast area which requires in-depth study as this law is applicable in all the transactions irrespective of the amount involved irrespective of the fact that it is exchange, sale or buy etc., and the parties concerned has to pay the stamp duty to the government. Be it an individual or a company, on every transaction, stamp duty has to be paid. As for instance, a company based in Okhla, Delhi gives a loan to a person based in Hauz Khas,Delhi, and thereafter the person based in Hauz Khas, Delhi executes a promissory note in favour of the company based in Okhla, but the stamp duty as fixed by the law is not paid, and the person based in Hauz Khas Delhi refuses to pay the loan amount to the Company based in Okhla, Delhi and if a suit for recovery of money is filed in the Court by the company based in Okhla, Delhi against the person who took the loan amount based in Hauz Khas, Delhi, then that promissory note may not be read as an evidence in favour of the company based in Okhla Delhi against the person based in Hauz Khas Delhi. Moreover, if the duty is not paid then the penalty may be imposed by the concerned authorities / Government. If the penalty is not as imposed is not paid, then the Collector concerned can also punish the person for non-payment of the stamp duty and the penalty. The word penalty means fine and forfeiture and the collector has got the power in the perspective of revenue at the district level and has got the power to either punish, imposition of fine and forfeiture.
Introduction with Effect of Not Duly Stamping Instruments
First of all let us understand the definition of few words
2.1 Definition
Instrument –
“instrument” includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded;
Duly stamped –
“duly stamped”, as applied to an instrument, means that the instrument bears an adhesive or impressed stamp of not less than the proper amount, and that such stamp has been affixed or used in accordance with the law for the time being in force in India.
Collector –
(a) means, within the limits of the towns of Calcutta, Madras and Bombay, the Collector of Calcutta, Madras and Bombay, respectively, and, without those limits, the Collector of a district; and
(b) includes a Deputy Commissioner and any officer whom the State Government may, by notification in the Official Gazette, appoint in this behalf ;
Penalty –
“penalty” means ‘fine and forfeiture’
Instrument not duly stamped –
From the above definition ‘instrument’ means ‘any right or liability is transferred’ and ‘duly stamped’ means ‘instrument bears an adhesive stamp of proper amount as per fixed by law’ so ‘Instrument not duly stamped’ means ‘instrument bear a stamp which of the lower amount as per fix by law’
We can now conclude from the above definition that instrument means any right or liability is transferred while duly stamped means instrument bears stamp of appropriate amount as fixed by the law, therefore instrument duly stamped means Instrument bearing stamp of the lower amount as fixed by the law.
Penalties on Instrument not duly stamped:-
When a appropriate / Proper stamp duties are not paid on the concerned instrument, then the Collector has the power to impose Penalty. The penalty as imposed by the Collector on the Insuuficient Stamp duty may be a fine of Rs.500/- or the Collector may impose a fine to ten times the insufficient stamp duty.
As for instance, when a company based in Okhla, Delhi, gives on rent his commercial premises to a company based in Connuaught Place, Delhi but the lease deed signed between the companies based in Okhla and Connaught Place are not sufficiently stamped and thereafter the company based in coonaught place stops giving the rent to the company based in Okhla, Delhi, and thereafter a suit is brought in a court by the company based in Okhla, Delhi against the company based in Connaught Place, Delhi, then the court may either refuse to even issue notice against the compay based in Connaught Place, Delhi or the lease-deed may not be read as an evidence in favour of the company based in Okhla Delhi and against the company based in Connuaght Place, Delhi.
Instruments may be impounded after its Registration:- When either by mistake or otherwise, when any instrument is not stamped properly / duly and is registered under the Registration Act, 1908, the Registering officer may call for the instrument in original and after giving the parties an opportunity of being heard and after the recording of the reasons in writing and furnishing a copy to the party, may impound the instrument. But, on failure to produce / bring the said original instrument by the concerned party, a true copy of the said instrument is taken from the record and shall be treated / deemed to be the original of said instrument.
Sub-Section(1) – Person- Liablity of Firm or Corporation for Servants’ Act – The term ‘person’ does include a Partnership firm and a Corporation. When a servant of a trading partnership firm gives an unstamped receipt and thereafter refuses to give a stamped receipt, then all the partners of the firm can be held to be criminally liable.
It is to be remembered that the word signing otherwise than as witness means that a witness to an Instrument does not draw, make ot execute it.
The word “Accepting” does not mean receiving the instrument but it is rather executing as an Acceptor. It is to be remembered that to receive a promissory note which is not duly stamped and thereafter to put it in a suit does not attract an offence / punishment. If an instrument is not duly / properly stamoped then the person who is subject to penalty is the person who has made that instrument and it is not that person in whose favour that particular instrument is made but it incurs the risk being debarred from producing it as an evidence but the person in whose favour it is made does not make him liable for penalty.In other sense, it is to be understood that the receiver of the instrument is not liable as that of an abettor. Receiving the payment of a promissory note means receiving the money which is due and under the promissory note and not receiving the promissory note itself.
Under Section 25 of the General Clauses Act, the fines which are recoverable are laid down under the the Criminal Procedure Code and if payment of fine is not made then Simple Imprisonment can also be made. The word penalty includes both fine and forfeiture.
Therefore, in general sense, it has to be understood that the Document / Instrument should be duly stamped and non payment of stamp duty may attract penalty, punishment and moreover, the most important fact is that the particular document / Instrument may not be read as an Evidence in the Court of Law.

Post Dated Cheque given as an advance does not constitute an offence under Section 138 of Negotiable Instrument Act:-

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Post Dated Cheque given as an advance does not constitute an offence under Section 138 of Negotiable Instrument Act:-
If a post-dated cheque is given to any person / seller as an advance in lieu of or towards purchase of any item and thereafter the cheque is bounced then it does not constitute an offence under Section 138 of Negotiable Instrument Act. The same has been held in the matter of:- Indus Airways Pvt. Ltd. v. Magnum Aviation Pvt. Ltd. decided on April 7, 2014 in Criminal Appeal No. 830 of 2014 by a bench of Justice R.M. Lodha and Justice Shiva Kirti Singh.
While adjudicating the above-said case law, the Hon’ble Supreme Court of India referred to the Explanation appended along with Section 138 of the Negotiable Instrument Act “debt or other liability”, which is mentioned as follows:-
“Explanation. – For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.”
The Hon’ble Supreme Court of India held as under:
“… The explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. In other words, drawal of the cheque in discharge of existing or past adjudicated liability is sine qua non for bringing an offence under Section 138. If a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise, and material or goods for which purchase order was placed is not supplied, in our considered view, the cheque cannot be held to have been drawn for an exiting debt or liability. The payment by cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability.”
As for instance, if a person / purchaser based in Green Park, Delhi comes intending to purchase some goods from a seller in Hauz Khas, Delhi. One of the terms and conditions of the contract is that the purchaser based in Green Park, Delhi has to give entire payment in advance and therefore the purchaser based in Green Park, Delhi gives a post-dated cheque as an advance to the seller in Hauz Khas, Delhi for the goods. Subsequently, the purchaser based in Hauz Khas, Delhi cancels the order and requests the seller based in Hauz Khas, Delhi to return the post-dated cheque and also made a request to his banker based in Green Park, Delhi for the stop-Payment. But the seller based in Hauz Khas, Delhi presents the post-dated cheque before his banker in Hauz Khas, Delhi and cheque given by the purchaser based in Green Park, Delhi bounces. Under these circumstances, the purchaser based in Green Park, Delhi will have no liability for the post-dated cheque given to the seller based in Hauz Khas, Delhi under Section 138 of Negotiable Instrument Act.

Jurisdiction of Courts with regard to Cheque-Bounce Cases

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Jurisdiction of Courts with regard to Cheque-Bounce Cases
The jurisdiction of filing cheque bounce cases under Section 138 of the Negotiable Instrument Act is now covered by the provisions of the new Ordinance promulgated by the Parliament with effect from 15.06.2015 which are as follows:
1. A Cheque bounce case under Section 138 of the Negotiable Instrument Act will be filed only where the payee / complainant has his bank account and the territorial jurisdiction of the court will be covered by the branch of the bank where it is located. As for instance, if a person is in Delhi and he has an account in a bank a particular place in Delhi / New Delhi. The person receives a cheque from a person in Chandigarh. The person presents the Cheque in Delhi / New Delhi in the bank where the person has his account. Thereafter if the cheque is bounced, then the case of cheque bounce will be filed only in Delhi / New Delhi in the particular Hon’ble Court which has the territorial jurisdiction over that place where the person’s bank is situated.
2. If the person has filed a case of cheque bounce in a court before the Hon’ble Court in the above-said manner, thereafter if second cheque of the same person / client (drawer) which has previously bounced, thereafter all the subsequent case of cheque bounce against the same person / client / drawer has to be filed before the same Hon’ble Court. This will guarantee the fact that the drawer of the cheque is not troubled by the several case of cheque bounce against him at other areas / cities. The crux of the above-said provision is that case of Cheque bounce under Section 138 of the Negotiable Instrument Act will be filed only in one Court notwithstanding the fact that the cheque is presented in different areas in different banks. If for instance, the payee / complainant has presented the cheque of the drawer in his bank located in Hauz Khas Branch in Delhi, then all the subsequent cheque of the same drawer / person has to be present in the same branch of his bank i.e., the same bank located in Hauz Khas Branch, Delhi
3. All the matters with regard to Dishonour of Cheques which are pendent lite / pending adjudication as on the date of 15-06-2015 Before the Hon’bl Courts in India will be moved / transferred to the Hon’ble court which has territorial jurisdiction to try the matter as afore-mentioned, meaning to say, the matters / cases of Cheque Bounce cases will be sent / transferred to the Hon’ble Court which has territorial jurisdiction at the area in which the bank of the payee / complainant is situated. So, where there has been multiple litigations between the same parties as on date 15.06.2015 then the matters will be sent / transferred before the Hon’ble Court which had jurisdiction where the first case / matter had Jurisdiction. If for Instance, the complainant / payee has several cases against the drawer of the case instituted in different Courts in India, i.e., one case of S.138 Cheque Bounce is pending Adjudication in Saket Courts , New Delhi instituted in the year 2010, another case of Cheque Bounce had been instituted against the same drawer in the year 2011 in Tis Hazari Courts, Delhi, another case of Cheque Bounce had been instituted against the same drawer in the year 2012 in Dwarka Courts, Delhi, another case of Cheque Bounce had been instituted against the same drawer in the year 2013 in Patiala House Courts, Delhi, another case of Cheque Bounce had been instituted against the same drawer in the year 2014 in Rohini Courts, Delhi, another case of Cheque Bounce had been instituted against the same drawer in the year 2015 in Karkardooma Courts, New Delhi, and all the above-said cases are pending adjudication, then Saket Courts will have the jurisdiction to try and adjudicate all the above-said matters since the First case of Cheque Bounce was firstly instituted in Saket Courts, Delhi.

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