ALAYA LEGAL BULLETIN
Arbitration and Litigation
Arbitration cannot be optional when the clause in an agreement provides for arbitration.
A dispute arose in a partnership business between the partners. The Hon’ble Supreme Court of India (‘Court’) observed that if any such dispute arises, the clause in the partnership deed stating that arbitration shall be optional and the partners with their mutual consent will appoint the arbitrator, shall not be read in isolation but in the context of the arbitration clause.
This means that an aggrieved party who wants to take recourse to arbitration can invoke the arbitration clause. To this extent, there is mutual agreement. Thereupon, the arbitrator can be appointed with the mutual consent of all parties. This does not obliterate or write off the arbitration clause.?
The Court allowed the appeal and held that, in terms of the Arbitration and Conciliation Act of 1996 (Arbitration Act), where parties cannot agree upon a common name as to who will act as an arbitrator, the court can appoint the arbitral tribunal. The arbitration clauses must be read in a pragmatic manner.
The only remedy against a compromise decree is a recall application before the Court which recorded the compromise.
The appellant initially filed a suit for declaration and injunction, which was dismissed by the trial court. The appellant then filed a first appeal. During its pendency, the parties reached a compromise, agreeing to dispose of the appeal based on its terms.
The High Court of Rajasthan (‘High Court’) decided the appellant’s application under Order 23, Rule 3 of the Code of Civil Procedure, 1908 (‘CPC’), and disposed of the first appeal regarding the compromise. However, when the respondent failed to comply with the compromise terms, the appellant filed an application to restore the appeal. By the impugned order, the High Court dismissed the application solely on the ground that the order recording the compromise does not grant liberty to restore the appeal.
The Hon’ble Supreme Court allowed the appeal and held that there was no occasion for the High Court to deny liberty to file for restoration by its order and the consequent dismissal of the recall application by the impugned order on this ground alone does not arise. Further, as a matter of public policy, courts must not curtail statutorily provisioned remedial mechanisms available to parties.
Termination of Mandate of Arbitral Tribunal due to delay.
The petition was filed under section 29A(4) and (5) of the Arbitration and Conciliation Act of 1996 (Arbitration Act), read with section 7 of the Commercial Courts Act, 2015, seeking extension of the mandate of the Learned Sole Arbitrator for a period of one year for concluding the arbitral proceedings and passing the arbitral award.
The mandate of the sole Arbitrator terminated on 31.08.2023 and the petition was filed on 12.01.2024 i.e. after a period of four and a half months. It was the case of the respondents that the extension under Section 29A of the Arbitration Act should not be granted mechanically but only in cases, where sufficient cause of delay in the arbitral proceedings has been shown.
The Court observed that the parties and the Arbitral Tribunal have invested a lot of time, effort and energy in the arbitral proceedings. The essence of the Arbitration Act is a litigant-centric process to expedite the disposal of cases and reducing the cost of litigation.?
The Court allowed the petition holding that said delay of four and a half months in filing the present petition is not an inordinate delay to direct that the mandate of the Sole Arbitrator should not be extended or a substitute arbitrator should be appointed.
If remedy for Cause of Action falls within scope of Arbitration Agreement, Counter Party cannot be compelled to defend it in a Suit.
The appellant filed an appeal under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) against the order dated 13.11.2024 passed by the learned Commercial Court, whereby the appellant's application under Section 8 of the Arbitration Act for referring the parties to arbitration, was rejected.
The respondent had filed the aforementioned suit against the appellant seeking a recovery of a sum of Rs. 81,73,378.15/- along with pendente lite and future interest. The learned Commercial Court noted that the appellant had, in its email dated 06.02.2021, mentioned that the amount due and outstanding was Rs.65,51,806.14/-, which was accepted by the respondent. In the aforesaid circumstances, the learned Commercial Court passed the impugned order dated 13.11.2024 rejecting the appellant's application under Section 8 of the Arbitration Act on the ground that there was no dispute that is required to be adjudicated.
The Court observed that the very import of an arbitration agreement is that the parties will not take recourse to instituting an action in court but refer their disputes to arbitration. With respect to the application under Section 8, the Court held that, the scope of examination in an application under Section 8 of the Arbitration Act is limited to prima facie examining the validity and existence of the arbitration agreement.
Once it is accepted that a valid arbitration agreement exists between the parties, the court is necessarily required to allow the application under Section 8 of the Arbitration Act and refer the parties to arbitration.?
Not necessary to file separate application for delay condonation along with Application to set aside ex-parte decree.
In the present case, the appellant had trusted his counsel to manage the suit proceedings. However, he was not made aware of the ex-parte decree by his previous counsel. It is only after the appointment of the new counsel, the appellant got to know about the ex- parte decree.
An appeal challenging the decision of the Allahabad High Court was filed before Hon’ble Supreme Court of India. The question before the Hon’ble Supreme Court was whether a separate application for condonation of delay is necessary under Section 5 of the Limitation Act, 1963. The Hon’ble Supreme Court of India held that? it is clear that there was no need to file a separate application for condonation of delay in the present case.
The High Court has erred in taking a hyper technical view and concluding that there was violation of mandatory provision of law. Endorsing such a view would effectively mean ignoring the purpose of judicial procedure. The procedure cannot stand in the way of achieving just and fair outcome
Corporate & Commercial
Approval of shareholders is mandatory for listing shares on stock exchanges.
The appellant applied for the listing of certain equity shares to the Bombay Stock Exchange (BSE) but the application to that effect was not accepted for the reason that the appellant had not taken in-principle approval from the Stock Exchange and that the appellant had not even taken the approval of the shareholders for the allotment of the shares to the Asset Reconstruction Private Limited.
The Hon’ble Supreme Court stated that the approval of the shareholders would be mandatory before the shares are accepted for listing on the BSE. As contemplated by Section 62 (1)(c) of the Companies Act, 2013, a special resolution of the shareholders is necessary for such listing which is lacking in the present matter.?
Moratorium does not extinguish Claim.
It was argued that a clause of a deed of hypothecation is a contingent contract wherein the contingent event is the shortfall between realisation and expenses. Placing reliance on Section 14(1) of Insolvency and Bankruptcy Code, 2016 (IBC) it was contended that the contract has become impossible, since owing to the moratorium imposed, the hypothecated properties could not be sold and the shortfall could not arise.
The Hon’ble Supreme Court ruled that said Section 14(1) imposes an embargo or prohibition on certain acts. However, it does extinguish the claim. If the argument that the claims of all the creditors of the Corporate Debtor are extinguished once the moratorium comes into force is accepted, no creditor would be able to file a claim.
It was further held that? if the right to payment exists or if a breach of contract gives rise to a right to payment, the definition of ‘claim’ under Section 3(6) of the IBC is attracted. Even if that right cannot be enforced by reason of the applicability of the moratorium, the claim will still exist. Therefore, whether the cause of action for invoking the guarantee has arisen or not is not relevant for considering the definition of ‘claim’.??
Measures to address regulatory arbitrage with respect to Offshore Derivative Instruments (ODIs) and Foreign portfolio investment (FPI) with segregated portfolios.
SEBI has mandated additional disclosures for ODI subscribers meeting specific thresholds. ODI subscribers with over 50% equity ODI positions in a single Indian corporate group or holding equity positions exceeding INR 25,000 crore in Indian markets must provide granular ownership, economic interest, and control details up to natural persons.
Exemptions include government entities, Public Retail Funds (PRFs), exchange-traded funds, regulated pooled investment vehicles, endowments, and frozen accounts. ODI issuing FPIs must track compliance and realignment within prescribed timelines.
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Securities and Exchange Board of India (‘SEBI’) clarifies its stance on Foreign Portfolio Investors (‘FPIs’) from issuing Overseas Derivatives Instruments (‘ODI’).
In a press release dated December 18, 2024, SEBI has clarified that FPIs? have? only? been? barred? from? issuing? ODIs? with? derivative instruments? as? the? underlying.? As? on? date,? there? are? no? ODIs? with? derivative instruments as the underlying. It further clarified that ODIs referencing cash market securities can continue to be issued.
The Foreign Contribution (Regulation) Amendment Rules, 2024
The Ministry of Home Affairs has issued the Foreign Contribution (Regulation) Amendment Rules, 2024, intended to come into effect from January 1, 2025. These amendments modify the Foreign Contribution (Regulation) Rules, 2011, with provisions allowing associations to carry forward unspent allowable administrative expenses to the next financial year under certain conditions.
The amendments also update Form FC-4, including new categories for reporting the transfer of foreign contributions and detailing the carry forward of unspent administrative expenses.
Additionally, the certificate from a Chartered Accountant, verifying compliance with the Foreign Contribution (Regulation) Act, 2010 will now require more detailed information, including any violations of the said Act.
Energy and Sustainability
The Central Electricity Regulatory Commission (CERC) issues a third order to remove difficulties under the Indian Electricity Grid Code, 2023.
CERC issued its third order dated December 22, 2024 addressing difficulties in implementing provisions of the CERC (Indian Electricity Grid Code) Regulations, 2023 (Grid Code). The Grid Code, which came into effect on October 1, 2023, governs the scheduling, dispatch, and operation of electricity in India.
The trial run of solar and wind projects with capacities above 250 MW can now be performed in multiple installments with a minimum capacity of 50 MW in each installment, removing earlier restrictions on the number of installments under Regulation 22(3)(a).
The Commission invoked its powers under Regulation 58 (Power to Remove Difficulty) and Regulation 60 (Suo Motu Orders and Directions) of the Grid Code to clarify these modalities until suitable amendments are incorporated in the Grid Code. These directions will remain in force until amendments are formally introduced in the Grid Code.
Ministry of New and Renewable Energy (MNRE) Establishes Dispute Resolution Mechanism for Renewable Energy Sector
The MNRE has established a Dispute Resolution Mechanism to address unforeseen disputes that may arise between renewable energy (RE) power developers, EPC contractors, and implementing agencies such as SECI, NTPC, NHPC, SJVN, or other entities designated by MNRE. This initiative aims to resolve issues that emerge during the implementation of contractual agreements, as well as matters that fall beyond the scope of such agreements.
MNRE, through its order dated June 7, 2023, initially set up the mechanism, emphasizing its commitment to facilitating smoother operations in the renewable energy sector. Subsequently, on January 1, 2024, MNRE issued another order outlining the composition of a three-member Dispute Resolution Committee (DRC).
The reconstituted committee will handle disputes and function as per MNRE’s directives, ensuring an impartial resolution process. The composition of this committee, approved by MNRE, will remain in place until further orders. This step reflects the Ministry’s proactive approach to mitigating challenges in renewable energy projects, fostering an environment conducive to sustainable energy development.
The Central Electricity Regulatory Commission (Deviation Settlement Mechanism and Related Matters) (First Amendment) Regulations, 2024 The Central Electricity Regulatory Commission (CERC) has notified the CERC (Deviation Settlement Mechanism and Related Matters) (First Amendment) Regulations, 2024.
The amendment has revised the provisions of the principal regulations to address implementation challenges and streamline operational procedures.
As per the guidelines, solar projects must conduct trial runs with a minimum capacity of 50 MW, and projects exceeding 50 MW can complete trial runs in up to four instalments. However, for projects with an installed capacity of 250 MW or more, trial runs may be conducted in instalments of 50 MW each, with no limit on the number of instalments.
The generating stations must provide at least seven days’ prior notice to the regional load despatch centre (RLDC) and beneficiaries before trial runs and are required to obtain prior permission from RLDC for any interchange of infirm power. The scheduling of power will only be permitted after the issuance of a successful trial run certificate by the RLDC.
Industry standards on reporting of ‘Business Responsibility and Sustainability Report’ (BRSR) Core
To facilitate ease of doing business and to bring standardisation in implementation, the Industry Standards Form (ISF) has formulated industry standards for effective implementation of the requirement to disclose BRSR Core. The listed entities must follow the standards to ensure compliance with SEBI requirements on disclosure of BRSR Core. The circular shall be applicable for FY 2024-25 and onwards.
Modification of the scheme of Budgetary Support for the cost Enabling infrastructure for Hydroelectric Projects
The Cabinet has approved modifications to the scheme of budgetary support for enabling infrastructure for hydroelectric projects. The scheme now includes additional components: transmission lines to pooling points, ropeways, railway sidings, communication infrastructure, and strengthening of existing roads/bridges.
It applies to hydropower projects above 25 MW and all Pumped Storage Projects (PSPs) allotted on a transparent basis, with eligibility for projects issuing their first major package by June 30, 2028.
Budgetary support is capped at ?1 crore per MW for projects up to 200 MW and ?200 crore plus ?0.75 crore per MW for larger projects, with a total outlay of ?12,461 crores from FY 2024-25 to 2031-32. Approximately 31 GW of hydro capacity, including 15 GW PSP, will be supported.
Information Technology and Artificial Intelligence
The Telecom Regulatory Authority of India (‘TRAI’) released the Telecom Consumers Protection (Twelfth Amendment) Regulations, 2024.
On December 23, 2024, TRAI issued Telecom Consumers Protection (Twelfth Amendment) Regulations, 2024 (‘Regulations’). The salient features of the regulations are as follows:
(i) To mandate separate Special Tariff Voucher (‘STV’) for Voice & SMS to give consumers an option to pay for the services they require in general and to provide benefits to certain segments of consumers especially the elderly persons and those living in rural areas;
(ii) The cap on validity period for STV and Combo Vouchers (CV) has been increased from the? existing 90 days to 365 days for the benefit of consumers;
(iii) Colour coding of vouchers as it exists in the physical form has been done away with in view of the prominence of online re-charges.
If you have any questions regarding any of these developments or would like to reach out to our team for tailored solutions aligned with your vision and growth objectives, contact us today by filling our form: https://alayalegal.com/contact-us/.
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