Highlights: 

Corporate Brief 

• Circular dated 24.09.2024 issued by Securities and Exchange Board of India (SEBI) regarding Parameters for Performance Evaluation of Market Infrastructure Institutions (MIIs).
• Circular dated 09.2024 issued by Securities and Exchange Board of India (SEBI) regarding Foreign Venture Capital Investors (FVCIs) and Designated Depository Participants (DDPs).
• Supreme Court Judgement decided on 09.09.2024 regarding Power of Rectification of Register of Members. 

RERA Brief

• Circular dated 02.09.2024 issued by Kerala RERA (K-RERA) regarding mandatory submission of updated Quarterly progress Reports (QPR) by promoters.
• Order dated 04.09.2024 bearing order no. 60/2024  issued by Maharashtra RERA regarding Submission of proforma of allotment letter and agreement for sale at the time of registration of a real estate project in compliance of Clause (g) of Sub-section 2 of Section 4 of the Real Estate (Regulation and Development) Act, 2016.
• Order dated 04.09.2024 bearing order no. 61/2024 issued by Maharashtra RERA (MahaRERA) regarding clarification of Order No. 56/2024 dated 27.06.24.
• Office order dated 10.09.2024 issued by Uttar Pradesh RERA (UP RERA) regarding standard operation procedure for transferring funds to the complainant’s account.
• Public Notice issued by RERA Punjab regarding discontinuation of undertaking cum indemnity bond for fresh registration and renewal of registration of Real Estate Agents with RERA Punjab.

Intellectual Property Rights Brief

• Vishesh Films Private Limited v. Super Cassettes Industries Limited (2024 SCC OnLine Del 6117)
• Axcess Limited v. Controller of Patents and Designs CA (COMM.IPD-PAT) 288/2022

NCLT Brief

• Breach of Repayment Plan by personal guarantor would entitle creditors to initiate bankruptcy proceedings against the said personal guarantor

Litigation Brief

• IN THE MATTER OF: Dalmia Family Office Trust & Anr v. Getamber Anand & Ors.
• High Court can invoke Article 227 to correct orders of Commercial Courts
• Calculating Limitation for adverse possession; Time of Ownership not be included: Neelam Gupta & Ors. Vs. Rajendra Kumar Gupta & Anr., Hon’ble Supreme Court of India.

Corporate Brief: 

Circular dated 24.09.2024 issued by Securities and Exchange Board of India (SEBI) regarding Parameters for Performance Evaluation of Market Infrastructure Institutions (MIIs). 

• SEBI vide circular dated 24.09.2024, provided the parameters for performance evaluation of recognized stock exchanges, recognized clearing corporations, and depositories (hereinafter “Market Infrastructure Institutions (MIIs)”).
• The Circular provides that the MIIs shall appoint an independent external agency to evaluate its performance and the performance of its statutory committees within such periodicity and in such a manner as may be specified by the Board.
• The parameters aim to bring consistency and uniformity with respect to evaluations to be done by the external agency, it provides for the basic minimum standards and principles along with weightages.
• The provisions of the Circular shall come into force from the 30th day of its issuance. 

Circular dated 09.2024 issued by Securities and Exchange Board of India (SEBI) regarding Operation Guidelines for Foreign Venture Capital Investors (FVCIs) and Designated Depository Participants (DDPs). 

• SEBI vide circular dated 26.09.2024, issued guidelines aimed at helping FVCIs and DDPs transition smoothly to the amended FVCI regime, which will come into effect on January 1, 2025. The amendment notification, inter alia, specifies provisions related to registration of FVCI through Designated Depository Participants, eligibility conditions, renewal of registration, etc.
• Key provisions include mandatory engagement with DDPs by March 31, 2025, for existing FVCIs, failure of which could result in a halt on new investments and deadlines for liquidating listed and unlisted securities by 2026 and 2027, respectively. The guidelines also provides for rigorous Know Your Customer (KYC) compliance.
• Additionally, DDPs are required to conduct eligibility assessments within six months of engagement, with FVCIs failing to meet the criteria restricted from making new investments. SEBI has also introduced strict measures to disqualify entities linked to the UN Security Council’s sanctions list.

Supreme Court Judgement decided on 09.09.2024 regarding Power Of Rectification Of Register Of Members.

• In the case of Chalasani Udaya Shankar and others v. M/s. Lexus Technologies Private Limited and Ors., the Supreme Court held that Company Law Tribunals can exercise powers of rectification of the register of members under Companies Act 2013 if the applicant was a victim of an ‘open-and-shut’ case of fraud by his opponents.
• The case pertained to a company engaged in the business of software development. In 2004, respondent Mantela Narasa Raju, no.2 acquired 94.8% of the company’s shares, subsequently leading to the appointment of Mantela Narasa Raju, respondent no.2, along with two others, as directors of the company.
• In 2015, the appellants, Chalasani Udaya Shankar, Sripathi Sreevana Reddy, and Yalamanchilli Manjusha purchased the shares of the Mantela Narasa Raju, respondent no. 2 and became the majority shareholders. They received share certificates that were signed and authenticated.
• The issue arose when the respondents failed to conduct Annual General Meetings for the financial years 2014-15, 2015-16, and 2016-17. Subsequently, the Registrar of Companies struck off M/s. Lexus Technologies Pvt. Ltd. (respondent company) from the Register of Companies on 21.07.2017. The appellants then discovered that their shareholding had been erased from the company records and their names were not on the shareholders’ list.
• The appellants filed the case in NCLT and alleged that the aforesaid persons committed various acts of oppression with the intention of grabbing the company property. They prayed for rectification of the Register of Members of the company, by entering their names and also taking appropriate actions against the opposite party. Thereupon, the NCLT, passed a final order stating that the appellants had failed to prove their case and had not bothered to realize their rights as shareholders. The case of the appellants was held to be fraudulent in nature and devoid of fact and law.
• Thereafter, the appellant approached the NCLAT by way of Company Appeal (AT) (CH) No. 44 of 2021. NCLAT held that they could not maintain the allegation of oppression and mismanagement which would be available only to a person who is a member of the company. The NCLAT accordingly dismissed the appeal and the I.A. as devoid of merit, leading to filing of appeals in the Supreme Court.
• The Supreme Court observed that when examining the issue of rectification, if the company court find that there is an open-and-shut case of fraud, making the present applicant a victim, powers to rectify can be exercised by the Court.
• The bench emphasized that the Court should carefully exercise the powers under S.59 of the Companies Act, 2013 by first conducting a detailed examination of the available materials, evidence, and facts, held that the company court or the NCLAT in the present instance must carefully examine each case. The Supreme Court set aside the judgment in Company Petition No. 667/59 & 241/HDB/2018 and judgement in Company Appeal (AT) (CH) No. 44 of 2021 and I.A. No. 548 of 2021. Further, it restored the Company Petition No. 667/59 and 241/HDB/2018 to the file of the National Company Law Tribunal, Amaravati Bench, for consideration afresh on merits and in accordance with law, upon proper appreciation of evidence.

Real Estate Brief

Circular dated 02.09.2024 issued by Kerala RERA (K-RERA) regarding mandatory submission of updated Quarterly progress Reports (QPR) by promoters. 

• K-RERA vide circular dated 02.09.24 reminded all promoters that periodical uploading of the QPR at the webportal of the authority is a mandatory requirement after the projects registration.
• In the said circular, it is stated that non-compliance with these statutory requirements shall result in possible suspension or revocation of the registration of the project, inclusion in the list of non-compliant projects, potentially affecting the market reputation and legal action including blacklisting/ restraining the sales of the units.

Order dated 04.09.2024 bearing order no. 61/2024 issued by Maharashtra RERA (MahaRERA) regarding clarification of Order No. 56/2024 dated 27.06.24. 

• MahaRERA vide Order issued a clarification of its previous order No.56/2024 dated 27.06.24, to address concerns over whether Landowners having entitlement to Revenue Share/ Area Share with the promoter-developer under a registered Development Agreement are required to maintain the three bank accounts for a real estate project.
• In the said order, it was clarified that Promoter as declared while seeking registration under Section 4 read with Section 3 of the RERA Act to follow the MahaRERA Order relating to the opening of the three bank accounts.
• Hence, only in cases where Landowners make a declaration of him being a promoter, would he be required to open the three bank accounts.

Order dated 04.09.2024 bearing order no. 60/2024 issued by Maharashtra RERA regarding Submission of proforma of allotment letter and agreement for sale at the time of registration of a real estate project in compliance of Clause (g) of Sub-section 2 of Section 4 of the Real Estate (Regulation and Development) Act, 2016.

• Maha RERA, in view of prior orders, issued directions regarding the submission of proforma of allotment letter and agreement for sale. The proforma of the allotment letter proposed to be signed by the promoters with the allottees is to be in accordance with the model allotment letter annexed to the order.
• The directions further state that in case the allotment letter is not in accordance with the proforma of the allotment letter as annexed to the said order, the deviations of the allotment letter shall be highlighted in a different colour and be uploaded along with a deviation sheet mentioning the deviations while seeking registration of the real estate project so as to allow the allottees to make an informed decision.
• The promoters have also been directed to upload the proforma of the agreement for sale proposed to be signed with the allottees as per model form of agreement at Annexure A of Rule 10 of the Rules or as per the proforma of the agreement for sale and provide details in the clauses of the agreement for sale as prescribed in the order.
• The clauses regarding parking as incorporated in the proforma of the allotment letter and agreement for sale are not permitted to be modified.

Office order dated 10.09.2024 issued by Uttar Pradesh RERA (UP RERA) regarding standard operation procedure for transferring funds to the complainant’s account.

• UP RERA vide Order dated 10.09.24 issued SOP for transferring funds to the complainant’s account. The said SOP prescribe the following:
  1. Process to be followed at RERA office upon receipt of cheque/ demand draft.
  2. Operating procedure for correspondence required for transfer of funds in complainant’s account.
  3. Process for transfer of funds in complainant’s account.

Public Notice issued by RERA Punjab regarding discontinuation of undertaking cum indemnity bond for fresh registration and renewal of registration of Real Estate Agents with RERA Punjab.

• RERA Punjab vide Public Notice informed all stakeholders that w.e.f. 04.09.24, the submission of Undertaking cum Indemnity Bond as part of the process for Fresh Registration and Renewal of Registration of Real Estate Agents is no longer a requirement.

Intellectual Property Rights Brief 

Vishesh Films Private Limited v. Super Cassettes Industries Limited (2024 SCC OnLine Del 6117)

The High Court of Delhi granted an interim injunction in favour of Vishesh Films, restraining Super Cassettes Industries Limited, from using the title “Tu Hi Aashiqui”/ “Tu Hi Aashiqui Hai” and/or any other name/ title which uses the mark “Aashiqui”, in respect of their proposed film. 

The Plaintiff filed a suit against the Defendant to restrain it from using the titles ‘Tu Hi Aashiqui’, ‘Tu Hi Aashiqui Hai’ or any other name which uses the mark ‘Aashiqui’ for its film. Both the parties had in the past signed an agreement for co-production of the film series ‘Aashiqui’, having various clauses that dealt with joint ownership of all rights in the film between the parties. They co-produced the films Aashiqui (1990) and Aashiqui (2013).  The Plaintiff is also the trademark owner of the trademarks .

The parties had agreed to work on a third project which was also publicly announced by them. However, shortly after the public announcement, the Plaintiff found that the Defendant had independently used the title ‘Tu Hi Aashiqui’ / ‘Tu Hi Aashiqui Hai’ for an upcoming film wherein the Defendant not only used the same personnel as were announced jointly by the parties but also used the music from the Aashiqui Franchise films. Thus, the Plaintiff claimed that its proprietary rights to the “Aashiqui” film franchise were being infringed by the Defendant. There were various findings of the Court, two of which pertaining to trademark infringement and the nature of the mark which were as follows:

• The Defendant challenged the rights asserted by the Plaintiff in their trademark “Aashiqui” on the grounds that it is both generic and common to trade within the film industry, and thus lacks distinctiveness. In the prima facie opinion of the Court, the title “Aashiqui” is neither generic nor common to trade. The court stated that “…it is a suggestive mark that has acquired distinctiveness and goodwill through its association with the successful Aashiqui Franchise. The term “Aashiqui” does not describe the general category of goods or services (films) but instead functions as a distinctive brand identifier for the Aashiqui Franchise.”

• The Defendant also contended that the Plaintiff’s trademarks are registered as device marks and not word marks, and therefore, due to their presentation in a particular font/ style, there cannot be said to be any deceptive similarity. However, in the opinion of the Court, this argument lacked merit. The Court stated that:
• The Plaintiff’s trademark registration under No. 2563752 is for the mark. Pertinently, while this mark is registered as a device, it comprises only of the word “Aashiqui”, which is represented in a standard font without any accompanying images, symbols, or designs that could divert attention away from the word itself. It is not as if there is a graphic presentation of a person or an object alongside the word “Aashiqui” that might shift the focus of the consumers to the accompanying device.

• The entire focus of consumers is on the word “Aashiqui”, which will be read, spoken, and recognized as the primary identifier of the mark. Since the Plaintiff’s registered device mark is nothing but the word “Aashiqui”, the anti-dissection rule, which requires the Court to assess a mark as a whole rather than in parts, does not come into play here. Thus, notwithstanding the registration being classified as a device mark, it must follow that protection has been granted to the term “Aashiqui”, regardless of the font, design, or stylistic presentation in which it is used.

• The reference to word marks as device marks for registration purposes does not diminish the protection afforded to the word “Aashiqui”, which is the core element of the brand identity of the Aashiqui Franchise. The title “Tu Hi Aashiqui”/ “Tu Hi Aashiqui Hai” prominently features the word “Aashiqui” as its dominant and most distinctive element. The word “Aashiqui”, when used in the title of a film, is immediately recognizable to the public as being associated with the highly successful romantic film series. This association is not merely incidental; it has been built through years of significant commercial success – an aspect which cannot be refuted by the Defendant, being a partner in the said franchise. Moreover, the addition of the words “Tu Hi” and “Hai” does not significantly alter the overall impression of the title, particularly when viewed through the lens of imperfect recollection. Therefore, the use of “Aashiqui” in any film title, particularly in a title that lacks additional distinctive elements, is likely to cause confusion among the public, leading them to believe that the film is part of the Aashiqui Franchise.

• The Plaintiff and Defendant also have a history of collaboration on the Aashiqui Franchise and have, in the recent past, publicised their intention to collaborate for the production of a third instalment of the series, which is an added fact to the cause of confusion within the public.

To conclude, the Court was of the prima facie opinion that the phonetic and conceptual similarities in the marks, combined with the likelihood of confusion among the target audience, supports the conclusion that the Defendant’s use of the title infringes upon the Plaintiff’s trademark rights.

In light of the above, an interim injunction was granted in favour of the Plaintiff, restraining the Defendant, and/or anybody acting on their behalf, from using the title “Tu Hi Aashiqui”/ “Tu Hi Aashiqui Hai” and/or any other name/ title which uses the mark “Aashiqui”, in respect of their proposed film.

Axcess Limited v. Controller of Patents and Designs CA (COMM.IPD-PAT) 288/2022

The High Court of Delhi passed an order against the Controller of Patents and Designs regarding a Patent application filed in India and the amendments made to the specification.

The Appellant had filed a patent application under no. 2427/DELNP/2011 for ‘Bile Acids and Biguanides as Protease Inhibitors for Preserving the Integrity of Peptides in the Gut’. The Controller of Patents passed an adverse order (“impugned order”) rejected the application under Section 15 of the Patent Act, 1970, citing Section 59(1), Section 3(d) and Section 3(e) of the Act. The Appellant challenged this rejection, arguing that their amended claims fall within the original scope of the specification and are permissible. The Appellant had filed amended claims on April 20, 2018, following earlier amendments made in 2017.

Primarily, the Appellant’s claim was that the amended claims fall within the scope of the specifications and the claims originally filed, and the Respondent’s conclusion under Section 59(1) of the Act is contrary to the facts on record.

The Respondent’s version was that after identifying certain portions of complete specifications to show that the scope of the subject application is limited to new use of a known compound or composition, the Respondent had in the impugned order held that the amendment sought to be made by the Appellant to a product claim should not be permitted.

However, after a detailed examination of the complete specification by the Court, the Court concluded otherwise, since the same contains descriptions in the amended claims related to the composition as a product also along with the use as another aspect of the invention. The Court relied on a recent decision of a co-ordinate bench of the High Court of Delhi dealing with a similar issue qua amendment of claim[s] made in the complete specification: The Regents of The University of California v Controller General of Patents, Designs & Trademarks & Anr. [C.A.(COMM.IPD-PAT) 143/2022 dated 05th February, 2024] which held as under:-

“10. It is, therefore, evident that amendments to the original application can be made only by way of the following:-

(i) Disclaimer; or

(ii) Correction; or

(iii) Explanation.

Additionally, the proposed amendments are tested against the following parameters:

(iv) Amendment should serve the purpose of incorporation of actual facts;

(v) Effect of the amendment should not allow matter not in substance, disclosed originally or shown in the specification;

(vi) Amended claim of the specification should fall within the scope of the original claim of the specification.”

Applying the same parameters to the facts involved herein, the Court inferred that the amended claims in the latest complete specification filed by the Appellant to the original/ initial claims made by it are well within the scope of the original PCT claims. More so, since the detailed description supports the same amendment concerning the composition as a product. Therefore, in view of the factual matrix involved coupled with the existing position of law with respect to what is/ are the permissible limits of amendment[s] by an applicant like the Appellant under Section 59(1) of the Act, in the considered opinion of this Court, the amended claims to the complete specifications sought by the Appellant and as they stand now are permissible and can be allowed.

Thus, the appeal was disposed of by the Court with the following directions:

1. The impugned order passed by the Controller rejecting the patent application be set aside and the matter be remanded back to the respondent for de novo consideration;
2. The patent application be restored to its original number;
3. The Controller shall, de hors the previous finding in the impugned order and issue a fresh Hearing Notice clearly delineating the objection[s] therein, and thereafter grant a fresh hearing[s] to the Appellant and decide the same by passing a fresh order preferably within a period of four months from the date of conclusion of the hearing[s].

NCLT Brief:

Breach of Repayment Plan by personal guarantor would entitle creditors to initiate bankruptcy proceedings against the said personal guarantor.

Pursuant to Section 118 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) a personal guarantor’s breach of repayment obligation shall give rise to automatic legal consequences, i.e., initiation of bankruptcy proceedings under Section 121 of the IBC, as held by the Hon’ble National Company Law Appellate Tribunal, Chennai (“NCLAT”) in Tummala Sri Ganesh vs. State Bank of India[1]. The issue raised was with respect to the obligations of the personal guarantors to ensure adherence to the timeline under the repayment under approved repayment plans and the initiation of bankruptcy proceedings under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

Brief Facts of the Case

The appellants were personal guarantors for a Corporate Debtor and were admitted into insolvency by Hon’ble National Company Law Tribunal (“NCLT”) and a repayment plan for the personal guarantors was approved on 13.09.2023 with directions to implement the same within the time frame provided. However, the terms of the repayment plan were not fully adhered to within the prescribed time frame. Therefore, Resolution Professional (“RP”) filed respective applications under Section 118(2) for pre-mature ending of the repayment plan before Hon’ble NCLT. The Hon’ble NCLT under Section 118(3) took note of the same and granted the creditors liberty to initiate bankruptcy proceedings against the personal guarantors. Accordingly, an application was preferred by the creditor for the initiation of the bankruptcy process against the Personal Guarantors and the Hon’ble NCLT initiated the bankruptcy proceedings against the Personal Guarantors.

Proceedings before NCLT: The Hon’ble NCLT ruled that the appellants’ non-compliance with the repayment plan deadlines constituted sufficient grounds for the plan to end prematurely. Consequently, under Section 118(3) of the IBC, the financial creditor was entitled to seek bankruptcy orders against the personal guarantors. Under IBC, the repayment plan will have to be regulated in accordance with Regulations 20 of IBBI Regulations and the stipulated time frame must be strictly adhered to. In an event of the breach of repayment by the personal guarantor, the legal consequences would automatically follow as per the provisions contained under Section 118 of the IBC.

Proceedings before NCLAT: The Hon’ble NCLAT emphasized that Section 121 of the IBC permits filing of an application for initiation of bankruptcy proceedings under the personal guarantors upon the failure to adhere to a repayment plan in terms Section 118(3) of the IBC. The Hon’ble NCLAT observed that Section 118 of the IBC has a self-contained deeming clause that, when there is a failure to make the payment as per the repayment plan, the said plan which earlier stood approved by the Hon’ble NCLT will cease to have its life and consequentially owing to the deeming clause, the grant of liberty to the creditor to initiate action under Section 121 cannot be faulted in any manner. The Hon’ble NCLAT further noted that that the appellant could not claim ‘negative parity’ stating that timelines for repayment plans have been diluted for other personal guarantors. The Hon’ble NCLAT dismissed the appellants’ claims that delayed partial payments should prevent bankruptcy proceedings as the appellants had consistently failed to comply with the repayment plan despite multiple reminders. The Hon’ble NCLAT thus upheld the decision of the Ld. NCLT.

Conclusion

In cases where a personal guarantor fails to comply with an approved repayment plan, the legal consequences are clearly established under Section 118 IBC. The case of Tummala Sri Ganesh vs. State Bank of India illustrates the strict enforcement of these provisions. Despite partial payments made by the appellants, their failure to fully adhere to the repayment plan triggered the automatic termination of the repayment plan and entitled the financial creditor to initiate bankruptcy proceedings. Both the NCLT and NCLAT upheld this outcome, reaffirming that strict compliance with the repayment plans is crucial under the IBC and even delayed payments do not prevent the initiation of bankruptcy proceedings when defaults have occurred.

Litigation Brief:

IN THE MATTER OF: Dalmia Family Office Trust & Anr v. Getamber Anand & Ors.

(Pronounced by the Hon’ble High Court of Delhi on 08.10.2024 in CONT.CAS.(CRL) No. 5/2021) 

On 08.10.2024, the Hon’ble Delhi High Court delivered a Landmark Judgment in the case of Dalmia Family Office Trust & Anr. vs. Getamber Anand & Ors., tackling significant issues surrounding baseless allegations against the arbitrator during arbitration proceedings and an arbitral tribunal’s power to issue contempt.

FACTS IN BRIEF

The captioned Contempt Petition arose from a dispute between the Dalmia Family Office Trust (‘Dalmia Group’) and Getamber Anand (‘ATS Group’) which arose from a series of financial transactions between the Dalmia Group and its associate companies within the ATS Group for the period between 2013 and 2015. The ATS Group allegedly failed to repay substantial investments made by the Dalmia Group resulting in execution of a Supplementary Agreement dated 18.10.2019 whereunder the ATS Group admitted its liabilities and agreed to settle the amount owed by it to Dalmia Group by 31.03.2020.

The matter escalated in 2021 when the arbitration was invoked by the ATS Group to resolve the dispute over the outstanding payments. A sole arbitrator, Hon’ble Mr. Justice Swatanter Kumar (Retd.), was appointed by the Hon’ble Court vide order dated 08.01.2021 to adjudicate the case with the consent of the parties. However, the arbitration process encountered obstacles when the ATS Group filed applications under Section 14(2) read with 12(5), 15, and 11(6) of the Arbitration & Conciliation Act, 1996 (‘the Act’) before the Ld. Single Judge of the Hon’ble Delhi High Court which were later withdrawn with liberty to approach the Ld. Arbitrator. Thereafter, the ATS Group submitted multiple applications under Sections 12 and 13 of the Act before the Ld. arbitrator seeking his recusal citing alleged conflict of interest.

The ATS Group introduced a legal notice dated 08.06.2021 in a hearing on 10.06.2021, issued by an advocate on behalf of a third party, a homebuyer and sought for recusal of the Ld. Arbitrator as it casted a doubt on the impartiality of the arbitrator. The ATS Group subsequently refused to proceed with the arbitration proceedings, citing conflict of interest based on the legal notice and filed multiple applications attempting to challenge the arbitrator’s mandate.

The arbitrator passed an order on the applications refuting all challenges/allegations as false and not proved and dismissed all applications under Sections 12 and 13 of the Act. Thereafter, the arbitrator referred the matter to the Delhi High Court under Section 27(5) of the Act for issuance of appropriate orders and directions for initiating perjury and criminal contempt proceedings. The arbitrator in under order dated 05.10.2021 accused the ATS Group and its representatives of making averments which to their personal knowledge were incorrect, tampering and fabricating evidence which is punishable under Sections 195 to 197 of the IPC and Section 340 of the CrPC and criminal contempt.

The court passed the direction to the respondents on 28.08.2023 to tender an apology to the Ld. Arbitrator. The Respondent No 1 tendered apology to arbitrator on 5^th December 2021, however, the arbitrator did not accept the apology of the respondent on the ground that the respondent had tendered apology as a tool of opportunism to overcome situation and avoid punitive consequences and not as a sincere and genuine expression of party’s remorse. 

ISSUES BEFORE THE COURT

1. Whether the ATS Group’s conduct warranted the initiation of criminal contempt proceedings?
2. Whether the arbitral tribunal, like a civil court, has the authority to address such contemptuous conduct and recommend punitive actions under the law?

 

ANALYSIS

The Hon’ble Court questioned the legitimacy of the recusal request submitted by ATS Group which alleged collusion between the arbitrator Group due to previous work or connections between his family and ATS. The Court highlighted that such a request for recusal would typically come from the opposing party, not from the party allegedly involved in the collusion.

The Hon’ble Delhi High Court examined the evidence and observed that the respondents’ actions, including the submission of false documents and making unfounded allegations, were deliberate attempts to mislead the arbitral tribunal and hinder with the arbitration proceedings. The Court also noted that such conduct undermines the integrity of the arbitration process and warrants a strict action.

The Court remarked that in the current system of adjudicating disputes, arbitral tribunals and arbitrators function as substitutes for civil courts. Baseless and unfounded allegations against arbitrators cannot be allowed. Arbitrators, who are often retired judges or practicing attorneys cannot be accused of conflicts of interest based solely on speculation without substantial evidence resulting in recusal. Applications containing reckless or baseless allegations should be dealt with strictly. While preserving the integrity of the arbitration process is paramount, it must not be weakened by allowing unsubstantiated or speculative claims against arbitrators. Such allegations amount to interference in the arbitration process itself.

The Court referred to Alka Chandewar v. Shamshul Ishrar Khan (2017) 16 SCC 119 and stated that it clearly records that the entire purpose for amending Section 17 of the Act was to make sure the orders passed by the tribunals are not toothless and can be enforced in accordance with the law. It had observed that the entire object of providing that a party may approach the arbitral tribunal instead of the court for interim reliefs would be stultified if interim orders passed by such tribunal are toothless. It also referred to the 246^th Law commission report where the commission opined that Section 17(2) was added so that the cumbersome procedure of an arbitral tribunal having to apply every time to the High Court for contempt of its orders would no longer be necessary. Such orders would now be deemed to be orders of the court for all purposes and would be enforced under the Civil Procedure Code 1908 in the same manner as if they were orders of the court.

The Delhi High Court also stated that a perusal of the two provisions i.e. Section 17(2) and Section 27(5) of the Act would show that the Section 27(5) specifically stipulates that if any person is guilty of contempt of the Arbitral Tribunal, during the conduct of arbitral proceedings, the punishments would be as though the said offences had taken place in suits before the Civil Court.

The Arbitral tribunal is no different from a Civil Court in respect of dealing with contempt against itself. Thus, any misconduct before an arbitral tribunal or a sole arbitrator would be liable to be dealt with in accordance with law, if the same constitutes civil law contempt.

The Court accepted the apology of Respondent No. 1, taking into account the expression of remorse and the substantial delay in the proceedings caused by the respondent’s conduct. The Court ordered the respondent to contribute Rs. 10 lakhs to a charitable organization, as designated by the Ld. Arbitrator, and Rs. 3 lakhs to the Petitioner as compensation for costs.

CONCLUSION

In this judgment, the Delhi High Court firmly upheld the authority and integrity of arbitral tribunals, equating their powers with those of civil courts, particularly in matters of contempt. The Court’s handling of the case serves as a reminder that allegations made during arbitral proceedings must be based on concrete evidence and not on speculation. The ruling reinforces the importance of maintaining the arbitration process’s credibility by discouraging unfounded allegations that disrupt proceedings. Through this decision, the Court underscored the enforceability of arbitral tribunal orders under Section 17(2) and the Tribunal’s powers under Section 27(5), ensuring that arbitration remains a robust and reliable dispute resolution mechanism.

High Court can invoke Article 227 to correct orders of Commercial Courts. 

CASE ANALYSIS: WP C 11484 of 2023 MS CP RAMA RAO SOLE PROPEREITOR v. NATIONAL HIGHWAYS AUTHORITY OF INDIA. 

Decided by Hon’ble High Court of Delhi on 22.10.2024. 

Factual matrix:

1. The Writ Petition under Article 227, was preferred against the judgment passed by the District Judge by way of which the District Judge refused to deal with objections under Section 34 of the Arbitration and Conciliation Act, 1996, holding that the objections under Section 34 would not be maintainable before the concerned Commercial Court as a prior application under Section 11 (6) of the Act had already been preferred before the Hon’ble High Court of Delhi and therefore, the petition under Section 34 would lie before the said High Court.
2. The District Judge had held that since an application under Section 11 had already been preferred before another court, Section 42 of the Act would be attracted and it would be the court which entertained the Section 11 petition which would alone have the power to set aside the award passed by the Arbitral Tribunal.
3. Impugning the order passed by the District Judge, the Petitioner filed the captioned petition under Article 227 for setting aside the judgment passed by the District Judge in refusing to set aside the award passed by the arbitral award. 

Key Issue

The first issue which arose in the present matter was whether a petition under Article 227 would be maintainable against the order of the District Judge who refused to entertain objections under Section 34 in light of the specific remedy available to parties under Section 37 of the Act.

The Second issue in the case was whether the District Judge was correct in refusing to entertain objections under Section 34 of the Act in light of the fact that a prior application under Section 11 of the Act had been preferred by the parties before the High Court.

Observations

1. With respect to maintainability of the Petition, the Hon’ble High Court considered Section 37 of the Act which provides for appealable orders.
2. It was urged before the Hon’ble High Court that the decision of the District Judge was essentially one whereby the District Judge had refused to set aside an arbitral award and therefore would attract Section 37 (1) (c) of the Act.
3. However, taking into account the findings of the Hon’ble Supreme Court in BGS SGS Soma JV v. NHPC Limited, the Hon’ble High Court went onto hold that the District Judge’s order refusing to entertain objections under Section 34 of the Act in light of Section 42 of the Act could not be equated to an order of refusal of setting aside an award and would therefore not attract Section 37 (1) (c) of the Act.
4. Referring to the earlier judgments passed by the Hon’ble Supreme Court of India in Ramesh Chandra Sankla and Ors. v. Vikram Cement and Ors., the Hon’ble High Court went onto hold that in absence of any specific remedy under the Arbitration Act and the Commercial Courts Act, the Hon’ble Court would have to invoke its powers under Article 227 in cases of obvious misrepresentation of statutory provisions.
5. With respect to interpretation of Section 42 of the Act, the Hon’ble High Court referred to the judgment of the Hon’ble Supreme Court in State of West Bengal v. Associated Contractors whereby the Apex Court had specifically held that Section 42 would not apply to applications made under Section 11 of the Act as applications made under Section 11 are made to the Chief Justice or his designate not being Court as defined and therefore, the same would be outside the purview of Section 42.
6. Since the Hon’ble Supreme Court has already held that an application under Section 11 of the Act cannot be recognised as an application made to a court, the Hon’ble High Court of Delhi held that decision of the District Judge in returning the objections under Section 34 for presentation before Hon’ble High Court in light of prior application under Section 11 of the Act was erroneous.
7. The Hon’ble High Court invoked its power under Article 227 and set aside the order of the District Judge.

Calculating Limitation for adverse possession; Time of Ownership not be included: Neelam Gupta & Ors. Vs. Rajendra Kumar Gupta & Anr., Hon’ble Supreme Court of India

The plaintiff instituted a suit in the Trial Court as Sitaram, being the common cousin of both parties, sold the suit land to the plaintiff Neelam Gupta by registering sale deed. On the other hand, the defendants argued that the sale was invalid because Sitaram did not own the property and had no right to sell it. The Trial Court dismissed on two counts firstly by holding that the suit schedule property being a Joint Hindu Family property, therefore Sitaram, the common cousin, had no right to sell the property; and secondly, that the suit is barred by limitation. On its part, the First Appellate Court set aside the finding of the Trial Court that the schedule property of the suit was a Joint Hindu Family property but concurred with the finding that the suit was barred by limitation. The finding of the First Appellate Court that the suit is barred by limitation was reversed by the High Court and it held that the plaintiff had established title over the suit land.

Issues: Out of several issues raised, the foremost one was whether suit was barred by limitation and whether the defendants forcibly take possession of the suit land in 1983

Ratio: The Supreme Court approved the High Court’s decision which had relied on the case of Saroop Singh v. Banto and Ors. (2005) to hold that “once the plaintiff proves his title over suit property it is for the defendant resisting the same claiming adverse possession that he perfected title through adverse possession and in that regard, in terms of Article 65 of the Limitation Act, 1963 the starting point of limitation would not commence from the date when the right of ownership arises to the plaintiff but would commence only from the date the defendant’s becomes adverse.” Permissive Possession: The court highlighted that possession obtained through permission (lease or other arrangements) cannot convert into adverse possession without explicit hostile intent and knowledge of the true owner.

Held:

The Supreme Court determined that the evidence presented by the defendants/appellants did not establish the necessary ‘animus possidendi’ to support a claim of hostile possession. Instead, their evidence only suggested permissive possession. Additionally, they failed to demonstrate when their possession became adverse to the plaintiff’s title and whether it was open and continuous for the required prescriptive period.

The High Court concluded that the appellants did not satisfy the criteria for establishing adverse possession. It ruled that the limitation period should be calculated from the date the respondent acquired ownership of the disputed land, rather than assessing whether the appellants adequately established the beginning of their adverse possession. The High Court’s involvement in this case was considered appropriate. As a result, the Supreme Court upheld the High Court’s well-reasoned decision in the contested judgment. 

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[1] Tummala Sri Ganesh vs. State Bank of India, Company Appeal (AT) (CH) (Ins) No.315/2024, Order dated 07.10.2024

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