COMPETITION ACT

Promotion for competition is integral part of any piece of legislation. But with the passage of time, this aspect has got so big that it needed a new house( Legislation) to function smoother and could not be one among many in a piece of legislation.

As a result of this, Competition act, 2002 was legislated. But since every act continues to talk about promotion of competition and has a regulator / commission to ensure implementation of the act, who exercises jurisdiction to decide the facet of competition still stands today as a sixty four dollar question and a tough proposition to decide.

For instance, TRAI Act 1997, Central Electricity Act 2003 and Petroleum and Natural Gas Regulatory Board Act 2006 confer duty to promote competition on respective tribunal/ Commissions formed under respective acts. On the other hand, Commission under Competition Act,2002 has a general duty to promote competition.

Factually, there is provision contained in section 21 and 21A of Competition act to make references by competition commission and other tribunals to each other but the time still waits first of such instance to happen. They are as unused as old wisdom of elders and energy and new wisdom of youngsters. Moreover, they are not mandatory in nature. Notably, in case of summer surprise offer by jio, competition commission found nothing wrong about it, whereas TRAI refrained the company from going forward with it.

If experiences are drawn from international laws, there are provisions for mandatory co-operation agreement between different regulators, entailing timely sharing of information and prior consultation. In some countries, the Competition Regulator has final say as to who will exercise jurisdiction in case of concurrent sector, post consultation which indicates supremacy of competition law.

ARBITRATION

Every legislation has provision for appeal and an appropriate authority constituted thereunder to move an appeal before. With the enactment of Arbitration Act, a separate and an alternative forum has been provided to adjudicate disputes, no matter such dispute is covered under any other act and a forum for redressal of grievance already provided therein.

The Act also has 3 subsections to a section 2 which determine arbitrality of a dispute. Let’s have a look at them.
Subsection 3. If any other act specifies that any dispute is not arbitrable, provisions of arbitration act shall not apply to that dispute. But to all the amuse, there is no act in the country which poses such roadblock to arbitration. However, Supreme Court has provided some disputes which are not arbitrable in case of Booz Allen & Hamilton Inc. Vs. Sbi Home Finance Limited discussed later.

Subsection 4 puts three matters out of the purview of arbitration since these matters are covered by separate sections under the act itself, that is 40(1), 41 and 43 and further says that this part shall apply to arbitration under any other enactment as if the arbitration were pursuant to an arbitration agreement and as if enactment were an arbitration agreement to the extent provision of this part is consistent with that other enactment.

Section 40(1) deals with liability of legal representative of deceased. Arbitration agreement shall not be discharged by death of any party but shall in that event be enforceable by or against legal representative of the deceased unless right of action is extinguished on the death of a person by virtue of any law, like defamation, minor criminal acts, personal damage or assault.

Section 41 deals with insolvency matter. In case of insolvency, arbitration is only possible when receiver adopts the contract to which the insolvent is a party and arbitration shall be then enforceable by or against that receiver. Or where a person who is party to an agreement has been adjudged as an insolvent before commencement of insolvency proceedings and the matter arises which according to arbitration agreement needs to be determined for insolvency proceedings, then the receiver or any other person may apply before judicial authority having jurisdiction over insolvency proceedings to refer matter to arbitration and the authority shall decide the case according to its merits.

Section 43 talks about limitation act 1963. The law of limitation shall apply to arbitration proceedings. However, if the contracts provide that a claim shall not be barred if some steps are taken to initiate arbitration proceedings within time limit as fixed by the agreement, then on an application before court, the court with regards to circumstances of the case may allow it.

Subsection 5 carves out three exceptions. First its subjectivity to above subsection 4, something else provided in any other law and subject to any agreement between India and any other country, this part shall apply to all proceedings.

If we sum up above sub sections, following things need to be looked in to determine arbitrality of any dispute
Any other law which prohibits arbitration – no such law in force in india. Same also held in case of A. Ayyasamy vs. A. Paramasivam.

Any agreement between india and other country with respect to arbitration – obviously in matter of international arbitration.

Separate provision for legal representative, insolvency and lapse of time period (Limitation Act, 1963) matters.

Any dispute covered under other law which is referred to arbitration but that act has provisions inconsistent with arbitration act.

Whether the dispute is covered by one of the six examples given in Booz Allen & Hamilton Inc. Vs. SBI Home Finance Limited, Vimal Kishore Shah Vs. jayesh Shah & Ors.
Whether the dispute is action/right in rem or action/right in personam. If right in personam, then such is arbitrable.

3 separate judicial decisions
Booz Allen & Hamilton Inc. Vs. SBI Home Finance Limited (Supreme Court), 2011.
The dispute involved is whether enforcement of mortgage interest is arbitrable or not. Firstly the court gave six examples of disputes which are not arbitrable as discussed in point no.5. They are
(i) Disputes relating to rights and liabilities which give rise to or arise out of criminal offences;
(ii) Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody;
(iii) guardianship matters;
(iv) insolvency (sec.41) and winding up matters;
(v) testamentary matters (grant of probate, letters of administration and succession certificate); and
(vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.
Interestingly, court held that matters incidental to matrimony (ii) and criminal offence(i) like personal injury are arbitrable. In former, terms on which husband and wife will separate can be referred to arbitration. In case of latter, right to damages can be arbitrated.

The dispute involved in the case was enforcement of mortgage. The court held that this is the case of action in rem, since it will also affect rights of person other than the parties to contract, being person in possession of property, auction purchasers, person having an interest in the mortgaged property and person entitled to equity of redemption. Hence the dispute is not arbitrable. An Arbitral Tribunal can’t give orders which are binding on third parties (parties which are not parties/signatories to agreement) or give orders like arrest or imprisonment. In this series, court further held that a grant of probate as held In Chiranjilal Shrilal Goenka vs. Jasjit Singh and Ors.- 1993 (2) SCC 507 is also an action in rem since it is binding on the whole world. Winding up of the company as held in Haryana Telecom Limited Vs. Sterlite Industries India Limited is also an action in rem and hence not arbitrable.

Interestingly, the above judgement covering the matter of enforcement of mortgage was delivered on 15-04-2011. An amendment was made in Arbitration Act in 2015 which amended section 8 of the act also allowing any person claiming through or under him to file application. Therefore, now affected parties can implead in any arbitration so any party whose right is being affected like in this case, person in possession of property etc. can represent themselves before Arbitral Tribunal. So does this amendment make this relevant part of the judgement redundant, needs to be seen?

If it does so, then only disputes which need strict actions by an authority like arrest or imprisonment can only be kept out of contours for arbitration. Or is it possible that if such actions are required to be taken, the Tribunal can seek assistance of the Court as it does in case of Assistance in case of evidence under section 27 which is now also available to international arbitrations. Though this enabling feature will require amendment in the act.

So does that also mean winding up of a company can also be referred to arbitration. Will Arbitral Tribunal be capable enough of handing such a cumbersome process? Well, if an Insolvency Professional Company can does so in case of Essar Steel which owes more than 50K crores, why can’t an Arbitral Tribunal handle winding up of a company? If so, will Tribunal formed under Companies Act be left with no winding up matters before it and a result, a series of sections pertaining to it will die their unnatural or natural death or the same sections will have to be administered by the tribunal? It seems that this discussion is going to be unending or is it, that Arbitration is the way ahead.
The court also held that when an application is filed under section 8 of Arbitration Act, the court has duty to see arbitrality of the dispute in addition to existence of valid agreement, whether dispute is covered by the agreement and whether all parties to suit are parties to arbitration to agreement. However, nothing such is written in section 8 of the act. Even in section 45, the judicial authority has to only see that the agreement is not null and void, inoperative and incapable of being performed. Duties case upon themselves by the court under section 8 in this judgement is out of its mandate and even excessive when compared with section 45 of the act which relates with enforcement of foreign awards.

Vimal kishore Shah Vs. Jayesh Dinesh Shah, 17-10-2016
The dispute involved here is whether matters arising out of trust deed are arbitrable or not. The Apex Court answered in negative and disapproved decision of the Bombay High Court. It gave following reasons for it
Since a specific remedy is already provided in the Trust Act itself to approach the Principal Civil court of original civil jurisdiction, the appellant can’t be entitled for an additional remedy.

If this proposition is accepted, most disputes will become unarbitrable since each dispute is covered in some or other legislation and a forum to adjudicate the same is also provided therein. For instance, MSME Act,2006 provides for MSME Facilitation Council to decide the reference in 90 days (Section 18) and an appeal against its decision can be made in a court (section 19) of Metropolitan Magistrate or Magistrate of First class (section 28). If the above proposition is applied, disputes to which an MSME is a party and has grievance against the buyer, will become unarbitrable.
Interestingly, the Facilitation council also settles the dispute by way of conciliation based on sections 65 to 81 in Arbitration and Conciliation act,1996 and where not settled, take up that dispute for arbitration and also has provision for referring the dispute to centres and institutions dealing in alternate dispute resolution ( arbitration, conciliation, negotiation, settlement).
More interestingly, MSMEs must not submit themselves to arbitration as Arbitration laws give more time to Arbitrators to pass the award that is 12 months and an additional six months (Sec.29) whereas in MSME law the same is settled within 90 days and also has provision empowering facilitation council to delegate matter to centre or institute dealing with it.

Moreover, the parties to litigation were not even parties or signatories to the trust since they were minor when the same was formed and it is one of the basic requirements for referring any matter to arbitration as held in case of Booz-Allen (supra). By its very nature, a trust deed is executed by trustee and its settler, and beneficiaries are never parties to it. As held in Vijay Kumar Sharma by SC that an arbitration clause in a will is not valid since legatees to will are not parties to it. Therefore in no instance, trust matters can be referred to arbitration since legatees or beneficiaries, as the case may be, are not parties to the trust deed. Even if they are allowed to implead by virtue of amendment in section 8, reluctance of other parties will continue the case to fall short of meeting the basic requirement of a valid agreement.
How can the requirement of a valid agreement be met when its fulfilment is impossible, and a person can’t be expected to fulfil the impossible. Arbitration in family matters provide for confidentiality, efficiency, timeliness and benefit of appointing an arbitrator who is aware of in and outs of a family. The judgement in this case has swept away these benefits available in arbitration.

NCDRC in case of Aftaab Singh & Others Vs. Emaar MGF Land Limited
The case was decided by Division Bench of Supreme Court on 13-02-2018 comprising Adarsh Kumar Goel and Uday Umesh Lalit by stating that the bench finds no ground to interfere with the impugned order of NCDRC.( Civil Appeal 23512-23513,2017) National consumer disputes redressal commission has held that consumer disputes are not arbitrable in nature based on following reasons
Arbitration is possible between or among parties of same level or stature – that is level players whereas Consumer Act,1986 is a special social legislation that provides a level playing field between unequal players
Section 2(3) excludes disputes which fall within public law regime and in respect of which statutory remedies are available.
Jurisdiction of consumer forums to adjudicate is not affected by section 8 of the act which makes it mandatory for judicial authority to refer the matter to arbitration.
In above case the court didn’t touch upon any factor which determines arbitrality of any dispute which it itself has pointed out in above two judgements (supra) and dismissed the appeal without any remark.

Article contributed by CA Krishna laddha

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