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TEAM CODE: B BEFORE THE HON’BLE HIGH COURT OF NIRDHAN
IN THE MATTERS OF:
People’s Union for Liberties & Democratic Reforms and JCi ...PETITIONERS
V.
Republic of Gariba, State of Nirdhan and Maxis Bank- Second Side ... RESPONDENTS
WRIT PETITION NO. 999 of 2015 CLUBBED WITH WRIT PETITION NO. 1021 of 2015
SUBMISSION TO THE HON’BLE HIGH COURT OF NIRDHAN UNDER ARTICLE 226 OF THE CONSTITUTION OF GARIBA
WRITTEN SUBMISSIONS ON BEHALF OF THE PETITIONERS
MEMORIAL ON BEHALF OF PETITIONERS Page i
TABE OF CONTENTS
TABE OF CONTENTS............................................................................................................. i LIST OF ABBREVIATIONS .................................................................................................. ii INDEX OF AUTHORITIES................................................................................................... iii JURISDICTION .......................................................................................................................v STATEMENT OF FACTS ..................................................................................................... vi ISSUES PRESENTED .......................................................................................................... viii SUMMARY OF ARGUMENTS............................................................................................. ix ARGUMENTS ADVANCED ................................................................................................... ISSUE 1: SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996 ISCONSTITUTIONALLY INVALID. .............................................................................................. 1
i. It amounts to introduction of ‘litigation’ in the arbitral process which is against the basic tenets of arbitration. ...................................................................................................... 1 ii. The pendency of Sec. 34 petitions is huge and the delay thereon amounts to expropriation, in as much as it takes away the fruits of the award which leads to violation of country’s bilateral and multilateral commitments under various conventions andinvestment treaties. ................................................................................................................. 4 iii. Admission of the petition under section 34 renders an award inexecutable and also takes away the rights of the party against whom the enforcement of the arbitral award isstayed. ...................................................................................................................................... 6
ISSUE 2: BANK IS OBLIGED TO RELEASE BANK GUARANTEE. ...................................... 7 ISSUE 3: NON-AVAILABILITY OF A NOTIFIED VACATION BENCH AND NOTIFIED PROCEDURE FOR LISTING WHEN THE COURT IS NOT IN SESSION IS UNCONSTITUTIONAL. ............................................................................................................... 9 i. Non-grant of listing before the issuance of election notification cannot affect the merits of the case since the Court was moved well in time and actus curaie neminem gravabit. .... 10 ISSUE 3: THE ORDINANCE PROMULGATED BY THE GOVERNOR IS ULTRA VIRES OF PART IX AND VIOLATIVE OF VARIOUS CONSTITUTIONAL PROVISIONS. ................. 11 i. Preamble & Basic structure of Constitution ................................................................ 11 ii. Single Citizenship .......................................................................................................... 12 iii.standards Marginalizes women and weaker sections due to the prevailing skewed literacy ............................................................................................................................... 13 iv. Ordinance is not retroactive .......................................................................................... 14 PRAYER FOR RELIEF ......................................................................................................... 15
MEMORIAL ON BEHALF OF PETITIONERS Page iii
INDEX OF AUTHORITIES
INDIAN CASE LAWS
- AFCON Infra. Ltd. v. The Board of Trustees of the Port of Mumbai , 2014(1) BomCR794.
- Boc Properties Ltd v. Delhi Development Authority, (1997)! BC 195.
- Centax (India) Ltd v. Vinmar Impex Inc., AIR 1986 SC 1924.
- D.S. Nakara & Others v. Union of India, AIR 1983 SC 130.
- Dwarka Prasad Agarwal v. B.D. Agarwal, (2003) 6 SCC 230.
- Food Corporation of India v. Kamdhenu Cattle Field Industries , AIR 1993 SC 1601.
- in Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd, (2004) 1 SCC 540.
- Kesavananda Bharati and Ors. v. State of Kerala and Anr, ( 1973) 4 SCC 225).
- Krishna Kumar Mishra & anr. v. State of Bihar , AIR 1996 Pat 112.
- Krishna Kumar Mishra & anr. v. State of Bihar , AIR 1996 Pat 112.
- Krishna Kumar Mishra & ors. v. State of Bihar, AIR 1996 Pat 112.
- Maneka Gandhi v. UOI , AIR 1978 SC 597; HL Trehan v. UOI , AIR 1989 SC 568.
- Minoo Framroze v. UOI, AIR 1992 Bom 375.
- Minoo Framroze v. UOI , AIR 1992 Bom 375.
- Mohammed Gasi v. State of Madhya Pradesh and Ors. 2000 (4) SCC 342.
- N amit Sharma Vs Union of India, (2013) 1 SSC 74.
- National Aluminium Co. Ltd. v R.S Builders (India) P. Ltd., (1994) 79 com Cas 379 (Orissa).
- National Thermal Power Corporation Ltd v. Flowmore Pvt. Ltd ., AIR 1996 SC 443.
- Rajesh D. Darbar & Others v. Narasingrao Krishnaji Kulkarni & Ors , JT 2003 (7) SC
- Swadeshi Cotton Mills v. Union of India , AIR 1981 SC 818.
- Vijay v. State of Maharashtra, (2006) 6 SCC 289. FOREIGN 1. Lowen Group Inc CASE LAWS v United States of America, 7 ICSID Rep 421).
- Saluka Investments BV (The Netherlands) v. The Czech Republic.
- Secretary of State for Social Security v. Tunnicliffe, [1991] 2 All ER 712.
MEMORIAL ON BEHALF OF PETITIONERS Page iv
- Union of India v McDonnel Douglas Corp [1993] 2 Lloyd’s Rep 48.
- White Industries Australia Limited v. The Republic of India, Award of 30th^ Nov’ 2011. BOOKS REFERRED
- DICEY, MORRIS & COLLINS, THE CONFLICT OF LAWS, VOL 2 (14TH^ EDN, 2010).
- DURGA DAS BASU, COMMENTARY ON CONSTITUTION OF INDIA, VOL. 6, (8TH^ ED. 2008).
- DURGA DAS BASU, COMMENTARY ON CONSTITUTION OF INDIA, VOL. 7, (8TH^ ED. 2008).
- DUTTA’S, BANKING LAW (PRINCIPLES PRACTICE AND PROCEDURE), VOL.1, (ED. 2010).
- FOUCHARD GAILLARD GOLDMAN, INTERNATIONAL COMMERCIAL ARBITRATION, SAVAGE AND GAILLARD, (ED.1999).
- G.P SINGH, PRINCIPLES OF STATUTORY INTERPRETATION, (12TH^ ED. 2010).
- H.M. SEERVAI, CONSTITUTIONAL LAW OF INDIA, VOL. 2, (4TH^ ED. 2008).
- M.P. JAIN, INDIAN CONSTITUTIONAL LAW, (6TH^ ED. 2010).
- REDFERN & HUNTER, INTERNATIONAL ARBITRATION, (5th^ ED. 2009). DICTIONARIES
- HENRY CAMPBELL BLACK, BLACK’S LAW DICTIONARY, (8TH^ ED. 2004).
- P. RAMNATHA AIYER, THE LAW LEXICON, (ED. 2002). STATUTORY & OTHER AUTHORITIES
- Arbitration & Conciliation Act, 1996.
- The UN Commission’s Report, 1985.
- UNCITRAL Model Law on International Commercial Arbitration.
- Swiss Private International Law Act, 1987.
- Supreme Court Rules, 2013.
- RBI Guidelines.
- The Constitution of India.
MEMORIAL ON BEHALF OF PETITIONERS Page vi
STATEMENT OF FACTS
- The Republic of Gariba is a sovereign federation of states with several union territories. Nirdhan is the biggest of the States in the Republic. The territory was considered as backward till 2011, when the then Governor of Nirdhan decided to fast pace the development of roads and highways.
- Jeopardy Contracts Inc. [JCi] entered into an agreement with Jodhpur Gaon Panchayat Samiti [JGPS] for 115 kms of road in a Scheduled area in Nirdhan. At the time of culmination of the project, certain issues cropped up regarding land acquisition, design of the bridges etc. due to which the JGPS terminated the contract.
- JCi sent a legal notice on for invoking arbitration as per contractual clause and also asked for ‘termination payment’ for the work already done. JGPS informed that the matter was covered under the Madhyastham Adhukaran Adhiniyam Act,1983 and therefore the Arbitration and Conciliation Act,1996 is not applicable. JGPS also invoked the performance bank guarantee.
- JCi moved the High Court of Nirdhan by filing an urgent civil writ petition being WP (C) No. 99/2014. the High Court took this matter and granted “…an ad-interim ex-parte stay on invocation of bank guarantee. The writ petition was disposed of directing the parties to seek appropriate interim remedies from the ld. Arbitrators. The arbitration culminated into an award dated in favour of JCi, and inter alia held JCi entitled to the money under the performance bank guarantee.
- JGPS immediately filed a petition under Sec. 34 of the Act of 1996, before the High Court of Nirdhan, on its original side. In response JCi challenged the constitutional validity of Sec. 34, by way of a writ petition, being WP 999/2015. The High Court of Nirdhan admitted the petition and issued notice to the ld. Attorney General.
MEMORIAL ON BEHALF OF PETITIONERS Page vii
- In the meanwhile, the Governor of the State of Nirdhan, promulgated Ordinance which came into effect from which amended the Nirdhan Panchayati Raj Act, 1994.the ordinance laid down the qualification criteria for election as the panch or member of the state panchayati raj.
- People’s Union for Liberties & Democratic Reforms issued a public statement that the Ordinance was replete with malice in law. People’s Union for Liberties & Democratic Reforms moved the High Court of Nirdhan where listing was denied the People’s Union for Liberties & Democratic Reforms moved the Hon’ble Apex Court under Art. 32. However, no listing was granted till the issuance of election notification. Upon listing, the Apex Court was pleased to observe that the matter can now be heard by High Court of Nirdhan. It filed a pro-bono petition WP (C) No. 1021/2015 in the High Court of Nirdhan seeking, to challenge the vires of the Ordinance.
MEMORIAL ON BEHALF OF PETITIONERS Page ix
SUMMARY OF ARGUMENTS
ISSUE 1: WHETHER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT,
1996 IS CONSTITUTIONALLY INVALID?
Section 34 of The Arbitration and Concicliation Act, 1996 is constitutionally invalid as it is violative of article 14 of the Constitution and principles of natural justice. ISSUE2:WHETHER BANK IS OBLIGED TO RETAIN BANK GUARANTEE? It is submitted that the bank has no authority to retain the bank guarantee as they do not have any right to interfere in the dispute between the parties. ISSUE 3: WHETHER NON-AVAILABILITY OF A NOTIFIED VACATION BENCH AND NOTIFIED PROCEDURE FOR LISTING WHEN THE COURT IS NOT IN SESSION IS UNCONSTITUTIONAL? Non-availability if a notified bench and a notified procedure for non-listing when the court is not in session is unconstitutional as it is violative of principles of natural justice and article 14 of the Constitution. ISSUE 4: WHETHERTHE ORDINANCE PROMULGATED BY THE GOVERNOR IS ULTRA VIRES OF PART IX AND VIOLATIVE OF VARIOUS CONSTITUTIONAL PROVISIONS? The ordinance promulgated is violative of Part IX of the Constitution as it violates article 14 and article 243-D of the Constitution and also violates principle of equal opportunity by marginalizing women and weaker sections of the society.
MEMORIAL ON BEHALF OF PETITIONERS Page 1
ARGUMENTS ADVANCED
ISSUE 1: SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996 IS
CONSTITUTIONALLY INVALID.
The submission is threefold: i. It amounts to introduction of ‘litigation’ in the arbitral process which is against the basic tenets of arbitration. Section 34 of the act leads to the violation of constitutional provisions and is against the basic tenets of arbitration. The submission is twofold: a. Party’ Autonomy The foundation of Arbitration law is based on party autonomy principle forms.^1 It can be defined as the freedom of the parties to construct their contractual relationship in the way they see fit.^2 It is based on choice of law by the parties in a contract.^3 The parties to an arbitration agreement waive the right to bring an action in court and exclude the jurisdiction of courts by this arbitration agreement. The parties have below mentioned freedom:
- The Law Applicable to Arbitration Agreement: Generally the laws applicable to the substance are chosen by parties themselves which meets the specific requirements of the dispute and
(^1) Edward Brunet, Richard E. Speidel, Jean R. Sternlight & Stephen J. Ware, “Arbitration Law in America: A Critical Assessment” (2006), Cambridge University Press. (^2) Abdulhay, S., Corruption in International Trade and Commercial Arbitration , (London, United Kingdom: Kluwer Law International 2004) 159. (^3) DICEY, MORRIS & COLLINS, THE CONFLICT OF LAWS, VOL 2 (14TH (^) EDN, 2010) ¶ ¶ 32-004.
MEMORIAL ON BEHALF OF PETITIONERS Page 3
not be a subject matter of challenge before a court of law. And under the ambit of Section 34 parties challenge award passed by the arbitrator not in a singular case but in almost all cases.^11 This failure of arbitration was further emphasized by the High Court at Calcutta which stated: the law of arbitration is a cripple, which walks permanently on the crutches of legal precedents. It is no exaggeration to say that almost every controversial arbitration of any importance always waits for a second bout of legal fight in the public courts proving the truth of the old cynical statement that only fools go to arbitration because they pay two sets of costs: one before the arbitrators, and the other before the courts where they came home to roost.^12 Further the Bombay High Court in Afcons Infrastructure Limited v. The Board of Trustees, Port of Mumbai,^13 observed that admission of a section 34 petition virtually paralyzes the process for the winning party award. b. Kompetenz-Kompetenz Article 16 of the UNCITRAL Model Law of International Commercial Arbitration^14 which has been legislatively enacted in Section 16 of the Arbitration & Conciliation Act, 1996 embodies the kompetenz- kompetenz rule which expressly gives the Arbitral Tribunal the power to rule on its own jurisdiction and including on the validity of the arbitration agreement.^15
(^11) AFCON Infra. Ltd. v. The Board of Trustees of the Port of Mumbai , 2014(1) BomCR794. (^12) Saha & Co. v. Ishar Singh, AIR 1956 Cal 321 at 341. (^13) 2014 (1) Arb LR 512 (Bom). (^14) UNCITRAL Model Law on International Commercial Arbitration. (^15) § 16 OF Arbitration & Conciliation Act, 1996.
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Therefore it is humbly submitted that Section 34 of the Act is against the basic tenets of arbitration and is also violative of Article 14 of the Constitution in a way that doctrine of legitimate expectation and promissory estoppel enriched under said Article has been violated.^16 ii. The pendency of Sec. 34 petitions is huge and the delay thereon amounts to expropriation, in as much as it takes away the fruits of the award which leads to violation of country’s bilateral and multilateral commitments under various conventions and investment treaties. It is humbly submitted that Republic of Gariba has entered into a bilateral trade agreement with various countries that include Australia, Japan, Africa, Finland, US, Singapore, Sri Lanka etc. and has ratified various International conventions out of which some has been give status of Most Favored Nation.^17 Pendency under Section 34 of the Act is huge and undue delay amounts to expropriation of property leads to breach of these bilateral trade agreement and conventions, the argument is twofold — i. Doctrine of legitimate expectation Legitimate expectations presuppose that an agreement or a promise generates a certain level of expectations, known as legitimate expectations.^18 The doctrine has been recognized as a part of the fair and equitable treatment standard provided under various investment treaties.^19 Fair and equitable treatment requirement in international law requires the host State to provide for investments treatment that does not affect the legitimate expectations which the investor had
(^16) Food Corporation of India v. Kamdhenu Cattle Field Industries , AIR 1993 SC 1601. (^17) Available at (^18) Christoph Schreuer and Ursula Kriebaum in Jacques Werner et al eds., 2009 at p. 273. (^19) Sempra Energy International v Argentine Republic, CSID No. ARB/02/16, ¶298.
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…the customary minimum standard is in any case binding upon a State and provides a minimum guarantee to foreign investors, even where the State follows a policy that is in principle opposed to foreign investment; in that context, the minimum standard of “fair and equitable treatment” may in fact provide no more than the “minimal” protection…^25 iii. Expropriation leading to Denial of justice It is submitted that Republic of Gariba’s Courts usually fail to try matters falling under section 34 owing to its extended judiciary and pendency of innumerable cases in the court to delay in enforcement of the award in a timely manner thereby causing denial of fair and equitable treatment and the undue delays by the courts constitute an expropriation which in turn leads to denial of justice.^26 Therefore, it is humbly submitted that Court delays under Section 34 of the Act has deprived JCi the benefit of the Award which is violation of bilateral trade agreement and conventions. Further it also leads to violation of Constitutional provisions under Art. 14 of the Constitution as doctrine of legitimate expectation is covered under it which is very much applicable in the instant case. Moreover, State is not able to fulfill its obligations under Art. 39 A and 51 of the Constitution. iii. Admission of the petition under section 34 renders an award inexecutable and also takes away the rights of the party against whom the enforcement of the arbitral award is stayed. According to the principle of natural justice, every person should be given a fair chance of presenting their case by virtue of audi altrem partem and this section is violating this principle because it is not giving the JCI a fair chance to present its case.
(^25) Ibid. (^26) Lowen Group Inc v United States of America, 7 ICSID Rep 421).
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It is violative of article 14 as it takes away the JCI’s right to present their case. No proper adjudication would amount to violation of article 14. It has been suggested in 246th^ Law Report^27 that an amendment needs to be brought to effect to avoid grant of automatic stay on the arbitral award. Also in Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd,^28 the court observed:
“….we do notice that this automatic suspension of the execution of the award, the moment an application challenging the said award is filed under section 34 of the Act leaving no discretion in the court to put the parties on terms, in our opinion, defeats the very objective of the alternate dispute resolution system to which arbitration belongs.” It is considered that noncompliance with the rules of natural justice amounts arbitrariness violating Art. 14.^29 Hence, this Section should be held to be unconstitutional.
ISSUE 2: BANK IS OBLIGED TO RELEASE BANK GUARANTEE. A performance guarantee is wherein a bank agrees that its customer shall duly perform and fulfill the obligations and conditions that may arise from the contract and if the party makes a default in the fulfillment of the same, it will make the payment as agreed in the guarantee. 30 Bank guarantee is a separate^31 , independent, underlying^32 and distinct^33 contract. it has been laid down and stressed by the courts that the banks should not interfere with the bank guarantee and
(^27) Law Commission of India, Amendments to the Arbitration and Conciliation Act 1996, August, 2014, Government of India. (^28) (2004) 1 SCC 540. (^29) Minoo Framroze v. UOI, AIR 1992 Bom 375. (^30) DUTTA’S, BANKING LAW (PRINCIPLES PRACTICE AND PROCEDURE), VOL.1, (ED. 2010), p.736. (^31) Boc Properties Ltd v. Delhi Development Authority, (1997)! BC 195.
MEMORIAL ON BEHALF OF PETITIONERS Page 9
Maxis bank is liable to release the bank guarantee as there is no fraud can be made out prima facie and no irretrievable injury shall be caused by releasing the bank guarantee.
ISSUE 3: NON-AVAILABILITY OF A NOTIFIED VACATION BENCH AND NOTIFIED PROCEDURE FOR LISTING WHEN THE COURT IS NOT IN SESSION IS UNCONSTITUTIONAL. Order VI, Rule VI, of Supreme Court Rules, 2013 provides for sitting of vacation bench comprising of vacation judge, exercising all the powers of a judge and court in relation to specified matter.^38 But contrary to the rules no vacation bench was available and no clear cut procedure has been laid down for filing of the matter before the Supreme Court.. The Preamble of the Constitution categorically provides for securing justice to all the Citizens.^39 Further, non-availability of notified bench and specified procedure for listing of the matter when the court is not in session is violation of the fundamental principle of natural justice i.e. Audi Alteram Partem which is basically rule of fair hearing.^40 This fundamental principle unequivocally states that every person has a constitutional right of access to justice and present his case.^41 The jurisprudence of the Supreme Court of India has repeatedly emphasized that the right to a fair trial and of access to justice is a basic fundamental and human right.^42 Further
(^38) Supreme Court Rules, 2013. (^39) Preamble of the Constitution. (^40) Swadeshi Cotton Mills v. Union of India , AIR 1981 SC 818. (^41) Maneka Gandhi v. UOI , AIR 1978 SC 597; HL Trehan v. UOI , AIR 1989 SC 568. (^42) Dwarka Prasad Agarwal v. B.D. Agarwal, (2003) 6 SCC 230, ¶33.
MEMORIAL ON BEHALF OF PETITIONERS Page 10
access to justice is also regarded as essential part of the fundamental rights under Articles 14 and 21 of the Constitution of India.^43 Therefore, as per this established rules minimum fair procedure should be provided to attain ends of principles of natural justice. But in the instant case it is pertinent to note that there is non- availability of vacation bench and notified procedure for listing of the matter before the honorable the Supreme Court. Thus it is humbly submitted before the Hon’ble Court that it leads to the violation of the principle of natural justice i.e. Audi Alteram Partem as well as of Constitutional provisions. It is considered that noncompliance with the rules of natural justice amounts arbitrariness violating Art. 14.^44 i. Non-grant of listing before the issuance of election notification cannot affect the merits of the case since the Court was moved well in time and actus curaie neminem gravabit. It is submitted that the maxim of equity, namely, actus curiae neminem gravabit an act of the Court shall prejudice no man, founded upon justice and good sense which serves a safe and certain guide for the administration of Law,^45 is very much applicable in the instant case. Therefore there can be no quarrel with the proposition that a party cannot be made to suffer on account of an act of the Court.^46 In the instant case it is pertinent to note that PULDR has moved to the Supreme Court within time and before issuance of election notification. And even after repeated reminders no listing
(^43) N amit Sharma Vs Union of India, (2013) 1 SSC 74, ¶83. (^44) Minoo Framroze v. UOI , AIR 1992 Bom 375. (^45) Mohammed Gasi v. State of Madhya Pradesh and Ors. 2000 (4) SCC 342. (^46) Rajesh D. Darbar & Others v. Narasingrao Krishnaji Kulkarni & Ors , JT 2003 (7) SC 209.
