Report No. 126

Chapter V

Contemporary Situation and Suggested Remedies by Interested Groups

5.1. Public sector undertakings, in response to the queries of the Law Commission, have bemoaned the mounting litigation to which they are subjected and feel the pinch of the same. Apart from the costs and expenses of litigation, the time of some of their officers is occupied in dealing with litigation, leaving them little time to concentrate on the goals for which public sector undertakings have been set up. This has led to a re-thinking of their litigative strategies and the panacea which, according to them, would relieve them from the burden and boredom of litigation.

5.2. The most illustrative case to which the attention of the Law Commission has been drawn is highlighted by the Election Commission of India. The Election Commission complains that to some extent by their indifference the courts have contributed to exposing a constitutional body like the Election Commission of India to mounting litigation. The grievance is that the courts are either unaware or sometimes ignore strategic legal formulations and constitutional provisions which, if properly perused and applied, would help in throwing out litigation at the threshold.

To illustrate, election to the Legislative Assembly of West Bengal was due in June 1982. Eight persons filed a writ petition against Union of India and the Election Commission and other respondents directing them not to issue a notification under section 15(2) of the Representation of the People Act, 1951, calling for election to the Legislative Assembly until the roils were duly revised. The petitioners challenged almost all the provisions of the Representation of the People Act, 1951 under which seven general elections were held by the time petition was filed and prayed for interim stay which was granted and subsequently confirmed.

The matter was heard by a Constitution Bench of the Supreme Court which pointed out that 'the fundamental error from which the writ petition suffers is this: the fact that revision of electoral rolls, either intensive or summary, is undertaken by the Election Commission does not have the effect of putting the electoral roll last published in cold storage. The revision of electoral rolls is a continuous process which has to go on, elections or no elections'1.

The Judge in the High Court who granted interim injunction and confirmed the same, failed to take note of the most obvious legal position that 'if an electoral roll is not revised, its validity and continued operation remained unaffected' and granted and confirmed interim injunction on a very nebulous yet wholly untenable ground throwing the entire electoral process out of gear. The case had to be with drawn to the Supreme Court and disposed of so that the electoral process may not be interfered with.

Earlier, the Court had vacated the interim injunction pointing out that 'it takes years to build up public confidence in the functioning of constitutional institutions, and a single court hearing, perhaps, to sully their image by casting aspersions upon them. It is the duty of the courts to protect and preserve the integrity of all constitutional institutions which are devised to faster democracy. And when the method of their functioning is questioned, which it is open to the citizen to do, courts must examine the allegations with more than ordinary care.

The presumption, be it remembered, is always of the existence of bona fides in the discharge of constitutional and statutory functions The petition is dressed up in constitutional attire but, before us, no counsel tried even to have the feel of it, except Shri Bhola Nath Sen. We will have occasion to demonstrate how, in a petition of this nature, no interim relief was permissible, especially in terms of prayer clause (f), by which the entire election process was brought to a standstill.2

It is in such a situation that one can appropriately utter a warning that 'wiser counsel would prevail' with court before exercising power of granting interim relief in such manner as would throw out of gear the entire election process on which the democracy is not only founded but nursed.

1. Lakshmi Charan Sen v. A.K.M. Hassan Uzzaman, (1985) 4 SCC 689.

2. A.K.M. Hassan Uzzaman v. Union of India, (1982) 2 SCC 218.

5.3. Though there are numerous such instances, one more should suffice to bring home the point under discussion. On January 12, 1983, election to all the 126 seats of the Assam Legislative Assembly was notified to be held in February 1983. A set of writ petitions was filed in the Guwahati High Court seeking, amongst others, a mandamus not to hold elections on the basis of the defective rolls and to defer holding of elections on account of prevailing disturbed situation in the State.

The writ petition was entertained, though interim relief was not granted. The cases were transferred to the Supreme Court of India. The Court disposing of the petition pointed out specifically that the validity of an election can only be challenged in the manner prescribed by the Representation of the People Act, 1951, and not by way of a writ petition under Article 226 of the Constitution implying that the matter should have been thrown out at the threshold.1

1. Indrajit Barua v. Election Commission of India, (1985) 4 SCC 722.

5.4. The Election Commission also pinpointed the failure of the court while issuing notice to consider whether everyone impleaded as respondent should be served with a notice even though the parties joined may be neither necessary nor, even remotely saying, proper parties. Questioning the election of the returned candidate, the petitioner in Calcutta High Court impleaded in his election petition not only the returned candidates but also other unsuccessful candidates.

Over and above them, the Chief Minister of West Bengal, the Minister of the Transport Branch of Home Department, Minister of Legislative and Judicial Department, District Magistrate and Returning Officer and Electoral Registration Officer, were impleaded alleging that they were proper parties. Notice of the petition was served upon all the respondents. The Chief Minister and the Ministers claimed in the written statement that the election petitioner was not entitled to implead them as parties to the election petition because they were not candidates at the election and, therefore, they could not be impleaded as parties to an election petition.

The Ministers moved a separate application before the High Court to strike out their names before the array of parties in the election petition. Even after the correct legal position was pointed out, the court declined to strike out the names of these persons holding that they were proper parties to the election petition. These Ministers approached the Supreme Court. The Supreme Court, after a review of the provisions of the Representation of the People Act and the relevant provisions of the Constitution, pointed out that a right to elect or to be elected or to dispute an election are neither fundamental rights nor common law rights.

These rights are created by the Representation of the People Act and the rules made thereunder and being statutory in character, the remedies are limited to those provided by relevant statutory provisions. The Court held that the concept of proper parties is foreign to an election petition and the necessary parties who must be pleaded have been set out in the relevant provisions of the 1951 Act.

The Court concluded that no one may be joined as a party to an election petition otherwise than as provided by section 82 and 86(4) of the 1951 Act. Accordingly, the appeal was allowed and the names of all those Ministers and others who were not necessary parties to the petition under the relevant provisions of the Act were struck out from the array of parties to the election petition.1

1. Jyoti Basil v. Devi Ghosal, AIR 1982 SC 983.

5.5. The Election Commission accordingly vigorously canvassed for a proposition that the court dealing with election petitions must, while exercising its power to admit a petition, not look at it merely mechanically at the threshold but should reject petition against those who are not necessary parties to the petition.

The grievance is made on account of the fact that the Election Commission goes on receiving notice after notice from the High Courts where it is unnecessarily being dragged to the court exposing it to unnecessary litigation and avoidable costs. The Election Commission, therefore, stated that in a socialist welfare State, courts have to assume and should be ever vigilant to achieving the goals of curbing litigious tendency as also frivolous litigation.

5.6. Another remedy suggested by various public sector undertakings is that the court should freely exercise the power to compel the parties to resort to arbitration. The suggestion is that where agreement between a public sector undertaking and a private litigant incorporates an arbitration agreement, the court should by its action hold the parties to the contract and force the recalcitrant parties to arbitration.

A second string to the bow was that it is now necessary to radically amend the Arbitration Act, 1940, to incorporate a provision therein where, even if the parties to the litigation did not have among themselves an arbitration agreement, the court should be empowered to force the parties in appropriate cases to go to arbitration. This suggestion has practically the support of a large number of public sector undertakings who have responded to the queries of the Law Commission.

In this connection, the Ministry of Communication brought to the notice of the Law Commission a provision for arbitration in cases involving telephone/telex subscribers and the Department as incorporated in the Indian Telegraph Act, 1885. The Department complains that despite this wholesome provision, subscribers tend to rush to the courts initiating action against the Department and the Courts, oblivious to the statutory provision, tend to take cognizance of the dispute. The Ministry asserts that a standing panel of arbitrators must be appointed and no subscriber should be allowed to invoke the jurisdiction of the court before seeking intervention of the arbitrator.

5.7. The National Thermal Power Corporation, a public sector undertaking, lends its weight to this suggestion for compulsory arbitration. It has pointed out that the Corporation has incorporated appropriate provisions in general conditions of contracts awarded/to be awarded to various contractors for settlement of disputes, if any, arising out of, or relating to, the contracts between them and the Corporation.

It then proceeded to point out that the Corporation always insists on arbitration but even then it is exposed to unnecessary litigation because the parties dissatisfied by the award of the arbitrator question the same in a court of law on frivolous grounds and the litigation not only perpetuates but multiplies. Accordingly, it is of the opinion that a time has come for radically amending the Arbitration Act, 1940.

5.8. It is unquestionable that interminable, time consuming, complex, exasperating and atrociously expensive court procedures impelled jurists to search for an alternative forum, less formal, more effective and speedy for resolution of disputes avoiding procedural claptrap. The search led them to the dictum: 'arbitrate-do not litigate'. However, the way in which the proceedings under the Arbitration Act, 1940, are conducted and without an exception challenged in courts has made lawyers laugh and legal philosophers weep.

Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical, accompanied by unending prolixity, at every stage providing a legal trap to the unwary. Informal forum of parties' choice for expeditious disposal of the disputes has, by the decision of the courts, been clothed with legalese of unforeseeable complexity which led Edmund Davies, J., in Price v. Milner (1966) 1 WLR 1235 to utter a warning 'that these may be disastrous proceedings'.

A petty labour contractor in search of his labour charges against a multinational was told that, in view of the subsisting arbitration agreement between the parties, the suit filed by the labour contractor must be stayed and the labour contractor must be forced to resort to arbitration by the International Chamber of Commerce in Paris with application to Yugoslavia Materials and Economical Law. On a request of the multinational, the suit was stayed with the effect that the labour contractor will have to resort to arbitration by the International Chamber of Commerce at Paris.

The Supreme Court vacated the stay pointing out that enforcement of the arbitration agreement in the circumstances of the case itself would lead to miscarriage of justice1 In another case, pursuant to an arbitration agreement, an arbitrator was appointed who gave his award. But before the award could be given, an application was made for removal of the arbitrator to the High Court but which ultimately came to be rejected. Against that order, a petition was moved under Article 136 of the Constitution to the Supreme Court of India.

The Court, by consent of parties, removed the first-named arbitrator and appointed another person as arbitrator. As the new arbitrator directed fresh pleadings to be filed, a petition was moved in the Supreme Court which had made the appointment of the arbitrator, seeking a direction that the new arbitrator should commence the arbitration proceedings from the stage where it was left by the earlier arbitrator. The Court gave necessary directions. When the proceedings were still pending, one of the parties made an application in the High Court seeking a direction that the arbitrator may be asked to consider its counter-claim.

The jurisdiction of the High Court was challenged to entertain the application. After some time, parties agreed to request the arbitrator to consider the counter-claim as well. Thereafter the arbitrator made the award. One of the parties, the beneficiaries of the award, directed the arbitrator to file the award in the Supreme Court so as to make it a rule of the court. This again led to a dispute about the jurisdiction of the Supreme Court to entertain the application.

A petition was also moved in the High Court. Ultimately, the Supreme Court, after hearing the parties, made the award a rule of the court.2 Would not the normal litigation have ended earlier than the arbitration proceedings? It is not for a moment suggested that the arbitration agreement should not be enforced and parties must be held to their bargain.

1. Ramji Dayawala and Sons (P) Ltd. v. Invest Import, (1981) 1 SCC 80.

2. Guru Nanak Foundation v. Rattan Singh and Sons, (1981) 4 SCC 634.

5.9. Cochin Shipyard Ltd., invited tenders for construction of building dock at Cochin. Tarapore and Company were the tenderers. Ultimately, the contract was awarded. One of the terms of contract was that a credit in yen would be made available to the contractor for importing piling plant and machinery, spares, technical knowhow and hiring of experts necessary for the work, amounting to about Rs. 2 crores. The credit was not forthcoming. Accordingly, the contractor requested the Government of India to give necessary clearance to import equipment from other countries where it is available.

Ultimately the contractor made an extra claim consequent upon increase in the cost of pile driving equipment and technical knowhow fees. The parties agreed to refer the dispute to arbitration. The points of difference between the parties were drawn up by the Cochin Shipyard itself. The arbitrator made an award directing Cochin Shipyard Ltd. to pay Rs. 99 lakhs with interest at nine and a half per cent. per annum on account of the increase in the cost of imported pile driving equipment and technical knowhow fees.

The Cochin Shipyard challenged the award on a technical ground that the arbitrator cannot decide its own jurisdiction and the dispute was not covered by the arbitration agreement. The arbitrator entered upon the reference on June 2, 1976, and the dispute finally ended by a decision of the Supreme Court on March 6, 1984. And all technical objections were taken by the Cochin Shipyard Ltd., one of them being that the arbitrator had no jurisdiction to decide its own jurisdiction, even though the point as to jurisdiction was agreed to be referred to the arbitrator.1

1. Tarapore and Company v. Cochin Shipyard Ltd., (1984) 2 SCC 680.

5.10. Even where parties have a subsisting arbitration agreement, yet when one party in breach of the agreement resorts to a court proceeding and the opposite party appears and seeks enforcement of the arbitration agreement by seeking a stay of the suit under section 34 of the Arbitration Act, 1940, highly technical contentions are raised in this behalf and the matter has repeatedly surfaced in the Supreme Court of India.

Food Corporation of India, a public sector undertaking, faces numerous litigation and as soon as a writ of summons of the suit is received, it appears through one of its officers and seeks adjournment of a day or two. A contention is raised that as Food Corporation of India has taken a step in the proceeding, it has waived its right under the Arbitration Act.1 In this case, the Supreme Court had to overrule four judgments of different High Courts.

1. Food Corporation of India v. Yadav Engineer and Contractor, (1983) 1 SCR 95.

5.11. Therefore, the votaries of arbitration as alternative to court proceedings must also be influenced by the culture of arbitration. Public sector undertakings have not exhibited a different culture than the one a private individual manifests when in breach of agreement court proceedings are started and stay of the suit is resisted. The Law Commission would, therefore, keep in view this oft-repeated suggestion but would like to indicate changes in the approach while insisting upon arbitration.

5.12. Further, there are numerous dispute prone situations where the arbitration agreement may not be subsisting between disputants. Also, between two public sector undertakings, between instrumentalities of the Government and the Government, and between the Union Government and the State Government, there is generally no arbitration agreement. What litigation policy must be formulated in the absence of arbitration agreement?

5.13. Apart from public sector undertakings, some individuals also responded to the queries of the Law Commission. An academe suggested two alternatives to restrict the inflow of litigation from public sector undertakings/Government. He was of the opinion that numerous specialist tribunals should be set up to deal with the litigation in which public sector undertakings are involved and, in order to put a wholesome restraint on the litigious tendencies disclosed by public sector undertakings/Government, a litigation Ombudsman be appointed with expansive jurisdiction.1

1. Prof. I.P. Massey: A Note on the Dialectics of Judicial Review and the Dynamics of Corporate Management: A Search for the Alternative, vide book titled 'Public Enterprises and Fundamental Rights: Basic Papers, and Discussions of a National Level Seminar, 1984', compiled by Laxmi Narain & B.S. Murry, p. 77.