Opinion: A Fantastic Tribunal ! - Armed Forces Judgment and its Inconsistent Take on the Basic Structure

Union of India and Ors. v. Major General Shri Kant Sharma and anr.[1]

The post is based on a paper selected for publication in the legal magazine Practical Lawyer.

Few months ago, the Supreme Court rendered an important verdict with massive implications for the Writ Jurisdiction of High Courts u/Art 226 and 227 and to the Basic Structure theory.

A.    Issue before the Court

Whether the right of appeal under Section 30 of the Armed Forces Tribunal Act, 2007 against an order of Armed Forces Tribunal with the leave of the Tribunal under Section 31 of the Act or leave granted by the Supreme Court, or bar of leave to appeal before the Supreme Court under Article 136(2) of the Constitution of India, will bar the jurisdiction of the High Court under Article 226 of the Constitution of India regarding matters related to Armed Forces.

B.    Judgment

The Court, firstly, discussed the precedents holding Article 226 and 32 to be part of the basic structure. Meanwhile, it pointed out that Article 227 and 136 are qualified under Article 136 (2) and 227 (4) and consequently, do not apply to the armed forces.

Then, while affirming that Articles 226 and 32 are part of basic structure and cannot be taken away, the Court concluded that in many instances the Court (exercising self- restraint) has imposed certain limitations on powers under/ Article 226, which is the theory of Alternative Statutory Remedy. The Court relied on various judgments, mainly Nivedita[2] case to conclude that the Courts should pay due regard to the intention of the legislature and when statutory remedy in form of appeal is provided, then the jurisdiction u/Art 226 would not be exercised.

C.    Analysis

There are few concerns regarding the judgment that need to be addressed. Firstly, it is true that the Nivedita judgment, relied on by the Court, unequivocally states:

“it is one thing to say that in exercise of the power vested in it under Article 226 of the Constitution, the High Court can entertain a writ petition against any order passed by or action taken by the State and/or its agency/instrumentality or any public authority or order passed by a quasi-judicial body/authority, and it is an altogether different thing to say that each and every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.” [emphasis mine]

But there is a difference in cases where alternative Statutory remedy is an appeal before a Tribunal and one where appeal is before the Supreme Court directly. In Nivedita case, the alternative statutory remedy was appeal from the orders of the State Consumer Redressal Commission to the National Consumer Redressal Commission u/s 19 of the Consumer Protection Act 1986, whereas the alternative statutory remedy is an appeal before the Supreme Court, which basically ousts the jurisdiction of the High Court, if once the Supreme Court is approached to by the parties. In L. Chandra Kumar[3] judgment, the Court noted the necessity of both Article 227 and 226 jurisdictions over the decisions of the Tribunal. It has been the position of the Supreme Court in L. Chandra Kumar, that Tribunals/ subordinate Courts constituted by ordinary statutes are not substitutes of the High Court/ Supreme Court, since the constitutional safeguards enjoyed by HC/SC judges are not bestowed upon any other judicial authority.[4] In lieu of this, it is submitted that the Nivedita judgment cannot be applied in the present, since allowing alternative remedy to the Supreme Court, ousts the jurisdiction of the High Court u/Art 226, which is part of the Basic Structure.

Secondly, the part where the Court deals with “anomalous situations”, it states:

“If any person aggrieved by the order of the Tribunal, moves before the High Court under Article 226 and the High Court entertains the petition and passes a judgment or order, the person who may be aggrieved against both the orders passed by the Armed Forces Tribunal and the High Court, cannot challenge both the orders in one joint appeal. The aggrieved person may file leave to appeal under Article 136 of the Constitution against the judgment passed by the High Court but in view of the bar of jurisdiction by clause (2) of Article 136, this Court cannot entertain appeal against the order of the Armed Forces Tribunal...”

But this does not make any difference since, if the High Court was to exercise its jurisdiction u/Article 226, then, an appeal u/Art 136 would have laid against that decision, since Art 136 excludes judgments, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces and clearly Article 226 order is not by a Court that is constituted by or under any law relating to the armed forces.

Lastly, when the Court states that Article 227 is qualified for any court or tribunal constituted by or under any law relating to the Armed Forces, it ignores the dictum of L. Chandra Kumar v. UOI, where the Court had specifically stated:

“the power vested in the High Courts to exercise judicial superintendence over the decisions of all Courts and Tribunals within their respective jurisdictions is also part of the basic structure of the Constitution.” [emphasis mine]

Though these observations were made in the case, when the Superintendence of the High Court over the Administrative was dealt with, still the decision of superintendence power of High Court to be the part of basic structure is equally applicable to the Armed Forces Tribunal, which in any case, is still a Tribunal. Arguendo, (even assuming that the Article 227 (4) was not in the mind of the Court while deciding L. Chandra Kumar case), still the Court should address the larger issue that whether even the basic structure of the Constitution classifies different legal positions, one for armed forces and other for commoners and then clarify that whether the power of superintendence extends to the armed forces tribunal or not (in lieu of Article 227).

While the Court had tried to approached the problem in a very pragmatic manner and sought to reduce invocation of Article 226 jurisdiction of the High Court, but, it is submitted that the reasoning opted by it has various lacunas.

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[1] Civil Appeal No. 7400 OF 2013.

[2] (2011) 14 SCC 337.

[3] (1997) 3 SCC 261.

[4] paras 78, 79, L. Chandra Kumar judgment.

Opinion: Competing Non- Obstante Clauses in the Oppression and Mismanagement Claims

Jurisdictional Dilemma: Competing Non- Obstante Clauses in the Oppression and Mismanagement Claims

This post is based on a part of the paper selected for publication in the Company Lawyer.

The provisions of the CA 1956 provide for the mechanism to address the issues of oppression and mismanagement with vast authority to grant reliefs.[1] The provisions of ss 397 and 398 CA 1956 are the charging provisions in such disputes, authorizing the invocation of wide jurisdiction of the CLB in granting relief to put an end to the grievances of the complainant.[2]

On the other hand, the provisions of the Act 1996 provide for an alternative dispute resolution mechanisms to the parties to a dispute, which they had agreed to do.

The CA 1956 contains an overriding provision stating that its provisions shall have effect, even to the extent of overriding all the agreements that a Company might execute contrary of these provisions.[3] At the same time, it is argued that s 5 r/w s 8 of the Act contain an overriding provisions to refer a dispute for arbitration, once the matter before the Court is one that is the subject of an arbitration agreement. S 5 states that “nothing contained in the laws for the time being in force shall allow any judicial authority to intervene in the matters governed by the Act 1996, unless the Act 1996 itself provides it, whereas s 8 makes a reference to the arbitration mandatory.

The text of Section 8 reads: Power to refer parties to arbitration where there is an arbitration agreement:

“(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.”

The most common approach for the purposes of resolving a conflict between two provisions of different Acts is to ascertain as to which one of the statutes was later in time. In the case of Solidaire India,[4] the Supreme Court had held that where there a two conflicting non-obstante clauses in different statutes, then, the non- obstante clause of that Act would prevail which was enacted later in time. The reason of such a position is because it is presumed that when the later Act was being drafted, the legislature had the knowledge of the presence of a non- obstante in that conflicting previous statute and consequently, it introduced another non- obstante clause in a new statutory enactment to override the existing laws.[5]

Therefore, by this proposition, since the Act was enacted in 1996, and the provisions of ss 9 r/w 397 to 402 CA 1956 had existed prior to it, it must be presumed that the enactment of ss 5 r/w 8 in the Act 1996 was with a view to override the provisions of CA 1956.

However, there is a deeper analysis at play here. The Courts have provided for an exception in cases where if the later in time statute is a general statute, then, the previous specific statute prevails.[6]

An issue arose regarding the jurisdiction of Debt Recovery Tribunal, when there was an arbitration agreement between the parties regarding the same subject matter. The Court held that since the Recovery of Debts Due to Banks and Financial Institutions (RDB) Act 1993 specifically dealt with the issue of the recovery of debts by the Banks, the overriding provisions of s 34 of the RDB Act override the provisions u/ss 5 r/w 8 of the Act, even though the Act was a later statute.[7]

The Court, further, noted that the Act 1996 is a general statute, since it consolidates the law relating to domestic arbitration, international, commercial arbitration and dealt with a vast number of subjects in law.[8]

Similarly, due to the existence of s 2 (3)[9] of the Act 1996, decisions rendered with regard to matters falling within the jurisdiction of the Small Causes Courts,[10]Consumer Protection Act,[11] wherein the Court had upheld the jurisdiction of these specialized even in cases of existence of an arbitration agreement, still hold good on the basis of reasoning.

Clearly, reaching a conclusion on this issue is not easy. So, here another aspect is to be taken note of. Parties to an arbitration agreement seek to arbitrate disputes due to simplicity, informality, and expeditious nature of proceedings and replace the procedures and opportunity for review of the courtroom.[12]

The argument that parties merely by making an agreement cannot circumvent the statutory rights and other provisions, it is submitted, suffers from are two flaws; (i) that there seems to an unintended assumption that by entering into such an agreement, the parties are losing out from all the forums providing it a redressal mechanism and (ii) moreover, in such a scenario the sanctity of a promise is not accorded its due consideration.

It is submitted that in such cases, the intention of the parties must be ascertained by giving effect to the bargain of the parties and from the words used in the contract.[13] It has been a settled position of law in India, that if the disputes or differences relate to the terms of the contract containing the arbitration clause, then, the parties are bound to take recourse to arbitration.[14]

An arbitration agreement is a form of contract, disclosing a determination and obligation on the agreeing parties to go to arbitration in case of any disagreement.[15] The Courts in US have adequately and aptly addressed this issue, when they held that merely because the parties have agreed to a statutory claim does not mean that they have waived the substantive rights conferred by a statute on them, instead the resolution of dispute is submitted for arbitration,[16] rather than to a judicial forum.[17]

More specifically, when parties agree to arbitrate disputes, they turn this general statute of the Act 1996, into a specific forum and procedural law for them. In other words, they agree to arbitrate their disputes by this alternative dispute resolution mechanism only. So, in such a case, the principle of generalia specialibus non derogant does not apply, as both laws are made specific, one by statutory framework, the other by parties consent r/w ss 5 and 7 of the Act.

This post is based on a part of the paper 'Arbitrability of Oppression and Mismanagement Disputes: Issues and Challenges'.

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[1] The Companies Act 1956, s 398, 399 r/w 402.

[2] Rakesh Malhotra v Rajinder Kumar Malhotra, Company Appeal (L) No 10 of 2013.

[3] CA 1956, s 9; Avinash Kumar, ‘Arbitrability of Oppression and Mismanagement Petitions in India’, Statute Law Review, doi:10.1093/slr/hmv002.

[4] Solidaire India Ltd v Fair Growth Financial Services Ltd (2001) BC 656 (SC).

[5] ibid.

[6] Maharashtra Tubes v State Industrial and Investment Corporation of Maharashtra (1993) 2 SCC 144.

[7] Berhampur Cold Storage P Ltd v ICICI Bank Ltd 2011 (I) ILR-CUT 371.

[8] ibid, para 25.

[9] The Act 1996, Section 2 (3) states:

“This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration.”

[10] Manshukhlal Dhanraj Jain v Eknath Vithal Ogale, AIR 1995 SC 1102.

[11] Fair Air Engineers Pvt Ltd v NK Modi AIR 1997 SC 533.

[12] Mitsubishi Motors Corp v Soler Chrysler-Plymouth Inc 473 US 614 at 627.

[13]Central Bank of India Ltd v The Hartford Fire Insurance Co Ltd AIR 1965 SC 1288.

[14]Twentieth Century Finance Corpn Ltd v RFB Latex Ltd (1999) 97 CompCas 636 CLB, para 7; Airtouch International (Mauritius) Limited v RPG Cellular Investments and Holdings Private Limited [2004] 121 Comp Cas 647 (CLB), para 6.

[15] Jindal Exports Limited v Fuerest Day Lawson Ltd, OMP 29/2003.

[16]Cunningham v Fleetwood Homes of Georgia Inc 253 F 3d 611 (2001).

[17]Mitsubishi Motors Corp v Soler Chrysler-Plymouth Inc 473 US 614.