Press Coverage

New Delhi, May 19 (PTI) The Supreme Court on Friday appointed former apex court judge Indu Malhotra as the sole arbitrator to adjudicate disputes arising from the conditions of a tender floated in 2011 by the Ministry of Home Affairs for supply of over 31,000 Glock pistols.

A bench headed by Chief Justice D Y Chandrachud rejected the submissions of the Centre’s counsel that the contracts entered into by the Union of India in the name of the President are immune from provisions that protect against conflict of interest of a party to a contract under section 12(5) of the Arbitration and Conciliation Act, 1996. The bench, also comprising Justices PS Narasimha and JB Pardiwala, delivered its verdict on an application by M/s Glock Asia-Pacific Ltd. under section 11(6) of the Act for the appointment of a sole arbitrator.

“We hereby appoint Justice Indu Malhotra, a former judge of this court, as the sole arbitrator to adjudicate upon the disputes arising under and in connection with the conditions of tender entered into between the parties, subject to the mandatory disclosures under the amended section 12 of the Arbitration and Conciliation Act, 1996,” the bench said, while allowing the application.

The top court noted that the Ministry of Home Affairs (Procurement Division) had floated a single party tender in February 2011 for supply of 31,756 Glock pistols.

It said the bid was confirmed in favour of the applicant and a tender of acceptance was issued by the ministry in March 2011.

The bench also noted the applicant, which had furnished the performance bank guarantee (PBG) in August 2011, proceeded to perform its contractual obligations and by August 6, 2012 delivered the entire supply under the contract.

It said the ministry accepted the consignment and paid the entire consideration by November 2012.

The apex court noted the PBG, which was issued in August 2011, was extended from time to time during the subsistence of the contract, and in May 2021, the applicant informed the ministry that the PBG will not be extended any further. The bench also noted that the ministry immediately invoked the PBG for Rs 9.64 crore, citing the clauses of the acceptance of tender which provided for guarantee and warranty.

Later, the firm issued a notice invoking arbitration in July 2022 and nominated a retired judge of the Delhi High Court as the sole arbitrator. The bench said, replying to the notice invoking arbitration, the ministry in an October 2022 letter stated that the nomination was contrary to clause 28 of the conditions of tender as per which disputes are to be referred to arbitration by an officer in the Ministry of Law, appointed by the Secretary of Ministry of Home Affairs.

In its verdict, the bench dealt with the submission of the Centre’s counsel that the contract in this case stands on a different footing as it was entered into in the name of the President of India. “It must be emphasized that Article 299 (of the Constitution) only lays down the formality that is necessary to bind the government with contractual liability. It is important to note that Article 299 does not lay down the substantial law relating to the contractual liability of the Government, which is to be found in the general laws of the land,” the bench said.

Defending the Centre, ASG argued that the contract in the case stands on a different footing as it is entered into in the name of the President

The Union of India cannot demand an immunity from the operation of pertinent legal provisions just because a contract is in the name of the President of India, the Supreme Court ruled on Friday.

A bench, comprising Chief Justice of India Dhananjaya Y Chandrachud and justices PS Narasimha and JB Pardiwala, interpreted Article 299 of the Constitution to hold that the central government, as a party to a contract, cannot wriggle out of statutory bars by arguing that the contract is in the name of the President of India

Article 299 provides that all contracts in the exercise of the executive power of the union or of a State shall be expressed to be made by the President or by the Governor of the State, and all such contracts will be executed by a person duly authorized in that behalf.

“Having considered the purpose and object of Article 299, we are of the clear opinion that a contract entered into in the name of the President of India, cannot and will not create an immunity against the application of any statutory prescription imposing conditions on parties to an agreement, when the Government chooses to enter into a contract,” held the judgment, authored by justice Narasimha.

The judgment came on an application filed for the appointment of a sole arbitrator by Glock Asia-Pacific Ltd which had a contract with the Union ministry of home affairs (MHA) for the supply of Glock Pistols. Invocation of performance bank guarantee by the MHA caused a rift between the two and the company issued a notice invoking arbitration in July 2022. It nominated a retired judge of the Delhi high court as the sole arbitrator and asked the MHA to accept the nomination. Instead, the MHA replied that a condition of the tender mandated that the dispute had to be referred to sole arbitration of an officer in the Union law ministry, who will be appointed by the secretary in MHA.

Senior counsel R Viraraghavan, assisted by advocates Siddharth Bambha and Shyam D Nandan, argued that appointment of the sole arbitrator as per the MHA’s terms would be contrary to Section 12(5) of the Arbitration Act, which protect against conflict of interest of a party to a contract. The lawyers contended that the Union of India, being a party to the agreement, appointing its own employee in the law ministry as the sole arbitrator is a clear case of conflict of interest.

Defending the Centre, additional solicitor general Aishwarya Bhati argued that the contract in the present case stands on a different footing as it is entered into in the name of the President of India.

The bench, however, rejected the ASG’s arguments, noting that Article 299 only lays down the formality that is necessary to bind the government with contractual liability and does not extend to the substantial law relating to the contractual liability of the government which is to be found in the general laws of the land.

“It is for this reason that, even though a contract may be formally valid under Article 299, it may nevertheless fail to bind the Government if it is void or unenforceable under the general provisions of law,” said the bench, lamenting that the arbitration clause in the present case enables a serving employee of the Union of India, a party to the contract, to nominate a serving employee of the Union of India as the sole arbitrator.

“We have no hesitation in rejecting the submission of the learned ASG that the contracts entered into by the Union of India in the name of the President of India are immune from provisions that protect against conflict of interest of a party to a contract, under Section 12(5) of the Act,” said the court, as it appointed its former judge Indu Malhotra as the sole arbitrator to decide the dispute.

The Supreme Court, while adjudicating an application for appointment of arbitrator, has held that a contract entered into in the name of the President of India, does not create an immunity against the application of any statutory prescription imposing conditions on parties to an agreement, when the Government chooses to enter into a contract.

“We are unable to trace any immunity arising out of Article 299, to support the contention that for contracts expressed to be made by the President of India, the ineligibility of appointment as an arbitrator as contemplated under Section 12(5) of the Act, read with Schedule VII, will be inapplicable”,

The Bench comprising of the Chief Justice Dr. Dhananjaya Y. Chandrachud, Justice PS Narasimha and Justice J. B. Pardiwala, while adjudicating an appeal M/s Glock Asia-Pacific Ltd. v Union of India, observed that the Union of India is a party to the contract in respect of which arbitration is being invoked. Therefore, the Arbitrator appointed by Union, who is an employee of the Union, is ineligible to be appointed as the Arbitrator as per Para 1 of Schedule VII read with Section 12(5) of the Arbitration and Conciliation Act, 1996.

In 2011, the Ministry of Home Affairs, Government of India (“Ministry”) floated a tender for the purchase of Glock pistols. The Conditions of Tender contained an Arbitration clause as per which the Secretary of Ministry of Home Affairs was to appoint an employee of the Ministry of Law and Justice (Government of India) as sole arbitrator.

Dispute arose between the Parties. On 20.07.2022 the Applicant issued a notice invoking arbitration and nominated a retired Judge of the Delhi High Court as the Sole Arbitrator. However, the Ministry opposed the appointment on the ground that as per Conditions of Tender an officer of Ministry of Law, appointed by the Secretary of Ministry of Home Affairs has to become an arbitrator.

The Applicant, being a foreign company, filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) before the Supreme Court.

The Section 12(5) of the Arbitration Act enumerates the grounds of challenge for appointment of an arbitrator. If the arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party, then he/she is ineligible to be appointed as an Arbitrator.

The Applicant placed reliance on the judgment in Perkins Eastman Architects DPC and Another v. HSCC (India) Ltd., (2020) 20 SCC 760, wherein it was held that any person having an interest in the outcome of the dispute would be ineligible to be an arbitrator. It was contended that if Union of India beingefa-border a party to the Contract, appoints its own employee as the Sole Arbitrator, then it would violate Section 12(5) of the Arbitration Act.

SUPREME COURT VERDICT

Contract entered into in the name of the President of India, does not create an immunity against application of any statutory prescription

The Article 299 of the Constitution of India provides that all contracts made in exercise of the executive power of the Union shall be expressed to be made in the name of the President.

While placing reliance on the judgment in Chatturbhuj Vithaldas Jasani v Moreshwar Parashram & Ors., (1954) SCR 817, the Bench opined that contract, where the Government is a party, must be formed by its agents in conformity with form given by Article 299(1) of the Constitution. Otherwise, such contract cannot be enforced at the instance of any contracting party.

The Bench observed as under:

“It must be emphasized that Article 299 only lays down the formality that is necessary to bind the government with contractual liability. It is important to note that Article 299 does not lay down the substantial law relating to the contractual liability of the Government, which is to be found in the general laws of the land. It is for this reason that, even though a contract may be formally valid under Article 299, it may nevertheless fail to bind the Government if it is void or unenforceable under the general provisions of law.”

On the issue of whether a contract entered into in the name of President would entail any immunity against the application of statutory prescription, the Bench held as under:

“Having considered the purpose and object of Article 299, we are of the clear opinion that a contract entered into in the name of the President of India, cannot and will not create an immunity against the application of any statutory prescription imposing conditions on parties to an agreement, when the Government chooses to enter into a contract. We are unable to trace any immunity arising out of Article 299, to support the contention that for contracts expressed to be made by the President of India, the ineligibility of appointment as an arbitrator as contemplated under Section 12(5) of the Act, read with Schedule VII, will be inapplicable.”

The Bench rejected the contention that the contracts entered into by the Union of India in the name of the President of India are immune from provisions that protect against conflict of interest of a party to a contract, under Section 12(5) of the Act.

The Hon’ble Supreme Court of India on Monday in the case of Varsha Garg vs State of Madhya Pradesh and Ors. ruled that Section 311 empowers the trial court to summon witnesses to arrive at a just decision.

The decoding registers, according to the bench of Justices Dhananjaya Y Chandrachud and AS Bopanna, are a pertinent evidence piece to establish the co-relationship between both the accused’s location as well as the cell phone tower. In this case, the appellant is the wife of an advocate who’d been brutally murdered outside his office on November 18, 2015, around 23:30 hrs. An FIR was filed under Section 302 read in conjunction with Section 34 of the IPC.

The CD which was produced during the trial was found to be corrupted hence an application was made to the trial court for the requisition of the copy CD which was available at the police station. An application was preferred for requisition of the said CD but this application was rejected by the trial court. A Single Judge of the High Court granted the appellant’s petition to challenge the trial court’s order, noting that the CD was a crucial piece of evidence that was provided to all of the accused along with the charge sheet.

This order of the trial court was challenged before the High Court by the appellant under Section 482 CrPC dismissing the second application which has been called into question in these proceedings.

The submission urged by the Counsel of Appellant was that in any event, there was no bar in law to the filing of an application under Section 311 even after the closure of evidence.

The submission which has been urged by Counsel for Respondent is that given the bar contained in Section 301 CrPC, it is not open to the appellant who is the spouse of the deceased to pursue these proceedings.