List of Current Affairs

Source: Supreme Court

Why in News?

Recently, a division bench of Justices Bela M Trivedi and Pankaj Mithal said that advocates cannot be held liable for deficiency of services under Consumer Protection Act, 2019.

• The Supreme Court gave this observation in the case of Bar of Indian Lawyers v. D.K.Gandhi.

What was the Background of Bar of Indian Lawyers v. D.K.Gandhi Case?

• Initiation:
  • Mr. D K Gandhi hired the services of an advocate to file a case under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) against Mr. Kamal Sharma for dishonoring a cheque of Rs. 20,000/-.
  • During the court proceedings, Mr. Kamal Sharma agreed to pay Rs. 20,000/- for the dishonored cheque and Rs. 5,000/- as expenses to Mr. D.K. Gandhi.
  • Mr. Kamal Sharma gave the advocate a DD/pay order for Rs. 20,000/- and a crossed cheque of Rs. 5,000/- on behalf of Mr. D.K. Gandhi.
  • However, the advocate did not deliver these to Mr. D K Gandhi. Instead, the advocate demanded Rs. 5,000/- in cash from Mr. D K Gandhi as his fees.
  • Advocate filed a suit in the Small Causes Court to recover Rs. 5,000/- as fees from Mr. D K Gandhi.
  • Later, the advocate gave the DD and cheque to Mr. D K Gandhi, but Mr. Kamal Sharma stopped payment of the Rs. 5,000/- cheque at advocates' instance.
• Complaint for Deficiency in Service:
  • D K Gandhi filed a consumer complaint against the advocate before the District Consumer Disputes Redressal Forum, alleging deficiency in service and seeking compensation.
• Consumer Forum’s Decision:
  • The District Forum allowed D K Gandhi's complaint, but the State Commission allowed advocates' appeal, holding that lawyers' services did not fall under the definition of "service" in the Consumer Protection Act, 2019.
  • However, the National Consumer Disputes Redressal Commission (NCDRC) allowed D K Gandhi's revision petition, holding that complaints alleging deficiency in Advocates' services would be maintainable under the Consumer Protection Act.
• Appeal to Supreme Court:
  • Aggrieved by this, appeals were filed in the SC by the Bar of Indian Lawyers, Delhi High Court Bar Association, Bar Council of India, and that advocate.

What were the Court’s Observations?

• Legislative Intent and Purpose of Consumer Protection Act:
  • The SC held that the very purpose and object of the Consumer Protection Act, 1986 as re-enacted in 2019 was to protect consumers from unfair trade practices and unethical business practices only.

• • There is nothing on record to suggest that the Legislature ever intended to include professions or services rendered by professionals within the purview of the Act.
• Legal Profession is sui generis:
  • The court observed that the legal profession is sui generis i.e. unique in nature and cannot be compared with any other profession.
  • Considering the role, status and duties of advocates as professionals, the legal profession cannot be equated with any other traditional profession.
  • The court held that it is not commercial in nature but is essentially a service-oriented, noble profession.
• Advocates' Services Fall Under 'Contract of Personal Service':
  • The court held that a service hired or availed of an advocate would be a service under a "contract of personal service" and would therefore stand excluded from the definition of "service" under Section 2(42) of the Consumer Protection Act, 2019.
  • This is because a considerable amount of direct control is exercised by the client over how an advocate renders services during employment.
• Complaints against Advocates not Maintainable under Consumer Protection Act:
  • The court concluded that a complaint alleging "deficiency in service" against advocates practicing the legal profession would not be maintainable under the Consumer Protection Act, 2019.
  • The court set aside the impugned NCDRC judgment which had relied on the Indian Medical Association v. V.P. Shantha & Others (1996) to bring advocates within the purview of the Act.
    • The court referred the Indian Medical Association case for consideration by a larger bench as it deserves to be revisited.

What is Deficiency of Services under the Consumer Protection Act, 2019?

• Definition:
  • The Section 2 (1) (g) of Consumer Protection Act, 1986 and Section 2(11) of Consumer Protection Act, 2019 defines "deficiency" as any fault, imperfection, shortcoming, or inadequacy in the quality, nature, and manner of performance required to be maintained under any law or undertaken to be performed by a person under a contract or otherwise in relation to any service. It includes:
    • Any act of negligence or omission or commission by the service provider, which causes loss or injury to the consumer.
    • Deliberate withholding of relevant information by the service provider from the consumer.
• Concept:
  • The concept of "deficiency of services" encompasses any failure, lack, or shortfall in the expected standard of services provided to consumers.
  • It covers instances where the service rendered falls short of the legal requirements, contractual obligations, or reasonable expectations of the consumer.
  • Deficiency can arise due to negligence, intentional acts, or omissions by the service provider, leading to consumer dissatisfaction, inconvenience, or harm.
• Complaint:
  • If a consumer encounters a deficiency in the services provided, they can file a complaint with the appropriate consumer forum established under the Act.
  • The complaint should include details of the complainant, the service provider, the facts of the case, the deficiency alleged, the relief sought, and supporting documents.
• Redressal Mechanism:
  • The Consumer Protection Act, 2019 establishes a three-tier quasi-judicial mechanism for redressal of consumer grievances:
    • District Consumer Disputes Redressal Forum: For claims up to Rs. 1 crore.
    • State Consumer Disputes Redressal Commission: For claims between Rs. 1 crore and Rs. 10 crore.
    • NCDRC: For claims exceeding Rs. 10 crore.

What are the Landmark Cases Cited in this Case?

• Dharangadhra Chemical Works Ltd. v. State of Saurashtra and Others (1957):
  • The court recognized the difficulty in definitively distinguishing a 'contract of service' from a 'contract for services' and laid down the following test:
    • “The correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer”.
• Byram Pestonji Gariwala v. Union Bank of India and Others (1992):
  • It discussed the unique nature of the Indian legal system rooted in common law traditions.
• State of U.P and Others v. U.P. State Law Officers Association and Others (1994):
  • It recognized the legal profession as essentially a service-oriented, noble profession.
• Indian Medical Association v. V P Shantha & Others (1996):
  • It held that the wide definition of 'service' under the CP Act would cover the services rendered by medical practitioners (This case was referred for reconsideration by a larger bench).
• Himalayan Cooperative Group Housing Society v. Balwan Singh and Others (2015):
  • It discussed the advocate-client relationship and the control exercised by the client over the advocate.

Source: Andhra Pradesh High Court

Why in the News?

In recently case Andhra Pradesh High Court stated that to validate an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A& C Act), the applicant must demonstrate that the respondents did not comply with the stipulated requirements in the arbitration clause and failed to refer the disputes to the Arbitrator despite being served a notice activating the arbitration clause.

What was the Background under of M/s Shree Swaminarayan Travels vs M/s Oil Natural Gas Corporation Limited (ONGC) Case?

• ONGC issued a tender for hiring eight 25-seater AC shift buses for 24-hour duty over four years.
• The Petitioner secured the contract and entered an agreement on 08.04.2019.
• Disputes arose, with ONGC seeking recovery of Rs. 65,61,300/- from subsequent bills.
• Petitioner requested resolution via Outside Expert Committee (OEC) but received no response.
• Petitioner approached the Andhra Pradesh High Court under Section 11(6) of the A&C Act.
• Respondents argued for adjudication through arbitration as per agreement.
• The High Court ruled that Section 11 application requires prior arbitration notice.
• Absence of notice per agreement's clause 27.1.3 and A&C Act's Section 21 led to dismissal of the application.

What were the Court’s Observations?

• The court observed that Clause 27.1 of the contract specifies that arbitration can only be initiated after a 60-day period following the issuance of a Dispute Notice as mandated in the agreement.
• Clause 27.3 outlines the dispute resolution procedure, requiring a written Dispute Notice to be tendered by either party to the opposing party's identified officer. Both parties must endeavor to achieve an amicable resolution within the designated 60-day period while maintaining confidentiality.
• Further Court observed that despite the Petitioner's apparent attempt to resolve disputes through conciliation by an OEC, no formal notice invoking the arbitration clause was served upon the Respondents after the 60-day period lapsed.
• The High Court referred to Section 11(6) of the A&C Act, granting parties the right to apply for dispute reference to an arbitrator if the other party fails to follow the prescribed procedure.
• Court stated that to sustain an application under Section 11(6), the Petitioner was required to demonstrate that the Respondents failed to comply with the clause and did not refer the disputes to the arbitrator after receiving a notice invoking the arbitration clause.
• Also, the High Court ruled that initiating an application under Section 11 of the A& C Act is only permissible after serving a notice of arbitration regarding the claims designated for arbitration.
• However, due to the absence of any notice served upon the Respondents in accordance with clause 27.1.3 of the agreement and Section 21 of the A&C Act, the High Court concluded that the disputes cannot be referred to an independent arbitrator for adjudication.

What is Section 11 of the Arbitration and Conciliation Act, 1996?

• Section 11 of the A&C Act, has undergone various interpretations and amendments in recent years.
• Indian courts traditionally held that the scope of inquiry under section 11 was confined to determining the existence of an arbitration agreement.
• The judiciary's role under section 11 was limited to preliminarily identifying the arbitration agreement and the dispute, without delving into the details of the dispute.
• An application under section 11 constrained the court's involvement to assessing:
  • Whether a valid arbitration agreement exists between the parties, and
  • If any dispute arising from such an agreement necessitates the appointment of an arbitrator.
• However, recent court decisions have seen a departure from this established principle. Courts now not only identify the arbitration agreement but also scrutinize and determine related prima facie questions.

What is Framework of Section 11 of the Arbitration and Conciliation Act, 1996?

• Section 11 of the Act addresses the appointment of arbitrators in arbitration proceedings.
• It offers options for parties to agree upon an appointment procedure for arbitrators.
• If parties cannot agree on arbitrator appointments, Section 11 enables them to approach the Hon’ble Supreme Court or the Hon’ble High Court for such appointments through sub-sections (4), (5), and (6).
• Amendments to Section 11 have been introduced through the Arbitration & Conciliation (Amendment) Act, 2015 (“2015 Amendment”) and the Arbitration & Conciliation (Amendment) Act, 2019 (“2019 Amendment”).
• The 2015 Amendment added sub-section 6A to Section 11, limiting the court's examination to the ‘existence’ of an arbitration agreement only.
• The 2019 Amendment transferred the power of appointing arbitrators from courts to arbitral institutions designated by the Supreme Court or the High Court, although this amendment is not yet effective.

What are the Major Amendments Related to Section 11 of the Arbitration and Conciliation Act, 1996?

• Amendment 2015
  • The appointment of arbitrators will now be conducted by the Supreme Court or the High Court, depending on the nature of the case, rather than by the Chief Justice of India or the Chief Justice of the High Court.
  • Applications for the appointment of arbitrator(s) will be handled promptly, with efforts made to resolve them within a sixty-day period from the date of service of notice to the opposing party.
  • The High Court has been granted the authority to establish rules for determining the fees of the arbitral tribunal and the manner of such payment. These rules must consider the fee rates outlined in the Fourth Schedule to the Act.
• Amendment 2019
  • The 2019 Amendment Act was enacted by Parliament based on recommendations from the High-Level Committee's report.
  • Key amendments include:
    • Establishment of the independent and autonomous "Arbitration Council of India".
    • Amendment to Section 11 of the Act, particularly focusing on the "Appointment of Arbitrators".
  • Sub-sections (6-A) and (7) were repealed through this amendment.
  • The amended Section 11(6) of the ACA now mandates that arbitrators be appointed by the designated arbitral institution.
  • The appointment process is based on an application by the party and is carried out by the arbitral institution designated by either the Supreme Court for international commercial arbitration or the High Court for arbitrations other than international commercial arbitration.

What are the Landmark Case Laws under the Arbitration and Conciliation Act, 1996?

• In both, Oriental Insurance Company Ltd. v. Narbheram Power and Steel Private Ltd. and United India Insurance Co.Ltd. v. Hyundai Engineering And Construction (2018) the Supreme Court other than identifying the existence of the arbitration agreement, examined whether the conditions stipulated in the contract to give effect to the arbitration agreement have been fulfilled.
• In Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.(2018) the Supreme Court was of the opinion that an application under Section 11 could be decided only if the arbitration clause or the contract containing the arbitration clause is sufficiently stamped. Considering sub-section (6-A) one could argue that examining the existence of an arbitration agreement does not include examining whether such agreement is sufficiently stamped.

Source: Supreme Court

Why in News?

Recently the Supreme Court held that in auction sale this is obligatory on court that only such portion of property as would satisfy decree is sold and not the entire property.

What was the Background of Bhikchand S/O Dhondiram Mutha (Deceased) through LRs. v. Shamabai Dhanraj Gugale (Deceased) through LRs. Case?

• Dhanraj husband of Shamabai Dhanraj Gugale (original plaintiff/decree holder) give loan of Rs. 8000/- to the defendant (appellant/judgment debtor) in 1969.
• The appellant was failed to repay the loan amount.
• The original plaintiffs instituted a civil suit for the recovery of loan amount with Rs. 2880/- as interest, along with interest @ 12% per annum pendente lite and post decree and for other ancillary reliefs and costs.
• The joint Civil Judge, Senior Division, Pune partly decreed the suit.
• The plaintiffs filed an appeal against rejection of part of the claim. In the same appeal judgment debtor preferred cross objections.
• During the pendency of this appeal, he also preferred execution application, which was transferred to Civil Judge, Senior Division, Ahmednagar because the property of judgment debtor against which the decretal amount was to be recovered was situated in Ahmednagar.
• In the execution proceedings, the court ordered the attachment and sale of three properties of judgment debtor.
• But the appeal was dismissed by the District Court and allowed defendant’s cross objections.
• The appellate court also reduced the interest rate from 12% per annum to 6% per annum for both pre-suit and pendente lite/future interest. The total decretal amount of Rs.27694/- thus stood reduced to Rs. 17120/-.
• Before the decision of appellate court, the plaintiffs executed the decree, and the properties of judgment debtor were put to auction and purchased by the original plaintiffs themselves for Rs. 34000/-.and one property was sold to respondent no.3 for Rs. 3.9 lakhs.
• In 1990 the judgment debtor filed an application for restitution under Section 144 of Code of Civil Procedure, 1908 (CPC) on the ground that the original decree having been varied, substantially, the execution sale deserves to be set aside and reversed by way of restitution. And he also deposited the entire decretal amount.
• The appellate court (High Court) rejected the application of restitution because judgment debtor had not deposited any amount in court.
• The present appeal was filed by the judgment debtor before the Supreme Court (SC).

What were the Court’s Observations?

• The SC convinced with the contention of judgment debtor that this is a case where the decree is subsequently modified/varied, and the decretal amount was reduced from Rs. 27,694/- to Rs. 17,120/-, and the sale of all three attached properties was not at all required.
• The SC stated that the Executing Court did not discharge its duty to ascertain whether the sale of a part of the attached property would be sufficient to satisfy the decree. The Court has caused great injustice to the judgment debtor by auctioning his entire attached property and the sale of all the three attached properties.
• In the facts and circumstances of the case variation of the decree read together with the sale of the properties at a low price has caused huge loss to the judgment debtor where restitution by setting aside the execution sale is the only remedy available.
• The SC was not convinced with the argument that the execution sale cannot be set aside at this stage when the judgment debtor has not paid any amount to satisfy the original decree or the modified decree nor he has challenged the legality of the auction sale on any permissible ground as contemplated in Order XXI of CPC.
• The SC held that the Court may make any order, as provided under Section 144 of CPC. It is in exercise of this power that we have considered the aspect of execution of the decree by attachment of whole property when part of the property could have satisfied the decree.
• Hence, the SC set aside the order of High Court and allowed the application of appellant under Section 144 of CPC and set aside the sale of attached properties belonging to the judgment debtor.
• The parties are restored back to the position where the execution was positioned before the attachment of the immovable properties of the judgment debtor.

What are the Landmark Judgments Cited in this Case?

• South Eastern Coalfields Ltd. v. State of M.P. & Ors (2003):
  • In this case the Supreme Court explained the meaning of the word “restitution” in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order, what has been lost to him in execution of decree or order of the court or in direct consequence of a decree or order.
  • The Court held that even away from Section 144, it has inherent jurisdiction to order restitution to do complete justice between the parties.
• Chinnamal & Ors. v. Arumugham & Anr (1990):
  • In this case the Supreme Court held that the person who purchases the property in court auction with the knowledge of the pending appeal against the decree cannot resist restitution.
  • It is well to remember that the Code of Civil Procedure is a body of procedural law designed to facilitate justice and it should not be treated as an enactment providing for punishments and penalties.
• Binayak Swain v. Ramesh Chandra Panigrahi & Anr. (1966):
  • The Supreme Court held that the obligation for restitution arises automatically on the reversal or modification of the decree and necessarily carries with it the right to restitution of all that has been done under the erroneous decree.
  • The Court in making restitution is bound to restore the parties, so far as they can be restored to the same position they were in at the time when the Court by its erroneous action had displaced them from.

What is the Legal Provision Involved in this Case?

• Section 144 of CPC: Application for restitution. —

(1) Where and in so far as a decree or an order is varied or reversed in any appeal, revision or other proceeding or is set aside or modified in any suit instituted for the purpose, the Court which passed the decree or order shall, on the application of any party entitled to any benefit by way of restitution or otherwise, cause such restitution to be made as will, so far as may be, place the parties in the position which they would have occupied but for such decree or order or such part thereof as has been varied, reversed, set aside or modified]; and for this purpose, the Court may make any orders, including orders for the refund of costs and for the payment of interest, damages, compensation and mesne profits, which are properly consequential on such variation, reversal, setting aside or modification of the decree or order.

Explanation. —For the purposes of sub-section (1), the expression “Court which passed the decree or order” shall be deemed to include, —

(a) where the decree or order has been varied or reversed in exercise of appellate or revisional jurisdiction, the Court of first instance;

(b) where the decree or order has been set aside by a separate suit, the court of first instance which passed such decree or order.

(c) where the Court of first instance has ceased to exist or has ceased to have jurisdiction to execute, it, the Court which, if the suit wherein the decree or order was passed were instituted at the time of making the application for restitution under this section, would have jurisdiction to try such suit.

(2) No suit shall be instituted for the purpose of obtaining any restitution or other relief which could be obtained by application under sub-section (1).