1

Gase Law Analysis

Vinubhai I-taribhai»talaviyaw The State OfGujarat

Off J6 October, zoig

CRIMINAL APPEAL NOS.478-479 OF 2017

Name of the parties:

Vinubhai Haribhai Malaviya and Ors. . . Appellants

Versus

The State of Gujarat and Anr. . ..Respondents

CORUM OF THE COURTS NAME OF THE JUDGES:

3 Bench judge . Rohinton Fali Nariman, Surya Kant, V. Ramasubramanian

Submitted By : Yash Tiwari

A11911115138

BA LLB SEC 'E’

 2

Introduction:

The Hon’b1e Supreme Court of India (Supreme Court), vide its recent judgment of Vinubhai
Haribhai and Others v The State of Gujarat and Another dated 16 October 2019, (Vinubhai Case)
arising out of a criminal appeal against an order of the High Court of Gujarat (High Court), has held
that a judicial magistrate has wide powers under Section 156(3) read with Section 156(1) and Section
2(h) read with Section 173(8) of the Code of Criminal Procedure, 1973 (CrPC) to direct further
investigation, upon an application or suo moto, even at post-cognizance stage before the
commencement of trial. This judgment assumes significance in view of the earlier judgments,
wherein a consistent view had been taken regarding the power accorded under Section 173(8) of the
CrPC i.e., such power vested only with the investigating agency and a magistrate had no power to
order investigation under the sub-section at a post-cognizance stage.

Facts & Issues:

The issue emanates from application(s) filed by the accused persons before the judicial magistrate
(First Class), Surat, (Magistrate) for further investigation citing additional facts that could have
incriminated the complainant. The Magistrate dismissed the said application(s) observing that the
facts sought to be placed by the accused were in the nature of defence to the allegations in the FIR by
the original complainant and therefore, the said facts and evidence(s) may be led during the trial. The
accused persons assailed the said order before the High Court, wherein the High Court held that the
Magistrate does not possess any power to order further investigation after a charge-sheet has been
filed and cognizance has been taken by the concerned magistrate. The said order was challenged by
way of an appeal by the accused persons before the Supreme Court (Appeal).

In the Appeal, the following question of law was to be determined by the Supreme Court:

Whether, after a charge-sheet is filed by the police, the Magistrate has the power to order further
investigation, and if so, up to what stage of a criminal proceeding?

Names of Advocate: Shri Dushyant Dave ( Appellant)

Shri Basant & Shri Navare (Defendant)

Rules Applicable : Section 156(1) CrPC, Section 156 (3) Crpc, 173(8) Crpc, Section 2(h) CrPC .

Arguements on Behalf of Appellants : Para 32-34

Arguements on Behalf of Respondents : Para 36 — Para

38

Precedents in Question : Bhagwant Singh vs Commissioner Of Police, Delhi on 6 May, 1983

Randhir Singh Rana vs The State Being The Delhi ... on 20 December, 1996

Judgment:

The Supreme Court observed that a fair investigation is a pre-requisite of a fair trial and heavily relied
upon Article 21 of the Constitution of India, 1950 considering it to be the guiding force for
interpretation of all the provisions of the CrPC. . While determining whether a Magistrate has powers
to direct such investigation, the Supreme Court held that the Magistrate under Section 156(3) of the
CrPC has to ensure a proper investigation. Further, Article 21 mandates all the powers necessary,
incidental or implied, are available to the Magistrate to ensure a proper investigation, which without
doubt, would include the ordering of further investigation even after receipt of a report under Section
173(2) of CrPC until the trial itself commences, upon an application being made before such
Magistrate or even suo moto. The Supreme Court proceeded to interpret the provisions of the CrPC to
arrive at the same conclusion as above.

The Supreme Court held that, even textually, the term “investigation” referred to in Section 156(1) of
CrPC would, as per the definition of “investigation” under Section 2(h), include all proceedings for
collections of evidence conducted by police. Accordingly, this would undoubtedly include
proceedings by way of further investigation under Section 173(8) of the CrPC. Therefore, the
Magistrate empowered under Section 156 of CrPC to order investigation, shall also be empowered to
order further investigation under Section 173(8) of CrPC.

To arrive at the conclusion, the Supreme Court, amongst other judgments, relied upon the judgment
of Kamlapati Trivedi v State of West Bengal (1980) 2 SCC 91, which recognized that if the
magistrate does not agree with the police report, he may order further investigation.

While arriving at the aforesaid conclusion, the Supreme Court also held that the judgment of the
Supreme Court in Devarapalli Lakshminarayana Reddy & Ors. v V. Narayana Reddy & Ors.
(Devarapalli Case) does not enunciate the correct law on the subject as Devarapalli Case did not take
into consideration Section 2(h) of CrPC while reading Section 156(3) or Section 173(8) of CrPC nor
has the said judgment provided any good reason to restrict a magistrate from exercising such powers.
The Supreme Court further, went on to overrule the judgments of Amrutbhai Shambhubhai Patel v
Sumanbhai Kantibhai Patel (2017) 4 SCC 177, Athul Rao v State of Karnataka & Anr. (2018) 14
SCC 298, Bikash Ranjan Rout v State through Secretary (Home), Government of NCT of Delhi
(2019) 5 SCC 542 and Randhir Singh Rana v State (Delhi Administration) (1997) 1 SCC 361, to the
extent they were contrary to the law laid down in the Vinubhai Case.

Comments:

1. While the said judgment paves a way for bonafide applicants to approach the magistrate with a
request to investigate further, as a corollary, it also gives liberty to the accused persons or other
parties in a criminal case to delay the trial by filing applications as a means to derail the
proceedings. This is furthered by the absence of specific or exceptional circumstances being
prescribed for the exercise of such powers by the magistrate.

2. However, empowering the magistrates to direct further investigation (even at a post-cognizance

stage till commencement of trial) may reduce the multiplicity of First Information Reports (FIRs)
and subsequent cases by cumulative investigation in relation to complaints and counter-complaints
amongst parties. This may also allow the magistrates to rectify a flawed investigation carried out by
the police. While this may embolden the magistrates to rectify lacunae at a later stage of the
proceedings, it may simultaneously increase the number of appellate or revisional proceedings, with
each such order of the magistrate being challenged before a superior court by the aggrieved party
thereby causing further delay as a result of these appeals / revisions / application.
 5

’s Ss SOI¥tA

CIVIL APPEAL NO. 9307 OF 2019

(ARISING OUT OF SLP (CIVIL) NO.25618 OF 2018)

BGS SGS SOMA JV . ..Petitioner

Versus

NHPC LTD..........................................Respondent

WITH
CIVIL APPEAL NO. 9308 OF 2019
(ARISING OUT OF SLP (CIVIL) NO. 25848 OF
2018)
WITH
CIVIL APPEAL NO. 9309 OF 2019
(ARISING OUT OF SLP (CIVIL) NO. 28062 OF
2018)

CORUM OF THE COURT7NAME OF THE JUDGES:

Bench: Rohinton Fali Nariman, Aniruddha Bose, V. Ramasubramanian

 7

On 10 December 2019, a three-judge bench of the Supreme Court (SC) passed a judgment in BGS SGS
SOMA JV v NHPC Ltd deciding key issues relating to interpretation of arbitration clauses and scope of
appealable orders under the Arbitration and Conciliation Act 1996 (Arbitration Act).

In particular, the SC has held that: (a) an appeal against an order transferring proceedings under Section
34 of the Arbitration Act is not maintainable under Section 37 of the Arbitration Act; (b) the designation
of a seat confers exclusive jurisdiction upon the courts of the said seat; and (c) a place of arbitration,
regardless of its designation as venue / seat / place is the juridical seat of arbitration, unless there are
significant contrary indicators.

In doing so, the SC has specifically declared that its earlier judgments in Union of India v Hardy
Exploration and Production (India) Inc (AIR 2018 SC 4871) (Hardy Exploration) and Antrix
Corporation Ltd v Devas Multimedia Pvt Ltd(2018 (4) ArbLR 66 (Delhi)) (Antrix) are incorrect.

Factual Background

A contract was signed between NHPC Limited (NHPC) and its contractor, BGS SGS SOMA JV (JV), for
India’s largest hydroelectric project in Assam and Arunachal Pradesh. The arbitration clause in the
contract stated that the “arbitration proceedings shall be held at New Delhi / Faridabad’.

Disputes arose between NHPC and the JV, and arbitration proceedings were commenced. The arbitration
proceedings were conducted in New Delhi and the consequent award (Award) was also signed there.
Since the Award was in favour of the JV, NHPC filed an application under Section 34 of the Arbitration
Act challenging the Award before the District Court in Faridabad.

The JV filed an application under Order VII Rule 10 of the Code of Civil Procedure 1908 and Section
2(1)(e)(i) of the Arbitration Act, seeking return of the Section 34 application to the appropriate court in
New Delhi (since the arbitration had taken place in New Delhi) or Assam, (since the cause of action had
arisen in Assam). Accordingly, the Section 34 application was transferred from Faridabad to New Delhi
(Transfer Order).

Aggrieved by this Transfer Order, NHPC filed an appeal under Section 37 of the Arbitration Act before
the Punjab and Haryana High Court. The High Court held that: (a) the appeal under Section 37 of the
Arbitration Act was maintainable; (b) the court with relevant jurisdiction was the Faridabad court because
 8

the cause of action had arisen there; and (c) New Delhi was not the seat of arbitration and only a
convenient venue (Impugned Order).

Advocate of the parties:

Petitioners:

Dr. Abhishek Manu Singhvi (Petitioner)

Shri Arunabh Chaudharily

Shri Ankit Chaturvedi

Respondents:

Smt. Maninder Acharya

Rules Applicable : Section 2 , Section 20 , Section 34,Section 37 of Indian Arbitration Act, 1996

Arguements on Behalf of Appellants : Para 6-18

• Precedents in Question : Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Service, Inc.,
(2012) 9 SCC 511
• Indus Mobile Distribution Private Limited v.Datawind Innovations Private Limited & Ors., (2017) 7 SCC 678

Issues

Whether a Section 37 appeal is maintainable against an order that transfers Section 34

g proceedings from one court to another?

Whether the designation of a place of arbitration confers exclusive jurisdiction upon the courts
g of the said place to decide disputes arising out of the arbitration agreement?

g What is the seat of arbitration in the present dispute?

Reasoning of the SC

Whether Section 37 appeal is maintainable against an order that transfers Section 34

Qroceedings?
1.
Appeals under Section 37 of the Arbitration Act may only lie against: (a) orders refusing
reference to arbitration under Section 8 of the Arbitration Act; (b) orders granting /
rejecting interim relief under Section 9 of the Arbitration Act; and (c) orders under Section
34 of the Arbitration Act, which set aside / refuse to set aside an arbitral award.

Accordingly, an order merely transferring the Section 34 proceedings from one court to
another, as stipulated in the Transfer Order, is not tantamount to an outright refusal to set
aside the Award. Therefore, NHPC’s appeal under Section 37 of the Arbitration Act was
not maintainable.

(Reliance placed on Kandla Export Corporation & Anr v is OCI Corporation &
Anr ((2018) 14 SCC 715) and South Delhi Municipal Corporation v Tech Mahindra (EFA
(OS) (Comm.) 3 of 2019))

Whether the designation of a place of arbitration confers exclusive Jurisdiction upon the
courts of the said Qlace?
2.
NHPC relied on paragraph 96 of Bharat Aluminium Co v Kaiser Aluminium Technical
Service, Inc ((2012) 9 SCC 552) (BALCO) and Matrix to contend that two courts have
jurisdiction over arbitration applications — the court of the seat and the court of cause of
action.

The SC on analysing paragraph 96 of BALCO held that it must be read together with other
portions of the judgment. In particular, BALCO relies upon the English judgment of Roger
Shashoua & Ors v Mukesh Sharma ([2009] EWHC 957 (Comm)) (Roger Shashoua), which
held that courts of the seat of arbitration have exclusive jurisdiction over all proceedings
arising out of the arbitration. The existence of multiple venues is only a matter of
convenience. Other portions of the BALCO judgment also confer exclusive jurisdiction
 upon the court of the seat of arbitration and acknowledge that the terms ‘seat’ and ‘place’
are used interchangeably.

The SC further held that Antrix’s reliance on paragraph 96 of BALCO to conclude that the
court of cause of action and the court of the seat have concurrent jurisdiction, was
incorrect, in light of the aforesaid reasoning.

Accordingly, the SC has held that the courts of the place of arbitration have the exclusive
jurisdiction to hear the Section 34 application.

(Reliance placed on Indus Mobile Distribution Private Limited v Datawind Innovations

Private Limited & Ors ((2017) 7 SCC 678), Reliance Industries Ltd v Union of
India ((2014) 7 SCC 603), Enercon (India) Ltd & Ors v Enercon GmbH & Anr ((2014) 5
SCC 1) and Brahmani River Pellets Ltd v Kamachi Industries Ltd (AIR 2019 SC 3658)).

What is the seat o/arbitration?

3.
In the present case, the arbitration agreement stated that the arbitration shall be held at a
particular place, without designating it as either a seat or venue. The SC considered the
following questions:

Is reference to a ’place of arbitration’ a reference to a juridical seat, or just a

convenient venue?

A place of arbitration is a stipulation that such place shall be the seat of the
arbitration, and consequently determine the lex fori. In this regard, the SC relied
on Roger Shashoua, which discussed the significant contrary indicia’ test. This test
was also applied in Naviera Amazonica Peruana S.A. v. Compania Internacional
De Seguros Del Peru ((1988) 1 Lloyd’s Rep 116 (CA)) and Enercon (India) Ltd &
Ors v Enercon GmbH & Anr ((2014) 5 SCC 1).

Applying the Roger Shashoua principle, the SC held New Delhi / Faridabad to be
the juridical seat, because there were no significant contrary indicia.

The Hardv Exploration conundrum

 l1

The SC held that the decision in Hardy Exploration (please see our Ergo update
on Hardy Exploration here) is incorrect in its conclusion that the ‘venue’ of
arbitration need not be the juridical seat, unless there are ‘concomitant factors’
which indicate that the parties intended for the venue to also be the seat.

This was because Hardy Exploration ignores Roger Shashoua, BALCO’s reliance
thereon, and the Indian leg of the Roger Shashoua case (Roger Shashoua & Ors v
Mukesh Sharma & Ors ((2017) 14 SCC 722)), all of which uphold that a venue of
the arbitration is the juridical seat, in the absence of any significant contrary indicia.
By allowing Indian law to apply to the arbitration agreement which designated
Kuala Lumpur as the venue, Hardy Exploration, in effect, allowed a foreign award
to be challenged under Section 34 of the Arbitration Act, undoing any progress
made post-BALCO.

Therefore, the SC held, “Hardy Exploration and Production (India) Inc. (supra),
being contrary to the Five Judge Bench in BALCO (supra), cannot be considered
to be good law.”

New Delhi or Faridabad? What is the juridical seat in the present case?

The SC took into consideration the fact that the parties had elected for all the
arbitration proceedings to take place in New Delhi, and that the Award was signed
in New Delhi. Accordingly, the SC overruled the Impugned Order and came to the
conclusion that New Delhi was the final juridical seat of the arbitration, and the
courts of New Delhi would have the jurisdiction to hear the Section 34 application.

Comment
 12

This judgment of the SC does an admirable job in clarifying the issue of exclusive jurisdiction where seat
of the arbitration is situated. This addresses the dichotomy created by Antrix relying on BALCO. The
judgment lends clarity to the said issue, and will also, in some manner, impact the ongoing challenges
post Hardy Exploration, where Section 34 proceedings may have been commenced in other jurisdictions.

Hardy Exploration came up with an alternative to the long standing view, which was summarised in
Indus Datawind by Delhi High Court, and instead, treated a ‘venue’ as a convenient geographical
location. In contrast, the present judgment and Roger Shashoua have conclusively stated that a place or
venue is the same as a juridical seat, as long as there is no indicator of the parties’ contrary intention.
Unless, an arbitration agreement specifies the seat and venue separately, venue will be understood to be
the juridical seat of arbitration. This is in consonance with some of the earlier model clauses which used
to the term venue in lieu of seat, and vice-versa.

What remains to be seen is that both the present case and Hardy Exploration were judgments passed by a
three-judge benches of the SC. Therefore, the present judgement’s declaration of the latter as “no
longer (being) good law” may not tantamount to an overruling of Hardy Exploration, and there is a
possibility that the issue may be referred to a bench of greater strength. Whether it is indeed an unresolved
question of law, remains to be seen. Recently, the SC has seen a lot of traction over the issue of a larger
bench deciding questions of law relating to the Land Acquisition Act (as amended in 2014) where
similarly, a three-judge bench declared another judgment of a three-judge bench, per incuriam. We hope
the instant issue is either addressed or resolved smoothly, if it is indeed referred to a larger bench.