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Category: News & Updates

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News & Updates

Incorporation of Arbitration Clause by Reference: A General Reference to A Contract Would Not Have the Effect of Incorporating the Arbitration Clause in Another Contract.

The Supreme Court in its recent decision dated March 19, 2024, in NBCC (India) Private Limited v. Zillion Infraprojects Private Limited[1] reaffirmed the position that a dispute cannot be referred to arbitration on the basis of arbitration clause contained in a referred contract unless a specific reference was made in the main contract to incorporate the arbitration clause into the same.

The same was observed by Hon’ble Supreme Court in the backdrop of appeal filed by NBCC (India) Limited against the decision of Delhi High Court which had referred the dispute between the parties to arbitration in absence of specific arbitration clause in the agreement.

Brief background of the Case

A principal contract or Letter of Intent (“LOI“), was executed between the parties containing a clause that the terms and conditions indicated in a former contract (“DVC”) would apply mutatis mutandis to the LOI.  The LOI specified that the disagreement will be resolved in civil court rather than through arbitration whereas, the DVC contained an arbitration clause to resolve the dispute through arbitration.

Issue for Consideration

Whether the arbitration clause of a contract applies ipso facto to another contract, if another contract makes a general reference to the referred contract?

Supreme Court’s Ruling

The Hon’ble Supreme Court ruled that when parties enter into a contract making a general reference to the contract which contains an arbitration clause, such general reference would not have the effect of incorporating the arbitration clause from the referred document into another contract between the parties. It has been held that the arbitration clause from a former/referred contract can be incorporated into another contract (where such reference is made) only by a specific reference to arbitration clause.

[1] 2024 SCC OnLine SC 323

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FSSAI Issues Advisory dated February 21, 2024, for Time-Bound Processing of Applications for Licenses Marked for Inspections

The Food Safety and Standards Authority of India (“FSSAI”) issued directions for Risk Based Inspections vide order number RCD-02001/9/2021-Regulatory-FSSAI dated May 2, 2022[1]. Basis these directions issued by the FSSAI, Pre – License inspections are mandated only for the following categories of Manufacturer/Processor:

  • Milk & Milk products
  • Meat & Meat products
  • Fish & Fish products
  • Fortified Rice Kernels (FRKs)
  • Slaughter Houses

For the remaining categories of food business, license may be granted based on the submission of required mandatory documents without requiring pre-licensing inspection.

However, it has been observed that the Designated officers (“DOs”) are frequently marking licensing applications for pre – licensing inspection in non-mandatory cases resulting in delay in processing of applications and hence the grant of license. Furthermore, in some of the applications of non – mandatory cases which are marked for inspection, it is observed that inspection is not initiated even after 15 days of marking inspection.

Taking into cognizance the above scenario, FSSAI has released an advisory to all the DOs that:

  • No pre-license inspections shall be conducted in cases other than mandated categories as stated above.
  • In the cases where DOs believe that it is necessary to conduct inspection in non-mandatory categories, the DO shall record the reason in writing with clear justification.
  • Moreover, once an application is marked for inspection in the non-mandatory categories, inspection should be done within 15 days itself, failing which, the DO shall recall the application back to Document Scrutiny Stage in Food Safety Compliance System and grant the license.
  • In case, where the DO still believes that inspection is necessarily to be conducted prior to the grant of the license, the DO may reassign the inspection to another FSO or to himself/herself for immediately conducting the inspection without any further delay.

[1] https://fssai.gov.in/upload/advisories/2022/05/626fad52101b0Order_RBIS_02_05_2022.pdf

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Liability of E-commerce Platforms to Comply with Consumer Protection (E-Commerce) Rules, 2020 – Abhi Traders v. Fashnear Technologies Private Limited & Ors.

The Plaintiff, a clothing retailer under the brand name “IBRANA,” filed an interim application before the Delhi High Court against Defendant No. 1, Fashnear Technologies Private Limited, an operator of the e-commerce platform “meesho.com” and Defendants No. 2 to 10 who are clothing retailers for copyright infringement and passing off.

The Plaintiff alleged that the Defendants No. 1 to 9 and an unknown party being Defendant No. 10, were improperly using its copyrighted images to list/showcase their own products under the goodwill of the Plaintiff’s products on the platform Meesho (“Platform”) which led to a significant drop in Plaintiff’s sale of original/actual products on the Platform. Further, the Plaintiff contended that the Defendant No. 1 failed to disclose the seller details while listing its product on their Platform which is a requirement under Rule 5(3)(a) of the Consumer Protection (E-Commerce) Rules, 2020 (“Rules”). The Court noted that the said requirement under the Rules aimed to protect the buyers of an e-commerce platform by allowing them to take an informed decision.

The Court ruled in favour of the Plaintiff by granting an ex-parte ad interim injunction and passed an order issuing the following directions:

  • prohibiting Defendants No. 2 to 9 from using Plaintiff’s copyrighted images or similar designs for listing Defendants’ products and from duplicating Plaintiff’s designs;
  • Defendant No. 1 to disclose seller details including addresses, contact information, sales, GST details and payments made to sellers as per the Rules;
  • Plaintiff to provide a list of infringing URLs to the Defendant No. 1’s counsel within seven (7) working days for the Defendant No. 1 to take down such URLs.
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Stamp Duty Reduction for Mining Deeds in Goa

The Government of Goa via a notification dated March 02, 2024, has promulgated “The Indian Stamp (Goa Amendment) Ordinance, 2024” amending section 3A, sub-section (1) of the Indian Stamp Act, 1899 which has reduced the stamp duty on mining lease deeds by 60%. Currently, the stamp duty on mining lease deeds is calculated by multiplying the Environmental Clearance Quantity by 15 (Fifteen) times and then the sum total is further multiplied by the period of lease. Now, under the new ordinance, the stamp duty will be arrived by multiplying the Environmental Clearance Quantity by 6 (Six) times and then further multiplying the sum total by the period of lease.

The goal of the government’s mining lease deed reduction program is expected to strengthen Goa’s reputation as a favorable location for mining operations, supporting the creation of jobs, income, and social development. Going forward, stakeholders expect additional policy interventions and initiatives aimed at tapping into the complete potential of the mining industry, promoting inclusive growth, and boosting Goa’s economic vitality both regionally and nationally.

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MEITY Advisory for Intermediaries on Use of Artificial Intelligence Models

Among the first attempts to regulate the artificial intelligence landscape of India, the Ministry of Electronic and Information Technology (MeitY) published an advisory on March 1, 2024, notifying intermediaries/platforms under the Information Technology Act, 2000 and Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“Intermediary Rules”) on the use of Artificial Intelligence model(s)/LLM/Generative AI, software(s) or algorithm(s) (collectively “Models”) by the intermediaries on or through its computer resource. The key provisions are produced hereafter.

  • The intermediaries to ensure that the use of Models does not permit the users to host, display, upload, modify, publish, transmit, store, update or share any unlawful content as outlined in the Information Technology Act and Rules thereunder.
  • Intermediaries to seek explicit permission from the Indian Government prior to usage and deployment of under-testing and unreliable Models. Where such under-tested and unreliable Models are used, such Model has to be: (a) appropriately labelled to ensure that the users are aware of the inherent fallibility and unreliability of such model; and (b) a “consent pop-up” mechanism has to be used which would explicitly inform users about the possible and inherent fallibility or unreliability of the output generated.
  • Intermediaries providing software and/or other computer resource which facilitates synthetic creation, modification, or generation of information and may be used for generation of misinformation or deepfake content are advised to embed a permanent unique metadata or identifiers into such created content. These identifiers shall assist in tracing back to the intermediary, the user of the software and/or resources and/or first originator of such misinformation or deepfake.
  • All intermediaries shall ensure that their computer resource do not permit any bias or discrimination or threaten the integrity of the electoral process including via the use of the Models.
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News & Updates

Courts Cannot Rewrite or Create a New Contract and Have to Simply Rely on The Terms and Conditions of The Agreement as Agreed Between the Parties

This was observed by the Hon’ble Supreme Court while deciding an Appeal filed against an order of the National Consumer Dispute Redressal Commission (“NCDRC”) rejecting the Appellant/ Buyer’s Application seeking termination of the Agreement and refund of the consideration.

Brief background of the case,

As per the terms of the contract, in case the Respondent fails to obtain the Occupation Certificate before the expiry period, the Appellant would have an option of election to terminate the contract and claim full refund of consideration paid.

However, NCDRC while rejecting the Appellant’s right to terminate the contract seeking refund of consideration observed that, “there was some delay in handling over the possession of the apartment by the Respondent company but it was not ‘unreasonable’, whereby the Appellants could cancel the Agreement and seek a refund.” In doing so, the NCDRC gave new interpretation of the contract entered between the Appellants and Respondents/ Seller for the purchase of an apartment.

Issue for Consideration

Whether the NCDRC can rewrite the terms and conditions of the covenants binding on the parties or make a new contract based on its interpretation?

Supreme Court’s Observation

The Hon’ble Supreme Court ruled that the Appellant/ Buyer’s action of terminating the Agreement on the date, as stipulated therein, cannot be deemed defective if the Respondent fails to furnish the ‘Occupation Certificate’ before the period expires.

The Supreme Court while setting aside the impugned order passed by the NCDRC observed that disregarding the legally enforceable covenants in the Agreement and using its own logic and reasoning to determine the parties’ and, more specifically, the Appellants, best course of action going forward, the NCDRC overreached its authority and jurisdiction.

CASE DETAILS: Venkataraman Krishnamurthy & Anr v. Lodha Crown Buildmart Pvt. Ltd.,[1]

[1] Civil Appeal No. 971 of 2023

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Demand Notice Sent to Cheque Drawer Via Email/WhatsApp is Valid: Allahabad High Court

The Hon’ble Allahabad High Court in the matter of Rajendra v. State of U.P. & Anr. whereby an application u/s 482 Cr.P.C. was filed seeking quashing of proceedings under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”), held that a demand notice sent to the drawer of a cheque through ‘Email or WhatsApp‘ under Section 138 of NI Act for the dishonour of a cheque, is a valid notice and the same shall be deemed to be dispatched and served on the same date if it fulfils the requirement of Section 13 of the Information Technology Act, 2000 (“IT Act”).

Section 13 of the IT Act stipulates that once an electronic notice is entered into a computer resource beyond the sender’s control, it is considered dispatched. Similarly, when the electronic notice enters the designated computer resource or the recipient’s computer resources, it is deemed to be served. Further, Section 12 of the IT Act also provides the procedure for acknowledgement of receipt of notice in electronic form.

The Hon’ble Court reached the above conclusion by interpreting proviso (b) of Section 138 of the NI Act, that while this provision requires notice in writing, it doesn’t specify any particular mode for sending the same. Even upon considering Section 94 of the NI Act, it could not be inferred that notice must exclusively be sent by post.

In this backdrop, referring to Section 4 of the IT Act which recognises electronic records, the Court concluded that Section 138 NI Act Notice will also include ‘Email or WhatsApp’ if the same remains available for subsequent reference. In this regard, the Court also referred to Section 65(B) of the Indian Evidence Act, 1972 which accepts the admissibility of electronic records.

In the same case, the Hon’ble Court also laid down that there is no legal requirement to mention the date of service of notice upon the drawer of the cheque in the Complaint itself, if the notice was sent through registered post, then presumption under Section 27 of the General Clauses Act, that notice would have been served within ten (10) days from the date of its dispatch, shall apply. Though it is always open for the drawer of the cheque to take the plea during trial that the notice was never served upon him.

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NCLT cannot reject approval of Resolution Plan submitted by Successful Resolution Applicant being an ex-promoter, by rejecting the validity of the MSME registration obtained by Corporate Debtor post initiation of CIRP: NCLAT New Delhi

The Hon’ble NCLAT Delhi in the matter of Ramesh Shah in consortium with Masitia Capital Services Pvt. Ltd. v. Central Bank of India & Ors. vide its order dated February 29, 2024, allowed two Appeals preferred by the Resolution Applicant and the Resolution Professional, wherein the issues that arose for consideration were as follows:

  • Whether the Resolution Applicant being an ex-promoter of the Corporate Debtor is eligible to submit a Resolution Plan when the Corporate Debtor has acquired a change in its status to that of an MSME after initiation of the CIRP proceedings?
  • Whether the Adjudicating Authority can raise concerns over the plausibility of the reports which had validated the MSME entitlement of the Corporate Debtor, by going under the computation exercise conducted by the Corporate Debtor and thereby reject the MSME status of the Corporate Debtor?

The peculiar facts of the case are such that the Corporate Debtor had been issued an MSME Certificate by the competent authority on the basis of an online application filed by an employee of the Corporate Debtor on the instructions of the Resolution Professional. Since the MSME Registration Certificate was obtained prior to the date of submission of the resolution plan, the Resolution Applicant (ex-promoter) filed a Resolution Plan seeking benefits of Section 240A of the IBC.

The said resolution plan was approved by the CoC with 77.56% vote share. The RP filed an Interlocutory Application for approval of the said resolution plan, which was dismissed by the Adjudicating Authority thereby rejecting the proposal for approval of the resolution plan. Also, the Central Bank of India, as a dissenting Financial Creditor, filed an Interlocutory Application seeking stay of the approval of the resolution plan before the Adjudicating Authority and challenged the eligibility of the ex-promotor as a Successful Resolution Applicant (“SRA”). The Adjudicating Authority allowed the Application of the dissenting Financial Creditor and held the SRA to be ineligible under Section 29A read with Section 240A of the IBC to submit a resolution plan. Hence, the two appeals were filed before the NCLAT.

The law as laid down by the Hon’ble Supreme Court in the matter of Hari Babu Thota in Civil Appeal No. 4422 of 2023 [(2024) 242 Comp Cas 1], was discussed “that not having MSME status at the time of commencement of the CIRP proceedings does not disqualify the ex-promoter from being a Resolution Applicant under Section 29A of the IBC as long as this status is attained well before the submission of the resolution plan”. However, the aforesaid ratio was questioned by the Respondent on the ground that the facts were distinguishable, as unlike in the present facts of the case, there was no dispute regarding the calculation, basis which MSME registration was obtained.

In view of the aforesaid facts and circumstances, the Hon’ble NCLAT observed and held that,

  • The MSME registration can only be revoked by the competent authority and the Adjudicating Authority cannot claim this jurisdiction upon itself to modify/revise/revoke or interfere in any manner with the MSME registration granted by the competent authority.
  • The RP was not required to seek permission of the CoC under Section 28(h) of IBC since the CoC was all along kept apprised by the RP regarding MSME registration and the CoC had therefore clearly found the Corporate Debtor to be eligible for MSME status and the SRA to submit a resolution plan.
  • RP who is running the business of the Corporate Debtor is best suited to take the decision for applying for MSME registration of the Corporate Debtor as long as it is not detrimental to the continued business operations of the Corporate Debtor.
  • The SRA is eligible to submit a resolution plan for the Corporate Debtor now being an MSME.
  • The Adjudicating Authority was thus directed to proceed to pass a fresh order in the Application filed by the RP seeking approval of the resolution plan along with necessary directions.
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Gujarat Labour Department Notifies Exemptions to IT-Enabled Services and Financial Services under Gujarat Shops and Establishments Act, 2019

Gujarat Labour Department issued a notification dated February 5, 2024, pertaining to the Gujarat Shops and Establishments (Regulation of Employment and Condition of Services) Act, 2019. It declares that establishments engaged in IT-enabled services and financial services shall be exempted from the following sections for a period of 2 (two) years from the date of notification in the Official Gazette:

Section 12: Restricts the employment of any worker at any shop or establishment for a duration exceeding 9 (nine) hours in any single day or 48 (forty-eight) hours within a week. Furthermore, no worker shall be compelled to engage in continuous work for a period exceeding 5 (five) hours without a break of no less than 30 (thirty) minutes.

Section 14: The spread-over duration of a worker in any shop or establishment shall not surpass 10 (ten) and a half hour in any given day. However, in instances where a worker is assigned intermittent or urgent tasks, the spread-over period may extend to 12 (twelve) hours, subject to the prior approval of the Inspector. Further, working hours or weekly holiday(s) may be relaxed in cases of urgent work upon obtaining prior authorization from the Inspector. 

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Increased Card Network Choices for Credit Card Customers

The Reserve Bank of India (“RBI”) vide its notification dated March 6, 2024 (“Circular”), has directed the card issuers to provide an option to its customers to choose their preferred card network for credit cards. Further, RBI has restricted the card issuers (banks and non-banks) from entering into arrangements with card networks where they are restrained from availing services from other card networks. It is to be noted that card issuers who issue credit cards on their own authorized card networks are exempted under this circular. Further, the requirement to provide option to the customers to choose the preferred card network will not be applicable to credit card issuers with number of active cards being ten (10) lakh or less. The Circular shall be effective from 6 (six) months from the date of the Circular i.e., March 6, 2024.