Case Notes – Spring 2010

By B.C. Thiruvengadam

Does an email exchange evidencing the parties’ agreement to arbitrate a dispute regarding a contract create a binding arbitration agreement?

Yes, according to the Supreme Court of India. In Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd., India, 2010 (1) SCALE 574, the petitioner, Trimex International, a Dubai-based company, placed an order for mineral ores from the respondent, Vedanta Aluminium. According to the petitioner, it made a commercial offer by email and, following an exchange of several more emails, the respondent accepted its offer via email. Based on this acceptance, the petitioner sent a formal contract containing a detailed arbitration clause to the respondent by email, which the respondent accepted and returned to the petitioner on the same day. A dispute arose with respect to the performance of the contract and the petitioner sought to invoke the arbitration clause. The respondent objected, arguing that there was no written contract containing an arbitration clause.

The Supreme Court examined each of the emails exchanged between the parties. Relying upon its earlier judgment in Great Offshore Ltd. v. Iranian Offshore Engg. and Construction Co., 2008 14 SCC 240, the Supreme Court stated: “Technicalities like stamps, seals and even signatures are red tape that have to be removed before the parties can get what they really want – an efficient, effective and potentially cheap resolution of their dispute.” The Supreme Court held that the parties entered into a binding contract, which included the arbitration clause, by the exchange of emails, even though no formal contract was signed by the parties.

May a complaint be lodged under the Protection of Women from Domestic Violence Act, 2005, against a person who does not reside in the complainant’s household?

In K. Narasimhan v. Smt. Rohini Devanathan, ILR 2010 Kar 669, the High Court of Karnataka has held that an action may not be brought under Section 12 of the Act if the accused does not reside in the same household as the complainant. The petitioner, K. Narasimhan, challenged a complaint filed against him under the Act by his brother’s wife. The petitioner contended that he was a resident of Canada who visited Chennai occasionally. The complainant was living with the petitioner’s brother in Bangalore. The relationship between petitioner’s brother and the complainant had strained and the complainant lodged a complaint against her husband as well as the petitioner alleging that, when she and her husband went to Chennai to meet the petitioner, she was subjected to emotional abuse.

The Court quashed the complaint against the petitioner because the petitioner did not reside in the same household as the complainant. In fact, the complainant went to Chennai to meet the petitioner who had traveled from Canada for a brief visit. According to the Court, the basic ingredient for a complaint under Section 12 of the Act is that the complainant and the accused live together and share a household by marriage or through a relationship in the nature of marriage. An allegation of abuse alone is not enough to bring a claim under the Act.

Is a preemption clause (right of first refusal) regarding shares held in a public limited company enforceable?

The Bombay High Court, in Western Maharashtra Development Corpn. Ltd. vs. Bajaj Auto Ltd., [2010] 154 Comp Cas 593 (Bom), has held that a preemption clause in an agreement between two groups of shareholders is contrary to Section 111A of the Companies Act, 1956, and, therefore, unenforceable. Western Maharashtra Development Corpn. Ltd., an undertaking of the Government of Maharashtra, entered into a protocol agreement with Bajaj Auto Ltd., leading to the creation of Maharashtra Scooters Ltd. (“MSL”). Western Maharashtra held 27% of the shares in MSL and Bajaj Auto, the respondent, held 24%. The agreement had a preemption clause requiring a party who is willing to sell its shares to give the first option to the other party. The agreement further provided that should a dispute arise in the price demanded or offered, the same should be resolved by arbitration.

Western Maharashtra offered to sell its shares to Bajaj Auto, but a dispute arose regarding the valuation and a joint reference was made to the arbitrator. Western Maharashtra, however, argued that the protocol agreement was null and void because it violates Section 111A of the Companies Act, 1956 and Section 9 of the Companies Act. The arbitrator ignored Western Maharashtra’s objection and determined the value of the shares.

Section 111A of the Companies Act, 1956, provides that the shares or debentures of a public limited company, and any interest therein, shall be freely transferable. Section 9 of the Companies Act, 1956, provides that the provisions of the Act shall have effect notwithstanding anything to the contrary contained in the company’s charter documents, such as its articles of association and memorandum of association. The Court held that the preemption rights, provided for in the company’s articles of association, may not override Section 111 A of the Companies Act, 1956.

May a conviction under Section 302 of the India Penal Code be set aside by the High Court if the lower court did not conduct the trial fairly?

In a landmark judgment, the Delhi High Court set aside a murder conviction in the Sessions Court where there “has not been a fair trial to the appellant and the blame has to be principally on the shoulders of his counsel, with the learned Trial Judge partly sharing the blame for the reason he did not just bother to ensure that the defence raises the standard to meet the requirements of a fair adversarial trial.”

In Salamat Ali v. State of Delhi, Criminal Appeal No.242/2010 (unreported), the Delhi High Court relied on the decisions of the United States Supreme Court in Strickland vs. Washington, 466 U.S. 668 (1984), and the Ninth Circuit Court of Appeals in Turner v. Duncan, 158 F.3d 449 (9th Cir. 1998). The High Court criticized the conduct of the defence counsel in the trial proceedings. Quoting the U.S Supreme Court in Strickland v. Washington, the Court stated:

No doubt, counsel’s assistance and performance at a trial has to be highly deferential but as observed by the US Supreme Court in the decision reported as Strickland vs. Washington 466 US 668 (1984), with regard to the required showing of prejudice, the proper standard requires the defendant to show that there is a reasonable probability that, but for counsel’s unprofessional efforts, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome. A Court hearing an ineffectiveness claim must consider the totality of the evidence before the Jury or the Judge.
The Delhi High Court set aside the judgment of conviction of the lower court and remanded the case for a new trial, with directions to the trial judge to ensure that effective counsel is made available to the appellant and that another opportunity be given to him to produce defence witnesses.

Compiled by B.C. Thiruvengadam, of Thiru and Thiru, Bangalore, with input from Mr. Ajay Verma, Advocate, New Delhi.

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