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Case Reviews, The Law

The Schrems II Judgement: The Implications of Invalidating the E.U.-U.S. Privacy Shield Arrangement

The privacy shield arrangement is a framework allowing the companies to transfer personal data from the European Union (“EU”) to the United States (“US”). This article analyses the ruling of the CJEU in the Schrems II case and lays down its implications on the international data transfer regime.

By: Shail Maheshwari, KIIT, School of Law.

Introduction

On 16th July 2020, the Court of Justice of the European Union (“CJEU”) unexpectedly declared the E.U.-U.S. Privacy Shield arrangement as invalid in its judgement, Data Protection Commissioner v. Facebook Ireland Ltd., Maximilian Schrems (“Schrems II”). The privacy shield arrangement is a framework allowing the companies to transfer personal data from the European Union (“EU”) to the United States (“US”). The decision of the CJEU means that those companies which seek to transfer the personal data of EU customers to the US have to now solely rely on EU sanctioned legal contracts i.e. Standard Contractual Clauses (“SCC”), which the court held as valid in this judgement.

The Schrems II judgment is a companion to the earlier judgment of the CJEU i.e. Maximilian Schrems v. Data Protection Commissioner (“Schrems I”) which invalidated the E.U.-U.S. Safe Harbour Arrangement which was the predecessor to the privacy shield arrangement.

An Analysis of the Schrems II Judgment

In 2013, the complainant Maximilian Schrems, a privacy activist, had first complained to the Irish Data Protection Commissioner (“DPC”) with regards to Facebook’s data transfer practices.

The complaint primarily concerned the alleged use of SCC by Facebook for data transfer of EU based Facebook users to the US leaving the personal data of users vulnerable to surveillance programs of the US government.

Thus, he sought suspension of data transfer via Facebook pursuant to SCC.

After the complaint was rejected by the DPC, Schrems approached the Irish High Court. The Irish High Court referred various questions to the CJEU for a preliminary ruling. Out of various questions which were referred the two most important questions were 

  1. whether SCCs are valid under the EU Charter of Fundamental Rights (“charter”)?
  2. whether the EU-US Privacy Shield ensures adequate protection under Article 45 of the General Data Protection Regulations (“GDPR”)?

Validity of SCCs

The CJEU in its ruling clarified the applicability of the GDPR to the transfer of personal data by an economic operator for commercial purposes. It further observed that an economic operator can transfer personal data only if it is established in a member state. However, the level of data protection should be equivalent to that which is guaranteed within the EU by the GDPR in light of the charter.

Upholding the validity of SCCs, it was stated by the CJEU that the level of data protection guaranteed by the SCC will include two important considerations:

  1. Contractual clause as agreed between the data exporter established in the EU and the recipient of the transfer established in the third country.
  2. Any access by the public authorities of that third country to which the data is transferred, the relevant aspects of the legal system of that third country.

Validity of the Privacy Shield

The CJEU determined the validity of Decision 2016/1250 (“the Privacy Shield decision”) in light of the adequacy of protection provided by the EU-US Privacy Shield. The privacy shield had been in force since 2016 and also imposes certain restrictions on the U.S. government to access EU citizen data. Many companies in the U.S. had relied on it to receive personal information from the E.U.

Since 2018, with the introduction of GDPR, there has been an increase in the level of data protection, and for companies located in the U.S., complying with the protection standard of privacy shield did not necessarily mean being GDPR compliant.

In light of the facts of the Schrems case, the CJEU invalidated the EU-US privacy shield under its “adequacy decision”  power provided by Article 45(2)(a) of the GDPR which states that such a decision can be made in light of  “the rule of law, including national security and the access of public authorities to personal data as well as effective and enforceable data subject rights and effective administrative and judicial redress for the data subjects whose personal data is being transferred.”

Accordingly, the CJEU laid down the main reasons for invalidating the privacy shield as follows:

  1. CJEU stated that the privacy shield’s protections were not “essentially equivalent” to those required by the EU law as “the surveillance programs based on those provisions are not limited to what is strictly necessary.”
  2. The provisions of the privacy shield did not grant “data subjects actionable rights before the courts against the U.S. authorities.”
  3. The body created to handle complaints lacked independence “to adopt decisions that are binding on the U.S. Intelligence services.”

The Implications of the Schrems II judgment

The implications of the judgment have been discussed with respect to first the impact on transatlantic data flows and second the global impact.

Impact on transatlantic data flows– The CJEU has not laid down any transition period required for the companies to adjust and comply with the change in data protection norms. Thus, the companies who rely on the data flow from the EU have been unclear with regards to the implications of the decision on their business. The United States Secretary of Commerce highlighted this concern in his statement following the Schrems II decision.

He stated that “data flows are essential not just to tech companies- but to businesses of all sizes in every sector. As our economies continue their post-COVID-19 recovery, it is critical that companies including more than 53000 privacy shield participants are able to transfer data without interruption.”

It is from this statement that it is clear that the decision impacts not only large organizations like Amazon, Google, Facebook, etc. but also smaller organizations that now have to either rely on a new data transfer mechanism or the SCCs. Thus, companies will have to look for alternatives to carry out transactions like storing documents on cloud-hosted servers, sending emails, etc. 

Further, these alternatives, primarily in the form of SCCs can be evaluated and challenged by the EU regulators on a case-by-case basis and can be invalidated if they do not comply with GDPR.

The Global Impact of the decision The decision is significant from the global perspective as it reinforces the importance of user data protection in international commerce. It also lays down a rigorous data protection standard which can be used to assess and build data governance models in countries like China, which have been a leader in personal data leak or privacy breach of internet users. Data exports from the EU to China is large owing to transfers to Chinese firms like TikTok, Alibaba, etc.

Thus, if the CJEU ruling is also enforced in countries like China, it will help in better understanding the economic implications of stronger data protection laws.

Further, several countries like the UK and Israel conduct extensive surveillance of personal data for national security purposes. The CJEU ruling has reopened questions as to the sufficiency of data protection in these regions as well.

Conclusion

Invalidation of the privacy-shield in the Schrems II ruling can lead to two possible scenarios in the future. The U.S. companies which rely on the E.U. data can continue with cross-border data flow from the EU based on SCCs, or the two countries will negotiate a successor to the E.U.-U.S. privacy shield. However, at present, there is complexity and uncertainty with respect to how quickly the transition has to be made to remain compliant to EU laws, the economic implications of the decision for smaller firms, and the risk of getting penalised by the EU regulators for lack of clear guidelines on adequate measures for data protection.

Case Reviews, The Law

Vineeta Sharma V. Rakesh Sharma

The Supreme Court in its landmark judgment on August 24, 2020, declared the equal position of woman as a coparcener in a Hindu Undivided Family. The father’s death does not affect the right of the daughter as a coparcener because the coparcenary right is a birth right. 

By: Asif Choudhary, 2nd Year LLB Student, Delhi University.

Bench: Justice Arun Mishra, Justice S. Abdul Nazeer, Justice M.R. Shah

Facts of the case:

The facts of the case as, One Ms. Vineeta Sharma (Appellant) filed a case against her two brothers Mr. Rakesh Sharma & Satyendra Sharma, and her father Sh. Dev Dutt Sharma (respondent). He expired on December 11, 1999. One of his sons expired on July 1, 2001 (unmarried). The Appellant claimed that being the daughter she was entitled to ¼ of the share in the property of her father. The case of the Respondents was that after her marriage, she ceased to be a member of the Joint family. The Hon’ble Delhi High Court disposed of the appeal as the amendments of 2005 did not benefit the Appellant as the father of the Appellant passed away on December 11, 1999.

Now, this case reached before the supreme court, but before this case, there are two major cases on the same grounds for which the divisional bench already rendered verdicts. The two cases are;

  • Prakash & Ors. v. Phulavati & Ors

In this case, the court held that section 6 is not retrospective in operation, and it applies when both coparceners and his daughter were alive on the date of commencement of Amendment Act, 9th, September 2005

  • Danamma @ Suman Surpur & Anr. v. Amar & Ors.

In this case, the court held that the amended provisions of section 6 confer full rights upon the daughter coparcener.

Stated that any coparcener including a daughter can claim a partition in the coparcenary property, even the coparcener’s father was not alive when the substituted provision of section 6 of HAS come into force. The daughters, sons, and the widow were given his/her shares.

Due to these two conflicting verdicts, this case was given to the larger bench of the supreme court headed by Justice Arun Mishra, with two other Justice S. Abdul Nazeer and Justice M.R. Shah.

Issues before the court:

  • Whether the death of the father before amendment 2005, affects the daughter’s right over the property?
  • Whether the application of amendment 2005 be retrospective?

Rules applied:

Section 6 Hindu Succession Act 1956

The judgment of the court:

Before the amendment of 2005 under the Hindu Succession Act (HAS), the rule of survivorship existed and under that rule, the males were coparceners up to 4th generation only, the females were not able to qualify for coparceners. After the amendment, the rule of survivorship had been cancelled out and two major-heads to be considered for the partition of property that is “Testamentary and Interstate” so after that the daughters are also coparceners in her father’s inherited property and have equal liability same as sons. The fathers are free to pass his self-acquired property to anyone even someone out from the family with effect from 9th September 2005.

The term ‘coparcener’ is not defined in the Succession Act. This Court considered it in Sathyaprema Manjunatha Gowda (Smt) v. Controller of Estate Duty, Karnataka.

It is a narrower body than a joint family and consists of only those persons who have taken by birth, an interest in the property, and can enforce a partition, whenever they like.

The 174th Report of Law Commission of India recommended the adoption of the Kerala Model, and the amendments were affected in Kerala, Andhra Pradesh, Karnataka, and in several States, giving coparcenary rights to the daughters.

This case emphasizes the nature of the 2005 amendment in sec 6 of the Hindu Succession Act. The amendment applies retrospectively to provide benefits conditional arising even before the passing of such legislation. 

The effect of an amendment can be seen in a manner that any action triggering partition before amendment only affects the extent of share, not the right to claim. In other words, if the partition is crystallized no change will be done in respect of amendment but if the partition isn’t done the daughter’s right to claim to remain intact.

The Hindu branch of dharma is influenced by the theological tenets of the Vedic Aryans. What is not modified or abrogated by the legislation or constitutional provisions still prevails, the basic Hindu law emanates from Vedas and past shrutis/smritis. Various dharma shastras regard custom as the basis of Hindu law as administered from time to time. Law has advanced and made progress as per the requirements of the society and the prevailing ethos. The justice used to be administered by the emperors resolving the conflicts. The building of law has taken place over time. There are two main schools of Hindu law, i.e., Mitakshara and Dayabhaga. Mitakshara law applies to most parts of India except Bengal.

As per the Mitakshara law, no coparcener has any fixed share. It keeps on fluctuating by birth or by death. It is the said principle of administration of Mitakshara coparcenary carried forward in statutory provisions of section 6. Even if a coparcener had left behind a female heir of Class I or a male claiming through such female Class I heir, there is no disruption of coparcenary by statutory fiction of partition. Fiction is only for ascertaining the share of a deceased coparcener, which would be allotted to him as and when actual partition takes place. The deemed fiction of partition is for that limited purpose. The classic Shastris Hindu law excluded the daughter from being coparcener, which injustice has now been done away with by amending the provisions in consonance with the spirit of the Constitution.

The judgment emphasized irrespective of the survivorship of the father, the Daughter acquire the right of the coparcener from birth and other related rights. While giving a contrary view in this case.

The Hon’ble Court held that irrespective of the life of the father, the daughter gets her right as coparceners.

In this manner the court was overruled the two verdicts i.e. Prakash v. Phulavati and Mangammal v. T.B. Raju & Ors as irrespective of the living status of the father, the daughter gets the coparcenary right from birth. 

Giving the daughter equal coparcenary rights aligns with the spirit of equality, under Article 14 of the Indian constitution.

Case Reviews, The Law

Central Public Information Officer, Supreme Court of India V. Subhash Chandra Agarwal

The judgment affirmed that the Supreme Court is a public office and is under the purview of RTI. It focused on public accountability and public interest at large which will lead to effective working and transparency along with the protection of personal information, privacy, and confidentiality of judges, It explained sec 8(1)(e) and  Sec 11 which is related to safeguard the confidential, personal and third party data. It opened doors for greater transparency while safeguarding third party data.

By: Anukriti Mathur 

CITATION: CA 10044/2010

BENCH: Justice Ranjan Gogoi, Justice Deepak Gupta, Justice Dr. Dhananjaya Y Chandrachud, Justice Sanjiv Khanna, and Justice NV Ramana

FACTS OF THE CASE:

The appointment of Justices HL Dattu, AK Ganguly, and RM Lodha while senior judges Justices AP Shah, AK Patnaik, and VK Gupta were superseded lead to various RTI applications filed before CIC for disclosure of correspondence between Collegium and Government for this matter. A CIC order was passed for such disclosure on an application filed by Activist Subhash Chandra Agarwal in Nov 2009. Such order was appealed and stayed by order of 4th Dec 2009

A similar issue arose in Jan 2009, before Delhi HC disclose information about judges’ assets. On 2nd Sept 2009, Supreme Court’s CPIO challenged CIC’s order before Justice Ravindra Bhat, who upheld CIC’s order. In Jan 2010, CPIO appealed to Supreme Court before Two judge bench on 26th Nov 2010 which was further referred to as the larger bench. On 17th August 2018, the bench of then CJI Ranjan Gogoi retired Justice Prafulla C Pant, and Justice AM Khanwilkar referred it to the constitutional bench over questions of independence or judiciary and right to privacy. The bench decided the matter on 4th April 2019 but reserved it and the final decision was pronounced on 13th Nov 2019

ISSUES: 

1. Does public disclosure of information held by the office of the CJI and collegium curtail the independence of the judiciary?

2. Does Section 8(i)(e) and/or (j) of the RTI Act exempt the CJI from public disclosure of information, on the grounds of protecting fiduciary and personal information?

3. Would disclose information pertaining to Collegium decision-making, prevent Collegium members from deliberating freely and frankly?

LAW APPLICABLE:

 Sec 8(i)(e), (j) and 11 of Right To Information Act 2005

CONTENTIONS:

 The APPELLANTS argued the following points:

  • Disclosure of communication will unnecessarily lead to intervention in the smooth working of court and the right to information isn’t an absolute right but subject to Protection of private data and confidentiality.
  • The communication among judges in judicial appointments and such disclosure might be futile on the independence of the judiciary and protected under sec 8(1)(e) and information related to assets of judges are protected under sec 8(1)(j).

The information on assets is voluntarily declared by the judges to the Chief Justice of India in his fiduciary capacity as the pater familias of the judiciary.

The RESPONDENT argued the following points:

  • The disclosure of information will not undermine judicial independence but will lead to transparency in the judiciary.
  • The public interest involves outweigh any exemption under sec 8(1)(e) of privacy and confidentiality and the mere existence of a fiduciary relationship does not bar disclosures.
  • Being public servants, The judges of the Supreme Court owe a duty towards citizens and a check over these duties by bona fide disclosure is a boon.1

And no fiduciary relationship is greater than the duty of service towards the citizen.

DECISION:

  • JUSTICE SANJIV KHANNA authored the majority decision while covering the following aspects:
  • On the issue of separate entity of SC and office or CJI and other judges, the bench held that SC is a public authority in the ambit of Sec 2(h) RTI Act as established by the Indian Constitution under Art 124 and the office of CJI and other judges are inclusive in SC making the office of CJI as a public authority 
  • Information is material in any form accessible, held, and controlled by public authority. Reliance was placed on the black’s law dictionary to explain the word ‘hold’ which signifies to keep, retain, maintain, possess, or have authority over. This includes not only physical control but an appropriate connection of that information with the said authority. 
  • Section 3 point out that right to information isn’t absolute but a right with restriction. When any information is asked for it is necessary to balance the right to privacy and public accountability and no information of confidential nature or which violates effective working more than a justification of public interest should be disclosed.3 The sec 8-11 of the RTI Act is a safeguard for the same and it classifies exemptions as absolute and qualified. In the case in hand, the fiduciary relationship between judges is fiduciary and qualifies under sec 8(1)(e), so be disclosed when larger public interest comes to play. 
  • The fiduciary relationship is understood as a capacity in reference to a specific beneficiary who is expected to be protected by certain action4. The rules of No Conflict, No profit, Undivided Loyalty, and duty of confidentiality oblige the people under such relation to having stricter obligations. The judges of the Supreme court share a fiduciary relationship and disclosure of such communication will depend on tests and parameter expressed for that particular situation.

Section 8 and 11 of the RTI Act protect the disclosure of information which may lead to violation of privacy and confidentiality to harmonize these rights with effective governance.

  • The court while commenting on sec 8 noted that court documents may contain a name, address, physical, mental and psychological status, medical records, finding records, etc., which are personal information entitled to protection from unwarranted invasion of privacy but can be accessed in larger public interest is involved. Similarly, sec 11, which deals with third party information needs to create an equilibrium with the harm of disclosure of such third party data with authoritative answerability.5. The disclosure of the information is highly dependent on if the right to access or the right to know outweighs the harm or injury caused to the third party when such information is confidential. 6 
  • The word ‘public interest’ is used repeatedly and defining it becomes necessary for establishing the boundaries. The court in interpreting ‘public interest’ emphasized on object and purpose of such disclosure and weighing the breach of privacy and confidentiality over the greater good associated.7 The stress is placed on weigh in favour of public accountability, public health, safety, International relation, Integrity, etc.
  • The PIO while disclosing the information regarding the RTI application must examine possible harm and injury to a third party on disclosure of such information. The vexatious motive or an application filed merely to abuse the power should be dealt with iron hands.
  • The other obstacle in the disclosure of information is Judicial independence and the need for transparency in judicial appointments. The arguments against non-inclusion of CJI’s office under RTI were confidentiality concern, data protection, the reputation of the selection committee, public scrutiny of future candidates. The independence of the judiciary includes judicial appointments as well as economic, social, and political concerns involved8. So, whenever the information is disclosed it must be an indicator of public interest and judicial independence. The existence of a fiduciary relationship among judges’ privacy and right to protect the personal information of judges need to be studied in light of Sec 8(1)(e) read with sec 11of the RTI Act and due procedure must be followed.
  • JUSTICE DY CHANDRACHUD in his concurring opinion emphasized on public accountability of CJI and other judge’s offices. In his opinion, such disclosure will bring more transparency and not dilute the independence or fiduciary relationship among judges. He threw light on the duty of loyalty, candour, disclosure, and accounting towards the citizens. He too stressed on balance between privacy and public interest along with curbing malicious applications.
  • JUSTICE NV RAMANA too agreed with fair disclosure but show his disquiet towards RTI applications which are just tool of surveillance to scuttle effective functioning of the judiciary. 

 ANALYSIS

The decision is authoritative and of binding nature and extended the scope of accessing information through RTI application to the Supreme court. However, concerns have been raised on Justice Ramana’s statement that RTI is used here as a tool of surveillance and scuttle functioning of the judiciary. The word ‘Motive’ behind seeking application is considered as a discretionary power in the hand of PIO to refuse applications and confidentiality in public office are highly controversial topics for the judgment.

Justice NV Ramana was highly criticized in light of the accountability of public office. The element of public interest in the disclosure of information depends highly on the motive for which it is sought. The judgment will balance the privacy and dignity of the court along with judicial transparency and right to know. The positions and salary of PIO are subject to the pleasure of the centre along with the word ‘disclosure in public interest’ which may act as a hurdle to the efficiency of the RTI process which is a matter of grave concern

ENDNOTES:

  • Central Board of Secondary Education and another v. Aditya Bandopadhyay and others (2011) 8 SCC 497
  • Reserve Bank of India v. Jayantilal N. Mistry (2016) 3 SCC 525
  • Thalappalam Service Cooperative Bank Limited v. State of Kerala and others (2013) 16 SCC 82
  • Aditya Bandopadhyay case
  • Commonwealth v. John Fairfax and Sons Ltd (1980) 147 CLR 39
  • Attorney General (UK) v. Heinemann Publishers Pty Ltd (1987) 10 NSWLR 86
  • Bihar Public Service Commission v. Saiyed Hussain Abbas Rizwi and Another, (2012) 13 SCC 61
  • Supreme Court Advocates-on-Record Association v. Union of India (2016) 5 SCC 1
Case Reviews, The Law

G. Prema v. SPL.Tahsildar, Tirupattur [2010] INSC 216

The instant case deals with the issue that whether the appellant is entitled to an increase in the amount of value of the land on the market value from the date of notification under section 4(1) of the LA Act till the date of award of the Collector? 

By: Harshal Kumar, Semester III, Year II B.A.L.L.B (Hons.), National Law University, Delhi.

Case Note:

Property – Acquisition – Compensation – Present appeal filed against order whereby High Court hold that value of land decided by Reference Court on basis of sale deed would be more appropriate because sale deed related to sale of land which was also subject matter of same acquisition – Held, acquired lands are situated on outskirts surrounded by developed areas – Land was acquired for making housing sites for weaker sections which also shows their potential for development – Deduction of 60 per cent towards development cost would be appropriate – If consider sale deed as basis, as there is gap of three years – Having regard to situation and potential, providing cumulative increase of 12 per cent for 3 years over base disclosed by sale deed would be appropriate – High Court awarded additional amount at 12 per cent and solatium at 30 per cent which is proper – Hence, appeals allowed in part as compensation for land is increased, compensation awarded in regard to well and structure is not disturbed and Respondent permitted to draw back any amount deposited in excess

Facts

  • Survey Nos. 59/3 and 59/1 of the village of Jolarpettai, Tirupattur Taluk, measuring 1,43 acres and 5,07 acres belonging to the respective appellant in both appeals (along with another 0,27 acre) were acquired to provide house sites for poorer parts, according to a preliminary notification dated 7 June 1989.
  • The Court of Reference increased the compensation to Rs.4,17,600/- per acre by its judgment and award dated 11.9.1995. It relied on a sale deed Ex. A1 dated 23.12.1988 concerning the sale of a 2520 sq. plot of land. Ft. in nearby Survey No.65/3 for Rs.30,870/- which works at Rs.12.25 per sq.ft. Or Rs.533,610/- for every acre. The Court of Reference took market value under Ex, however. A1 as sq.ft rs.12. Or the market value of the acquired land at Rs.4,176/- percent or Rs.4,17,600/- per acre, after deducting 1/4th (Rs.1044/-) from it in respect of the cost of development. The State, feeling aggrieved, appealed to the High Court.

Issues:

Whether the Appellant be entitled to an increase in the amount of value of the land on the market value from the date of notification under section 4(1) of the LA Act till the date of award of the Collector? 

Rules:

Land Acquisition Act, 1894 [repealed] – Section 23(2), Land Acquisition Act, 1894 [repealed] – Section 4(1)

Procedural History:

The High Court was of the view that relying on Ex would be more appropriate. A2 dated 11.8.1986 referring to the sale of land which was also the subject of the same acquisition. Under Ex. A2, one of the appellants (Prema) had sold 15 cents of land at Sy. For Rs.18,750/- No.59/3 which worked at Rs.1,250 percent or Rs.125,000/- per acre. Since the sale was from the year 1986 and the preliminary notification was from the year 1989, the High Court provided an increase of 10 percent per year, that is to say, Rs.375/- for three years, and reached the market value of Rs.1,625/- percent or Rs.162,500/- per acre. Consequently, the High Court has partially allowed the appeals and reduced the compensation from Rs.4,17,600/- to Rs.1,62,500/- per acre.

Arguments:

Appellants: 

  • The appellants contended that the High Court committed an error in relying on Ex. A2 as it was nearly 3 years before the acquisition and there was a steep increase in the value of land during that period.

They contended that Ex. A1 relating to Survey No. 65/3 which was a nearby land, was more appropriate for determining compensation as it was a sale on 23.12.1988, much nearer to the date of acquisition.

  • They contended that the compensation awarded by the Reference Court ought not to have been interfered with by the High Court.

Alternatively, they contended that even if Ex. A2 had to be relied on, the price thereunder should have been increased cumulatively at least by 30% per annum. 

Respondent: 

  • Learned Counsel for the respondent – state submitted that when a sale deed executed by one of the claimants relating to an acquired land was available, the High Court was justified in taking note of that transaction (Ex. A2 dated 11.8.1986) in preference to Ex. A1 dated 23.12.1988 which related to land farther away. 
  • While Ex. A2 relied on by the High Court relates to 15 cents of land whereas Ex. A1 relied on by the Reference Court was regarding a small plot of developed land measuring hardly 2 cents that are 2520 sq.ft. and therefore Ex. A2 dated 11.8.1986 was rightly preferred instead of Ex. A1 dated 23.12.1988. 
  • The respondent also contended that the increase in value per year was rightly taken as 10% and that is the standard increase, should not be interfered with.

Decision:

Land compensation is increased from Rs.162,500 per acre to Rs.195,000 per hectare. Compensation granted in respect of well and structure shall not be disturbed. The appellants shall be entitled to an additional amount @ 12% per annum on the market value from the date of notification under section 4(1) of the LA Act until the date of the collector’s award and to a solatium amount of 30% of the market value and the aggregate interest including solatium @ 9% per annum for one year from the date of taking possession and 15% per annum there. The respondent is allowed to withhold any amount deposited exceeding what is due as stated above. The respondent shall be entitled to recover the same if the appellants have drawn any amount exceeding what is due to them. Parties to bear the costs incurred.

Precedents

  1. Sardar Joginder Singh v. State of U.P. 2008 (17) SCC 133
Case Reviews, The Law

Overnite Express Limited vs Delhi Metro Rail Corporation [2020]

The present petitions deal with Section 9 of the Arbitration and Conciliation Act, 1996 in lieu of seeking direction to the Respondent to handover the licensed area on ‘as is where is basis’, including relief seeking an injunction of the Respondent from raising invoices and restraining Respondent from taking any coercive steps under the 4 License Agreements all dated 04.02.2019.

By: Hanoon Vahab, 3rd Year, BBA LLB, Geeta Institute of Law.

Background

Despite the material alterations and damage in the Areas by removing fixtures, fittings from concourse level to the first floor, and several requests made by the Petitioner to rectify the defects and restore the premises, the Respondent, on 23.07.2019 and 25.07.2019 raised invoices for payment of License Fee w.e.f. 10.08.2019; which led to the filing of the present petitions.

Facts

  • On July 9, 2018, Respondent Corporation invited open bids by E-tender for Licensing of commercial space at New Delhi Metro Station of Delhi Airport Express Line of DMRC network on “as is where is basis” and provided the site visit of the areas for a pre-bid site inspection and survey.
  • At the time of the site visit, it was found that there were partly constructed 20 units and 5 halls at the Concourse level. Whereas, facilities including white false ceilings with an adequate number of functional LED lights, each unit having individual isolators and power cables along with separate water inlet, having chill water pipelines for Air conditioning with fresh air ducting for ventilation and smoke extraction system and having fire sprinklers, smoke detectors were found in good working condition.
  • Likewise, the area on the ground and the first floor was also found partly constructed but with power cables, isolators, etc.

On 8 August 2018, the petitioner submitted the bid for all 4 Scheduled Areas along with the Tender document fee and rupees 4,878,000/- towards refundable Security Deposit which was then declared successful.

  • On 22 October 2018, Separate Letters of Acceptance were issued by the Respondent with respect to the 4 areas and the petitioner deposited the advance rental for a period of 12 months for each of the scheduled areas totalling an amount of rupees 6,35,06,937/-.
  • On 4 February 2019, 4 license Agreements were executed and were registered on 26 April 2019 in the office of the Sub- Registrar.
  • On February 11, 2019, Respondent invited the Petitioner for joint measurements and handed over the areas to him to enable the Licensee to carry out the business activities in terms of Clause 6.2 of the License Agreement.

On the said date, the measurement for only Schedule 1 Area could be carried and possession was taken over while the other levels were in a severely damaged condition and in contrast with the one represented at the pre-bid stage. Thus, possession was not taken and the same was reported to the respondent to rectify various deficiencies.

  • On February 12, 2019, the Respondent informed the petitioner that there was a deemed handing over of the areas to the petitioner. Thereafter, on 3rd May 2019 request was also made to provide the necessary connection to carry out the finishing work in the areas and also deposited the requisite charges and there was no response from the respondent.
  • Despite the hurdles, the Petitioner submitted the layout plans and drawings on 30.05.2019 regarding the existing spaces and also sent several reminders thereafter to take necessary action to restore the premises for use by the Petitioner.
  •  Instead of heeding to the various demands of the Petitioner for rectification of the premises, the Respondent, on 23.07.2019 and 25.07.2019 raised invoices for payment of License Fee w.e.f. 10.08.2019.

Arguments Advanced

Petitioner

  • The Petitioner contended that it was obligatory upon the Respondent to hand over the commercial space as they were on the date of the pre-bid site visit i.e. 19th July 2018, without any change or alteration.

It was also argued that the Respondent should be restrained from terminating the Agreements and the subject matter in aid of the Arbitration be preserved and protected.

  • It was next argued that the petitioner should be protected from coercive actions by the Respondent and a direction be given not to raise any further invoices and to provide an injunction.
  • It was further contended that on account of the breach by the Respondent, a substantial loss is being caused to the Petitioner who has made substantial investments and has been negotiating with several prospective sub-licensees including Multinational Companies.

Respondent

The Respondent submitted that present petitions are not maintainable as none of the prayers sought therein can be granted in law as in:

  • It was argued that the License Agreements being determinable, cannot be enforced by this Court by way of mandatory injunction, and also Petitioner has an alternate remedy to claim damages or compensation for the alleged breach of the Agreements.
  • He further contended that Clause (D) is for an interim injunction restraining the Respondent from taking coercive steps against the Petitioner under the License Agreements and is clearly barred under Section 41(e).
  • It was next argued that the petition is otherwise liable to be rejected as the Petitioner has failed to make out any prima facie case in its favour.
  • Furthermore, the contention of the Petitioner that Respondent is in breach of the Agreement is neither borne out from the pleadings nor could the petitioner substantiate the breach during the arguments and on the contrary, non-payment of the license fee for the commercial space in question would cause serious loss to the Respondent who needs money for its various projects.
  • Moreover, it was for the Petitioner to have assessed the commercial viability on ‘as is where is basis’ as stated in the terms and conditions of the Tender and also in accordance with Clause 6.2 was also cited to inform the Petitioner that ‘rent-free fitment period’ was restricted only to 180 days from the date of handing over the licensed spaces. 

Precedents

  • RPS Educational Society (Regd.) vs. DDA, OMP 538/2008

Referring to the judgement of this case, it can be seen that an order under Section 9 of the Arbitration and Conciliation Act cannot be passed by the Court directing specific performance of the contract, the breach of which is alleged by the petitioner.

  • Excel Generators Pvt. Ltd. Vs. IJ M Corporation Berhad OMP No. 241/09 

In this judgement, the court had observed that where a contract is a terminable contract and it can be foreclosed, the interim relief under Section 9 of the Arbitration and Conciliation Act cannot be granted for specific performance of the contract.

  • Adhunik Steels Ltd vs Orissa Manganese And Minerals … on 10 July 2007

In reference to this judgement, the court observed that it would not be correct to say that the power under Section 9 of the Act is totally independent of the well-known principles governing the grant of an interim injunction that generally governs the courts in this connection. 

In the judgement, the court observed that once a contract is determinable in nature and has been terminated by one party to the contract, the same cannot be revived or restored by a Court and specific performance of the same cannot be sought by the defaulting party.

  • RPS Educational Society (Regd.) vs. DDA, OMP 538/2008

In this judgement, the court stated that an order under Section 9 of the Arbitration and Conciliation Act cannot be passed by the Court directing specific performance of the contract, the breach of which is alleged by the petitioner.

In reference to this judgement, the court observed that Sec. 37 specifically provides that temporary injunctions which have to continue until a specified time or until further order of the court are regulated by the Code of Civil Procedure.

In reference to this judgment, the court observed that the Court had powers under Section 9 of the Act, akin to the powers of a Civil Court under Order 39 Rules 1 & 2 CPC, for grant of interim injunction and that Section 41 of the Specific Relief Act was not applicable to proceedings under Section 9 of the Act.

In this judgment, it has been observed that if the petitioner is aggrieved by the letter of termination of the contract and is advised to challenge the validity thereof, the petitioner can always’ invoke the arbitration ‘clause to claim damages, if any, suffered by the petitioner.

Rules

  • Section 9 in The Specific Relief Act, 1963
  • Section 14 in The Specific Relief Act, 1963
  • Section 41 in The Specific Relief Act, 1963
  • Section 9 in The Arbitration Act, 1940

Decision

It is made clear that the Court has not expressed any opinion on the merits of the disputes, which will be dealt with the Arbitration Tribunal as and when constituted & the narration is only for non-entitlement of reliefs sought for, in lieu of interim order. Therefore, petitions are accordingly dismissed, and in the interim order dated 06.09.2019 is hereby vacated.

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