Page 24 - Banking Finance December 2024

LEGAL UPDATE

The ruling was delivered by a five-judge party, particularly a government en- The top court rejected the view taken
constitutional bench comprising, tity, has the sole authority to appoint by it in a minority judgement in 1977
Chandrachud and justices Manoj an arbitrator, it creates a power imbal- and thereafter, in 1983 and 1997, that
Mishra, Hrishikesh Roy, Pankaj Mithal ance that undermines the fairness of all private properties can be acquired
and P.S. Narasimha. the arbitration process. by the State for the common good.
Tushar Kumar, an advocate at the Su- However, this court is unable to sub-
preme Court, said, "Together, these SC limits state's right ac- scribe to the expansive view adopted
measures refine India's business milieu, quire private property in the minority judgement authored by
establishing a framework where con- Justice Krishna Iyer in State of
In a landmark judgment that has im- Karnataka Vs Ranganatha Reddy
tractual commitments are honored
with a robust sense of fairness and plications on a citizen's right to hold (1977) and subsequently relied on by
property, the Supreme Court ruled this court in Sanjeev Coke Manufactur-
dependability."
that all privately-owned properties ing Co Vs Bharat Coking Coal Ltd
While the judgement came on cannot be considered as "material re- (1983), it added.
Chandrachud's last working day, the source of the community" and, there-
finance ministry push came much ear- fore, cannot be acquired by the State Stating that the role of this court was
lier in June, asking all arms of the gov- to subserve the common good. not to lay down economic policy, the
CJI said that people have voted for the
ernment, including PSUs to refrain
A nine-judge Constitution bench led by government which adopted varied eco-
from arbitration if the disputed value Chief Justice of India D Y Chandrachud nomic policy.
exceeded Rs. 10 crore.
by a majority view held that Justice V It would undermine the very principle
The government has earned the moni- Krishna Iyer's previous decision which of the Constitution if all resources held
ker of being the country's biggest dis- declared that all privately owned re- by the individuals are considered as
putant, and state-run firms cutting sources can be acquired by the State material resources of the community,
down on arbitration may slow India's under Article 39(b), was motivated he added.
bid to compete with arbitration hubs by a particular economic and socialist Two other judges on the bench - Jus-
such as London, Singapore and Dubai, ideology. tices B V Nagarathna and Sudhanshu
experts and practitioners said.
The CJI writing the majority ruling for Dhulia - however, partially differed
Already, state-run firms have doubled himself, and Justices Hrishikesh Roy, with the CJI's majority judgment. Jus-
down on the finance ministry push and J.B. Pardiwala, Manoj Misra, Rajesh tice Nagarathna termed the CJI's com-
amended their general conditions of Bindal, Satish Chandra Sharma and ments on Justice Krishna Iyer as "un-
contract. Augustine George Masih said that "the warranted and unjustified". Justice
direct question referred to this bench Dhulia too recorded his "strong disap-
PSU arbitration is back in fray as the
is whether the phrase 'material re- proval" on remarks made on Justice
top court, in order to protect the rights
sources of the community' used in Ar- Krishna Iyer doctrine, saying "This criti-
of private contractors, clipped the PSU cism is harsh and could have been
practice of appointing arbitrators via a ticle 39(b) of the Constitution includes
privately owned resources. Theoreti- avoided".
panel of its own arbitrators.
cally, the answer is yes, the phrase may
"For PSUs, the implications of this judi- include privately owned resources," Join
cial decision are far-reaching, urging a
The phrase material resource in Article
re-assessment of dispute management Online Certificate
39(b) of the Constitution "may include
strategies to avert the financial strains
privately owned resources Not every Course on
often inherent in lengthy arbitration
resource owned by an individual can be
processes," said advocate Kumar. considered a 'material resource of the Motor Insurance
The top court struck down this practice community' merely because it meets For details please visit
as it could result in arbitrators being the qualifier of 'material needs," the
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biased. The court noted that when one majority opinion.

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